As filed with the Securities and Exchange Commission on
December 29, 1995
Securities Act File No. 33-54549
Investment Company Act File No. 811-07201
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM N-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 x
Pre-Effective Amendment No. o
Post-Effective Amendment No. 1 x
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 x
Amendment No. 3 x
(check appropriate box or boxes)
___________
GREENWICH STREET CALIFORNIA
MUNICIPAL FUND INC.
(Exact Name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (zip code)
Registrant's Telephone Number, including Area Code: (212)
723-9218
Ms. Christina T. Sydor, Secretary
Greenwich Street California Municipal Fund Inc.
388 Greenwich Street, 22nd Floor
New York, New York 10013
(Name and Address of Agent for Service of Process)
___________
Copies to:
Jon S. Rand, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Approximate Date of Proposed Public Offering: As soon as
practicable afte
r the effective date of this Registration Statement.
If any of the securities being registered on this Form
N-2 are to be offered on a delayed or continuous basis
pursuant to Rule 415 of the Securities Act of 1933, as
amended (the "1933 Act"), other than securities offered only
in connection with dividend or interest reinvestment plans,
check the following box. x
It is proposed that this filing will become effective:
x when declared effective pursuant to section 8(c).
This Registration Statement relates to the registration
of an indeterminate number of shares solely for market-
making transactions. A fee of $100 was paid to the Fund's
CIK# 0000926505 on December 22,
1995 pursuant to Section 6(b) of the 1933 Act. Pursuant to
Rule 429, this Registration Statement relates to shares
previously registered on Form N-2. (Registration No. 33-
54549).
Registrant amends this Registration Statement under the
1933 Act, on such date as may be necessary to delay its
effective date until Registrant files a further amendment
that specifically states that this Registration Statement
will thereafter become effective in accordance with the
provisions of Section 8(a) of the 1933 Act, or until the
Registration Statement becomes effective on such date as the
Securities and Exchange Commission, acting pursuant to
Section 8(a), may determine.
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
Form N-2
Cross-Reference Sheet
Parts A and B of Prospectus*
Items Location
in
Parts
A and
B of
Form N-
2*
1. Outside Front Cover Outside Front Cover
2. Inside Front and Outside Back Inside Front and
Outside Back
Cover Page Cover Page
3. Fee Table and Synopsis Prospectus Summary;
Fee Table
4. Financial Highlights Financial
Highlights
5. Plan of Distribution Outside Front Cover
6. Selling Shareholders Not Applicable
7. Use of Proceeds Use of
Proceeds; Investment
Objective and
Management
Policies
8. General Description of The Portfolio;
Investment
Registrant Objective and
Management
Policies;
Investment
Restrictions; Net
Asset Value;
Securities
Transactions and
Turnover;
Description of Shares
9. Management Management of
the Portfolio;
Custodian,
Transfer Agent,
Dividend-Paying
Agent, Registrar
and Plan Agent
10. Capital Stock, Long-Term Debt, Dividends and
Distributions;
and Other Securities Dividend
Reinvestment Plan;
Description of
Shares; Taxation
11. Defaults and Arrears on Senior Not Applicable
Securities
12. Legal Proceedings Not Applicable
13. Table of Contents of Statement
of Additional Information Not Applicable
14 Cover Page Not Applicable
15. Table of Contents Not Applicable
16. General Information and History The Portfolio,
Investment
Objective and
Management
Policies
17. Investment Objective and Investment
Objective and
Policies Management
Policies; Investment
Restrictions;
Securities
Transactions and
Turnover
18. Management Management of
the Portfolio;
Custodian,
Transfer Agent,
Dividend-Paying
Agent, Registrar
and Plan Agent
19. Control Persons and Principal Description of
Shares
Holders of Securities
* Pursuant to General Instructions of Form N-2, all
information required to be set forth in
Part B: Statement of Additional Information, has been
included in Part A: The Prospectus.
20. Investment Advisory and Other Management of the
Portfolio
Services
21. Brokerage Allocation and Other Securities
Transactions and
Practices Turnover
22. Tax Status Dividends and
Distributions;
Dividend
Reinvestment Plan;
Taxation
23. Financial Statements Experts
<PAGE>
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- --------------------
Greenwich Street California Municipal Fund Inc.
PROSPECTUS DECEMBER 29,
1995
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Greenwich Street California Municipal Fund Inc. (the
"Portfolio") is a non-
diversified, closed-end management investment company that
seeks as high a
level of current income exempt from federal income tax and
California personal
income tax as is consistent with the preservation of
principal. Under normal
conditions, the Portfolio, in seeking to achieve its
investment objective,
invests its assets primarily in long-term, investment grade
obligations issued
by, or on behalf of, the State of California and its
political subdivisions,
agencies and instrumentalities or multistate agencies or
authorities. There is
no assurance that the Portfolio will achieve its investment
objective. The
shares of closed-end investment companies have in the past
frequently traded at
discounts from their net asset values. Investors should
carefully assess the
risks associated with an investment in the Portfolio. See
"Investment Objective
and Management Policies--Risk Factors and Special
Considerations."
This Prospectus sets forth concisely the information about
the Portfolio that
a prospective investor ought to know before investing and
should be retained
for future reference. Additional information about the
Portfolio has been filed
with the Securities and Exchange Commission and is available
upon written or
oral request by calling or writing to the Portfolio at the
telephone number or
address set forth above or by contacting a Smith Barney
Financial Consultant.
Smith Barney Inc. ("Smith Barney") intends to make a market
in the Portfolio's
Common Stock, although it is not obligated to conduct market-
making
(Continued on page 2)
SMITH BARNEY INC.
Distributor
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
<PAGE>
Greenwich Street California Municipal Fund Inc.
PROSPECTUS (CONTINUED)
DECEMBER 29, 1995
activities and any such activities may be discontinued at
any time, without
notice by Smith Barney. The shares of Common Stock that may
be offered from
time to time pursuant to this Prospectus were issued and
sold by the Portfolio
on September 23, 1994 in an initial public offering at a
price of $12.00 per
share. No assurance can be given as to the liquidity of, or
the trading market
for, the Common Stock as a result of any market-making
activities undertaken
by Smith Barney. The Portfolio will not receive any proceeds
from the sale of
any Common Stock offered pursuant to this Prospectus. The
Portfolio's shares
of Common Stock have been approved for listing on the
American Stock Exchange
under the symbol, " GCM."
All dealers effecting transactions in the registered
securities, whether or
not participating in this distribution, may be required to
deliver a Prospec-
tus.
Investors are advised to read this Prospectus and to retain
it for future
reference.
2
<PAGE>
Greenwich Street California Municipal Fund Inc.
TABLE OF CONTENTS
<TABLE>
<S>
<C>
PROSPECTUS SUMMARY
4
- ------------------------------------------------------------
- -----------------
PORTFOLIO EXPENSES
8
- ------------------------------------------------------------
- -----------------
FINANCIAL HIGHLIGHTS
10
- ------------------------------------------------------------
- -----------------
THE PORTFOLIO
11
- ------------------------------------------------------------
- -----------------
THE OFFERING
11
- ------------------------------------------------------------
- -----------------
USE OF PROCEEDS
11
- ------------------------------------------------------------
- -----------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
11
- ------------------------------------------------------------
- -----------------
INVESTMENT RESTRICTIONS
34
- ------------------------------------------------------------
- -----------------
SHARE PRICE DATA
36
- ------------------------------------------------------------
- -----------------
MANAGEMENT OF THE PORTFOLIO
37
- ------------------------------------------------------------
- -----------------
SECURITIES TRANSACTIONS AND TURNOVER
42
- ------------------------------------------------------------
- -----------------
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN
43
- ------------------------------------------------------------
- -----------------
NET ASSET VALUE
45
- ------------------------------------------------------------
- -----------------
TAXATION
46
- ------------------------------------------------------------
- -----------------
DESCRIPTION OF SHARES
52
- ------------------------------------------------------------
- -----------------
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
53
- ------------------------------------------------------------
- -----------------
CUSTODIAN, TRANSFER, AND DIVIDEND-PAYING AGENT, REGISTRAR
AND PLAN AGENT 55
- ------------------------------------------------------------
- -----------------
REPORTS TO SHAREHOLDERS
55
- ------------------------------------------------------------
- -----------------
EXPERTS
55
- ------------------------------------------------------------
- -----------------
FURTHER INFORMATION
56
- ------------------------------------------------------------
- -----------------
APPENDIX A
A-1
- ------------------------------------------------------------
- -----------------
APPENDIX B
B-1
- ------------------------------------------------------------
- -----------------
</TABLE>
3
<PAGE>
Greenwich Street California Municipal Fund Inc.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the
more detailed
information appearing in the body of this Prospectus. Cross
references in this
summary are to headings in the body of the Prospectus.
THE PORTFOLIO Greenwich Street California Municipal Fund
Inc. (the "Portfo-
lio") is a non-diversified, closed-end management investment
company. See "The
Portfolio."
INVESTMENT OBJECTIVE The Portfolio seeks as high a level of
current income
exempt from federal income tax and California personal
income tax as is con-
sistent with the preservation of principal. See "Investment
Objective and Man-
agement Policies."
TAX-EXEMPT INCOME The Portfolio is intended to operate in
such a manner that
dividends paid by the Portfolio may be excluded by the
Portfolio's sharehold-
ers from their gross incomes for federal income tax and
California personal
income tax purposes. See "Investment Objective and
Management Policies" and
"Taxation."
QUALITY INVESTMENTS The Portfolio invests substantially all
of its assets in
long-term, investment grade obligations issued by state and
local governments,
political subdivisions, agencies and public authorities. The
Portfolio oper-
ates subject to a fundamental investment policy providing
that, under normal
conditions, the Portfolio will invest not less than 80% of
its net assets in
municipal obligations and not less than 65% of its net
assets in California
obligations. At least 80% of the Portfolio's total assets
will be invested in
securities rated investment grade by Moody's Investors
Service, Inc.
("Moody's"), Standard & Poor's Rating Group ("S&P"), Fitch
Investors Service,
Inc. ("Fitch") or another nationally-recognized rating
agency (that is, rated
no lower than Baa, MIG or Prime-1 by Moody's, BBB, SP-2 or A-
1 by S&P or BBB
or F-1 by Fitch). Up to 20% of the Portfolio's total assets
may be invested in
unrated securities that are deemed by the Portfolio's
investment adviser to be
of a quality comparable to investment grade. See "Investment
Objective and
Management Policies" and "Appendix A."
THE OFFERING Smith Barney intends to make a market in the
Common Stock in addi-
tion to the trading of the Common Stock on the AMEX. Smith
Barney, however, is
not obligated to conduct market-making activities and any
such activities may
be discontinued at any time without notice, at the sole
discretion of Smith
Barney.
4
<PAGE>
Greenwich Street California Municipal Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
LISTING AMEX.
SYMBOL GCM.
INVESTMENT MANAGER Greenwich Street Advisors, a division of
Smith Barney Mutual
Funds Management Inc. ("SBMFM"), serves as the Portfolio's
investment manager
(the "Investment Manager"). The Investment Manager provides
investment advi-
sory and management services to investment companies
affiliated with Smith
Barney. Smith Barney is a wholly owned subsidiary of Smith
Barney Holdings
Inc. ("Holdings"), which is in turn a wholly owned
subsidiary of Travelers
Group Inc. ("Travelers"). Subject to the supervision and
direction of the
Portfolio's Board of Directors, the Investment Manager
manages the securities
held by the Portfolio in accordance with the Portfolio's
stated investment
objective and policies, makes investment decisions for the
Portfolio, places
orders to purchase and sell securities on behalf of the
Portfolio and employs
professional portfolio managers. SBMFM acts as administrator
of the Portfolio
and in that capacity provides certain administrative
services, including over-
seeing the Portfolio's non-investment operations and its
relations with other
service providers and providing executive and other officers
to the Portfolio.
The Portfolio pays the Investment Manager a fee ("Management
Fee") for serv-
ices provided to the Portfolio that is computed daily and
paid monthly at the
annual rate of 0.90% of the value of the Portfolio's average
daily net assets.
The Management Fee is higher than the rates for similar
services paid by other
publicly offered, closed-end, management investment
companies that have
investment objectives and policies similar to those of the
Portfolio. The
Portfolio will bear other expenses and costs in connection
with its operation
in addition to the costs of investment management services.
See "Management of
the Portfolio-- Investment Manager."
CUSTODIAN PNC Bank, National Association ("PNC Bank") serves
as the Portfolio's
custodian. See "Custodian, Transfer Agent, Dividend-Paying
Agent, Registrar
and Plan Agent."
TRANSFER AGENT, DIVIDEND-PAYING AGENT, REGISTRAR AND PLAN
AGENT First Data
Investor Services Group ("First Data") serves as the
Portfolio's transfer
agent, dividend-paying agent and registrar. See "Custodian,
Transfer Agent,
Dividend-Paying Agent, Registrar and Plan Agent."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment
income (that is,
income other than net realized capital gains) are paid
monthly and distribu-
tions of net realized capital gains, if any, are paid
annually. All dividends
or distributions with respect to shares of Common Stock are
reinvested
automati-
5
<PAGE>
Greenwich Street California Municipal Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
cally in additional shares through participation in the
Portfolio's Dividend
Reinvestment Plan, unless a shareholder elects to receive
cash. When the mar-
ket price of the Common Stock is equal to or exceeds net
asset value, partici-
pants in the Portfolio's Dividend Reinvestment Plan will
receive distributions
through issuance of additional shares of Common Stock valued
at net asset
value or, if the net asset value is less than 95% of the
then current market
price of the Common Stock, then at 95% of the market price.
Whenever market
price is less than net asset value, participants will
receive distributions
through purchases of shares on the open market. See
"Dividends and Distribu-
tions; Dividend Reinvestment Plan."
RISK FACTORS AND SPECIAL CONSIDERATIONS The Portfolio is a
closed-end invest-
ment company. The net asset value of the Common Stock will
change with changes
in the value of the securities held by the Portfolio.
Because the Portfolio
invests primarily in fixed-income securities, the net asset
value of the Com-
mon Stock can be expected to change as levels of interest
rates fluctuate;
generally, when prevailing interest rates increase, the
value of fixed-income
securities held by the Portfolio can be expected to decrease
and when prevail-
ing interest rates decrease, the value of the fixed-income
securities held by
the Portfolio can be expected to increase. The value of the
fixed-income secu-
rities held by the Portfolio, and thus the Portfolio's net
asset value, may
also be affected by other economic, market and credit
factors. The net asset
value of the Portfolio may be subject to greater fluctuation
to the extent
that the Portfolio invests in zero coupon securities. See
"Investment Objec-
tive and Management Policies -- Risk Factors and Special
Considerations."
The Portfolio does not purchase securities that are rated
lower than Baa by
Moody's, BBB by S&P or BBB by Fitch at the time of purchase.
Although obliga-
tions rated Baa by Moody's BBB by S&P or BBB by Fitch are
considered to be
investment grade, they may be subject to greater risks than
other higher rated
investment grade securities. Obligations rated Baa by
Moody's, for example,
are considered medium grade obligations that lack
outstanding investment char-
acteristics and have speculative characteristics as well;
obligations rated
BBB by S&P are regarded as having an adequate capacity to
pay principal and
interest, and obligations rated BBB by Fitch are deemed to
be subject to an
increased likelihood that their rating will fall below
investment grade then
higher rated bonds. See "Investment Objective and Management
Policies -- Qual-
ity Standards" and "-- Risk Factors and Special
Considerations."
6
<PAGE>
Greenwich Street California Municipal Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
The Portfolio may invest up to 20% of its total assets in
unrated securities
that the Investment Manager determines to be of comparable
quality to the
securities rated investment grade in which the Portfolio may
invest. Dealers
may not maintain daily markets in unrated securities and
retail secondary mar-
kets for many of them may not exist; this lack of markets
may affect the Port-
folio's ability to sell these securities when the Investment
Manager deems it
appropriate. The Portfolio has the right to invest without
limitation in state
and local obligations that are "private activity bonds," the
income from which
may be taxable as a specific preference item for purposes of
the federal
alternative minimum tax. Thus, the Portfolio may not be a
suitable investment
for investors who are subject to the alternative minimum
tax. See "Investment
Objective and Management Policies" and "Taxation."
Certain of the instruments held by the Portfolio and
certain of the invest-
ment techniques that the Portfolio employs (which may
include instruments and
techniques commonly referred to as "derivatives") might
expose the Portfolio
to special risks. The instruments presenting the Portfolio
with risks are
municipal leases, zero coupon securities, custodial
receipts, municipal obli-
gation components, floating and variable rate demand notes
and bonds, and par-
ticipation interests. Entering into securities transactions
on a when-issued
or delayed delivery basis, entering into repurchase
agreements, lending port-
folio securities, and engaging in financial futures and
options transactions,
are investment techniques involving risks to the Portfolio.
As a non-diversi-
fied fund within the meaning of the Investment Company Act
of 1940, as amended
(the "1940 Act"), the Portfolio may invest a greater
proportion of its assets
in the obligations of a smaller number of issuers and, as a
result, may be
subject to greater risk than a diversified fund with respect
to its holdings
of securities. See "Investment Objective and Management
Policies -- Types of
Municipal Obligations Held by the Portfolio", "-- Investment
Techniques" and
"-- Risk Factors and Special Considerations."
The Portfolio's concentration in California obligations
involves certain
additional risks that should be considered carefully by
investors. Certain
California constitutional amendments, legislative measures,
executive orders,
administrative regulations, court decisions and voter
initiatives could result
in certain adverse consequences affecting California
obligations. In particu-
lar, there are risks resulting from certain amendments to
the California Con-
stitution and other statutes that limit the taxing and
spending authority of
California governmental entities, and these may have the
effect of impairing
the ability of certain issuers of California obligations to
pay principal and
interest on their obliga-
7
<PAGE>
Greenwich Street California Municipal Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
tions. In addition, investors purchasing municipal
obligations of their state
of residence, or a fund comprised of such obligations,
should recognize that
the benefits of the exemption from state and local taxes, in
addition to the
exemption from federal taxes, necessarily limits the
Portfolio's ability to
diversify geographically. See "Investment Objective and
Management Policies--
Risk Factors and Special Considerations" and "Taxation."
The Portfolio's Articles of Incorporation include
provisions that could have
the effect of limiting the ability of other entities or
persons to acquire
control of the Portfolio and of depriving shareholders of an
opportunity to
sell their shares of Common Stock at a premium over
prevailing market prices.
See "Certain Provisions of the Articles of Incorporation."
PORTFOLIO EXPENSES
The following tables are intended to assist investors in
understanding the
various costs and expenses directly or indirectly associated
with investing in
the Portfolio.
<TABLE>
- ------------------------------------------------------------
- -----------
<S>
<C>
ANNUAL EXPENSES
(as a percentage of net assets attributable to Common
Stock)
Management Fees (absent fee waiver)*
0.90%
Other Expenses**
0.24%
- ------------------------------------------------------------
- -----------
TOTAL ANNUAL OPERATING EXPENSES*
1.14%
- ------------------------------------------------------------
- -----------
</TABLE>
* For the period from September 23, 1994 (commencement of
operations) to
August 31, 1995, the Investment Manager waived a portion
of its fee so that
the actual management fees paid by the Portfolio were
0.78% and actual total
Portfolio operating expenses were 1.02%. The Investment
Manager does not
expect to waive any portion of its management fee for the
year ending August
31, 1996. See "Management of the Portfolio" for additional
information.
** "Other Expenses", as shown above, is based upon amounts
of expenses for the
fiscal period ended August 31, 1995.
8
<PAGE>
Greenwich Street California Municipal Fund Inc.
PORTFOLIO EXPENSES (CONTINUED)
EXAMPLE
The following example demonstrates the projected dollar
amount of total
cumulative expenses that would be incurred over various
periods with respect
to a hypothetical investment in the Portfolio. These amounts
are based upon
payment by the Portfolio of operating expenses at the levels
set forth in the
table above.
An investor would pay the following expenses on a $1,000
investment, assuming
(1) a 5% annual return and (2) reinvestment of all dividends
and distributions
at net asset value:
<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS YEARS
- ---------------------------------
<S> <C> <C> <C> <C>
$12 $36 $63 $139
- ---------------------------------
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES OF
THE PORTFOLIO AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
Moreover, while the example assumes a 5% annual return, the
Portfolio's per-
formance will vary and may result in a return greater or
less than 5%. In
addition, while the example assumes reinvestment of all
dividends and distri-
butions at net asset value, participants in the Portfolio's
Dividend Reinvest-
ment Plan may receive shares purchased or issued at a price
or value different
from net asset value. See "Dividends and Distributions;
Dividend Reinvestment
Plan."
9
<PAGE>
Greenwich Street California Municipal Fund Inc.
FINANCIAL HIGHLIGHTS
The following information for the period ended August 31,
1995 has been
audited by KPMG Peat Marwick LLP, independent auditors,
whose report thereon
appears in the Portfolio's Annual Report dated August 31,
1995. The informa-
tion set out below should be read in conjunction with the
financial statements
and related notes that also appear in the Portfolio's Annual
Report, which is
incorporated by reference.
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE
PERIOD:
<TABLE>
<CAPTION>
1995(A)(B)
- ------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income* 0.60
Net realized and unrealized gain on investments 0.84
- ------------------------------------------------------------
Total Income from Investment Operations 1.44
- ------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.52)
- ------------------------------------------------------------
Total Distributions (0.52)
- ------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.92
- ------------------------------------------------------------
TOTAL RETURN 12.24%++
- ------------------------------------------------------------
NET ASSETS, END OF PERIOD (000S) $47,250
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses* 1.02%+
Net investment income 5.16+
- ------------------------------------------------------------
PORTFOLIO TURNOVER RATE 7.32%
- ------------------------------------------------------------
MARKET PRICE AT END OF PERIOD $11.50
- ------------------------------------------------------------
</TABLE>
(a) Based on weighted average shares outstanding for period.
(b) For the period from September 23, 1994 (commencement of
operations) to
August 31, 1995.
++ Total return is not annualized as it may not be
representative of the total
return for the period.
+ Annualized
* The Manager has waived a portion of its management fees
for the period from
September 23, 1994 to August 31, 1995. If such fees were
not waived, the per
share decrease in net investment income would have been
$0.01, and the ratio
of expenses to average net assets would have been 1.14%,
annualized.
10
<PAGE>
Greenwich Street California Municipal Fund Inc.
THE PORTFOLIO
The Portfolio is a non-diversified, closed-end management
investment company
that seeks as high a level of current income exempt from
federal income tax as
is consistent with the preservation of principal. The
Portfolio, which was
incorporated under the laws of the State of Maryland on July
8, 1994, is regis-
tered under the 1940 Act, and has its principal office at
388 Greenwich Street,
New York, New York 10013. The Portfolio's telephone number
is (212) 723-9218.
THE OFFERING
Smith Barney intends to make a market in the Portfolio's
Common Stock,
although it is not obligated to conduct market-making
activities and any such
activities may be discontinued at any time without notice at
the sole discre-
tion of Smith Barney. No assurance can be given as to the
liquidity of, or the
trading market for, the Common Stock as a result of any
market-making activi-
ties undertaken by Smith Barney. This Prospectus is to be
used by Smith Barney
in connection with offers and sales of the Common Stock in
market-making trans-
actions in the over-the-counter market at negotiated prices
related to prevail-
ing market prices at the time of the sale.
USE OF PROCEEDS
The Portfolio will not receive any proceeds from the sale
of Common Stock
offered pursuant to this Prospectus. Proceeds received by
Smith Barney as a
result of its market-making in Common Stock will be utilized
by Smith Barney in
connection with its secondary market operations and for
general corporate pur-
poses.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
Set out below is a description of the investment objective
and principal
investment policies of the Portfolio. No assurance can be
given that the Port-
folio will be able to achieve its investment objective,
which may be changed
only with the approval of a majority of the Portfolio's
outstanding voting
securities as defined in the 1940 Act. Such a majority is
defined in the 1940
Act as the lesser of (1) 67% or more of the shares present
at a meeting of the
Portfolio, if the hold-
11
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ers of more than 50% of the outstanding shares of the
Portfolio are present or
represented by proxy or (2) more than 50% of the outstanding
shares of the
Portfolio.
GENERAL
The Portfolio's investment objective is to seek as high a
level of current
income exempt from federal income tax and California
personal income taxes as
is consistent with the preservation of principal. In seeking
its objective,
the Portfolio invests primarily in investment grade debt
obligations issued
by, or on behalf of, the State of California and its
political subdivisions,
agencies and instrumentalities or multistate agencies or
authorities, the
interest from which debt obligations is, in the opinion of
bond counsel to
their issuer, excluded from gross income for the purposes of
federal income
tax as well as California personal income tax. The Portfolio
operates subject
to a fundamental investment policy providing that, under
normal conditions,
the Portfolio will invest not less than 80% of its net
assets in municipal
obligations the interest on which is exempt from federal
income tax (other
than the alternative minimum tax) ("Municipal Obligations")
and not less than
65% of its net assets in Municipal Obligations the interest
on which is also
exempt from California personal income tax in the opinion of
bond counsel to
the issuers ("California obligations"). The Portfolio
generally invests in
long-term Municipal Obligations; under normal market
conditions, the weighted
average maturity of the Portfolio's securities is generally
in excess of 20
years.
The Portfolio is classified as a non-diversified fund under
the 1940 Act,
which means that the portfolio is not limited by the 1940
Act in the propor-
tion of its assets that it may invest in the obligations of
a single issuer.
The Portfolio conducts its operations, however, so as to
qualify as a "regu-
lated investment company" for purposes of the Internal
Revenue Code of 1986,
as amended (the "Code"), which relieves the Portfolio of any
liability for
federal income tax to the extent that its earnings are
distributed to share-
holders. To qualify as a regulated investment company, the
Portfolio, among
other things, limits its investments so that, at the close
of each quarter of
its taxable year (1) not more than 25% of the market value
of the Portfolio's
total assets will be invested in the securities of a single
issuer and (2)
with respect to 50% of the market value of its total assets,
not more than 5%
of the market value of its total assets will be invested in
the securities of
a single issuer. See "Taxation."
The Portfolio generally does not invest more than 25% of
its total assets in
any industry. Governmental issuers of Municipal Obligations
are not considered
part of any "industry." Municipal Obligations backed only by
the assets and
12
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Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
revenues of non-governmental users may be deemed to be
issued by the non-
governmental users, and would be subject to the Portfolio's
25% industry
limitation.
The Portfolio may invest more than 25% of its total assets
in a broad segment
of the Municipal Obligations market, such as revenue
obligations of hospitals
and other health care facilities, housing agency revenue
obligations, or air-
port revenue obligations, if the Investment Manager
determines that the yields
available from obligations in a particular segment of the
market justify the
additional risks associated with a large investment in the
segment. Although
these Municipal Obligations could be supported by the credit
of governmental
users, or by the credit of non-governmental users engaged in
a number of
industries, economic, business, political and other
developments generally
affecting the revenues of the users (for example, proposed
legislation or
pending court decisions affecting the financing of projects
and market factors
affecting the demand for their services or products) may
have a general
adverse effect on all municipal securities in such a market
segment.
From time to time, the Portfolio's investments include
securities as to which
the Portfolio, by itself or together with other funds or
accounts managed by
the Investment Manager, holds a major portion or all of an
issue of Municipal
Obligations. Because relatively few potential purchasers may
by available for
these investments and, in some cases, contractual
restrictions may apply on
resales, the Portfolio may find it more difficult to sell
these securities at
a time when the Investment Manager believes it is advisable
to do so.
MUNICIPAL OBLIGATIONS
Municipal Obligations are classified as general obligation
bonds, revenue
bonds and notes. General obligation bonds are secured by the
issuer's pledge
of its full faith, credit and taxing power for the payment
of principal and
interest. Revenue bonds are payable from the revenue derived
from a particular
facility or class of facilities or, in some cases, from the
proceeds of a spe-
cial excise or other specific revenue source, but not from
the general taxing
power. Notes are short-term obligations of issuing
municipalities or agencies
and are sold in anticipation of a bond sale, collection of
taxes or receipt of
other revenues. Municipal Obligations bear fixed, floating
and variable rates
of interest, and variations exist in the security of
Municipal Obligations,
both within a particular classification and between
classifications.
13
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Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
The yields on, and values of, Municipal Obligations are
dependent on a vari-
ety of factors, including general economic and monetary
conditions, money mar-
ket factors, conditions in the Municipal Obligation markets,
size of a partic-
ular offering, maturity of the obligation and rating of the
issue. Consequent-
ly, Municipal Obligations with the same maturity, coupon and
rating may have
different yields or values, whereas obligations of the same
maturity and cou-
pon with different ratings may have the same yield or value.
See "Risk Factors
and Special Considerations -- Municipal Obligations."
Issuers of Municipal Obligations may be subject to the
provisions of bank-
ruptcy, insolvency and other laws, such as the Federal
Bankruptcy Reform Act
of 1978, affecting the rights and remedies of creditors. In
addition, the
obligations of those issuers may become subject to laws
enacted in the future
by Congress, state legislatures or referenda extending the
time for payment of
principal and/or interest, or imposing other constraints
upon enforcement of
the obligations or upon the ability of municipalities to
levy taxes. The pos-
sibility also exists that, as a result of litigation or
other conditions, the
power or ability of any issuer to pay, when due, the
principal of, and inter-
est on, its obligations may be materially affected.
QUALITY STANDARDS
The Portfolio typically purchases Municipal Obligations if
the Investment
Manager believes that the yield of the obligation is
sufficiently attractive
in light of the risks of ownership of the obligation. In
determining whether
the Portfolio should invest in particular Municipal
Obligations, the Invest-
ment Manager will consider factors such as: the price,
coupon and yield to
maturity of the obligations; the Investment Manager's
assessment of the credit
quality of the issuer of the obligations; the issuer's
available cash flow and
the related coverage ratios; the property, if any, securing
the obligations;
and the terms of the obligations, including subordination,
default, sinking
fund and early redemption provisions. The Investment Manager
will also review
the ratings, if any, assigned to the securities by Moody's,
S&P, Fitch or
another nationally-recognized rating agency.
The Portfolio will invest at least 80% of its total assets
in Municipal Obli-
gations rated investment grade, that is, rated no lower than
Baa, MIG 3 or
Prime-1 by Moody's, BBB, SP-2 or A-1 by S&P or BBB or F-1 by
Fitch. Up to 20%
of the Portfolio's total assets may be invested in unrated
securities that are
deemed by the Investment Manager to be of a quality
comparable to investment
grade. The Portfolio will not invest in Municipal
Obligations that are rated
14
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
lower than Baa by Moody's, BBB by S&P or BBB by Fitch, at
the time of pur-
chase. Although Municipal Obligations rated Baa by Moody's,
BBB by S&P or BBB
by Fitch are considered to be investment grade, they may be
subject to greater
risks than other higher rated investment grade securities.
Municipal Obliga-
tions rated Baa by Moody's for example, are considered
medium grade obliga-
tions that lack outstanding investment characteristics and
have speculative
characteristics as well. Municipal Obligations rated BBB by
S&P are regarded
as having an adequate capacity to pay principal and
interest. Municipal Obli-
gations rated BBB by Fitch are deemed to be subject to a
higher likelihood
that their rating will fall below investment grade than
higher rated bonds.
The ratings of agencies such as Moody's, S&P and Fitch
represent their opin-
ions as to the quality of the Municipal Obligations that
they undertake to
rate; the ratings are relative and subjective and are not
absolute standards
of quality. The Investment Manager's judgment as to the
credit quality of a
Municipal Obligation, thus, may differ from that suggested
by the ratings pub-
lished by a rating service. A description of Moody's, S&P
and Fitch ratings
relevant to the Portfolio's investments is included as
Appendix A to this Pro-
spectus. The policies of the Portfolio described above as to
ratings of
investments will apply only at the time of the purchase of a
security, and the
Portfolio will not be required to dispose of a security in
the event Moody's,
S&P or Fitch downgrades its assessment of the credit
characteristics of the
security's issuer.
PRIVATE ACTIVITY BONDS
The Portfolio may invest without limit in Municipal
Obligations that are tax-
exempt "private activity bonds," as defined in the Code,
which are in most
cases revenue bonds. Private activity bonds generally do not
carry the pledge
of the credit of the issuing municipality, but are
guaranteed by the corporate
entity on whose behalf they are issued. Interest income on
certain types of
private activity bonds issued after August 7, 1986 to
finance nongovernmental
activities is a specific tax preference item for purposes of
the federal indi-
vidual and corporate alternative minimum taxes. Individual
and corporate
shareholders may be subject to a federal alternative minimum
tax to the extent
that the Portfolio's dividends are derived from interest on
these bonds. Divi-
dends derived from interest income on Municipal Obligations
are a "current
earnings" adjustment item for purposes of the federal
corporate alternative
minimum tax. See "Taxation." Private activity bonds held by
the Portfolio will
be included in the term Municipal
15
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Obligations for purposes of determining compliance with the
Portfolio's policy
of investing at least 80% of its total assets in Municipal
Obligations.
TYPES OF MUNICIPAL OBLIGATIONS HELD BY THE PORTFOLIO
Municipal Leases.Among the Municipal Obligations in which
the Portfolio may
invest are municipal leases, which may take the form of a
lease or an install-
ment purchase or conditional sales contract to acquire a
wide variety of
equipment and facilities. Interest payments on qualifying
municipal leases are
exempt from federal income taxes and state income taxes
within the state of
issuance. The Portfolio may invest in municipal leases
containing "non-appro-
priation" clauses that provide that the governmental issuer
has no obligation
to make future payments under the lease or contract unless
money is appropri-
ated for the purpose by the applicable legislative body on a
yearly or other
periodic basis.
Municipal leases that the Portfolio may acquire will be
both rated and
unrated. Rated leases that may be held by the Portfolio
include those rated
investment grade at the time of investment (that is, rated
no lower than Baa
by Moody's, BBB by S&P or BBB by Fitch). The Portfolio may
acquire unrated
issues that the Investment Manager deems to be comparable in
quality to rated
issues in which the Portfolio is authorized to invest. A
determination by the
Investment Manager that an unrated lease obligation is
comparable in quality
to a rated lease obligation will be made on the basis of,
among other things,
a consideration of whether the nature of the leased
equipment or other prop-
erty is such that its ownership or use is reasonably
essential to a governmen-
tal function of the issuing municipality. In addition, all
such determinations
made by the Investment Manager will be subject to oversight
and approval by
the Portfolio's Board of Directors.
Municipal leases held by the Portfolio are considered
illiquid securities
unless the Portfolio's Board of Directors determines on an
ongoing basis that
the leases are readily marketable. An unrated municipal
lease with a non-
appropriation risk that is backed by an irrevocable bank
letter of credit or
an insurance policy issued by a bank or insurer deemed by
the Investment Man-
ager to be of high quality and minimal credit risk will not
be deemed to be
illiquid solely because the underlying municipal lease is
unrated, if the
Investment Manager determines that the lease is readily
marketable because it
is backed by the letter of credit or insurance policy.
16
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Municipal leases are subject to special risks described
below under "Risk
Factors and Special Considerations." To limit those risks,
the Portfolio will
invest no more than 5% of its total assets in lease
obligations that contain
non-appropriation clauses and will only purchase a non-
appropriation lease
obligation with respect to which (1) the nature of the
leased equipment or
other property is such that its ownership or use is
reasonably essential to a
governmental function of the issuing municipality, (2) the
lease payments will
begin to amortize the principal balance due at an early
date, resulting in an
average life of five years or less for the lease obligation,
(3) appropriate
covenants will be obtained from the municipal obligor
prohibiting the substi-
tution or purchase of similar equipment or other property if
lease payments
are not appropriated, (4) the lease obligor has maintained
good market accept-
ability in the past, (5) the investment is of a size that
will be attractive
to institutional investors and (6) the underlying leased
equipment or other
property has elements of portability and/or use that enhance
its marketability
in the event that foreclosure on the underlying equipment or
other property
were ever required.
Zero Coupon Securities.The Portfolio may invest up to 10%
of its assets in
zero coupon Municipal Obligations. Zero coupon Municipal
Obligations are gen-
erally divided into two categories: Pure Zero Obligations,
which are those
that pay no interest for their entire life and Zero/Fixed
Obligations, which
pay no interest for some initial period and thereafter pay
interest currently.
In the case of a Pure Zero Obligation, the failure to pay
interest currently
may result from the obligation's having no stated interest
rate, in which case
the obligation pays only principal at maturity and is issued
at a discount
from its stated principal amount. A Pure Zero Obligation
may, in the alterna-
tive, specify a stated interest rate, but provide that no
interest is payable
until maturity, in which case accrued unpaid interest on the
obligation may be
capitalized as incremental principal. The value to the
investor of a zero cou-
pon Municipal Obligation consists of the economic accretion
either of the dif-
ference between the purchase price and the nominal principal
amount (if no
interest is stated to accrue) or of accrued, unpaid interest
during the Munic-
ipal Obligation's life or payment deferral period.
Custodial Receipts.The Portfolio may acquire custodial
receipts or certifi-
cates underwritten by securities dealers or banks that
evidence ownership of
future interest payments, principal payments or both on
certain Municipal
Obligations. The underwriter of these certificates or
receipts typically pur-
chases Municipal Obligations and deposits the obligations in
an irrevocable
trust or custodial account with a custodian bank, which then
issues receipts
or certifi-
17
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
cates that evidence ownership of the periodic unmatured
coupon payments and
the final principal payment on the obligations. Custodial
receipts evidencing
specific coupon or principal payments have the same general
attributes as zero
coupon Municipal Obligations described above. Although under
the terms of a
custodial receipt, the Portfolio would be typically
authorized to assert its
rights directly against the issuer of the underlying
obligation, the Portfolio
could be required to assert through the custodian bank those
rights as may
exist against the underlying issuer. Thus, in the event the
underlying issuer
fails to pay principal and/or interest when due, the
Portfolio may be subject
to delays, expenses and risks that are greater than those
that would have been
involved if the Portfolio had purchased a direct obligation
of the issuer. In
addition, in the event that the trust or custodial account
in which the under-
lying security has been deposited is determined to be an
association taxable
as a corporation, instead of a non-taxable entity, the yield
on the underlying
security would be reduced in recognition of any taxes paid.
Municipal Obligation Components.The Portfolio may invest in
Municipal Obliga-
tions, the interest rate on which has been divided by the
issuer into two dif-
ferent and variable components, which together result in a
fixed interest
rate. Typically, the first of the components (the "Auction
Component") pays an
interest rate that is reset periodically through an auction
process, whereas
the second of the components (the "Residual Component") pays
a residual inter-
est rate based on the difference between the total interest
paid by the issuer
on the Municipal Obligation and the auction rate paid on the
Auction Compo-
nent. The Portfolio may purchase both Auction and Residual
Components.
Because the interest rate paid to holders of Residual
Components, which are
also sometimes referred to as "inverse floaters," is
generally determined by
subtracting the interest rate paid to the holders of Auction
Components from a
fixed amount, the interest rate paid to Residual Component
holders will
decrease as the Auction Component's rate increases and
increase as the Auction
Component's rate decreases. Moreover, the extent of the
increases and
decreases in market value of Residual Components may be
larger than comparable
changes in the market value of an equal principal amount of
a fixed rate
Municipal Obligation having similar credit quality,
redemption provisions and
maturity.
Floating and Variable Rate Instruments.The Portfolio may
purchase floating
and variable rate demand notes and bonds, which are
Municipal Obligations nor-
mally having a stated maturity in excess of one year, but
which permit their
18
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
holder to demand payment of principal at any time, or at
specified intervals.
The issuer of floating and variable rate demand obligations
normally has a
corresponding right, after a given period, to prepay at its
discretion the
outstanding principal amount of the obligations plus accrued
interest upon a
specified number of days' notice to the holders of the
obligations. The inter-
est rate on a floating rate demand obligation is based on a
known lending
rate, such as a bank's prime rate, and is adjusted
automatically each time
that rate is adjusted. The interest rate on a variable rate
demand obligation
is adjusted automatically at specified intervals.
Frequently, floating and
variable rate obligations are secured by letters of credit
or other credit
support arrangements provided by banks. Use of letters of
credit or other
credit support arrangements will not adversely affect the
tax-exempt status of
these obligations. Because they are direct lending
arrangements between the
lender and borrower, floating and variable rate obligations
will generally not
be traded. In addition, no secondary market generally exists
for these obliga-
tions, although their holders may demand their payment at
face value. For
these reasons, when floating and variable rate obligations
held by the Portfo-
lio are not secured by letters of credit or other credit
support arrangements,
the Portfolio's right to demand payment is dependent on the
ability of the
borrower to pay principal and interest on demand. The
Investment Manager, on
behalf of the Portfolio, will consider, on an ongoing basis,
the creditworthi-
ness of the issuers of floating and variable rate demand
obligations held by
the Portfolio. To the extent the Portfolio holds certain
floating and variable
rate demand obligations or Auction Components, the Portfolio
may not, under
certain market conditions, be fully achieving its investment
objective.
Participation Interests.The Portfolio may purchase from
financial institu-
tions tax-exempt participation interests in Municipal
Obligations. A partici-
pation interest gives the Portfolio an undivided interest in
the Municipal
Obligation in the proportion that the Portfolio's
participation interest bears
to the total amount of the Municipal Obligation. These
instruments may have
floating or variable rates of interest. If the participation
interest is
unrated, it will be backed by an irrevocable letter of
credit or guarantee of
a bank that the portfolio's Board of Directors has
determined meets certain
quality standards or the payment obligation otherwise will
be collateralized
by obligations issued or guaranteed by the U.S. Government
or its agencies or
instrumentalities ("U.S. Government securities"). The
portfolio will have the
right, with respect to certain participation interests, to
demand payment, on
a specified number of days' notice, for all or any part of
the Portfolio's
interest in the Municipal Obliga-
19
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
tion, plus accrued interest. The Portfolio intends to
exercise its right with
respect to these instruments to demand payment only upon a
default under the
terms of the Municipal Obligation or to maintain or improve
the quality of the
instruments it holds. In addition, the Portfolio will invest
no more than 5%
of its total assets in participation interests.
TAXABLE INVESTMENTS
Under normal conditions, the Portfolio may hold up to 20%
of its total assets
in cash or money market instruments, including taxable money
market instru-
ments (collectively, "Taxable Investments"). In addition,
the Portfolio may
take a temporary defensive posture and invest without
limitation in short-term
Municipal Obligations and Taxable Investments, upon a
determination by the
Investment Manager that market conditions warrant such a
posture. To the
extent the Portfolio holds Taxable Investments, the
Portfolio will not be pur-
suing its investment objective.
Money market instruments in which the Portfolio may invest
include: U.S. Gov-
ernment securities; tax-exempt notes of municipal issuers
rated, at the time
of purchase, no lower than MIG 1 by Moody's, SP-1 by S&P or
F-1 by Fitch or,
if not rated, by issuers having outstanding, unsecured debt
then rated within
the three highest rating categories; bank obligations
(including certificates
of deposit, time deposits and bankers' acceptances of
domestic banks, domestic
savings and loan associations and similar institutions);
commercial paper
rated no lower than P-1 by Moody's, A-1 by S&P or F-1 by
Fitch or the equiva-
lent from another nationally-recognized rating agency or, if
unrated, of an
issuer having an outstanding, unsecured debt issue then
rated within the three
highest rating categories; and repurchase agreements. At no
time will the
Portfolio's investments in bank obligations, including time
deposits, exceed
25% of the value of its assets.
U.S. Government securities in which the Portfolio may
invest include direct
obligations of the United States and obligations issued by
U.S. Government
agencies and instrumentalities. Included among direct
obligations of the
United States are Treasury Bills, Treasury Notes and
Treasury Bonds, which
differ principally in terms of their maturities. Included
among the securities
issued by U.S. Government agencies and instrumentalities
are: securities that
are supported by the full faith and credit of the United
States (such as Gov-
ernment National Mortgage Association certificates);
securities that are sup-
ported by the right of the issuer to borrow from the U.S.
Treasury (such as
securities of Federal Home Loan Banks); and securities that
are supported by
the credit of the instrumental-
20
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ity (such as Federal National Mortgage Association and
Federal Home Loan Mort-
gage Corporation bonds).
The Portfolio may enter into repurchase agreement
transactions with member
banks of the Federal Reserve System or with certain dealers
listed on the Fed-
eral Reserve Bank of New York's list of reporting dealers. A
repurchase agree-
ment is a contract under which the buyer of a security
simultaneously commits
to resell the security to the seller at an agreed-upon price
on an agreed-upon
date. Under the terms of a typical repurchase agreement, the
portfolio would
acquire an underlying debt obligation for a relatively short
period subject to
an obligation of the seller to repurchase, and the Portfolio
to resell, the
obligation at an agreed-upon price and time, thereby
determining the yield dur-
ing the portfolio's holding period. This arrangement results
in a fixed rate of
return that is not subject to market fluctuations during the
Portfolio's hold-
ing period. Under each repurchase agreement, the selling
institution will be
required to maintain the value of the securities subject to
the repurchase
agreement at not less than their repurchase price.
The value of the securities underlying a repurchase
agreement of the Portfolio
will be monitored on an ongoing basis by the Investment
Manager to ensure that
the value is at least equal at all times to the total amount
of the repurchase
obligation, including interest. The Investment Manager will
also monitor, on an
ongoing basis to evaluate potential risks, the
creditworthiness of the banks
and dealers with which the Portfolio enters into repurchase
agreements.
INVESTMENT TECHNIQUES
The Portfolio may employ, among others, the investment
techniques described
below, which may give rise to taxable income:
When-Issued and Delayed Delivery Securities. The Portfolio
may purchase secu-
rities on a when-issued basis, or may purchase or sell
securities for delayed
delivery. In when-issued or delayed delivery transactions,
delivery of the
securities occurs beyond normal settlement periods, but no
payment or delivery
will be made by the Portfolio prior to the actual delivery
or payment by the
other party to the transaction. The Portfolio will not
accrue income with
respect to a when-issued or delayed delivery security prior
to its stated
delivery date. The Portfolio will establish with PNC Bank a
segregated account
consisting of cash, U.S. Government securities, or other
liquid high grade debt
obligations, in an amount equal to the amount of the
Portfolio's when-issued
and delayed delivery purchase commitments. Placing
securities rather than cash
in the segregated
21
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
account may have a leveraging effect on the Portfolio's net
asset value per
share; that is, to the extent that the Portfolio remains
substantially fully
invested in securities at the same time that it has
committed to purchase
securities on a when-issued or delayed delivery basis,
greater fluctuations in
its net asset value per share may occur than if it had set
aside cash to sat-
isfy its purchase commitments.
Stand-By Commitments. The Portfolio may acquire "stand-by
commitments" with
respect to Municipal Obligations it holds. Under a stand-by
commitment, which
resembles a put option, a broker, dealer or bank is
obligated to repurchase at
the Portfolio's option specified securities at a specified
price. Each exer-
cise of a stand-by commitment, therefore, is subject to the
ability of the
seller to make payment on demand. The Portfolio will acquire
stand-by commit-
ments solely to facilitate liquidity and does not intend to
exercise the
rights afforded by the commitments for trading purposes. The
Portfolio antici-
pates that stand-by commitments will be available from
brokers, dealers and
banks without the payment of any direct or indirect
consideration. The Portfo-
lio may pay for stand-by commitments if payment is deemed
necessary, thus
increasing to a degree the cost of the underlying Municipal
Obligation and
similarly decreasing the obligation's yield to investors.
Financial Futures and Options Transactions. To hedge
against a decline in the
value of Municipal Obligations it owns or an increase in the
price of Munici-
pal Obligations it proposes to purchase, the Portfolio may
enter into finan-
cial futures contracts and invest in options on financial
futures contracts
that are traded on a U.S. exchange or board of trade. The
futures contracts or
options on futures contracts that may be entered into by the
Portfolio will be
restricted to those that are either based on an index of
Municipal Obligations
or relate to debt securities the prices of which are
anticipated by the
Investment Manager to correlate with the prices of the
Municipal Obligations
owned or to be purchased by the Portfolio.
In entering into a financial futures contract, the
Portfolio will be required
to deposit with the broker through which it undertakes the
transaction an
amount of cash or cash equivalents equal to approximately 5%
of the contract
amount. This amount, which is known as "initial margin," is
subject to change
by the exchange or board of trade on which the contract is
traded, and members
of the exchange or board of trade may charge a higher
amount. Initial margin
is in the nature of a performance bond or good faith deposit
on the contract
that is returned to the Portfolio upon termination of the
futures contract,
assuming all
22
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
contractual obligations have been satisfied. In accordance
with a process
known as "marking-to-market," subsequent payments, known as
"variation mar-
gin," to and from the broker will be made daily as the price
of the index or
securities underlying the futures contract fluctuates,
making the long and
short positions in the futures contract more or less
valuable. At any time
prior to the expiration of a futures contract, the Portfolio
may elect to
close the position by taking an opposite position, which
will operate to ter-
minate the Portfolio's existing position in the contract.
A financial futures contract provides for the future sale
by one party and
the purchase by the other party of a certain amount of a
specified property at
a specified price, date, time and place. Unlike the direct
investment in a
futures contract, an option on a financial futures contract
gives the pur-
chaser the right, in return for the premium paid, to assume
a position in the
financial futures contract at a specified exercise price at
any time prior to
the expiration date of the option. Upon exercise of an
option, the delivery of
the futures position by the writer of the option to the
holder of the option
will be accompanied by delivery of the accumulated balance
in the writer's
futures margin account, which represents the amount by which
the market price
of the futures contract exceeds, in the case of a call, or
is less than, in
the case of a put, the exercise price of the option on the
futures contract.
The potential loss related to the purchase of an option on
financial futures
contracts is limited to the premium paid for the option
(plus transaction
costs). The value of the option may change daily and that
change would be
reflected in the net asset value of the Portfolio.
Regulations of the Commodity Futures Trading Commission
applicable to the
Portfolio require that its transactions in financial futures
contracts and
options on financial futures contracts be engaged in for
bona fide hedging
purposes or other permitted purposes, and that no such
transactions may be
entered into by the Portfolio if the aggregate initial
margin deposits and
premiums paid by the Portfolio exceed 5% of the market value
of its assets. In
addition, the Portfolio will, with respect to its purchases
of financial
futures contracts, establish a segregated account consisting
of cash or cash
equivalents in an amount equal to the total market value of
the futures con-
tracts, less the amount of initial margin on deposit for the
contracts. The
Portfolio's ability to trade in financial futures contracts
and options on
financial futures contracts may be limited to some extent by
the requirements
of the Code applicable to a regulated investment company
that are described
below under "Taxation."
23
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Lending Securities. The Portfolio is authorized to lend
securities it holds to
brokers, dealers and other financial organizations, but it
will not lend secu-
rities to any affiliate of the Investment Manager, including
Smith Barney,
unless the Portfolio applies for and receives specific
authority to do so from
the Securities and Exchange Commission (the "SEC"). Loans of
the Portfolio's
securities, if and when made, may not exceed 33 1/3% of the
Portfolio's assets
taken at value. The Portfolio's loans of securities will be
collateralized by
cash, letters of credit or U.S. Government securities that
will be maintained
at all times in a segregated account with PNC Bank in an
amount equal to the
current market value of the loaned securities. From time to
time, the Portfo-
lio may pay a part of the interest earned from the
investment of collateral
received for securities loaned to the borrower and/or a
third party that is
unaffiliated with the Portfolio and that is acting as a
"finder."
By lending its securities, the Portfolio can increase its
income by continu-
ing to receive interest on the loaned securities, by
investing the cash col-
lateral in short-term instruments or by obtaining yield in
the form of inter-
est (which is taxable to shareholders as ordinary income)
paid by the borrower
when U.S. Government securities are used as collateral. The
Portfolio will
adhere to the following conditions whenever it lends its
securities: (1) the
Portfolio must receive at least 100% cash collateral or
equivalent securities
from the borrower, which amount of collateral will be
maintained by daily
marking to market; (2) the borrower must increase the
collateral whenever the
market value of the securities loaned rises above the level
of the collateral;
(3) the Portfolio must be able to terminate the loan any
time; (4) the Portfo-
lio must receive reasonable interest on the loan, as well as
any dividends,
interest or other distributions on the loaned securities,
and any increase in
market value; (5) the Portfolio may pay only reasonable
custodian fees in con-
nection with the loan; and (6) voting rights on the loaned
securities may pass
to the borrower, except that, if a material event adversely
affecting the
investment in the loaned securities occurs, the Portfolio's
Board of Directors
must terminate the loan and retain the Portfolio's right to
vote the securi-
ties.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Portfolio involves risk factors and
special considerations,
such as those described below:
Municipal Obligations. Substantially all of the Portfolio's
total assets will
be invested, under normal market conditions, in Municipal
Obligations rated
investment grade at the time of investment. Market rates of
interest available
with
24
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
respect to Municipal Obligations generally may be lower than
those available
with respect to taxable securities, although the differences
may be wholly or
partially offset by the effects of federal income tax on
income derived from
taxable securities. The amount of available information
about the financial
condition of issuers of Municipal Obligations may be less
extensive than that
for corporate issuers with publicly traded securities, and
the market for
Municipal Obligations may be less liquid than the market for
corporate debt
obligations. Municipal Obligations in which the Portfolio
may invest include
special obligation bonds, lease obligations, participation
certificates and
variable rate instruments. The market for these Municipal
Obligations may be
less liquid than the market for general obligation Municipal
Obligations.
Although the Portfolio's policy is generally to hold
Municipal Obligations
until their maturity, the relative illiquidity of some of
the Portfolio's secu-
rities may adversely affect the ability of the Portfolio to
dispose of the
securities in a timely manner and at a fair price. The
market for less liquid
securities tends to be more volatile than the market for
more liquid securities
and market values of relatively illiquid securities may be
more susceptible to
change as a result of adverse publicity and investor
perceptions than are the
market values of more liquid securities. Although the issuer
of certain Munici-
pal Obligations may be obligated to redeem the obligations
at face value,
redemption could result in capital losses to the Portfolio
to the extent that
the Municipal Obligations were purchased by the Portfolio at
a premium to face
value.
Although the Municipal Obligations in which the Portfolio
may invest are, at
the time of investment, rated investment grade, municipal
securities, like
other debt obligations, are subject to the risk of non-
payment by their
issuers. The ability of issuers of Municipal Obligations to
make timely pay-
ments of interest and principal may be adversely affected in
general economic
downturns and as relative governmental cost burdens are
allocated and reallo-
cated among federal, state and local governmental units. Non-
payment by an
issuer would result in a reduction of income to the
Portfolio, and could result
in a reduction in the value of the Municipal Obligations
experiencing non-pay-
ment and a potential decrease in the net asset value of the
Portfolio.
Issuers of Municipal Obligations may from time to time seek
protection under
federal bankruptcy laws. In the event of bankruptcy of an
issuer of a Municipal
Obligation it holds, the Portfolio could experience delays
and limitations with
respect to the collection of principal and interest on the
obligation, and the
Portfolio may not, in all circumstances, be able to collect
all principal and
interest to which it is entitled. To enforce its rights in
the event of a
default
25
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
in the payment of interest or repayment of principal, or
both, the Portfolio
may take possession of and manage the assets securing the
issuer's obligations
on the securities, which may increase the Portfolio's
operating expenses and
adversely affect the net asset value of the Portfolio. Any
income derived from
the Portfolio's ownership or operation of these assets may
not be tax-exempt.
In addition, the Portfolio's intention to qualify as a
regulated investment
company under the Code may limit the extent to which the
Portfolio may exer-
cise its rights by taking possession of the assets, because
as a regulated
investment company the Portfolio is subject to certain
limitations on its
investments and on the nature of its income. See "Taxation."
Opinions relating to the validity of Municipal Obligations
and to the exemp-
tion of interest on them from federal income taxes are
rendered by bond coun-
sel to the respective issuers at the time of issuance.
Neither the Portfolio
nor the Investment Manager reviews the procedures relating
to the issuance of
Municipal Obligations or the basis for opinions of counsel.
The Investment Manager values the Portfolio's investments
pursuant to guide-
lines adopted and periodically reviewed by the Portfolio's
Board of Directors.
To the extent that no established retail market exists for
some of the securi-
ties in which the Portfolio may invest, trading in the
securities may be rela-
tively inactive and the ability of the Investment Manager to
value the securi-
ties accurately may be adversely affected. During periods of
reduced market
liquidity and in the absence of readily available market
quotations for Munic-
ipal Obligations held by the Portfolio, the responsibility
of the Investment
Manager to value the Portfolio's securities will become more
difficult. The
Investment Manager's judgment may play a greater role in the
valuation of the
Portfolio's securities as a result of the reduced
availability of reliable
objective data. To the extent that the Portfolio invests in
illiquid securi-
ties and securities that are restricted as to resale, the
Portfolio may incur
additional risks and costs. The sale of illiquid and
restricted securities is
particularly difficult.
The net asset value of the Common Stock will change when
the value of the
Portfolio's securities changes. Because the Portfolio
invests primarily in
fixed-income securities, the net asset value of the Common
Stock can be
expected to change as levels of interest rates fluctuate;
generally, when pre-
vailing interest rates increase, the value of fixed-income
securities held by
the Portfolio can be expected to decrease and when
prevailing interest rates
decrease, the value of the fixed-income securities held by
the Portfolio can
be expected to increase. The value of the fixed-income
securities held by the
Portfolio, and thus the Port-
26
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
folio's net asset value, may also be affected by other
economic, market and
credit factors.
Special Considerations Relating to California
Obligations.The Portfolio's con-
centration in California obligations involves certain
additional risks that
should be considered carefully by investors. Certain
California constitutional
amendments, legislative measures, executive orders,
administrative regulations,
court decisions and voter initiatives could result in
certain adverse conse-
quences affecting California obligations. In particular,
there are risks
resulting from certain amendments to the California
Constitution and other
statutes that limit the taxing and spending authority of
California governmen-
tal entities, and these may have the effect of impairing the
ability of certain
issuers of California obligations to pay principal and
interest on their obli-
gations.
The following information is a summary of special factors
affecting California
obligations. It does not purport to be a complete
description and is based on
information from statements relating to securities offerings
of California
issuers.
California's economy is the largest among the 50 states.
The State's January
1, 1993 population of almost 32 million represented
approximately 12.3% of the
total United States population. Total employment is about 14
million, the
majority of which is in the service, trade and manufacturing
sectors.
Since the start of the 1990-91 fiscal year, the State has
faced the worst eco-
nomic, fiscal and budget conditions since the 1930s. After
experiencing strong
growth throughout much of the 1980s, the State was adversely
affected by the
national recession and the cutbacks in aerospace and defense
spending, both of
which have had a severe impact on the economy in Southern
California. The
State's tax revenue experience clearly reflects sharp
declines in employment,
income, and retail sales on a scale not seen in over 50
years. The May 1994
Revision to the 1994-95 Governor's Budget assumes that the
State will start to
recover from recessionary conditions in 1994, with a modest
upturn in 1994 and
continuing in 1995.
On January 17, 1994, Northridge, California experienced an
earthquake that
registered 6.8 on the Richter scale, resulting in
significant property damage
to private and public facilities throughout the Los Angeles
and Ventura Coun-
ties, and to parts of the Orange and San Bernardino
Counties. Current estimates
of total property damage are in the range of $20 billion or
more. In mid-Febru-
ary 1994 Congress approved an earthquake relief package
totaling about $8.6 bil-
27
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
lion, bringing total federal support to $9.5 billion,
including assistance to
homeowners and small businesses, and costs for repair of
damaged public facil-
ities. The bipartisan Commission on State Finance believes
that, although it
may carry long-term implications for the City of Los
Angeles, the earthquake
will not derail the State's economic recovery.
In 1990, unemployment moved above the national average for
the first time in
many years, and it has remained significantly above the
United States average
through July 1994. Overall, the State has lost approximately
850,000 jobs
since the Spring of 1990. However, employment in the first
six months of 1994
has shown some signs of growth. During this period, payrolls
are up by approx-
imately 50,000 jobs. The June 1994 unemployment rate was
8.3%, compared to
9.1% a year earlier. Average 1994 nonfarm employment is now
forecast to main-
tain 1993 levels. Pre-recession job levels are not expected
to be reached
until 1997.
Construction data show continued weakness in the State's
housing market.
Although existing home sales have strengthened and
subdivision surveys indi-
cate increased new home sales, building permits are up only
slightly from
recession lows. Gains are expected in the months ahead, but
higher mortgage
interest rates will likely dampen the upturn. The Northridge
earthquake adds a
few thousand housing units to the forecast, but this effect
is offset by
higher interest rates.
The recession has seriously affected State tax revenues,
which basically mir-
ror economic conditions. These economic difficulties have
exacerbated the
structural budget imbalance which has been evident since
fiscal year 1985-86.
Since that time, budget shortfalls have become increasingly
more difficult to
solve, and the State has recorded General Fund operating
deficits in five of
the past six fiscal years. Many of these problems have been
attributable to
the fact that the great population influx has produced
increased demand for
education and social services at a far greater pace than the
growth in the
State's tax revenues. Despite substantial tax increases,
expenditure reduc-
tions, and the shift of some expenditure responsibilities to
local government,
the budget condition has remained problematic in recent
years.
On July 8, 1994, the Governor signed into law a $57.5
billion budget which,
among other things, (a) reduces welfare grants and aid to
families and to the
aged, blind and disabled, and (b) relies on the State's
ability to obtain $2.8
billion in new reimbursement from the federal government for
the State's cost
of
28
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
serving illegal immigrants. Although the State legislature
has passed a
standby measure which could trigger automatic budget
reductions if the State's
fiscal condition worsens over the next two years, the
stability of the budget
would be jeopardized if the State is unable to obtain the
hoped-for federal
funds. The current budget includes General Fund spending of
$40.9 billion, up
4.2% from the level of spending during the 1993-94 fiscal
year. The budget
also envisions General Fund spending climbing another 8.4%
in the 1995-96 fis-
cal year.
By June 30, 1994, the General Fund had an accumulated
deficit, on a budgeted
basis, of approximately $2 billion. In addition, the
accumulated budget defi-
cits over the past several years had exhausted the State's
available cash
reserves and resources. In July and August, 1994, the State
was required to
issue a total of $7 billion of short-term revenue
anticipation warrants to
fund, in part, the State's cash flow management needs for
the 1994-95 fiscal
year. The current budget recognizes that the accumulated
deficit cannot be
repaid in one year. The budget forecasts levels of revenues
and expenditures
which will result in operating surpluses in both 1994-95 and
1995-96, leading
to the elimination of the accumulated budget deficit by June
30, 1996.
The State is subject to an annual appropriations limit
imposed by Article
XIIIB of the State Constitution (the "Appropriations
Limit"), and is prohib-
ited from spending "appropriations subject to limitation" in
excess of the
Appropriations Limit. Article XIIIB, originally adopted in
1979, was modified
substantially by Propositions 98 and 111 in 1988 and 1990,
respectively. "Ap-
propriations subject to limitation" are authorizations to
spend "proceeds of
taxes", which consist of tax revenues and certain other
funds, including pro-
ceeds from regulatory licenses, user charges or other fees
to the extent that
such proceeds exceed the reasonable cost of providing the
regulation, product
or service. The Appropriations Limit is based on the limit
for the prior year,
adjusted annually for certain changes, and is tested over
consecutive two-year
periods. Any excess of the aggregate proceeds of taxes
received over such two-
year period above the combined Appropriations Limits for
those two years is
divided equally between transfers to K-14 districts and
refunds to taxpayers.
Exempted from the Appropriations Limit are debt service
costs of certain
bonds, court or federally mandated costs, and, pursuant to
Proposition 111,
qualified capital outlay projects and appropriations or
revenues derived from
any increase in gasoline taxes and motor vehicle weight fees
above January 1,
1990 levels. Some recent initiatives were structured to
create new tax reve-
nues dedicated to specific uses and expressly exempted from
the Article XIIIB
limits.
29
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
The Appropriations Limit may also be exceeded in cases of
emergency arising
from civil disturbance or natural disaster declared by the
Governor and
approved by two-thirds of the Legislature. If not so
declared and approved,
the Appropriations Limit for the next three years must be
reduced by the
amount of the excess.
Article XIIIB, as amended by Proposition 98 on November 8,
1988, also estab-
lishes a minimum level of state funding for school and
community college dis-
tricts and requires that excess revenues up to a certain
limit be transferred
to schools and community college districts instead of
returned to the taxpay-
ers. Determination of the minimum level of funding is based
on several tests
set forth in Proposition 98.
Because of the complexities of Article XIIIB, the
ambiguities and possible
inconsistencies in its terms, the applicability of its
exceptions and exemp-
tions and the impossibility of predicting future
appropriations, it is not
currently possible to predict with any confidence the impact
of this or
related legislation on the California obligations in the
Portfolio. Other Con-
stitutional amendments affecting state and local taxes and
appropriations have
been proposed from time to time. If any such initiatives are
adopted, the
State could be pressured to provide additional financial
assistance to local
governments or appropriate revenues as mandated by such
initiatives. Proposi-
tions such as Proposition 98 and others that may be adopted
in the future, may
place increasing pressure on the State's budget over future
years, potentially
reducing resources available for other State programs,
especially to the
extent the Article XIIIB spending limit would restrain the
State's ability to
fund such other programs by raising taxes.
As of June 30, 1994, the State had over $18,895 billion
aggregate amount of
its general obligation bonds outstanding. General obligation
bond authoriza-
tions in the aggregate amount of approximately $5,361
billion remain unissued
as of June 30, 1994. The State also builds and acquires
capital facilities
through the use of lease purchase borrowing. As of June 30,
1994, the State
had approximately $5.09 billion of outstanding Lease-
Purchase Debt.
In addition to the general obligation bonds, State agencies
and authorities
had approximately $23,304 billion aggregate principal amount
of revenue bonds
and notes outstanding as of June 30, 1994. Revenue bonds
represent both obli-
gations payable from State revenue-producing enterprises and
projects, which
are not payable from the General Fund, and conduit
obligations payable only
from revenues paid by private users of facilities financed
by such revenue
bonds. Such enterprises and projects include transportation
projects, various
30
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
public works and exposition projects, education facilities
(including the Cali-
fornia State University and University of California
systems), housing health
facilities and pollution control facilities.
The State is a party to numerous legal proceedings, many of
which normally
occur in governmental operations. In addition, the State is
involved in certain
other legal proceedings that, if decided against the State,
might require the
State to make significant future expenditure or impair
future revenue sources.
Examples of such cases include challenges to certain vehicle
license fees, and
challenges to the State's use of Public Employee Retirement
System funds to
offset future State and local pension contributions. Other
cases which could
significantly impact revenue or expenditures involve
reimbursement to school
districts for voluntary school desegregation and state
mandated costs, chal-
lenges to Medi-Cal eligibility, recovery for flood damages,
and liability for
toxic waste cleanup. Because of the prospective nature of
such proceedings, it
is not presently possible to predict the outcome of such
litigation or estimate
the potential impact on the ability of the State to pay debt
service on its
obligations.
Because of the State of California's continuing budget
problems, the rating on
the State's general obligation bonds was downgraded in July
1994 from Aa to A1
by Moody's, from A+ to A by S&P, and from AA to A by Fitch.
All three rating
agencies expressed uncertainty in the State's ability to
balance the budget by
1996. All three agencies cite the 1994-95 Budget-Act's
dependence on a "ques-
tionable" federal bailout to pay for the cost of illegal
immigrants, the Propo-
sition 98's guaranty of a minimum portion of State revenues
for kindergarten
through community college, and the persistent deficit
requiring more borrowing
as reasons for the reduced rating. Another concern was the
State's reliance on
a standby mechanism which could trigger across-the-board
reductions in all
State programs, and which could disrupt State operations,
particularly in fis-
cal year 1995-96. However, an S&P's spokesman stated that,
although the lowered
ratings means California is a riskier borrower, S&P
anticipates that the State
will pay off its debts and not default. There can be no
assurance that such
ratings will continue for any given period of time or that
they will not in the
future be further revised or withdrawn.
As a result of Orange County's Chapter 9 bankruptcy filing
on December 6,
1994, Moody's has suspended the County's bond ratings, and
S&P has cut its rat-
ing of all Orange County debt from "AA-" to "CCC", a level
below investment
grade and an indication of high risk and uncertainty. Fitch
does not rate
Orange County bonds. It is anticipated that as Orange
County's credit and bond
ratings fall, it will have difficulty in getting loans or
selling its bonds to
31
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
raise money. Additionally, the County's bankruptcy filing
could affect about
180 municipalities, school districts, and other municipal
entities which
entrusted billions of dollars to Orange County to invest.
S&P has informed
such entities that they have been placed on negative credit
watch, the usual
step prior to a downgrade of credit rating.
Potential Legislation.In past years, the U.S. Government
has enacted various
laws that have restricted or diminished the income tax
exemption on various
types of Municipal Obligations and may enact other similar
laws in the future.
If any such laws are enacted that would reduce the
availability of Municipal
Obligations for investment by the Portfolio so as to affect
the Portfolio's
shareholders adversely, the Portfolio's Board of Directors
will reevaluate the
Portfolio's investment objective and management policies and
might submit pos-
sible changes in the Portfolio's structure to the
shareholders for their con-
sideration. If legislation was enacted that would treat a
type of Municipal
Obligation as taxable for federal income tax purposes, the
Portfolio would
treat the security as a permissible Taxable Investment
within the applicable
limits described in this Prospectus.
Unrated Securities.The Portfolio may invest in unrated
securities that the
Investment Manager determines to be of comparable quality to
the rated securi-
ties in which the Portfolio may invest. Dealers may not
maintain daily markets
in unrated securities and retail secondary markets for many
of them may not
exist. As a result, the Portfolio's ability to sell these
securities when the
Investment Manager deems it appropriate may be diminished.
Municipal Leases.Municipal leases in which the Portfolio
may invest have spe-
cial risks not normally associated with Municipal
Obligations. These obliga-
tions frequently contain non-appropriation clauses that
provide that the gov-
ernmental issuer of the obligation need not make future
payments under the
lease or contract unless money is appropriated for that
purpose by a legisla-
tive body annually or on another periodic basis. Municipal
leases have addi-
tional risks because they represent a type of financing that
has not yet
developed the depth of marketability generally associated
with other Municipal
Obligations. Moreover, although a municipal lease typically
will be secured by
financed equipment or facilities, the disposition of the
equipment or facili-
ties in the event of foreclosure might prove difficult. In
addition, in cer-
tain instances the tax-exempt status of the municipal lease
will not be sub-
ject to the legal opinion of a nationally-recognized bond
counsel, although in
all cases the Investment Manager will require that a
municipal lease purchased
by the Portfolio be covered
32
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
by a legal opinion to the effect that, as of the effective
date of the munici-
pal lease, the lease is the valid and binding obligation of
the governmental
issuer.
Non-Publicly Traded Securities.As suggested above, the
Portfolio may, from
time to time, invest a portion of its assets in non-publicly
traded Municipal
Obligations. Non-publicly traded securities may be less
liquid than publicly
traded securities. Although non-publicly traded securities
may be resold in
privately negotiated transactions, the prices realized from
these sales could
be less than those originally paid by the Portfolio.
Repurchase Agreements.By entering into a repurchase
agreement, the Portfolio
bears a risk of loss in the event that the other party to
the transaction
defaults on its obligations and the Portfolio is delayed or
prevented from
exercising its rights to dispose of the underlying
securities, including the
risk of a possible decline in the value of the underlying
securities during
the period in which the Portfolio seeks to assert its rights
to them, the risk
of incurring expenses associated with asserting those rights
and the risk of
losing all or a part of the income from the agreement.
When-Issued and Delayed Delivery Transactions.Securities
purchased on a when-
issued or delayed delivery basis may expose the Portfolio to
risk because the
securities may experience fluctuations in value prior to
their delivery. Pur-
chasing securities on a when-issued or delayed delivery
basis can involve the
additional risk that the yield available in the market when
the delivery takes
place may be higher than that obtained in the transaction
itself.
Financial Futures and Options.Although the Portfolio
intends to enter into
financial futures contracts and options on financial futures
contracts that
are traded on a U.S. exchange or board of trade only if an
active market
exists for those instruments, no assurance can be given that
an active market
will exist for them at any particular time. If closing a
futures position in
anticipation of adverse price movements is not possible, the
Portfolio would
be required to make daily cash payments of variation margin.
In those circum-
stances, an increase in the value of the portion of the
Portfolio's invest-
ments being hedged, if any, may offset partially or
completely losses on the
futures contract. No assurance can be given, however, that
the price of the
securities being hedged will correlate with the price
movements in a futures
contract and, thus, provide an offset to losses on the
futures contract or
option on the futures contract. In addition, in light of the
risk of an imper-
fect correlation between securities held by the Portfolio
that are the subject
of a hedging transaction and the futures or options used as
a hedging device,
the hedge may not be fully effective because,
33
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
for example, losses on the securities held by the Portfolio
may be in excess of
gains on the futures contract or losses on the futures
contract may be in
excess of gains on the securities held by the Portfolio that
were the subject
of the hedge. In an effort to compensate for the imperfect
correlation of move-
ment in the price of the securities being hedged and
movements in the price of
futures contracts, the Portfolio may enter into financial
futures contracts or
options on financial futures contracts in a greater or
lesser dollar amount
than the dollar amount of the securities being hedged if the
historical vola-
tility of the futures contract has been less or greater than
that of the secu-
rities. This "over hedging" or "under hedging" may adversely
affect the Portfo-
lio's net investment results if market movements are not as
anticipated when
the hedge is established.
If the Portfolio has hedged against the possibility of an
increase in interest
rates adversely affecting the value of securities it holds
and rates decrease
instead, the Portfolio will lose part or all of the benefit
of the increased
value of securities that it has hedged because it will have
offsetting losses
in its futures or options positions. In addition, in those
situations, if the
Portfolio has insufficient cash, it may have to sell
securities to meet daily
variation margin requirements on the futures contracts at a
time when it may be
disadvantageous to do so. These sales of securities may, but
will not necessar-
ily, be at increased prices that reflect the decline in
interest rates.
Non-Diversified Classification.Investment in the Portfolio,
which is classi-
fied as a non-diversified fund under the 1940 Act, may
present greater risks to
investors than an investment in a diversified fund. The
investment return on a
non-diversified fund typically is dependent upon the
performance of a smaller
number of securities relative to the number of securities
held in a diversified
fund. The Portfolio's assumption of large positions in the
obligations of a
small number of issuers will affect the value of the
securities it holds to a
greater extent than that of a diversified fund in the event
of changes in the
financial condition, or in the market's assessment, of the
issuers.
INVESTMENT RESTRICTIONS
The Portfolio has adopted certain fundamental investment
restrictions that may
not be changed without the prior approval of the holders of
a majority of the
Portfolio's outstanding shares of Common Stock as defined in
the 1940 Act. All
percentage limitations included in the investment
restrictions below apply
immediately after a purchase or initial investment, and any
subsequent change
34
<PAGE>
Greenwich Street California Municipal Fund Inc.
INVESTMENT RESTRICTIONS (CONTINUED)
in any applicable percentage resulting from market
fluctuations will not
require the Portfolio to dispose of any security that it
holds. Under its fun-
damental restrictions, the Portfolio may not:
1. Borrow money, except for temporary or emergency
purposes, or for clear-
ance of transactions, and then only in amounts not
exceeding 15% of its
total assets (not including the amount borrowed) and as
otherwise
described in this Prospectus. When the Portfolio's
borrowings exceed 5% of
the value of its total assets, the Portfolio will not make
any additional
investments.
2. Sell securities short or purchase securities on margin,
except for
short-term credits as are necessary for the clearance of
transactions, but
the Portfolio may make margin deposits in connection with
transactions in
options, futures and options on futures.
3. Underwrite any issue of securities, except to the
extent that the pur-
chase of Municipal Obligations may be deemed to be an
underwriting.
4. Purchase, hold or deal in real estate or oil and gas
interests, except
that the Portfolio may invest in Municipal Obligations
secured by real
estate or interests in real estate.
5. Invest in commodities, except that the Portfolio may
enter into futures
contracts, including those relating to indexes, and
options on futures
contracts or indexes, as described in this Prospectus.
6. Lend any funds or other assets, except through
purchasing Municipal
Obligations or Taxable Investments, lending securities and
entering into
repurchase agreements consistent with the Portfolio's
investment
objective.
7. Issue senior securities.
8. Invest more than 25% of its total assets in the
securities of issuers
in any single industry, except that this limitation will
not be applicable
to the purchase of U.S. Government securities.
9. Make any investments for the purpose of exercising
control or
management of any company.
35
<PAGE>
Greenwich Street California Municipal Fund Inc.
SHARE PRICE DATA
The Portfolio's Common Stock is listed on the AMEX under
the symbol "GCM."
Smith Barney also intends to make a market in the Common
Stock.
The following table sets forth the high and low sales
prices for the Portfo-
lio's Common Stock, the net asset value per share and the
discount or premium
to net asset value represented by the quotation for each
quarterly period
since inception.
<TABLE>
<CAPTION>
AMEX
THREE AMEX NAV PRICE AT NAV AT
MONTHS PRICE PRICE QUARTER- QUARTER-
PREMIUM
ENDED RANGE RANGE END END
(DISCOUNT)
- ------------------------------------------------------------
- --------
<S> <C> <C> <C> <C>
<C>
11/30/94* $11.00-$ 12.00 $11.04-$12.00 $11.38 $11.34
.31%
2/28/95 10.25- 11.75 11.37- 12.63 11.38 12.63
(9.94)
5/31/95 11.00- 11.875 11.46- 13.19 11.50 13.19
(12.81)
8/31/95 11.25- 12.125 12.50- 13.45 11.50 12.92
(10.99)
11/30/95 11.25- 12.00 12.83- 13.69 11.94 13.69
(12.80)
- ------------------------------------------------------------
- --------
</TABLE>
* The Fund commenced operations on September 23, 1994.
As of December 19, 1995, the price per share of Common
Stock as quoted on the
AMEX was $12.00, representing a 11.63% discount from the
Common Stock's net
asset value calculated on that day.
36
<PAGE>
Greenwich Street California Municipal Fund Inc.
MANAGEMENT OF THE PORTFOLIO
DIRECTORS AND OFFICERS
The business and affairs of the Portfolio, including the
general supervision
of the duties performed by the Investment Manager under the
Investment Manage-
ment Agreement, are the responsibility of the Portfolio's
Board of Directors.
The Directors and officers of the Portfolio, their addresses
and their princi-
pal occupations for at least the past five years are set
forth below:
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL
OCCUPATIONS
NAME AND ADDRESS WITH THE PORTFOLIO DURING PAST FIVE
YEARS AND AGE
- ------------------------------------------------------------
- --------------
<S> <C> <C>
*+Heath B. McLendon Chairman of the Managing
Director of
388 Greenwich Street Board of Smith Barney;
Director of
New York, NY 10013 Directors and forty-two
investment com-
Chief Executive panies
associated with
Officer Smith Barney;
Chairman of
the Board of
Smith Barney
Investment
Strategy
Advisers Inc.
and Presi-
dent of SBMFM;
formerly,
Senior
Executive Vice
President of
Shearson
Lehman
Brothers Inc.;
Vice Chairman
of Shearson
Asset
Management; Direc-
tor of
PanAgora Asset
Management,
Inc. and
PanAgora Asset
Management
Limited; 62.
*+Jessica Bibliowicz Director and Executive Vice
President
388 Greenwich Street President of Smith
Barney; Director
New York, NY 10013 of twelve
investment com-
panies
associated with
Smith Barney;
President
of forty-one
investment
companies
associated with
Smith Barney;
formerly
Director of
Sales and
Marketing for
Prudential
Mutual Funds;
prior to
September
1991, First
Vice
President, Asset
Management
Division of
Shearson
Lehman Brothers,
Inc.; 36.
+Joseph H. Fleiss Director Retired;
Director of ten
3849 Torrey Pines Blvd. investment
companies
Sarasota, FL 34238 associated
with Smith
Barney;
formerly Senior
Vice President
of
Citibank;
Manager of
Citibank's
Bond Invest-
ment Portfolio
and Money
Management
Desk and a
Director of
Citicorp
Securities
Co., Inc.; 78.
</TABLE>
37
<PAGE>
Greenwich Street California Municipal Fund Inc.
MANAGEMENT OF THE PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL
OCCUPATIONS
NAME AND ADDRESS WITH THE PORTFOLIO DURING PAST
FIVE YEARS AND AGE
- ------------------------------------------------------------
- -----------------
<S> <C> <C>
+Donald R. Foley Director Retired;
Director of ten
3668 Freshwater Drive investment
companies
Jupiter, FL 33477 associated
with Smith
Barney;
formerly Vice
President
of Edwin Bird
Wilson,
Incorporated (ad-
vertising);
73.
+Paul Hardin Director Professor
of Law at the
60134 Davie Street University
of North Caro-
Chapel Hill, NC 27599 lina at
Chapel Hill;
Director of
twelve
investment
companies
associated
with Smith
Barney;
formerly, Chan-
cellor of
the University
of North
Carolina at
Chapel
Hill; Director of
The Summit
Bancorpora-
tion; 64.
+Francis P. Martin Director Practicing
physician;
2000 North Village Ave. Director of
ten invest-
Rockville Centre, NY 11570 ment
companies associated
with Smith
Barney; for-
merly
President of the
Nassau
Physicians' Fund,
Inc; 71.
+Roderick C. Rasmussen Director Investment
Counselor;
81 Mountain Road Director of
ten invest-
Verona, NJ 07044 ment
companies associated
with Smith
Barney; for-
merly Vice
President of
Dresdner
and Company Inc.
(Investment
counselors);
69.
+John P. Toolan Director Retired;
Director of ten
82 Druid Road investment
companies
Summit, NJ 07901 associated
with Smith
Barney;
formerly, Direc-
tor and
Chairman of Smith
Barney
Trust Company,
Director of
Smith Barney
and SBMFM
and Senior
Executive
Vice President,
Director
and Member of
the
Executive Committee
of Smith
Barney; 65.
+C. Richard Youngdahl Director Retired;
Director of ten
339 River Drive investment
companies
Tequesta, FL 33469 associated
with Smith
Barney;
Member of the
Board of
Directors of
D.W. Rich &
Company,
Inc.;
formerly Chairman
of the
Board of Pensions
Lutheran
Church in Ameri-
ca;
Chairman of the Board
and Chief
Executive Offi-
cer of
Aubrey G. Lanston
& Co.
(dealers in U.S.
Government
securities)
and
President of the
Association
of Primary
Dealers in
U.S. Govern-
ment
Securities; 80.
</TABLE>
38
<PAGE>
Greenwich Street California Municipal Fund Inc.
MANAGEMENT OF THE PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL
OCCUPATIONS
NAME AND ADDRESS WITH THE PORTFOLIO DURING PAST FIVE
YEARS AND AGE
- ------------------------------------------------------------
- -----------
<S> <C> <C>
Lewis E. Daidone Senior Vice Managing Director
of
388 Greenwich Street President, Smith Barney,
Senior Vice
New York, NY 10013 Chief Financial President and/or
Trea-
and surer of other
investment
Accounting companies
associated with
Officer and Smith Barney;
Director
Treasurer and Senior Vice
President
of SBMFM, and
Senior Vice
President of
Smith Barney
Strategy Advisers
Inc.;
38.
Joseph P. Deane Vice President Managing Director
of
388 Greenwich Street and Investment Greenwich Street
Advi-
New York, NY 10013 Officer sors; investment
officer
of other
investment com-
panies associated
with
Smith Barney;
Managing
Director of Smith
Barney;
48.
Thomas M. Reynolds Controller and Director of Smith
Barney
388 Greenwich Street Assistant in the Financial
Services
New York, NY 10013 Secretary Division, and
Controller
and Assistant
Secretary
of certain other
invest-
ment companies
associated
with Smith
Barney. Prior
to September
1991, Assis-
tant Treasurer of
Aquila
Management
Corporation
and its
associated
investment
companies; 35.
Christina T. Sydor Secretary Managing Director
of
388 Greenwich Street Smith Barney and
Secre-
New York, NY 10013 tary of the other
Invest-
ment companies
associated
with Smith
Barney; Secre-
tary and General
Counsel
of SBMFM; 44.
- ------------------------------------------------------------
- -----------
</TABLE>
* "Interested person" of the Portfolio as defined in the
1940 Act.
+ Director, trustee and/or general partner of other
investment companies regis-
tered under the 1940 Act with which Smith Barney is
affiliated.
Fees for Directors who are not "interested persons" of the
Portfolio and who
are directors of a group of funds sponsored by Smith Barney
are set at $40,000
per annum and are allocated based on relative net assets of
each fund in the
group. In addition, these Directors receive $100 per fund or
portfolio for each
day of Board meetings attended plus travel and out-of-pocket
expenses incurred
in connection with Board meetings. The Board meeting fees
are borne equally by
each individual fund or portfolio in the group; the out-of-
pocket expenses are
allocated based on relative net assets of each fund or
portfolio.
39
<PAGE>
Greenwich Street California Municipal Fund Inc.
MANAGEMENT OF THE PORTFOLIO (CONTINUED)
The following table shows the compensation estimated to be
paid by the Port-
folio to each incumbent Director during the Portfolio's
current fiscal year
(from September 1, 1995 to August 31, 1996).
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
PENSION OR
COMPENSATION NUMBER OF
AGGREGATE RETIREMENT FROM
PORTFOLIO FUNDS FOR
COMPENSATION BENEFITS ACCRUED
AND FUND WHICH DIRECTOR
FROM AS PART OF
COMPLEX SERVES WITHIN
NAME OF PERSON PORTFOLIO PORTFOLIO EXPENSES PAID
TO DIRECTORS FUND COMPLEX
-------------- ------------ ------------------ -----
- ------------ --------------
<S> <C> <C> <C>
<C>
Jessica Bibliowicz* $ 0 $ 0 $
0 12
Joseph H. Fleiss 452.00 0
51,200.00 10
Donald R. Foley 452.00 0
51,200.00 10
Paul Hardin 452.00 0
64,425.00 12
Francis P. Martin 452.00 0
51,200.00 10
Heath B. McLendon* 0 0
0 42
Roderick C. Rasmussen 452.00 0
51,200.00 10
John P. Toolan 452.00 0
51,200.00 10
C. Richard Youngdahl 452.00 0
51,200.00 10
</TABLE>
- ----------
* Designates an "interested director".
At the close of business on December 19, 1995, 3,635,177
shares of Common
Stock or 99% of the Portfolio's total shares outstanding on
that date were
held in accounts, but not beneficially owned by, CEDE & Co.,
c/o Depository
Trust Company, Box 20, Bowling Green Station, NY, NY 10004-
9998. As of that
date, the officers and Board members of the Portfolio
beneficially owned less
than 1% of the outstanding shares of the Portfolio.
INVESTMENT MANAGER
Greenwich Street Advisors, a division of Smith Barney
Mutual Funds Management
Inc. ("SBMFM" or the "Investment Manager") serves as the
Portfolio's invest-
ment manager. The Investment Manager provides investment
advisory and manage-
ment services to investment companies affiliated with Smith
Barney. SBMFM was
incorporated in 1968 and currently manages investment
companies that had total
assets in excess of $64 billion as of November 30, 1995, of
which approxi-
mately $7.7 billion consisted of municipal bond portfolios.
SBMFM is con-
trolled by Holdings, the parent company of Smith Barney.
Holdings is a wholly-
owned subsidiary of Travelers. SBMFM is located at 388
Greenwich Street, New
York, New York 10013.
40
<PAGE>
Greenwich Street California Municipal Fund Inc.
MANAGEMENT OF THE PORTFOLIO (CONTINUED)
Subject to the supervision and direction of the Portfolio's
Board of Direc-
tors, the Investment Manager manages the securities held by
the Portfolio in
accordance with the Portfolio's stated investment objectives
and policies,
makes investment decisions for the Portfolio, places orders
to purchase and
sell securities on behalf of the Portfolio and employs
managers and securities
analysts who provide research services to the Portfolio.
SBMFM also provides
certain administration services to the Portfolio, including
overseeing the
Portfolio's non-investment operations and its relations with
other service
providers and providing executive and other officers to the
Portfolio. The
Portfolio pays the Investment Manager a management fee for
the services pro-
vided to the Portfolio that is computed daily and paid
monthly at the annual
rate of 0.90% of the value of the Portfolio's average daily
net assets, which
is higher than the rates for similar services paid by other
recently organized
publicly offered, closed-end, management investment
companies that have invest-
ment objectives and policies similar to those of the
Portfolio. For the period
from September 22, 1994 through August 31, 1995, the
Portfolio paid $327,792 in
management fees to SBMFM.
Joseph P. Deane, Vice President and Investment Officer of
the Portfolio, is
primarily responsible for management of the Portfolio's
assets. Mr. Deane is a
Managing Director of the Investment Manager and is the
senior asset manager for
six other investment companies and other accounts investing
in tax-exempt secu-
rities with aggregate assets of $4.7 billion as of November
30, 1995.
The Investment Manager bears all expenses in connection
with the performance
of the services it provides to the Portfolio. The Portfolio
will bear all other
expenses to be incurred in its operation, including, but not
limited to the
costs incurred in connection with the Portfolio's
organization; management
fees; fees for necessary professional and brokerage services
fees for any pric-
ing service; the costs of regulatory compliance; the costs
associated with
maintaining the Portfolio's corporate existence; and costs
of corresponding
with the Portfolio's shareholders.
41
<PAGE>
Greenwich Street California Municipal Fund Inc.
SECURITIES TRANSACTIONS AND TURNOVER
GENERAL
The Portfolio's securities ordinarily are purchased from
and sold to parties
acting as either principal or agent. Newly issued securities
ordinarily are
purchased directly from the issuer or from an underwriter;
other purchases and
sales usually are placed with those dealers from which the
Investment Manager
determines that the best prices or execution will be
obtained. Usually no bro-
kerage commissions, as such, are paid by the Portfolio for
purchases and sales
undertaken through principal transactions, although the
price paid usually
includes an undisclosed compensation to the dealer acting as
agent. The prices
paid to underwriters of newly issued securities typically
include a concession
paid by the issuer to the underwriter, and purchases of
after-market securi-
ties from dealers ordinarily are executed at a price between
the bid and asked
price.
Transactions on behalf of the Portfolio are allocated to
various dealers by
the Investment Manager in its best judgment. The primary
consideration is
prompt and effective execution of orders at the most
favorable price. Subject
to that primary consideration, dealers may be selected for
research, statisti-
cal or other services to enable the Investment Manager to
supplement its own
research and analysis with the views and information of
other securities
firms.
Research services furnished by broker-dealers through which
the Portfolio
effects securities transactions may be used by the
Investment Manager in man-
aging other investment funds and accounts and conversely,
research services
furnished to the Investment Manager by broker-dealers in
connection with other
funds and accounts the Investment Manager advises may be
used by the Invest-
ment Manager in advising the Portfolio. Although it is not
possible to place a
dollar value on these services, the Investment Manager is of
the view that the
receipt of the services should not reduce the overall costs
of its research
services.
Investment decisions for the Portfolio are made
independently from those of
other investment companies or accounts managed by the
Investment Manager. If
those investment companies or accounts are prepared to
invest in, or desire to
dispose of, Municipal Obligations or Taxable Investments at
the same time as
the Portfolio, however, available investments or
opportunities for sales will
be allocated equitably to each client of the Investment
Manager. In some
cases, this procedure may adversely affect the size of the
position obtained
for or disposed of by the Portfolio or the price paid or
received by the Port-
folio.
42
<PAGE>
Greenwich Street California Municipal Fund Inc.
SECURITIES TRANSACTIONS AND TURNOVER (CONTINUED)
The Portfolio's Board of Directors will review periodically
the commissions
paid by the Portfolio to determine if the commissions paid
over representative
periods of time were reasonable in relation to the benefits
inuring to the
Portfolio. The Portfolio may seek an exemptive order from
the SEC permitting
it to enter into principal transactions involving certain
money market instru-
ments with Smith Barney and certain Smith Barney-affiliated
dealers; no assur-
ance can be given that such an order will be sought or
granted.
TURNOVER
The Portfolio cannot accurately predict its turnover rate,
but anticipates
that its annual turnover rate will not exceed 100%. The
Portfolio's turnover
rate is calculated by dividing the lesser of the Portfolio's
sales or pur-
chases of securities during a year (excluding any security
the maturity of
which at the time of acquisition is one year or less) by the
average monthly
value of the Portfolio's securities for the year. Higher
turnover rates can
result in corresponding increases in the Portfolio's
transaction costs. The
Portfolio will not consider turnover rate a limiting factor
in making invest-
ment decisions consistent with its investment objective and
policies.
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN
The Portfolio expects to pay monthly dividends of
substantially all net
investment income (that is, income (including its tax-exempt
income and its
accrued original issue discount income) other than net
realized capital gains)
to the holders of the Common Stock. Under the Portfolio's
current policy,
which may be changed at any time by its Board of Directors,
the Portfolio's
monthly dividends will be made at a level that reflects the
past and projected
performance of the Portfolio, which policy over time will
result in the dis-
tribution of all net investment income of the Portfolio. Net
income of the
Portfolio consists of all interest income accrued on the
Portfolio's assets
less all expenses of the Portfolio. Expenses of the
Portfolio are accrued each
day. Net realized capital gains, if any, will be distributed
to the sharehold-
ers at least once a year.
Under the Portfolio's Dividend Reinvestment Plan (the
"Plan"), a shareholder
whose shares of Common Stock are registered in his own name
will have all dis-
tributions from the Portfolio reinvested automatically by
First Data as agent
under the Plan, unless the shareholder elects to receive
cash. Distributions
with respect to shares registered in the name of a broker-
dealer or other nom-
inee
43
<PAGE>
Greenwich Street California Municipal Fund Inc.
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN
(CONTINUED)
(that is, in "Street Name") will be reinvested by the broker
or nominee in
additional shares under the Plan, unless the service is not
provided by the
broker or nominee or the shareholder elects to receive
distributions in cash.
Investors who own Common Stock registered in Street Name
should consult their
broker-dealers for details regarding reinvestment. All
distributions to Port-
folio shareholders who do not participate in the Plan will
be paid by check
mailed directly to the record holder by or under the
direction of First Data
as dividend-paying agent.
If the Portfolio declares a dividend or capital gains
distribution payable
either in shares of Common Stock or in cash, shareholders
who are not Plan
participants will receive cash, and Plan participants will
receive the equiva-
lent amount in shares of Common Stock. When the market price
of the Common
Stock is equal to or exceeds the net asset value per share
of the Common Stock
on the date of valuation, Plan participants will be issued
shares of Common
Stock valued at the net asset value most recently determined
as described
below under "Net Asset Value" or, if net asset value is less
than 95% of the
then current market price of the Common Stock, then at 95%
of the market val-
ue.
If the market price of the Common Stock is less than the
net asset value of
the Common Stock, or if the Portfolio declares a dividend or
capital gains
distribution payable only in cash, a broker-dealer not
affiliated with Smith
Barney, as purchasing agent for Plan participants (the
"Purchasing Agent"),
will buy Common Stock in the open market, on the AMEX or
elsewhere, for the
participants' accounts. If, following the commencement of
the purchases and
before the Purchasing Agent has completed its purchases, the
market price
exceeds the net asset value of the Common Stock, the average
per share pur-
chase price paid by the Purchasing Agent may exceed the net
asset value of the
Common Stock, resulting in the acquisition of fewer shares
than if the divi-
dend or capital gains distribution had been paid in Common
Stock issued by the
Portfolio at net asset value. First Data will apply all cash
received as a
dividend or capital gains distribution to purchase Common
Stock on the open
market as soon as practicable after the payment date of the
dividend or capi-
tal gains distribution (and may place orders to purchase
Common Stock five
business days in advance of the payment date), but in no
event later than 30
days after that date, except when necessary to comply with
applicable provi-
sions of the federal securities laws.
First Data will maintain all shareholder accounts in the
Plan and will fur-
nish written confirmations of all transactions in each
account, including
information
44
<PAGE>
Greenwich Street California Municipal Fund Inc.
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN
(CONTINUED)
needed by a shareholder for personal and tax records. The
automatic reinvest-
ment of dividends and capital gains distributions will not
relieve Plan partic-
ipants of any income tax that may be payable on the
dividends or capital gains
distributions. Common Stock in the account of each Plan
participant will be
held by First Data in uncertificated form in the name of the
Plan participant,
and each shareholder's proxy will include those shares
purchased pursuant to
the Plan.
Plan participants are subject to no charge for reinvesting
dividends and capi-
tal gains distributions. First Data's fees for handling the
reinvestment of
dividends and capital gains distributions will be paid by
the Portfolio. No
brokerage charges apply with respect to shares of Common
Stock issued directly
by the Portfolio as a result of dividends or capital gains
distributions pay-
able either in Common Stock or in cash. Each Plan
participant will, however,
bear a proportionate share of brokerage commissions incurred
with respect to
open market purchases made in connection with the
reinvestment of dividends or
capital gains distributions.
Experience under the Plan may indicate that changes to it
are desirable. The
Portfolio reserves the right to amend or terminate the Plan
as applied to any
dividend or capital gains distribution paid subsequent to
written notice of the
change sent to participants at least 30 days before the
record date for the
dividend or capital gains distribution. The Plan also may be
amended or termi-
nated by First Data, with the Portfolio's prior written
consent, on at least 30
days' written notice to Plan participants. All
correspondence concerning the
Plan should be directed by mail to First Data Investor
Services Group, One Ex-
change Place, Boston, Massachusetts 02109 or by telephone at
1-800-331-1710.
NET ASSET VALUE
The net asset value of shares of the Common Stock will be
calculated as of the
close of regular trading on the New York Stock Exchange (the
"NYSE"), currently
4:00 p.m., New York time, on each day on which the NYSE is
open for trading.
The Portfolio reserves the right to cause its net asset
value to be calculated
on a less frequent basis as determined by the Portfolio's
Board of Directors.
For purposes of determining net asset value, futures
contracts and options on
futures contracts will be valued 15 minutes after the close
of regular trading
on the NYSE.
45
<PAGE>
Greenwich Street California Municipal Fund Inc.
NET ASSET VALUE (CONTINUED)
Net asset value per share of Common Stock is calculated by
dividing the value
of the Portfolio's total assets less liabilities. In
general, the Portfolio's
investments will be valued at market value, or in the
absence of market value,
at fair value as determined by or under the direction of the
Portfolio's Board
of Directors. Short-term investments that mature in 60 days
or less are valued
on the basis of amortized cost (which involves valuing an
investment at its
cost and, thereafter, assuming a constant amortization to
maturity of any dis-
count or premium, regardless of the effect of fluctuating
interest rates on
the market value of the investment) when the Board of
Directors has determined
that amortized cost represents fair value.
The valuation of the Portfolio's assets is made after
consultation with an
independent pricing service (the "Service") approved by the
Portfolio's Board
of Directors. When, in the judgment of the Service, quoted
bid prices for
investments 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. Investments for which, in the
judgment of the Serv-
ice, no readily obtainable market quotation is available,
are carried at fair
value as determined by the Service, based on methods that
include considera-
tion of: yields or prices of Municipal Obligations of
comparable quality, cou-
pon, maturity and type; indications as to values from
dealers; and general
market conditions. The Service may use electronic data
processing techniques
and/or a matrix system to determine valuations. The
procedures of the Service
are reviewed periodically by the officers of the Portfolio
under the general
supervision and responsibility of the Board of Directors,
which may replace
the Service at any time if it determines it to be in the
best interests of the
Portfolio to do so.
TAXATION
The discussion set out below of tax considerations
generally affecting the
Portfolio and its shareholders is intended to be only a
summary and is not
intended as a substitute for careful tax planning by
prospective shareholders.
TAXATION OF THE PORTFOLIO AND ITS INVESTMENTS
The Portfolio has qualified and intends to continue to
qualify each year as a
"regulated investment company" under Subchapter M of the
Code. In addition,
the Portfolio intends to satisfy each year conditions
contained in the Code
that will enable interest from Municipal Obligations,
excluded from gross
income
46
<PAGE>
Greenwich Street California Municipal Fund Inc.
TAXATION (CONTINUED)
for federal income tax purposes with respect to the
Portfolio, to retain that
tax-exempt status when distributed to the shareholders of
the Portfolio (that
is, to be classified as "exempt-interest" dividends of the
Portfolio).
As a regulated investment company, the Portfolio pays no
federal income taxes
on its taxable net investment income (that is, taxable
income other than net
realized capital gains) and its net realized capital gains
that are distributed
to shareholders. To qualify under Subchapter M of the Code,
the Portfolio must,
among other things: (1) distribute to its shareholders at
least 90% of its tax-
able net investment income (for this purpose consisting of
taxable net invest-
ment income and net realized short-term capital gains) and
90% of its tax-
exempt net investment income (reduced by certain expenses);
(2) derive at least
90% of its gross income from dividends, interest, payments
with respect to
loans of securities, gains from the sale or other
disposition of securities, or
other income (including, but not limited to, gains from
options, futures and
forward contracts) derived with respect to the Portfolio's
business of invest-
ing in securities; (3) derive less than 30% of its annual
gross income from the
sale or other disposition of securities, options, futures or
forward contracts
held for less than three months; and (4) diversify its
holdings so that, at the
end of each fiscal quarter of the Portfolio (a) at least 50%
of the market
value of the Portfolio's assets is represented by cash, U.S.
Government securi-
ties and securities of other regulated investment companies,
and other securi-
ties, with those other securities limited, with respect to
any one issuer, to
an amount no greater than 5% of the Portfolio's assets and
(b) not more than
25% of the market value of the Portfolio's assets is
invested in the securities
of any one issuer (other than U.S. Government securities or
securities of other
regulated investment companies) or of two or more issuers
that the Portfolio
controls and that are determined to be in the same or
similar trades or busi-
nesses or related trades or businesses. In meeting these
requirements, the
Portfolio may be restricted in the selling of securities
held by the Portfolio
for less than three months and in the utilization of certain
of the investment
techniques described above under "Investment Objective and
Management Poli-
cies--Investment Techniques." As a regulated investment
company, the Portfolio
is subject to a 4% non-deductible excise tax measured with
respect to certain
undistributed amounts of ordinary income and capital gain.
The Portfolio pays
dividends and distributions necessary to avoid the
application of this excise
tax.
Legislation currently pending before the U.S. Congress
would repeal the
requirement contained in Subchapter M of the Code that a
regulated investment
company must derive less than 30% of its gross income from
the sale or other
47
<PAGE>
Greenwich Street California Municipal Fund Inc.
TAXATION (CONTINUED)
disposition of assets described above that are held for less
than three
months. It is unclear at this time whether this legislation
will become law
and, if it is so enacted, the form it will take.
As described above, the Portfolio may invest in financial
futures contracts
and options on financial futures contracts that are traded
on a U.S. exchange
or board of trade. As a general rule, these investment
activities will
increase or decrease the amount of long-term and short-term
capital gains or
losses realized by the Portfolio and, thus, will affect the
amount of capital
gains distributed to the Portfolio's shareholders.
For federal income tax purposes, gain or loss on the
futures and options
described above (collectively referred to as "Section 1256
Contracts") would,
as a general rule, be taxed pursuant to a special "mark-to-
market system."
Under the mark-to-market system, the Portfolio may be
treated as realizing a
greater or lesser amount of gains or losses then actually
realized. As a gen-
eral rule, gain or loss on Section 1256 Contracts is treated
as 60% long-term
capital gain or loss and 40% short-term capital gain or
loss, and as a result,
the mark-to-market system will generally affect the amount
of capital gains or
losses taxable to the Portfolio and the amount of
distributions taxable to a
shareholder. Moreover, if the Portfolio invests in both
Section 1256 Contracts
and offsetting positions in those contracts, then the
Portfolio might not be
able to receive the benefit of certain realized losses for
an indeterminate
period of time. The Portfolio expects that its activities
with respect to Sec-
tion 1256 Contracts and offsetting positions in those
Contracts (1) will not
cause it or its shareholders to be treated as receiving a
materially greater
amount of capital gains or distributions than actually
realized or received
and (2) will permit it to use substantially all of its
losses for the fiscal
years in which the losses actually occur.
TAXATION OF THE PORTFOLIO'S SHAREHOLDERS
Dividends paid by the Portfolio, other than dividends from
Taxable Invest-
ments and market discount on Municipal Obligations and from
income or gain
derived from securities transactions and from the use of
certain of the
investment techniques described under "Investment Objective
and Management
Policies--Investment Techniques," are derived from interest
on Municipal Obli-
gations and are exempt-interest dividends that may be
excluded by shareholders
from their gross income for federal income tax purposes if
the Portfolio sat-
isfies certain asset percentage requirements. Dividends paid
from the Portfo-
lio's net investment income and distributions of the
Portfolio's net realized
short-term capital gains are taxable to shareholders of the
Portfolio as ordi-
nary income,
48
<PAGE>
Greenwich Street California Municipal Fund Inc.
TAXATION (CONTINUED)
regardless of the length of time shareholders have held
shares of Common Stock
and whether the dividends or distributions are received in
cash or reinvested
in additional shares. As a general rule, a shareholder's
gain or loss on a
sale of his shares of Common Stock will be a long-term gain
or loss if he has
held his shares for more than one year and will be a short-
term capital gain
or loss if he has held his shares for one year or less.
Dividends and distri-
butions paid by the Portfolio do not qualify for the federal
dividends-
received deduction for corporations.
In general, investors should recognize that the benefits of
the exemption
from state and local taxes, in addition to the exemption
from federal taxes,
necessarily limits the Portfolio's ability to diversify
geographically.
EXEMPT-INTEREST DIVIDENDS
Interest on indebtedness incurred by a shareholder to
purchase or carry
shares of Common Stock is not deductible for federal income
tax purposes. If a
shareholder receives exempt-interest dividends with respect
to any share of
Common Stock and if the share is held by the shareholder for
six months or
less, then any loss on the sale of the share may, to the
extent of the exempt-
interest dividends, be disallowed. The Code may also require
a shareholder, if
he receives exempt-interest dividends, to treat as taxable
income a portion of
certain otherwise non-taxable social security and railroad
retirement benefit
payments. In addition, the portion of any exempt-interest
dividend paid by the
Portfolio that represents income derived from private
activity bonds held by
the Portfolio may not retain its tax-exempt status in the
hands of a share-
holder who is a "substantial user" of a facility financed by
the bonds, or a
"related person" of the substantial user. Although the
Portfolio's exempt-
interest dividends may be excluded by shareholders from
their gross income for
federal income tax purposes (1) some or all of the
Portfolio's exempt-interest
dividends may be a specific preference item, or a component
of an adjustment
item, for purposes of the federal individual and corporate
alternative minimum
taxes and (2) the receipt of dividends and distributions
from the Portfolio
may affect a corporate shareholder's federal "environmental"
tax liability.
The receipt of dividends and distributions from the
Portfolio may affect a
foreign corporate shareholder's federal "branch profits" tax
liability and the
federal "excess net passive income" tax liability of a
shareholder of an S
corporation. Shareholders should consult their own tax
advisors to determine
whether they are (1) "substantial users" with respect to a
facility or "relat-
ed" to those users within the meaning of the Code or (2)
subject to a federal
alternative minimum tax, the federal "environ-
49
<PAGE>
Greenwich Street California Municipal Fund Inc.
TAXATION (CONTINUED)
mental" tax, the federal "branch profits" tax, or the
federal "excess net pas-
sive income" tax.
TAX-EXEMPT INCOME VS. TAXABLE INCOME
The tables set out in Appendix B to this Prospectus show
individual taxpayers
how to translate the tax savings from investments such as
the Portfolio into
an equivalent return from a taxable investment. The yields
used in the tables
are for illustration only and are not intended to represent
current or future
yields for the Portfolio, which may be higher or lower than
those shown.
DIVIDEND REINVESTMENT PLAN
A shareholder of the Portfolio receiving dividends or
distributions in addi-
tional shares pursuant to the Plan should be treated for
federal income tax
purposes as receiving a distribution in an amount equal to
the amount of money
that a shareholder receiving cash dividends or distributions
receives, and
should have a cost basis in the shares received equal to
that amount.
CALIFORNIA TAXATION
California law relating to taxation of regulated investment
companies and
their shareholders was generally conformed to federal law
effective January 1,
1993. In any year in which the Portfolio qualifies as a
regulated investment
company under the Code and is exempt from federal income
tax, (i) the Portfo-
lio will also be exempt from the California corporate income
and franchise
taxes to the extent it distributes its income and (ii)
provided 50% or more of
the value of the total assets of the Portfolio at the close
of each quarter of
its taxable year consists of "California obligations, the
interest on which
(when held by an individual) is exempt from personal income
taxation under the
laws of California, the Portfolio will be qualified under
California law to
pay exempt-interest dividends which will be exempt from the
California per-
sonal income tax.
Individual shareholders of the Portfolio who reside in
California will not be
subject to the California personal income tax on
distributions received from
the Portfolio which are exempt-interest dividends. The
portion of any distri-
bution constituting exempt-interest dividends is that (i)
portion derived from
California obligations and (ii) designated as such by the
Portfolio. The total
amount of exempt-interest dividends paid by the Portfolio to
its shareholders
with respect to any taxable year cannot exceed the amount of
interest received
by the Portfolio during such year on California obligations
less any expenses
and expenditures deemed to have been paid from such
interest.
50
<PAGE>
Greenwich Street California Municipal Fund Inc.
TAXATION (CONTINUED)
Distributions from the Portfolio that are attributable to
sources other than
California obligations, generally will be taxable to such
shareholders as ordi-
nary income. In addition, distributions of short-term
capital gains realized by
the Portfolio will be taxable to the shareholders as
ordinary income. Distribu-
tions of long-term capital gains will be taxable as such to
the shareholders
regardless of how long they held their shares. Any dividends
paid to corporate
shareholders subject to the California franchise tax will be
taxed to such
shareholders.
Interest on indebtedness incurred or continued by
shareholders to purchase or
carry shares of the Portfolio will not be deductible for
California personal
income tax purposes. As a result of California's
incorporation of certain pro-
visions of the Code, a loss realized by a shareholder upon
the sale of shares
held for six months or less may be disallowed to the extent
of any exempt-
interest dividends received with respect to such shares. Any
loss realized upon
the redemption of shares within 30 days before or after the
acquisition of
other shares of the same series may be disallowed under the
"wash sale" rules.
With respect to individual shareholders, California does not
treat tax-exempt
interest as a tax preference item for purposes of its
alternative minimum tax.
To the extent a corporate shareholder receives dividends
which are exempt from
California taxation, a portion of such dividends may be
subject to the alterna-
tive minimum tax.
STATEMENTS AND NOTICES
Statements as to the tax status of the dividends and
distributions received by
shareholders of the Portfolio are mailed annually. These
statements show the
dollar amount of income excluded from federal income taxes
and the dollar
amount, if any, subject to federal income taxes. The
statements will also des-
ignate the amount of exempt-interest dividends that are a
specific preference
item for purposes of the federal individual and corporate
alternative minimum
taxes. The Portfolio will notify shareholders annually as to
the interest
excluded from federal income taxes earned by the Portfolio
with respect to
those states and possessions in which the Portfolio has or
had investments. The
dollar amount of dividends paid by the Portfolio that is
excluded from federal
income taxation and the dollar amount of dividends paid by
the Portfolio that
is subject to federal income taxation, if any, will vary for
each shareholder
depending upon the size and duration of the shareholder's
investment in the
Portfolio. To the extent that the Portfolio earns taxable
net investment
income, it intends to designate as taxable dividends the
same percentage of
each day's dividend as its taxable
51
<PAGE>
Greenwich Street California Municipal Fund Inc.
TAXATION (CONTINUED)
net investment income bears to its total net investment
income earned on that
date. Therefore, the percentage of each day's dividend
designated as taxable,
if any, may vary from day to day.
BACKUP WITHHOLDING
If a shareholder fails to furnish a correct taxpayer
identification number,
fails to report fully dividend or interest income, or fails
to certify that he
has provided a correct taxpayer identification number and
that he is not sub-
ject to "backup withholding," the shareholder may be subject
to a 31% "backup
withholding" tax with respect to (1) taxable dividends and
distributions and
(2) the proceeds of any sales or repurchases of shares of
Common Stock. An
individual's taxpayer identification number is his social
security number. The
31% backup withholding tax is not an additional tax and may
be credited
against a taxpayer's federal income tax liability.
DESCRIPTION OF SHARES
The Portfolio was incorporated under the laws of the State
of Maryland on
July 8, 1994 by the Articles of Incorporation. The Articles
of Incorporation
authorize issuance of the Common Stock. The Articles of
Incorporation provide
that the Fund shall continue without limitation of time.
COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING
EXCLUSIVE OF SHARES
HELD BY
PORTFOLIO FOR ITS
AMOUNT HELD OWN
ACCOUNT AS OF
TITLE OF SHARES BY PORTFOLIO FOR ITS
DECEMBER 19,
CLASS AUTHORIZED OWN ACCOUNT
1995
- ------------------------------------------------------------
- --------------
<S> <C> <C> <C>
Common Stock 500,000,000 0
3,658,334
</TABLE>
No shares, other than those currently outstanding, are
offered for sale pur-
suant to this Prospectus. All shares of Common Stock have
equal non-cumulative
voting rights and equal rights with respect to dividends,
assets and liquida-
tion. Shares of Common Stock will be fully paid and non-
assessable when issued
and have no preemptive, conversion or exchange rights.
52
<PAGE>
Greenwich Street California Municipal Fund Inc.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
ANTI-TAKEOVER PROVISIONS
The Portfolio's Articles of Incorporation include
provisions that could have
the effect of limiting the ability of other entities or
persons to acquire con-
trol of the Portfolio or to change the composition of its
Board of Directors
and could have the effect of depriving shareholders of an
opportunity to sell
their shares of Common Stock at a premium over prevailing
market prices by dis-
couraging a third party from seeking to obtain control of
the Portfolio. Com-
mencing with the first annual meeting of shareholders, the
Board of Directors
will be divided into three classes. At the annual meeting of
shareholders in
each year thereafter, the term of one class will expire and
each Director
elected to the class will hold office for a term of three
years. The classifi-
cation of the Board of Directors in this manner could delay
for up to two years
the replacement of a majority of the Board. The Articles of
Incorporation pro-
vide that the maximum number of Directors that may
constitute the Portfolio's
entire board is 12. A Director may be removed from office,
or the maximum number
of Directors increased, only by vote of the holders of at
least 75% of the
shares of Common Stock entitled to be voted on the matter.
The affirmative votes of at least 75% of the Directors and
the holders of at
least 75% of the shares of the Portfolio are required to
authorize any of the
following transactions (referred to individually as a
"Business Combination"):
(1) a merger, consolidation or share exchange of the
Portfolio with or into any
other person (referred to individually as a "Reorganization
Transaction"); (2)
the issuance or transfer by the Portfolio (in one or a
series of transactions
in any 12-month period) of any securities of the Portfolio
to any other person
or entity for cash, securities or other property (or
combination thereof)
having an aggregate fair market value of $1,000,000 or more,
excluding sales of
securities of the Portfolio in connection with a public
offering, issuances of
securities of the Portfolio pursuant to a dividend
reinvestment plan adopted by
the Portfolio and issuances of securities of the Portfolio
upon the exercise of
any stock subscription rights distributed by the Portfolio;
or (3) a sale,
lease, exchange, mortgage, pledge, transfer or other
disposition by the
Portfolio (in one or a series of transactions in any 12-
month period) to or
with any person of any assets of the Portfolio having an
aggregate fair market
value of $1,000,000 or more, except for transactions in
securities effected by
the Portfolio in the ordinary course of its business (each
such sale, lease,
exchange, mortgage, pledge, transfer or other disposition
being referred to
individually as a "Transfer Transaction"). The same
affirmative votes are
required with respect to: any proposal as to the voluntary
liquidation or
dissolution of the Portfolio
53
<PAGE>
Greenwich Street California Municipal Fund Inc.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
(CONTINUED)
or any amendment to the Portfolio's Articles of
Incorporation to terminate its
existence (referred to individually as "Termination
Transaction"); and any
shareholder proposal as to specific investment decisions
made or to be made
with respect to the Portfolio's assets.
A 75% shareholder vote will not be required with respect to
a Business Combi-
nation if the transaction is approved by a vote of at least
75% of the Contin-
uing Directors (as defined below) or if certain conditions
regarding the con-
sideration paid by the person entering into, or proposing to
enter into, a
Business Combination with the Portfolio and various other
requirements are
satisfied. In such case, a majority of the votes entitled to
be cast by share-
holders of the Portfolio will be required to approve the
transaction if it is
a Reorganization Transaction or a Transfer Transaction that
involves substan-
tially all of the Portfolio's assets and no shareholder vote
will be required
to approve the transaction if it is any other Business
Combination. In addi-
tion, a 75% shareholder vote will not be required with
respect to a Termina-
tion Transaction if it is approved by a vote of at least 75%
of the Continuing
Directors, in which case a majority of the votes entitled to
be cast by share-
holders of the Portfolio will be required to approve the
transaction.
The voting provisions described above could have the effect
of depriving
shareholders of the Portfolio of an opportunity to sell
their Common Stock at
a premium over prevailing market prices by discouraging a
third party from
seeking to obtain control of the Portfolio in a tender offer
or similar trans-
action. In view of the Portfolio's Board of Directors,
however, these provi-
sions offer several possible advantages, including: (1)
requiring persons
seeking control of the Portfolio to negotiate with its
management regarding
the price to be paid for the amount of Common Stock required
to obtain con-
trol; (2) promoting continuity and stability; and (3)
enhancing the Portfo-
lio's ability to pursue long-term strategies that are
consistent with its
investment objective and management policies. The Board of
Directors has
determined that the voting requirements described above,
which are generally
greater than the minimum requirements under Maryland law and
the 1940 Act, are
in the best interests of shareholders generally.
A "Continuing Director," as used in the discussion above,
is any member of
the Portfolio's Board of Directors (1) who is not a person
or affiliate of a
person who enters or proposes to enter into a Business
Combination with the
Portfolio (such a person or affiliate being referred to
individually as an
"Interested Party") and (2) who has been a member of the
Board of Directors
for a period
54
<PAGE>
Greenwich Street California Municipal Fund Inc.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
(CONTINUED)
of at least 12 months (or since the commencement of the
Portfolio's opera-
tions, if less than 12 months), or is a successor of a
Continuing Director who
is unaffiliated with an Interested Party and is recommended
to succeed a Con-
tinuing Director by a majority of the Continuing Directors
then members of the
Board of Directors.
CONVERSION TO OPEN-END FUND
The Portfolio's Articles of Incorporation require the
favorable vote of the
holders of at least two-thirds of the shares of Common Stock
then entitled to
be voted to authorize the conversion of the Portfolio from a
closed-end to an
open-end investment company as defined in the 1940 Act,
unless two-thirds of
the Continuing Directors (as defined above) approve such a
conversion. In the
latter case, the affirmative vote of a majority of the
shares outstanding will
be required to approve the amendment to the Portfolio's
Articles of
Incorporation providing for the conversion of the Portfolio.
CUSTODIAN, TRANSFER, AND DIVIDEND-PAYING AGENT, REGISTRAR
AND PLAN AGENT
PNC Bank, located at 17th and Chestnut Streets,
Philadelphia, Pennsylvania
19103, acts as custodian of the Portfolio's investments.
First Data, located
at One Exchange Place, Boston, Massachusetts 02109, serves
as the Portfolio's
transfer agent, dividend-paying agent and registrar. First
Data also serves as
agent in connection with the Plan.
REPORT TO SHAREHOLDERS
The Portfolio sends unaudited quarterly and audited annual
reports to the
holders of its securities, including a list of investments
held.
EXPERTS
The audited financial statements incorporated into this
Prospectus have been
so included in reliance on the report of KPMG Peat Marwick
LLP, independent
auditors, given on the authority of said firm as experts in
auditing and
accounting.
55
<PAGE>
Greenwich Street California Municipal Fund Inc.
FURTHER INFORMATION
This Prospectus does not contain all of the information set
forth in the Reg-
istration Statement filed with the SEC. The complete
Registration Statement
may be obtained from the SEC upon payment of the fee
prescribed by its Rules
and Regulations.
--------------------
No person has been authorized to give any information or to
make any repre-
sentations not contained in this Prospectus and, if given or
made, the infor-
mation or representations must not be relied upon as having
been authorized by
the Portfolio, the Investment Manager or Smith Barney. This
Prospectus does
not constitute an offer to sell or a solicitation of an
offer to buy any secu-
rity other than the shares of Common Stock offered by this
Prospectus, nor
does it constitute an offer to sell or a solicitation of an
offer to buy the
shares of Common Stock by anyone in any jurisdiction in
which the offer or
solicitation would be unlawful. Neither the delivery of this
Prospectus nor
any sale made hereunder will, under any circumstances,
create any implication
that there has been no change in the affairs of the
Portfolio since the date
of this Prospectus. If any material change occurs while this
Prospectus is
required by law to be delivered, however, this Prospectus
will be supplemented
or amended accordingly.
56
<PAGE>
Greenwich Street California Municipal Fund Inc.
APPENDIX A
DESCRIPTION OF MOODY'S, S&P AND FITCH
RATINGS
DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS:
Aaa--Bonds that are rated Aaa are judged to be of the
best quality, carry
the smallest degree of investment risk and are generally
referred to as "gilt
edge." Interest payments with respect to these bonds are
protected by a large
or by an exceptionally stable margin, and principal is
secure. Although the
various protective elements applicable to these bonds are
likely to change,
those changes are most unlikely to impair the fundamentally
strong position of
these bonds.
Aa--Bonds that are rated Aa are judged to be of high
quality by all stan-
dards and together with the Aaa group comprise what are
generally known as high
grade bonds. They are rated lower than the best bonds
because margins of pro-
tection may not be as large as in Aaa securities, or
fluctuation of protective
elements may be of greater amplitude, or other elements may
be present that
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 with respect to these bonds are
considered adequate,
but elements may be present that suggest a susceptibility to
impairment some-
time in the future.
Baa--Bonds rated Baa are considered to be medium grade
obligations, that is
they are neither highly protected nor poorly secured.
Interest payment and
principal security appear adequate for the present but
certain protective
elements may be lacking or may be characteristically
unreliable over any great
length of time. These bonds lack outstanding investment
characteristics and may
have speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 in
each generic rating
classification from Aa through B. The modifier 1 indicates
that the security
ranks in the higher end of its generic rating category; the
modifier 2 indi-
cates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in
the lower end of its generic rating category.
A-1
<PAGE>
Greenwich Street California Municipal Fund Inc.
APPENDIX A (CONTINUED)
DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS:
Moody's ratings for state and municipal notes and other
short-term loans
are designated Moody's Investment Grade (MIG) and for
variable demand obliga-
tions are designated Variable Moody's Investment Grade
(VMIG). This distinc-
tion recognizes the differences between short-term credit
risk and long-term
risk. Loans bearing the designation MIG 1/VMIG 1 are of the
best quality,
enjoying strong protection from established cash flows of
funds for their ser-
vicing or from established and broad-based access to the
market for refinanc-
ing, or both. Loans bearing the description MIG 2/VMIG 2 are
of high quality,
with margins of protection ample, although not as large as
the preceding
group. Loans bearing the designation MIG 3/VMIG 3 are of
favorable quality,
with all security elements accounted for but lacking the
undeniable strength
of the preceding grades. Market access for refinancing, in
particular, is
likely to be less well established.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper
rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting
institutions) are con-
sidered to have a superior capacity for repayment of short-
term promissory
obligations. Issuers rates Prime-2 (or related supporting
institutions) are
considered to have a strong capacity for repayment of short-
term promissory
obligations, normally evidenced by many of the
characteristics of issuers
rated Prime-1 but to a lesser degree. Earnings trends and
coverage ratios,
while sound, will be more subject to variation.
Capitalization characteris-
tics, while still appropriate, may be more affected by
external conditions.
Ample alternative liquidity is maintained.
DESCRIPTION OF S&P MUNICIPAL BOND RATINGS:
AAA--These bonds are the obligations of the higher
quality and have the
strongest capacity for timely payment of debt service.
GENERAL OBLIGATION BONDS RATED AAA--In a period of
economic stress, the
issuers of these bonds will suffer the smallest declines in
income and will be
least susceptible to autonomous decline. Debt burden is
moderate. A strong
revenue structure appears more than adequate to meet future
expenditure
requirements. Quality of management appears superior.
A-2
<PAGE>
Greenwich Street California Municipal Fund Inc.
APPENDIX A (CONTINUED)
REVENUE BONDS RATED AAA--Debt service coverage with
respect to these bonds
has been, and is expected to remain, substantial. Stability
of the pledged
revenues is also exceptionally strong due to the competitive
position of the
municipal enterprise or to the nature of the revenues. Basic
security provi-
sions (including rate covenant, earnings test for issuance
of additional
bonds, debt service reserve requirements) are rigorous.
There is evidence of
superior management.
AA--The investment characteristics of bonds in this
group are only
slightly less marked than those of the prime quality issues.
Bonds rated AA
have the second strongest capacity for payment of debt
service.
A--Principal and interest payments on bonds in this
category are regarded
as safe although the bonds are somewhat more susceptible to
the adverse
effects of changes in circumstances and economic conditions
than bonds in
higher rated categories. This rating describes the third
strongest capacity
for payment of debt service.
GENERAL OBLIGATION BONDS RATED A--There is some
weakness, either in the
local economic base, in debt burden, in the balance between
revenues and
expenditures, or in quality of management. Under certain
adverse circumstanc-
es, any one such weakness might impair the ability of the
issuer to meet debt
obligations at some future date.
REVENUE BONDS RATED A--Debt service coverage is good,
but not exceptional.
Stability of the pledged revenues could show some variations
because of
increased competition or economic influences on revenues.
Basic security pro-
visions, while satisfactory, are less stringent. Management
performance
appearance appears adequate.
BBB--The bonds in this group are regarded as having an
adequate capacity
to pay interest and repay principal. Whereas bonds in this
group normally
exhibit adequate protection parameters, adverse economic
conditions or chang-
ing circumstances are more likely to lead to a weakened
capacity to pay inter-
est and repay principal for debt in this category than in
higher rated catego-
ries. Bonds rated BBB have the fourth strongest capacity or
payment of debt
service.
S&P's letter ratings may be modified by the addition of
a plus or a minus
sign, which is used to show relative standing within the
major rating catego-
ries, except in the AAA category.
A-3
<PAGE>
Greenwich Street California Municipal Fund Inc.
APPENDIX A (continued)
DESCRIPTION OF S&P MUNICIPAL NOTE RATINGS:
Municipal notes with maturities of three years or less
are usually given
note ratings (designated SP-1, -2 or -3) to distinguish more
clearly the
credit quality of notes as compared to bonds. Notes rated SP-
1 have a very
strong or strong capacity to pay principal and interest.
Those issues deter-
mined to possess overwhelming safety characteristics are
given the designation
of SP-1+. Notes rated SP-2 have a satisfactory capacity to
pay principal and
interest.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by S&P indicates that the
degree of safety
regarding timely payment is either overwhelming or very
strong. Those issues
determined to possess overwhelming safety characteristics
are denoted A-1+.
Capacity for timely payment on commercial paper rated A-2 is
strong, but the
relative degree of safety is not as high as for issues
designated A-1.
DESCRIPTION OF FITCH MUNICIPAL BOND RATINGS:
AAA--Bonds rated AAA by Fitch are considered to be
investment grade and of
the highest credit quality. The obligor has an exceptionally
strong ability to
pay interest and repay principal, which is unlikely to be
affected by reason-
ably foreseeable events.
AA--Bonds rated AA by Fitch are considered to be
investment grade and of
very high credit quality. The obligor's ability to pay
interest and repay
principal is very strong, although not quite as strong as
bonds rated AAA.
Because bonds rated in the AAA and AA categories are not
significantly vulner-
able to foreseeable future developments, short-term debt of
these issues is
generally rated F-1+ by Fitch.
A--Bonds rated A by Fitch are considered to be
investment grade and of
high credit quality. The obligor's ability to pay interest
and repay principal
is considered to be strong, but may be more vulnerable to
adverse changes in
economic conditions and circumstances than bonds with higher
ratings.
BBB--Bonds rated BBB by Fitch are considered to be
investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions
and circumstances, however, are more likely to have adverse
consequences on
these bonds, and therefore impair timely payment. The
likelihood that the
A-4
<PAGE>
Greenwich Street California Municipal Fund Inc.
APPENDIX A (continued)
ratings of these bonds will fall below investment grade is
higher than for
bonds with higher ratings.
Plus and minus signs are used by Fitch to indicate the
relative position of
a credit within a rating category. Plus and minus signs,
however, are not used
in the AAA category.
DESCRIPTION OF FITCH SHORT-TERM RATINGS:
Fitch's short-term ratings apply to debt obligations
that are payable on
demand or have original maturities of generally up to three
years, including
commercial paper, certificates of deposit, medium-term
notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a
long-term rating on
the existence of liquidity necessary to meet the issuer's
obligations in a
timely manner.
Fitch's short-term ratings are as follows:
F-1+--Issues assigned this rating are regarded as having
the strongest
degree of assurance for timely payment.
F-1--Issues assigned this rating reflect an assurance of
timely payment
only slightly less in degree than issues rated F-1+.
F-2--Issues assigned this rating have a satisfactory
degree of assurance
for timely payment but the margin of safety is not as great
as for issues
assigned F-1+ and F-1 ratings.
F-3--Issues assigned this rating have characteristics
suggesting that the
degree of assurance for timely payment is adequate, although
near-term adverse
changes could cause these securities to be rated below
investment grade.
LOC--The symbol LOC indicates that the rating is based
on a letter of
credit issued by a commercial bank.
A-5
<PAGE>
Greenwich Street California Municipal Fund Inc.
APPENDIX B
TAX-EXEMPT INCOME COMPARED TO TAXABLE
INCOME
In August 1993 the United States Congress passed the
Revenue Reconcilia-
tion Act of 1993 which increased the top federal income tax
bracket to 36 per-
cent. For taxpayers with adjusted incomes in excess of
$250,000 a surcharge of
ten percent was added, and thus these taxpayers have a top
bracket of 39.6
percent.
For many Americans the new rates mean higher taxes at a
time when the tax-
advantaged status of many investments has been eliminated.
One simple and liq-
uid investment that has retained its tax-exempt status is
municipal bonds.
Because the interest they pay is exempt from federal income
taxes, and in some
cases state and local taxes, municipal bonds can allow
investors to realize
higher effective yields than investments in taxable
instruments having the
same stated interest rate.
The tables below show individual taxpayers how to
translate the tax sav-
ings from investments such as the Portfolio into an
equivalent return from a
taxable investment. The yields used below are for
illustration only and are
not intended to represent current or future yields for the
portfolio, which
may be higher or lower than those shown.
<TABLE>
<CAPTION>
TAX
BRACKET TAX-EXEMPT
YIELDS
CALIFORNIA -------------------------
- ----------------------
TAXABLE INCOME & FEDERAL* 5.00% 5.50% 6.00%
6.50% 7.00%
- ------------------------------------------------------------
- ----------------------
EQUIVALENT
TAXABLE YIELD
<S> <C> <C> <C> <C>
<C> <C>
SINGLE RETURN
$22,751-$55,100 34.70% 7.66% 8.42%
9.19% 9.95% 10.72%
$55,101-$115,000 37.42 7.99 8.79 9.59
10.39 11.19
$115,101-$250,000 42.40 8.68 9.55 10.42
11.28 12.15
over $250,000 46.24 9.30 10.23 11.16
12.09 13.02
JOINT RETURN
$38,001-$91,850 34.70 7.66 8.42 9.19
9.95 10.72
$91,851-$140,000 37.42 7.99 8.79 9.59
10.39 11.19
$140,001-$250,000 42.40 8.68 9.55 10.42
11.28 12.15
over $250,000 46.24 9.30 10.23 11.16
12.09 13.02
- ------------------------------------------------------------
- ----------------------
</TABLE>
* The combined California and federal tax rates shown are
based on 1995
federal tax tables and 1994 California tax tables. These
tax rates are
subject to change. The calculations in the table assume
that no income will
be
B-1
<PAGE>
Greenwich Street California Municipal Fund Inc.
APPENDIX B (CONTINUED)
subject to any federal, state or local individual
alternative minimum taxes
and do not reflect the federal phase-out of itemized
deductions and
personal exemptions. For ease of illustration, the tax
brackets shown are
those corresponding to federal taxes and in each case the
California tax
rate believed to be most representative of the rates
applicable to
California taxpayers within that bracket is used to
determine the combined
rate; as a result, a California taxpayer with taxable
income in the lower
or upper portion of a given bracket may bear a lower or
higher combined
California and federal rate than that shown, as the case
may be.
B-2
<PAGE>
- ------------------------------------------------------------
- --------------------
SMITH BARNEY
- ------------
A Member of
Travelers Group [LOGO]
Greenwich
Street
California
Municipal
Fund Inc.
COMMON STOCK
388 Greenwich
Street
New York, New
York 10013
FD0620
12/95
PART C
Information required to be included in Part C is set forth,
under the appropriate item so numbered, in Part C of this
Registration Statement.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements
Parts A and B
(a) Financial Highlights
(b) The Registrant's Annual Report for the period
ended August 31, 1995,
and the Independent Auditors' Report are
incorporated by reference
to the definitive 30b2-1 filed on December
21, 1995 as accession
number 91155-95-000462.
Part C
None
(2) Exhibits:
Exhibit
Number Description
(a) Articles of Incorporation of
Registrant*
(b) By-Laws*
(c) Not Applicable
(d) Form of Specimen Certificate
representing shares of
Common Stock, par value $.001 per
share**
(e) Registrant's Dividend Reinvestment
Plan*
(f) Not Applicable
(g)(1) Form of Investment Management
Agreement**
(2) Form of Transfer and
Assumption of Investment
Management Agreement between
Registrant, Mutual
Management Corp. and Smith Barney
Mutual Funds
Management Inc. (filed herewith).
(h)(1) Form of Purchase Agreement*
(2) Form of Underwriting
Agreement**
(i) Not Applicable
(j) Form of Custodian Services
Agreement**
(k) Form of Transfer Agency and
Registrar Agreement*
(l)(1) Opinion and consent of Willkie
Farr & Gallagher**
(2) Opinion and consent of
Venable, Baetjer and Howard**
(m) Not Applicable.
(n) Consent of KPMG Peat Marwick LLP
(filed herewith)
(o) Not Applicable.
(p) Not Applicable
(q) Not Applicable.
(r) Financial Data Schedule (filed
herewith)
_______________________________
* Previously filed by Registrant with its
initial Registration Statement (No.
33-54549) on July 12, 1994.
** Previously filed by Registrant with Pre-
Effective Amendment No. 2 to its
Registration Statement (No. 33-54549) on
September 22, 1994.
Item 25. Marketing Arrangements
Reference is made to the Purchase Agreement and the
Underwriting Agreement filed as Exhibits (h)(1) and (h)(2)
by Registrant with Pre-Effective Amendment No. 2 to its
Registration Statement.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to
be incurred in connection with the offering described in
this Registration Statement:
Securities and Exchange Commission registration
fees....................................................$
100.00
Printing (other than stock
certificates)...............................................
..............................$5,000.00
Legal fees and
expenses....................................................
..............................................$ 0
Accounting fees and
expenses....................................................
.....................................$ 0
Miscellaneous...............................................
............................................................
.....$ 0
TOTAL.......................................................
.......................................................$5,10
0.00
Item 27. Person Controlled by or Under Common Control
None.
Item 28. Number of Holders of Securities
The number of record holders of Registrant as of
December 21, 1995 is as follows:
(1) (2)
Title of Class: Number of Record
Holders:
Shares of Common Stock, 59
$.001 Par Value
Item 29. Indemnification
Under Article Seventh of Registrant's Articles of
Incorporation, any past or present director or officer of
Registrant is indemnified to the fullest extent permitted by
the Maryland General Corporation Law ("MGCL") against
liability and all expenses reasonable incurred by him in
connection with any action, suit or proceeding to which he
may be a party or otherwise involved by reason of his being
or having been a Director or officer of Registrant. This
provisions does not authorize indemnification when it is
determined that the Director or officer would otherwise be
liable to Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of his duties. Expenses may be paid by Registrant
to its currently acting and its former Directors and
officers, to the fullest extent that indemnification of
directors is permitted by the MGCL, the 1933 Act and the
1940 Act, in advance of the final dispositions of any
action, suit or proceeding. The Board may, by by-law,
resolution or agreement, make further provision for
indemnification of Directors, officers, employees and agents
to the fullest extent permitted by MGCL.
Insofar as indemnification for liabilities arising
under the 1933 Act may be permitted to directors, officers
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other
than the payment by Registrant of expenses incurred or paid
by a director, officer or controlling person of Registrant
in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person
in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
Item 30. Business and Other Connections of the Investment
Adviser
Greenwich Street Advisors, through its predecessors,
has been in the investment counseling business since 1934
and is a division of Smith Barney Mutual Funds Management
Inc. ("SBMFM"). SBMFM was incorporated in 1968 and is a
wholly owned subsidiary of Smith Barney Holdings Inc.
("Holdings"), which is in turn a wholly owned subsidiary of
Travelers Group Inc. ("Travelers").
The list required by this Item 30 of officers and
directors of SBMFM and Greenwich Street Advisors, together
with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by
such officers and directors during the past two fiscal
years, is incorporated by reference to Schedules A and D of
FORM ADV filed by SBMFM pursuant to the Advisers Act (SEC
File No. 801-8314).
Item 31. Location of Accounts and Records
Each Person maintaining physical possession of
accounts, books and other documents required to be
maintained pursuant to Section 31(a) of the 1940 Act is
listed below:
(1) Smith Barney Mutual Funds
Management Inc.
388 Greenwich Street
` New York, New York 10013
(2) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
(3) First Data Investor Services Group
Exchange Place
Boston, Massachusetts 02109
Item 32. Management Services
Not applicable.
Item 33. Undertakings
(1) Not Applicable.
(2) Not Applicable.
(3) Not applicable.
(4) (a) Registrant undertakes to file, during any
period in which offers or sales are being made, a Post-
Effective Amendment to the Registration Statement:
(1) to include any prospectus required by Section
10(a)(3) of the 1933 Act;
(2) to reflect in the prospectus any facts ors
events after the effective date of the Registration
Statement (or the most recent Post-Effective Amendment
hereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement; and
(3) to include any material information with
respect to the plan of distribution not previously disclosed
in this Registration Statement or any material change to
such information in this Registration Statement.
(4) (b) Registrant undertakes that, for the purpose
of determining any liability under the 1933 Act, each
subsequent Post-Effective Amendment shall be deemed to be a
new Registration Statement relating to the securities
offered therein, and the offering of those securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(4) (c) Not applicable.
(5) Not applicable.
(6) Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Post-Effective
Amendment No. 1 to its Registration Statement on Form N-2 to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, on the 21st day of
December, 1995.
GREENWICH STREET CALIFORNIA
MUNICIPAL FUND INC.
By /s/ Heath B.
McLendon
_________________
Heath B. McLendon
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, as amended, this Post-Effective Amendment to the
Registration Statement has been by the following persons in
the capacities and on the dates indicated:
Signature Title
Date
/s/ Heath B. Chairman of the Board and
McLendon Chief Executive Officer
December 21,
Heath B. McLendon
1995
/s/ JESSICA
BIBLIOWICZ President and Director
December 21,
Jessica Bibliowicz
1995
/s/ Joseph H.
Fleiss* Director
December 21,
Joseph H. Fleiss
1995
/s/ Donald R.
Foley* Director
December 21,
Donald R. Foley
1995
/s/ Paul Hardin
III* Director
December 21,
Paul Hardin III
1995
/s/ Francis P.
Martin* Director
December 21,
Francis P. Martin
1995
/s/ Roderick C.
Rasmussen* Director
December 21,
Roderick C.
1995
Rasmussen
/s/ John P. Toolan*
John P. Toolan Director
December 21,
1995
/s/ C. Richard
Youngdahl* Director
December 21,
C. Richard
1995
Youngdahl
Senior Vice President,
/s/ Lewis E. Treasurer (Chief Financial
Daidone and Accounting Officer)
December 21,
Lewis E. Daidone
1995
*By: /s/ Lewis E. Daidone
Lewis E. Daidone
Pursuant to a Power of Attorney
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
EXHIBIT INDEX
Exhibit No. Description of Exhibit
(g)(2) Form of Transfer and Assumption of
Investment Management
Agreement between the Registrant, Mutual
Management Corp.
and Smith Barney Mutual Funds Management
Funds Inc.
(n) Consent of KPMG Peat Marwick LLP,
independent
accountants for the Portfolio.
(r) Financial Data Schedule
Cover Letter
TRANSFER AND ASSUMPTION OF
INVESTMENT MANAGEMENT AGREEMENT
for
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
TRANSFER AND ASSUMPTION OF MANAGEMENT AGREEMENT, made
as of the 31st day of December, 1994, by and among Greenwich
Street California Municipal Fund Inc. (the "Fund"), a
corporation organized under the laws of the State of
Maryland, Mutual Management Corp., a New York corporation
("MMC") and the Greenwich Street Advisors Division of Smith
Barney Mutual Funds Management Inc., a Delaware corporation
("SBMFM").
WHEREAS, the Fund is registered with the Securities and
Exchange Commission as a non-diversified closed-end
management investment company under the Investment Company
Act of 1940, as amended (the "Act"); and
WHEREAS, the Fund and MMC entered into a Management
Agreement on September 22, 1994, under which MMC serves as
the investment manager (the "Investment Manager") for the
Fund; and
WHEREAS, MMC desires that its interest, rights,
responsibilities and obligations in and under the Management
Agreement be transferred to SBMFM and SBMFM desires to
assume MMC's interest, rights, responsibilities and
obligations in and under the Management Agreement; and
WHEREAS, this Agreement does not result in a change of
actual control or management of the Investment Manager to
the Fund and, therefore, is not an "assignment" as defined
in Section 2(a)(4) of the Act nor an "assignment" for the
purposes of Section 15(a)(4) of the Act.
NOW, THEREFORE, in consideration of the mutual
covenants set forth in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:
1. Assignment. Effective as of December 31, 1994
(the "Effective Date"), MMC hereby transfers to SBMFM all of
MMC's interest, rights, responsibilities and obligations in
and under the Management Agreement dated September 22, 1994,
to which MMC is a party with the Fund.
2. Assumption and Performance of Duties. As of the
Effective Date, SBMFM hereby accepts all of MMC's interest
and rights, and assumes and agrees to perform all of MMC's
responsibilities and obligations in and under the Management
Agreement; SBMFM agrees to be subject to all of the terms
and conditions of said Agreement; and SBMFM shall indemnify
and hold harmless MMC from any claim or demand made
thereunder arising or incurred after the Effective Date.
3. Representation of SBMFM. SBMFM represents and
warrants that : (1) it is registered as an investment
adviser under the Investment Advisers Act of 1940, as
amended; and (2) Smith Barney Holdings Inc. is its sole
shareholder.
4. Consent. The Fund hereby consents to this
transfer by MMC to SBMFM of MMC's interest, rights,
responsibilities and obligations in and under the Management
Agreement and to acceptance and assumption by SBMFM of the
same. The Fund agrees, subject to the terms and conditions
of said Agreement, to look solely to SBMFM for the
performance of the Investment Manager's responsibilities and
obligations under said Agreement from and after the
Effective Date, and to recognize as inuring solely to SBMFM
the interest and rights heretofore held by MMC thereunder.
5. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto
were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers
hereunto duly attested.
Attest:
By:
Secretary Greenwich Street California
Municipal Fund Inc.
Date:December 31, 1994
Attest:
By:
Secretary Mutual Management Corp.
Date:December 31, 1994
Attest:
By:
Secretary Greenwich Street Advisors
Division of
Smith Barney Mutual Funds
Management Inc.
Date:December 31, 1994
Independent Auditors' Consent
To the Shareholders and Directors of
Greenwich Street California Municipal Fund Inc.:
We consent to the use of our report dated October 11,
1995 with respect to the Greenwich Street California
Municipal Fund Inc., incorporated herein by reference,
and to the references to our Firm under the headings
"Financial Highlights" and "Experts" in the Prospectus.
KPMG PEAT MARWICK
LLP
New York, New York
December 22, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE>
<CIK>
<NAME> GREENWICH STREET CALIFORNIA
MUNICIPAL FUND, INC.
<SERIES>
<NUMBER>
<NAME>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> PERIOD
<FISCAL-YEAR-END> AUGUST 31, 1994
<PERIOD-START> SEPTEMBER 23, 1995
<PERIOD-END> AUGUST 31, 1995
<INVESTMENTS-AT COST> 43,459,643
<INVESTMENTS-AT VALUE> 46,509,156
<RECEIVABLES> 767,759
<ASSETS-OTHER> 143,142
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 47,420,057
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 170,212
<TOTAL-LIABILITIES> 170,212
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43,835,008
<SHARES-COMMON-STOCK> 3,658,334
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 278,796
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 86,528
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,049,513
<NET-ASSETS> 47,249,845
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,618,971
<OTHER-INCOME> 0
<EXPENSES-NET> 430,525
<NET-INVESTMENT-INCOME> 2,188,446
<REALIZED-GAINS-CURRENT> 86,528
<APPREC-INCREASE-CURRENT> 3,049,513
<NET-CHANGE-FROM-OPS> 5,324,487
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,909,650)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,835,008
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 43,835,008
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 381,704
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 484,437
<AVERAGE-NET-ASSETS> 45,131,945
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> .60
<PER-SHARE-GAIN-APPREC> .84
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.52)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.92
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
