[PHOTO OMITTED]
Smith Barney
California
Municipals
Fund Inc.
[PHOTO OMITTED]
------------------
SEMI-ANNUAL REPORT
------------------
August 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(sm)
<PAGE>
Smith Barney California
Municipals Fund Inc.
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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.
Average Annual Total Returns
August 31, 1998
Without Sales Charges(1)
---------------------------------
Class A Class B Class L(2)
================================================================================
Six Months+ 2.79% 2.54% 2.51%
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One-Year 9.22 8.61 8.63
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Five-Year 7.46 6.90 N/A
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Ten-Year 8.66 N/A N/A
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Since Inception++ 9.11 8.14 11.23
================================================================================
With Sales Charges(3)
---------------------------------
Class A Class B Class L(2)
================================================================================
Six Months+ (1.33)% (1.96)% 0.50%
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One-Year 4.86 4.11 6.53
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Five-Year 6.59 6.74 N/A
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Ten-Year 8.21 N/A N/A
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Since Inception++ 8.80 8.14 10.94
================================================================================
(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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.50% and 1.00%,
respectively; and Class B shares reflect the deduction of a 4.50% CDSC,
which applies if shares are redeemed within one year from 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 L shares also 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 L shares are April 9, 1984, November 6,
1992 and November 14, 1994, respectively.
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FUND HIGHLIGHT
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"The largest state economy now appears to be running on all cylinders as real
estate prices throughout the state have shown marked improvements. Existing home
sales in California through June have increased roughly 19%, while the median
price of a home in California has increased approximately 11% so far this year.
Furthermore, California's office vacancy rate is among the lowest in the U.S."
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NASDAQ SYMBOL
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Class A SHRCX
Class B SCABX
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WHAT'S INSIDE
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Shareholder Letter............................................................ 1
Historical Performance........................................................ 3
Smith Barney California Municipals Fund Inc.
at a Glance................................................................... 5
Schedule of Investments....................................................... 6
Statement of Assets and Liabilities.......................................... 20
Statement of Operations...................................................... 21
Statements of Changes in Net Assets.......................................... 22
Notes to Financial Statements................................................ 23
Financial Highlights......................................................... 26
Additional Shareholder Information........................................... 28
<PAGE>
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Shareholder Letter
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[PHOTO OMITTED] [PHOTO 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 ended August 31, 1998. 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, 1998, the Fund had a total return of 2.79%,
2.54% and 2.51% for its Class A, B and L shares, respectively. In comparison,
the Fund's Lipper Analytical Services, Inc. California municipal peer group
average posted a total return of 1.41% 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 $0.41 per Class A share. Based on
its net asset value ("NAV") of $17.05 as of August 31, 1998, and the current
monthly income dividend of $0.065 for Class A shares, this equates to an
annualized distribution rate of 4.57%. For a California resident in the combined
federal and state income tax bracket of 45.22%, the Fund's tax-free yield of
4.57% is equivalent to a taxable yield of 8.34%.
Municipal Bond Market Update
The municipal bond market has been in a positive state of mind for quite a while
now. Recent events in Asia and Russia have accelerated the flow of capital
specifically into U.S. government bonds. These factors have created a very
positive interest rate backdrop for the tax-exempt market with increased capital
flows into the U.S., very modest inflation and a potential slowing of the U.S.
economy due to the economic slowdown of several of our trading partners. This is
the lowest long-term interest rate we have seen since the 1960's.
The rates for municipal bonds have also moved lower, but not to the same degree
as U.S. government bonds. The municipal bond market doesn't benefit from foreign
money flows, because the benefits of tax-exemption are only valuable to U.S.
taxpayers.
New-issue supply of municipal bonds in 1998 has been quite heavy. The municipal
bond market is on pace to surpass the record volume underwritten in 1993. These
two factors - pressure toward lower rates and heavy municipal bond issuance -
have led to a market that we believe is very reasonably priced versus taxable
bonds, and has led to a flatter yield curve than we've seen in many years. The
difference in yields between intermediate municipal bonds maturity and very
long-term bonds is minimal. And, in our view, the yield differential between
very high-grade paper and much weaker credits has never been lower. These
investors are not in, our opinion, being adequately compensated for the added
risk.
California Economic Highlights
Prior to 1990, the structural underpinnings of California's economy were
buttressed by its strong economic growth due in large part to its aerospace and
defense industries and a continually appreciating real estate market. However,
during the past several years, the Golden State's economic recovery has been
mainly driven by the growth of new, more diversified industries absent the
benefit of rising real estate values (a condition which has changed recently.)
The
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Smith Barney California Municipals Fund Inc. 1
<PAGE>
nation's largest state economy now appears to be running on all cylinders as
real estate prices throughout the state have shown marked improvements. Existing
home sales in California through June have increased roughly 19%, while the
median price of a home in California has increased approximately 11% so far this
year. Furthermore, California's office vacancy rate is among the lowest in the
U.S.
We think these gains, coupled with California's lowest unemployment levels in
eight years and an annual state gross domestic product ("GDP") of more than $1
trillion, should allow California to remain a competitive economic force for
many years to come.
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 conservative investment management and the
preservation of capital. The Fund's average weighted maturity is approximately
18.5 years.
As of August 31, 1998, approximately 99% of the Fund's holdings were rated
investment grade (BBB/Baa and higher) by either Standard & Poor's Corporation or
Moody's Investors Service Inc., with approximately 68% of the Fund invested in
AAA bonds, the highest possible rating. (Investment-grade bonds are those rated
Aaa, Aa, A and Baa by Moody's Investors Service, Inc. or AAA, AA, A and BBB by
Standard & Poor's Rating Service, or have an equivalent rating by any nationally
recognized statistical rating organization, or determined by the manager to be
of equivalent quality.) The Smith Barney California Municipals Fund's largest
holdings are concentrated in water and sewer bonds (20.9%), hospital bonds
(12.2%) and education bonds (7.9%).
Our investment strategy has recently been quite simple: we have avoided very
long-term debt and lower-rated issues. We have been concentrating our purchases
in very high-grade bonds with maturities between 12 and 20 years. Our coupon
structure has also become somewhat higher. At today's record low interest rates,
we are taking a more conservative approach to the market. Our experience
indicates conditions are near perfect for bonds at the moment and prudence
suggests we take advantage of these conditions.
Municipal Bond Market Outlook
Our outlook for the municipal bond market for the next six months carries a
caveat. If economic conditions around the world do not get much worse, then
interest rates have fallen to levels that seem appropriate. If things continue
to deteriorate beyond today's levels, then there could be more downward pressure
on interest rates in the U.S. We will be monitoring these events very closely
for our shareholders. Thank you for investing in the Smith Barney California
Municipals Fund.
Sincerely,
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President and
Investment Officer
September 15, 1998
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2 1998 Semi-Annual Report to Shareholders
<PAGE>
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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>
8/31/98 $16.99 $17.05 $0.41 $0.00 $0.00 2.79%+
- -------------------------------------------------------------------------------------------------------------
2/28/98 16.26 16.99 0.84 0.23 0.00 11.44
- -------------------------------------------------------------------------------------------------------------
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
=============================================================================================================
Total $9.95 $2.01 $0.04
=============================================================================================================
</TABLE>
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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>
8/31/98 $16.98 $17.04 $0.36 $0.00 $0.00 2.54%+
- -------------------------------------------------------------------------------------------------------------
2/28/98 16.25 16.98 0.76 0.23 0.00 10.88
- -------------------------------------------------------------------------------------------------------------
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 $4.49 $1.59 $0.01
=============================================================================================================
</TABLE>
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Historical Performance -- Class L 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>
8/31/98 $16.97 $17.03 $0.36 $0.00 $0.00 2.51%+
- -------------------------------------------------------------------------------------------------------------
2/28/98 16.24 16.97 0.75 0.23 0.00 10.83
- -------------------------------------------------------------------------------------------------------------
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 $2.87 $0.65 $0.00
=============================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
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Smith Barney California Municipals Fund Inc. 3
<PAGE>
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Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 8/31/98+ 2.79% 2.54% 2.51%
- --------------------------------------------------------------------------------
Year Ended 8/31/98 9.22 8.61 8.63
- --------------------------------------------------------------------------------
Five Years Ended 8/31/98 7.46 6.90 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 8/31/98 8.66 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 8/31/98 9.11 8.14 11.23
================================================================================
With Sales Charges(2)
--------------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 8/31/98+ (1.33)% (1.96)% 0.50%
- --------------------------------------------------------------------------------
Year Ended 8/31/98 4.86 4.11 6.53
- --------------------------------------------------------------------------------
Five Years Ended 8/31/98 6.59 6.74 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 8/31/98 8.21 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 8/31/98 8.80 8.14 10.94
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (8/31/88 through 8/31/98) 129.41%
- --------------------------------------------------------------------------------
Class B (Inception* through 8/31/98) 57.64
- --------------------------------------------------------------------------------
Class L (Inception* through 8/31/98) 49.81
================================================================================
(1) Assumes reinvestment of all dividend 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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) Assumes reinvestment of all dividend and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed less than one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also 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 and L shares are April 9, 1984, November 6,
1992 and November 14, 1994, respectively.
- --------------------------------------------------------------------------------
4 1998 Semi-Annual Report to Shareholders
<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 1988 -- August 1998
[The following table was depicted as a line graph in the printed material.]
SB Cal Muni Lehman Muni Bond Lipper Cal
8/88 9,599 10,000 10,000
2/89 10,150 10,465 10,551
2/90 11,066 11,539 11,497
2/91 11,983 12,604 12,424
2/92 12,922 13,862 13,608
2/93 14,830 15,771 15,511
2/94 15,706 16,644 16,366
2/95 16,090 16,958 16,406
2/96 18,071 18,831 18,110
2/97 19,223 19,869 18,983
2/98 21,422 21,686 20,764
8/98 22,021 22,432 21,443
- --------------------------------------------------------------------------------
+ Hypothetical illustration of $10,000 invested in Class A shares on August
31, 1988, 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, 1998. 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 107 mutual
funds investing in California municipal bonds as of August 31, 1998. 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*
- --------------------------------------------------------------------------------
[The following table was depicted as a bar graph in the printed material.]
7.9% Education
6.4% General Obligation
12.2% Hospitals
3.7% Housing: Multi-Family
2.6% Housing: Single-Family
3.4% Pollution Control Revenue
3.7% Pre-Refunded
1.8% Solid Waste
4.0% Tax Allocation
2.5% Transportation
4.7% Utilities
20.9% Water & Sewer
26.2% Other
* As a percentage of total investments.
Summary of Investments by Combined Ratings
- --------------------------------------------------------------------------------
Standard Percentage
Moody's & Poor's of Total Investments
- --------------------------------------------------------------------------------
Aaa AAA 68.4%
Aa AA 8.9
A A 15.9
Baa BBB 5.4
Ba BB 0.1
VMIG 1/P-1 A-1 0.7
NR NR 0.6
--------
100.0%
========
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Smith Barney California Municipals Fund Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Education -- 7.9%
$2,000,000 AAA Adelanto School District, Series B, FGIC-Insured,
zero coupon due 9/1/18 $ 732,500
California Educational Facilities Authority Revenue:
6,125,000 Baa3* Pooled College & University Project, Series A, 5.500% due 7/1/15 6,354,688
Southwestern University Project:
2,635,000 A3* 6.600% due 11/1/14 2,964,375
4,505,000 A3* 6.700% due 11/1/24 5,028,706
2,500,000 A3* University of San Diego, 6.500% due 10/1/22 2,787,500
California State Public Works Board, Lease Revenue:
1,000,000 A High Technology Facility, San Jose Facilities, Series A,
7.750% due 8/1/06 1,215,000
Various California State University Projects:
Series B:
3,085,000 A 5.400% due 9/1/13 3,231,536
3,245,000 A 5.450% due 9/1/14 3,399,137
2,425,000 A 5.500% due 9/1/15 2,531,094
1,400,000 A 5.550% due 9/1/16 1,461,250
Series C, AMBAC-Insured:
6,590,000 AAA 5.000% due 9/1/13 6,754,750
6,000,000 AAA 5.000% due 9/1/14 6,120,000
6,000,000 AAA Campbell Unified School District, FGIC-Insured, 5.000% due 8/1/17 6,030,000
1,400,000 AAA Eastside Unified High School District, Santa Clara County, Series B,
FGIC-Insured, 5.000% due 9/1/18 1,398,250
1,750,000 AAA Escondito Unified School District, Series A, FGIC-Insured,
5.125% due 9/1/15 1,791,562
2,545,000 AAA King City, CA Joint Unified High School District, FGIC-Insured,
5.000% due 8/1/15 2,579,993
2,000,000 AAA Lancaster School District COP, FSA-Insured, 5.125% due 4/1/14 2,065,000
2,300,000 AAA Rio Linda Unified School District, FSA-Insured, 5.250% due 8/1/17 2,354,625
San Diego Community College District, Lease Revenue, MBIA-Insured:
1,250,000 AAA 6.125% due 12/1/16 1,439,062
3,460,000 AAA 5.250% due 12/1/21 3,771,400
1,530,000 AAA Santa Rosa High School District, FGIC-Insured, 5.900% due 5/1/14 1,661,963
Standard School District COP, (Capital Improvement Project), Series A:
320,000 A- 6.200% due 3/1/10 345,600
340,000 A- 6.250% due 3/1/11 366,350
4,500,000 A3* Ukiah Unified School District COP, (Measure A Capital Projects),
6.000% due 9/1/10 4,747,500
2,600,000 AAA Victor Valley Unified High School District,
MBIA-Insured, 5.750% due 11/1/17 2,811,250
1,000,000 AAA Windsor, CA Unified School District COP, (Capital Projects),
FSA-Insured, 5.200% due 6/1/18 1,017,500
2,500,000 Baa1* Yuba City Unified School District COP, (Ardors Karperos
School Construction Project), 6.700% due 2/1/13 2,715,625
- ----------------------------------------------------------------------------------------------------------------------------------
77,676,216
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Electric -- 0.7%
Sacramento Power Authority, Cogeneration Project Revenue:
$ 1,800,000 BBB- 6.500% due 7/1/07 $ 2,047,500
1,800,000 BBB- 6.500% due 7/1/08 2,022,750
2,200,000 BBB- 6.500% due 7/1/09(a) 2,458,500
- ----------------------------------------------------------------------------------------------------------------------------------
6,528,750
- ----------------------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity(b) -- 5.6%
270,000 AAA Contra Costa County Home Mortgage Revenue, Mortgage Backed
Securities Program, GNMA-Collateralized, 7.750% due 5/1/22 353,815
100,000 AAA Kern High School District, Series C, MBIA-Insured,
8.750% due 8/1/03 121,750
San Joaquin Hills California Transportation Corridor Agency
Toll Road Revenue:
5,000,000 AAA Zero coupon due 1/1/14(a) 2,400,000
60,000,000 AAA Zero coupon due 1/1/16(a) 25,725,000
17,500,000 AAA Zero coupon due 1/1/17(a) 7,109,375
25,000,000 AAA Zero coupon due 1/1/18(a) 9,656,250
20,000,000 AAA Zero coupon due 1/1/19(a) 7,350,000
845,000 AAA Santa Rosa Hospital Revenue, (Santa Rosa Hospital
Memorial Project), 10.300% due 3/1/11 1,125,963
1,250,000 BBB Sequoia Hospital District Revenue, 5.375% due 8/15/23 1,307,813
- ----------------------------------------------------------------------------------------------------------------------------------
55,149,966
- ----------------------------------------------------------------------------------------------------------------------------------
General Obligation -- 6.4%
California State GO:
30,000,000 AAA AMBAC-Insured, 5.000% due 10/1/18 29,962,500
Veterans Series:
455,000 A+ Series AL, 9.700% due 4/1/02 542,588
725,000 A+ Series AM, 9.000% due 10/1/02 863,656
Series AT:
4,000,000 A+ 9.700% due 2/1/01(a) 4,540,000
1,000,000 A+ 9.500% due 2/1/10 1,443,750
2,000,000 A+ Series AU, 8.400% due 10/1/06 2,572,500
1,000,000 Aa1* San Diego Public Safety Communication Project,
6.650% due 7/15/11 1,212,500
Santa Margarita/Dana Point Authority Revenue GO:
20,000,000 AAA Series A, AMBAC-Insured, 5.125% due 8/1/18 20,200,000
1,500,000 AAA Water Improvement Districts 3-3A-4 & 4A, Series B, MBIA-Insured,
7.250% due 8/1/14 1,938,750
- ----------------------------------------------------------------------------------------------------------------------------------
63,276,244
- ----------------------------------------------------------------------------------------------------------------------------------
Hospitals -- 12.2%
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 1,616,250
235,000 A+ California Health Facilities Authority Revenue, Victory Valley
Community Hospital, Series 84-A, 9.875% due 7/1/12 236,069
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Hospitals -- 12.2% (continued)
California Health Facilities Financing Authority Revenue:
AMBAC-Insured:
$ 2,500,000 AAA Catholic Health Facilities, 5.750% due 7/1/15 $ 2,678,125
5,620,000 AAA Catholic Healthcare West, Series E, 5.250% due 7/1/16 5,746,450
Industrial Health Facilities:
705,000 A+ Casa De Las Campanas, Series A, 5.500% due 8/1/12 729,674
2,500,000 A+ Marshall Hospital, Series A, 5.250% due 11/1/18 2,512,500
1,000,000 AAA Scripps Health, Series C, MBIA-Insured, 5.000% due 10/1/14 1,017,500
Kaiser Permanente, Series A, FSA-Insured:
3,500,000 AAA 5.000% due 6/1/18 3,495,625
3,500,000 AAA 5.500% due 6/1/22 3,670,625
Series A, MBIA-Insured:
2,000,000 AAA Catholic Healthcare West, 5.000% due 7/1/17 2,000,000
3,000,000 AAA Catholic Healthcare West, 5.125% due 7/1/24 3,007,500
2,000,000 AAA Cedars-Sinai Center, 5.125% due 8/1/17 2,020,000
5,145,000 AAA Stanford Health Care, Series A, 5.000% due 11/15/18 5,106,413
Sutter Health:
Series A, FSA-Insured:
1,470,000 AAA 5.125% due 8/15/17 1,484,700
1,500,000 AAA 5.250% due 8/15/27 1,518,750
Series B:
5,000,000 A-1+ AMBAC-Insured, 3.500% due 7/1/12(c) 5,000,000
3,000,000 A-1+ 3.500% due 3/1/20(c) 3,000,000
4,200,000 A-1+ Series C, 3.500% due 7/1/22(c) 4,200,000
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(a) 4,853,625
600,000 A-1+ John Muir/Mount Diablo Health, AMBAC-Insured,
3.400% due 8/15/27 600,000
19,000,000 A Kaiser Permanente, 5.300% due 12/1/15 19,261,250
1,100,000 A+ Solheim Lutheran Home, 6.500% due 11/1/17 1,196,250
St. Joseph's Health System:
4,825,000 AA 5.500% due 7/1/14 4,993,875
4,000,000 AA 5.250% due 7/1/21 4,050,000
6,000,000 AA 6.625% due 7/1/21 6,907,500
Sutter Health Obligated Group:
MBIA-Insured:
3,500,000 AAA 5.500% due 8/15/09 3,745,000
500,000 AAA 6.000% due 8/15/25 544,375
1,030,000 A+ Villaview Community, 7.000% due 9/1/09 1,126,563
Fresno Health Facilities Revenue, Holy Cross Health System Corp.:
2,200,000 AA 5.200% due 12/1/04 2,312,750
2,435,000 AA 5.375% due 12/1/06 2,571,969
1,000,000 AA St. Agnes, 6.625% due 6/1/21 1,113,750
1,000,000 AAA Modesto Health Facilities Revenue, Memorial Hospital Association,
Series B, MBIA-Insured, 5.125% due 6/1/17 1,010,000
2,000,000 A Riverside County Asset Leasing Corp., (Riverside County Hospital
Project), Series A, 6.375% due 6/1/09 2,162,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Hospitals -- 12.2% (continued)
$2,750,000 A- San Joaquin County COP, (General Hospital Project 1993),
6.250% due 9/1/13 $ 2,970,000
9,550,000 A Torrance Hospital Revenue Bonds, Little County of Mary Hospital,
6.875% due 7/1/15(a) 10,409,500
1,500,000 NR Valley Health System COP, 6.875% due 5/15/23 1,627,500
- ----------------------------------------------------------------------------------------------------------------------------------
120,496,588
- ----------------------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.7%
1,250,000 AAA ABAG County, Series 96A, FNMA-Collateralized,
5.700% due 11/1/06(a) 1,329,688
California HFA:
Home Mortgage Revenue:
Series B:
3,000,000 AAA AMBAC-Insured, 5.150% due 2/1/18(d) 3,018,750
350,000 Aa2* Project 1983, zero coupon due 8/1/15 63,000
280,000 Aa2* Series C, 8.300% due 8/1/19(d) 286,300
Series E:
215,000 Aa2* 8.250% due 8/1/08(d) 219,300
380,000 Aa2* 8.350% due 8/1/19(d) 387,600
5,225,000 Aa2* 6.375% due 8/1/27(d) 5,675,655
990,000 Aa2* Series F-1, 7.000% due 8/1/26(d) 1,069,200
Series A:
1,595,000 A+ 6.625% due 2/1/24(d) 1,698,675
5,000 AAA 1985, MBIA-Insured, 8.750% due 8/1/10 5,144
480,000 AAA Series C, MBIA-Insured, 7.000% due 8/1/23(b) 511,800
6,000,000 AAA California Statewide Community Development Authority COP,
St. Joseph's Health System Group, Series E,
FNMA-Collateralized, 6.400% due 6/1/28(a)(d) 6,435,000
2,250,000 A+ California State Department of Veterans Affairs, Series B,
5.500% due 12/1/18(d) 2,289,375
1,670,000 NR Hayward Housing Authority Revenue, FNMA-Collateralized, Family
Revenue, Cypress Gardens, Series C, 9.375% due 12/1/18 1,880,838
6,000,000 AAA Pleasanton-Suisun City HFA, Home Mortgage, Series A, MBIA-Insured,
(Escrowed to maturity with U.S. government securities),
zero coupon due 10/1/16(b) 2,317,500
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) 1,859,375
1,500,000 Aa3* San Jose Multi-Family Timberwood Apartments, Series A,
LOC -- Wells Fargo Bank, 7.500% due 2/1/20 1,537,500
1,320,000 AAA Santa Rosa Mortgage Revenue, (Village Square Apartments Project),
Series A, FHA-Insured, 6.875% due 9/1/27 1,447,050
2,755,000 AAA Victorville Multi-Family Housing Revenue, Wimbledon Apartments,
Series A, GNMA-Collateralized, 6.300% due 4/20/31(a) 2,947,850
1,700,000 AAA Upland Hospital Revenue COP, San Antonio Community Hospital,
(Pre-Refunded -- Escrowed with U.S. government securities,
Call 1/1/99 @ 102), 7.800% due 1/1/18 1,757,511
- ----------------------------------------------------------------------------------------------------------------------------------
36,737,111
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Housing: Single-Family -- 2.6%
California HFA Revenue Bonds, Home Mortgage:
$ 10,000 Aa2* 10.250% due 2/1/14 $ 10,022
310,000 Aa2* Capital Appreciation, Series 1984-B, zero coupon due 8/1/16 41,878
Single-Family Mortgage:
8,000,000 AAA Issue A-2, FHA-Isured, 6.350% due 8/1/15(a)(d) 8,630,000
3,650,000 AAA Series B-3, Class II, MBIA-Insured, 5.375% due 8/1/21 3,709,313
Los Angeles Home Mortgage Revenue Bonds, GNMA-Collateralized:
745,000 Aaa* Second Mortgage Project, 8.100% due 5/1/17 835,331
495,000 AAA Single-Family Mortgage Revenue, Mortgage Backed Securities
Program, Issue A, 7.550% due 12/1/23(d) 516,038
125,000 AAA Martinez, CA Home Mortgage Revenue Bonds, 10.750% due 2/1/16 198,906
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(b)(d) 4,409,781
Riverside County Housing Authority Revenue Bonds,
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(b)(d) 3,507,525
1,000,000 AAA 7.800% due 5/1/21(b)(d) 1,347,500
1,500,000 AAA Sacramento County Single-Family Mortgage Revenue, Issue A,
GNMA-Collateralized, (Escrowed to maturity with U.S. government
securities), 8.125% due 7/1/16(b)(d) 2,040,000
110,000 AA+ San Francisco City & County Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 7.450% due 1/1/24(b)(d) 115,088
160,000 AAA Southern California HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, Series B, 7.750% due 3/1/24(d) 168,400
- ----------------------------------------------------------------------------------------------------------------------------------
25,529,782
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Development -- 0.1%
1,000,000 Aa2* Los Angeles IDA, IDR, (Altshule Properties Project),
7.200% due 10/1/11(d) 1,031,060
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 19.8%
500,000 A2* ABAG Finance Authority Nonprofit Corps., COP, Peninsula
Family, YMCA, Series A, 6.800% due 10/1/11 528,125
2,445,000 AAA Alameda County COP, (Refunding & Capital Projects), AMBAC-Insured,
5.000% due 6/1/12 2,503,067
2,500,000 NR Alhambra, Arcadia, Azusa Counties, Independent Cities,
Risk Management Authority COP, 7.250% due 3/1/07 2,528,450
2,000,000 AAA Anaheim COP, Regular Fixed Option Bonds, MBIA-Insured,
6.200% due 7/16/23 2,262,500
1,025,000 Baa* Azusa COP, (Capital Improvements Refinancing Project),
6.625% due 8/1/13 1,101,875
Brisbane Redevelopment Agency, Brisbane Community
Redevelopment Bonds:
200,000 AA 9.400% due 5/1/05 203,746
220,000 AA 9.400% due 5/1/06 224,066
California Public Capital Improvements Finance Authority Revenue,
(Pooled Project):
750,000 Baa* Series A, 8.500% due 3/1/18 775,620
565,000 AAA Series B, BIG-Insured, 8.100% due 3/1/18 576,526
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Miscellaneous -- 19.8% (continued)
$5,000,000 AAA California State Department of Transportation COP,
Series A, MBIA-Insured, 5.250% due 3/1/16 $5,143,750
5,000,000 AAA California State University Headquarters Building Authority, Series B,
MBIA-Insured, 5.125% due 9/1/17 5,075,000
150,000 A- Concord Santa Cruz South Gate COP, Series A, 7.625% due 6/1/11 150,975
Contra Costa County COP, (Capital Projects), AMBAC-Insured:
4,630,000 AAA 5.250% due 2/1/17 4,739,963
3,000,000 AAA 5.250% due 2/1/21 3,060,000
Dublin COP, (Civic Center Project), AMBAC-Insured:
1,305,000 AAA 5.600% due 2/1/06 1,316,419
1,380,000 AAA 5.625% due 2/1/07 1,392,075
Fresno Joint Powers Financing Authority, Local Agency Revenue, Series A:
2,000,000 BBB 6.000% due 9/2/01 2,067,500
1,000,000 BBB 6.200% due 9/2/03 1,045,000
1,500,000 BBB 6.550% due 9/2/12 1,635,000
Irvine Import Board Act 1915:
1,000,000 VMIG 1* Updates Assessment District No. 89-10, 3.500% due 9/2/15(c) 1,000,000
2,600,000 A-1+ Updates Assessment District No. 97-16, 3.500% due 9/2/22(c) 2,600,000
3,600,000 VMIG 1* Updates Assessment District No. 97-17, 3.500% due 9/2/23(c) 3,600,000
5,000,000 AAA Long Beach Board Finance Authority Lease Revenue, (Civic Center
Project), Series A, MBIA-Insured, 5.000% due 10/1/17 5,018,750
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 3,469,375
Los Angeles County COP:
2,000,000 Baa1* Special Linked SAVRS & RIBS, 6.708% due 6/1/15 2,190,000
1,000,000 Baa1* Structured Yield Curve Note, 6.600% due 11/1/11 1,101,250
7,500,000 AA Los Angeles County Public Works Financing Authority Revenue,
Regional Park & Open Space District, Series A, 5.000% due 10/1/19 7,462,500
Oakland, CA State Buliding Authority Lease Revenue, Elihu M Harris,
Series A, AMBAC-Insured:
6,715,000 AAA 5.000% due 4/1/16 6,773,756
2,725,000 AAA 5.000% due 4/1/17 2,735,219
2,670,000 AAA Ontario Redevelopment Finance Authority Revenue, (Project No. 1),
MBIA-Insured, (Escrowed to maturity with U.S. government
securities), 5.800% due 8/1/23(b) 2,820,188
1,500,000 AAA Orange County Community Facility District 86-1,
FSA-Insured, 7.125% due 8/15/17 1,575,150
1,300,000 Baa* Orange County Public Facility COP, Solid Waste Revenue,
7.875% due 12/1/07 1,339,767
6,000,000 AAA Orange County Recovery COP, Series A, MBIA-Insured,
5.875% due 7/1/19 6,517,500
1,455,000 AAA Placer County, CA Juvenile Detention Facilities, MBIA-Insured,
5.000% due 7/1/18 1,453,181
920,000 Baa1* Pleasanton Joint Powers Financing Authority Revenue, Series A,
6.150% due 9/2/12 989,000
6,670,000 AAA Pomona, CA Public Financing Authority Revenue, (Redevelopment
Project), Series W, MBIA-Insured, 5.000% due 2/1/24 6,611,637
7,000,000 AAA Puerto Rico Commonwealth Infrastructure Financing Authority,
Series A, AMBAC-Insured, 5.000% due 7/1/16 7,061,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Miscellaneous -- 19.8% (continued)
Sacramento County COP, (Public Facilities Project):
AMBAC-Insured:
$14,495,000 AAA 4.750% due 10/1/17 $ 14,150,744
3,750,000 AAA 4.750% due 10/1/27 3,595,313
4,700,000 AAA Solid Waste Facilities, MBIA-Insured, 5.250% due 12/1/16 4,829,250
2,800,000 AAA Salida Area Public Financing Agency Community Facilities District,
Special Tax No. 1988-1, FSA-Insured, 5.250% due 9/1/18 2,859,500
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(b) 2,587,500
San Diego County COP:
9,000,000 AAA Central Jail Refunding, AMBAC-Insured, 5.000% due 10/1/25 8,921,250
1,000,000 AAA Regular Fixed Option Certificates, MBIA-Insured,
6.363% due 11/18/19 1,068,750
135,000 A* San Francisco Downtown Parking, Corporate Parking
Revenue Bonds, 6.250% due 4/1/04 149,344
13,015,000 AAA San Francisco, CA City & County Redevelopment Agency Hotel
Tax Revenue, FSA-Insured, 5.000% due 7/1/18 12,998,731
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(b) 1,508,500
5,995,000 AAA San Ramone COP, (Central Park Project), FSA-Insured,
5.000% due 8/1/24 5,942,544
2,875,000 AAA Santa Ana Financing Authority Lease Revenue, Police
Administration & Holding Facility, Series A, MBIA-Insured,
6.250% due 7/1/24 3,446,406
3,460,000 A+ Santa Barbara County COP, 5.700% due 3/1/11 3,680,575
7,180,000 AAA Santa Maria Redevelopment Agency, Town Center Package,
FSA-Insured, 5.000% due 6/1/16 7,215,900
Sonoma County COP, Detention Facilities Improvement Project:
4,200,000 A+ 5.000% due 11/15/13 4,231,500
3,000,000 A+ 5.000% due 11/15/17 2,962,500
2,000,000 AAA South Orange County Public Finance Authority, Special Tax Revenue,
Series A, MBIA-Insured, 7.000% due 9/1/10 2,472,500
1,100,000 AAA Sunnyvale, CA COP, Parking Facilities, Series A, AMBAC-Insured,
5.000% due 10/1/17 1,105,500
500,000 AA- Tustin, CA Improvement Bond Act of 1915, Reassessment District
No. 95-2, Series A, 3.500% due 9/2/13(c) 500,000
10,000,000 BBB- Virgin Islands Public Financing Authority Revenue, Series A,
5.500% due 10/1/18 10,162,500
- ----------------------------------------------------------------------------------------------------------------------------------
195,036,987
- ----------------------------------------------------------------------------------------------------------------------------------
Pollution Control Revenue -- 3.4%
California Financing Authority:
Pacific Gas & Electric Co.:
Series B:
2,500,000 AA- 6.350% due 6/1/09(d) 2,728,125
4,300,000 A-1+ 3.600% due 11/1/26(c) 4,300,000
5,000,000 A-1+ Series C, 3.550% due 11/1/26(c) 5,000,000
800,000 A-1 Series G, 3.600% due 2/1/16(c) 800,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Pollution Control Revenue -- 3.4% (continued)
San Diego Gas & Electric, Series A:
$5,800,000 A 5.900% due 6/1/14(a) $ 6,503,250
1,500,000 A+ 6.800% due 6/1/15(d) 1,831,875
Solid Waste Disposal Revenue, (Shell Martinez Refining Project),
Series A:
2,300,000 A-1+ 3.500% due 10/1/31(c)(d) 2,300,000
1,800,000 VMIG 1* 3.600% due 10/1/24(c)(d) 1,800,000
1,600,000 A-1+ Series B, 3.600% due 12/1/24(c)(d) 1,600,000
500,000 BBB Resource Recovery Revenue, Series A,
Waste Management, 7.150% due 2/1/11(d) 540,000
5,200,000 A-1+ Orange County Sanitation Districts COP, District No.'s 1,2,3,6,7 & 11,
Series C, FGIC-Insured, 3.500% due 8/1/17(c) 5,200,000
400,000 P-1* Unita County (Chevron USA Project), 3.700% due 8/15/20(c) 400,000
- ----------------------------------------------------------------------------------------------------------------------------------
33,003,250
- ----------------------------------------------------------------------------------------------------------------------------------
Pre-Refunded(e) -- 3.7%
California Health Facilities Financing Authority Revenue:
115,000 Aa1* Community Provider Pooled Loan, Series A, (Call 6/1/00 @ 102),
7.350% due 6/1/20 124,200
1,250,000 AA South Coast Medical Center, (Call 7/1/00 @ 102),
7.250% due 7/1/15 1,351,563
1,450,000 AAA St. Elizabeth Hospital, (Call 11/15/02 @ 102),
6.200% due 11/15/09 1,604,063
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 1,082,500
1,405,000 AAA Contra Costa County COP, Merrithew Memorial Hospital,
(Call 11/1/02 @ 102), 6.500% due 11/1/06 1,571,844
1,500,000 AAA Desert Hospital District COP, (Call 7/1/00 @ 102), 8.100% due 7/1/20 1,646,250
1,000,000 A+ Inglewood Insured Hospital Revenue Bonds, Daniel Freeman
Hospital Inc., (Call 5/1/01 @ 102), 6.750% due 5/1/13 1,093,750
465,000 AAA Local Government Finance Joint Powers Authority Revenue,
Anaheim Redevelopment Agency, Series A, (Call 9/1/98 @ 102),
8.200% due 9/1/15 474,300
450,000 AAA Los Angeles, CA Convention & Exhibition Center Authority,
(Call 12/1/05 @ 100), 9.000% due 12/1/20 588,375
Los Angeles Department of Water & Power:
1,950,000 Aa3* Electric Plantation Revenue, (Call 1/15/01 @ 102),
7.100% due 1/15/31 2,123,063
1,550,000 AA Water Works Revenue, (Call 2/15/99 @ 102), 7.200% due 2/15/19 1,606,404
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 8/1/21 571,250
1,000,000 AAA Orange County Community Facility District, Special Tax, Series A,
(Call 8/15/00 @102), 7.800% due 8/15/15 1,096,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Pre-Refunded(e) -- 3.7% (continued)
$1,740,000 AAA Oxnard Public Facilities Corp. COP, Wastewater Treatment
Plant Project, AMBAC-Insured, (Call 9/1/99 @ 100),
7.500% due 9/1/06 $ 1,808,834
1,000,000 A2* Rancho Mirage COP, Eisenhower Memorial Hospital, Joint Powers
Financing Authority, (Call 3/1/02 @ 102), 7.000% due 3/1/22 1,121,250
2,000,000 AAA Rancho Water District Financing Authority Revenue, Regular Fixed
Option Bonds, AMBAC-Insured, (Call 9/11/01 @ 102),
6.427% due 8/17/21 2,180,000
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 2,622,050
1,000,000 AAA San Bernadino County COP, (West Valley Detention Center Project),
(Call 11/1/98 @ 102), 7.700% due 11/1/18 1,026,770
1,000,000 AAA San Buenaventura COP, AMBAC-Insured,
(Call 10/1/00 @ 102), 7.500% due 10/1/20 1,095,000
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 1,483,625
- ----------------------------------------------------------------------------------------------------------------------------------
36,363,779
- ----------------------------------------------------------------------------------------------------------------------------------
Solid Waste -- 1.8%
2,770,000 AAA Fresno County Finance Authority, Solid Waste Revenue Bonds,
American Avenue Landfill, MBIA-Insured, 5.750% due 5/15/14 2,981,213
Inland Empire Solid Waste Authority Revenue, FSA-Insured:
5,000,000 AAA 6.250% due 8/1/11(d) 5,650,000
2,500,000 AAA 6.000% due 8/1/16(d) 2,721,875
500,000 BBB+ Kings County Waste Management Authority, Solid Waste Revenue,
7.200% due 10/1/14(d) 576,250
1,000,000 BB Nevada County COP, 7.500% due 6/1/21 1,063,750
4,135,000 Baa1* South Napa Waste Management Authority Revenue, (Solid Waste
Transfer Facilities Project), 6.500% due 2/15/14(d) 4,439,956
- ----------------------------------------------------------------------------------------------------------------------------------
17,433,044
- ----------------------------------------------------------------------------------------------------------------------------------
Tax Allocation -- 4.0%
2,000,000 AAA Anaheim Public Finance Authority, Tax Allocation Revenue, Regular
Fixed Option Bonds, MBIA-Insured, 6.450% due 12/28/18 2,310,000
1,000,000 Baa3* Azusa Redevelopment Agency, Tax Allocation, Merged Project Area,
Series A, 6.750% due 8/1/23 1,075,000
1,200,000 AAA Bay Area Government Assessment, Tax Allocation,
Redevelopment Agency Pool, Series A6, FSA-Insured,
5.250% due 12/15/17 1,230,000
295,000 AAA Brea Public Finance Authority, Tax Allocation,
MBIA-Insured, 7.000% due 8/1/15 323,763
30,000 AAA Concord Redevelopment Agency, Tax Allocation,
Series 3, MBIA-Insured, 8.000% due 7/1/18 31,002
6,000,000 AAA Corona Redevelopment Agency, Tax Allocation,
Redevelopment Project Area A, Series A,
FGIC-Insured, 5.500% due 9/1/24 6,217,500
1,000,000 AAA El Centro Redevelopment Tax Allocation,
MBIA-Insured, 6.375% due 11/1/17 1,133,750
4,160,000 AAA Fontana Public Finance Authority, Tax Allocation,
MBIA-Insured, Series A, 5.000% due 9/1/20 4,128,800
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Tax Allocation -- 4.0% (continued)
$10,000,000 AAA Fremont, CA Alameda County Union School District, Series A,
FGIC-Insured, 4.750% due 8/1/20 $ 9,712,500
3,275,000 BBB+ Garden Grove Community Development Agency, Tax Allocation,
(Garden Grove Community Project), 5.700% due 10/1/08 3,463,312
2,000,000 Baa* Hawthorne Community Redevelopment, Tax Allocation,
(Project Area 2), 6.625% due 9/1/14 2,187,500
1,000,000 AAA Irwindale Community Redevelopment Agency, Tax Allocation, (City
Industrial Development Project), FSA-Insured, 5.000% due 8/1/17 1,005,000
2,275,000 AAA Los Angeles, CA Community Redevelopment Agency, Tax Allocation,
(Hollywood Redevelopment Project), Series C, MBIA-Insured,
5.050% due 7/1/15 2,314,813
2,445,000 AAA Rancho Cucamonga Redevelopment, Tax Allocation, (Rancho
Redevelopment Project), MBIA-Insured, 5.250% due 9/1/16 2,512,237
2,000,000 AAA Vista Community Development, Tax Allocation Revenue,
Vista Redevelopment Project Area, MBIA-Insured,
5.250% due 9/1/15 2,047,500
- ----------------------------------------------------------------------------------------------------------------------------------
39,692,677
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation -- 2.5%
5,000,000 AA Los Angeles Harbor Department Revenue, Series B,
5.375% due 11/1/15(d) 5,137,500
2,000,000 A Port of Oakland Special Facilities Revenue, Series A,
6.750% due 1/1/12(d) 2,147,500
9,000,000 AAA Sacramento County Airport System Revenue, Series A,
MBIA-Insured, 5.900% due 7/1/24(a)(d) 9,697,500
400,000 A1* Sacramento Regional Transportation District COP,
Series A, 6.400% due 3/1/03 439,000
3,000,000 AAA San Francisco Airport Community International Corp.
Lease Revenue, FGIC-Insured, 6.500% due 5/1/19(d) 3,345,000
180,000 AAA San Francisco Airport Improvement Corp., Lease Revenue,
(Escrowed to maturity with U.S. government securities),
8.000% due 7/1/13(b) 225,000
San Jose Airport Revenue Bonds, FGIC-Insured:
200,000 AAA 5.400% due 3/1/04(d) 212,750
1,500,000 AAA 5.500% due 3/1/07(d) 1,597,500
1,250,000 A* Santa Barbara COP, (Harbor Reference Project),
6.750% due 10/1/27 1,365,625
- ----------------------------------------------------------------------------------------------------------------------------------
24,167,375
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 4.7%
Northern California Power Agency Public Power Refunding:
1,110,000 A- Geothermal Project No. 3, Series A, 5.000% due 7/1/09 1,110,599
Hydroelectric Project No. 1, Series A, MBIA-Insured:
5,000,000 AAA 5.000% due 7/1/17 5,018,750
3,920,000 AAA 5.000% due 7/1/18 3,915,100
2,000,000 AAA Redding Electric System Revenue COP, Regular Linked SAVRS & RIBS,
MBIA-Insured, 6.368% due 7/8/22 2,387,500
2,670,000 AAA Redding Joint Powers Finance Authority, Electric System Revenue,
Series D, MBIA-Insured, 5.250% due 6/1/15 2,753,438
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Utilities -- 4.7% (continued)
Sacramento Municipal Utility District Electric Revenue:
Series D:
$ 4,000,000 AAA FGIC-Insured, 5.250% due 11/15/12 $ 4,145,000
4,500,000 AAA MBIA-Insured, 5.250% due 11/15/20 4,550,625
3,000,000 A Series E, 5.700% due 5/15/12 3,172,500
5,425,000 AAA Series I, MBIA-Insured, 5.750% due 1/1/15 5,804,750
3,000,000 AAA Series L, MBIA-Insured, 5.200% due 7/1/17 3,063,750
Southern California Public Power Authority:
5,000,000 AAA Power Project Revenue, (Mead Adelanto Project), Series A,
AMBAC-Insured, 5.000% due 7/1/17 5,018,750
3,000,000 AAA Transmission Project Revenue, MBIA-Insured, 5.750% due 7/1/21 3,150,000
1,960,000 BBB- Trinity County, Public Utility District COP, Electric District Facilities,
6.750% due 4/1/23(d) 2,084,950
- ----------------------------------------------------------------------------------------------------------------------------------
46,175,712
- ----------------------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 20.9%
8,000,000 AAA Arcade Water Distrct Revenue COP, FGIC-Insured,
5.000% due 11/1/17 8,030,000
California State Department of Water, Central Valley Project Revenue:
Series O:
1,000,000 AA 5.000% due 12/1/22 991,250
2,235,000 AA 4.750% due 12/1/25 2,142,806
Series S:
5,000,000 AA 5.000% due 12/1/19 4,993,750
5,000,000 AA 5.000% due 12/1/22 4,956,250
6,500,000 AAA Calleguas-Las Virgines, CA Public Financing Authority, Municipal
Water District, FSA-Insured, 5.000% due 11/1/17 6,532,500
East Bay Municipal Utility District, FGIC-Insured:
Wastewater Treatment Systems Revenue:
4,155,000 AAA 4.750% due 6/1/21 4,004,380
9,300,000 AAA 5.000% due 6/1/26 9,218,625
Water Systems Revenue:
7,500,000 AAA 5.000% due 6/1/15 7,584,375
1,750,000 AAA 5.000% due 6/1/16 1,763,125
5,000,000 AAA 4.750% due 6/1/21 4,818,750
8,400,000 AAA 5.000% due 6/1/26 8,326,500
Eastern Municipal Water District COP,
Water & Sewer Revenue, Series A:
FGIC-Insured:
1,000,000 AAA 6.750% due 7/1/12 1,226,250
1,000,000 AAA 5.375% due 7/1/13 1,043,750
17,750,000 AAA MBIA-Insured, 5.250% due 7/1/23 18,082,813
El Centro Financing Authority, Water & Wastewater Revenue,
Series A, AMBAC-Insured:
1,500,000 AAA 5.125% due 10/1/17 1,522,500
1,900,000 AAA 5.125% due 10/1/27 1,904,750
Fresno Sewer Revenue, Series A, MBIA-Insured:
18,150,000 AAA 5.000% due 9/1/23 17,991,188
7,400,000 AAA 4.750% due 9/1/26 7,104,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C> <C>
Water & Sewer -- 20.9% (continued)
Irvine Ranch Water District:
$ 500,000 A-1+ District No.'s 140, 240, 105, 250, 3.500% due 4/1/33(c) $ 500,000
Joint Powers Agency, Local Pool Revenue, FNMA Investment,
Series B:
2,000,000 A-1+ 3.300% due 10/1/04(c) 2,000,000
1,400,000 A-1+ 3.250% due 8/1/09(c) 1,400,000
2,500,000 A-1+ 3.500% due 10/1/10(c) 2,500,000
200,000 AA Los Angeles COP, 6.600% due 11/1/99 207,000
Los Angeles Waste Water System Revenue:
2,430,000 AAA Series A, MBIA-Insured, 5.700% due 6/1/09 2,627,437
12,330,000 AAA Series D, FGIC-Insured, 4.700% due 11/1/17 11,960,100
Metropolitan Water District, Southern California Waterworks Revenue:
4,500,000 AA Series C, 5.250% due 7/1/16 4,623,750
2,500,000 AAA Series C, MBIA-Insured, 4.750% due 7/1/21 2,409,375
5,000,000 AAA Modesto Irrigation District Financing Authority Revenue, Series A,
MBIA-Insured, 6.000% due 10/1/15 5,537,500
6,045,000 AAA Orange Cove Irrigation District Revenue COP, (Rehabilitation Project),
AMBAC-Insured, 5.000% due 2/1/17 6,067,669
1,875,000 AAA Palmdale, CA Water District Revenue COP, FGIC-Insured,
5.000% due 10/1/18 1,872,656
4,560,000 AAA Pittsburg Public Finance Authority, Waste Water Revenue, Series A,
FGIC-Insured, 5.375% due 6/1/22 4,668,300
2,855,000 AAA Pomona Public Financing Authority, Series Q, MBIA-Insured,
5.750% due 12/1/15 3,065,556
28,875,000 AAA San Diego PFA Sewer Revenue, FGIC-Insured, 5.000% due 5/15/20 28,658,438
15,000,000 Aa* San Francisco Public Utility, Community Water Revenue,
5.000% due 11/1/26 14,868,750
- ----------------------------------------------------------------------------------------------------------------------------------
205,204,093
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $904,078,428**) $983,502,634
==================================================================================================================================
</TABLE>
(a) Security partially segregated by Custodian for open purchase commitments
and/or futures contracts commitments.
(b) Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(c) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(d) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(e) Bonds are escrowed with U.S. government securities and are considered by
the Manager to be triple-A rated even if issuerhad not applied for new
ratings.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 18 and 19 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Service ("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 debts 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 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 these bonds.
Aa -- Bonds 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 that make the
long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds 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 that suggest a susceptibility to
impairment some time in the future.
Baa -- Bonds rated "Baa" are considered to be medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payment 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.
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Short-Term Security Ratings (unaudited)
- --------------------------------------------------------------------------------
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 (unaudited)
- --------------------------------------------------------------------------------
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
PSFG -- Permanent School Fund Guaranty
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
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 19
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) August 31, 1998
- ---------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (Cost -- $904,078,428) $ 983,502,634
Cash 246,708
Interest receivable 13,066,891
Receivable for Fund shares sold 3,666,108
Receivable for securities sold 10,007,515
Other assets 10,169
- ---------------------------------------------------------------------------------------
Total Assets 1,010,500,025
- ---------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 9,674,672
Payable for Fund shares purchased 441,485
Payable to broker-variation margin 356,250
Investment advisory fees payable 259,703
Administration fees payable 164,683
Distribution fees payable 74,703
Accrued expenses 144,500
- ---------------------------------------------------------------------------------------
Total Liabilities 11,115,996
- ---------------------------------------------------------------------------------------
Total Net Assets $ 999,384,029
=======================================================================================
NET ASSETS:
Par value of capital shares $ 58,620
Capital paid in excess of par value 918,357,306
Overdistributed net investment income (1,799,534)
Accumulated net realized gain from security transactions
and futures contracts 6,359,055
Net unrealized appreciation of investments
and futures contracts 76,408,582
- ---------------------------------------------------------------------------------------
Total Net Assets $ 999,384,029
=======================================================================================
Shares Outstanding:
Class A 42,429,374
----------------------------------------------------------------------------------
Class B 13,884,450
----------------------------------------------------------------------------------
Class L 2,306,313
----------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 17.05
----------------------------------------------------------------------------------
Class B * $ 17.04
----------------------------------------------------------------------------------
Class L ** $ 17.03
----------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $ 17.76
----------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $ 17.20
=======================================================================================
</TABLE>
* 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 L shares reduced by a 1.00% CDSC if
shares are redeemed within one year from initial purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended August 31, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 25,665,673
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 1,445,195
Distribution fees (Note 3) 1,390,517
Administration fees (Note 3) 917,803
Shareholder and system servicing fees 106,069
Shareholder communications 37,000
Audit and legal 28,383
Registration fees 25,343
Directors' fees 20,781
Pricing service fees 17,740
Custody 17,486
Other 3,752
- --------------------------------------------------------------------------------
Total Expenses 4,010,069
- --------------------------------------------------------------------------------
Net Investment Income 21,655,604
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 4 AND 5):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 2,930,487
Futures contracts (2,358,000)
- --------------------------------------------------------------------------------
Net Realized Gain 572,487
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Futures Contracts:
Beginning of period 72,422,115
End of period 76,408,582
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 3,986,467
- --------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 4,558,954
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 26,214,558
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended August 31, 1998 (unaudited)
and the Year Ended February 28, 1998
<TABLE>
<CAPTION>
August 31 February 28
==================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 21,655,604 $ 39,954,481
Net realized gain 572,487 16,037,222
Increase in net unrealized appreciation 3,986,467 33,262,757
- --------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 26,214,558 89,254,460
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (22,306,833) (40,945,727)
Net realized gains -- (11,749,638)
- --------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (22,306,833) (52,695,365)
- --------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 114,786,173 171,885,490
Net asset value of shares issued for reinvestment of dividends 12,361,608 29,781,914
Cost of shares reacquired (44,423,728) (94,186,514)
- --------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 82,724,053 107,480,890
- --------------------------------------------------------------------------------------------------
Increase in Net Assets 86,631,778 144,039,985
NET ASSETS:
Beginning of period 912,752,251 768,712,266
- --------------------------------------------------------------------------------------------------
End of period* $ 999,384,029 $ 912,752,251
==================================================================================================
* Includes overdistributed net investment income of: $ (1,799,534) $ (1,148,305)
==================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<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 asked 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, 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
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment adviser to the Fund. The Fund pays MMC 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.
MMC 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 SSBH, acts as distributor of
Fund shares.
On June 12, 1998, the Fund's Class C shares were renamed Class L shares.
Effective June 15, 1998, Class L shares are being sold at net asset value plus a
maximum initial sales charge of 1.00%. Class L shares also have a 1.00%
contingent deferred sales charge ("CDSC"), which applies if redemption occurs
within the first year of purchase.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
There is also a CDSC of 4.50% on Class B shares, which applies if redemption
occurs within one year from purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred. In
addition, Class A shares also have a 1.00% CDSC, 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, 1998, SB received sales charges of
approximately $906,000 and $21,000 on sales of the Portfolio's Class A shares
and Class L shares respectively. In addition, CDSCs paid to SB were
approximately:
Class A Class B
================================================================================
CDSCs $11,000 $89,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and L 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 L 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, 1998, total Distribution Plan fees incurred
were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $524,915 $739,939 $125,663
================================================================================
All officers and one Director of the Fund are employees of SB.
4. Investments
During the six months ended August 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $120,582,537
- --------------------------------------------------------------------------------
Sales 73,188,247
================================================================================
At August 31, 1998, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were as follows:
================================================================================
Gross unrealized appreciation $79,427,296
Gross unrealized depreciation (3,090)
- --------------------------------------------------------------------------------
Net unrealized appreciation $79,424,206
================================================================================
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).
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
At August 31, 1998, the Fund had the following open futures contracts:
<TABLE>
<CAPTION>
Expiration # of Basis Market Unrealized
Month/Year Contracts Value Value Loss
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Future contracts to sell:
U.S. Government Long Bond Index 9/98 600 $73,259,376 $76,275,000 $(3,015,624)
=======================================================================================================
</TABLE>
6. Capital Shares
At August 31, 1998, 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. Effective June 12, 1998, the Fund
adopted the renaming of existing Class C shares as Class L shares.
At August 31, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class L
==========================================================================================
<S> <C> <C> <C>
Total Paid-in Capital $654,578,886 $225,884,268 $37,952,772
==========================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
August 31, 1998 February 28, 1998*
------------------------- -------------------------
Shares Amount Shares Amount
==========================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 4,610,509 $ 77,554,988 6,214,750 $103,679,768
Shares issued on reinvestment 623,931 9,087,985 1,316,448 21,906,147
Shares redeemed (1,915,953) (30,467,766) (4,019,227) (66,642,233)
- ------------------------------------------------------------------------------------------
Net Increase 3,318,487 $ 56,175,207 3,511,971 $ 58,943,682
==========================================================================================
Class B
Shares sold 1,718,295 $ 28,725,530 2,887,789 $ 48,061,691
Shares issued on reinvestment 189,394 2,747,300 413,966 6,891,397
Shares redeemed (755,440) (11,981,175) (1,236,051) (20,591,600)
- ------------------------------------------------------------------------------------------
Net Increase 1,152,249 $ 19,491,655 2,065,704 $ 34,361,488
==========================================================================================
Class L
Shares sold 505,322 $ 8,505,655 973,664 $ 16,181,597
Shares issued on reinvestment 35,730 526,323 56,783 947,401
Shares redeemed (123,212) (1,974,787) (169,042) (2,817,702)
- ------------------------------------------------------------------------------------------
Net Increase 417,840 $ 7,057,191 861,405 $ 14,311,296
==========================================================================================
Class Y
Shares sold -- -- 249,488 $ 3,962,434
Shares issued on reinvestment -- -- 2,241 36,969
Shares redeemed -- -- (251,729) (4,134,979)
- ------------------------------------------------------------------------------------------
Net Decrease -- -- -- $ (135,576)
==========================================================================================
</TABLE>
* For Class Y shares, transactions are for the period from April 16, 1997
(inception date) to October 24, 1997.
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.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares 1998(1) 1998 1997 1996(2) 1995 1994(2)
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.99 $ 16.26 $ 16.31 $ 15.40 $ 16.15 $ 16.70
- -------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.40 0.82 0.85 0.85 0.89 0.86
Net realized and unrealized gain (loss) 0.07 0.98 0.15 0.93 (0.56) 0.08
- -------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.47 1.80 1.00 1.78 0.33 0.94
- -------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.41) (0.84) (0.85) (0.84) (0.89) (0.84)
Net realized gains -- (0.23) (0.20) (0.03) (0.19) (0.65)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.41) (1.07) (1.05) (0.87) (1.08) (1.49)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 17.05 $ 16.99 $ 16.26 $ 16.31 $ 15.40 $ 16.15
- -------------------------------------------------------------------------------------------------------------------------
Total Return 2.79%++ 11.44% 6.37% 11.93% 2.46% 5.92%
- -------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $723,474 $664,471 $578,687 $582,324 $401,743 $425,181
- -------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.69%+ 0.70% 0.71% 0.76% 0.80% 0.80%
Net investment income 4.66+ 4.97 5.29 5.26 5.76 5.20
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 43% 60% 44% 59% 76%
=========================================================================================================================
<CAPTION>
Class B Shares 1998(1) 1998 1997 1996(2) 1995 1994(2)
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.98 $ 16.25 $ 16.32 $ 15.40 $ 16.15 $ 16.70
- -------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.36 0.74 0.76 0.75 0.81 0.77
Net realized and unrealized gain (loss) 0.06 0.98 0.14 0.96 (0.57) 0.09
- -------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.42 1.72 0.90 1.71 0.24 0.86
- -------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36) (0.76) (0.77) (0.76) (0.80) (0.76)
Net realized gains -- (0.23) (0.20) (0.03) (0.19) (0.65)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.99) (0.97) (0.79) (0.99) (1.41)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 17.04 $ 16.98 $ 16.25 $ 16.32 $ 15.40 $ 16.15
- -------------------------------------------------------------------------------------------------------------------------
Total Return 2.54%++ 10.88% 5.73% 11.39% 1.89% 5.40%
- -------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $236,633 $216,234 $173,347 $153,044 $127,888 $107,740
- -------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.21%+ 1.21% 1.23% 1.29% 1.32% 1.33%
Net investment income 4.14+ 4.45 4.75 4.71 5.25 4.67
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 43% 60% 44% 59% 76%
=========================================================================================================================
</TABLE>
(1) For the six months ended August 31, 1998 (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.
- --------------------------------------------------------------------------------
26 1998 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 L Shares 1998(1) 1998 1997 1996(2) 1995(3)
========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.97 $16.24 $16.31 $15.40 $14.19
- --------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.35 0.73 0.75 0.78 0.24
Net realized and unrealized gain 0.07 0.98 0.15 0.92 1.39*
- --------------------------------------------------------------------------------------------------------
Total Income From Operations 0.42 1.71 0.90 1.70 1.63
- --------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36) (0.75) (0.77) (0.76) (0.23)
Net realized gains -- (0.23) (0.20) (0.03) (0.19)
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.98) (0.97) (0.79) (0.42)
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.03 $16.97 $16.24 $16.31 $15.40
- --------------------------------------------------------------------------------------------------------
Total Return 2.51%++ 10.83% 5.68% 11.30% 11.72%++
- --------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $39,277 $32,047 $16,678 $10,809 $762
- --------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.26%+ 1.26% 1.29% 1.39% 1.37%+
Net investment income 4.10+ 4.39 4.69 4.44 5.19+
- --------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 43% 60% 44% 59%
========================================================================================================
</TABLE>
(1) For the six months ended August 31, 1998 (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. 27
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On March 9, 1998, the Special Meeting of shareholders of the Fund was held for
the purpose of voting on the following matters:
1. To elect Directors of the Fund; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage Shares Voted Percentage of
Name of Directors For Shares Voted Against Shares Voted
=====================================================================================
<S> <C> <C> <C> <C>
Herbert Barg 27,609,547.355 97.837% 610,436.281 2.163%
Alfred J. Bianchetti 27,596,286.096 97.790 623,697.540 2.210
Martin Brody 27,604,659.921 97.820 615,323.715 2.180
Dwight B. Crane 27,646,375.930 97.967 573,607.706 2.033
Burt N. Dorsett 27,639,835.113 97.944 580,148.523 2.056
Elliot S. Jaffe 27,620,742.983 97.877 599,240.653 2.123
Stephen E. Kaufman 27,645,342.474 97.964 574,641.162 2.036
Joseph J. McCann 27,646,097.324 97.966 573,886.312 2.034
Heath B. McLendon 27,627,254.908 97.900 592,728.728 2.100
Cornelius C. Rose, Jr. 27,644,219.497 97.960 575,764.139 2.040
=====================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Fund. The following chart demonstrates that
all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy; and "R" indicates
the reclassification of the policy from fundamental (which would require
shareholder approval to change) to non-fundamental (which can be changed by a
vote of the Board of Directors).
================================================================================
M Issuance of Senior Securities Approved
- --------------------------------------------------------------------------------
M Borrowing Approved
- --------------------------------------------------------------------------------
M Lending Approved
- --------------------------------------------------------------------------------
R Margin and Short-Sales Approved
- --------------------------------------------------------------------------------
M Real Estate Approved
================================================================================
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all Proposals.*
Shares Percentage Shares Percentage Percentage
Voted of Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Voted
================================================================================
24,870,401.116 88.304% 773,372.549 2.746% 2,520,851.971 8.950%
================================================================================
* Broker non-votes constituted less than one percent of voted shares.
- --------------------------------------------------------------------------------
28 1998 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 C. Rose
James J. Crisona, Emeritus
Officers
Heath B. McLendon
President and
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
Mutual Management Corp.
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 submitted for the general information of shareholders of Smith
Barney California Municipals Fund Inc. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current Prospectus for
the Fund, which contains information concerning the Fund's investment policies
and expenses as well as other pertinent information.
Smith Barney
- ------------
A Member of TravelersGroup[LOGO]
Smith Barney California
Municipals Fund Inc.
Smith Barney Mutual Funds
388 Greenwich Street
MF-2
New York, New York 10013
www.smithbarney.com
FD0434 10/98
