[PHOTO OMITTED]
Smith Barney
California
Municipals
Fund Inc.
[PHOTO OMITTED]
- ------------------
SEMI-ANNUAL REPORT
- ------------------
August 31, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(tm)
<PAGE>
Smith Barney California
Municipals Fund Inc.
================================================================================
The Smith Barney California Municipals Fund Inc. ("Fund") seeks to provide
California investors with as high a level of dividend income exempt from Federal
income taxes and California state personal income tax as is consistent with
prudent investment management and the preservation of capital.
Smith Barney California Municipals Fund Inc.'s
Average Annual Total Returns Ended
August 31, 1997
Without Sales Charges*
------------------------------
Class A Class B Class C
================================================================================
Six-Month+ 4.89% 4.68% 4.60%
- --------------------------------------------------------------------------------
One-Year 10.95 10.40 10.29
- --------------------------------------------------------------------------------
Five-Year 8.13 N/A N/A
- --------------------------------------------------------------------------------
Ten-Year 8.43 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 9.10 8.04 12.18
================================================================================
With Sales Charges**
------------------------------
Class A Class B Class C
================================================================================
Six-Month+ 0.68% 0.18% 3.60%
- --------------------------------------------------------------------------------
One-Year 6.48 5.90 9.29
- --------------------------------------------------------------------------------
Five-Year 7.25 N/A N/A
- --------------------------------------------------------------------------------
Ten-Year 7.99 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 8.77 7.88 12.18
================================================================================
* Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
** Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00%; and Class B shares reflect
the deduction of a 4.50% CDSC, which applies if shares are redeemed within
one year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase. All figures
represent past performance and are not a guarantee of future results.
Investment returns and principal value will fluctuate, and redemption
value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B and C shares are April 9, 1984, November 6,
1992 and November 14, 1994, respectively.
================================================================================
FUND HIGHLIGHTS
================================================================================
The Smith Barney California Municipals Fund Inc.'s Class A shares provided a
total return of 4.89% for the six-months ended August 31, 1997 versus its Lipper
Analytical Services Inc.* peer group average total return of 4.16% for the same
period.
*Lipper Analytical Services Inc. is a major fund-tracking organization.
================================================================================
NASDAQ SYMBOL
================================================================================
Class A SHRCX
Class B SCABX
================================================================================
WHAT'S INSIDE
================================================================================
Shareholder Letter ........................................................ 1
Historical Performance .................................................... 4
Smith Barney California Municipals Fund Inc.
at a Glance ............................................................... 6
Schedule of Investments ................................................... 7
Statement of Assets and Liabilities ....................................... 21
Statement of Operations ................................................... 22
Statements of Changes in Net Assets ....................................... 23
Notes to Financial Statements ............................................. 24
Financial Highlights ...................................................... 27
<PAGE>
================================================================================
Shareholder Letter
================================================================================
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
HEATH B. MCLENDON JOSEPH P. DEANE
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney California
Municipals Fund Inc. ("Fund") for the period ending August 31, 1997. In this
report, we summarize the period's prevailing economic and market conditions and
outline our portfolio strategy. A detailed summary of the Fund's performance can
be found in the appropriate sections that follow.
Performance Update
For the six months ended August 31, 1997, the Fund had a total return of 4.89%,
4.68% and 4.60% for its Class A, B and C shares, respectively. In comparison,
the Fund's Lipper Analytical Services, Inc. peer group average posted a total
return of 4.16% for the same period. (Lipper is a major fund-tracking
organization.) Over the six-month period covered by this report, the Fund
distributed income dividends totaling $0.42 per Class A share. Based on its net
asset value (NAV) of $16.63 as of August 31, 1997, and the current income
dividend of $0.07 for Class A shares, this equates to an annualized distribution
rate of 5.05%. For a California resident in the combined federal and state
income tax bracket of 45.3%, the Fund's tax-free yield of 5.05% is equivalent to
a taxable yield of 9.23%.
Municipal Bond Market Update
The past year in the municipal bond market can be described in three phases. The
first phase was a meaningful rally that began late summer 1996 and culminated in
Federal Reserve Board ("Fed") Chairman Alan Greenspan's "irrational exuberance"
speech in early December. The second phase was a notable increase in rates
because of the subsequent fears of a major Fed rate action. The final phase,
culminating in today's market, is one in which rates are back to the levels
present before the Fed chairman's speech. We've believed all along that today's
municipal bond prices are quite appropriate, given the low inflation that
continues to be evident.
California Economic Highlights
California is continuing to improve and even to surprise on the economic front.
The Golden State has quite properly repositioned itself as a major beneficiary
of the growth in foreign trade, the entertainment field and interestingly
enough, in manufacturing. This approach has led to a more broad-based economy
and a healthy environment for select California issues. In fact, California
issues are in somewhat short supply, due to the state's solid economy and the
great demand created by today's growth in personal incomes. California is
clearly back in the economic forefront and should stay there for the balance of
the 1990s.
Investment Strategy
As noted, the Fund seeks to provide California investors with as high a level of
dividend income exempt from federal income taxes and California state personal
income tax as is consistent with prudent investment management and the
preservation of capital. The Fund continues its investment strategy of selecting
coupons and maturities that should benefit the most from a further decline in
long-term interest rates. The Fund's average weighted maturity is approximately
21 years. In addition, in every market downturn we have sought out bonds with
coupons that would benefit from further drops in interest rates.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 1
<PAGE>
As of this report, the U.S. Treasury 30-year bond yields are approximately 6.7%,
and it could decline to 6% in the near future if the inflation rate remains at
today's low levels. Given our expectations for a continued moderate U.S.
economy, we continue to emphasize longer-term, deeper discount bonds with very
high credit quality.
As of August 31, 1997, approximately 92.6% of the Fund's holdings were rated
investment grade (BBB/Baa and higher) by either Standard & Poor's Rating
Services or Moody's Investors Service Inc., with about 60.7% of the Fund
invested in AAA-rated bonds, the highest possible rating. (Standard & Poor's and
Moody's are two major credit-reporting and bond-rating agencies.) The Fund's
largest holdings are concentrated in water & sewer bonds (24.0%), transportation
bonds (9.4%) and hospital bonds (9.4%).
Market Outlook
Going forward, we would expect a drop in long-term rates, probably sooner rather
than later. The inflation rate is still key for us, and until we begin to see
that deteriorate we will continue to maintain our positive outlook for municipal
bonds.
Municipal bonds have continued to be in tight supply, and there is little reason
to believe there is a major supply spike on the horizon. Municipals outperformed
that taxable market in the past year and will likely continue to in the near
future. In our view, the municipal bond market at today's levels is very
competitively priced and should provide investors with attractive after-tax
yields. Furthermore, municipal bonds may have some capital appreciation
possibilities if the inflation numbers continue on today's steady path.
In closing, thank you for investing in the Smith Barney California Municipals
Fund Inc. We look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/Heath B. McLendon /s/Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President and
Investment Officer
September 23, 1997
- --------------------------------------------------------------------------------
2 1997 Semi-Annual Report to Shareholders
<PAGE>
California Municipals Fund Inc.
"California is clearly back in the economic forefront and should stay there for
the balance of the 1990s."
[GRAPHIC OMITTED]
"We believe you can't just manage for yield alone. By adjusting your average
maturity, you can try to mitigate volatility or have it work to your advantage.
If you have a fund that is not managed for total return, we believe you are
going to miss out on tremendous opportunities or put yourself in a position
where you could get hurt."
Joseph P. Deane, Managing Director of Smith Barney, has more than 25 years of
Wall Street experience. Currently, Joe manages in excess of $5 billion of Smith
Barney assets in both open- and closed-end mutual funds, including the Smith
Barney California Municipals Fund Inc.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 3
<PAGE>
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
8/31/97 $16.26 $16.63 $ 0.42 $ 0.00 $ 0.00 4.89%+
- ----------------------------------------------------------------------------------------------------------
2/28/97 16.31 16.26 0.85 0.20 0.00 6.37
- ----------------------------------------------------------------------------------------------------------
2/29/96 15.40 16.31 0.84 0.03 0.00 11.93
- ----------------------------------------------------------------------------------------------------------
2/28/95 16.15 15.40 0.89 0.19 0.00 2.46
- ----------------------------------------------------------------------------------------------------------
2/28/94 16.70 16.15 0.84 0.65 0.00 5.92
- ----------------------------------------------------------------------------------------------------------
2/28/93 15.78 16.70 0.97 0.29 0.04 14.76
- ----------------------------------------------------------------------------------------------------------
2/29/92 15.66 15.78 1.05 0.27 0.00 9.50
- ----------------------------------------------------------------------------------------------------------
2/28/91 15.61 15.66 1.07 0.12 0.00 8.29
- ----------------------------------------------------------------------------------------------------------
2/28/90 15.33 15.61 1.07 0.00 0.00 9.02
- ----------------------------------------------------------------------------------------------------------
2/28/89 15.49 15.33 1.12 0.03 0.00 6.67
- ----------------------------------------------------------------------------------------------------------
2/29/88 16.54 15.49 1.09 0.07 0.00 1.09
==========================================================================================================
Total $10.21 $ 1.85 $ 0.04
==========================================================================================================
</TABLE>
================================================================================
Historical Performance -- Class B Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
8/31/97 $16.25 $16.62 $ 0.38 $ 0.00 $ 0.00 4.68%+
- ----------------------------------------------------------------------------------------------------------
2/28/97 16.32 16.25 0.77 0.20 0.00 5.73
- ----------------------------------------------------------------------------------------------------------
2/29/96 15.40 16.32 0.76 0.03 0.00 11.39
- ----------------------------------------------------------------------------------------------------------
2/28/95 16.15 15.40 0.80 0.19 0.00 1.89
- ----------------------------------------------------------------------------------------------------------
2/28/94 16.70 16.15 0.76 0.65 0.00 5.40
- ----------------------------------------------------------------------------------------------------------
Inception* -- 2/28/93 15.84 16.70 0.28 0.29 0.01 9.27+
==========================================================================================================
Total $ 3.75 $ 1.36 $ 0.01
==========================================================================================================
</TABLE>
================================================================================
Historical Performance -- Class C Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
8/31/97 $16.24 $16.61 $ 0.37 $ 0.00 $ 0.00 4.60%+
- ----------------------------------------------------------------------------------------------------------
2/28/97 16.31 16.24 0.77 0.20 0.00 5.68
- ----------------------------------------------------------------------------------------------------------
2/29/96 15.40 16.31 0.76 0.03 0.00 11.30
- ----------------------------------------------------------------------------------------------------------
Inception* -- 2/28/95 14.19 15.40 0.23 0.19 0.00 11.72+
==========================================================================================================
Total $ 2.13 $ 0.42 $ 0.00
==========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
4 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Historical Performance -- Class Y Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Inception* -- 8/31/97 $15.83 $16.62 $0.36 $0.00 $0.00 7.53%+
- ----------------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
================================================================================
Average Annual Total Return
================================================================================
Without Sales Charge(1)
----------------------------------------------
Class A Class B Class C Class Y
================================================================================
Six Months Ended 8/31/97+ 4.89% 4.68% 4.60% N/A
- --------------------------------------------------------------------------------
Year Ended 8/31/97 10.95 10.40 10.29 N/A
- --------------------------------------------------------------------------------
Five Years Ended 8/31/97 8.13 N/A N/A N/A
- --------------------------------------------------------------------------------
Ten Years Ended 8/31/97 8.43 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 8/31/97 9.10 8.04 12.18 7.53%+
================================================================================
With Sales Charge(2)
----------------------------------------------
Class A Class B Class C Class Y
================================================================================
Six Months Ended 8/31/97+ 0.68% 0.18% 3.60% N/A
- --------------------------------------------------------------------------------
Year Ended 8/31/97 6.48 5.90 9.29 N/A
- --------------------------------------------------------------------------------
Five Years Ended 8/31/97 7.25 N/A N/A N/A
- --------------------------------------------------------------------------------
Ten Years Ended 8/31/97 7.99 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 8/31/97 8.77 7.88 12.18 7.53%+
================================================================================
================================================================================
Cumulative Total Return
================================================================================
Without Sales Charge(1)
================================================================================
Class A (8/31/87 through 8/31/97) 124.71%
- --------------------------------------------------------------------------------
Class B (Inception* through 8/31/97) 45.14
- --------------------------------------------------------------------------------
Class C (Inception* through 8/31/97) 37.91
- --------------------------------------------------------------------------------
Class Y (Inception* through 8/31/97) 7.53+
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B, C and Y shares are April 9, 1984, November
6, 1992, November 14, 1994 and April 16, 1997, respectively.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 5
<PAGE>
================================================================================
Smith Barney California Municipals Fund Inc. at a Glance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of the Smith Barney California
Municipals Fund Inc. vs. the Lehman Brothers Municipal Bond Index and the Lipper
California Municipal Fund Average+
- --------------------------------------------------------------------------------
August 1987 -- August 1997
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
+ Hypothetical illustration of $10,000 invested in Class A shares on August
31, 1987, assuming deduction of the maximum 4.00% sales charge at the time
of investment and reinvestment of dividends and capital gains, if any, at
net asset value through August 31, 1997. The Lehman Brothers Municipal
Bond Index is a weighted composite which is comprised of more than 15,000
bonds issued within the last 5 years, having a minimum credit rating of at
least Baa and a maturity of at least 2 years, excluding all bonds subject
to the Alternative Minimum Tax and bonds with floating or zero coupons.
The index is unmanaged and is not subject to the same management and
trading expenses of a mutual fund. The Lipper California Municipal Fund
Average is composed of an average of the Fund's peer group of 245 mutual
funds investing in California municipal bonds as of August 31, 1997. The
performance of the Fund's other classes may be greater or less than the
Class A shares' performance indicated on this chart, depending on whether
greater or lesser sales charges and fees were incurred by shareholders
investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or
capital gains.
Industry Diversification*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
6.4% Education
4.2% General Obligation
9.4% Hospitals
3.7% Housing: Multi-Family
2.8% Housing: Single-Family
1.5% Pollution Control Revenue
4.9% Pre-Refunded
2.0% Solid Waste
3.9% Tax Allocation
9.4% Transportation
4.5% Utilities
24.0% Water & Sewer
23.3% Other
* As a percentage of total investments.
Summary of Investments by Combined Ratings
- --------------------------------------------------------------------------------
Standard Percentage
Moody's & Poor's of Total Investments
- --------------------------------------------------------------------------------
Aaa AAA 60.7%
- --------------------------------------------------------------------------------
Aa AA 12.8
- --------------------------------------------------------------------------------
A A 14.1
- --------------------------------------------------------------------------------
Baa BBB 5.0
- --------------------------------------------------------------------------------
Ba BB 0.1
- --------------------------------------------------------------------------------
VMIG 1/P-1 A-1 1.0
- --------------------------------------------------------------------------------
NR NR 6.3
--------
100.0%
--------
6 1997 Semi-Annual Report to Shareholders
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (unaudited) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Education -- 6.4%
$2,000,000 AAA Adelanto School District, Series B, FGIC-Insured,
zero coupon due 9/1/18 $ 625,000
California Educational Facilities Authority Revenue:
Southwestern University Project:
2,635,000 A3* 6.600% due 11/1/14 2,858,975
4,505,000 A3* 6.700% due 11/1/24 4,859,769
7,000,000 AAA Stanford University, Series M, 5.250% due 12/1/26 6,868,750
2,500,000 A* University of San Diego, 6.500% due 10/1/22 2,646,875
California State Public Works Board, Lease Revenue, Series A:
1,000,000 A High Technology Facility, San Jose Facilities,
7.750% due 8/1/06 1,191,250
1,575,000 AAA University Projects, CONNIE LEE- Insured, 5.000% due 6/1/23 1,450,969
California State University Projects, Series B:
3,085,000 A 5.400% due 9/1/13 3,104,280
3,245,000 A 5.450% due 9/1/14 3,265,280
2,425,000 A 5.500% due 9/1/15 2,440,155
1,400,000 A 5.550% due 9/1/16 1,408,750
1,400,000 AAA Eastside Unified High School District, Santa Clara County, Series B,
FGIC-Insured, 5.000% due 9/1/18 1,317,750
1,750,000 AAA Escondito Unified School District, Series A,
FGIC-Insured, 5.125% due 9/1/15 1,710,625
100,000 AAA Kern High School District, Series C, MBIA-Insured, (Escrowed to
Maturity with U.S. Government Securities), 8.750% due 8/1/03(a) 123,000
2,300,000 AAA Rio Linda Unified School District, FSA-Insured, 5.250% due 8/1/17 2,254,000
San Diego Community College District, Lease Revenue, MBIA-Insured:
1,250,000 AAA 6.125% due 12/1/16 1,339,064
3,460,000 AAA 5.250% due 12/1/21 3,382,150
1,530,000 AAA Santa Rosa High School District, FGIC-Insured, 5.900% due 5/1/14 1,596,937
Standard School District COP, (Capital Improvement Project), Series A:
320,000 A- 6.200% due 3/1/10 336,000
340,000 A- 6.250% due 3/1/11 354,450
4,500,000 A3* Ukiah Unified School District COP, (Measure A Capital Projects),
6.000% due 9/1/10 4,539,375
2,600,000 AAA Victor Valley Unified High School District,
MBIA-Insured, 5.750% due 11/1/17 2,665,000
2,500,000 Baa1* Yuba City Unified School District, COP, (Andors Karperos
School Construction Project), 6.700% due 2/1/13 2,593,750
- ------------------------------------------------------------------------------------------------------------------------------------
52,932,154
- ------------------------------------------------------------------------------------------------------------------------------------
Electric -- 0.8%
Sacramento Power Authority, Cogeneration Project Revenue:
1,800,000 BBB- 6.500% due 7/1/07 1,973,250
1,800,000 BBB- 6.500% due 7/1/08 1,968,750
2,200,000 BBB- 6.500% due 7/1/09 2,359,500
- ------------------------------------------------------------------------------------------------------------------------------------
6,301,500
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 7
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
General Obligation -- 4.2%
California State GO:
$18,910,000 AAA AMBAC-Insured, 5.250% due 6/1/21 $18,484,525
Veterans Series:
455,000 A+ Series AL, 9.700% due 4/1/02 553,395
725,000 A+ Series AM, 9.000% due 10/1/02 870,905
Series AT:
4,000,000 A+ 9.700% due 2/1/01 4,680,000
1,000,000 A+ 9.500% due 2/1/10 1,416,250
2,000,000 A+ Series AU, 8.400% due 10/1/06 2,530,000
1,000,000 AA San Diego Public Safety Communication Project,
6.650% due 7/15/11 1,166,250
3,460,000 A+ Santa Barbara County COP, 5.700% due 3/1/11 3,490,275
1,500,000 AAA Santa Margarita/Dana Point Authority Revenue GO,
Improvement Water Districts 3-3A-4 & 4A, Series B,
MBIA-Insured, 7.250% due 8/1/14 1,839,375
- ------------------------------------------------------------------------------------------------------------------------------------
35,030,975
- ------------------------------------------------------------------------------------------------------------------------------------
Hospitals -- 9.4%
1,500,000 A+ ABAG Finance Authority for Nonprofit Corps. COP,
(Rehabilitation Mental Health Services Inc. Project),
California Mortgage Insured, 6.550% due 6/1/22 1,593,750
245,000 A+ California Health Facilities Authority Revenue, Victory Valley
Community Hospital, Series 84-A, 9.875% due 7/1/12 249,350
California Health Facilities Financing Authority Revenue:
AMBAC-Insured:
Catholic Healthcare West, Series E:
5,620,000 AAA 5.750% due 7/1/16 5,472,475
3,330,000 AAA 5.250% due 7/1/23 3,230,100
2,500,000 AAA Insured Catholic Health Facilities, 5.750% due 7/1/15 2,571,875
115,000 Aa1* Community Provider Pooled Loan, Series A,
LOC-Swiss Bank, 7.350% due 6/1/20 121,613
1,150,000 A+ Episcopal Homes, Series A, 7.700% due 7/1/18 1,202,394
1,250,000 AA South Coast Medical Center, 7.250% due 7/1/15 1,346,875
Sutter Health:
LOC-Morgan Guaranty Trust:
200,000 VMIG 1* Series A, 3.400% due 3/1/20(b) 200,000
1,100,000 VMIG 1* Series B, 3.400% due 3/1/20(b) 1,100,000
Series A, FSA-Insured:
1,470,000 AAA 5.125% due 8/15/17 1,409,363
1,500,000 AAA 5.250% due 8/15/27 1,441,875
California Statewide Community Development Authority
Revenue COP:
4,515,000 AAA Industrial Health Facilities, Unihealth, Series A,
AMBAC-Insured, 5.500% due 10/1/07 4,723,819
1,100,000 A+ Solheim Lutheran Home, 6.500% due 11/1/17 1,175,625
St. Joseph's Health System:
4,825,000 AA 5.500% due 7/1/14 4,831,030
6,000,000 AA 6.625% due 7/1/21 6,622,500
700,000 VMIG 1* 3.400% due 7/1/24(b) 700,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1997 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Hospitals -- 9.4% (continued)
Sutter Health Obligated Group:
$2,000,000 VMIG 1* AMBAC-Insured, 3.400% due 7/1/15(b) $ 2,000,000
MBIA-Insured:
3,500,000 AAA 5.500% due 8/15/09 3,613,750
500,000 AAA 6.000% due 8/15/25 523,750
1,095,000 A+ Villaview Community, 7.000% due 9/1/09 1,193,550
1,405,000 A+ Contra Costa County COP, Merrithew Memorial Hospital,
6.500% due 11/1/06 1,568,330
1,500,000 AAA Desert Hospital District COP, (Pre-Refunded - Escrowed with
U.S. Government Securities to 7/1/00 Call @ 102),
8.100% due 7/1/20(a) 1,683,750
Fresno Health Facilities Revenue, Holy Cross Health System Corp.:
2,200,000 AA 5.200% due 12/1/04 2,260,500
2,435,000 AA 5.375% due 12/1/06 2,505,005
1,000,000 AA St. Agnes, 6.625% due 6/1/21 1,082,500
250,000 AAA Glendale Hospital Revenue Refunding, Glendale Memorial Hospital,
(Pre-Refunded - Escrowed with U.S. Government Securities
to 11/1/97 Call @ 102), 9.000% due 11/1/17(a) 257,053
1,000,000 A+ Inglewood Insured Hospital Revenue Bonds, Daniel Freeman
Hospital Inc., 6.750% due 5/1/13 1,062,500
1,000,000 AAA Modesto Health Facilities Revenue, Memorial Hospital Association,
Series B, MBIA-Insured, 5.125% due 6/1/17 958,750
1,000,000 AAA Rancho Mirage COP, Eisenhower Memorial Hospital, Joint Powers
Financing Authority, (Pre-Refunded - Escrowed with
U.S. Government Securities to 3/1/02 Call @ 102),
7.000% due 3/1/22(a) 1,123,750
2,000,000 A Riverside County Asset Leasing Corp., (Riverside County
Hospital Project), Series A, 6.375% due 6/1/09 2,127,500
2,750,000 A* San Joaquin County COP, (General Hospital Project 1993),
6.250% due 9/1/13 2,870,313
875,000 AAA Santa Rosa Hospital Revenue, (Santa Rosa Hospital Memorial
Project), (Escrowed to Maturity with U.S. Government Securities),
10.300% due 3/1/11(a) 1,162,655
1,250,000 BBB Sequoia Hospital District Revenue, 5.375% due 8/15/23 1,235,938
9,805,000 A Torrance Hospital Revenue Bonds, Little County of Mary Hospital,
6.875% due 7/1/15(c) 10,589,400
1,500,000 NR Valley Health System COP, 6.875% due 5/15/23 1,582,500
1,000,000 BBB- Woodland Hospital Revenue COP, Woodland Memorial Hospital,
8.200% due 8/1/15 1,043,470
- ------------------------------------------------------------------------------------------------------------------------------------
78,437,608
- ------------------------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.7%
1,250,000 AAA ABAG County, Series 96A, FNMA-Collateralized,
5.700% due 11/1/06(c) 1,293,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 9
<PAGE>
<TABLE>
<CAPTION>
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Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Housing: Multi-Family -- 3.7% (continued)
California HFA:
Home Mortgage Revenue:
$ 195,000 Aa2* Series B, 8.600% due 8/1/19(d) $ 202,004
350,000 Aa2* Series B, (Project 1983), zero coupon due 8/1/15 57,312
310,000 Aa2* Series C, 8.300% due 8/1/19(d) 320,060
Series E:
505,000 Aa2* 8.250% due 8/1/08(d) 520,195
400,000 Aa* 8.350% due 8/1/19(d) 412,455
5,225,000 Aa2* 6.375% due 8/1/27(d) 5,460,125
990,000 Aa2* Series F-1, 7.000% due 8/1/26(d) 1,045,687
Series A:
1,595,000 A+ 6.625% due 2/1/24(d) 1,668,769
5,000 AAA 1985, MBIA-Insured, 8.750% due 8/1/10 5,163
480,000 AAA Series C, MBIA-Insured, 7.000% due 8/1/23(d) 508,800
6,000,000 AAA California Statewide Community Development Authority COP,
St. Josephs Health System Group, Series E,
FNMA-Collateralized, 6.400% due 6/1/28(d) 6,247,500
1,695,000 NR Hayward Housing Authority Revenue, FNMA-Collateralized,
Family Revenue, Cypress Gardens, Series C,
9.375% due 12/1/18 1,843,313
125,000 AAA Martinez Home Mortgage, (Pre-Refunded - Escrowed with
U.S. Government Securities to 8/1/02 Call @ 100),
10.750% due 2/1/16(a) 194,844
6,000,000 AAA Pleasanton-Suisun City HFA, Home Mortgage, Series A,
(Escrowed to Maturity with U.S. Government Securities),
MBIA-Insured, zero coupon due 10/1/16(a) 1,980,000
1,750,000 AAA Riverside County Housing Authority, Multi-Family Housing Revenue,
Brandon Place Apartments, Series B, FNMA-Collateralized,
5.625% due 7/1/09(d) 1,789,375
1,500,000 Aa3* San Jose Multi-Family Timberwood Apartments, Series A,
LOC - Wells Fargo Bank, 7.500% due 2/1/20 1,526,250
1,320,000 AAA Santa Rosa Mortgage Revenue, (Village Square Apartments Project),
Series A, FHA-Insured, 6.875% due 9/1/27 1,423,950
20,000 BBB+ Sonoma County Home Mortgage Multiple Lenders,
FHA-Insured, 9.125% due 6/1/15 21,500
1,700,000 AAA Upland Hospital Revenue COP, San Antonio Community Hospital,
(Pre-Refunded - Escrowed with U.S. Government Securities to
1/1/99 Call @ 102), 7.800% due 1/1/18(a) 1,816,875
2,755,000 AAA Victorville Multi-Family Housing Revenue, Wimbledon Apartments,
Series A, GNMA-Collateralized, 6.300% due 4/20/31 2,851,425
- ------------------------------------------------------------------------------------------------------------------------------------
31,189,352
- ------------------------------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 2.8%
California HFA Revenue Bonds, Home Mortgage:
10,000 Aa2* 10.250% due 2/1/14 10,121
310,000 Aa2* Capital Appreciation, Series 1984-B, zero coupon due 8/1/16 37,662
8,000,000 AAA Single-Family Mortgage, Issue A-2, FHA-Insured,
6.350% due 8/1/15(c)(d) 8,440,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1997 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
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Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Housing: Single-Family -- 2.8% (continued)
$ 270,000 AAA Contra Costa County Home Mortgage Revenue, GNMA-Collateralized,
(Escrowed to Maturity with U.S. Government Securities),
7.750% due 5/1/22(a)(d) $ 345,938
10,000 NR Fresno County Housing Finance Revenue, Private Mortgage,
12.500% due 9/15/12 10,052
Los Angeles Home Mortgage Revenue Bonds, GNMA-Collateralized:
1,045,000 Aaa* Second Mortgage Project, 8.100% due 5/1/17 1,152,113
635,000 AAA Single-Family Mortgage Revenue, Mortgage Backed Securities
Program, Issue A, 7.550% due 12/1/23(d) 664,369
3,325,000 AAA Perris County, Single-Family Mortgage, GNMA-Collateralized,
(Escrowed to Maturity with U.S. Government Securities),
8.300% due 6/1/13(a)(d) 4,305,875
Riverside County Housing Authority Revenue Bonds:
1,765,000 Baa* Series A, 7.900% due 10/1/18 1,787,063
Single-Family Mortgage Revenue, GNMA-Collateralized, Series A,
(Escrowed to Maturity with U.S. Government Securities):
2,620,000 AAA 8.300% due 11/1/12(a)(d) 3,438,750
1,000,000 AAA 7.800% due 5/1/21(a)(d) 1,290,000
1,500,000 AAA Sacramento County Single-Family Mortgage Revenue, Issue A,
(Escrowed to Maturity with U.S. Government Securities),
GNMA-Collateralized, 8.125% due 7/1/16(a)(d) 1,940,625
110,000 AAA San Francisco City & County Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 7.450% due 1/1/24(d) 115,500
190,000 AAA Southern California HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, Series B, 7.750% due 3/1/24(d) 200,925
- ------------------------------------------------------------------------------------------------------------------------------------
23,738,993
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Development -- 0.1%
1,000,000 Aa2* Los Angeles, IDA, IDR, (Altshule Properties Project),
7.200% due 10/1/11(d) 1,038,750
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 22.4%
500,000 Baa1* ABAG Finance Authority Nonprofit Corps. COP, Daiwa Bank
Peninsula Family, YMCA, Series A, 6.800% due 10/1/11 520,000
2,500,000 NR Alhambra, Arcadia, Azush Counties, Independent Cities,
Risk Management Authority COP, 7.250% due 3/1/07 2,520,900
2,000,000 AAA Anaheim COP, MBIA-Insured, 6.200% due 7/16/23(e) 2,147,500
Anaheim County Financing Authority, (Public Improvements Project),
FSA-Insured:
Series A:
4,750,000 AAA 5.000% due 9/1/27 4,429,375
9,500,000 AAA 5.000% due 3/1/37 8,728,125
Series C, Capital Appreciation:
8,945,000 AAA Zero coupon, due 9/1/21 2,314,519
10,000,000 AAA Zero coupon, due 9/1/22 2,437,500
10,000,000 AAA Zero coupon, due 9/1/23 2,312,500
1,025,000 Baa* Azusa COP, (Capital Improvements Refinancing Project),
6.625% due 8/1/13 1,077,531
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 11
<PAGE>
<TABLE>
<CAPTION>
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Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Miscellaneous -- 22.4% (continued)
Brisbane Redevelopment Agency, Brisbane Community
Redevelopment Bonds:
$ 200,000 AA 9.400% due 5/1/05 $ 204,546
220,000 AA 9.400% due 5/1/06 224,983
California Public Capital Improvements Finance Authority Revenue,
(Pooled Project):
750,000 Baa* Series A, 8.500% due 3/1/18 777,000
575,000 AAA Series B, BIG-Insured, 8.100% due 3/1/18 599,633
14,405,000 AAA California Public Works Board, Lease Revenue, Department of
Corrections State Prison, Series A, AMBAC-Insured, 5.250%
due 1/1/21 13,990,856
2,500,000 Baa* California Special Districts Finance Authority COP, Series A,
8.500% due 7/1/18 2,616,300
150,000 A- Concord Santa Cruz South Gate COP, Series A,
7.625% due 6/1/11 150,662
Contra Costa County COP, (Capital Projects), AMBAC-Insured:
4,630,000 AAA 5.250% due 2/1/17 4,537,400
3,000,000 AAA 5.250% due 2/1/21 2,913,750
Dublin COP, (Civic Center Project), AMBAC-Insured:
1,305,000 AAA 5.600% due 2/1/06 1,322,944
1,380,000 AAA 5.625% due 2/1/07 1,397,250
3,525,000 AAA Hayward COP, (Civic Center Project), MBIA-Insured,
5.250% due 8/1/26 3,414,844
480,000 VMIG 1* Irvine Improvement, Board Act 1915, Assessment District
No. 89-10, 3.400% due 9/2/15(b) 480,000
21,000,000 AAA Los Angeles Convention & Exhibition Center Authority Lease
Revenue, Series A, MBIA-Insured, 5.125% due 8/15/21 19,871,250
3,250,000 AAA Los Angeles County Community Facilities, District No. 3 Special
Tax Refunding, Series A, FSA-Insured, 5.500% due 9/1/14 3,274,375
Los Angeles County COP, INFLOS:
2,000,000 BBB Special Linked SAVRS & RIBS, 6.708% due 6/1/15(e) 2,057,500
1,000,000 Baa1* Structured Yield Curve Note, 6.600% due 11/1/11 1,051,250
2,670,000 AAA Ontario Redevelopment Finance Authority Revenue, (Project No. 1),
(Escrowed to Maturity with U.S. Government Securities),
MBIA-Insured, 5.800% due 8/1/23(a) 2,733,413
1,500,000 AAA Orange County Community Facility District 86-1,
FSA-Insured, 7.125% due 8/15/17 1,606,875
1,300,000 Baa* Orange County Public Facility COP, Solid Waste Revenue,
7.875% due 12/1/07 1,363,375
2,200,000 VMIG 1* Orange County Sanitation District COP, 3.400% due 8/1/15(b) 2,200,000
2,855,000 AAA Pomona Public Financing Authority, Series Q, MBIA-Insured,
5.750% due 12/1/15 2,940,650
2,750,000 AAA Sacramento Area Flood Control Agency, FGIC-Insured,
5.375% due 10/1/20 2,715,625
9,000,000 AAA Sacramento City Financing Authority Lease Revenue, Series A,
AMBAC-Insured, 5.375% due 11/1/14 9,157,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1997 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Miscellaneous -- 22.4% (continued)
$ 4,700,000 AAA Sacramento County COP, (Public Facilities Project),
MBIA-Insured, 5.250% due 12/1/16 $ 4,606,000
Sacramento County Special Tax Revenue, Community Facilities,
District No. 1:
645,000 NR 5.700% due 9/1/08 636,130
790,000 NR 5.800% due 9/1/09 779,138
785,000 NR 5.900% due 9/1/10 773,225
850,000 NR 6.000% due 9/1/11 836,188
440,000 NR 6.000% due 9/1/12 429,550
665,000 NR 6.100% due 9/1/13 653,363
2,000,000 AAA San Bernadino COP, (Capital Facilities Project), Series B,
(Escrowed to Maturity with U.S. Government Securities),
6.875% due 8/1/24(a) 2,422,500
San Diego County COP:
9,000,000 AAA Central Jail Refunding, AMBAC-Insured, 5.000% due 10/1/25 8,437,500
1,000,000 AAA MBIA-Insured, 6.363% due 11/18/19(e) 1,051,250
6,500,000 AAA Northern County Regional Center Expansion, AMBAC-Insured,
5.250% due 11/15/19 6,353,750
4,000,000 AAA San Francisco Building Authority Lease Revenue, AMBAC-Insured,
5.250% due 12/1/21 3,885,000
135,000 A* San Francisco Downtown Parking, Corporate Parking
Revenue Bonds, 6.250% due 4/1/04 146,475
5,325,000 A+ San Jose Finance Authority Revenue, Central Service Yard,
Series D, 5.250% due 10/15/23 5,058,750
15,325,000 AAA San Jose Redevelopment Agency, (Merged Area Redevelopment
Project), MBIA-Insured, 5.000% due 8/1/20 14,424,656
4,310,000 Aaa* San Marcos Public Facilities Authority, Public Facilities Revenue,
(Escrowed to Maturity with U.S. Government Securities),
zero coupon due 1/1/19(a) 1,298,388
5,995,000 AAA San Ramone COP, (Central Park Project), FSA-Insured,
5.000% due 8/1/24 5,597,831
2,875,000 AAA Santa Ana Financing Authority Lease Revenue, Police Administration
& Holding Facility, Series A, MBIA-Insured, 6.250% due 7/1/24 3,230,781
7,180,000 AAA Santa Maria Redevelopment Agency, Town Center Package,
FSA-Insured, 5.000% due 6/1/16 6,767,150
2,335,000 AA- Simi Valley Community Development Agency COP, Simi Valley
Business Center, 6.050% due 10/1/18,
Mandatory Put 10/1/99 2,402,131
Sonoma County COP, (Detention Facilities Improvement Project):
4,200,000 A+ 5.000% due 11/15/13 3,948,000
3,000,000 A+ 5.000% due 11/15/17 2,771,250
2,000,000 AAA South Orange County Public Finance Authority, Special Tax Revenue:
Series A, MBIA-Insured, 7.000% due 9/1/10 2,380,000
- ------------------------------------------------------------------------------------------------------------------------------------
186,978,937
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 13
<PAGE>
<TABLE>
<CAPTION>
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Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Pollution Control Revenue -- 1.5%
California Financing Authority:
PCR:
$2,500,000 A+ Pacific Gas & Electric Co., Series B, 6.350% due 6/1/09(d) $ 2,665,625
San Diego Gas & Electric, Series A:
5,800,000 A 5.900% due 6/1/14 6,162,500
1,500,000 A+ 6.800% due 6/1/15(d) 1,730,625
Resource Recovery Revenue, Series A:
500,000 P-1* Ultrapower-Rocklin, 3.550% due 6/1/17(b)(d) 500,000
500,000 A1* Waste Management, 7.150% due 2/1/11(d) 542,500
1,300,000 P-1* Jackson County, MS PCR, (Chevron USA Inc. Project),
3.800% due 6/1/23(b) 1,300,000
- ------------------------------------------------------------------------------------------------------------------------------------
12,901,250
- ------------------------------------------------------------------------------------------------------------------------------------
Pre-Refunded(a) -- 4.9%
Banning COP, Banning Wastewater Facilities Corp.:
115,000 AAA Call 11/1/97 @ 101.50, 11.500% due 11/1/03 118,119
125,000 AAA Call 11/1/97 @ 101.75, 11.500% due 11/1/04 128,701
140,000 AAA Call 11/1/97 @ 102.00, 11.600% due 11/1/05 144,515
155,000 AAA Call 11/1/97 @ 102.25, 11.650% due 11/1/06 160,397
175,000 AAA Call 11/1/97 @ 102.50, 11.700% due 11/1/07 181,541
195,000 AAA Call 11/1/97 @ 102.75, 11.750% due 11/1/08 202,788
220,000 AAA Call 11/1/97 @ 103.00, 11.750% due 11/1/09 229,335
1,450,000 AAA California Health Facilities Finance Authority, St. Elizabeth Hospital,
(Call 11/15/02 @ 102), 6.200% due 11/15/09 1,596,813
1,500,000 AAA California Lease Finance Authority COP, Nevada County,
(Call 10/1/98 @ 101), 7.600% due 10/1/19 1,547,595
California Public Works Board, Lease Revenue, Series A:
2,000,000 AAA California State University Project, (Call 10/1/02 @ 102),
6.700% due 10/1/17 2,250,000
1,000,000 AAA Department of Corrections State Prison, Series A,
(Call 9/1/00 @ 102), 7.000% due 9/1/09 1,097,500
1,245,000 AAA Concord Redevelopment Agency Tax Allocation Bonds, Series 3,
MBIA-Insured, (Call 7/1/98 @ 102), 8.000% due 7/1/18 1,312,678
550,000 AAA Grossmont Hospital Revenue, Series A, MBIA-Insured,
(Call 11/15/97 @ 102), 8.000% due 11/15/97 565,620
465,000 AAA Local Government Finance Joint Powers Authority Revenue,
Anaheim Redevelopment Agency, Series A,
(Call 9/1/98 @ 102), 8.200% due 9/1/15 494,156
450,000 AAA Los Angeles Convention & Exhibition Center Authority,
Lease Revenue, (Call 12/1/05 @ 100), 9.000% due 12/1/20 590,063
500,000 AAA Los Angeles County Transportation Community, Sales Tax
Revenue, Series A, (Call 7/1/98 @ 102), 8.000% due 7/1/18 527,180
Los Angeles Department of Water & Power:
Electric Plantation Revenue:
1,000,000 AAA (Call 5/1/98 @ 102), 7.900% due 5/1/28 1,045,500
1,950,000 AAA (Call 1/15/01 @ 102), 7.100% due 1/15/31 2,140,125
1,550,000 AAA Water Works Revenue, (Call 2/15/99 @ 102),
7.200% due 2/15/19 1,648,813
1,200,000 AAA Los Angeles Waste Water System Revenue,
(Call 11/1/97 @ 102), 8.125% due 11/1/17 1,232,316
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1997 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Pre-Refunded(a) -- 4.9% (continued)
Mojave Water Agency, Improvement District,
Morongo Basin, (Call 9/1/02 @ 102):
$1,500,000 AAA 6.600% due 9/1/13 $ 1,678,125
5,510,000 AAA 6.600% due 9/1/22 6,164,313
500,000 AAA Oceanside COP, AMBAC-Insured, (Call 8/1/02 @ 102),
7.300% due 8/1/21 573,750
Orange County Community Facility District:
1,000,000 AAA Rancho Santa Margarita, (Call 8/15/98 @ 102),
7.800% due 8/15/13 1,057,580
1,000,000 AAA Special Tax, Series A, (Call 8/15/00 @ 102),
7.800% due 8/15/15 1,116,250
1,905,000 AAA Oxnard Public Facilities Corp. COP, (Wastewater Treatment
Plant Project), AMBAC-Insured, (Call 9/1/99 @ 100),
7.500% due 9/1/06 2,033,587
2,000,000 AAA Rancho Water District Financing Authority Revenue Bonds,
AMBAC-Insured, (Call 9/11/01 @ 102),
6.427% due 8/17/21(e) 2,185,000
2,500,000 AAA Riverside County Asset Leasing Corp., Leasehold Revenue,
(Riverside County Hospital Project), Series A,
(Call 6/1/99 @ 102), 7.400% due 6/1/14 2,690,625
1,000,000 AAA San Bernadino County COP, (West Valley Detention Center Project),
(Call 11/1/98 @ 102), 7.700% due 11/1/18 1,062,500
1,000,000 AAA San Buenaventura COP, AMBAC-Insured,
(Call 10/1/00 @ 102), 7.500% due 10/1/20 1,113,750
2,000,000 AAA San Diego Redevelopment Agency, (Marina Redevelopment Project),
(Call 12/1/97 @ 101.50), 8.750% due 12/1/08 2,054,260
1,300,000 AAA Yolo County Flood Control & Water Conservation District, COP,
FGIC-Insured, (Call 7/15/03 @ 100), 7.125% due 7/15/15 1,485,250
- ------------------------------------------------------------------------------------------------------------------------------------
40,428,745
- ------------------------------------------------------------------------------------------------------------------------------------
Solid Waste -- 2.0%
2,770,000 AAA Fresno County Finance Authority, Solid Waste Revenue Bonds,
American Avenue Landfill, MBIA-Insured, 5.750% due 5/15/14 2,860,025
Inland Empire Solid Waste Authority Revenue, FSA-Insured:
5,000,000 AAA 6.250% due 8/1/11(d) 5,431,250
2,500,000 AAA 6.000% due 8/1/16(d) 2,596,875
500,000 BBB+ Kings County Waste Management Authority, Solid Waste Revenue,
7.200% due 10/1/14(d) 544,375
1,000,000 BB Nevada County COP, 7.500% due 6/1/21 1,060,000
4,135,000 Baa1* South Napa Waste Management Authority Revenue, (Solid Waste
Transfer Facilities Project), 6.500% due 2/15/14(d) 4,315,906
- ------------------------------------------------------------------------------------------------------------------------------------
16,808,431
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Allocation -- 3.9%
2,000,000 AAA Anaheim Public Finance Authority, Tax Allocation Revenue, Regular
Fixed Option Bonds, MBIA-Insured, 6.450% due 12/28/18(e) 2,212,500
1,000,000 Baa* Azusa Redevelopment Agency, Tax Allocation, Merged Project Area,
Series A, 6.750% due 8/1/23 1,057,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 15
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Tax Allocation -- 3.9% (continued)
Bay Area Government Assessment, Tax
Allocation, Redevelopment Agency Pool,
Series A6, FSA-Insured:
$1,200,000 AAA 5.250% due 12/15/17 $ 1,168,500
1,875,000 AAA 5.375% due 12/15/25 1,839,844
295,000 AAA Brea Public Finance Authority, Tax Allocation,
MBIA-Insured, 7.000% due 8/1/15 324,868
30,000 AAA Concord Redevelopment Agency, Tax Allocation,
Series 3, MBIA-Insured, 8.000% due 7/1/18 31,525
6,000,000 AAA Corona Redevelopment Agency, Tax Allocation, Redevelopment
Project Area A, Series A, FGIC-Insured, 5.500% due 9/1/24 5,985,000
1,000,000 AAA El Centro Redevelopment Tax Allocation,
MBIA-Insured, 6.375% due 11/1/17 1,095,000
4,160,000 AAA Fontana Public Finance Authority, Tax Allocation,
Series A, MBIA-Insured, 5.000% due 9/1/20 3,905,200
3,275,000 BBB+ Garden Grove Community Development Agency, Tax Allocation,
(Garden Grove Community Project), 5.700% due 10/1/08 3,348,689
2,000,000 Baa* Hawthorne Community Redevelopment, Tax Allocation,
(Project Area 2), 6.625% due 9/1/14 2,127,500
Rancho Cucamonga Redevelopment, Tax Allocation,
(Rancho Redevelopment Project), MBIA-Insured:
2,445,000 AAA 5.250% due 9/1/16 2,411,381
5,000,000 AAA 5.250% due 9/1/26 4,875,000
2,000,000 AAA Vista Community Development, Tax Allocation,
MBIA-Insured, 5.250% due 9/1/15 1,985,000
- ------------------------------------------------------------------------------------------------------------------------------------
32,367,507
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation -- 9.4%
Los Angeles County Metropolitan Transportation Authority,
Sales Tax Revenue, Series A:
22,500,000 AAA Proposition A, First Tier, MBIA-Insured, 5.250% due 7/1/27 21,768,750
5,375,000 AAA Proposition C, Second Series, AMBAC-Insured,
5.000% due 7/1/25 5,018,907
2,000,000 A Port of Oakland Special Facilities Revenue, Series A,
6.750% due 1/1/12(d) 2,117,500
400,000 A1* Sacramento Regional Transportation District COP,
Series A, 6.400% due 3/1/03 430,500
3,000,000 AAA San Francisco Airport Community International Airport Revenue,
FGIC-Insured, 6.500% due 5/1/19(d) 3,255,000
180,000 AAA San Francisco Airport Improvement Corp., Lease Revenue,
8.000% due 7/1/13 215,775
San Joaquin Hills Transcorridor Agency, Toll Road Revenue, Sr. Lien:
5,000,000 NR Zero coupon due 1/1/14(c) 1,950,000
60,000,000 NR Zero coupon due 1/1/16(c) 20,850,000
17,500,000 NR Zero coupon due 1/1/17(c) 5,753,125
25,000,000 NR Zero coupon due 1/1/18(c) 7,750,000
20,000,000 NR Zero coupon due 1/1/19(c) 5,850,000
San Jose Airport Revenue Bonds, FGIC-Insured:
200,000 AAA 5.400% due 3/1/04(d) 209,000
1,500,000 AAA 5.500% due 3/1/07(d) 1,560,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1997 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Transportation -- 9.4% (continued)
$1,250,000 A* Santa Barbara COP, (Harbor Reference Project),
6.750% due 10/1/27 $ 1,328,125
- ------------------------------------------------------------------------------------------------------------------------------------
78,056,682
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities -- 4.5%
Fresno Joint Powers Financing Authority, Local Agency Revenue,
Series A:
2,000,000 BBB 6.000% due 9/2/01 2,040,000
1,000,000 BBB 6.200% due 9/2/03 1,028,750
1,500,000 BBB 6.550% due 9/2/12 1,582,500
2,000,000 AA Los Angeles County Finance Authority Revenue, (Sanitation
Districts Capital Projects), Series A, 5.250% due 10/1/19 1,940,000
1,110,000 A- Northern California Power Agency Public Power Refunding,
(Geothermal Project No. 3), Series A, 5.000% due 7/1/09 1,076,700
955,000 Baa* Pleasanton Joint Powers Financing Authority, Series A,
6.150% due 9/2/12 1,006,330
2,000,000 AAA Redding Electric System Revenue COP, Regular Linked
SAVRS & RIBS, MBIA-Insured, 6.368% due 7/8/22(e) 2,232,500
2,670,000 AAA Redding Joint Powers Finance Authority, Electric System Revenue,
Series D, MBIA-Insured, 5.250% due 6/1/15 2,633,288
Sacramento Municipal Utility District Electric Revenue:
Series D:
4,000,000 AAA FGIC-Insured, 5.250% due 11/15/12 4,010,000
4,500,000 AAA MBIA-Insured, 5.250% due 11/15/20 4,342,500
3,000,000 A Series E, 5.700% due 5/15/12 3,037,500
5,425,000 AAA Series I, MBIA-Insured, 5.750% due 1/1/15 5,601,314
5,000,000 AAA Southern California Public Power Authority, Power Project Revenue,
(Mead Adelanto Project), Series A, AMBAC-Insured,
5.000% due 7/1/17 4,743,750
1,960,000 BBB- Trinity County, Public Utility District COP, Electric District Facilities,
6.750% due 4/1/23(d) 2,038,400
- ------------------------------------------------------------------------------------------------------------------------------------
37,313,532
- ------------------------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 24.0%
1,200,000 AAA Bakersfield COP, (Waste Water Treatment Plant 3 Projects),
(Pre-Refunded - Escrowed with U.S. Government Securities to
1/1/98 Call @ 101), 8.000% due 1/1/10(a) 1,228,223
California State Department of Water, Central Valley Project Revenue:
Series O:
1,000,000 AA 5.000% due 12/1/22 933,750
2,235,000 AA 4.750% due 12/1/25 1,989,151
Series S:
5,000,000 AA 5.000% due 12/1/19 4,756,250
5,000,000 AA 5.000% due 12/1/22 4,706,250
6,750,000 AA 5.000% due 12/1/29 6,294,375
East Bay Municipal Utility District, FGIC-Insured:
9,300,000 AAA Wastewater Treatment Systems Revenue, 5.000% due 6/1/26 8,695,500
Water Systems Revenue:
7,500,000 AAA 5.000% due 6/1/15 7,265,625
1,750,000 AAA 5.000% due 6/1/16 1,684,375
8,400,000 AAA 5.000% due 6/1/26 7,854,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 17
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (unaudited) (continued) August 31, 1997
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Water & Sewer -- 24.0% (continued)
Eastern Municipal Water District COP, Water & Sewer Revenue,
Series A:
$ 1,000,000 AAA FGIC-Insured, 6.750% due 7/1/12 $ 1,162,500
1,000,000 AAA FGIC-Insured, 5.375% due 7/1/13 1,000,000
17,750,000 AAA MBIA-Insured, 5.250% due 7/1/23 17,217,500
18,150,000 AAA Fresno County Sewer Revenue, Series A, MBIA-Insured,
5.000% due 9/1/23 17,015,625
Irvine Ranch Water District Joint Powers Agency, Local Pool Revenue:
AIG Investment Agreement:
9,000,000 A+ 7.800% due 2/15/08(c) 9,144,720
1,750,000 A+ 7.875% due 2/15/23(c) 1,778,334
9,500,000 A+ FNMA Investment Agreement, Issue II, 8.250% due 8/15/23(c) 9,855,964
200,000 AA Los Angeles, COP, 6.600% due 11/1/99 210,500
Los Angeles Waste Water System Revenue:
2,430,000 AAA Series A, MBIA-Insured, 5.700% due 6/1/09 2,554,538
2,125,000 AAA Series D, FGIC-Insured, 5.200% due 11/1/21 2,034,688
Metropolitan Water District, Southern California Waterworks
Revenue, Series C:
4,500,000 AA 5.250% due 7/1/16 4,438,125
36,250,000 AA 5.000% due 7/1/27 33,803,125
6,045,000 AAA Orange Cove Irrigation District Revenue COP, (Rehabilitation Project),
AMBAC-Insured, 5.000% due 2/1/17 5,780,530
4,560,000 AAA Pittsburg Public Finance Authority, Waste Water Revenue, Series A,
FGIC-Insured, 5.375% due 6/1/22 4,503,000
28,875,000 AAA San Diego PFA Sewer Revenue, FGIC-Insured,
5.000% due 5/15/20 27,106,406
2,950,000 AAA San Diego Public Facilities, Finance Authority, Sewer Revenue,
Series B, FGIC-Insured, 5.250% due 5/15/27 2,854,125
15,000,000 Aa* San Francisco Public Utility, Community Water Revenue,
5.000% due 11/1/26 13,968,750
- ------------------------------------------------------------------------------------------------------------------------------------
199,835,929
====================================================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $782,872,543**) $833,360,345
====================================================================================================================================
</TABLE>
(a) Bonds escrowed with U.S. Government Securities and Bonds escrowed to
maturity with U.S. Government Securities are considered by the Manager to
be triple-A rated even if issuer has not applied for new ratings.
(b) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(c) Security segregated by Custodian for open purchase commitments.
(d) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(e) Residual interest bonds - coupon varies inversely with level of short-term
tax-exempt interest.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 19 and 20 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Bond Ratings
================================================================================
All ratings are by Standard & Poor's Rating Services ("Standard & Poor's")
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard & Poor's -- Ratings from "AA" to "BB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA"' have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest
rating within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
Smith Barney California Municipal Fund Inc. 19
<PAGE>
================================================================================
Short-Term Security Ratings
================================================================================
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong;
those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
================================================================================
Security Descriptions
================================================================================
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
ETM -- Escrowed To Maturity
FAIRS -- Floating Adjustable Interest Rate Securities
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Agency
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PSF -- Permanent School Fund
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
SAVRS -- Select Auction Variable Rate Securities
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
SYCC -- Structured Yield Curve Certificate
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
- --------------------------------------------------------------------------------
20 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statement of Assets and Liabilities (unaudited) August 31, 1997
================================================================================
ASSETS:
Investments, at value (Cost -- $782,872,543) $ 833,360,345
Cash 15,462
Interest receivable 11,007,137
Receivable for Fund shares sold 1,170,317
Receivable for securities sold 990,300
Other assets 10,169
- --------------------------------------------------------------------------------
Total Assets 846,553,730
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 18,434,593
Dividend payable 3,376,826
Administration fees payable 207,181
Investment advisory fees payable 152,470
Distribution fees payable 63,503
Accrued expenses 157,966
- --------------------------------------------------------------------------------
Total Liabilities 22,392,539
- --------------------------------------------------------------------------------
Total Net Assets $ 824,161,191
================================================================================
NET ASSETS:
Par value of capital shares $ 49,573
Capital paid in excess of par value 765,348,695
Overdistributed net investment income (182,050)
Accumulated net realized gain on security transactions
and futures contracts 8,457,171
Net unrealized appreciation of investments 50,487,802
- --------------------------------------------------------------------------------
Total Net Assets $ 824,161,191
================================================================================
Shares Outstanding:
Class A 36,593,220
---------------------------------------------------------------------------
Class B 11,433,973
---------------------------------------------------------------------------
Class C 1,455,002
---------------------------------------------------------------------------
Class Y 90,423
---------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 16.63
---------------------------------------------------------------------------
Class B* $ 16.62
---------------------------------------------------------------------------
Class C** $ 16.61
---------------------------------------------------------------------------
Class Y (and redemption price) $ 16.62
---------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value) $ 17.32
================================================================================
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if
shares are redeemed within one year from initial purchase (See Note 3).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase (See Note 3).
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 21
<PAGE>
================================================================================
Statement of Operations (unaudited) For the Six Months Ended August 31, 1997
================================================================================
INVESTMENT INCOME:
Interest $23,206,788
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 1,195,159
Distribution fees (Note 3) 1,110,125
Administration fees (Note 3) 767,507
Shareholder and system servicing fees 89,272
Registration fees 47,380
Shareholders communications 43,866
Audit and legal 33,009
Pricing service fees 20,366
Directors' fees 19,151
Custody 16,619
Other 7,608
- --------------------------------------------------------------------------------
Total Expenses 3,350,062
- --------------------------------------------------------------------------------
Net Investment Income 19,856,726
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES4 AND 5):
Realized Gain From:
Security Transactions (excluding short-term securities) 6,580,499
Futures Contracts 377,688
- --------------------------------------------------------------------------------
Net Realized Gain 6,958,187
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 39,159,358
End of period 50,487,802
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 11,328,444
- --------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 18,286,631
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $38,143,357
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statements of Changes in Net Assets
================================================================================
For the Six Months Ended August 31, 1997 (unaudited)
and the Year Ended February 28, 1997
<TABLE>
<CAPTION>
August 31 February 28
===========================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 19,856,726 $ 38,464,345
Net realized gain 6,958,187 13,674,000
Increase (decrease) in net unrealized appreciation 11,328,444 (6,967,210)
- -----------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 38,143,357 45,171,135
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (19,881,717) (38,621,404)
Net realized gains -- (9,156,095)
- -----------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (19,881,717) (47,777,499)
- -----------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 80,625,180 105,614,153
Net asset value of shares issued for reinvestment of dividends 8,972,150 27,141,633
Cost of shares reacquired (52,410,045) (107,613,987)
- -----------------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 37,187,285 25,141,799
- -----------------------------------------------------------------------------------------------------------
Increase in Net Assets 55,448,925 22,535,435
NET ASSETS:
Beginning of period 768,712,266 746,176,831
- -----------------------------------------------------------------------------------------------------------
End of period* $ 824,161,191 $ 768,712,266
===========================================================================================================
* Includes overdistributed net investment income of: $ (182,050) $ (157,059)
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 23
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)
================================================================================
1. Significant Accounting Policies
Smith Barney California Municipals Fund Inc. ("Fund"), a Maryland corporation,
is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between the quoted bid and ask prices as provided by an independent
pricing service; (c) securities maturing within 60 days are valued at cost plus
accreted discount or minus amortized premium, which approximates value; (d)
gains or losses on the sale of securities are calculated using the specific
identification method; (e) interest income, adjusted for amortization of premium
and accretion of original issue discount, is recorded on an accrual basis;
market discount is recognized upon the disposition of the security; (f) direct
expenses are charged to each class; management fees and general fund expenses
are allocated on the basis of relative net assets; (g) dividends and
distributions to shareholders are recorded on the ex-dividend date; (h) the Fund
intends to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended ("Code"), pertaining to regulated investment companies and to
make distributions of taxable income sufficient to relieve it from substantially
all Federal income and excise taxes; (i) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles; and (j) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from Federal income tax and from designated state
income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment adviser to the Fund. The Fund
pays SBMFM an advisory fee calculated at an annual rate of 0.30% of the average
daily net assets. The investment advisory fee is calculated daily and paid
monthly.
SBMFM also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets up to $500
million and 0.18% of the average daily net assets in excess of $500 million.
This fee is calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of Fund
shares. For the six months ended August 31, 1997, SB received sales charges of
approximately $679,000 on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B shares,
which applies if redemption occurs less than one year from initial purchase.
This CDSC declines by 0.50% for the first year after purchase and thereafter by
1.00% per year until no CDSC is incurred. Class C shares have a 1.00% CDSC,
which applies if redemption occurs within the first year of purchase. In certain
cases, Class A shares also have a 1.00% CDSC,
- --------------------------------------------------------------------------------
24 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
which applies if redemption occurs within the first year of purchase. This CDSC
only applies to those purchases of Class A shares, which when combined with
current holdings of Class A shares, equal or exceed $500,000 in the aggregate.
These purchases do not incur an initial sales charge. For the six months ended
August 31, 1997, CDSCs paid to SB were:
Class A Class B Class C
================================================================================
CDSCs $8,000 $153,000 $3,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and C shares calculated at an annual rate of 0.15% of the average
daily net assets for each respective class. In addition, the Fund pays a
distribution fee with respect to its Class B and C shares calculated at an
annual rate of 0.50% and 0.55% of the average daily net assets of each class,
respectively.
For the six months ended August 31, 1997, total Distribution Plan fees incurred
were:
Class A Class B Class C
================================================================================
Distribution Plan Fees $444,033 $594,516 $71,576
================================================================================
All officers and one Director of the Fund are employees of SB.
4. Investments
During the six months ended August 31, 1997, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $200,734,467
- --------------------------------------------------------------------------------
Sales 160,442,791
================================================================================
At August 31, 1997, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 50,970,663
Gross unrealized depreciation (482,861)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 50,487,802
================================================================================
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the proceeds from (or cost of)the closing
transactions and the Fund's basis in the contract.
The Fund enters into such contracts to hedge a portion of its portfolio. The
Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts) and the credit
risk should a counterparty fail to perform under such contracts.
At August 31, 1997, the Fund had no open futures contracts.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 25
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
6. Capital Shares
At August 31, 1997, the Fund had 500 million shares of $0.001 par value capital
stock authorized. The Fund has the ability to establish multiple classes of
shares. Each share of a class represents an identical interest in the Fund and
has the same rights, except that each class bears certain expenses specifically
related to the distribution of its shares.
At August 31, 1997, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
=============================================================================================
<S> <C> <C> <C> <C>
Total Paid-in Capital $556,019,539 $184,429,548 $ 23,562,882 $ 1,386,299
=============================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
August 31, 1997 February 28, 1997
------------------------------- -------------------------------
Shares Amount Shares Amount
=========================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 2,926,598 $(47,976,989 3,949,726 $(63,826,420
Shares issued on reinvestment 417,610 6,769,118 1,294,680 20,922,197
Shares redeemed (2,349,904) (38,322,141) (5,338,776) (86,219,159)
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 994,304 $(16,423,966 (94,370) $ (1,470,542)
=========================================================================================================
Class B
Shares sold 1,276,094 $(20,767,611 2,129,481 $(34,296,606
Shares issued on reinvestment 121,684 1,973,254 355,573 5,749,381
Shares redeemed (630,302) (10,342,442) (1,198,383) (19,306,526)
- ---------------------------------------------------------------------------------------------------------
Net Increase 767,476 $(12,398,423 1,286,671 $(20,739,461
=========================================================================================================
Class C
Shares sold 484,878 $ (7,905,213 464,736 $ (7,491,127
Shares issued on reinvestment 13,471 218,846 29,081 470,055
Shares redeemed (70,415) (1,145,462) (129,633) (2,088,302)
- ---------------------------------------------------------------------------------------------------------
Net Increase 427,934 $ (6,978,597 364,184 $ (5,872,880
=========================================================================================================
Class Y*
Shares sold 249,488 $ (3,975,367 -- --
Shares issued on reinvestment 1,459 10,932 -- --
Shares redeemed (160,524) (2,600,000) -- --
- ---------------------------------------------------------------------------------------------------------
Net Increase 90,423 $ (1,386,299 -- --
=========================================================================================================
* For the period from April 16, 1997 (inception date) to August 31, 1997.
</TABLE>
7. Concentration of Credit
The Fund primarily invests in debt obligations issued by the State of California
and local governments in the State of California, its political subdivisions,
agencies and public authorities to obtain funds for various public purposes. The
Fund is more susceptible to factors adversely affecting issuers of California
municipal securities than is a municipal bond fund that is not concentrated in
these issuers to the same extent.
- --------------------------------------------------------------------------------
26 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares 1997(1) 1997 1996(2) 1995 1994(2) 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.26 $ 16.31 $ 15.40 $ 16.15 $ 16.70 $ 15.78
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.42 0.85 0.85 0.89 0.86 0.97
Net realized and unrealized gain (loss) 0.37 0.15 0.93 (0.56) 0.08 1.25
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.79 1.00 1.78 0.33 0.94 2.22
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.42) (0.85) (0.84) (0.89) (0.84) (0.97)
Net realized gains -- (0.20) (0.03) (0.19) (0.65) (0.29)
Capital -- -- -- -- -- (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (1.05) (0.87) (1.08) (1.49) (1.30)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 16.63 $ 16.26 $ 16.31 $ 15.40 $ 16.15 $ 16.70
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 4.89%++ 6.37% 11.93% 2.46% 5.92% 14.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $608,440 $578,687 $582,324 $401,743 $425,181 $423,504
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.71%+ 0.71% 0.76% 0.80% 0.80% 0.70%
Net investment income 5.12+ 5.29 5.26 5.76 5.20 6.04
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 60% 44% 59% 76% 72%
====================================================================================================================================
</TABLE>
(1) For the six months ended August 31, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 27
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class B Shares 1997(1) 1997 1996(2) 1995 1994(2) 1993(3)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.25 $ 16.32 $ 15.40 $ 16.15 $ 16.70 $ 15.84
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.38 0.76 0.75 0.81 0.77 0.29
Net realized and unrealized gain (loss) 0.37 0.14 0.96 (0.57) 0.09 1.15
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.75 0.90 1.71 0.24 0.86 1.44
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.38) (0.77) (0.76) (0.80) (0.76) (0.28)
Net realized gains -- (0.20) (0.03) (0.19) (0.65) (0.29)
Capital -- -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.38) (0.97) (0.79) (0.99) (1.41) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 16.62 $ 16.25 $ 16.32 $ 15.40 $ 16.15 $ 16.70
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 4.68%++ 5.73% 11.39% 1.89% 5.40% 9.27%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $190,053 $173,347 $153,044 $127,888 $107,740 $ 37,924
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.23%+ 1.23% 1.29% 1.32% 1.33% 1.30%+
Net investment income 4.59+ 4.75 4.71 5.25 4.67 5.44+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 60% 44% 59% 76% 72%
====================================================================================================================================
</TABLE>
(1) For the six months ended August 31, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) For the period from November 6, 1992 (inception date) to February 28,
1993.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
28 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class C Shares 1997(1) 1997 1996(2) 1995(3)
=======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.24 $ 16.31 $ 15.40 $ 14.19
- -------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.37 0.75 0.78 0.24
Net realized and unrealized gain 0.37 0.15 0.92 1.39*
- -------------------------------------------------------------------------------------------------------
Total Income From Operations 0.74 0.90 1.70 1.63
- -------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.37) (0.77) (0.76) (0.23)
Net realized gains -- (0.20) (0.03) (0.19)
- -------------------------------------------------------------------------------------------------------
Total Distributions (0.37) (0.97) (0.79) (0.42)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 16.61 $ 16.24 $ 16.31 $ 15.40
- -------------------------------------------------------------------------------------------------------
Total Return 4.60%++ 5.68% 11.30% 11.72%++
- -------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 24,165 $ 16,678 $ 10,809 $ 762
- -------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.28%+ 1.29% 1.39% 1.37%+
Net investment income 4.53+ 4.69 4.44 5.19+
- -------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 60% 44% 59%
=======================================================================================================
</TABLE>
(1) For the six months ended August 31, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) For the period from November 14, 1994 (inception date) to February 28,
1995.
* The amount shown may not agree with the change in aggregate gains and
losses of portfolio securities due to the timing of sales and the
redemptions of Fund shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 29
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each period:
Class Y Shares 1997(1)
================================================================================
Net Asset Value, Beginning of Period $ 15.83
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.42
Net realized and unrealized gain 0.73
- --------------------------------------------------------------------------------
Total Income From Operations 1.15
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36)
- --------------------------------------------------------------------------------
Total Distributions (0.36)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 16.62
- --------------------------------------------------------------------------------
Total Return++ 7.53%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 1,503
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.53%
Net investment income 5.26
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 20%
================================================================================
(1) For the period from April 16, 1997 (inception date) to August 31, 1997
(unaudited).
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
30 1997 Semi-Annual Report to Shareholders
<PAGE>
Smith Barney
California Municipals
Fund Inc.
Directors
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius Rose
James J. Crisona, Emeritus
Officers
Heath B. McLendon
Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Joseph P. Deane
Vice President and Investment Officer
David Fare
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser and Administrator
Smith Barney Mutual Funds Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is for the information of shareholders of Smith Barney California
Municipals Fund Inc., but it may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the Fund. If used as
sales material after September 30, 1997, this report must be accompanied by
performance for the most recently completed calendar quarter.
Smith Barney
- ------------
A Member of TravelersGroup
Smith Barney
California Municipals Fund Inc.
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
FD0434 10/97
