<PAGE>
[GRAPHIC]
SMALL BOX ABOVE FUND NAME
SHOWING PALM TREES IN FRONT
OF A HIGH-RISE BUILDING.
SEMI- Smith Barney Shearson
ANNUAL INTERMEDIATE
REPORT MATURITY
CALIFORNIA
MUNICIPALS
FUND
.......................................
MAY 31, 1994
[LOGO]
<PAGE>
Intermediate Maturity California Municipals Fund
DEAR SHAREHOLDER:
We are pleased to provide you with the Semi-Annual
Report
which includes the portfolio of investments for Smith
Barney
Shearson Intermediate Maturity California Municipals
Fund for
the six-month period ended May 31, 1994. During the past six
months
the Fund paid tax-exempt distributions of $0.19 per share and a
capital gains distribution of $0.01 per share, which largely
offset
the decline in the Fund's net asset value to $8.17 from $8.50 per
share and resulted in a total return of (1.52%).
A TALE OF TWO BOND MARKETS:
"IT WAS THE BEST OF TIMES, IT WAS THE WORST OF TIMES . . ."
After becoming accustomed to the best of times in an extremely
bullish
bond market, beginning in November of 1993, investors found
themselves
embroiled in a very bearish bond market and facing the winter of
despair. For the first time in close to five years, market
participants confronted a classic environment that if in fact was
not
the worst of times, it came very close. There was a tremendous
decline
in bond prices, and as important as it was during 1993 to be
offensively positioned in terms of security holdings, it now was
equally as important to be defensively positioned.
The Federal Reserve's increase in short-term rates was perhaps
the
catalyst for the municipal market decline, but all of the fixed
income
markets reacted much more powerfully than could have been
anticipated,
perhaps even overreacted. The intermediate-
term market was and continues to be under some real pressure because it's
more
directly impacted by Federal Reserve activity, short-term rates and the
performance of two-and three-year government securities. And since there
has
been a tremendous reversal in that market, the impact on the intermediate-
maturity market has been pretty substantial. This is clearly seen in the
decline
in the Fund's net asset value per share during the past six months.
Over the next year and a half to two years, we think that the yield curve
(the
difference in yield between securities of varying maturities) will flatten.
Looking at the segment of the yield curve that encompasses maturities
between
one and ten years, we anticipate that there will be less pressure on
1
<PAGE>
the eight-to-ten-year range as the Fed continues to raise short-term
interest
rates than there will be on the two-, three-, or four-year range. We
consequently have been trying to keep the Fund's average maturity closer to
nine
years because there should be less pressure in that area.
We also attribute the market's exaggerated response on both the upside and
the
downside to the winding and unwinding of some very large leverage trades
that
were put on by hedge funds. And it is no secret that some of these trades
did
not work out as anticipated, forcing investors to quickly unwind their
trades
sooner than expected, and thereby exacerbating the municipal bond market's
downturn. Now that this has passed, the market should once again react to
the
fundamentals of the environment more than anything else. As long as the
economic
numbers continue to indicate that inflation is still a threat, we think
that the
Federal Reserve will raise short-term interest rates until the American
economy
begins to lose some steam. And as strong as the economy looks right now, it
could be some time before it begins to slow.
"IT WAS THE AGE OF WISDOM, IT WAS THE AGE OF FOOLISHNESS . . ."
Unlike many other investors who believed the bull market for bonds
seemingly
would never end, we took an incredibly cautious stance last fall towards
the
marketplace. We shortened the average life of the Fund's holdings and
raised the
percentage of cash holdings. In sum, we took about as defensive a position
as we
could.
During market declines, the area that usually declines the most is the
high-grade area of the market because it is the most liquid. So in April,
when
we decided that the market had adjusted enough and consequently presented
some
good investment opportunities, we were able to buy AA and AAA-rated
securities
at very attractive prices. Most of our purchases were in the general
obligation
and essential service revenue sectors because we think they offer the best
value
at this time, defining value as the highest yield relative to their credit
risk.
We are still wary of uninsured health care bonds for two reasons: the 1986
tax
act materially changed the way hospitals are reimbursed by Medicare and
Medicaid; and the current health care package has too many uncertainties
associated with it. Although the California economy is very close to
bottoming,
we are still avoiding state general obligations and any issues backed by
the
state's credit such as state lease securities. California potentially could
be
downgraded to an A rating; if this
2
<PAGE>
happens, we may finally after several years begin to look at buying that
credit
again. The average maturity of the Fund currently is 7.9 years, and we have
kept
a fairly small cash position of 3.4%.
"GREAT EXPECTATIONS . . ."
By the end of May the worst of the volatility and downside in the bond
market
was over. Could it go down from here? Yes, but if it does, we doubt that it
will
be dramatic; it is far more likely to be a minor correction. We're a little
bit
more aggressive on the municipal market right now because it's a much more
benign investment climate than it was and we think that current interest
rates
represent very fair value.
We also think that the supply and demand characteristics are very positive
for
the municipal market and will moderate its volatility. In terms of demand,
the
Clinton tax package makes tax-exempt income for the individual investor
even
more valuable than it was in the past. And there is also a great deal of
institutional participation in our marketplace, which we haven't seen for a
long
time.
In terms of supply, we anticipate a tremendous cutback in the supply of
municipals coming in the market as a result of the rise in interest rates.
Over
the next couple of years the supply of municipal bonds could decline by 50%
of
1993's record level. And because of this, we think that tax-exempt
securities
will perform substantially better than taxable issues.
The past six months were a difficult investment environment, but we believe
we
have been successful in meeting our stated investment objective of
providing
investors with a high level of current income exempt from Federal income
taxes*
and California personal income taxes and attempting to preserve principal.
During the next six months we will endeavor to do the same and look forward
to
reporting to you in the Fund's Annual Report.
Sincerely,
Heath B. McLendon Joseph P. Deane
CHAIRMAN OF THE BOARD VICE PRESIDENT AND
INVESTMENT OFFICER
JULY 18, 1994
- - --------------------------------------------------------------------
*Income may be subject to Federal alternative minimum tax and state or
local
taxes.
3
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - ------------------------------------------
PORTFOLIO HIGHLIGHTS (UNAUDITED) MAY 31,
1994
INDUSTRY BREAKDOWN
Pie chart depicting the allocation of the Income Trust Intermediate
Maturity
California Municipals Fund investment securities held at May 31, 1994 by
industry classification. The pie is broken in pieces representing
industries in
the following percentages:
<TABLE>
<CAPTION>
INDUSTRY PERCENTAGE
<S> <C>
Education 26.0%
Housing 2.0%
Transportation 14.9%
Water/Sewer 9.3%
Other Municipal Bonds and Notes 34.9%
Hospital 5.3%
Utility Revenue 3.3%
Short-Term Municipal Bonds and Notes
and Net Other Assets and Liabilities 4.3%
</TABLE>
SUMMARY OF MUNICIPAL BONDS AND SHORT-TERM
TAX-EXEMPT INVESTMENTS BY COMBINED RATINGS
<TABLE>
<CAPTION>
Standard & Percent
Moody's Poor's of Value
<S> <C> <C>
- - -----------------------------------
AAA OR AAA 24.8%
- - -----------------------------------
AA AA 5.7
- - -----------------------------------
A A 37.9
- - -----------------------------------
BAA BBB 28.2
- - -----------------------------------
VMIG1 A-1 0.6
- - -----------------------------------
P-1 NR 2.8
- - -----------------------------------
100.0%
---------------
</TABLE>
AVERAGE MATURITY 7.9 years
4
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - ------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) MAY 31,
1994
-------------------------------------------------------------
<TABLE>
<S> <C>
KEY TO INSURANCE ABBREVIATIONS
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Federal Guaranty Insurance Corporation
MBIA -- Municipal Bond Investor Assurance
</TABLE>
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
<C> <S> <C> <C> <C>
--------------------------------------------------------------------------
- - -
MUNICIPAL BONDS AND NOTES -- 95.7%
CALIFORNIA -- 93.1%
$ 500,000 Bakersfield, California,
Hospital Revenue,
(Adventist Health
Systems/West Agency), (MBIA
Insured),
5.100% due 3/1/03 Aaa AAA $ 490,000
Belmont, California,
Redevelopment Agency, Tax
Allocation Project, (Los
Costanos Community
Development), Series A:
150,000 5.850% due 8/1/02 A A- 149,063
160,000 5.950% due 8/1/03 A A- 158,800
California Educational
Facilities Authority:
1,000,000 Pooled College and
University Financing,
Series B,
5.800% 6/1/02 Baa NR 976,250
320,000 6.300% due 10/1/03 A1 NR 334,800
985,000 (Saint Mary's College),
4.900% due 10/1/03 A NR 924,669
35,000 (Loyola Marymount
University),
5.500% due 10/1/00 A1 NR 35,350
200,000 (Mills College),
6.500% due 9/1/02 Baa1 NR 209,000
500,000 (University of Southern
California),
5.300% due 10/1/04 Aa AA 495,625
100,000 California, General
Obligation Bonds,
9.800% due 10/1/00 Aa AA 123,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- - -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 200,000 California Health
Facilities Financing
Authority, (Sisters of
Providence),
6.200% due 10/1/03 A1 AA- $ 202,500
400,000 California Health
Facilities, (St.
Elizabeth's Hospital
Project),
5.900% due 11/15/03 A1 A+ 401,500
200,000 California Health
Facilities Revenue,
(Adventist Health
System/West Agency), Series
B, (MBIA Insured),
6.150% due 3/1/99 Aaa AAA 209,250
10,000 California Housing Finance
Agency Revenue, Home
Mortgage,
10.000% due 2/1/02 Aa A+ 10,113
200,000 California State, General
Obligation Bonds,
6.000% due 9/1/03 Aa A+ 208,000
200,000 California State,
Department of Water
Resources, Series J,
5.600% due 12/1/02 Aa AA 205,750
305,000 Cucamonga, California,
County Water District,
Certificates of
Participation, (FGIC
Insured),
6.000% due 9/1/03 Aaa AAA 312,625
Desert Sands, California,
Unified School District,
Certificates of
Participation:
(Measure O Project), Series
C:
500,000 4.650% due 3/1/00 A NR 473,125
1,000,000 4.900% due 3/1/02 A NR 931,250
200,000 Escondido, California,
Joint Powers Financing
Authority, (AMBAC Insured),
5.500% due 9/1/00 Aaa AAA 204,000
190,000 Escondido, California,
Unified School District,
Certificates of
Participation, Series A,
5.400% due 7/1/03 A A- 182,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- - -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$1,000,000 Foothill, California,
Transportation Zone,
Certificates of
Participation, Series A,
5.050% due 5/1/00 Baa1 NR $ 956,250
1,500,000 Fresno, California, Joint
Powers Financing Authority:
Series A,
5.750% due 9/2/98 NR BBB 1,488,750
355,000 Certificates of
Participation, (Street
Light Acquisition Project),
Series A,
5.375% due 8/1/03 A A+ 340,356
855,000 Garden Grove, California,
Agency Tax Allocation
Revenue, (Garden Grove
Community Project),
5.375% due 10/1/03 NR A+ 805,838
1,620,000 Hawthorne, California,
Community Redevelopment
Agency,
6.200% due 9/1/05 Baa NR 1,569,375
Irvine Ranch, California,
Water District, Joint
Powers Agency, Local Pool
Revenue, Issue II,
800,000 7.200% due 8/15/96 NR BBB 834,000
480,000 7.800% due 8/15/01 NR BBB 520,200
285,000 Kern, California, High
School District, Series C,
(MBIA Insured),
8.750% due 8/1/03 Aaa AAA 346,631
230,000 Kings River Conservation
District, (California Pine
Flat Power Project), Series
D,
5.375% due 2/1/00 Aa AA 232,588
45,000 Los Angeles County
Transportation Commission,
Certificates of
Participation, Series G,
6.100% due 1/1/00 A NR 46,744
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- - -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 30,000 Los Angeles County,
California, Multiple
Capital Facilities,
Certificates of
Participation, (Project
III),
5.800% due 11/1/98 A A $ 30,488
Los Angeles County,
California, Transportation
Authority, Transportation
Commission, Certificates of
Participation:
500,000 Series B,
6.200% due 7/1/03 A1 NR 519,375
30,000 Series G,
6.300% due 1/1/02 A NR 31,313
375,000 Marysville, California,
Hospital Revenue, (Fremont
Rideout Health Group),
Group A, (AMBAC Insured),
5.900% due 1/1/03 Aaa AAA 386,719
500,000 Modesto, California, High
School District,
(Stanislaus Company), (FGIC
Insured),
5.300% due 8/1/04 Aaa AAA 493,125
Mojave, California, Water
District, California
Improvement District,
(Moronogo Basin):
250,000 6.250% due 9/1/02 Baa BBB+ 254,062
280,000 6.375%, due 9/1/03 Baa BBB+ 285,600
Orange County, Cailfornia,
Development Agency Tax
Allocation, (Santa Ana
Heights Project):
500,000 5.500% due 9/1/00 Baa1 BBB 484,375
500,000 5.600% due 9/1/01 Baa1 BBB 482,500
30,000 Padre Dam Municipal Water
District, California
Improvement District,
Series C,
6.200% due 11/1/02 A A- 31,350
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- - -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
Palm Springs, California,
Financing Authority,
Airport Revenue, (Palm
Springs Regional Airport),
(MBIA Insured):
$ 200,000 5.400% due 11/1/03 Aaa AAA $ 200,750
400,000 5.500% due 1/1/04 Aaa AAA 400,000
75,000 Pasadena, California,
Certificates of
Participation,
6.750% due 8/1/00 A1 A+ 81,280
385,000 Pinole, California,
Redevelopment Agency,
Series A, (Pinole Vista
Redevelopment Project Tax
Allocation), (MBIA
Insured),
5.500% due 8/1/03 Aaa AAA 391,256
200,000 Rancho, California, Revenue
Refunding, Water District
Financing Authority, (FGIC
Insured),
5.600% due 8/1/00 Aaa AAA 206,500
795,000 Redding, California, Joint
Powers Financing Authority,
Solid Waste and Corporate
Yard, Series A,
5.000% due 1/1/04 A BBB+ 737,362
150,000 Riverside County,
California, Transportation
Commission, Sales Tax
Revenue, Series A,
6.500% due 6/1/00 A A+ 159,938
Sacramento, California,
Regional Transportation,
Certificates of
Participation, Series A:
300,000 6.375% due 3/1/02 A1 NR 312,375
350,000 6.400% due 3/1/03 A1 NR 364,000
1,240,000 San Bernardino County,
California, Certificates of
Participation, Unified
School District,
4.900% due 5/1/04 NR A- 1,131,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- - -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 200,000 San Bernardino County,
California, Certificates of
Participation, Airport
Improvement Project, (MBIA
Insured),
5.700% due 1/1/01 Aaa AAA $ 204,250
100,000 San Diego, California,
Certificates of
Participation, Unified
School District, Series B,
6.000% due 7/1/03 Aa AA- 102,625
25,000 San Diego County,
California, Regional
Transportation Commission,
Sales Tax Revenue, Series
A,
6.400% due 4/1/01 A1 AA- 26,437
San Francisco, California,
City and County Public
Utilities Commission,
Series A:
500,000 Sewer Revenue, (AMBAC
Insured),
5.600% due 10/1/03 Aaa AAA 507,500
200,000 Water Revenue,
6.000% due 11/1/01 Aa AA 209,500
San Francisco, California,
City and County Revenue,
340,000 4.750% due 3/1/02 Aaa NR 325,125
305,000 4.900% due 3/1/03 Aaa NR 290,512
San Francisco, California,
Downtown Parking, Series R:
450,000 6.000% due 4/1/02 A NR 445,500
280,000 6.150% due 4/1/03 A NR 277,550
San Jose, California,
Airport Revenue:
800,000 (FGIC Insured),
5.400% due 3/1/04 Aaa AAA 779,000
500,000 (MBIA Insured),
5.750% due 3/1/03 Aaa AAA 511,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- - -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
Santa Barbara, California,
Certificates of
Participation, (Harbor
Refunding Project):
$ 270,000 6.400% due 10/1/02 A NR $ 280,125
285,000 6.500% due 10/1/03 A NR 295,688
200,000 Santa Fe Springs,
California, Redevelopment
Agency, Redevelopment
Project Tax Allocation,
Series A, (MBIA Insured),
5.600% due 9/1/00 Aaa AAA 206,500
Sierra Sands Unified School
District, California,
Sierra Sands School
Financing Corporation,
Certificates of
Participation:
450,000 5.250% due 3/1/00 Baa NR 434,250
470,000 5.350% due 3/1/01 Baa NR 451,200
1,000,000 South Napa, California,
Waste Management
Facilities,
6.000% due 2/15/04 Baa1 NR 970,000
200,000 Southern California, Public
Power Authority, (Palo
Verde Project), Series C,
(AMBAC Insured),
5.700% due 7/1/02 Aaa AAA 205,750
450,000 Southern California Rapid
Transit Authority, District
A2, Special Benefit
Assessment,
6.100% due 9/1/03 Baa A- 451,688
105,000 Tehachapi, California,
Unified School District,
School Facilities
Corporation, Certificates
of Participation,
5.900% due 8/1/03 Baa NR 98,962
Tulare County, California,
Certificates of
Participation, (Financing
Project), (MBIA Insured),
Series A:
200,000 5.700% due 11/15/03 Aaa AAA 204,250
250,000 5.800% due 11/15/04 Aaa AAA 255,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- - -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 500,000 Ukiah, California, Unified
School District,
Certificates of
Participation, (Measure A
Capital Projects),
5.625% due 9/1/02 Baa1 BBB $ 480,000
University of California,
Multiple Purpose Projects,
(MBIA Insured),
200,000 Series A,
6.100% due 9/1/00 Aaa AAA 210,000
205,000 Upland, California,
Certificates of
Participation, (Police
Building Refunding
Project), (AMBAC Insured),
6.200% due 8/1/02 Aaa AAA 215,762
200,000 Walnut Valley, California,
Water District,
Certificates of
Participation,
(Badillo/Grand Transmission
Project), (FGIC Insured),
5.800% due 2/1/02 Aaa AAA 206,500
--------------------------------------------------------------------------
- - -
30,008,094
--------------------------------------------------------------------------
- - -
GUAM -- 2.6%
900,000 Guam Power Authority
Revenue, Series A,
5.200% due 10/1/04 NR BBB 839,250
--------------------------------------------------------------------------
- - -
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $31,227,793) 30,847,344
--------------------------------------------------------------------------
- - -
SHORT-TERM MUNICIPAL BONDS AND NOTES -- 3.4%
CALIFORNIA -- 3.4%
California Pollution
Control Project:
100,000 (Burney Forest Project),
Class A,
2.900%, due 9/1/20+ P-1 NR 100,000
100,000 (Delano Project),
3.250% due 8/1/19+ P-1 NR 100,000
700,000 (Honey Lake Power Company
Project),
3.200%, due 9/1/18+ P-1 NR 700,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- - -
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
California Pollution Control Project --
(continued):
$ 100,000 Irvine Ranch, California,
Water District,
2.950% due 10/1/00+ NR A-1+ $ 100,000
100,000 Shell Oil Company
Project-A,
2.900%, due 10/1/10+ VMIG1 A-1+ 100,000
--------------------------------------------------------------------------
- - -
TOTAL SHORT-TERM
MUNICIPAL BONDS AND NOTES
(Cost $1,100,000) 1,100,000
--------------------------------------------------------------------------
- - -
TOTAL INVESTMENTS (Cost $32,327,793*) 99.1% 31,947,344
OTHER ASSETS AND LIABILITIES (NET) 0.9 295,057
--------------------------------------------------------------------------
- - -
NET ASSETS 100.0%
$32,242,401
--------------------------------------------------------------------------
- - -
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds and notes are payable upon not more than one
business day's notice.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) MAY 31,
1994
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost
$32,327,793) (Note 1)
See accompanying schedule $ 31,947,344
Interest receivable 474,213
Receivable for Fund shares sold 271,479
Receivable from investment advisor 41,508
Unamortized organization costs (Note 6) 31,109
- - ------------------------------------------------------------------------
TOTAL ASSETS 32,765,653
- - ------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares redeemed $387,582
Dividends payable 88,581
Due to custodian 19,254
Distribution fee payable (Note 3) 4,110
Custodian fees payable (Note 2) 3,400
Transfer agent fees payable (Note 2) 1,150
Accrued expenses and other payables 19,175
- - ------------------------------------------------------------------------
TOTAL LIABILITIES 523,252
- - ------------------------------------------------------------------------
NET ASSETS $ 32,242,401
- - ------------------------------------------------------------------------
NET ASSETS consist of:
Accumulated net realized loss on
investments sold $ (188,441)
Unrealized depreciation of investments (380,449)
Par value 3,947
Paid-in capital in excess of par value 32,807,344
- - ------------------------------------------------------------------------
TOTAL NET ASSETS $ 32,242,401
- - ------------------------------------------------------------------------
NET ASSET VALUE per share
($32,242,401 DIVIDED BY 3,946,599 shares of
beneficial interest outstanding)+ $8.17
- - ------------------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE ($8.17 DIVIDED BY
0.9875)
(based on sales charge of 1.25% of the offering
price at May 31, 1994) $8.27
- - ------------------------------------------------------------------------
<FN>
+ Redemption price per share is equal to Net Asset Value less any
applicable
contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - ---------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- - -------------------------------------------------------------
FOR THE SIX MONTHS ENDED MAY 31,
1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $
888,783
- - ---------------------------------------------------------------------------
- - -------
EXPENSES:
Investment advisory fee (Note 2) $ 58,534
Administration fee (Note 2) 33,268
Distribution fee (Note 3) 25,086
Shareholder reports expense 20,614
Legal and audit fees 12,916
Custodian fees (Note 2) 10,448
Transfer agent fees (Note 2) 6,203
Amortization of organization costs (Note 6) 6,021
Trustees' fees and expenses (Note 2) 2,288
Other 13,695
Fees waived by investment adviser and
administrator (Note 2) (63,652)
- - ---------------------------------------------------------------------------
- - -------
TOTAL EXPENSES
125,421
- - ---------------------------------------------------------------------------
- - -------
NET INVESTMENT INCOME
763,362
- - ---------------------------------------------------------------------------
- - -------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTES 1 AND 4):
Net realized loss on investments during the
period
(165,015)
Net unrealized depreciation of investments
during the period
(1,162,911)
- - ---------------------------------------------------------------------------
- - -------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(1,327,926)
- - ---------------------------------------------------------------------------
- - -------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $
(564,564)
- - ---------------------------------------------------------------------------
- - -------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - ---------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR
5/31/94
ENDED
(UNAUDITED)
11/30/93
<S> <C>
<C>
Net investment income $ 763,362
$ 886,464
Net realized gain/(loss) on investments during the
period (165,015)
25,380
Net unrealized appreciation/(depreciation) of
investments during the period (1,162,911)
673,107
- - ---------------------------------------------------------------------------
- - ----------
Net increase/(decrease) in net assets resulting from
operations (564,564)
1,584,951
Distributions to shareholders from:
Net investment income (763,362)
(886,464)
Net realized gain on investments (44,755)
- - --
Net increase in net assets from Fund share transactions
(Note 5) 1,101,200
21,148,865
- - ---------------------------------------------------------------------------
- - ----------
Net increase/(decrease) in net assets (271,481)
21,847,352
NET ASSETS:
Beginning of period 32,513,882
10,666,530
- - ---------------------------------------------------------------------------
- - ----------
End of period $32,242,401
$ 32,513,882
- - ---------------------------------------------------------------------------
- - ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
PERIOD
5/31/94 ENDED
ENDED
(UNAUDITED) 11/30/93
11/30/92*
<S> <C> <C> <C>
Net Asset Value, beginning of period $ 8.50 $ 8.04 $
7.90
- - ---------------------------------------------------------------------------
- - -------
Income from investment operations:
Net investment income+ 0.19 0.39
0.35
Net realized and unrealized gain/(loss) on
investments (0.32) 0.46
0.14
- - ---------------------------------------------------------------------------
- - -------
Total from investment operations (0.13) 0.85
0.49
- - ---------------------------------------------------------------------------
- - -------
Less distributions:
Distributions from net investment income (0.19) (0.39)
(0.35)
Distributions from net realized capital
gains (0.01) -- -
- - -
- - ---------------------------------------------------------------------------
- - -------
Total distributions (0.20) (0.39)
(0.35)
- - ---------------------------------------------------------------------------
- - -------
Net asset value, end of year $ 8.17 $ 8.50 $
8.04
- - ---------------------------------------------------------------------------
- - -------
Total return++ (1.52)% 10.70%
6.33%
- - ---------------------------------------------------------------------------
- - -------
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's) $32,242 $32,514
$10,667
Ratio of operating expenses to average net
assets+++ 0.75%** 0.72%
0.65%**
Ratio of net investment income to average
net assets 4.56%** 4.45%
4.81%**
Portfolio turnover rate 21% 16%
46%
- - ---------------------------------------------------------------------------
- - -------
<FN>
* The Fund commenced operations on December 31, 1991.
** Annualized.
+ Net investment income before waiver of fees by investment adviser and
administrator for the six months ended May 31, 1994 was $0.18. Net
investment income before waiver of fees and reimbursement of expenses
by
investment adviser and administrator for the year ended November 30,
1993
and waiver of fees and reimbursement of expenses by investment
adviser,
sub-investment adviser and administrator, custodian and distributor
for
period ended November 30, 1992 were $0.32 and $0.24, respectively.
++ Total return represents aggregate total return for the periods
indicated and
does not reflect any applicable sales charges.
+++ Annualized operating expense ratio before waiver of fees and/or
reimbursement by investment adviser and administrator for the six
months
ended May 31, 1994 and year ended November 30, 1993 and before waiver
of
fees and reimbursement of expenses by investment adviser, sub-
investment
adviser and/or administrator, custodian and distributor for the
period ended
November 30, 1992 were 1.13%, 1.49% and 2.18%, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Shearson Income Trust (the "Trust") was organized as a
"Massachusetts business trust" under the laws of the Commonwealth of
Massachusetts on October 17, 1991. The Trust is registered with the
Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended
(the "1940 Act"), as an open-end management investment company. The Trust
consists of the following four funds: Smith Barney Shearson Limited
Maturity
Treasury Fund, Smith Barney Shearson Limited Maturity Municipals Fund,
Smith
Barney Shearson Intermediate Maturity California Municipals Fund (the
"Fund")
and Smith Barney Shearson Intermediate Maturity New York Municipals Fund.
The
following is a summary of significant accounting policies consistently
followed
by the Fund in the preparation of its financial statements.
PORTFOLIO VALUATION: Securities are valued by The Boston Company Advisors,
Inc.
("Boston Advisors") after consultation with an independent pricing service
(the
"Service") approved by the Board of Trustees. When, in the judgment of the
Service, quoted bid prices for securities are readily available and are
representative of the bid side of the market, these investments are valued
at
the mean between the quoted bid prices and asked prices. Securities for
which,
in the judgment of the Service, there are no readily obtainable market
quotations (which may constitute a majority of the portfolio securities)
are
carried at fair value as determined by the Service, based on methods, which
include consideration of: yields or prices of municipal securities of
comparable
quality, coupon, maturity and type; indications as to values from dealers;
and
general market conditions. Securities, not valued by the Service, for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Trustees.
Short-term investments that mature in 60 days or less are valued at
amortized
cost.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-
issued or
delayed-delivery basis may be settled a month or more after the trade date.
Interest income is recorded on the accrual basis. Realized gains and losses
from
securities sold are recorded on the identified cost basis.
18
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund
to
declare dividends from net investment income daily and to pay such
dividends
monthly. Distributions from net realized capital gains, if any, are
declared and
paid annually, after the end of the calendar year in which earned. In
addition,
in order to avoid the application of a 4% nondeductible excise tax on
certain
undistributed amounts of ordinary income and capital gains, the Fund may
make an
additional distribution shortly before December 31 in each year of any
undistributed ordinary income or capital gains and expects to make any
other
distributions as are necessary to avoid this tax. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and
gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
FEDERAL INCOME TAXES: The Trust intends that the Fund separately qualify as
a
regulated investment company, if such qualification is in the best interest
of
its shareholders, which distributes exempt-interest dividends, by complying
with
the requirements of the Internal Revenue Code of 1986, as amended,
applicable to
regulated investment companies and by distributing substantially all of its
earnings to its shareholders. Therefore, no Federal income tax provision is
required.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION
FEE AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with Greenwich Street Advisors, a division of Mutual Management
Corp., which is controlled by Smith Barney Holdings Inc. ("Holdings").
Holdings
is a wholly owned subsidiary of The Travelers Inc. Under the Advisory
Agreement,
the Fund pays a monthly fee at the annual rate of 0.35% of the value of its
average daily net assets.
19
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Prior to April 20, 1994, the Fund was a party to an administration
agreement
with Boston Advisors, an indirect wholly owned subsidiary of Mellon Bank
Corporation ("Mellon"). Under this agreement, the Fund paid a monthly fee
at the
annual rate of 0.20% of the value of its average daily net assets.
As of the close of business on April 20, 1994, Smith, Barney Advisers, Inc.
("SBA"), which is controlled by Holdings, succeeded Boston Advisors as the
Fund's administrator. The new administration agreement contains
substantially
the same terms and conditions, including the level of fees, as the
predecessor
agreement.
As of the close of business on April 20, 1994, the Fund also entered into a
sub-adminstration agreement (the "Sub-Administration Agreement") with
Boston
Advisors. Under the Sub-Administration Agreement, Boston Advisors is paid a
portion of the fee paid by the Fund to SBA at a rate agreed upon from time
to
time between SBA and Boston Advisors.
From time to time, Greenwich Street Advisors and the Fund's administrator
may
voluntarily waive a portion or all of their respective fees otherwise
payable to
them. For the six months ended May 31, 1994, Greenwich Street Advisors and
Boston Advisors, the Fund's prior administrator, voluntarily waived fees of
$40,802 and $22,850, respectively.
For the six months ended May 31, 1994, Smith Barney Inc. ("Smith Barney")
received $58,540 from investors representing commissions (sales charges) on
sales of Fund shares.
A contingent deferred sales charge is generally payable by a shareholder in
connection with the redemption of shares within one year after the date of
purchase. For the six months ended May 31, 1994, Smith Barney received from
shareholders $8,483 in contingent deferred sales charges.
No officer, director or employee of Smith Barney or of any parent or
subsidiary
of Smith Barney receives any compensation from the Trust for
20
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
serving as a Trustee or officer of the Trust. The Trust pays each Trustee
who is
not an officer, director or employee of Smith Barney or any of its
affiliates
$4,000 per annum plus $500 per meeting attended and reimburses each such
Trustee
for travel and out-of-pocket expenses.
Boston Safe Deposit and Trust Company an indirect wholly owned subsidiary
of
Mellon, serves as the Trust's custodian. The Shareholder Services Group
Inc., a
subsidiary of First Data Corporation, serves as the Trust's transfer agent.
3. DISTRIBUTION PLAN
The Trust has adopted a plan of distribution (the "Plan") under Rule 12b-1
of
the 1940 Act. Under the Plan, the Fund pays Smith Barney a monthly fee at
the
annual rate of 0.15% of the value of its average daily net assets for
activities
primarily intended to result in the sale of its shares.
Under its terms, the Plan shall remain in effect from year to year,
provided
that such continuance is approved annually by vote of the Trust's Trustees,
including a majority of those Trustees who are not "interested persons" of
the
Trust and who have no direct or indirect financial interest in the
operation of
the Plan.
4. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding short-
term
investments, for the six months ended May 31, 1994 were $6,670,347 and
$7,657,606, respectively.
At May 31, 1994, aggregate gross unrealized appreciation for all securities
in
which there was an excess of value over tax cost was $294,240 and aggregate
gross unrealized depreciation for all securities in which there was an
excess of
tax cost over value was $674,689.
21
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest
with a
$.001 par value. Changes in shares of beneficial interest in the Fund were
as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED
5/31/94
11/30/93
Shares Amount Shares
Amount
<S> <C> <C> <C>
<C>
- - ---------------------------------------------------------------------------
- - ----------
Sold 781,221 $ 6,610,290
2,773,792 $23,473,658
Issued as reinvestment of dividends 76,362 641,472
81,600 688,363
Redeemed (738,050) (6,150,562)
(355,224) (3,013,156)
- - ---------------------------------------------------------------------------
- - ----------
Net increase 119,533 $ 1,101,200
2,500,168 $21,148,865
- - ---------------------------------------------------------------------------
- - ----------
</TABLE>
6. ORGANIZATION COSTS
The Fund bears all costs in connection with its organization including the
fees
and expenses of registering and qualifying its shares for distribution
under
Federal and state securities regulations. All such cost are being amortized
on
the straight-line method over a period of five years from the commencement
of
operations of the Fund. In the event that any of the initial shares of the
Fund
are redeemed during such amortization period, the Fund will be reimbursed
for
any unamortized organization costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by 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.
22
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - ---------------------------------------------------------------------------
PARTICIPANTS
DISTRIBUTOR
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
ADMINISTRATOR
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services
Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and
Trust Company
One Boston Place
Boston, Massachusetts 02108
23
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- - ---------------------------------------------------------------------------
GLOSSARY OF COMMONLY USED MUTUAL FUND TERMS
CAPITAL GAIN (OR LOSS): This is the increase (or decrease) in the market
value
(price) of a security in your portfolio. If a stock or bond appreciates in
price, there is a capital gain; if it depreciates there is a capital loss.
A
capital gain or loss is "realized" upon the sale of a security; if net
capital
gains exceed net capital losses, there may be a capital gain distribution
to
shareholders.
CDSC (CONTINGENT DEFERRED SALES CHARGE): One kind of back-end load, a CDSC
is
imposed if shares are redeemed during the first few years of ownership. The
CDSC
may be expressed as a percentage of either the original purchase price or
the
redemption proceeds. Most CDSCs decline over time, and some will not be
charged
if shares are redeemed after a certain period of time.
DISTRIBUTION RATE: This is the rate at which a mutual fund pays out (or
distributes) interest, dividends and realized capital gains to
shareholders. A
fund's distribution rate is usually expressed as an annualized percent of
the
fund's offering price.
DIVIDEND: This is income generated by securities in a portfolio and
distributed
after expenses to shareholders.
FRONT-END SALES CHARGE: This is the sales charge applied to an investment
at the
time of initial purchase.
NET ASSET VALUE (NAV): Net asset value is the total market value of all
securities held by a fund, minus any liabilities, divided by the number of
shares outstanding. It is the value of a single share of a mutual fund on a
given day. The total value of your investment would be the NAV multiplied
by the
number of shares you own.
SEC YIELD: This standardized calculation of a mutual fund's yield is based
on a
formula developed by the Securities and Exchange Commission (SEC) to allow
funds
to be compared on an equal basis. It is an annualized yield based on the
portfolio's potential earnings from dividends, interest and yield to
maturity of
its holdings, and it reflects the payments of all portfolio expenses for
the
most recent 30-day period. Mutual funds are required to use this figure
when
stating yield.
TOTAL RETURN: Total return measures a fund's performance, taking into
account
the combination of dividends paid and the gain or loss in the value of the
securities held in the portfolio. It may be expressed on an AVERAGE ANNUAL
basis
or CUMULATIVE basis (total change over a given period). In addition, total
return may be expressed with or without the effects of sales charges or the
reinvestment of dividends and capital gains.
Whenever a fund reports any type of performance, it must also report the
average
annual total return according to the standardized calculation developed by
the
SEC. This standardized calculation was introduced to insure that investors
can
compare different funds on an equal basis. The SEC AVERAGE ANNUAL TOTAL
RETURN
calculation includes the effects of all fees and sales charges and assumes
the
reinvestment of all dividends and capital gains.
24
<PAGE>
INTERMEDIATE
MATURITY
CALIFORNIA
MUNICIPALS
FUND
TRUSTEES
Burt N. Dorsett
Elliot S. Jaffe
Harry W. Knight
Heath B. McLendon
Cornelius C. Rose
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD
Stephen J. Treadway
PRESIDENT
Richard P. Roelofs
EXECUTIVE VICE PRESIDENT
Joseph P. Deane
VICE PRESIDENT AND
INVESTMENT OFFICER
Lewis E. Daidone
TREASURER
Christina T. Sydor
SECRETARY
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF
SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND. 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, FEES AND EXPENSES AS WELL AS
OTHER
PERTINENT INFORMATION.
[LOGO]
SMITH BARNEY SHEARSON
MUTUAL FUNDS
Two World Trade Center
New York, New York 10048
Fund 165
FD2230 G4
