- --------------------------------------------------------------------------------
Greenwich Street
-------------------------------------------------
CALIFORNIA
MUNICIPAL FUND INC.
Semi-Annual Report
February 28, 1999
- --------------------------------------------------------------------------------
<PAGE>
Greenwich Street California [PHOTO OMITTED] [PHOTO OMITTED]
Municipal Fund HEATH B. MCLENDON JOSEPH P. DEANE
Inc. Chairman Vice President
Dear Shareholder:
We are pleased to provide the semi-annual report for the Greenwich Street
California Municipal Fund, Inc. ("Fund") for the period ended February 28, 1999.
We hope you find this report to be useful and informative. Over the six-months
covered by this report, the Fund distributed income dividends totaling $0.31 per
share. The table below details the annualized distribution rates and the
six-month total returns based on the Fund's February 28, 1999 net asset value
("NAV") per share and its American Stock Exchange ("AMEX") closing price:
Annualized Six-Month
Price Per Share Distribution Rate* Total Return
--------------- ------------------ ------------
$14.35 (NAV) 4.10% 2.39%
$13.00 (AMEX) 4.52% 2.53%
In comparison, the Fund's Lipper Inc. peer group average posted a total return
on NAV of 2.52% for the same time period. (Lipper is a major fund-tracking
organization.)
Investment Strategy
During the past six months, the Fund focused on hospital bonds (20.3%), water
and sewer bonds (19.8%) and transportation bonds (18.2%) because we believe they
offered good relative values. At the end of February, the Fund's weighted
average maturity was roughly 23.3 years.
In addition, as of February 28, 1999, about 95.7% of the Fund's holdings were
rated investment grade (BBB/Baa and higher) by either Standard & Poor's
Corporation or Moody's Investors Service Inc., with approximately 41.3% of the
Fund invested in AAA bonds, the highest possible rating.
- ----------
* This distribution rate assumes a current monthly income dividend rate of
$0.049 per share.
- --------------------------------------------------------------------------------
Greenwich Street California Municipal Fund Inc. 1
<PAGE>
California Economic Highlights
We are very optimistic about the prospects for California's economy. Throughout
1998, we saw solid employment growth led primarily by high-tech manufacturing
and construction. These gains in turn caused personal income levels to rise in
the Golden State as well as higher commercial and residential real estate
prices. Even as severe recessions wreaked havoc on many Asian economies
(California's largest export destinations) during the reporting period, overall
exports remained strong.
We think that all of these positive factors should exert a favorable influence
on California's future growth potential. California's economy is currently
robust and well diversified and good economic conditions should enable the
Golden State to maintain its leadership role in the U.S. economy for many years
to come.
Municipal Bond Market Update and Outlook
During the Fund's reporting period, the bond markets were not dull. Beginning
with the Asian crisis, Russia's default and the problems with a major hedge fund
we have certainly seen some turbulence. The bottom line though is that inflation
is near historic lows, the U.S. economy is quite solid and the Federal Reserve
Board ("Fed") has adopted a more accommodative stance for short-term rates. It
all adds up to a positive backdrop for bonds.
In our view, the large drop in rates last year in the U.S. government bond
market was not caused by economic fundamentals but primarily the unwinding of
huge short positions by major hedge funds. In fact, 1998 was the first year in
recent memory where the economic fundamentals seemed to mean so little to the
bond market.
Over the short term, we do not think that future Fed monetary policy will be
influenced by conditions in the financial markets. We think that any future Fed
decisions on rates will be driven by the state of the U.S. economy. Unless there
are any signs of inflationary pressures, we do not anticipate any Fed tightening
in the coming months. However, if the U.S. economy begins to re-accelerate and
labor markets continue to tighten, the Fed may raise rates in the second half of
1999.
Low inflation and a benign Fed monetary policy are favorable for the bond
markets. We think these positive conditions should be with us in the coming
months. As you get closer to a presidential election year, the economy may
pick-up. At that point we may take a more conservative
- --------------------------------------------------------------------------------
2 1999 Semi-Annual Report to Shareholders
<PAGE>
stance in the Fund than we currently follow. We believe that the economy should
be our guide, because it will be the key factor affecting future Fed monetary
policy.
In rallies, municipal bonds generally underperform versus U.S. government bonds
and corporate bonds. That happened in July, August, September and October of
last year. However, with long-term municipal bonds yielding roughly 94% of
long-term U.S. Treasury bonds, we think that municipal bonds are very attractive
on a relative basis. If rates do rise, the volume of new issues and refunding
deals in the municipal bond market will decrease, causing more favorable supply
and demand conditions, providing support for municipal bond prices and leading
to outperformance versus long-term U.S. Treasuries.
In closing, thank you for investing in the Greenwich Street California
Municipals Fund Inc. We look forward to continuing to help you pursue your
financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President
April 6, 1999
- --------------------------------------------------------------------------------
Greenwich Street California Municipal Fund Inc. 3
<PAGE>
- --------------------------------------------------------------------------------
Take Advantage of the Fund's Dividend Reinvestment Plan!
Did you know that Fund investors who reinvest their dividends are taking
advantage of one of the most effective wealth-building tools available today?
Systematic investments put time to work for you through the strength of
compounding.
As an investor in the Fund, you can participate in its Dividend Reinvestment
Plan ("Plan"), a convenient, simple and efficient way to reinvest your dividends
and capital gains, if any, in additional shares of the Fund. Below is a short
summary of how the Plan works.
Plan Summary
If you are a Plan participant who has not elected to receive your dividends in
the form of a cash payment, then your dividend and capital gain distributions
will be reinvested automatically in additional shares of the Fund.
The number of common stock shares in the Fund you will receive in lieu of a cash
dividend is determined in the following manner. If the market price of the
common stock is equal to or exceeds the net asset value per share ("NAV") on the
determination date, you will be issued shares by the Fund at a price reflecting
the NAV, or 95% of the market price, whichever is greater.
If the market price is less than the NAV at the time of valuation (the close of
business on the determination date), or if the Fund declares a dividend or
capital gains distribution payable only in cash, the Plan Agent (First Data
Investors Services Group Inc.) will buy common stock for your account in the
open market.
If the Plan Agent begins to purchase additional shares in the open market and
the market price of the shares subsequently rises above the previously
determined NAV before the purchases are completed, the Plan Agent will attempt
to terminate purchases and have the Fund issue the remaining dividend or
distribution in shares at the greater of the previously determined NAV or 95% of
the market price. In that case, the number of Fund shares you receive 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.
Restated Plan Adopted
A more complete description of the current Plan appears in the section of this
report beginning on page 17. The descriptions herein are based on a restated
version of the Plan, which was recently adopted to reflect current practices of
the Plan Agent and for the purpose of standardizing the terms among all
closed-end mutual funds managed by SSBCFund Management Inc., formerly known as
Mutual Management Corp.
To find out more detailed information about the Plan and about how you can
participate, please call First Data Investors Services Group Inc. at (800)
331-1710.
- --------------------------------------------------------------------------------
4 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) February 28, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT RATING (a) SECURITY VALUE
================================================================================
Education -- 8.6%
California Educational Facility Authority:
$ 2,100,000 A1* Loyola Marymount University, 5.750% due 10/1/24 $ 2,212,875
2,000,000 A3* Southwestern University, 6.700% due 11/1/24 2,255,000
- --------------------------------------------------------------------------------
4,467,875
- --------------------------------------------------------------------------------
General Obligation -- 3.3%
1,715,000 AAA California State GO, AMBAC-Insured, 5.000%
due 10/1/18 1,721,431
- --------------------------------------------------------------------------------
Hospital -- 20.3%
California Health Facility Financing Authority:
1,930,000 NR Daniel Freeman Hospital, (Pre-Refunded --
Escrowed with U.S. government securities to
5/1/05 Call @ 102), 6.500% due 5/1/20(b) 2,238,800
2,000,000 A Kaiser Permanente Hospital, 5.550% due 8/15/25 2,017,500
100,000 A-1+ Sutter Health, Series B, 3.100% due 3/1/20(c) 100,000
2,000,000 AA California Statewide Community Development
Authority, COP, St. Joseph's Hospital,
(Pre-Refunded -- Escrowed with state & local
government securities to 7/1/04 Call @ 102),
6.625% due 7/1/21(d) 2,312,500
2,000,000 AA Fresno Health Facility Revenue, Holy Cross Health
System, 5.625% due 12/1/15 2,090,000
1,665,000 A Torrence Hospital Revenue, Little Company of Mary
Hospital, (Escrowed to Maturity with U.S.
government securities), 6.875% due 7/1/15(b) 1,794,038
- --------------------------------------------------------------------------------
10,552,838
- --------------------------------------------------------------------------------
Housing -- 7.1%
1,400,000 Aa2* California HFA Home Mortgage, Series E, FHA-Insured,
6.375% due 8/1/27(d) 1,487,500
2,000,000 AAA Santa Rosa Mortgage Revenue, Village Square
Apartments, FHA-Insured, 6.875% due 9/1/27 2,180,000
- --------------------------------------------------------------------------------
3,667,500
- --------------------------------------------------------------------------------
Miscellaneous -- 10.4%
2,000,000 AAA Los Angeles Convention and Exhibition Center
Authority Lease Revenue, Series A, MBIA-Insured,
5.375% due 8/15/18 2,060,000
1,675,000 AAA Orange County 1996 Recovery, COP, Series A,
MBIA-Insured, 6.000% due 7/1/26 1,852,969
1,505,000 AAA Pomona California, Public Financing Authority
Revenue, (Pomona Redevelopment Project),
MBIA-Insured, 5.000% due 2/1/18 1,506,881
- --------------------------------------------------------------------------------
5,419,850
- --------------------------------------------------------------------------------
Tax Allocation -- 12.3%
2,100,000 Baa* Hawthorne Community Redevelopment Agency,
Tax Allocation, (Pre-Refunded -- Escrowed with
U.S. government securities to 9/1/04 Call @ 102),
6.700% due 9/1/20(b) 2,283,750
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Greenwich Street California Municipal Fund Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) February 28, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT RATING (a) SECURITY VALUE
================================================================================
Tax Allocation -- 12.3% (continued)
$ 2,000,000 AAA Rancho Cucamonga Redevelopment Agency, Tax
Allocation, MBIA-Insured, 5.250% due 9/1/26 $ 2,035,000
2,000,000 AAA San Jose Redevelopment Agency, Tax Allocation,
MBIA-Insured, 5.250% due 8/1/16 2,057,500
- --------------------------------------------------------------------------------
6,376,250
- --------------------------------------------------------------------------------
Transportation -- 18.2%
2,000,000 BBB- Foothill Eastern Transportation, California
Toll Revenue, Series A, 6.000% due 1/1/34(d) 2,180,000
2,000,000 AAA Los Angeles County Metropolitan Transportation
Authority, Sales Tax Allocation, Series A,
MBIA-Insured, 5.625% due 7/1/18 2,117,500
20,000,000 AAA San Joaquin Hills Transportation Corridor Agency,
Sr. Lien Toll, (Escrowed to Maturity with state
& local government securities), zero coupon
due 1/1/26 5,175,000
- --------------------------------------------------------------------------------
9,472,500
- --------------------------------------------------------------------------------
Water and Sewer -- 19.8%
1,240,000 AAA Anaheim Public Finance Authority, Water Utility,
(Lenain Filtration Project), FGIC-Insured,
5.250% due 10/1/19 1,266,350
2,000,000 AA California State Department of Water Revenue,
Series L, 5.500% due 12/1/23 2,072,500
2,140,000 AAA East Bay Municipal Wastewater System, FGIC-Insured,
5.000% due 6/1/26 2,121,275
2,000,000 BBB Kings County Waste Management Authority, Solid
Waste Revenue, 7.200% due 10/1/14(e) 2,315,000
1,000,000 AAA Redding Joint Powers Financing Authority,
Wastewater Revenue, Series A, FGIC-Insured,
5.500% due 12/1/18 1,043,750
1,500,000 AAA San Diego PCFA Sewer Revenue, FGIC-Insured,
5.000% due 5/15/20 1,496,250
- --------------------------------------------------------------------------------
10,315,125
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $43,301,391**) $51,993,369
================================================================================
(a) All ratings are by Standard & Poor's Services, except those which are
indentified by an asterisk (*), which are rated by Moody's Investors
Service Inc.
(b) Pre-Refunded bonds escrowed with U.S. government securities and bonds
escrowed to maturity with U.S. government securities are considered by the
Manager to be triple-A rated even if the issuer has not applied for new
ratings.
(c) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(d) Security segregated by Custodian for open purchase commitments.
(e) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
** Aggregate cost for federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6 1999 Semi-Annual Report to Shareholders
<PAGE>
PAGES 7-8 MISSING
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) February 28, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $43,301,391) $51,993,369
Interest receivable 676,759
Deferred organization costs 12,024
- -------------------------------------------------------------------------------
Total Assets 52,682,152
- -------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 84,080
Management fees payable 34,695
Payable to bank 30,485
Accrued expenses 38,022
- -------------------------------------------------------------------------------
Total Liabilities 187,282
- -------------------------------------------------------------------------------
Total Net Assets $52,494,870
================================================================================
NET ASSETS:
Par value of capital shares $ 3,658
Capital paid in excess of par value 43,831,350
Overdistributed net investment income (38,686)
Accumulated net realized gain from security transactions 6,570
Net unrealized appreciation of investments 8,691,978
- -------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $14.35 per share on 3,658,334 shares of $0.001
par value outstanding; 500,000,000 shares authorized) $52,494,870
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Greenwich Street California Municipal Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended February 28,1999
INVESTMENT INCOME:
Interest $1,381,562
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 233,017
Audit and legal 21,578
Shareholder communications 18,636
Shareholder and system servicing fees 18,514
Amortization of deferred organization costs (Note 1) 10,010
Directors' fees 1,962
Pricing services fees 1,765
Registration fees 1,471
Custody 1,294
Other 1,717
- --------------------------------------------------------------------------------
Total Expenses 309,964
- --------------------------------------------------------------------------------
Net Investment Income 1,071,598
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securitites):
Proceeds from sales 496,310
Cost of securities sold 489,743
- --------------------------------------------------------------------------------
Net Realized Gain 6,567
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of Period 8,615,361
End of Period 8,691,978
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 76,617
- --------------------------------------------------------------------------------
Net Gain on Investments 83,184
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $1,154,782
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended February 28, 1999 (unaudited)
and the Year Ended August 31, 1998
1999 1998
================================================================================
OPERATIONS:
Net investment income $ 1,071,598 $ 2,194,956
Net realized gain 6,567 148,236
Increase in net unrealized appreciation 76,617 2,791,493
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,154,782 5,134,685
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (1,148,717) (2,173,047)
Net realized gains (84,873) (373,150)
- -------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,233,590) (2,546,197)
- -------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (78,808) 2,588,488
NET ASSETS:
Beginning of period 52,573,678 49,985,190
- -------------------------------------------------------------------------------
End of period* $ 52,494,870 $ 52,573,678
================================================================================
* Includes undistributed (overdistributed) net
investment income of: $ (38,686) $ 38,433
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Greenwich Street California Municipal Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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 significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between the quoted bid and 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 for
which market quotations are not available will be valued in good faith at fair
value by or under the direction of the Board of Directors; (d) securities
maturing within 60 days are valued at cost plus accreted discount, or minus
amortized premium, which approximates value; (e) gains or losses on the sale of
securities are calculated by using the specific identification method; (f)
interest income, adjusted for amortization of premium and accretion of original
issue discount, is recorded on an accrual basis; market discount is recognized
upon the disposition of the security; (g) dividends and distributions to
shareholders are recorded on the ex-dividend date; (h) the Fund intends to
comply with the applicable provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (i) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles; and (j) estimates and assumptions are
required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in the
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ.
In addition, organization costs have been deferred and are being amortized on a
straight-line basis over a five year period, beginning at the commencement of
the Fund's operations in September 1994.
2. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax and from designated
state income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
- --------------------------------------------------------------------------------
12 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Management Agreement and Affiliated Transactions
SSBCFund Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
manager to the Fund. The Fund pays SSBC 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 one director of the Fund are employees of Salomon Smith Barney
Inc., another subsidiary of SSBH.
4. Investments
For the six months ended February 28, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases --
- --------------------------------------------------------------------------------
Sales $496,310
================================================================================
At February 28, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $8,691,978
Gross unrealized depreciation --
- --------------------------------------------------------------------------------
Net unrealized appreciation $8,691,978
================================================================================
5. Portfolio Concentration
Since the Fund invests primarily in obligations of issuers within California, it
is subject to possible concentration risks associated with economic, political,
or legal developments or industrial or regional matters specifically affecting
California.
- --------------------------------------------------------------------------------
Greenwich Street California Municipal Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
6. Futures Contracts
Initial margin deposits are made upon entering into futures contracts and are
recognized as assets. Securities equal to the initial margin amount are
segregated by the custodian in the name of the broker. Additional securities are
also segregated up to the current market value of the futures contracts. During
the period the futures contract is open, changes in the value of the contract
are recognized as unrealized gains or losses by "marking to market" on a daily
basis to reflect the market value of the contract at the end of each day's
trading. Variation margin payments are received or made and recognized as assets
due from or liabilities due to broker, depending upon whether unrealized gains
or losses are incurred. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the proceeds from (or cost of) the
closing transactions and the Fund's basis in the contract.
The Fund enters into such contracts to hedge a portion of its portfolio. The
Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At February 28, 1999, the Fund had no open futures contracts.
- --------------------------------------------------------------------------------
14 1999 Semi-Annual Report to Shareholders
<PAGE>
PAGES 15-18 MISSING
<PAGE>
- --------------------------------------------------------------------------------
Greenwich Street
-------------------------------------------------
CALIFORNIA
MUNICIPAL FUND INC.
- --------------------------------------------------------------------------------
DIRECTORS
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
OFFICERS
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Joseph P. Deane
Vice President
Paul A. Brook
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
SSBC Fund Management Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 8030
Boston, MA 02266
This report is submitted for the general information of the shareholders of
Greenwich Street California Municipal Fund Inc. It is not authorized for
distribution to prospective investors unless accompanied or preceded by a
current Prospectus for the Fund, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent information.
GREENWICH STREET
CALIFORNIA MUNICIPAL FUND INC.
388 Greenwich Street
New York, New York 10013
FD01108 4/99
