UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-3970
Smith Barney California Municipals Fund Inc.
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: February 29
Date of reporting period: February 29, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Annual Report to Stockholders is filed herewith.
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SMITH BARNEY
CALIFORNIA MUNICIPALS
FUND INC.
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CLASSIC SERIES | ANNUAL REPORT | FEBRUARY 29, 2004
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed.(R) is a registered
service mark of Citigroup Global Markets Inc.
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NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
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[PHOTO OMITTED]
JOSEPH P. DEANE
PORTFOLIO MANAGER
[LOGO] Classic Series
Annual Report o February 29, 2004
SMITH BARNEY CALIFORNIA
MUNICIPALS FUND INC.
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JOSEPH P. DEANE
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Joseph P. Deane has more than 34 years of securities business experience and has
managed the Fund since its inception.
Education: BA in History from Iona College
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FUND OBJECTIVE
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The fund seeks to provide California investors with as high a level of current
income exempt from federal income taxes and California state personal income
taxes as is consistent with prudent investment management and the preservation
of capital.* The fund invests at least 80% of its assets in California municipal
securities. California municipal securities include securities issued by the
state of California and certain other municipal issuers, political subdivisions,
agencies and public authorities that pay interest that is exempt from California
personal income taxes.
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FUND FACTS
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FUND INCEPTION
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April 9, 1984
MANAGER INVESTMENT
INDUSTRY EXPERIENCE
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34 Years
* Certain investors may be subject to the federal Alternative Minimum Tax,
and state and local taxes may apply. Capital gains, if any, are fully
taxable. Please consult your personal tax advisor.
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What's Inside
Letter from the Chairman .................................................. 1
Manager Overview .......................................................... 2
Fund Performance .......................................................... 5
Historical Performance .................................................... 6
Schedule of Investments ................................................... 7
Statement of Assets and Liabilities ....................................... 16
Statement of Operations ................................................... 17
Statements of Changes in Net Assets ....................................... 18
Notes to Financial Statements ............................................. 19
Financial Highlights ...................................................... 24
Independent Auditors' Report .............................................. 27
Additional Information .................................................... 28
Tax Information ........................................................... 31
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LETTER FROM THE CHAIRMAN
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[PHOTO OMITTED]
R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
Dear Shareholder,
The U.S. economy's quarterly pace of growth picked up considerably towards the
end of calendar year 2003.(i) This stronger-than-expected second- and
third-quarter economic data exacerbated concerns among bond investors that
inflation and interest rates might rise sooner than previously anticipated,
causing bond prices to fall. However, many of these concerns were tempered
somewhat by tepid employment results and comments from the Fed, which indicated
it would maintain interest rates at historical lows. Although the bond markets
shifted course throughout the year, municipal bonds collectively finished in
positive territory on a total return basis.
Please read on for a more detailed look at prevailing economic and market
conditions during the fund's fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected fund
performance.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The regulators appear to be
examining, among other things, the fund's response to market timing and
shareholder exchange activity, including compliance with prospectus disclosure
related to these subjects. The fund has been informed that the Adviser and its
affiliates are responding to those information requests, but are not in a
position to predict the outcome of these requests and investigations.
As always, thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
March 17, 2004
1 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
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MANAGER OVERVIEW
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PERFORMANCE SNAPSHOT
AS OF FEBRUARY 29, 2004
(excluding sales charges)
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6 Months 12 Months
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Class A Shares 3.94% 5.48%
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Lehman Brothers Municipal Bond Index 6.52% 6.30%
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Lipper California Municipal Debt Funds
Category Average 6.90% 5.87%
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The performance shown represents past performance. Past performance is no
guarantee of future results and current performance may be higher or lower than
the performance shown above. Principal value and investment returns will
fluctuate and investors' shares, when redeemed may be worth more or less than
their original cost. To obtain performance data current to the most recent
month-end, please visit our website at www.smithbarneymutualfunds.com.
Class A share returns assume the reinvestment of income dividends and capital
gains distributions at net asset value and the deduction of all fund expenses.
Returns have not been adjusted to include sales charges that may apply when
shares are purchased or the deduction of taxes that a shareholder would pay on
fund distributions. Excluding sales charges, Class B shares returned 3.67% and
Class L shares returned 3.66% over the six months ended February 29, 2004.
Excluding sales charges, Class B shares returned 4.94% and Class L shares
returned 4.91% over the 12 months ended February 29, 2004.
All index performance reflects no deduction for fees, expenses or taxes. The
Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond
market with maturities of at least one year. Please note that an investor cannot
invest directly in an index.
Lipper, Inc. is a major independent mutual-fund tracking organization. Returns
are based on the period ended February 29, 2004, calculated among the 128 funds
for both the six-month and 12-month periods in the fund's Lipper category
including the reinvestment of dividends and capital gains, if any, and excluding
sales charges.
Certain investors may be subject to the federal Alternative Minimum Tax, and
state and local taxes may apply. Capital gains, if any, are fully taxable.
Please consult your personal tax adviser.
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Performance Review
For the 12 months ended February 29, 2004, Class A shares of the Smith Barney
California Municipals Fund Inc., excluding sales charges, returned 5.48%. These
shares underperformed both the fund's benchmark, the unmanaged Lehman Brothers
Municipal Bond Index(ii), which returned 6.30% as well as the fund's Lipper
California municipal debt funds category average, which returned 5.87% during
the same period.(1) Certain investors may be subject to the federal Alternative
Minimum Tax, and state and local taxes may apply. Capital gains, if any, are
fully taxable. Please consult your personal tax adviser.
Given our concerns early last year that U.S. economic growth could pick up and
interest rates might rise sooner than anticipated, we structured the fund
defensively to help mitigate the effects of a possible rise in interest rates
(which would cause bond prices to fall). Our strategy entailed focusing on bonds
with higher coupons, maintaining a lower average life than in recent years, and
maintaining a short position in U.S. Treasury futures.(iii) Although this
conservative strategy limited the fund's full participation in market rallies,
it helped reduce its overall volatility during the fund's fiscal year. Our
approach also favorably contributed to the fund's relative performance during
times when long-term bond prices were dropping, particularly early in the
summer.
Market Overview
Last spring, many states continued to struggle with budgetary concerns resulting
from lackluster tax revenues. To help boost economic activity, the Fed reduced
its target for the federal funds rate,(iv) which dropped to four-decade lows.
The prices of U.S. Treasury bonds plunged through the early summer as
stronger-than-expected second-quarter economic growth data generated concerns
that inflation could become more pronounced. Municipal bonds collectively held
up better than U.S. Treasury bonds during this volatile period, although the
bond markets generally stabilized as the summer came to a close.
(1) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 12-month period ended February 29, 2004
calculated among the 128 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any, and excluding sales
charges.
2 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
During autumn, stronger-than-expected estimates of third-quarter economic
growth rekindled concerns about interest rates and inflation. Despite the 8.2%
annual growth in gross domestic product ("GDP") over the third quarter of 2003,
investors' concerns about the prospects of rising rates were contained because
some of this growth was attributable to one-time factors, such as the tax cuts
and the end of major combat operations in Iraq, and many investors felt the Fed
appeared to be in a holding pattern from adjusting its rate targets.
Preliminary estimates of fourth-quarter GDP growth registered at 4.1%, which was
below the third-quarter results but above those earlier in 2003. Investors'
concerns about interest rates remained contained due to lackluster employment
results and comments from the Fed, which stated late in January that it
"believes that it can be patient in removing its policy accommodation."(v)
However, the fact that the Fed did not include the clause "considerable period"
in this statement, as it had referenced in prior statements during recent
months, added some ambiguity to the Fed's intentions, according to market
analysts.
The Economic State of California
The state of California's spending has exceeded its revenues over recent years,
saddling the State with a mountain of debt. As a result, the Governor's office
increased its budget deficit projection for California to $38 billion last
June.(vi) Given California's fiscal woes, major ratings agencies downgraded
their credit ratings on the State's general obligation ("GO") bonds last year.
Furthermore, following a recall election based largely on voters'
dissatisfaction with the state government's fiscal-management performance,
Governor Arnold Schwarzenegger was sworn into office last November to replace
the State's former Governor, Gray Davis.(vii)
On March 2, 2004, after the end of the fund's reporting period, voters approved
passage of Proposition 57 and Proposition 58. Dubbed the "California Economic
Recovery Bond Act," Proposition 57 enables the State to raise up to $15 billion
via a one-time bond offering to pay off California's accumulated General Fund
deficit as of June 30, 2004.(viii) The offering date has yet to be determined,
but it may occur as early as May, according to some reports. A quarter cent of
the state sales tax would be dedicated to repay this deficit-reduction bond.(ix)
The proposed bond issuance was conditional upon voter approval of Proposition
58,(x )which requires California politicians to balance the budget every year in
the future; it also mandates a "rainy day" account for the State to address
certain financing needs.
The Fund Focused on Revenue Bonds...
Given the budgetary challenges facing the State, as of the end of February this
year, approximately less than one-half percent of the fund's net assets were
invested in California GOs. Alternatively, the fund held a significant quantity
of revenue bonds, which are backed by the generally stable revenue streams of
specific public works. The portfolio's heavier revenue bond exposure was in the
water-and-sewer, finance, transportation, hospital and education sectors, as we
felt many of these issues had strong revenue streams funded by essential
services and offered better relative values on a risk/reward basis.
Although proceeds from the deficit-reduction bond are intended to help the State
address its current budget crisis, as of this writing, we have remained cautious
about investing in California state-backed bonds and continued to err on the
side of caution by prudently weighing the credit risks of the State's GOs
against their potential rewards. For the moment, we have continued to focus on
revenue bonds with an emphasis on higher-coupon issues, and we will evaluate the
merits of the proposed $15 billion revenue bond offering when it comes to
market.
....And Higher-Coupon Bonds
In rising-rate environments, the prices of shorter-term fixed-income obligations
have typically held up better than those on longer-term bonds. Rather than
commit a substantial portion of the fund's assets to low-yielding, short-term
instruments, the fund maintained an emphasis on longer-term, premium-priced
higher-coupon bonds for their favorable income streams. However, it continued to
hold a short position in U.S. Treasury bond futures to help hedge the portfolio
against interest rate risk. As of the end of February, the fund's average
maturity was approximately 17.5 years.
3 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
However, the fund's option-adjusted modified duration, a measure of a fund's
sensitivity to interest rate movements, which accounts for the effect of
hedging, was less than 5.2 years. While no one can say for sure where interest
rates will head, given the recent improvement in GDP growth, as of the end of
February, we continued to maintain a defensive posture.
Thank you for your investment in the Smith Barney California Municipals Fund
Inc. We appreciate that you have entrusted us to manage your money and value our
relationship with you.
Sincerely,
/s/ Joseph P. Deane
Joseph P. Deane
Vice President and Investment Officer
March 17, 2004
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of February 29, 2004 and are subject to
change. Please refer to pages 7 through 13 for a list and percentage breakdown
of the fund's holdings.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
RISKS: The fund may use derivatives, such as options and futures, which can be
illiquid, may disproportionately increase losses, and have a potentially large
impact on fund performance. Certain investors may be subject to the federal
Alternative Minimum Tax, and state and local taxes may apply. Capital gains, if
any, are fully taxable. Please consult your personal tax adviser.
Keep in mind, the fund's investments are subject to interest rate and credit
risks. Portfolio holdings may include lower-rated securities that present
greater risk of loss of principal and interest than higher rated securities. As
a non-diversified fund, it can invest a larger percentage of its assets in fewer
issues than a diversified fund. This may magnify the fund's losses from events
affecting a particular issuer.
(i) Source: Based upon gross domestic product data from the Bureau of
Economic Analysis (January 30, 2004). Gross domestic product is a market
value of goods and services produced by labor and property in a given
country.
(ii) The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year.
(iii) Derivatives, such as options and futures, can be illiquid and harder to
value, especially in declining markets. A small investment in certain
derivatives may have a potentially large impact on the fund's
performance. Derivatives can disproportionately increase losses as stated
in the prospectus.
(iv) The federal funds rate is the interest rate that banks with excess
reserves at a Federal Reserve district bank charge other banks that need
overnight loans.
(v) Source: Federal Reserve (January 28, 2004).
(vi) Source: Lehman Brothers.
(vii) Source: Lehman Brothers.
(viii) Source: State of California.
(ix) Source: Small School Districts Association.
(x) Source: State of California.
4 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
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Average Annual Total Returns+ (unaudited)
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Without Sales Charges(1)
--------------------------------------
Class A Class B Class L
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Twelve Months Ended 2/29/04 5.48% 4.94% 4.91%
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Five Years Ended 2/29/04 4.73 4.17 4.13
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Ten Years Ended 2/29/04 6.08 5.53 N/A
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Inception* through 2/29/04 7.88 6.19 6.96
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With Sales Charges(2)
--------------------------------------
Class A Class B Class L
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Twelve Months Ended 2/29/04 1.25% 0.44% 3.91%
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Five Years Ended 2/29/04 3.87 4.00 4.13
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Ten Years Ended 2/29/04 5.65 5.53 N/A
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Inception* through 2/29/04 7.66 6.19 6.96
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================================================================================
Cumulative Total Returns+ (unaudited)
================================================================================
Without Sales Charges(1)
================================================================================
Class A (2/28/94 through 2/29/04) 80.45%
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Class B (2/28/94 through 2/29/04) 71.25
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Class L (Inception* through 2/29/04) 86.90
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(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00%; Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from purchase payment. This CDSC declines by 0.50% the first year
after purchase payment and thereafter by 1.00% per year until no CDSC is
incurred. Class L shares also reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within one year from purchase payment. The
1.00% initial sales charge on Class L shares is no longer imposed
effective February 2, 2004.
+ All figures represent past performance and are not a guarantee of future
results. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares.
* Inception dates for Class A, B, and L shares are April 9, 1984, November
6, 1992 and November 14, 1994, respectively.
5 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
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Historical Performance (unaudited)
================================================================================
Value of $10,000 Invested in Class A Shares of the Smith Barney California
Municipals Fund Inc. vs. the Lehman Brothers Municipal Bond Index and the Lipper
California Municipal Debt Funds Average+
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February 1994 -- February 2004
[GRAPHIC OMITTED]
[The following table was depicted as a line chart in the printed material.]
Smith Barney
California Lehman Brothers Lipper California
Municipals Fund, Inc. -- Municipal Bond Municipal Debt
Class A Shares Index Funds Average
------------------------ --------------- -----------------
Feb 1994 9602 10000 10000
Feb 1995 9837 10188 10025
Feb 1996 11048 11314 11066
Feb 1997 11752 11937 11599
Feb 1998 13096 13029 12688
Feb 1999 13753 13891 13381
Feb 2000 13017 13602 12280
Feb 2001 14930 15280 13842
Feb 2002 15856 16324 14601
Feb 2003 16426 17576 15448
Feb 2004 17326 18683 16355
+ Hypothetical illustration of $10,000 invested in Class A shares on
February 28, 1994, assuming the deduction of the maximum 4.00% initial
sales charge at the time of investment and reinvestment of dividends and
capital gains, if any, at net asset value through February 29, 2004. The
Lehman Brothers Municipal Bond Index is a broad measure of the municipal
bond market with maturities of at least one year. The Index is unmanaged
and is not subject to the same management and trading expenses of a mutual
fund. The Lipper California Municipal Debt Funds Average is composed of an
average of the Fund's peer group of 128 mutual funds investing in
California municipal bonds as of February 29, 2004. The performance of the
Fund's other classes may be greater or less than the Class A shares'
performance indicated on this chart, depending on whether greater or
lesser sales charges and fees were incurred by shareholders investing in
the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares.
6 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
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Schedule of Investments February 29, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
====================================================================================================================================
Education -- 5.8%
California Educational Facilities Authority Revenue:
$ 2,980,000 Aa3* Claremont University Center, Series B, 5.000% due 3/1/24 $ 3,124,351
Loyola Marymount University:
230,000 A2* 5.750% due 10/1/24 235,216
1,870,000 Aaa* Call 4/1/04 @ 102, 5.750% due 10/1/24 (b) 1,914,469
Pepperdine University, Series A:
1,775,000 A1* 5.000% due 11/1/18 1,901,522
1,500,000 A1* 5.000% due 11/1/29 1,552,485
6,125,000 Ba1* Pooled College & University Project, Series A, (Call 7/1/08 @ 101)
5.500% due 7/1/15 (b) 5,860,767
1,000,000 A1* Scripps College, 5.250% due 8/1/26 1,051,930
Southwestern University Project:
2,635,000 A3* 6.600% due 11/1/14 (b) 2,785,221
6,505,000 A3* 6.700% due 11/1/24 (b) 6,880,078
15,000,000 AAA Stanford University, Series Q, 5.250% due 12/1/32 (c) 16,054,650
450,000 A3* California State Public Works Board, Lease Revenue, High Technology Facility,
San Jose Facilities, Series A, 7.750% due 8/1/06 484,024
2,000,000 AAA California State University Foundation Revenue, Monterey Bay, MBIA-Insured,
5.350% due 6/1/31 2,178,720
2,700,000 VMIG 1* California Statewide Communities Development Authority Revenue,
(Concordia University Irvine Project), Series A, 1.010% due 10/1/31 (d) 2,700,000
1,000,000 AAA Fullerton University Foundation, Auxiliary Organization Revenue, Series A, MBIA-Insured,
5.750% due 7/1/30 1,121,980
1,250,000 AAA San Diego Community College District, Lease Revenue, MBIA-Insured, (Call 12/1/06 @ 102),
6.125% due 12/1/16 (b) 1,441,725
2,600,000 AAA Victor Valley Unified High School District COP, MBIA-Insured, 5.750% due 11/1/17 2,846,740
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52,133,878
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Electric -- 0.7%
Sacramento Power Authority, Cogeneration Project Revenue:
1,800,000 BBB- 6.500% due 7/1/07 1,993,986
1,800,000 BBB- 6.500% due 7/1/08 2,000,088
2,200,000 BBB- 6.500% due 7/1/09 2,441,890
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6,435,964
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Finance -- 6.7%
1,500,000 BBB+ Fresno Joint Powers Financing Authority Local Agency Revenue, Series A, 6.550% due 9/2/12 1,560,150
3,000,000 AAA Long Beach Bond Finance Authority Lease Revenue, AMBAC-Insured, 5.250% due 5/1/24 3,219,360
6,500,000 AA Los Angeles County Public Works Financing Authority Revenue, 5.000% due 10/1/19 6,880,185
895,000 Baa1* Pleasanton Joint Powers Financing Authority Revenue, Series A, 6.150% due 9/2/12 915,728
5,550,000 AAA Pomona PFA Revenue, (Merged Redevelopment Project), Tax Allocation, Series AD,
MBIA-Insured, 5.000% due 2/1/21 5,868,293
Sacramento City Financing Authority Revenue, Capital Improvement:
2,000,000 AA- 5.625% due 6/1/30 2,196,980
AMBAC-Insured:
Series A:
5,070,000 AAA 5.500% due 12/1/20 5,765,756
6,300,000 AAA 5.500% due 12/1/21 7,147,161
1,600,000 AAA Solid Waste and Redevelopment Project, 5.875% due 12/1/29 1,835,872
2,800,000 AAA Salida Area Public Facilities Financing Agency Community Facilities District Special
Tax Revenue, FSA-Insured, 5.250% due 9/1/18 3,077,676
2,875,000 AAA Santa Ana Financing Authority Lease Revenue, Series A, MBIA-Insured, 6.250% due 7/1/24 3,566,696
See Notes to Financial Statements.
7 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Schedule of Investments (continued) February 29, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
====================================================================================================================================
Finance -- 6.7% (continued)
$ 2,000,000 AAA South Orange County PFA Special Tax Revenue, Series A, MBIA-Insured,
7.000% due 9/1/10 (e) $ 2,522,740
Virgin Islands Public Finance Authority Revenue, Series A:
10,000,000 BBB- 5.500% due 10/1/18 (c) 10,575,800
5,000,000 BBB 6.500% due 10/1/24 5,705,200
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60,837,597
- ------------------------------------------------------------------------------------------------------------------------------------
General Obligation -- 9.3%
2,000,000 AAA Adelanto School District, Series B, FGIC-Insured, zero coupon due 9/1/18 1,038,940
California State:
6,700,000 VMIG 1* Series A-2, 0.970% due 5/1/33 (d) 6,700,000
Veterans Bonds:
1,000,000 A Series AT, 9.500% due 2/1/10 1,331,070
2,000,000 A Series AU, 8.400% due 10/1/06 2,318,340
Los Angeles Unified School District:
20,000,000 AAA Series A, FSA-Insured, 5.000% due 7/1/24 (c) 21,144,000
14,230,000 AAA Series E, MBIA-Insured, 5.125% due 7/1/22 (c) 15,332,683
4,720,000 AAA Pasadena Unified School District, Series A, FGIC-Insured, 5.000% due 5/1/20 5,023,118
1,000,000 Aa1* San Diego Public Safety Communication Project, 6.650% due 7/15/11 1,253,120
Santa Margarita/Dana Point Authority Revenue:
20,000,000 AAA Series A, AMBAC-Insured, 5.125% due 8/1/18 (c) 21,661,000
1,500,000 AAA Water Improvement Districts 3, 3A, 4 & 4A, Series B, MBIA-Insured, 7.250% due 8/1/14 (e) 1,985,655
1,530,000 AAA Santa Rosa High School District, FGIC-Insured, 5.900% due 5/1/14 1,572,534
4,000,000 AAA Tahoe Truckee Unified School District, Improvement District No.1, Series A, FGIC-Insured,
(Pre-Refunded -- Escrowed with state and local government securities to 8/1/09
Call @ 101), 5.750% due 8/1/20 4,796,960
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84,157,420
- ------------------------------------------------------------------------------------------------------------------------------------
Hospitals -- 10.5%
California Health Facilities Financing Authority Revenue:
Adventist Health System West:
500,000 VMIG 1* Series A, 0.970% due 9/1/25 (d) 500,000
2,000,000 VMIG 1* Series C, 0.970% due 9/1/15 (d) 2,000,000
2,500,000 AAA Catholic Health Facilities, AMBAC-Insured, 5.750% due 7/1/15 2,695,075
3,000,000 AAA Catholic Healthcare West, MBIA-Insured, 5.125% due 7/1/24 3,138,360
12,000,000 A3* Cedars-Sinai Medical Center, Series A, 6.125% due 12/1/30 (c) 12,867,840
1,930,000 NR Daniel Freeman Hospital, (Call 5/1/05 @ 102), 6.500% due 5/1/20 (b) 2,090,827
Industrial Health Facilities, Series A:
705,000 BBB Casa De Las Campanas, 5.500% due 8/1/12 773,935
2,500,000 BBB Marshall Hospital, 5.250% due 11/1/18 2,639,750
Kaiser Permanente:
3,500,000 AAA Series A, FSA-Insured, 5.000% due 6/1/18 (f) 3,813,565
1,750,000 A Series B, 5.250% due 10/1/14 1,974,157
5,145,000 AAA Stanford Health Care, Series A, FSA-Insured, 5.000% due 11/15/18 5,520,225
Sutter Health, Series A:
FSA-Insured:
1,470,000 AAA 5.125% due 8/15/17 1,591,084
1,500,000 AAA 5.250% due 8/15/27 1,582,005
2,000,000 AAA MBIA-Insured, 5.000% due 8/15/19 2,151,960
5,000,000 AAA California State Public Works Board Lease Revenue, Department of Health Services,
Series A, MBIA-Insured, 5.750% due 11/1/24 5,578,550
See Notes to Financial Statements.
8 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Schedule of Investments (continued) February 29, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
====================================================================================================================================
Hospitals -- 10.5% (continued)
California Statewide Communities Development Authority Revenue COP:
$ 4,515,000 AAA Industrial Health Facilities, Unihealth America, Series A, AMBAC-Insured,
5.500% due 10/1/07 (f) $ 5,148,545
19,000,000 A Kaiser Permanente, 5.300% due 12/1/15 (c)(f) 20,627,160
1,100,000 BBB Solheim Lutheran Home, 6.500% due 11/1/17 1,158,861
St. Joseph's Health System:
4,000,000 AA- 5.250% due 7/1/21 4,134,720
8,000,000 AA- Pre-Refunded -- Escrowed with state and local government securities to 7/1/04
Call @ 102, 6.625% due 7/1/21 8,308,960
500,000 AAA Sutter Health Obligated Group, MBIA-Insured, 6.000% due 8/15/25 538,840
1,000,000 AAA Modesto Health Facilities Revenue, Memorial Hospital Association, Series B, MBIA-Insured,
5.125% due 6/1/17 1,080,420
2,000,000 AAA San Bernardino County COP, (Capital Facility Project), Series B, 6.875% due 8/1/24 (f) 2,670,200
590,000 AAA Santa Rosa Hospital Revenue, (Santa Rosa Hospital Memorial Project), 10.300% due 3/1/11 (f) 764,929
1,250,000 BBB Sequoia Hospital District, 5.375% due 8/15/23 (f) 1,269,188
- ------------------------------------------------------------------------------------------------------------------------------------
94,619,156
- ------------------------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 2.1%
1,250,000 AAA ABAG Finance Authority for Nonprofit Corp., MFH Revenue, (Edgewood Apartments Project),
Series A, FNMA-Collateralized, 5.700% due 11/1/26 (g) 1,299,912
590,000 VMIG 1* California HFA Revenue, MFH, Series B, 0.950% due 2/1/31 (d) 590,000
6,000,000 NR California Statewide Communities Development Authority Revenue, Series E,
FNMA-Collateralized, 6.400% due 6/1/28 (e)(g) 6,267,720
1,740,000 AAA Riverside County Housing Authority, MFH Revenue, Brandon Place Apartments, Series B,
FNMA-Collateralized, 5.625% due 7/1/29 (g) 1,892,372
660,000 AA San Francisco City & County Redevelopment Agency, MFH Revenue, 1045 Mission Apartments,
Series C, GNMA-Collateralized, 5.200% due 12/20/17 (g) 689,502
1,500,000 Aaa* San Jose MFH Revenue, Timberwood Apartments, Series A, 7.500% due 2/1/20 1,509,705
3,320,000 AA- Santa Rosa Mortgage Revenue, (Village Square Apartments Project), Series A, FHA-Insured,
6.875% due 9/1/27 3,417,110
2,755,000 AAA Victorville MFH Revenue, Wimbledon Apartments, Series A, GNMA-Collateralized,
6.300% due 4/20/31 2,883,934
- ------------------------------------------------------------------------------------------------------------------------------------
18,550,255
- ------------------------------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 4.3%
California HFA Revenue Bonds, Home Mortgage:
Capital Appreciation:
350,000 Aa2* Series 1983-B, FHA-Insured, zero coupon due 8/1/15 134,400
310,000 Aa2* Series 1984-B, zero coupon due 8/1/16 77,205
10,000 Aa2* MGIC-Insured, 10.250% due 2/1/14 10,480
7,365,000 VMIG 1* Series F, 0.970% due 2/1/33 (d)(g) 7,365,000
Single-Family Mortgage:
1,055,000 AAA Issue A-2, FHA-Insured, 6.350% due 8/1/15 (e)(g) 1,090,406
2,280,000 AAA Series B-3, Class II, MBIA-Insured, 5.375% due 8/1/21 (g) 2,350,224
1,610,000 AAA California Rural Home Mortgage Financing Authority, Single-Family Mortgage Revenue,
Mortgage Backed Security, Series D, GNMA/FNMA-Collateralized, 6.000% due 12/1/31 (g) 1,718,675
10,000,000 AAA California State Department of Veterans Affairs, Home Purchase Revenue, Series A,
AMBAC-Insured, 5.350% due 12/1/27 10,454,600
270,000 AAA Contra Costa County Home Mortgage Revenue, Mortgage-Backed Securities Program,
GNMA-Collateralized, 7.750% due 5/1/22 (f)(g) 374,503
75,000 Aaa* Los Angeles Home Mortgage Revenue Bonds, (Second Mortgage Project), GNMA-Collateralized,
8.100% due 5/1/17 77,555
See Notes to Financial Statements.
9 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
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Schedule of Investments (continued) February 29, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
====================================================================================================================================
Housing: Single-Family -- 4.3% (continued)
$ 115,000 AAA Martinez Home Mortgage Revenue Bonds, 10.750% due 2/1/16 $ 169,212
3,325,000 AAA Perris Single-Family Mortgage Revenue, Series A, Mortgage Backed Securities Program,
GNMA-Collateralized, 8.300% due 12/1/13 (f)(g) 4,339,258
6,000,000 AAA Pleasanton-Suisun City Home Financing Authority, Home Mortgage Revenue, Series A,
MBIA-Insured, zero coupon due 10/1/16 (f) 3,673,020
Riverside County Single-Family Mortgage Revenue, Series A, Mortgage Backed Securities
Program, GNMA Collateralized:
2,620,000 AAA 8.300% due 11/1/12 (f)(g) 3,594,954
1,000,000 AAA 7.800% due 5/1/21 (f)(g) 1,414,050
1,500,000 AAA Sacramento County Single-Family Mortgage Revenue, Issue A, GNMA-Collateralized,
8.000% due 7/1/16 (f)(g) 1,945,635
- ------------------------------------------------------------------------------------------------------------------------------------
38,789,177
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 17.0%
2,000,000 AAA Anaheim COP, Regular Fixed Option Bonds, MBIA-Insured, 6.200% due 7/16/23 2,269,280
10,000,000 AA Beverly Hills PFA, Lease Revenue, (Capital Improvements Project), Series A,
5.250% due 6/1/28 (c) 10,571,400
California County Tobacco Securitization Agency, Asset-Backed Revenue, Alameda County:
5,250,000 Baa2* 5.750% due 6/1/29 4,855,725
4,000,000 A1* 6.000% due 6/1/42 3,531,200
California Infrastructure & Economic Development Bank Insured Revenue:
AMBAC-Insured, (Rand Corp. Project):
4,000,000 AAA Series A, 5.500% due 4/1/32 4,387,400
900,000 A-1+ Series B, 0.960% due 4/1/42 (d) 900,000
15,000,000 AAA Bay Area Toll Bridges, 1st Lien, Series A, FGIC-Insured, 5.000% due 7/1/29 (c) 15,798,900
2,500,000 AAA California State Public Works Board Lease Revenue, Department of Corrections, Series B,
MBIA-Insured, 5.000% due 9/1/21 2,631,275
3,000,000 AAA Contra Costa County COP, (Capital Projects), AMBAC-Insured, 5.250% due 2/1/21 3,212,100
3,680,000 AAA Fontana COP, AMBAC-Insured, 5.000% due 9/1/21 3,909,190
2,770,000 AAA Fresno County Financing Authority, Solid Waste Revenue, (American Avenue Landfill Project),
MBIA-Insured, 5.750% due 5/15/14 2,977,418
20,000,000 BBB Golden State Tobacco Securitization Corp., Tobacco Settlement Revenue, Series 2003-A-1,
6.750% due 6/1/39 (c) 19,524,800
Inland Empire Solid Waste Financing Authority Revenue, FSA-Insured:
5,000,000 AAA 6.250% due 8/1/11 (f)(g) 5,839,200
2,500,000 AAA Call 8/1/06 @ 102, 6.000% due 8/1/16 (b)(g) 2,821,300
1,035,000 VMIG 1* Irvine California Impact Board Act of 1915, District No. 97-16, 0.980% due 9/2/22 (d) 1,035,000
2,345,000 BBB Kings County Waste Management Authority Solid Waste Revenue, 7.200% due 10/1/14 (g) 2,450,361
3,250,000 AAA Los Angeles County Community Facilities, District No. 3, Special Tax Refunding, Series A,
FSA-Insured, 5.500% due 9/1/14 3,685,598
Orange County:
1,675,000 AAA 1996 Recovery COP, Series A, MBIA-Insured, 6.000% due 7/1/26 1,862,248
1,195,000 VMIG 1* Sanitation Districts COP, Series A, 0.980% due 8/1/29 (d) 1,195,000
25,000,000 AAA San Francisco, California State Building Authority Lease Revenue, San Francisco Civic
Center, Complex-A, AMBAC-Insured, 5.250% due 12/1/21 (c) 26,834,500
San Francisco City & County COP, San Bruno Jail No. 3, AMBAC-Insured:
14,000,000 AAA 5.250% due 10/1/26 (c) 15,007,300
5,000,000 AAA 5.250% due 10/1/33 5,346,700
3,205,000 AAA San Luis Obispo County Financing Authority Revenue, (Lopez Dam Improvement Project),
Series A, MBIA-Insured, 5.375% due 8/1/30 3,450,054
See Notes to Financial Statements.
10 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Schedule of Investments (continued) February 29, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
====================================================================================================================================
Miscellaneous -- 17.0% (continued)
$ 4,310,000 Aaa* San Marcos Public Facilities Authority, Public Facilities Revenue, zero coupon due 1/1/19 (f) $ 2,231,201
2,795,000 AAA Solano County COP, (Capital Improvement Project), AMBAC-Insured, 5.000% due 11/15/19 3,032,743
4,135,000 Baa2* South Napa Waste Management Authority Revenue, 6.500% due 2/15/14 (g) 4,298,663
- ------------------------------------------------------------------------------------------------------------------------------------
153,658,556
- ------------------------------------------------------------------------------------------------------------------------------------
Pollution Control Revenue -- 1.6%
California Financing Authority:
2,500,000 CCC Pacific Gas & Electric Co., Series B, 6.350% due 6/1/09 (g) 2,540,825
1,500,000 A+ San Diego Gas & Electric Co., Series A, 6.800% due 6/1/15 (g) 1,810,560
9,900,000 BB Southern California Edison Co., Series B, 6.400% due 12/1/24 (g) 9,952,965
- ------------------------------------------------------------------------------------------------------------------------------------
14,304,350
- ------------------------------------------------------------------------------------------------------------------------------------
Public Facilities -- 0.9%
450,000 AAA Los Angeles Convention & Exhibition Center Authority, COP, (Call 12/1/05 @ 100),
9.000% due 12/1/20 (b) 510,989
2,000,000 AAA Monrovia Financing Authority Lease Revenue, AMBAC-Insured, 5.125% due 12/1/31 2,146,000
Riverside County COP, (Historic Courthouse Project), Series A:
2,320,000 A+ 5.000% due 11/1/23 2,375,216
2,705,000 A+ 5.000% due 11/1/28 2,737,920
- ------------------------------------------------------------------------------------------------------------------------------------
7,770,125
- ------------------------------------------------------------------------------------------------------------------------------------
Solid Waste -- 0.6%
4,600,000 AAA Sacramento County COP (Public Facilities Project), Solid Waste Facilities, MBIA-Insured,
5.250% due 12/1/16 5,060,736
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Allocation -- 5.4%
2,000,000 AAA Anaheim Public Finance Authority, Tax Allocation Revenue, Regular Fixed Option Bonds,
MBIA-Insured, 6.450% due 12/28/18 2,378,260
30,000 AAA Concord Redevelopment Agency, Tax Allocation, Series 3, BIG-Insured, 8.000% due 7/1/18 30,670
5,000,000 AAA Corona-Norco Unified School District, Special Tax, MBIA-Insured, 5.500% due 9/1/33 5,406,950
6,000,000 AAA Corona Redevelopment Agency, Tax Allocation, (Redevelopment Project Area A), Series A,
FGIC-Insured, 5.500% due 9/1/24 6,201,900
1,000,000 AAA El Centro Redevelopment Agency, Tax Allocation, MBIA-Insured, 6.375% due 11/1/17 1,140,220
2,160,000 AAA Fontana Public Finance Authority, Tax Allocation, Series A, MBIA-Insured, 5.000% due 9/1/20 2,219,076
Hawthorne Community Redevelopment Agency, Tax
Allocation, (Project Area 2), (Call 9/1/04 @ 102):
2,000,000 Baa2* 6.625% due 9/1/14 (b) 2,086,320
2,100,000 Baa2* 6.700% due 9/1/20 (b) 2,176,902
6,485,000 AAA Healdsburg Community Redevelopment Agency, Tax Allocation, (Sotoyome Community
Development Project), Series A, MBIA-Insured, 5.125% due 8/1/31 6,849,652
6,500,000 AAA La Quinta Redevelopment Agency, Tax Allocation, (Redevelopment Project Area No. 1),
AMBAC-Insured, 5.125% due 9/1/32 6,932,120
2,670,000 AAA Ontario Redevelopment Financing Authority, Tax Allocation, (Redevelopment Project No. 1)
MBIA-Insured, 5.800% due 8/1/23 (f) 2,730,502
Rancho Cucamonga Redevelopment Agency, Tax Allocation, (Rancho Redevelopment Project):
2,500,000 AAA FSA-Insured, 5.250% due 9/1/20 2,770,675
MBIA-Insured:
2,445,000 AAA 5.250% due 9/1/16 2,682,043
1,000,000 AAA 5.250% due 9/1/26 1,050,690
2,000,000 AAA San Jose Redevelopment Agency, Tax Allocation, (Merged Area Redevelopment Project),
MBIA-Insured, 5.250% due 8/1/16 2,047,500
2,000,000 AAA Vista Community Development Commission, Tax Allocation, (Vista Redevelopment Project),
MBIA-Insured, 5.250% due 9/1/15 2,119,620
- ------------------------------------------------------------------------------------------------------------------------------------
48,823,100
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
11 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Schedule of Investments (continued) February 29, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
====================================================================================================================================
Transportation -- 13.0%
$ 2,000,000AAA Foothill Eastern Corridor Agency, California Toll Revenue, Sr. Lien, Series A, (Call 1/1/07 @ 100),
6.000% due 1/1/34 (b)(e) $ 2,256,540
1,250,000 AAA Fresno Airport Revenue, Series A, FSA-Insured, 5.500% due 7/1/30 1,362,825
2,000,000 A3* Port of Oakland Special Facilities Revenue, Series A, 6.750% due 1/1/12 (g) 2,031,200
9,000,000 AAA Sacramento County Airport System Revenue, Series A, MBIA-Insured, 5.900% due 7/1/24 (g) 9,868,140
140,000 AAA San Francisco Airport Improvement Corp. Lease Revenue, (United Airlines Inc.),
8.000% due 7/1/13 (f) 176,873
15,270,000 AAA San Francisco Bay Area Rapid Transportation District Sales Tax Revenue, AMBAC-Insured,
5.000% due 7/1/28 (c) 15,881,716
3,000,000 AAA San Francisco City and County Airports Commission, International Airport Revenue,
FGIC-Insured, 6.500% due 5/1/19 (g) 3,083,550
San Joaquin Hills, California Transportation Corridor
Agency, Toll Road Revenue, (Escrowed to maturity with
state and local government securities):
5,000,000 AAA Zero coupon due 1/1/14 3,490,700
60,000,000 AAA Zero coupon due 1/1/16 (c) 37,733,400
17,500,000 AAA Zero coupon due 1/1/17 10,255,000
25,000,000 AAA Zero coupon due 1/1/18 (c) 13,863,000
20,000,000 AAA Zero coupon due 1/1/19 10,474,400
20,000,000 AAA Zero coupon due 1/1/26 6,878,600
- ------------------------------------------------------------------------------------------------------------------------------------
117,355,944
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities -- 1.8%
Northern California Power Agency, Public Power Revenue, (Geothermal Project No. 3.),
Series A:
360,000 A- 5.000% due 7/1/09 360,972
750,000 A- Pre-Refunded -- Escrowed with state and local government securities to 7/1/08 Call @ 100,
5.000% due 7/1/09 829,155
2,000,000 AAA Redding Electric System Revenue COP, Regular Linked SAVRS & RIBS, MBIA-Insured,
6.368% due 7/1/22 2,494,320
Sacramento Municipal Utility District Electric Revenue, MBIA-Insured:
6,000,000 AAA Series N, 5.000% due 8/15/28 6,269,040
805,000 AAA Unrefunded Balance-2001, Series I, 5.750% due 1/1/15 824,739
5,000,000 AAA Southern California Public Power Authority, Power Project Revenue, (Mead Adelanto Project),
Series A, AMBAC-Insured, 5.000% due 7/1/17 5,132,600
- ------------------------------------------------------------------------------------------------------------------------------------
15,910,826
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer -- 20.3%
1,240,000 AAA Anaheim PFA Revenue, Water Utility, (Lenain Filtration Project), FGIC-Insured,
(Pre-Refunded -- Escrowed with state and local government securities to 4/1/06
Call @ 100), 5.250% due 10/1/19 1,347,285
California State Department of Water Resources:
Central Valley Project Revenue:
1,000,000 AA Series O, 5.000% due 12/1/22 1,030,230
5,000,000 AA Series S, 5.000% due 12/1/19 5,313,800
11,000,000 AA Series U, 5.000% due 12/1/29 (c) 11,415,910
Power Supply Revenue:
1,000,000 VMIG 1* Series B-1, 0.970% due 5/1/22 (d) 1,000,000
1,300,000 VMIG 1* Series B-2, 0.960% due 5/1/22 (d) 1,300,000
855,000 VMIG 1* Series B-3, 0.970% due 5/1/22 (d) 855,000
3,300,000 VMIG 1* Series B-4, 0.970% due 5/1/22 (d) 3,300,000
400,000 VMIG 1* Series B-6, 0.980% due 5/1/22 (d) 400,000
See Notes to Financial Statements.
12 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
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Schedule of Investments (continued) February 29, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
====================================================================================================================================
Water and Sewer -- 20.3% (continued)
Castaic Lake Water Agency Revenue COP, (Water System Improvement Project), AMBAC-Insured:
$ 7,270,000 AAA 5.250% due 8/1/19 $ 8,066,138
7,615,000 AAA 5.125% due 8/1/30 8,046,466
6,000,000 AAA Clovis Sewer Revenue Refunding, MBIA-Insured, 5.200% due 8/1/28 6,353,940
4,000,000 AAA Cucamonga County Water District COP, FGIC-Insured, 5.125% due 9/1/31 4,256,160
11,440,000 AAA East Bay Municipal Utility District Wastewater Treatment Systems Revenue, FGIC-Insured,
5.000% due 6/1/26 (c) 11,805,165
East Bay Municipal Utility District Water Systems Revenue:
8,400,000 AAA FGIC-Insured, 5.000% due 6/1/26 8,668,128
8,400,000 AAA MBIA-Insured, 5.000% due 6/1/26 8,778,084
Eastern Municipal Water District COP, Water & Sewer Revenue:
1,000,000 AAA FGIC-Insured, 6.750% due 7/1/12 1,269,400
17,750,000 AAA Series A, MBIA-Insured, 5.250% due 7/1/23 (c) 18,823,165
1,900,000 AAA El Centro Financing Authority, Water & Wastewater Revenue, Series A, AMBAC-Insured,
5.125% due 10/1/27 1,998,097
Metropolitan Water District, Southern California Waterworks Revenue, Series A:
1,000,000 AA 5.000% due 7/1/18 1,082,590
12,900,000 AA 4.750% due 7/1/22 (c) 13,239,399
7,610,000 AA 5.000% due 7/1/26 8,340,636
5,540,000 AA Pre-Refunded -- Escrowed with state and local government securities to 1/1/08 Call @ 101,
5.000% due 7/1/26 6,262,139
10,000,000 AAA Series B-2, FGIC-Insured, 5.000% due 10/1/26 (c) 10,528,400
4,500,000 AA Series C, (Call 1/1/07 @ 102), 5.250% due 7/1/16 (b) 5,070,510
1,925,000 AAA Morgan Hill COP, (Water Systems Improvement Projects), FSA-Insured, 5.125% due 6/1/21 2,087,297
4,560,000 AAA Pittsburg PFA, Wastewater Revenue, Series A, FGIC-Insured, 5.375% due 6/1/22 4,677,648
6,575,000 AAA Placer County Water Agency Revenue COP, (Capital Improvement Projects), AMBAC-Insured,
5.500% due 7/1/29 7,263,403
Pomona Public Financing Authority Revenue:
2,855,000 AAA Series Q, MBIA-Insured, (Call 12/1/05 @ 102), 5.750% due 12/1/15 (b) 3,139,729
2,500,000 AAA Water Facilities Project, Series AA, FSA-Insured, 5.000% due 5/1/29 2,611,975
6,875,000 AAA San Diego PFA, Sewer Revenue, FGIC-Insured, 5.000% due 5/15/20 7,071,419
2,820,000 AAA Sunnyvale Financing Authority, Water & Wastewater Revenue, AMBAC-Insured,
5.000% due 10/1/22 2,989,454
4,350,000 AAA Vallejo Parity Revenue Refunding, (Water Improvement Project), Series A, FSA-Insured,
5.250% due 5/1/29 4,682,558
- ------------------------------------------------------------------------------------------------------------------------------------
183,074,125
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $795,704,007**) $901,481,209
====================================================================================================================================
(a) All ratings are by Standard & Poor's Ratings Service, except for those
which are identified by an asterisk (*), are rated by Moody's Investors
Service.
(b) Pre-Refunded bonds are escrowed with U.S. government securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(c) All or a portion of this security is segregated for open futures
contracts.
(d) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(e) All or a portion of this security is held as collateral for open futures
contracts.
(f) Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(g) 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 $794,128,345.
See pages 14 and 15 for definitions of ratings and certain abbreviations.
See Notes to Financial Statements.
13 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Bond Ratings (unaudited)
================================================================================
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"CCC" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA"' have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small
degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debts in this category than in higher
rated categories.
BB, B, -- Bonds rated "BB", "B", "CCC" and "CC" are regarded, on balance, as
CCC predominantly speculative with respect to capacity to pay interest and
and CC repay principal in accordance with the terms of the obligation. "BB"
represents a lower degree of speculation than "B", "CCC" and "CC", the
highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainities or major risk exposures to adverse conditions.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each generic rating from "Aa" to "Caa", where 1 is the highest and 3
the lowest rating within its generic category.
Aaa -- Bonds 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 these bonds.
Aa -- Bonds 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 that make the long-term risks
appear somewhat larger than in "Aaa" securities.
A -- Bonds 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 that suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds rated "Baa" are considered to be medium grade obligations, i.e.,
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. Such bonds lack outstanding
investment characteristics and in fact have speculative
characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payment or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be in
default, or present elements of danger may exist with respect to
principal or interest.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
14 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Short-Term Security Ratings (unaudited)
================================================================================
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation ("VRDO") rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
================================================================================
Abbreviations* (unaudited)
================================================================================
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- Ambac Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE -- College Construction Loan Insurance
LEE Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
ETM -- Escrowed To Maturity
FAIRS -- Floating Adjustable Interest Rate Securities
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Agency
IDA -- Industrial Development Agency
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MGIC -- MGIC Investment Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PFA -- Public Financing Authority
PSFG -- Permanent School Fund Guaranty
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
SAVRS -- Select Auction Variable Rate Securities
SYCC -- Structured Yield Curve Certificate
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
- ----------
* Abbreviations may or may not appear in the schedule of investments.
15 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Statement of Assets and Liabilities February 29, 2004
================================================================================
ASSETS:
Investments, at value (Cost -- $795,704,007) $ 901,481,209
Cash 52,452
Interest receivable 10,088,461
Receivable for securities sold 8,512,713
Receivable for Fund shares sold 374,330
Prepaid expenses 13,657
- ------------------------------------------------------------------------------------------------------
Total Assets 920,522,822
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable to broker -- variation margin 3,093,750
Payable for Fund shares reacquired 1,827,205
Dividends payable 1,524,242
Investment advisory fee payable 217,652
Administration fee payable 138,515
Distribution plan fees payable 64,959
Accrued expenses 105,190
- ------------------------------------------------------------------------------------------------------
Total Liabilities 6,971,513
- ------------------------------------------------------------------------------------------------------
Total Net Assets $ 913,551,309
======================================================================================================
NET ASSETS:
Par value of capital shares $ 54,012
Capital paid in excess of par value 846,302,214
Undistributed net investment income 2,165,205
Accumulated net realized loss from investment transactions and futures contracts (20,941,855)
Net unrealized appreciation of investments and futures contracts 85,971,733
- ------------------------------------------------------------------------------------------------------
Total Net Assets $ 913,551,309
======================================================================================================
Shares Outstanding:
Class A 42,517,833
------------------------------------------------------------------------------------------------
Class B 7,929,257
------------------------------------------------------------------------------------------------
Class L 3,564,646
------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 16.92
------------------------------------------------------------------------------------------------
Class B * $ 16.90
------------------------------------------------------------------------------------------------
Class L * $ 16.88
------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $ 17.63
======================================================================================================
* Redemption price is NAV of Class B and L shares reduced by a 4.50% and
1.00% CDSC, respectively, if shares are redeemed within one year from
purchase payment (See Note 3).
See Notes to Financial Statements.
16 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Statement of Operations For the Year Ended February 29, 2004
================================================================================
INVESTMENT INCOME:
Interest $ 47,383,261
- ------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 3) 2,766,663
Distribution plan fees (Note 7) 2,451,975
Administration fee (Note 3) 1,759,997
Transfer agency services (Note 7) 174,060
Custody 66,101
Audit and legal 52,385
Shareholder communications (Note 7) 45,194
Directors' fees 25,335
Registration fees 22,079
Other 5,545
- ------------------------------------------------------------------------------------------------
Total Expenses 7,369,334
- ------------------------------------------------------------------------------------------------
Net Investment Income 40,013,927
- ------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 4 AND 5):
Realized Gain (Loss) From:
Investment transactions 7,330,840
Futures contracts (5,540,183)
- ------------------------------------------------------------------------------------------------
Net Realized Gain 1,790,657
- ------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of year 79,969,066
End of year 85,971,733
- ------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 6,002,667
- ------------------------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 7,793,324
- ------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 47,807,251
================================================================================================
See Notes to Financial Statements.
17 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Statements of Changes in Net Assets
================================================================================
For the Year Ended February 29, 2004
and the Year Ended February 28, 2003
2004 2003
=====================================================================================================
OPERATIONS:
Net investment income $ 40,013,927 $ 43,202,388
Net realized gain (loss) 1,790,657 (4,589,485)
Increase (decrease) in net unrealized appreciation 6,002,667 (5,423,733)
- -----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 47,807,251 33,189,170
- -----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 2 AND 8):
Net investment income (39,311,037) (42,834,733)
- -----------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (39,311,037) (42,834,733)
- -----------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 99,960,664 152,922,831
Net asset value of shares issued for reinvestment of dividends 20,894,978 23,106,619
Cost of shares reacquired (168,727,858) (190,165,123)
- -----------------------------------------------------------------------------------------------------
Decrease in Net Assets From Fund Share Transactions (47,872,216) (14,135,673)
- -----------------------------------------------------------------------------------------------------
Decrease in Net Assets (39,376,002) (23,781,236)
NET ASSETS:
Beginning of year 952,927,311 976,708,547
- -----------------------------------------------------------------------------------------------------
End of year* $ 913,551,309 $ 952,927,311
=====================================================================================================
* Includes undistributed net investment income of: $ 2,165,205 $ 1,607,584
=====================================================================================================
See Notes to Financial Statements.
18 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
Smith Barney California Municipals Fund Inc. ("Fund"), a Maryland corporation,
is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are in
conformity with generally accepted accounting principles ("GAAP") and are as
follows: (a) security transactions are accounted for on trade date; (b)
securities are valued at the mean between the quoted bid and asked prices as
provided by an independent pricing service; (c) securities 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
using the specific identification method; (f) interest income, adjusted for
amortization of premium and accretion of discount, is recorded on an accrual
basis; (g) class specific expenses are charged to each class; management fees
and general fund expenses are allocated on the basis of relative net assets of
each class or on another reasonable basis; (h) dividends and distributions to
shareholders are recorded on the ex-dividend date; (i) 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; (j) the character of income and gains to be distributed is
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America. At
February 29, 2004, reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Net investment income, net realized
gains and net assets were not affected by this change; and (k) 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.
2. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from Federal income tax and from designated state
income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
It is the Fund's policy to distribute dividends monthly. Capital gains
distributions, if any, are taxable to shareholders, and are declared and paid at
least annually.
3. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment adviser to the Fund. The
Fund pays SBFM an advisory fee calculated at an annual rate of 0.30% of the
Fund's average daily net assets. This fee is calculated daily and paid monthly.
SBFM also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the Fund's average daily net assets up
to $500 million and 0.18% of the Fund's average daily net assets in excess of
$500 million. This fee is calculated daily and paid monthly.
19 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Fund's transfer agent. PFPC Inc. ("PFPC") and Primerica Shareholder Services
("PSS"), another subsidiary of Citigroup, act as the Fund's sub-transfer agents.
CTB receives account fees and asset-based fees that vary according to the size
and type of account. PFPC and PSS are responsible for shareholder recordkeeping
and financial processing for all shareholder accounts and are paid by CTB. For
the year ended February 29, 2004, the Fund paid transfer agent fees of $166,997
to CTB.
Citigroup Global Markets Inc. ("CGM") and PFS Distributors, Inc., both of which
are subsidiaries of Citigroup, act as the Fund's distributors.
There is a maximum initial sales charge of 4.00% for Class A shares. There is a
contingent deferred sales charge ("CDSC") of 4.50% on Class B shares, which
applies if redemption occurs within one year from purchase payment. This CDSC
declines by 0.50% the first year after purchase payment and thereafter by 1.00%
per year until no CDSC is incurred. Class L shares also have a 1.00% CDSC, which
applies if redemption occurs within one year from purchase payment. In addition,
Class A shares also have a 1.00% CDSC, which applies if redemption occurs within
one year from purchase payment. This CDSC only applies to those purchases of
Class A shares, which, when combined with current holdings of Class A shares,
equal or exceed $500,000 in the aggregate. These purchases do not incur an
initial sales charge.
For the year ended February 29, 2004, CGM and its affiliates received sales
charges of approximately $728,000 and $123,000 on sales of the Fund's Class A
and L shares, respectively. In addition, for the year ended February 29, 2004,
CDSCs paid to CGM and its affiliates were approximately:
Class A Class B Class L
================================================================================
CDSCs $38,000 $208,000 $3,000
================================================================================
All officers and one Director of the Fund are employees of Citigroup or its
affiliates.
4. Investments
During the year ended February 29, 2004, the aggregate cost of purchases and
proceeds from sales of investments (including maturities of long-term
investments, but excluding short-term investments) were as follows:
================================================================================
Purchases $124,547,115
- --------------------------------------------------------------------------------
Sales 203,598,293
================================================================================
At February 29, 2004, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were as follows:
================================================================================
Gross unrealized appreciation $ 109,889,247
Gross unrealized depreciation (2,536,383)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 107,352,864
================================================================================
5. Futures Contracts
Securities or cash equal to the initial margin amount are either deposited with
the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the current market
value of the futures contract. 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
20 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
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 typically 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.
At February 29, 2004, the Fund had the following open futures contracts:
Number of Basis Market Unrealized
Contracts Expiration Value Value Loss
=====================================================================================================
Contracts to Sell:
U.S. Treasury Bonds 3,000 3/04 $321,819,531 $341,625,000 $(19,805,469)
=====================================================================================================
6. Fund Concentration
The Fund primarily invests in debt obligations issued by the State of California
and local governments in the State of California, its political subdivisions,
agencies and public authorities to obtain funds for various public purposes. The
Fund is more susceptible to factors adversely affecting issuers of California
municipal securities than is a municipal bond fund that is not concentrated in
these issuers to the same extent.
7. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, the Fund pays a service fee with
respect to its Class A, B and L shares calculated at the annual rate of 0.15% of
the average daily net assets of each respective class. The Fund also pays a
distribution fee with respect to its Class B and L shares calculated at the
annual rate of 0.50% and 0.55% of the average daily net assets for each class,
respectively. For the year ended February 29, 2004, total Rule 12b-1
Distribution Plan fees, which are accrued daily and paid monthly, were as
follows:
Class A Class B Class L
================================================================================
Rule 12b-1 Distribution Plan Fees $1,071,848 $955,005 $425,122
================================================================================
For the year ended February 29, 2004, total Transfer Agency Service expenses
were as follows:
Class A Class B Class L
================================================================================
Transfer Agency Service Expenses $112,619 $46,684 $14,757
================================================================================
For the year ended February 29, 2004, total Shareholder Communication expenses
were as follows:
Class A Class B Class L
================================================================================
Shareholder Communication Expenses $29,900 $11,453 $3,841
================================================================================
8. Distributions Paid to Shareholders by Class
Year Ended Year Ended
February 29, 2004 February 28, 2003
================================================================================
Net Investment Income
Class A $31,318,944 $33,776,815
Class B 5,663,746 6,604,782
Class L 2,328,347 2,453,136
- --------------------------------------------------------------------------------
Total $39,311,037 $42,834,733
================================================================================
21 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
9. Capital Shares
At February 29, 2004, the Fund had 500 million shares of $0.001 par value
capital stock authorized. The Fund has the ability to establish multiple classes
of shares. Each share of a class represents an identical interest in the Fund
and has the same rights, except that each class bears certain expenses
specifically related to the distribution of its shares.
Transactions in shares of each class were as follows:
Year Ended Year Ended
February 29, 2004 February 28, 2003
-------------------------------------- ----------------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------
Class A
Shares sold 4,768,018 $ 80,191,110 6,865,113 $ 115,404,814
Shares issued on reinvestment 984,175 16,528,525 1,073,073 18,045,904
Shares reacquired (7,006,300) (117,699,287) (8,295,606) (139,736,628)
- ---------------------------------------------------------------------------------------------------------------------------
Net Decrease (1,254,107) $ (20,979,652) (357,420) $ (6,285,910)
- ---------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 687,289 $ 11,532,048 1,453,307 $ 24,480,955
Shares issued on reinvestment 170,407 2,857,299 203,405 3,416,150
Shares reacquired (2,339,835) (39,264,581) (2,292,714) (38,569,588)
- ---------------------------------------------------------------------------------------------------------------------------
Net Decrease (1,482,139) $ (24,875,234) (636,002) $ (10,672,483)
- ---------------------------------------------------------------------------------------------------------------------------
Class L
Shares sold 491,147 $ 8,237,506 773,862 $ 13,037,062
Shares issued on reinvestment 90,086 1,509,154 98,008 1,644,565
Shares reacquired (701,593) (11,763,990) (705,628) (11,858,907)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (120,360) $ (2,017,330) 166,242 $ 2,822,720
- ---------------------------------------------------------------------------------------------------------------------------
10. Capital Loss Carryforward
At February 29, 2004, the Fund had, for Federal income tax purposes,
approximately $21,927,000 of unused capital loss carryforwards available to
offset future capital gains. To the extent that these carryforward losses are
used to offset capital gains, it is probable that the gains so offset will not
be distributed.
The amount and year of expiration for each carryforward loss is indicated below.
Expiration occurs on the last day in February of the year indicated:
2007 2008 2009 2011
================================================================================
Carryforward Amounts $980,000 $11,080,000 $4,885,000 $4,982,000
================================================================================
In addition, the Fund had $18,820,130 of capital losses realized after October
31, 2003, which were deferred for tax purposes to the first day of the following
fiscal year.
11. Income Tax Information and Distributions to Shareholders
At February 29, 2004, the tax basis components of distributable earnings were:
================================================================================
Undistributed tax-exempt income $ 2,129,032
- --------------------------------------------------------------------------------
Accumulated capital losses (21,927,194)
- --------------------------------------------------------------------------------
Unrealized appreciation 107,352,864
================================================================================
22 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
At February 29, 2004, the difference between book basis and tax basis unrealized
appreciation and depreciation was attributable primarily to the treatment of
accretion of discounts and amortization of premiums and mark-to-market of
derivative contracts.
The tax character of distributions paid during the years ended February 29, 2004
and February 28, 2003 was:
2004 2003
================================================================================
Tax-exempt income $39,050,302 $42,791,344
Ordinary income 260,735 43,389
- --------------------------------------------------------------------------------
Total $39,311,037 $42,834,733
================================================================================
12. Additional Information
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue guarantee
agreement with this sub-contractor providing that the sub-contractor would
guarantee certain benefits to CAM or its affiliates (the "Revenue Guarantee
Agreement"). In connection with the subsequent purchase of the sub-contractor's
business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by
CAM on many of the funds it manages, this Revenue Guarantee Agreement was
amended eliminating those benefits in exchange for arrangements that included a
one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. CAM also plans an
independent review to verify that the transfer agency fees charged by CAM were
fairly priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
23 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Financial Highlights
================================================================================
For a share of each class of capital stock outstanding throughout each year
ended February 28, unless otherwise noted:
Class A Shares 2004(1)(2) 2003(2) 2002(2) 2001(2) 2000(2)(3)
==================================================================================================================
Net Asset Value, Beginning of Year $ 16.76 $ 16.93 $ 16.70 $ 15.28 $ 16.93
- ------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.75 0.77 0.79 0.79 0.78
Net realized and unrealized gain (loss)(4) 0.15 (0.17) 0.22 1.41 (1.67)
- ------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.90 0.60 1.01 2.20 (0.89)
- ------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.74) (0.77) (0.78) (0.78) (0.76)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.77) (0.78) (0.78) (0.76)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 16.92 $ 16.76 $ 16.93 $ 16.70 $ 15.28
- ------------------------------------------------------------------------------------------------------------------
Total Return 5.48% 3.59% 6.20% 14.70% (5.36)%
- ------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $ 720 $ 734 $ 747 $ 698 $ 628
- ------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.68% 0.70% 0.68% 0.68% 0.70%
Net investment income(4) 4.46 4.58 4.68 4.91 4.99
- ------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 12% 21% 29% 29%
==================================================================================================================
(1) For the year ended February 29, 2004.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the year ended February 29, 2000.
(4) Effective March 1, 2001, the Fund adopted a change in the accounting
method that requires the Fund to amortize premiums and accrete all
discounts. Without the adoption of this change, for the year ended
February 28, 2002, those amounts would have been $0.77, $0.24 and 4.61%
for net investment income, net realized and unrealized gain and the ratio
of net investment income to average net assets, respectively. Per share
information, ratios and supplemental data for the periods prior to March
1, 2001 have not been restated to reflect this change in presentation.
24 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each year
ended February 28, unless otherwise noted:
Class B Shares 2004(1)(2) 2003(2) 2002(2) 2001(2) 2000(2)(3)
===================================================================================================================
Net Asset Value, Beginning of Year $ 16.74 $ 16.92 $ 16.69 $ 15.28 $ 16.93
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.66 0.68 0.69 0.70 0.70
Net realized and unrealized gain (loss)(4) 0.15 (0.18) 0.24 1.41 (1.68)
- -------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.81 0.50 0.93 2.11 (0.98)
- -------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.65) (0.68) (0.70) (0.70) (0.67)
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (0.65) (0.68) (0.70) (0.70) (0.67)
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 16.90 $ 16.74 $ 16.92 $ 16.69 $ 15.28
- -------------------------------------------------------------------------------------------------------------------
Total Return 4.94% 3.02% 5.69% 14.06% (5.87)%
- -------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $ 134 $ 157 $ 170 $ 183 $ 196
- -------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.20% 1.22% 1.20% 1.19% 1.22%
Net investment income(4) 3.94 4.06 4.14 4.39 4.47
- -------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 12% 21% 29% 29%
===================================================================================================================
(1) For the year ended February 29, 2004.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the year ended February 29, 2000.
(4) Effective March 1, 2001, the Fund adopted a change in the accounting
method that requires the Fund to amortize premiums and accrete all
discounts. Without the adoption of this change, for the year ended
February 28, 2002, those amounts would have been $0.68, $0.25 and 4.07%
for net investment income, net realized and unrealized gain and the ratio
of net investment income to average net assets, respectively. Per share
information, ratios and supplemental data for the periods prior to March
1, 2001 have not been restated to reflect this change in presentation.
25 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of capital stock outstanding throughout each year
ended February 28, unless otherwise noted:
Class L Shares 2004(1)(2) 2003(2) 2002(2) 2001(2) 2000(2)(3)
===================================================================================================================
Net Asset Value, Beginning of Year $ 16.72 $ 16.90 $ 16.68 $ 15.26 $ 16.91
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.65 0.68 0.69 0.69 0.69
Net realized and unrealized gain (loss)(4) 0.15 (0.19) 0.22 1.42 (1.68)
- -------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.80 0.49 0.91 2.11 (0.99)
- -------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.64) (0.67) (0.69) (0.69) (0.66)
- -------------------------------------------------------------------------------------------------------------------
Total Distributions (0.64) (0.67) (0.69) (0.69) (0.66)
- -------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 16.88 $ 16.72 $ 16.90 $ 16.68 $ 15.26
- -------------------------------------------------------------------------------------------------------------------
Total Return 4.91% 2.99% 5.59% 14.09% (5.92)%
- -------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $ 60 $ 62 $ 60 $ 51 $ 38
- -------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.24% 1.26% 1.25% 1.24% 1.28%
Net investment income(4) 3.90 4.01 4.12 4.34 4.41
- -------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 12% 21% 29% 29%
===================================================================================================================
(1) For the year ended February 29, 2004.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the year ended February 29, 2000.
(4) Effective March 1, 2001, the Fund adopted a change in the accounting
method that requires the Fund to amortize premiums and accrete all
discounts. Without the adoption of this change, for the year ended
February 28, 2002, those amounts would have been $0.68, $0.23 and 4.05%
for net investment income, net realized and unrealized gain and the ratio
of net investment income to average net assets, respectively. Per share
information, ratios and supplemental data for the periods prior to March
1, 2001 have not been restated to reflect this change in presentation.
26 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Independent Auditors' Report
================================================================================
The Shareholders and Board of Directors of
Smith Barney California Municipals Fund Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney California Municipals Fund Inc.
("Fund") as of February 29, 2004, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended and financial highlights for each of the
years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of February 29, 2004, by correspondence with the custodian
and broker. As to securities sold but not yet delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of February 29, 2004, and the results of its operations for the year
then ended, the changes in its net assets for each of the years in the two-year
period then ended and financial highlights for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
New York, New York
April 9, 2004
27 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Additional Information (unaudited)
================================================================================
Information about Directors and Officers
The business and affairs of the Smith Barney California Municipals Fund Inc.
("Fund") are managed under the direction of the Board of Directors. Information
pertaining to the Directors and Officers of the Fund is set forth below. The
Statement of Additional Information includes additional information about the
Fund's Directors and is available, without charge, upon request by calling the
Fund's transfer agent (Citicorp Trust Bank, fsb. at 1-800-451-2010) or
sub-transfer agent (Primerica Shareholder Services at 1-800-451-5445).
Number of
Term of Portfolios Other
Office* and Principal in Fund Board
Position(s) Length of Occupation(s) Complex Memberships
Held with Time During Past Overseen Held by
Name, Address and Age Fund Served Five Years by Director Director
===================================================================================================================================
Non-Interested Directors:
Dwight B. Crane Director Since Professor, Harvard Business School 49 None
Harvard Business School 1988
Soldiers Field
Morgan Hall #375
Boston, MA 02163
Age 66
Burt N. Dorsett Director Since President of Dorsett McCabe Capital 27 None
201 East 62nd Street 1994 Management Inc.; Chief Investment
New York, NY 10021 Officer of Leeb Capital Management,
Age 73 Inc. (since 1999)
Elliot S. Jaffe Director Since Chairman of The Dress Barn Inc. 27 The Dress
The Dress Barn Inc. 1994 Barn, Inc.
Executive Office
30 Dunnigan Drive
Suffern, NY 10901
Age 77
Stephen E. Kaufman Director Since Attorney 55 None
Stephen E. Kaufman PC 1984
277 Park Avenue
47th Floor
New York, NY 10172
Age 72
Joseph J. McCann Director Since Retired 27 None
200 Oak Park Place 1984
Suite One
Pittsburgh, PA 15243
Age 74
Cornelius C. Rose, Jr. Director Since Chief Executive Officer of Performance 27 None
Meadowbrook Village 1994 Learning Systems
Building 1, Apt. 6
West Lebanon, NH 03784
Age 71
28 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios Other
Office* and Principal in Fund Board
Position(s) Length of Occupation(s) Complex Memberships
Held with Time During Past Overseen Held by
Name, Address and Age Fund Served Five Years by Director Director
===================================================================================================================================
Interested Director:
R. Jay Gerken, CFA** Chairman, Since Managing Director of Citigroup Global 221 None
Citigroup Asset Management President and 2002 Markets Inc. ("CGM"); Chairman,
("CAM") Chief President and Chief Executive Officer
399 Park Avenue, 4th Floor Executive of Smith Barney Fund Management
New York, NY 10022 Officer LLC ("SBFM"), Travelers Investment
Age 52 Adviser, Inc. ("TIA") and Citi Fund
Management Inc. ("CFM"); President
and Chief Executive Officer of certain
mutual funds associated with Citigroup
Inc. ("Citigroup"); Formerly, Portfolio
Manager of Smith Barney Allocation
Series Inc. (from 1996 to 2001) and
Smith Barney Growth and Income Fund
(from 1996 to 2000)
Officers:
Andrew B. Shoup Senior Vice Since Director of CAM; Senior Vice President N/A N/A
CAM President and 2003 and Chief Administrative Officer of
125 Broad Street, 11th Floor Chief mutual funds associated with Citigroup;
New York, NY 10004 Administrative Treasurer of certain mutual funds
Age 47 Officer associated with Citigroup; Head of
International Funds Administration of
CAM (from 2001 to 2003); Director of
Global Funds Administration of CAM
(from 2000 to 2001); Head of U.S.
Citibank Funds Administration of CAM
(from 1998 to 2000)
Richard L. Peteka Chief Since Director of CGM; Chief Financial N/A N/A
CAM Financial 2002 Officer and Treasurer of certain mutual
125 Broad Street, 11th Floor Officer and funds affiliated with Citigroup;
New York, NY 10004 Treasurer Director and Head of Internal Control
Age 42 for CAM U.S. Mutual Fund
Administration (from 1999 to 2002);
Vice President, Head of Mutual Fund
Administration and Treasurer of
Oppenheimer Capital (from 1996
to 1999)
Joseph P. Deane Vice President Since Managing Director of CGM; N/A N/A
CAM and Investment 1989 Investment Officer of SBFM
399 Park Avenue, 4th Floor Officer
New York, NY 10022
Age 55
29 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios Other
Office* and Principal in Fund Board
Position(s) Length of Occupation(s) Complex Memberships
Held with Time During Past Overseen Held by
Name, Address and Age Fund Served Five Years by Director Director
===================================================================================================================================
Andrew Beagley Chief Anti- Since Director of CGM (since 2000); Director N/A N/A
CAM Money 2002 of Compliance, North America, CAM
399 Park Avenue, 4th Floor Laundering (since 2000); Chief Anti-Money
New York, NY 10022 Compliance Laundering Compliance Officer and
Age 40 Officer Vice President of certain mutual funds
associated with Citigroup; Director of
Compliance, Europe, the Middle East
and Africa, CAM (from 1999 to 2000);
Compliance Officer, Salomon Brothers
Asset Management Limited, Smith
Barney Global Capital Management
Inc., Salomon Brothers Asset
Management Asia Pacific Limited
(from 1997 to 1999)
Kaprel Ozsolak Controller Since Vice President of CGM; Controller of N/A N/A
CAM 2002 certain mutual funds associated
125 Broad Street, 11th Floor with Citigroup
New York, NY 10004
Age 38
Robert I. Frenkel Secretary Since Managing Director and General N/A N/A
CAM and Chief 2003 Counsel of Global Mutual Funds for
300 First Stamford Place Legal Officer CAM and its predecessor (since 1994);
4th Floor Secretary of CFM; Secretary and Chief
Stamford, CT 06902 Legal Officer of mutual funds
Age 48 associated with Citigroup
- -----------
* Each Director and Officer serves until his or her successor has been duly
elected and qualified.
** Mr. Gerken is an "interested person" of the Fund as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is an
officer of SBFM and certain of its affiliates.
30 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
================================================================================
Tax Information (unaudited)
================================================================================
For the year ended February 29, 2004, 99.34% of the dividends paid by the Fund
from net investment income were tax-exempt for regular Federal income tax and
California state income tax purposes.
31 Smith Barney California Municipals Fund Inc. | 2004 Annual Report
(This page intentionally left blank.)
- --------------------------------------------------------------------------------
SMITH BARNEY
CALIFORNIA MUNICIPALS FUND INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS
Dwight B. Crane
Burt N. Dorsett
R. Jay Gerken, CFA
Chairman
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Cornelius C. Rose, Jr.
OFFICERS
R. Jay Gerken, CFA
President and
Chief Executive Officer
Andrew B. Shoup
Senior Vice President and
Chief Administrative Officer
Richard L. Peteka
Chief Financial Officer
and Treasurer
Joseph P. Deane
Vice President and
Investment Officer
Andrew Beagley
Chief Anti-Money Laundering
Compliance Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer
INVESTMENT ADVISER
ANDADMINISTRATOR
Smith Barney Fund
Management LLC
DISTRIBUTORS
Citigroup Global Markets Inc.
PFS Distributors, Inc.
CUSTODIAN
State Street Bank and
Trust Company
TRANSFER AGENT
Citicorp Trust Bank, fsb.
125 Broad Street, 11th Floor
New York, New York 10004
SUB-TRANSFER AGENTS
PFPC Inc.
P.O. Box 9699 Providence, Rhode Island
02940-9699
Primerica Shareholder Services
P.O. Box 9662
Providence, Rhode Island
02940-9662
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Smith Barney California Municipals Fund Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of
Smith Barney California Municipals Fund Inc., but it may also be used as sales
literature when preceded or accompanied by the current Prospectus.
SMITH BARNEY CALIFORNIA MUNICIPALS FUND INC.
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
This document must be preceded or accompanied by a free prospectus. Investors
should consider the fund's investment objectives, risks, charges and expenses
carefully before investing. The prospectus contains this and other important
information about the fund. Please read the prospectus carefully before you
invest or send money.
www.smithbarneymutualfunds.com
(C)2004 Citigroup Global Markets Inc.
Member NASD, SIPC
FD2209 4/04 04-6447
- --------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Directors of the registrant has determined that Dwight B.
Crane, the Chairman of the Board's Audit Committee, possesses the
technical attributes identified in Instruction 2(b) of Item 3 to Form
N-CSR to qualify as an "audit committee financial expert," and has
designated Mr. Crane as the Audit Committee's financial expert. Mr.
Crane is an "independent" Director pursuant to paragraph (a)(2) of Item
3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees for Smith Barney California Municipals Fund Inc. were
$27,000 and $25,500 for the years ended 2/29/04 and 2/28/03.
(b) Audit-Related Fees for Smith Barney California Municipals Fund
Inc. were $0 and $0 for the years ended 2/29/04 and 2/28/03.
(c) Tax Fees for Smith Barney California Municipals Fund Inc. were
$2,200 and $2,200 for the years ended 2/29/04 and 2/28/03.
These amounts represent aggregate fees paid for tax compliance,
tax advice and tax planning services, which include (the filing
and amendment of federal, state and local income tax returns,
timely RIC qualification review and tax distribution and analysis
planning) rendered by the Accountant to Smith Barney California
Municipals Fund Inc.
(d) There were no all other fees for Smith Barney California
Municipals Fund Inc. for the years ended 2/29/04 and 2/28/03.
(e) (1) Audit Committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
The Charter for the Audit Committee (the "Committee") of the
Board of each registered investment company (the "Fund") advised
by Smith Barney Fund Management LLC or Salomon Brothers Asset
Management Inc or one of their affiliates (each, an "Adviser")
requires that the Committee shall approve (a) all audit and
permissible non-audit services to be provided to the Fund and
(b) all permissible non-audit services to be provided by the
Fund's independent auditors to the Adviser and any Covered
Service Providers if the engagement relates directly to the
operations and financial reporting of the Fund. The Committee may
implement policies and procedures by which such services are
approved other than by the full Committee.
The Committee shall not approve non-audit services that the
Committee believes may impair the independence of the auditors.
As of the date of the approval of this Audit Committee Charter,
permissible non-audit services include any professional services
(including tax services), that are not prohibited services as
described below, provided to the Fund by the independent
auditors, other than those provided to the Fund in connection
with an audit or a review of the financial statements of the
Fund. Permissible non-audit services may not include:
(i) bookkeeping or other services related to the accounting
records or financial statements of the Fund; (ii) financial
information systems design and implementation; (iii) appraisal or
valuation services, fairness opinions or contribution-in-kind
reports; (iv) actuarial services; (v) internal audit outsourcing
services; (vi) management functions or human resources;
(vii) broker or dealer, investment adviser or investment banking
services; (viii) legal services and expert services unrelated to
the audit; and (ix) any other service the Public Company
Accounting Oversight Board determines, by regulation, is
impermissible.
Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount of
all such permissible non-audit services provided to the Fund, the
Adviser and any service providers controlling, controlled by or
under common control with the Adviser that provide ongoing
services to the Fund ("Covered Service Providers") constitutes
not more than 5% of the total amount of revenues paid to the
independent auditors during the fiscal year in which the
permissible non-audit services are provided to (a) the Fund, (b)
the Adviser and (c) any entity controlling, controlled by or
under common control with the Adviser that provides ongoing
services to the Fund during the fiscal year in which the services
are provided that would have to be approved by the Committee;
(ii) the permissible non-audit services were not recognized by
the Fund at the time of the engagement to be non-audit services;
and (iii) such services are promptly brought to the attention of
the Committee and approved by the Committee (or its delegate(s))
prior to the completion of the audit.
(f) N/A
(g) Non-audit fees billed - $100,000 and $1.2 million for the years
ended 12/31/2003 and 12/31/2002.
(h) Yes. The Smith Barney California Municipals Fund Inc.'s Audit
Committee has considered whether the provision of non-audit
services that were rendered to Service Affiliates which were not
pre-approved (not requiring pre-approval) is compatible with
maintaining the Accountant's independence. All services provided
BY the Accountant to the Smith Barney California Municipals Fund
Inc. or to Service Affiliates which were required to be pre-
approved were pre-approved as required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an
annual report) that have materially affected, or are likely to
materially affect the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, there unto duly authorized.
Smith Barney California Municipals Fund Inc.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Smith Barney California Municipals Fund Inc.
Date: May 7, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Smith Barney California Municipals Fund Inc.
Date: May 7, 2004
By: /s/ Richard L. Peteka
(Richard L. Peteka)
Chief Financial Officer of
Smith Barney California Municipals Fund Inc.
Date: May 7, 2004