QUARTERLY REPORT
================================================================================
Greenwich Street
California
Municipal
Fund, Inc.
----------------
May 31, 1996
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every Day.
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Greenwich Street California Municipal Fund Inc.
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Dear Shareholder:
We are pleased to provide you with the third quarter report for the Greenwich
Street California Municipal Fund Inc. for the period ended May 31, 1996. During
the past quarter, the Fund distributed dividends totaling $0.174 per share. The
table below represents the annualized distribution rates based on the Fund's May
31, 1996 Net Asset Value (NAV) per share and American Stock Exchange (AMEX)
closing price.
Price Annualized
Per Share Distribution Rate
------------- -----------------
$13.01 (NAV) 5.35%
$12.13 (AMEX) 5.74%
For your convenience, we have summarized the period's prevailing economic and
market conditions and outlined the investment strategy employed by the Fund
during this time. A detailed summary of performance and current holdings for the
Fund can be found in the appropriate sections that follow in the quarterly
report.
Market and Economic Overview
The past year, and certainly the most recent quarter, has been interesting for
the municipal bond market. This year has been characterized by low inflation,
somewhat weaker U.S economic growth, and a modest supply of new issue volume. On
the surface, you would think these conditions would result in a quiet and
uneventful bond market. However, the reality was quite different. The period
from June through December 1995 saw an extension of the year's bond market
rally, while the period of January through May 1996 witnessed a meaningful rise
in interest rates and a corresponding decline in the bond market.
In our view, the catalyst for this increased bond market volatility came
primarily from the U.S. government securities market. By the end of 1995, U.S.
Treasuries were driven to extremely low interest rates through purchases by
foreign central banks, leveraged hedge funds, and, in some cases, equity fund
managers seeking investment opportunities outside the stock market. Interest
rates have risen this year because many large investors gradually reversed their
positions as the 1995 year-end bond market euphoria began to fade. More
recently, long municipal bond yields have approached 6% plus, and long-term U.S.
securities are yielding approximately 7%. This is the buying opportunity we have
been waiting for, and we will begin to become more aggressive at today's lower
bond prices.
1
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California Economic Highlights
Throughout 1996, the California economy has continued to show signs of solid
economic growth, especially as measured by strong state employment gains. It is
important to note that there has been a fundamental shift in employment patterns
in California. Jobs that were lost over the past six years have been replaced,
but in a surprising way. Large job layoffs in the aerospace and defense
industries, were offset by significant job gains in the import, export and
transportation industries. Furthermore, business services employment such as
computer software companies have also grown significantly. California has been
able to add manufacturing jobs at a time when the U.S. has experienced a net
loss in manufacturing jobs. In our view, employment patterns in California
indicate the state now has a diversified and vibrant economy which should prove
to be beneficial for California's counties and local communities as well.
Fund Strategy Update
The Greenwich Street California Municipal Fund was well-positioned for the rally
that occurred in 1995 with lower coupon discount bonds being our key position.
However, when the market continued to rally past levels that we believed to be
its maximum potential upside, we shortened our maturities, raised coupons,
increased our cash position and became more conservative in late fall 1995. The
Fund's conservative investment philosophy remained the same as interest rates
rose during the first quarter of 1996. However, we have become more positive
about the municipal bond market's prospects as both taxable and tax-exempt
yields have retreated by more than 1% in recent months. In anticipation of lower
long-term interest rates, we have recently lowered our cash position, slightly
lengthened the Portfolio's maturity, and emphasized more high-grade discounts
than we had earlier in the quarter.
In light of encouraging economic developments within the California economy, we
have reviewed the Fund's investment posture. Where the Fund once avoided general
obligation bonds as well as bonds that rely on state budget appropriations to
service their debt, these types of issues have begun to be included in the
portfolio, assuming they meet our strict investment criteria. However, despite
the dramatic turnaround in California's economy, we still favor revenue bonds
backed by essential services such as water and sewer, and transportation
projects. Furthermore, a percentage of the Fund's portfolio is now invested in
insured securities issued by local community districts and redevelopment
agencies in California.
As of May 31, 1996, over 94% of the Fund's holdings were rated investment grade
(BBB/Baa and higher) by Standard and Poor's Corporation or Moody's Investors
Service Inc., two major credit reporting and bond rating agencies. The Fund's
holdings are primarily concentrated in the following sectors: hospital (16.2%),
water and sewer (14.3%), education (12.8%), tax allocation/redevelopment
agencies (11.49%), and transportation (9.9%). The average weighted maturity of
the Greenwich Street California Municipal Fund was 24 years as of May 31, 1996.
2
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In closing, we believe many investors may have become too pessimistic about the
municipal bond market's prospects over the near term. If the economic and
inflation numbers stay moderate, we expect a gradual decline in long-term
interest rates from today's levels. Because of our expectations, we believe
today's municipal bond market represents fair value, and the second half of 1996
should be a more positive environment for municipal bond investors than 1996 has
been so far.
Thank you for investing in the Greenwich Street California Municipal Fund. We
look forward to continuing to help you achieve your financial goals.
Sincerely,
/s/Heath B. McLendon /s/Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman and Vice President and
Chief Executive Officer Investment Officer
June 28, 1996
3
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Greenwich Street California Municipal Fund Inc.
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Schedule of Investments (unaudited) May 31, 1996
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FACE
AMOUNT RATING SECURITY VALUE
================================================================================
LONG-TERM INVESTMENTS -- 97.7%
Education -- 12.8%
California Education Facility Authority:
$2,100,000 A1* Loyola Marymount University, 5.750% due 10/1/24 $2,037,000
2,000,000 A* Pooled College & University, 5.600% due 12/1/14 1,877,500
2,000,000 A* Southwestern University, 6.700% due 11/1/24 2,090,000
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6,004,500
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General Obligation -- 3.7%
1,730,000 AAA California State GO, FGIC-Insured, 6.000% due 8/1/19 1,714,862
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Hospital -- 16.2%
2,000,000 Aa* California Health Facility Financing Authority,
Kaiser Permanente Hospital, 5.550% due 8/15/25 1,817,500
2,000,000 AA California Statewide Community Development Authority,
COP, St. Joseph's Hospital, 6.625% due 7/1/21 2,082,500
2,000,000 AA- Fresno Health Facility Revenue, Holy Cross Health
System, 5.625% due 12/1/15 1,860,000
1,785,000 A Torrence Hospital Revenue, Little Company of Mary
Hospital, 6.875% due 7/1/15 1,831,856
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7,591,856
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Housing -- 6.9%
1,220,000 Aa* California Housing Finance Agency Home Mortgage,
Series B, 5.700% due 2/1/25 1,145,275
2,000,000 AAA Santa Rosa Mortgage Revenue, Village Square
Apartments, FHA-Insured, 6.875% due 9/1/27 2,095,000
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3,240,275
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Miscellaneous -- 22.0%
2,100,000 Baa* Hawthorne Community Redevelopment Agency,
Tax Allocation, 6.700% due 9/1/20 2,107,875
2,000,000 BBB+ Kings County Waste Management Authority, Solid
Waste Revenue, 7.200% due 10/1/14 (a) 2,097,500
2,000,000 AAA Los Angeles Convention and Exhibition Center Authority
Lease Revenue, MBIA-Insured, 5.375% due 8/15/18 1,832,500
2,000,000 AAA Oceanside Civic Center Project, MBIA-Insured,
5.750% due 8/1/15 1,950,000
2,400,000 AAA University of California (Various CAP Projects),
MBIA-Insured, Series B, 5.550% due 9/1/10 2,355,000
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10,342,875
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See Notes to Financial Statements.
4
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Greenwich Street California Municipal Fund Inc.
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Schedule of Investments (unaudited) (continued) May 31,1996
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FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Tax Allocation -- 11.9%
$2,000,000 AAA Orange County Redevelopment Agency, Tax Allocation
Revenue, (Southwest Redevelopment Project),
AMBAC-Insured, 5.700% due 10/1/23 $ 1,890,000
2,000,000 AAA Rancho Cucamonga Redevelopment Agency, Tax
Allocation, MBIA-Insured, 5.500% due 9/1/23 1,850,000
2,000,000 AAA San Jose Redevelopment Agency, Tax Allocation,
MBIA-Insured, 5.250% due 8/1/16 1,832,500
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5,572,500
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Transportation -- 9.9%
2,000,000 AAA Los Angeles County Metropolitan Transportation
Authority, Sales Tax Allocation, MBIA-Insured,
5.625% due 7/1/18 1,905,000
20,000,000 NR San Joaquin Hills, Transportation Corridor Agency,
Senior Lien Toll, zero coupon due 1/1/26 2,750,000
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4,655,000
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Water & Sewer -- 14.3%
1,240,000 AAA Anaheim Public Finance Authority Water Utility,
(Lenain Filtration Project), FGIC-Insured,
5.250% due 10/1/19 1,120,650
2,000,000 AA California State Department of Water Revenue,
Series L, 5.500% due 12/1/23 1,845,000
2,140,000 AAA East Bay Mud, CA Wastewater System, FGIC-Insured,
5.000% due 6/1/26 1,851,100
1,000,000 AAA El Dorado, CA Irrigation District Revenue,
FGIC-Insured, 5.600% due 2/15/12 972,500
1,000,000 AAA Redding Joint Powers Financing Authority, Waste Water
Revenue, FGIC-Insured, 5.500% due 12/1/18 942,500
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6,731,750
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TOTAL LONG-TERM INVESTMENTS
(Cost -- $43,334,919) 45,853,618
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See Notes to Financial Statements.
5
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Greenwich Street California Municipal Fund Inc.
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Schedule of Investments (unaudited) (continued) May 31, 1996
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FACE
AMOUNT RATING SECURITY VALUE
================================================================================
SHORT-TERM INVESTMENTS(b) -- 2.3%
$ 200,000 VMIG 1* California Health Facility Financing, Veterans Hospital
Association, St. Joseph Health, System B,
3.400% due 7/1/13 $ 200,000
California PCFA:
300,000 VMIG 1 Recovery Revenue, Ultrapower-Malaga-A,
3.950% due 4/1/17(a) 300,000
400,000 VMIG 1* Solid Waste Disposal Revenue, Shell Oil,
3.950% due 10/1/24(a) 400,000
200,000 VMIG 1* California State PCR, Shell Oil Company,
3.400% due 10/1/11 200,000
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TOTAL SHORT-TERM INVESTMENTS
(Cost -- $1,100,000) 1,100,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $44,434,919**) $46,953,618
================================================================================
(a) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 7 for the definition of ratings and certain security descriptions.
See Notes to Financial Statements.
6
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Greenwich Street California Municipal Fund Inc.
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Ratings and Security Descriptions
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BOND RATINGS
All ratings are by Standard & Poor's Corporation ("Standard & Poor's"), except
that those identified by an asterisk (*) are rated by Moody's Investors Services
("Moody's"). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the
addition of a plus (+) or a minus (-) sign to show relative standings within the
major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest
rating within its generic category.
Aaa - Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
SHORT - TERM SECURITIES RATINGS
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
VMIG 1 -- Moody's highest rating for issues having demand feature --
variable-rate demand obligation (VRDO).
SECURITY DESCRIPTIONS
AMBAC --American Municipal Bond Assurance Corporation
CGIC --Capital Guaranty Insurance Company
COP --Certificate of Participation
FGIC --Financial Guaranty Insurance Company
FHA --Federal Housing Administration
FHLMC --Federal HomeLoan Mortgage Corporation
FLAIRS --Floating Adjustable Interest Rate Securities
FNMA --Federal National Mortgage Association
FSA --Financial Security Assurance
GIC --Guaranteed Investment Contract
GNMA --Government National Mortgage Association
GO --General Obligation
IDA --Industrial Development Agency
IDR --IndustrialDevelopment Revenue
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance Corporation
PCFA --Pollution Control Financing Authority
PCR --Pollution Control Revenue
PSFG --Permanent School Fund Guaranty
RIBS --Residual Interest Bonds
7
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Greenwich Street California Municipal Fund Inc.
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Statement of Assets and Liabilities (unaudited) May 31, 1996
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ASSETS:
Investments, at value (Cost -- $44,434,919) $46,953,618
Interest receivable 829,358
Deferred organization costs 68,000
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Total Assets 47,850,976
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LIABILITIES:
Dividends payable 106,160
Payable to bank 45,813
Management fees payable 36,434
Accrued expenses 54,698
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Total Liabilities 243,105
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Total Net Assets $47,607,871
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NET ASSETS:
Par value of capital shares $ 3,658
Capital paid in excess of par value 43,831,350
Undistributed net investment income 110,883
Accumulated net realized gain on security transactions 1,143,281
Net unrealized appreciation of investments 2,518,699
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Total Net Assets
(Equivalent to $13.01 a share on 3,658,334 shares of $0.001 par
value outstanding; 500,000,000 shares authorized) $47,607,871
================================================================================
See Notes to Financial Statements.
8
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Greenwich Street California Municipal Fund Inc.
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Statement of Operations (unaudited)
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For the Nine Months Ended May 31, 1996
INVESTMENT INCOME:
Interest $2,161,445
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EXPENSES:
Management fees (Note 2) 330,524
Audit and legal 24,436
Shareholder and system servicing fees 23,126
Amortization of deferred organization costs 15,322
Shareholder communications 11,562
Custody 2,669
Pricing service 2,500
Insurance 2,250
Directors' fees 2,247
Other 5,070
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Total Expenses 419,706
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Net Investment Income 1,741,739
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 13,180,868
Cost of securities sold (12,037,595)
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Net Realized Gain 1,143,273
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Change in Net Unrealized Appreciation of Investments:
Beginning of period 3,049,513
End of period 2,518,699
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Decrease In Net Unrealized Appreciation (530,814)
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Net Gain on Investments 612,459
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Increase in Net Assets From Operations $2,354,198
================================================================================
See Notes to Financial Statements.
9
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Greenwich Street California Municipal Fund Inc.
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Statements of Changes in Net Assets
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For the Nine Months Ended May 31, 1996 (unaudited)
and the Period Ended August 31, 1995
1996 1995(1)
================================================================================
OPERATIONS:
Net investment income $ 1,741,739 $ 2,188,446
Net realized gain 1,143,273 86,528
Increase (decrease) in net unrealized appreciation (530,814) 3,049,513
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Increase in Net Assets From Operations 2,354,198 5,324,487
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,909,652) (1,909,650)
Net realized gains (86,520) --
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Decrease in Net Assets From
Distributions To Shareholders (1,996,172) (1,909,650)
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FUND SHARE TRANSACTIONS FROM:
Net proceeds from sale of 3,658,334 shares
(less offering expenses of $65,000) -- 43,835,008
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Increase in Net Assets From
Fund Share Transactions -- 43,835,008
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Increase in Net Assets 358,026 47,249,845
NET ASSETS
Beginning of period 47,249,845 --
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End of period* $ 47,607,871 $ 47,249,845
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* Includes undistributed net investment income of: $ 110,883 $ 278,796
================================================================================
(1) For the period from September 23, 1994 (commencement of operations) to
August 31, 1995.
See Notes to Financial Statements.
10
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Greenwich Street California Municipal Fund Inc.
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Notes to Financial Statements (unaudited)
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1. SIGNIFICANT ACCOUNTING POLICIES
The Greenwich Street California Municipal Fund Inc. ("Fund"), a Maryland
corporation, is registered under the Investment Company Act of 1940, as amended,
as a non-diversified, closed-end management investment company. The Fund
commenced operations on September 23, 1994 after completion of the initial
public offering of 3,625,000 shares of its common stock and the issuance of
8,334 shares to related parties at $12.00 per share. The underwriters' option
for the purchase of 25,000 additional shares was exercised on November 22, 1994.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) securities are
valued at the mean between bid and ask prices provided by an independent pricing
service that are based on transactions in municipal obligations, quotations from
municipal bond dealers, market transactions in comparable securities and various
relationships between securities; (c) securities maturing within 60 days or less
are valued at cost plus accreted discount, or minus amortized premium, which
approximates market value; (d) gains or losses on the sale of securities are
calculated by using the specific identification method; (e) interest income,
adjusted for amortization of premium and accretion of original issue discount,
is recorded on the accrual basis; market discount is recognized upon the
disposition of the security; (f) dividends and distributions to shareholders are
recorded on the ex-dividend date; (g) the Fund intends to comply with the
applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and make distributions of taxable
income sufficient to relieve it from substantially all Federal income and excise
taxes; and (h) estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from operations when
financial statements are prepared. Changes in the economic environment,
financial markets and any other parameters used in determining these estimates
could cause actual results to differ.
In addition, organization costs have been deferred and are being amortized
on a straight-line basis over a five year period, beginning with the
commencement of the Fund's operations in September 1994.
11
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Greenwich Street California Municipal Fund Inc.
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Notes to Financial Statements (unaudited) (continued)
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2. MANAGEMENT AGREEMENT AND AFFILIATED TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), through its Greenwich
Street Advisors division ("GSA"), a subsidiary of Smith Barney Holdings Inc.,
acts as investment manager to the Fund. As compensation for GSA's services, the
Fund pays SBMFM a fee calculated at an annual rate of 0.90% of the Fund's
average daily net assets; this fee is calculated daily and paid monthly.
All officers and two Directors of the Fund are employees of Smith Barney
Inc.
3. INVESTMENT TRANSACTIONS
For the period ended May 31, 1996 the total aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were $12,170,442 and $13,180,868, respectively.
At May 31, 1996, aggregate gross unrealized appreciation for all securities
in which there was an excess of market value over tax cost amounted to
approximately $2,720,337 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value amounted
to approximately $201,638 or a net unrealized appreciation of $2,518,699.
12
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Greenwich Street California Municipal Fund Inc.
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Financial Highlights
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For a share of capital stock outstanding throughout each period:
1996(1) 1995(2)(3)
================================================================================
Net Asset Value, Beginning of Period $12.92 $12.00
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Income From Operations:
Net investment income 0.48 0.60*
Net realized and unrealized gain 0.15 0.84
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Total Income From Operations 0.63 1.44
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Less Distributions From:
Net investment income (0.52) (0.52)
Net realized gains (0.02) --
- --------------------------------------------------------------------------------
Total Distributions (0.54) (0.52)
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Net Asset Value, End of Period $13.01 $12.92
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Total Return++ 5.23% 12.24%
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Net Assets, End of Period (000s) $47,608 $47,250
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Ratios to Average Net Assets+:
Expenses 1.14% 1.02%*
Net investment income 4.75 5.16
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Portfolio Turnover Rate 25.10% 7.32%
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Market Price at End of Period $12.13 $11.50
================================================================================
(1)For the nine months ended May 31, 1996 (unaudited).
(2)Based on the weighted average shares outstanding for the period.
(3)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 ended
August 31, 1995. If such fees were not waived, the per share effect on net
investment income would have been a decrease of $0.01, and the expense ratio
would have been 1.14%, annualized.
13
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Greenwich Street California Municipal Fund Inc.
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Financial Data (unaudited)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout the period:
AMEX Net Asset Income Reinvestment
Period Closing Price Value Declared Price
================================================================================
December 27, 1994 $10.875 $11.48 $0.05800 $10.27
January 24, 1995 11.125 11.75 0.05800 11.27
February 21, 1995 11.625 12.46 0.05800 11.77
March 21, 1995 11.625 12.71 0.05800 11.77
April 25, 1995 11.500 12.87 0.05800 11.65
May 23, 1995 11.750 13.03 0.05800 11.77
June 23, 1995 11.750 12.81 0.05800 12.02
July 28, 1995 11.750 13.08 0.05800 11.95
August 25, 1995 11.625 12.70 0.05800 11.65
September 29, 1995 11.500 12.99 0.05800 11.65
October 27, 1995 11.625 13.26 0.05800 11.77
November 24, 1995 11.875 13.49 0.05800 12.02
December 29, 1995 12.000 13.80 0.05800 12.02
December 29, 1995+ 12.000 13.80 0.02365 12.02
January 26, 1996 12.063 13.75 0.05800 12.14
February 23, 1996 12.000 13.67 0.05800 12.05
March 29, 1996 12.000 13.22 0.05800 12.05
April 26, 1996 12.125 13.08 0.05800 12.10
May 31, 1996 12.125 13.01 0.05800 12.03
================================================================================
+ Capital gain distribution.
14
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Greenwich Street California Municipal Fund Inc.
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Dividend Reinvestment Plan
- --------------------------------------------------------------------------------
Pursuant to the Fund's Dividend Reinvestment Plan ("Plan"), all
distributions are automatically reinvested by First Data Investor Services
Group, Inc. (formerly known as "The Shareholders Services Group, Inc.") as plan
agent ("Plan Agent"), in additional shares of its Common Stock ("Common Shares")
as provided below unless a shareholder elects to receive cash.
Distributions with respect to Common Shares registered in the name of a
broker-dealer or other nominee (i.e., in "Street Name") are reinvested by the
broker or nominee in additional Common Shares under the Plan, unless the service
is not provided by the broker or nominee. Investors who own Common Shares
registered in Street Name should consult their broker-dealer for details. All
distributions to shareholders who do not participate in the Plan are paid by
check, mailed directly to the record holder by the Plan Agent.
If the Fund declares a distribution payable either in Common Shares or in
cash, nonparticipants in the Plan receive cash, and Plan participants receive
the equivalent in Common Shares valued in the following manner: whenever the
market price is equal to or exceeds the net asset value per share at the time
Common Shares are valued for the purpose of determining the number of Common
Shares equivalent to the cash distribution, participants are issued Common
Shares valued at the greater of (1) the net asset value most recently determined
or (2) 95% of the then current market price of the Common Shares.
If the net asset value of the Common Shares at the time of valuation
exceeds the market price of the Common Shares, or if the Fund declares a
distribution payable only in cash, the Plan Agent buys Common Shares in the open
market, on the American Stock Exchange or elsewhere, for the participants'
accounts. The Plan Agent applies all cash received as a distribution to purchase
Common Shares on the open market as soon as practicable after the payment date
of the distribution, but in no event later than 30 days after such date, except
when necessary to comply with applicable provisions of the Federal securities
laws. If following the commencement of purchases and before the Plan Agent has
completed its purchases the market price exceeds the net asset value of the
Common Shares, the Plan Agent is permitted to cease purchasing shares on the
open market and the Fund may issue the remaining shares at a price equal to the
greater of (a) net asset value or (b) 95% of the then current market price. In a
case where the Plan Agent has terminated open market purchases and the Fund has
issued the remaining shares, the number of shares received by the participant in
respect of the cash dividend or distribution will be based on the weighted
average of prices paid for shares purchased in the open market and the price at
which the Fund issues the remaining shares.
15
<PAGE>
Greenwich Street California Municipal Fund Inc.
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (continued)
- --------------------------------------------------------------------------------
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent which must be received at least ten business days prior to the
distribution record date to become effective for that distribution. Shares in
the account of each Plan participant are held by the Plan Agent in
non-certificated form in the name of the Plan Agent or participant. When a
participant withdraws from the Plan or upon termination of the Plan as provided
below, certificates for whole Fund shares credited to his or her account under
the Plan are issued and a cash payment is made for any fraction of a Fund share
credited to such account.
The automatic reinvestment of distributions does not relieve participants
of any Federal income tax that may be payable on such distributions.
The Fund does not charge participants for reinvesting distributions. Any
Plan Agent's fees for the handling of reinvestment of distributions under the
Plan are paid by the Fund. There are no brokerage charges with respect to Common
Shares issued directly by the Fund as a result of distributions payable either
in stock or in cash. However, each participant pays a pro-rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to amend the Plan as
applied to any distribution paid subsequent to written notice of the change sent
to all shareholders of the Fund at least 90 days before the record date for the
distribution. The Plan also may be terminated by the Fund or the Plan Agent by
at least 30 days' written notice to all shareholders of the Fund. All
correspondence concerning the Plan should be directed to the Plan Agent at First
Data Investor Services Group, Inc. P.O. Box 1376, Boston, Massachusetts 02104.
- --------------------------------------------------------------------------------
Purchase of Shares on the Open Market (unaudited)
- --------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase at
market prices shares of its common stock in the open market.
16
<PAGE>
Greenwich Street SMITH BARNEY
California ------------
Municipal Fund Inc. A Member of the TravelersGroup [Logo]
Directors
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P. Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
C. Richard Youngdahl
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Joseph P. Deane
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Smith Barney Mutual
Funds Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 1376
Boston, MA 02104
This report is submitted for the general
information of the shareholders of
Greenwich Street California Municipal
Fund Inc. It is not authorized for distribu-
tion to prospective investors unless
accompanied or preceded by a current
Prospectus for the Fund, which contains
information concerning the Fund's
investment policies and expenses as well
as other pertinent information.
Greenwich Street
California Municipal
Fund Inc.
388 Greenwich Street
New York, New York 10013
FD0950 7/96
