[PHOTO OMITTED]
[GRAPHIC OMITTED]
Smith Barney
California
Municipals
Fund Inc.
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
February 28, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(sm)
<PAGE>
Smith Barney California
Municipals Fund Inc.
================================================================================
The Smith Barney California Municipals Fund Inc. ("Fund") seeks to provide
California investors with as high a level of dividend income exempt from Federal
income taxes and California state personal income tax as is consistent with
prudent investment management and the preservation of capital.
Smith Barney California Municipals Fund Inc.
Average Annual Total Returns
February 28, 1998
Without Sales Charges*
----------------------------
Class A Class B Class C
================================================================================
One-Year 11.44% 10.88% 10.83%
- --------------------------------------------------------------------------------
Five-Year 7.63 7.07 N/A
- --------------------------------------------------------------------------------
Ten-Year 8.45 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 9.24 8.44 12.21
================================================================================
With Sales Charges**
----------------------------
Class A Class B Class C
================================================================================
One-Year 6.97% 6.38% 9.83%
- --------------------------------------------------------------------------------
Five-Year 6.75 6.91 N/A
- --------------------------------------------------------------------------------
Ten-Year 8.01 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 8.92 8.44 12.21
================================================================================
* 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 shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
** Assumes reinvestment of all dividend and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00%; and Class B shares reflect
the deduction of a 4.50% CDSC, which applies if shares are redeemed within
one year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
++ Inception dates for Class A, B and C shares are April 9, 1984, November 6,
1992 and November 14, 1994, respectively.
- --------------------------------------------------------------------------------
FUND HIGHLIGHT
- --------------------------------------------------------------------------------
"Throughout 1997, California has continued its strong economic expansion. The
key component of this growth has been robust employment gains. California
generated more than 500,000 new jobs over a broad range of industries (its
strongest growth in 13 years). In addition, California also experienced a
long-awaited rebound in residential real estate values. In fact, home prices
have jumped an average of 10% over last year." IFC-1
- --------------------------------------------------------------------------------
NASDAQ SYMBOL
- --------------------------------------------------------------------------------
Class A SHRCX
Class B SCABX
- --------------------------------------------------------------------------------
WHAT'S INSIDE
- --------------------------------------------------------------------------------
Shareholder Letter........................ 1
Historical Performance.................... 4
Smith Barney California Municipals Fund
Inc. at a Glance.......................... 6
Schedule of Investments................... 7
Statement of Assets and Liabilities...... 20
Statement of Operations.................. 21
Statements of Changes in Net Assets...... 22
Notes to Financial Statements............ 23
Financial Highlights..................... 26
Independent Auditors' Report............. 29
Tax Information.......................... 30
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Letter
- --------------------------------------------------------------------------------
[PHOTO OMITTED] [PHOTO OMITTED]
Heath B. McLendon Joseph P. Deane
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney California
Municipals Fund Inc. ("Fund") for the year ended February 28, 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 year ended February 28, 1998, the California Municipals Fund had a total
return of 11.44%, 10.88% and 10.83% for its Class A, B and C shares,
respectively. In comparison, the Fund's Lipper Analytical Services, Inc. peer
group average posted a total return of 9.37% for the same period. (Lipper is a
major fund-tracking organization.) Over the one- year period covered by this
report, the Fund distributed income dividends totaling $0.84 per Class A share.
Based on its net asset value ("NAV") of $16.99 as of February 28, 1998, and
current monthly income dividend rate of $0.068 for Class A shares, this equates
to an annualized distribution rate of 4.80%. For a California resident in the
combined Federal and state income tax bracket of 45.3%, the Fund's tax-free
yield of 4.80% is equivalent to a taxable yield of 8.78%.
Municipal Bond Market Update
If there was one overriding trend in the bond market over the past year, it had
to be the benign inflationary environment despite strong economic growth and a
relatively tight labor market. This is clearly the first time in my career as a
portfolio manager that inflation has stayed subdued in the face of both of these
events.
The bond market takes its ultimate cue from inflation and bonds experienced a
meaningful rally during the past twelve months. A positive inflationary outlook
continues today and that should, in our view, provide a reasonable backdrop for
municipal bonds in the months ahead. And while municipal bonds have lagged a
little on the upside versus taxable bonds, the after-tax spread between
municipal and taxable bonds is very reasonable by historical standards. In our
opinion, the difference in spreads between municipal and taxable bonds should
make municipal bonds less vulnerable to any short-term rate increase if one
occurs.
California Economic Highlights
Throughout 1997, California has continued its strong economic expansion. The key
component of this growth has been robust employment gains. California generated
more than 500,000 new jobs over a broad range of industries (its strongest job
growth in 13 years). In addition, California also experienced a long-awaited
rebound in residential real estate values. In fact, home prices have jumped an
average of 10% over last year.
Strong economic growth coupled with conservative fiscal policy has allowed the
California legislature to focus on educational, infrastructural and other public
works needs in the Golden State. We think these initiatives should enable
California to maintain its competitive edge for many years to come.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 1
<PAGE>
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
19.6 years, but in every market downturn we have sought out coupons that would
benefit from further drops in rates.
Our fundamental goal is to try and create portfolios that will provide
shareholders with the ability to participate in the upside of the municipal bond
market (when we think there's great potential), but we also exercise discipline
amidst euphoria when the market experiences a serious rally.
We believe that our discipline over time produces attractive, long-term results
and those are the only ones we try to achieve. Recently, our discipline led us,
in early January (when the market was at its euphoric best), to sell some of our
largest and more aggressive holdings. We then waited a bit and redeployed those
assets in shorter maturity bonds that we think should prove to be rewarding. If
the municipal bond market continues to exude strength (and it likely will during
the first half of 1998), we will use ensuing market rallies to do more of the
same. In our view, while the backdrop for bonds today is excellent, rates are at
an historic low. Our philosophy therefore remains "know when to hold 'em, and
know when to fold 'em."
Two characteristics of the Fund recently are its emphasis on extremely
high-grade securities and, in the last market rally, a shorter average life
since the middle of 1997.
In our view, there is much more value in the higher-rated issues today. Right
now, there is not enough extra yield associated with lesser-rated bonds to
justify the added risk, so our emphasis has been primarily on high-quality
issues. Credit spreads have collapsed between different bond ratings. You are
paid almost nothing extra today to buy higher-risk bonds and we don't think that
condition will change any time soon.
As of February 28, 1998, 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 about 70% of the Fund invested in AAA bonds, the
highest possible rating. (Investment-grade bonds are rated Aaa, Aa, A and Baa by
Moody's Investors Service, Inc. or AAA, AA, A and BBB by Standard & Poor's
Ratings Services, or within the highest four rating categories of any other
nationally recognized statistical rating organization, or are 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 (23.6%),
hospital bonds (10.0%), and transportation bonds (8.8%).
Municipal Bond Market Outlook
We anticipate the municipal bond market to be rather benign over the next six
months. Yet, we still think there may be some upside potential in the market,
especially if the long-term U.S. government bond drifts down toward 51/2%.
We believe that you cannot just manage for yield alone, and that is why we
concentrate so much on total return. By making adjustments to a fund's average
maturity, you can try to lessen the impact of volatility or take advantage of
it. We think you are going to miss tremendous opportunities or make yourself
more vulnerable to losses when you do not manage for total return.
Over the long term, you need to generate high total returns in order to provide
shareholders with a substantial enough stream of overall distributions,
especially when interest rates are heading down. In order to succeed in today's
municipal bond market you need, in baseball terms, to hit singles and doubles
and not try to hit home runs. We will, therefore, continue to apply our best
efforts on your behalf and provide you with what
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
we believe is the best investment vehicle possible consistent with our
total-return philosophy. 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
March 23, 1998
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 3
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
=========================================================================================================================
<C> <C> <C> <C> <C> <C> <C>
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 $9.54 $2.01 $0.04
=========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
=========================================================================================================================
<C> <C> <C> <C> <C> <C> <C>
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 $4.13 $1.59 $0.01
=========================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
=========================================================================================================================
<C> <C> <C> <C> <C> <C> <C>
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 $2.51 $0.65 $0.00
=========================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-----------------------------------
Class A Class B Class C
================================================================================
Year Ended 2/28/98 11.44% 10.88% 10.83%
- --------------------------------------------------------------------------------
Five Years Ended 2/28/98 7.63 7.07 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 2/28/98 8.45 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 2/28/98 9.24 8.44 12.21
================================================================================
With Sales Charge(2)
-----------------------------------
Class A Class B Class C
================================================================================
Year Ended 2/28/98 6.97% 6.38% 9.83%
- --------------------------------------------------------------------------------
Five Years Ended 2/28/98 6.75 6.91 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 2/28/98 8.01 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 2/28/98 8.92 8.44 12.21
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (2/28/88 through 2/28/98) 125.13%
- --------------------------------------------------------------------------------
Class B (Inception* through 2/28/98) 53.74
- --------------------------------------------------------------------------------
Class C (Inception* through 2/28/98) 46.14
================================================================================
(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 shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and C shares.
(2) Assumes reinvestment of all dividend and capital gain distributions, if any,
at net asset value. In addition, Class A shares reflect the deduction of the
maximum sales charge of 4.00% and Class B shares reflect the deduction of a
4.50% CDSC, which applies if shares are redeemed within one year from
initial purchase. This CDSC declines by 0.50% the first year after purchase
and thereafter by 1.00% per year until no CDSC is incurred. Class C shares
reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed
within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
* Inception dates for Class A, B and C shares are April 9, 1984, November 6,
1992 and November 14, 1994, respectively.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the Smith Barney California
Municipals Fund Inc. vs. the Lehman Brothers Municipal Bond Index and the Lipper
California Municipal Fund Average+
- --------------------------------------------------------------------------------
February 1988 -- February 1998
[The following table was depicted as a line chart in the printed material]
Smith Barney Lipper
California Lehman Brothers California
Municipal Municipal Bond Municipal
Funds Inc. Index Fund Average
------------ --------------- ------------
2/88 9597 10000 10000
2/89 10237 10622 10638
2/90 11161 11712 11592
2/91 12086 12793 12533
2/92 13033 14070 13725
2/93 14957 16008 15648
2/94 15840 16894 16504
2/95 16229 17212 16544
2/96 18226 19114 18255
2/97 19388 20167 19219
2/98 21606 22270 20991
+ Hypothetical illustration of $10,000 invested in Class A shares on
February 28, 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 February 28, 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 103 mutual funds investing in California municipal bonds as of February
28, 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*
- ---------------------------------------------------------------
Education 7.1%
General Obligation 7.0%
Hospitals 10.0%
Housing: Multi-Family 3.9%
Housing: Single-Family 2.5%
Pollution Control Revenue 1.7%
Pre-Refunded 5.2%
Solid Waste 1.9%
Tax Allocation 5.3%
Transportation 8.8%
Utilities 4.6%
Water & Sewer 23.6%
Other 18.4%
* As a percentage of total investments.
Summary of Investments by Combined Ratings
- ---------------------------------------------------------------
Standard Percentage
Moody's &Poor's of Total Investments
- ---------------------------------------------------------------
Aaa AAA 69.5%
Aa AA 10.2
A A 12.5
Baa BBB 4.4
Ba BB 0.1
VMIG 1/P-1 A-1 2.6
NR NR 0.7
-------
100.0%
-------
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Education -- 7.1%
$2,000,000 AAA Adelanto School District, Series B, FGIC-lnsured,
zero coupon due 9/1/18 $ 710,000
California Educational Facilities Authority Revenue,
Southwestern University Project:
2,635,000 A3* 6.600% due 11/1/14 2,924,850
4,505,000 A3* 6.700% due 11/1/24 5,023,075
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 1,212,500
Various California State University Projects:
Series B:
3,085,000 A 5.400% due 9/1/13 3,200,688
3,245,000 A 5.450% due 9/1/14 3,370,744
2,425,000 A 5.500% due 9/1/15 2,525,031
1,400,000 A 5.550% due 9/1/16 1,456,000
Series C, AMBAC-lnsured:
6,590,000 AAA 5.000% due 9/1/13 6,655,900
6,000,000 AAA 5.000% due 9/1/14 6,022,500
6,000,000 AAA Campbell Unified School District, FGIC-lnsured, 5.000% due 8/1/17 5,925,000
1,400,000 AAA Eastside Unified High School District, Santa Clara County, Series B,
FGIC-lnsured, 5.000% due 9/1/18 1,389,500
1,750,000 AAA Escondito Unified School District, Series A,
FGIC-Insured, 5.125% due 9/1/15 1,774,063
100,000 AAA Kern High School District, Series C, MBIA-lnsured, (Escrowed to
Maturity with U.S. government securities), 8.750% due 8/1/03 122,875
2,000,000 AAA Lancaster School District COP, FSA-lnsured, 5.125% due 4/1/14 2,020,000
2,300,000 AAA Rio Linda Unified School District, FSA-lnsured, 5 250% due 8/1/17 2,334,500
San Diego Community College District, Lease Revenue, MBIA-lnsured:
1,250,000 AAA 6.125% due 12/1/16 1,378,125
3,460,000 AAA 5.250% due 12/1/21 3,477,300
1,530,000 AAA Santa Rosa High School District, FGIC-lnsured, 5.900% due 5/1/14 1,644,750
Standard School District COP, (Capital Improvement Project), Series A:
320,000 A- 6.200% due 3/1/10 342,800
340,000 A- 6.250% due 3/1/11 363,375
4,500,000 A3* Ukiah Unified School District COP, (Measure A Capital Projects),
6.000% due 9/1/10 4,623,750
2,600,000 AAA Victor Valley Unified High School District, MBIA-lnsured,
5.750% due 11/1/17 2,765,750
2,500,000 Baa1* Yuba City Unified School District, COP, (Ardors Karperos School
Construction Proiect), 6.700% due 2/1/13 2,728,124
- -----------------------------------------------------------------------------------------------------------------------------
63,991,200
- -----------------------------------------------------------------------------------------------------------------------------
Electric -- 0.7%
Sacramento Power Authority, Cogeneration Project Revenue:
1,800,000 BBB- 6.500% due 7/1/07 2,013,750
1,800,000 BBB- 6.500% due 7/1/08 1,998,000
2,200,000 BBB- 6.500% due 7/1/09 2,425,500
- -----------------------------------------------------------------------------------------------------------------------------
6,437,250
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
General Obligation -- 7.0%
California State GO:
$30,000,000 AAA AMBAC-Insured, 5.000% due 10/1/18 $29,550,000
Veterans Series:
455,000 A+ Series AL, 9.700% due 4/1/02 550,550
725,000 A+ Series AM, 9.000% due 10/1/02 871,813
Series AT:
4,000,000 A+ 9.700% due 2/1/01 4,620,000
1,000,000 A+ 9.500% due 2/1/10 1,440,000
2,000,000 A+ Series AU, 8.400% due 10/1/06 2,575,000
1,000,000 Aa1* San Diego Public Safety Communication Project, 6.650% due 7/15/11 1,206,250
1,500,000 AAA Santa Margarita/Dana Point Authority Revenue GO,
Water Improvement Districts 3-3A-4 & 4A, Series B,
MBIA-Insured, 7.250% due 8/1/14 1,914,375
20,000,000 AAA Santa Margarita/Dana Point Authority Revenue GO, Series A,
AMBAC-Insured, 5.125% due 8/1/18 19,950,000
- -----------------------------------------------------------------------------------------------------------------------------
62,677,988
- -----------------------------------------------------------------------------------------------------------------------------
Hospitals -- 10.0%
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 1,614,375
245,000 A+ California Health Facilities Authority Revenue, Victory Valley
Community Hospital, Series 84-A, 9.875% due 7/1/12 245,919
California Health Facilities Financing Authority Revenue:
AMBAC-Insured:
5,620,000 AAA Catholic Healthcare West, Series E, 5.250% due 7/1/16 5,676,200
2,500,000 AAA Insured Catholic Health Facilities, 5.750% due 7/1/15 2,656,250
1,150,000 A+ Episcopal Homes, Series A, 7.700% due 7/1/18 1,186,156
Series A, MBIA-Insured:
2,000,000 AAA Cedars-Sinai Center, 5.125% due 8/1/17 1,987,500
2,000,000 AAA Catholic Healthcare West, 5.000% due 7/1/17 1,962,500
3,000,000 AAA Catholic Healthcare West, 5.125% due 7/1/24 2,962,500
1,200,000 VMIG1* St. Joseph's Health System, Series A, 3.550% due 7/1/13(b) 1,200,000
Sutter Health:
Series A, FSA-Insured:
1,470,000 AAA 5.125% due 8/15/17 1,464,488
1,500,000 AAA 5.250% due 8/15/27 1,500,000
2,400,000 VMIG1* Series A, LOC-Morgan Guaranty Trust, 3.650% due 3/1/20(b) 2,400,000
10,000,000 VMIG1* Series B, AMBAC-Insured, 3.650% due 7/1/12(b) 10,000,000
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 4,836,694
1,100,000 A+ Solheim Lutheran Home, 6.500% due 11/1/17 1,199,000
St. Joseph's Health System:
4,825,000 AA 5.500% due 7/1/14 4,951,655
6,000,000 AA 6.625% due 7/1/21 6,907,500
4,000,000 AA 5.250% due 7/1/21 4,010,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Hospitals -- 10.0% (continued)
Sutter Health Obligated Group:
MBIA-Insured:
$3,500,000 AAA 5.500% due 8/15/09 $ 3,692,500
500,000 AAA 6.000% due 8/15/25 540,625
1,095,000 A+ Villaview Community, 7.000% due 9/1/09 1,201,763
Fresno Health Facilities Revenue, Holy Cross Health System Corp.:
2,200,000 AA 5.200% due 12/1/04 2,307,250
2,435,000 AA 5.375% due 12/1/06 2,562,838
1,000,000 AA St. Agnes, 6.625% due 6/1/21 1,092,500
1,000,000 AAA Modesto Health Facilities Revenue, Memorial Hospital Association,
Series B, MBIA-Insured, 5.125% due 6/1/17 996,250
2,000,000 A Riverside County Asset Leasing Corp., (Riverside County Hospital
Project), Series A, 6.375% due 6/1/09 2,165,000
2,750,000 A- San Joaquin County COP, (General Hospital Project 1993),
6.250% due 9/1/13 2,956,250
845,000 AAA Santa Rosa Hospital Revenue, (Santa Rosa Hospital Memorial
Project), (Escrowed to Maturity with U.S. government
securities), 10.300% due 3/1/11 1,149,200
1,250,000 AAA Sequoia Hospital District Revenue, (Escrowed to Maturity with U.S.
government securities), 5.375% due 8/15/23 1,290,624
9,805,000 A Torrance Hospital Revenue Bonds, Little County of Mary Hospital,
6.875% due 7/1/15 10,687,450
1,500,000 NR Valley Health System COP, 6.875% due 5/15/23 1,635,000
1,000,000 BBB- Woodland Hospital Revenue COP, Woodland Memorial Hospital,
8.200% due 8/1/15 1,032,250
- -----------------------------------------------------------------------------------------------------------------------------
90,070,237
- -----------------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.9%
1,250,000 AAA ABAG County, Series 96A, FNMA-Collateralized,
5.700% due 11/1/06(c) 1,320,312
California HFA:
Home Mortgage Revenue:
Series B:
185,000 Aa2* 8.600% due 8/1/19(d) 190,217
3,000,000 AAA AMBAC-Insured, 5.150% due 2/1/18(d) 2,977,500
350,000 Aa2* Project 1983, zero coupon due 8/1/15 59,937
280,000 Aa2* Series C, 8.300% due 8/1/19(d) 287,453
Series E:
505,000 Aa2* 8.250% due 8/1/08(d) 517,892
380,000 Aa* 8.350% due 8/1/19(d) 389,883
5,225,000 AA 6.375% due 8/1/27(d) 5,649,530
990,000 Aa2* Series F-1, 7.000% due 8/1/26(d) 1,065,488
Series A:
5,000 AAA 1985, MBIA-Insured, 8.750% due 8/1/10 5,169
1,595,000 A+ 6.625% due 2/1/24(d) 1,694,687
480,000 AAA Series C, MBIA-Insured, 7.000% due 8/1/23(d) 512,400
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Housing: Multi-Family -- 3.9% (continued)
$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(d) $ 6,390,000
2,250,000 A+ California State Department of Veterans Affairs, Series B,
5.500% due 12/1/18(d) 2,264,062
1,685,000 NR Hayward Housing Authority Revenue, FNMA-Collateralized, Family
Revenue, Cypress Gardens, Series C, 9.375% due 12/1/18 1,891,413
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 2,190,000
1,750,000 AAA Riverside County Housing Authority, Multi-Family Housing Revenue,
Brandon Place Apartments, Series B, FNMA-Collateralized,
5.625% due 7/1/09(d) 1,839,687
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 1,443,750
2,755,000 AAA Victorville Multi-Family Housing Revenue, Wimbledon Apartments,
Series A, GNMA-Collateralized, 6.300% due 4/20/31 2,923,743
- -----------------------------------------------------------------------------------------------------------------------------
35,150,623
- -----------------------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 2.5%
California HFA Revenue Bonds, Home Mortgage:
10,000 Aa2* 10.250% due 2/1/14 10,131
310,000 Aa2* Capital Appreciation, Series 1984-B, zero coupon due 8/1/16 39,839
8,000,000 AAA Single-Family Mortgage, Issue A-2, FHA-Insured,
6.350% due 8/1/15(c)(d) 8,600,000
270,000 AAA Contra Costa County Home Mortgage Revenue, Mortgage Backed
Securities Program, GNMA-Collateralized, (Escrowed to Maturity
with U.S. government securities), 7.750% due 5/1/22(d) 350,663
Los Angeles Home Mortgage Revenue Bonds, GNMA-Collateralized:
865,000 Aaa* Second Mortgage Project, 8.100% due 5/1/17 978,531
585,000 AAA Single-Family Mortgage Revenue, Mortgage Backed Securities
Program, Issue A, 7.550% due 12/1/23(d) 612,786
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(d) 4,397,311
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(d) 3,500,975
1,000,000 AAA 7.800% due 5/1/21(d) 1,336,250
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(d) 2,015,625
110,000 AAA San Francisco City & County Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 7.450% due 1/1/24(d) 115,500
180,000 AAA Southern California HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, Series B, 7.750 due 3/1/24(d) 190,575
- -----------------------------------------------------------------------------------------------------------------------------
22,148,186
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Industrial Development -- 0.1%
$1,000,000 Aa2* Los Angeles IDA, IDR, (Altshule Properties Project),
7.200% due 10/1/11(d) $ 1,037,290
- -----------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 17.6%
500,000 A1* ABAG Finance Authority Nonprofit Corps., COP,
Peninsula Family, YMCA, Series A, 6.800% due 10/1/11 526,875
2,445,000 AAA Alameda County COP, Refunding & Capital Projects,
AMBAC-Insured, 5.000% due 6/1/12 2,460,281
2,500,000 NR Alhambra, Arcadia, Azusa Counties, Independent Cities,
Risk Management Authority, COP, 7.250% due 3/1/07 2,525,600
2,000,000 AAA Anaheim COP, Regular Fixed Option Bonds, MBIA-Insured,
6.200% due 7/16/23 2,240,000
Anaheim County Financing Authority, (Public Improvements Project),
Series C, FSA-Insured, Capital Appreciation:
8,945,000 AAA Zero coupon due 9/1/21 2,672,319
10,000,000 AAA Zero coupon due 9/1/22 2,837,500
10,000,000 AAA Zero coupon due 9/1/23 2,662,500
1,025,000 Baa* Azusa COP, (Capital Improvements Refinancing Project),
6.625% due 8/1/13 1,095,469
Brisbane Redevelopment Agency, Brisbane Community Redevelopment
Bonds:
200,000 AA 9.400% due 5/1/05 203,682
220,000 AA 9.400% due 5/1/06 224,033
California Public Capital Improvements Finance Authority Revenue,
(Pooled Project):
750,000 Baa* Series A, 8.500% due 3/1/18 778,455
565,000 AAA Series B, BIG-Insured, 8.100% due 3/1/18 589,832
2,500,000 Baa* California Special Districts Finance Authority, COP, Series A,
8.500% due 7/1/18 2,579,350
5,000,000 AAA California State Department of Transportation, COP, Series A,
MBIA-Insured, 5.250% due 3/1/16 5,068,750
5,000,000 AAA California State University Headquarters Building Authority,
Series B, MBIA-Insured, 5.125% due 9/1/17 5,012,500
150,000 A- Concord Santa Cruz South Gate COP, Series A, 7.625% due 6/1/11 150,816
Contra Costa County COP, (Capital Projects), AMBAC-Insured:
4,630,000 AAA 5.250% due 2/1/17 4,670,513
3,000,000 AAA 5.250% due 2/1/21 3,015,000
Dublin COP, (Civic Center Project), AMBAC-Insured:
1,305,000 AAA 5.600% due 2/1/06 1,319,681
1,380,000 AAA 5.625% due 2/1/07 1,395,525
Fresno Joint Powers Financing Authority, Local Agency Revenue,
Series A:
2,000,000 BBB 6.000% due 9/2/01 2,075,000
1,000,000 BBB 6.200% due 9/2/03 1,046,250
1,500,000 BBB 6.550% due 9/2/12 1,620,000
100,000 VMIG1* Irvine Import, Board Act 1915, Updates Assessment District
No. 89-10, 3.650% due 9/2/15(b) 100,000
5,000,000 AAA Long Beach Board Finance Authority Lease Revenue, (Civic Center
Project), Series A, MBIA-Insured, 5.000% due 10/1/17 4,925,000
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 3,445,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Miscellaneous -- 17.6% (continued)
Los Angeles County COP:
$ 2,000,000 AAA Special Linked SAVRS & RIBS, 6.708% due 6/1/15 $ 2,197,500
1,000,000 Baa1* Structured Yield Curve Note, 6.600% due 11/1/11 1,103,750
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 7,303,125
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 2,803,500
1,500,000 AAA Orange County Community Facility District 86-1, FSA-Insured,
7.125% due 8/15/17 1,593,750
1,300,000 Baa* Orange County Public Facility COP, Solid Waste Revenue,
7.875% due 12/1/07 1,365,715
6,000,000 AAA Orange County Recovery COP, Series A, MBIA-Insured,
5.875% due 7/1/19 6,487,500
920,000 Baa* Pleasanton Joint Powers Financing Authority Revenue, Series A,
6.150% due 9/2/12 989,000
7,000,000 AAA Puerto Rico Commonwealth Infrastructure Financing Authority, Series A,
AMBAC-Insured, 5.000% due 7/1/16 7,008,750
Sacramento County COP, (Public Facilities Project):
AMBAC-Insured:
14,495,000 AAA 4.750% due 10/1/17 13,878,963
3,750,000 AAA 4.750% due 10/1/27 3,525,000
4,700,000 AAA Solid Waste Facilities, MBIA-Insured, 5.205% due 12/1/16 4,770,500
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 2,817,500
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 2,540,000
San Diego County COP:
9,000,000 AAA Central Jail Refunding, AMBAC-Insured, 5.000% due 10/1/25 8,786,250
1,000,000 AAA Regular Fixed Option Certificates, MBIA-Insured, 6.363%
due 11/18/19 1,070,000
135,000 A* San Francisco Downtown Parking, Corporate Parking Revenue Bonds,
6.250% due 4/1/04 148,669
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 1,438,463
5,995,000 AAA San Ramone COP, (Central Park Project), FSA-Insured,
5.000% due 8/1/24 5,867,606
2,875,000 AAA Santa Ana Financing Authority Lease Revenue, Police Administration
& Holding Facility, Series A, MBIA-Insured, 6.250% due 7/1/24 3,396,094
3,460,000 A+ Santa Barbara County COP, 5.700% due 3/1/11 3,585,425
7,180,000 AAA Santa Maria Redevelopment Agency, Town Center Package,
FSA-Insured, 5.000% due 6/1/16 7,072,300
2,215,000 AA- Simi Valley Community Development Agency COP, Simi Valley
Business Center, 6.050% due 10/1/18, Mandatory Put 10/1/99 2,278,681
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Miscellaneous -- 17.6% (continued)
Sonoma County COP, Detention Facilities Improvement Project:
$ 4,200,000 A+ 5.000% due 11/15/13 $ 4,105,500
3,000,000 A+ 5.000% due 11/15/17 2,898,750
2,000,000 AAA South Orange County Public Finance Authority, Special Tax Revenue,
Series A, MBIA-Insured, 7.000% due 9/1/10 2,470,000
1,000,000 A-1+ Valdez Alaska Marine Terminal Revenue, Exxon Pipeline Co. Project,
3.650% due 12/1/33(b) 1,000,000
- -----------------------------------------------------------------------------------------------------------------------------
157,742,222
- -----------------------------------------------------------------------------------------------------------------------------
Pollution Control Revenue -- 1.7%
California Financing Authority:
PCR:
2,500,000 AA- Pacific Gas & Electric Co., Series B, 6.350% due 6/1/09(d) 2,731,250
San Diego Gas & Electric, Series A:
5,800,000 A 5.900% due 6/1/14 6,438,000
1,500,000 A+ 6.800% due 6/1/15(d) 1,803,750
500,000 BBB Resource Recovery Revenue, Series A, Waste Management,
7.150% due 2/1/11(d) 545,625
2,900,000 A-1+ California Pollution Control Financing Authority, PCR, Pacific Gas &
Electric, Series C, 3.650% due 11/1/26(b)(d) 2,900,000
700,000 P-1* California Pollution Control Financing Authority, Resource Recovery
Revenue, Ultrapower Rocklin, Series A, 3.650% due 6/1/17(b)(d) 700,000
- -----------------------------------------------------------------------------------------------------------------------------
15,118,625
- -----------------------------------------------------------------------------------------------------------------------------
Pre-Refunded(a) -- 5.2%
2,500,000 AAA California Educational Facilities Authority Revenue, University of
San Diego, (Call 10/1/02 @ 102), 6.500% due 10/1/22 2,793,750
California Health Facilities Financing Authority Revenue:
115,000 AAA Community Provider Pooled Loan, Series A, (Call 6/1/00 @
102), 7.350% due 6/1/20 125,638
1,250,000 AAA South Coast Medical Center, (Call 7/1/00 @ 102),
7.250% due 7/1/15 1,365,625
1,450,000 AAA California Health Facilities Finance Authority, St. Elizabeth Hospital,
(Call 11/15/02 @ 102), 6.200% due 11/15/09 1,605,875
1,500,000 AAA California Lease Finance Authority COP, Nevada County,
(Call 10/1/98 @ 101), 7.600% due 10/1/19 1,519,395
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 2,257,500
1,000,000 AAA Department of Corrections State Prison, Series A,
(Call 9/1/00 @ 102), 7.000% due 9/1/09 1,092,500
1,245,000 AAA Concord Redevelopment Agency Tax Allocation Bonds, Series 3,
MBIA-Insured, (Call 7/1/98 @ 102), 8.000% due 7/1/18 1,287,504
1,405,000 AAA Contra Costa County COP, Merrithew Memorial Hospital,
(Call 11/1/02 @ 102), 6.500% due 11/1/06 1,575,356
1,500,000 AAA Desert Hospital District, COP, (7/1/00 Call @ 102), 8.100%
due 7/1/20 1,668,750
1,000,000 AAA Inglewood Insured Hospital Revenue Bonds, Daniel Freeman
Hospital Inc., (Call 5/1/01 @ 102), 6.750% due 5/1/13 1,098,750
465,000 AAA Local Government Finance Joint Powers Authority Revenue, Anaheim
Redevelopment Agency, Series A, (Call 9/1/98 @ 102), 8.200%
due 9/1/15 484,511
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Pre-Refunded(a) -- 5.2% (continued)
$ 450,000 AAA Los Angeles California Convention & Exhibition Center Authority,
(Call 12/1/05 @ 100), 9.000% due 12/1/20 $ 593,438
500,000 AAA Los Angeles County Transportation Community, Sales Tax Revenue,
Series A, (Call 7/1/98 @ 102), 8.000% due 7/1/18 517,070
Los Angeles Department of Water & Power:
Electric Plantation Revenue:
1,000,000 AAA Call 5/1/98 @ 102, 7.900% due 5/1/28 1,026,350
1,950,000 AAA Call 1/15/01 @ 102, 7.100% due 1/15/31 2,140,125
1,550,000 AAA Water Works Revenue, (Call 2/15/99 @ 102), 7.200%
due 2/15/19 1,630,972
125,000 AAA Martinez Home Mortgage, (Call 8/1/02 @ 100), 10.750%
due 2/1/16 198,281
Mojave Water Agency, Improvement District, Morongo Basin,
(Call 9/1/02 @ 102):
1,500,000 AAA 6.600% due 9/1/13 1,683,750
5,510,000 AAA 6.600% due 9/1/22 6,184,975
500,000 AAA Oceanside COP, AMBAC-Insured, (Call 8/1/02 @ 102), 7.300%
due 8/1/21 574,375
Orange County Community Facility District:
1,000,000 AAA Rancho Santa Margarita, (Call 8/15/98 @ 102), 7.800%
due 8/15/13 1,038,420
1,000,000 AAA Special Tax, Series A, (Call 8/15/00 @ 102), 7.800% due 8/15/15 1,108,750
1,905,000 AAA Oxnard Public Facilities Corp., COP, Wastewater Treatment Plant
Project, AMBAC-Insured, (Call 9/1/99 @ 100), 7.500%
due 9/1/06 2,012,156
1,000,000 AAA Rancho Mirage COP, Eisenhower Memorial Hospital, Joint Powers
Financing Authority, (Call 3/1/02 @ 102), 7.000% due 3/1/22 1,125,000
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 2,187,500
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 2,662,500
1,000,000 AAA San Bernadino County COP, (West Valley Detention Center Project),
(Call 11/1/98 @ 102), 7.700% due 11/1/18 1,046,370
1,000,000 AAA San Buenaventura COP, AMBAC-Insured, (Call 10/1/00 @ 102),
7.500% due 10/1/20 1,107,500
1,700,000 AAA Upland Hospital Revenue, COP, San Antonio Community Hospital,
(Call 1/1/99 @ 102), 7.800% due 1/1/18 1,789,962
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 1,490,125
- -----------------------------------------------------------------------------------------------------------------------------
46,992,773
- -----------------------------------------------------------------------------------------------------------------------------
Solid Waste -- 1.9%
2,770,000 AAA Fresno County Finance Authority, Solid Waste Revenue Bonds,
American Avenue Landfill, MBIA-Insured, 5.750% due 5/15/14 2,950,050
Inland Empire Solid Waste Authority Revenue, FSA-Insured:
5,000,000 AAA 6.250% due 8/1/11(d) 5,612,500
2,500,000 AAA 6.000% due 8/1/16(d) 2,700,000
500,000 BBB+ Kings County Waste Management Authority, Solid Waste Revenue,
7.200% due 10/1/14(d) 558,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Solid Waste -- 1.9% (continued)
$ 1,000,000 BB Nevada County COP, 7.500% due 6/1/21 $ 1,067,500
4,135,000 Baa1* South Napa Waste Management Authority Revenue, (Solid Waste
Transfer Facilities Project), 6.500% due 2/15/14(d) 4,419,281
- -----------------------------------------------------------------------------------------------------------------------------
17,308,081
- -----------------------------------------------------------------------------------------------------------------------------
Tax Allocation -- 5.3%
2,000,000 AAA Anaheim Public Finance Authority, Tax Allocation Revenue, Regular
Fixed Option Bonds, MBIA-Insured, 6.450% due 12/28/18 2,285,000
1,000,000 Baa* 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 1,215,000
295,000 AAA Brea Public Finance Authority, Tax Allocation, MBIA-Insured,
7.000% due 8/1/15 325,606
30,000 AAA Concord Redevelopment Agency, Tax Allocation, Series 3,
BIG-Insured, 8.000% due 7/1/18 30,995
6,000,000 AAA Corona Redevelopment Agency, Tax Allocation, Redevelopment
Project Area A, Series A, FGIC-Insured, 5.500% due 9/1/24 6,180,000
1,000,000 AAA El Centro Redevelopment Tax Allocation, MBIA-Insured,
6.375% due 11/1/17 1,122,500
4,160,000 AAA Fontana Public Finance Authority, Tax Allocation, MBIA-Insured,
Series A, 5.000% due 9/1/20 4,056,000
3,275,000 BBB+ Garden Grove Community Development Agency, Tax Allocation,
(Garden Grove Community Project), 5.700% due 10/1/08 3,418,281
2,000,000 Baa* Hawthorne Community Redevelopment, Tax Allocation,
(Project Area 2), 6.625% due 9/1/14 2,172,500
1,000,000 AAA Irwindale Community Redevelopment Agency, Tax Allocation, (City
Industrial Development Project), FSA-Insured, 5.000% due 8/1/17 982,500
Rancho Cucamonga Redevelopment, Tax Allocation, (Rancho
Redevelopment Project), MBIA-Insured:
2,445,000 AAA 5.250% due 9/1/16 2,481,675
5,000,000 AAA 5.250% due 9/1/26 5,018,750
15,325,000 AAA San Jose Redevelopment Agency, (Merged Area Redevelopment
Project), MBIA-Insured, 5.000% due 8/1/20 14,980,188
2,000,000 AAA Vista Community Development, Tax Allocation Revenue, Vista
Redevelopment Project Area, MBIA-Insured, 5.250% due 9/1/15 2,027,500
- -----------------------------------------------------------------------------------------------------------------------------
47,371,495
- -----------------------------------------------------------------------------------------------------------------------------
Transportation -- 8.8%
5,375,000 AAA Los Angeles County Metropolitan Transportation Authority, Sales Tax
Revenue, Series A, Proposition C, Second Series, AMBAC-Insured,
5.000% due 7/1/25 5,227,188
5,000,000 AA Los Angeles Harbor Department Revenue, Series B, 5.375%
due 11/1/15(d) 5,081,250
2,000,000 A Port of Oakland Special Facilities Revenue, Series A, 6.750%
due 1/1/12(d) 2,142,500
9,000,000 AAA Sacramento County Airport System Revenue, Series A,
MBIA-Insured, 5.900% due 7/1/24(d) 9,596,250
400,000 A1* Sacramento Regional Transportation District, COP, Series A,
6.400% due 3/1/03 434,000
3,000,000 AAA San Francisco Airport Community International Corp., Lease Revenue,
FGIC-Insured, 6.500% due 5/1/19(d) 3,337,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Transportation -- 8.8% (continued)
$ 180,000 AAA San Francisco Airport Improvement Corp., Lease Revenue,
(Escrowed to Maturity with U.S. government securities),
8.000% due 7/1/13 $ 220,500
San Joaquin Hills California Transportation Corridor Agency Toll Road
Revenue, (Escrowed to Maturity with U.S. government securities):
5,000,000 AAA Zero coupon due 1/1/14(c) 2,281,250
60,000,000 AAA Zero coupon due 1/1/16(c) 24,825,000
17,500,000 AAA Zero coupon due 1/1/17(c) 6,890,625
25,000,000 AAA Zero coupon due 1/1/18(c) 9,218,750
20,000,000 AAA Zero coupon due 1/1/19(c) 7,025,000
San Jose Airport Revenue Bonds, FGIC-Insured:
200,000 AAA 5.400% due 3/1/04(d) 212,500
1,500,000 AAA 5.500% due 3/1/07(d) 1,599,375
1,250,000 A* Santa Barbara COP, (Harbor Reference Project), 6.750% due 10/1/27 1,353,125
- -----------------------------------------------------------------------------------------------------------------------------
79,444,813
- -----------------------------------------------------------------------------------------------------------------------------
Utilities -- 4.6%
1,110,000 A- Northern California Power Agency Public Power Refunding,
(Geothermal Project No. 3), Series A, 5.000% due 7/1/09 1,108,613
4,600,000 VMIG1* Orange County Sanitation District, COP, 3.650% due 8/1/15(b) 4,600,000
2,000,000 AAA Redding Electric System Revenue, COP, Regular Linked SAVRS & RIBS,
MBIA-Insured, 6.368% due 7/1/22 2,337,500
2,670,000 AAA Redding Joint Powers Finance Authority, Electric System Revenue,
Series D, MBIA-Insured, 5.250% due 6/1/15 2,720,062
Sacramento Municipal Utility District Electric Revenue:
Series D:
4,000,000 AAA FGIC-Insured, 5.250% due 11/15/12 4,115,000
4,500,000 AAA MBIA-Insured, 5.250% due 11/15/20 4,505,625
3,000,000 A Series E, 5.700% due 5/15/12 3,097,500
5,425,000 AAA Series I, MBIA-Insured, 5.750% due 1/1/15 5,770,844
3,000,000 AAA Series L, MBIA-Insured, 5.250% due 7/1/17 3,018,750
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 4,918,750
3,000,000 AAA Transmission Project Revenue, MBIA-Insured, 5.750% due 7/1/21 3,127,500
1,960,000 BBB- Trinity County, Public Utility District, COP, Electric District Facilities,
6.750% due 4/1/23(d) 2,082,500
- -----------------------------------------------------------------------------------------------------------------------------
41,402,644
- -----------------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 23.6%
8,000,000 AAA Arcade Water District Revenue, COP, FGIC-Insured, 5.000%
due 11/1/17 7,870,000
California State Department of Water, Central Valley Project Revenue:
Series O:
1,000,000 AA 5.000% due 12/1/22 973,750
2,235,000 AA 4.750% due 12/1/25 2,109,281
Series S:
5,000,000 AA 5.000% due 12/1/19 4,925,000
5,000,000 AA 5.000% due 12/1/22 4,900,000
6,750,000 AA 5.000% due 12/1/29 6,572,813
East Bay Municipal Utility District, FGIC-Insured:
Wastewater Treatment Systems Revenue:
4,155,000 AAA 4.750% due 6/1/21 3,947,250
9,300,000 AAA 5.000% due 6/1/26 9,079,125
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Water & Sewer -- 23.6% (continued)
Water Systems Revenue:
$ 7,500,000 AAA 5.000% due 6/1/15 $ 7,434,375
1,750,000 AAA 5.000% due 6/1/16 1,736,875
5,000,000 AAA 4.750% due 6/1/21 4,750,000
8,400,000 AAA 5.000% due 6/1/26 8,200,500
Eastern Municipal Water District, COP, Water & Sewer Revenue,
Series A:
FGIC-Insured:
1,000,000 AAA 6.750% due 7/1/12 1,206,250
1,000,000 AAA 5.375% due 7/1/13 1,041,250
17,750,000 AAA MBIA-Insured, 5.250% due 7/1/23 17,794,375
El Centro Financing Authority, Water & Wastewater Revenue,
Series A, AMBAC-Insured:
1,500,000 AAA 5.125% due 10/1/17 1,498,125
1,900,000 AAA 5.125% due 10/1/27 1,878,625
Fresno Sewer Revenue, Series A, MBIA-Insured:
18,150,000 AAA 5.000% due 9/1/23 17,718,938
7,400,000 AAA 4.750% due 9/1/26 6,983,750
Irvine Ranch Water District Joint Powers Agency, Local Pool Revenue:
AIG Investment Agreement:
9,000,000 A+ 7.800% due 2/15/08(c) 9,015,480
1,750,000 A+ 7.875% due 2/15/23(c) 1,753,062
9,500,000 A+ FNMA Investment Agreement, Issue II, 8.250% due 8/15/23(c) 9,673,185
200,000 AA Los Angeles COP, 6.600% due 11/1/99 209,250
Los Angeles Waste Water System Revenue:
2,430,000 AAA Series A, MBIA-Insured, 5.700% due 6/1/09 2,606,175
12,330,000 AAA Series D, FGIC-Insured, 4.700% due 11/1/17 11,682,675
4,500,000 AA Metropolitan Water District, Southern California Waterworks Revenue,
Series C, 5.250% due 7/1/16 4,590,000
5,000,000 AAA Modesto Irrigation District Financing Authority Revenue, Series A,
MBIA-Insured, 6.000% due 10/1/15 5,481,250
6,045,000 AAA Orange Cove Irrigation District Revenue, COP, (Rehabilitation Project),
AMBAC-Insured, 5.000% due 2/1/17 5,969,437
4,560,000 AAA Pittsburg Public Finance Authority, Waste Water Revenue, Series A,
FGIC-Insured, 5.375% due 6/1/22 4,645,500
2,855,000 AAA Pomona Public Financing Authority, Series Q, MBIA-Insured,
5.750% due 12/1/15 3,037,005
28,875,000 AAA San Diego PFA Sewer Revenue, FGIC-Insured, 5.000% due 5/15/20 28,261,405
15,000,000 Aa* San Francisco Public Utility, Community Water Revenue,
5.000% due 11/1/26 14,643,750
- -----------------------------------------------------------------------------------------------------------------------------
212,188,456
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $826,760,080**) $899,081,883
=============================================================================================================================
</TABLE>
(a) Bonds escrowed with U.S. Government Securities and Bonds escrowed to
maturity with U.S. Government Securities are considered by the Manager to
be triple-A rated even if issuer has not applied for new ratings.
(b) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(c) Security partially segregated by Custodian for open purchase and/or
futures contracts commitments.
(d) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
** 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
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Rating Services ("Standard & Poor's")
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard & Poor's -- Ratings from "AA" to "BB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA"' have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for bonds in this category than in
higher rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest
rating within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Short-Term Security Ratings
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation ("VRDO") rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
- --------------------------------------------------------------------------------
Security Descriptions
- --------------------------------------------------------------------------------
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
ETM -- Escrowed To Maturity
FAIRS -- Floating Adjustable Interest Rate Securities
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Agency
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PSF -- Permanent School Fund
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
SAVRS -- Select Auction Variable Rate Securities
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
SYCC -- Structured Yield Curve Certificate
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
- --------------------------------------------------------------------------------
Smith Barney California Municipal Fund Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost-- $826,760,080) $899,081,883
Cash 398,447
Interest receivable 11,529,370
Receivable for Fund shares sold 5,387,749
Receivable for securities sold 4,712,464
Other assets 10,169
- -----------------------------------------------------------------------------------------
Total Assets 921,120,082
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 5,945,487
Dividends payable 1,638,305
Distribution fees payable 250,913
Investment advisory fees payable 205,523
Administration fees payable 151,068
Payable for Fund shares purchased 27,038
Accrued expenses 149,497
- -----------------------------------------------------------------------------------------
Total Liabilities 8,367,831
- -----------------------------------------------------------------------------------------
Total Net Assets $912,752,251
=========================================================================================
NET ASSETS:
Par value of capital shares $ 53,732
Capital paid in excess of par value 835,638,141
Overdistributed net investment income (1,148,305)
Accumulated net realized gain from security transactions
and futures contracts 5,786,568
Net unrealized appreciation of investments
and futures contracts 72,422,115
- -----------------------------------------------------------------------------------------
Total Net Assets $912,752,251
=========================================================================================
Shares Outstanding:
Class A 39,110,887
--------------------------------------------------------------------------------------
Class B 12,732,201
--------------------------------------------------------------------------------------
Class C 1,888,473
--------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $16.99
--------------------------------------------------------------------------------------
Class B* $16.98
--------------------------------------------------------------------------------------
Class C** $16.97
--------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) $17.70
=========================================================================================
</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 C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $46,838,302
- ----------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 2,479,000
Distribution fees (Note 3) 2,326,035
Administration fees (Note 3) 1,587,128
Shareholder and system servicing fees 182,949
Shareholder communications 72,920
Audit and legal 61,841
Registration fees 50,290
Directors' fees 40,879
Pricing service fees 35,916
Custody 32,877
Other 13,986
- ----------------------------------------------------------------------------------------
Total Expenses 6,883,821
- ----------------------------------------------------------------------------------------
Net Investment Income 39,954,481
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES4 AND 5):
Realized Gain From:
Security transactions (excluding short-term securities) 15,837,097
Futures contracts 200,125
- ----------------------------------------------------------------------------------------
Net Realized Gain 16,037,222
- ----------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures:
Beginning of year 39,159,358
End of year 72,422,115
- ----------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 33,262,757
- ----------------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 49,299,979
- ----------------------------------------------------------------------------------------
Increase in Net Assets From Operations $89,254,460
========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended February 28,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
==========================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 39,954,481 $ 38,464,345
Net realized gain 16,037,222 13,674,000
Increase (decrease) in net unrealized appreciation 33,262,757 (6,967,210)
- ------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 89,254,460 45,171,135
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (40,945,727) (38,621,404)
Net realized gains (11,749,638) (9,156,095)
- ------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (52,695,365) (47,777,499)
- ------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 171,885,490 105,614,153
Net asset value of shares issued for reinvestment
of dividends 29,781,914 27,141,633
Cost of shares reacquired (94,186,514) (107,613,987)
- ------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 107,480,890 25,141,799
- ------------------------------------------------------------------------------------------
Increase in Net Assets 144,039,985 22,535,435
NET ASSETS:
Beginning of year 768,712,266 746,176,831
- ------------------------------------------------------------------------------------------
End of year* $912,752,251 $768,712,266
==========================================================================================
* Includes overdistributed net investment income of: $(1,148,305) $(157,059)
==========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 ("Code"), pertaining to regulated investment companies and to
make distributions of taxable income sufficient to relieve it from substantially
all Federal income and excise taxes; (i) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles; and (j) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in deter mining 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"), formerly known as Smith Barney Mutual Funds
Management Inc., 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. For the year ended February 28, 1998, SB received sales charges of
approximately $1,357,000 on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B shares,
which applies if redemption occurs less than one year from initial purchase.
This CDSC declines by 0.50% for the first year after purchase and thereafter by
1.00% per year until no
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
CDSC is incurred. Class C shares have a 1.00% CDSC, which applies if redemption
occurs within the first year of purchase. In certain cases, Class A shares also
have a 1.00% CDSC, 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
year ended February 28, 1998, CDSCs paid to SB were:
Class A Class B Class C
=================================================
CDSCs $38,000 $263,000 $5,000
=================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and C shares calculated at an annual rate of 0.15% of the average
daily net assets for each respective class. In addition, the Fund pays a
distribution fee with respect to its Class B and C shares calculated at an
annual rate of 0.50% and 0.55% of the average daily net assets of each class,
respectively.
For the year ended February 28, 1998, total Distribution Plan fees incurred
were:
Class A Class B Class C
===========================================================
Distribution Plan Fees $915,346 $1,244,383 $166,306
===========================================================
All officers and one Director of the Fund are employees of SB.
4. Investments
During the year ended February 28, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
===========================================
Purchases $411,815,883
- -------------------------------------------
Sales 352,831,437
===========================================
At February 28, 1998, aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
============================================
Gross unrealized appreciation $72,584,665
Gross unrealized depreciation (262,862)
- --------------------------------------------
Net unrealized appreciation $72,321,803
============================================
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 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At February 28, 1998, the Fund had the following open futures contracts:
<TABLE>
<CAPTION>
Expiration # of Basis Market Unrealized
Month/Year Contracts Value Value Gain
================================================================================================
<S> <C> <C> <C> <C> <C>
Future contracts to sell:
Municipal Bond Index 3/98 150 $18,578,437 $18,478,125 $100,312
================================================================================================
</TABLE>
6. Capital Shares
At February 28, 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.
At February 28, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class C
==========================================================================================
<S> <C> <C> <C>
Total Paid=in Capital $598,403,679 $206,392,613 $30,895,581
==========================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
February 28, 1998* February 28, 1997**
------------------------------- -----------------------------
Shares Amount Shares Amount
==========================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 6,214,750 $103,679,768 3,464,432 $(55,882,110
Shares issued on reinvestment 1,316,448 21,906,147 1,294,680 20,922,197
Shares redeemed (4,019,227) (66,642,233) (4,853,482) (78,341,730)
- ------------------------------------------------------------------------------------------
Net Increase (Decrease) 3,511,971 $ 58,943,682 (94,370) $ (1,537,423)
==========================================================================================
Class B
Shares sold 2,887,789 $ 48,061,691 2,129,481 $(34,296,606
Shares issued on reinvestment 413,966 6,891,397 355,573 5,749,381
Shares redeemed (1,236,051) (20,591,600) (1,198,383) (19,306,526)
- ------------------------------------------------------------------------------------------
Net Increase 2,065,704 $ 34,361,488 1,286,671 $(20,739,461
==========================================================================================
Class C
Shares sold 973,664 $ 16,181,597 464,736 $( 7,491,127
Shares issued on reinvestment 56,783 947,401 29,081 470,055
Shares redeemed (169,042) (2,817,702) (129,633) (2,088,302)
- ------------------------------------------------------------------------------------------
Net Increase 861,405 $ 14,311,296 364,184 $( 5,872,880
==========================================================================================
Class Y
Shares sold 249,488 $ 3,962,434 485,294 $ 7,944,310
Shares issued on reinvestment 2,241 36,969 -- --
Shares redeemed (251,729) (4,134,979) (485,294) (7,877,429)
- ------------------------------------------------------------------------------------------
Net Increase (Decrease) -- $ (135,576) -- $ 66,881
==========================================================================================
</TABLE>
* For Class Y shares, transactions are for the period from April 16, 1997
(inception date) to October 24, 1997.
** For Class Y shares, transactions are for the period from December 5, 1996
(incepetion date) to February 27, 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 year:
<TABLE>
<CAPTION>
Class A Shares 1998 1997 1996(1) 1995 1994(1)
===========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $16.26 $16.31 $15.40 $16.15 $16.70
- -----------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.82 0.85 0.85 0.89 0.86
Net realized and unrealized gain (loss) 0.98 0.15 0.93 (0.56) 0.08
- -----------------------------------------------------------------------------------------------------------
Total Income From Operations 1.80 1.00 1.78 0.33 0.94
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (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 (1.07) (1.05) (0.87) (1.08) (1.49)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.99 $16.26 $16.31 $15.40 $16.15
- -----------------------------------------------------------------------------------------------------------
Total Return 11.44% 6.37% 11.93% 2.46% 5.92%
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $664,471 $578,687 $582,324 $401,743 $425,181
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.70% 0.71% 0.76% 0.80% 0.80%
Net investment income 4.97 5.29 5.26 5.76 5.20
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 43% 60% 44% 59% 76%
===========================================================================================================
</TABLE>
(1) 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.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class B Shares 1998 1997 1996(1) 1995 1994(1)
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $16.25 $16.32 $15.40 $16.15 $16.70
- -----------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.74 0.76 0.75 0.81 0.77
Net realized and unrealized gain (loss) 0.98 0.14 0.96 (0.57) 0.09
- -----------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.72 0.90 1.71 0.24 0.86
- -----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (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 (0.99) (0.97) (0.79) (0.99) (1.41)
- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.98 $16.25 $16.32 $15.40 $16.15
- -----------------------------------------------------------------------------------------------------------------------
Total Return 10.88% 5.73% 11.39% 1.89% 5.40%
- -----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $216,234 $173,347 $153,044 $127,888 $107,740
- -----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.21% 1.23% 1.29% 1.32% 1.33%
Net investment income 4.45 4.75 4.71 5.25 4.67
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 43% 60% 44% 59% 76%
=======================================================================================================================
</TABLE>
(1) 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.
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class C Shares 1998 1997 1996(1) 1995(2)
=======================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $16.24 $16.31 $15.40 $14.19
- ---------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.73 0.75 0.78 0.24
Net realized and unrealized gain 0.98 0.15 0.92 1.39*
- ---------------------------------------------------------------------------------------
Total Income From Operations 1.71 0.90 1.70 1.63
- ---------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.75) (0.77) (0.76) (0.23)
Net realized gains (0.23) (0.20) (0.03) (0.19)
- ---------------------------------------------------------------------------------------
Total Distributions (0.98) (0.97) (0.79) (0.42)
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.97 $16.24 $16.31 $15.40
- ---------------------------------------------------------------------------------------
Total Return 10.83% 5.68% 11.30% 11.72%++
- ---------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $32,047 $16,678 $10,809 $762
- ---------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.26% 1.29% 1.39% 1.37%+
Net investment income 4.39 4.69 4.44 5.19+
- ---------------------------------------------------------------------------------------
Portfolio Turnover Rate 43% 60% 44% 59%
=======================================================================================
</TABLE>
(1) 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.
(2) 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.
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Smith Barney California Municipal Fund Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney California Municipal Fund Inc. as
of February 28, 1998, the related statement of operations for the year then
ended, and the statements of changes in net assets for each of the years in the
two-year period then ended and financial highlights for each of the years in the
three-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the years in the
two-year period ended February 28, 1995 were audited by other auditors whose
report thereon, dated April 10, 1995, expressed an unqualified opinion on those
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1998, by correspondence with the custodian. As to securities
purchased and sold but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Smith
Barney California Municipals Fund Inc. as of February 28, 1998, the results of
its operations for the year then ended and the changes in its net assets for
each of the years in the two-year period then ended and financial highlights for
each of the years in the three-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
April 15, 1998
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc. 29
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
February 28, 1998:
o 100.00% of the dividends paid by the Fund from net investment income
as tax-exempt for regular Federal income tax purposes.
o The Taxpayer Relief Act of 1997 enacted differing rates of tax on
various long-term capital gain transactions. As a result, the Fund
designates:
o Total long-term capital gain distributions paid of $5,746,504.
$2,245,734 are considered "28 percent rate gains".
$3,500,770 are considered "20 percent rate gains".
- --------------------------------------------------------------------------------
30 1998 Annual Report to Shareholders
<PAGE>
Smith Barney California Municipals Fund Inc.
Directors
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius Rose
James J. Crisona, Emeritus
Officers
Heath B. McLendon
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 an effective 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 TravelerGroup[LOGO]
Smith Barney
California Municipals Fund Inc.
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD0434 4/98
