-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dw1NQUjcjxBjsQruBJNbU40gfMkecKsUQrTglzC2G5sgZF7svJP9NNczEokVXw5Q OzYNdMRiIomWE80EuGsvJg== 0000950007-96-000155.txt : 19960829 0000950007-96-000155.hdr.sgml : 19960829 ACCESSION NUMBER: 0000950007-96-000155 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960828 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA MUNI FUND CENTRAL INDEX KEY: 0000715756 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 136828244 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03674 FILM NUMBER: 96622305 BUSINESS ADDRESS: STREET 1: 90 WASHINGTON ST - 19TH FL CITY: NEW YORK STATE: NY ZIP: 10006 BUSINESS PHONE: 2126353005 N-30D 1 SEMI-ANNUAL The California Muni Fund Dear Fellow Shareholder: Interest rates rose sharply in this year's first half, and bond prices consequently fell. As result, the Net Asset Value of the California Muni Fund dropped from $8.91 per share at year end 1995, to $7.78 per share on June 30, 1996. This was disappointing. However, municipal bonds generally outperformed taxable bonds in the period. This reflected improving credit conditions for municipals, favorable supply conditions, and diminished expectations for tax reform legislation. 1996 began with a high degree of optimism in global financial markets that Congress and the Clinton Administration would reach a bipartisan agreement to eliminate the federal budget deficit by the turn of the century. This hope seemed to be shattered in mid-winter. At the same time, evidence began to surface that economic activity was accelerating. This raised anxieties about a possible credit tightening move by the Federal Reserve, which drove down bond prices. None of this seemed to concern the equity market. Strong money flows propelled equity prices to new heights. By mid-year the Bond Buyer Municipal Bond Index dropped by 6.7% from year end 1995, while the Dow Jones Industrial Average posted a 10.5% advance. No doubt some investors shifted funds from bonds to equities in the period. This weakened the entire fixed income market, and eventually made equities expensive relative to bonds by most measures. We were disappointed by the collapse of budget negotiations, but view this as a buying opportunity in the fixed income markets. After all, despite the political stalemate, policies toward deficit reduction remain firmly entrenched, and the deficit continues to shrink both absolutely and as a share of the economy. Meanwhile, while the economy is continuing to grow, this growth is moderate and noninflationary. For these reasons we have not thought the Federal Reserve would tighten credit by raising short term interest rates. But even if the Fed were so inclined, any tightening is likely to be minor, and not indicative of a trend. Given this, the Fund's portfolio was positioned for a continued solid bond market in 1996. A large portion of the Fund's assets, relative to other Funds with similar investment objectives, were in municipal bonds having a high degree of sensitivity to changes in interest rates. In addition, the Fund borrows more than other Funds with similar investment objectives, paying short term interest rates to buy higher yielding long term municipal bonds. Borrowing also increases the Fund's sensitivity to interest rates. This approach worked well in 1995. However, it was disadvantageous in the first half of this year. Our expectaton is that it will be beneficial going forward if the bond market climate improves as we anticipate. Moreover, municipals face an extremely favorable net supply condition going forward as bond calls, redemptions, prepayments, and coupon payments will exceed the amount of new municipal bond issuance in the next year. Thus, if there is any rechanneling of funds out of equities and into fixed income securities, a dramatic improvement in municipal bond prices could be expected. Additionally, California state and municipal bonds may do especially well as California's credit worthiness has improved with a favorable resolution of the Orange County bankruptcy situation. We thank you for your continued trust, and we look forward to serving you in the future. Sincerely, Dr. Vincent J. Malanga President 1 The California Muni Fund Portfolio Composition June 30, 1996 CHART GOES HERE FIXED COUPON BONDS FCLT - Long Term (maturity + 15 years) (includes long zero coupons) FCSI - Short or Intermediate Term - (maturity -15 years) (includes zero coupon bonds) VARIABLE RATE BONDS RIB (Residential Interest Bond) type inverse floaters. These are leveraged bonds whose coupon varies inversely with rates on short term companion issues, and whose value will fluctuate by some multiple of the fluctuations in value of a fixed rate bond with the same maturity and coupon as the underlying bond. LRIB - Long Term (maturity = 15 years) SRIB - Short or Intermediate Term (- 15 year maturity) IN (Index) based inverse floaters are bonds whose interest coupons vary inversely with an index of short term interest rates and then revert to a fixed rate mode. The duration and fluctuations on these bonds will be similar to fixed rate bonds with the same maturity. INLT - Long Term (maturity + 15 years) INSI - Short or Intermediate Term (maturity - 15 years) +If a security has a split rating, the highest applicable rating is used, including published ratings on identical credits for individual securities not individually rated. 2 (Left column) THE CALIFORNIA MUNI FUND STATEMENT OF ASSETS AND LIABILITIES June 30, 1996 (Unaudited) - ------------------------------------------------------------------------------- ASSETS Cash ........................................................... $ 56,804 Investment in securities at value (cost $16,541,660) .................................. 15,992,991 Receivables Interest ..................................................... 253,373 Capital Shares Purchased ..................................... 10,000 ----------- Total assets ........................................... 16,313,168 ----------- LIABILITIES Dividends payable .............................................. 15,126 Accrued expenses and other payables ............................ 116,428 ----------- Total liabilities ...................................... 131,554 ----------- NET ASSETS consisting of: Accumulated net realized loss ..................... $ (338,412) Unrealized depreciation of securities ............. (548,669) Paid-in-capital applicable to 2,079,329 shares of beneficial interest (Note 4) ................. 17,068,695 ----------- ----------- $16,181,614 =========== NET ASSET VALUE PER SHARE ........................................ $7.78 ===== (Right Column) STATEMENT OF OPERATIONS For the Six Months Ended June 30, 1996 (Unaudited) - ------------------------------------------------------------------------------- INVESTMENT INCOME Interest income ..................................... $ 579,096 EXPENSES (Notes 2 and 3) Management fee ...................................... $35,394 Custodian and accounting fees ....................... 31,288 Transfer agent fees ................................. 16,616 Professional fees ................................... 55,290 Printing and postage ................................ 3,450 Interest ............................................ 38,511 Distribution expenses ............................... 35,394 Shareholder communication ........................... 7,000 Trustees' fees ...................................... 3,438 Miscellaneous ....................................... 2,575 ------- Total expenses ............................... 228,956 ----------- Net investment income ........................ 350,140 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain on investments .................... 34,840 Unrealized depreciation of investments for the period ........................ (1,316,311) ----------- Net loss on investments ..................... (1,281,471) ----------- NET DECREASE IN NET ASSETS FROM OPERATIONS ............ $ (931,331) =========== (Bottom) STATEMENT OF CHANGES IN NET ASSETS - ------------------------------------------------------------------------------- Six Months Ended Year Ended June 30, 1996 December 31, (Unaudited) 1995 ------------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income ........................... $ 350,140 $ 678,642 Net realized gain on investments ................ 34,840 152,418 Unrealized appreciation (depreciation) of investments for the period .................... (1,316,311) 3,192,187 ----------- ----------- Net increase (decrease) in net assets from operations .......................... (931,331) 4,023,247 DIVIDENDS PAID TO SHAREHOLDERS FROM Investment income ............................... (350,140) (678,642) CAPITAL SHARE TRANSACTIONS (Note 4) ............... 4,840,753 (1,279,945) ----------- ----------- Total increase ................... 3,559,282 2,064,660 NET ASSETS: Beginning of period ............................. 12,622,332 10,557,672 ----------- ----------- End of period ................................... $16,181,614 $12,622,332 =========== =========== See Notes to Financial Statements. 3 THE CALIFORNIA MUNI FUND STATEMENT OF INVESTMENTS June 30, 1996 (Unaudited) - -------------------------------------------------------------------------------
Principal Market Amount Issue(degree)(degree)(degree) Type(degree) Rating(degree)(degree) Value ------ ----------------------------- ------------ ---------------------- ------- $ 100,000 #Arvin Development Corporation, COP, RB, 8.75, 9/01/18 ............ FCLT NR $ 24,013 9,395,000 ++Bakersfield, COP, ETM, CAB, 4/15/21 ............................. FCLT AAA 2,127,498 200,000 ++Beverly Hills, PFA, RB, IFRN*, MBIA Insured, 7.52, 6/01/15 ....... LRIB AAA 172,790 100,000 CSAC Finance Corp, COP, Sutter County Health Facilities Project, 7.80, 1/01/21 ....................................... FCLT BAA 101,614 1,020,000 California HFA, Valley Presbyterian Hospital Project, RB, Series A, 9.00, 5/01/12 ................................... FCLT BB 1,031,424 500,000 California Housing Finance Authority, RB, Series A, MBIA Insured, 5.70, 8/01/10 .................................... FCSI AAA 502,140 40,000 California HFA, Pomona Valley Community Hospital Project, Series A, 7.00, 1/01/17 ........................... FCLT A- 40,540 1,100,000 California Pollution Control Financing, Burney Forest Project, LOC National Westminster, AMT, VRDN+, 3.65, 7/01/96 ................................................. VRDN AAA 1,100,000 300,000 ++California Statewide Communities Development Authority, Cedars Sinai Medical Project, COP, RB, IFRN*, 7.07, 11/01/15 ....................................................... LRIB A1 218,487 15,000 Corona City, California Redevelopment Authority, SFRM, RB, 9.00, 11/15/12 ..................................... FCLT A 15,151 300,000 East Bay, Wastewater System Project, RB, Refunding, AMBAC Insured, IFRN*, 7.07, 6/01/20 .......................... LRIB AAA 248,754 500,000 Foothill / Eastern Transportation Corridor Agency, Toll Road Revenue, CAB, 1/01/26 ............................. FCLT BAA 66,975 250,000 Hawthorne, California Redevelopment Authority, TAR, 6.75, 9/01/24 .................................................. FCLT BAA 254,943 200,000 Lake Elsinore, USD, Refunding, COP, 6.90, 2/01/20 ............. FCLT BBB 207,852 15,000 Los Angeles, Home Mortgage, RB, 9.00, 6/15/18 ................. FCLT A 15,455 2,000,000 Los Angeles Regional Airports Improvement Corp, LOC Societe Generale, VRDN+, 3.65, 12/01/25 ................. VRDN A1+ 2,000,000 300,000 Los Angeles, Multiple Capital Facilities Project III, COP, IFRN*, 8.16, 11/01/11 ..................................... INLT BAA1 298,212 1,264,498 Los Angeles, Housing Finance Authority, MFH Project C, CAB, RB, 12.00, 12/01/29 ..................................... FCLT NR 1,264,498 35,000 Modesto, Valley Oak Project, RB, 10.60, 5/01/09 ................. FCSI NR 36,057 350,000 ++New Haven, USD, AMBAC Insured, CAB, 8/01/16 ................... FCLT AAA 104,045 250,000 ++Northern California Power Agency, Multiple Capital Facilities, RB, MBIA Insured, IFRN*, 9.13, 8/01/25 ............. LRIB AAA 267,438 250,000 ++Northern California Transmission Agency, CA-ORE Transmission Project, RB, MBIA Insured, IFRN*, 4/29/24 ........ LRIB AAA 215,188 250,000 Orange County, LTA, RB, IFRN*, 6.49, 2/14/11 ................... LRIB AA 252,725 250,000 Orange County, LTA, RB, IFRN*, 6.84, 2/14/11 .................. LRIB AAA 260,910 250,000 ++Palmdale, SFRM, Series A, CAB, 3/01/17 ........................... FCLT AAA 74,683 200,000 Panoche, Water District, COP, 7.50, 12/01/08 .................. FCSI BBB 215,604 250,000 ++Rancho, Water District Financing Authority, RB, Prerefunded @104, AMBAC Insured, IFRN*, 8/17/21 .............. LRIB AAA 299,975 250,000 ++Redding, Electric System, COP, Series A, FGIC Insured, IFRN*, 7.28, 6/01/19 ......................................... LRIB AAA 228,910 565,000 ++Rio, USD,COP, FSA Insured, Convertible, CAB, 9/01/03 .......... FCLT AAA 379,590 175,000 Riverside, HFA, Riverside Apartment Project, RB, 7.87,1/01/19 ... FCSI BB- 181,587 2,000,000 ++Salinas, Redevelopment Agency, TAB, CGIC Insured, Central City Project, CAB, 11/01/22 ............................ FCLT AAA 412,900 500,000 ++San Bernardino, COP, Series B, MBIA Insured, IFRN*, 7.40, 7/01/16 .................................................. INLT AAA 478,245 900,000 San Bernardino, COP, Series PA-38, MBIA Insured, IFRN*, 13.91, 7/01/16 ................................................. LRIB AAA 725,202
4 THE CALIFORNIA MUNI FUND STATEMENT OF INVESTMENTS (continued) June 30, 1996 (Unaudited) - -------------------------------------------------------------------------------
$ 200,000 ++San Diego Water Authority, COP, FGIC Insured, IFRN*, 7.39, 4/22/09 ........................................................ LRIB AAA $ 207,790 1,440,000 San Jose, California Redevelopment Authority, TAB, MBIA Insured, IFRN*, 9.15, 8/01/16 ............................... LRIB AAA 991,066 250,000 ++Southern California Public Power Authority, FGIC Insured, IFRN*, 6.38, 7/01/17 ........................................... LRIB AAA 212,293 500,000 ++Southern California Public Power Authority, AMBAC Insured, IFRN*, 6.18, 7/01/15 ............................... LRIB AAA 412,140 105,000 ++Tri City, Housing Finance Authority, FNMA/GNMA Collateralized, AMT, 6.45, 12/01/28 .......................... FCLT AAA 108,309 130,000 Tri City, Housing Finance Authority, FNMA/GNMA Collateralized, AMT, Series B, 6.30, 12/01/28 .................. FCLT AAA 132,348 100,000 Upland, Housing Finance Authority, RB, 7.850, 7/01/20 ............ FCLT BBB 105,646 ----------- Total Investments (Cost $16,541,660@) ................. $15,992,991 =========== *Inverse Floating Rate Notes (IFRN) are instruments whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index. (see Note 5) Coupon shown is as of June 30, 1996. +Variable Rate Demand Notes (VRDN) are instruments whose interest rate charges on a specific date and/or whose interest rates vary with changes in a designated base rate. Coupons shown are at June 30, 1996. @Cost is the same for Federal income tax purposes. ++Approximately $5,826,678 market value of securities are segregated in whole or in part as collateral securing a line of credit. (dd)Non-income producing security. Legend (degree)Type FCLT -Fixed Coupon Long Term FCSI -Fixed Coupon Short or Intermediate Term LRIB -Residual Interest Bond Long Term SRIB -Residual Interest Bond Short or Intermediate Term INLT -Indexed Inverse Floating Rate Bond Long Term INSI -Indexed Inverse Floating Rate Bond Short or Intermediate Term VRDN -Variable Rate Demand Note (degree)(degree)Ratings If a security has a split rating the highest applicable rating is used, including published ratings on identicial credits for individual securities not individually rated. NR -Not Rated (degree)(degree)(degree)Issue AMBAC American Municipal Bond Assurance Corporation AMT Alternative Minimum Tax CAB Capital Appreciation Bond CGIC Capital Guaranty Insurance Company COP Certificate of Participation ETM Escrowed to Maturity FGIC Financial Guaranty Insurance Corporation FNMA Federal National Mortgage Association FSA Financial Security Assurance, Inc. GNMA Government National Mortgage Association HFA Health Facilities Authority LOC Letter of Credit LTA Local Transportation Authority MBIA Municipal Bond Insurance Assurance Corporation MFH Multi Family Housing PFA Public Financing Authority RB Revenue Bond SFRM Single Family Residential Mortgage TAB Tax Allocation Bond TAR Tax Allocation Refunding USD Unified School District
5 (Left column) THE CALIFORNIA MUNI FUND NOTES TO FINANCIAL STATEMENTS (continued) - ------------------------------------------------------------------------------- 1. Significant Accounting Policies The California Muni Fund (the Fund) was organized as a Massachusetts business trust and is registered as an open end management investment company under the Investment Company Act of 1940. The Fund's objective is to provide as high a level of income that is excluded from gross income for federal income tax purposes and exempt from California personal income tax as is consistent with the preservation of capital. The following is a summary of significant accounting policies followed in the preparation of its financial statements: Valuation of Securities-The Fund's portfolio securities are valued on the basis of prices provided by an independent pricing service when, in the opinion of persons designated by the Fund's trustees, such prices are believed to reflect the fair market value of such securities. Prices of non-exchange traded portfolio securities provided by independent pricing services and generally determined without regard to bid or last sale prices but take into account institutional size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. Securities traded or dealt in upon a securities exchange and not subject to restrictions against resale as well as options and futures contracts listed for trading on a securities exchange or board of trade are valued at the last quoted sales price, or, in the absence of a sale, at the mean of the last bid and asked prices. Options not listed for trading on a securities exchange or board of trade for which over-the-counter market quotations are readily available are valued at the mean of the current bid and asked prices. Money market and short-term debt instruments with a remaining maturity of 60 days or less will be valued on an amortized cost basis. Securities not priced in a manner described above and other assets are valued by persons designated by the Fund's trustees using methods which the trustees believe accurately reflects fair value. Federal Income Taxes-It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to "regulated investment companies" and to distribute all of its taxable and tax exempt income to its shareholders. Therefore, no provision for federal income tax is required. Distributions-The Fund declares dividends daily from its net investment income and pays such dividends on the last business day of each month. Distributions of net capital gains, if any, realized on sales of investments are made annually, as declared by the Fund's Board of Trustees. Dividends are reinvested at the net asset value unless shareholders request payment in cash. (Right column) General-Securities transactions are accounted for on a trade date basis. Interest income is accrued as earned. Premiums and original issue discount on securities purchased are amortized over the life of the respective securities. Realized gains and losses from the sale of securities are recorded on an identified cost basis. Accounting Estimates-The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. 2. Investment Advisory Fees and Other Transactions With Affiliates Under a Management Agreement, the Fund pays an investment management fee to Fundamental Portfolio Advisors, Inc. (the Manager) equal to 0.5% of the Fund's average daily net asset value up to $100 million and decreasing by .02% of each $100 million increase in net assets down to 0.4% of net assets in excess of $500 million. Under the Agreement, the Manager is required to reimburse to the Fund an amount not exceeding the amount of fees payable to the Manager under the Agreement for any fiscal year, if, and to the extent that the aggregate operating expenses of the Fund for any fiscal year (including the fees payable to the Manager, but excluding interest expense, taxes, brokerage fees and commissions, extraordinary expenses beyond the control of the Manager and other fees and expenses properly excludable from the definition of "aggregate annual expenses" under California law) exceed any expense limitation imposed under California law. No such reimbursements was required during the six months ended June 30, 1996. Pursuant to a Distribution Plan (the Plan) adopted pursuant to Rule12b-1, promulgated under the Investment Company Act of 1940, the Fund may pay certain promotional and advertising expenses and may compensate certain registered securities dealers and financial institutions for services provided in connection with the processing of orders for purchase or redemption of the Fund's shares and furnishing other shareholder services. Payments by the Fund shall not in the aggregate, in any fiscal year, exceed 0.5% of the average daily net assets of the Fund. Under a Distribution Agreement with Fundamental Service Corporation (FSC), an affiliate of the Manager, amounts are paid under the Plan to compensate FSC for the services it provides and the expenses it bears in distributing the Fund's shares to investors. Fees for those services aggregated $11,200 for the six months ended June 30, 1996. 6 (Left column) THE CALIFORNIA MUNI FUND NOTES TO FINANCIAL STATEMENTS (continued) - ------------------------------------------------------------------------------- The Fund compensates Fundamental Shareholder Services, Inc., an affiliate of the Manager, for the services it provides under a Transfer Agent and Service Agreement. Transfer agent fees for the six months ended June 30, 1996 are set forth in the statement of operations. 3. Trustees' Fees All of the Trustees of the Fund are also directors or trustees of two other affiliated mutual funds for which the Manager acts as investment adviser. For services and attendance at board meetings and meetings of committees which are common to each Fund, each Trustee who is not affiliated with the Manager is compensated at the rate of $6,500 per quarter pro rated among the funds based on their respective average net assets. 4. Shares of Beneficial Interest As of June 30, 1996 there were an unlimited number of shares of beneficial interest (no par value) authorized and capital paid in amounted to $17,068,695. Transactions in shares were as follows: Six Months Ended Year Ended June 30, 1996 December 31, 1995 ---------------- ----------------- Shares Amount Shares Amount ------ ------ ------ ------ Shares sold .............. 13,399,158 $110,715,165 7,881,857 $66,180,540 Shares issued on reinvestment of dividends .............. 30,786 251,496 60,506 494,825 Shares redeemed .......... (12,767,460) (106,125,908) (8,012,453) (67,955,310) ---------- ------------- ---------- ----------- Net increase (decrease) .. 662,484 $ 4,840,753 (70,090) ($1,279,945) ========== ============= ========== =========== 5. Complex Securities and Investment Transactions Inverse Floating Rate Notes: The Fund invests in variable rate securities commonly called "inverse floaters". The interest rates on these securities have an inverse relationship to the interest rate of other securities or the value of an index. Changes in interest rate on the other security or index inversely affect the rate paid on the inverse floater, and the inverse floater's price will be more volatile than that of a fixed rate bond. Certain interest rate movements and other market factors can substantially affect the liquidity of certain IFRN's. Investment Transactions: During the six months ended June 30, 1996, the cost of purchases and proceeds from sales of investment securities, other than short-term obligations, were $1,099,546 and $1,704,123 respectively. (Right Column) As of June 30, 1996 the net unrealized depreciation of portfolio securities amounted to $548,669 composed of unrealized appreciation of $390,240 and unrealized depreciation of $938,909. 6. Line of Credit The Fund has a line of credit agreement with its custodian bank collateralized by portfolio securities. Borrowings under this agreement bear interest linked to the bank's prime rate. The maximum month end and the average borrowings outstanding during the period ended June 30, 1996, were $2,000,000 and $989,000, respectively. 7. Litigation The Fund was named as a defendant in a class action lawsuit: Sedrak v. The California Muni Fund, et al., United States District Court, Southern District of California (which was transferred to the United States District Court, Southern District of New York). Also named as defendants in this action were the Manager, Fundamental Service Corporation, and alleged control persons of the Fund. The suit was filed in August of 1994 and alleged that the Fund invested in certain financial instruments, primarily "derivatives," that were inconsistent with the Fund's stated objectives as set forth in its prospectus. The suit claimed that defendants are liable under Sections, 11 and/or 12 of the Securities Act of 1933 because there existed material misstatements or omissions in the prospectus that rendered it misleading. This suit also claimed that defendants are liable under Section 10(b) of the Securities and Exchange Act of 1934 (and Rule 10b-5 promulgated thereunder) for making material misstatements or omissions in connection with the purchase or sale of securities. The action also alleged common law claims, including fraud. By Stipulation of Settlement dated April 5, 1996, a settlement was reached with the plaintiffs. By Final Judgement and Order of Consolidation and Dismissal with Prejudice dated July 17, 1996, the Stipulation of Settlement was approved by the Court. The settlement requires a payment of approximately $500,000 or more under certain future circumstances by the Fund's investment adviser to the class members as set forth in the Stipulation of Settlement. Under no circumstances will the settlement result in any liability or cost to the Fund or its shareholders. The settlement has, however, resulted in the dismissal of the lawsuit and a release from liability issuing in favor of all defendants including the Fund. The Stipulation of Settlement also expressly states that the settlement does not constitute an admission of wrongdoing by the Fund or any of the other defendants. 7 THE CALIFORNIA MUNI FUND NOTES TO FINANCIAL STATEMENTS (continued) - ------------------------------------------------------------------------------- 8. Selected Financial Information
Six Months Years Ended December 31, Ended -------------------------------------------- June 30, 1996 1995 1994 1993 1992 ------------- ---- ---- ---- ---- (Unaudited) PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net Asset Value, Beginning of Period ..................... $ 8.91 $ 7.10 $ 9.49 $ 8.81 $ 8.80 ------ ------ ------ ------ ------ Income from investment operations: Net investment income .................................... .210 .419 .553 .563 .604 Net realized and unrealized gains (losses) on investments ......................................... (1.130) 1.810 (2.390) .876 .010 ------ ------ ------ ------ ------ Total from investment operations ............... (.920) 2.229 (1.837) 1.439 .614 ------ ------ ------ ------ ------ Less Distributions: Dividends from net investment income ..................... .210 (.419) (.553) (.563) (.604) Dividends from net realized gains ........................ - - - (.196) - ------ ------ ------ ------ ------ Total distributions ............................ .210 (.419) (.553) (.759) (.604) ------ ------ ------ ------ ------ Net Asset Value, End of Period ........................... $ 7.78 $ 8.91 $ 7.10 $ 9.49 $ 8.81 ====== ====== ====== ====== ====== Total Return ............................................. (10.41%) 32.02% (19.89%) 16.80% 7.23% RATIOS/SUPPLEMENTAL DATA Net Assets, End of Period (000) .......................... 16,182 12,622 10,558 16,280 11,549 Ratios to Average Net Assets (annualized): Interest expense ....................................... .54% .39% .98% .39% .16% Operating expenses ..................................... 2.69% 2.81% 2.50% 1.77%* 1.47% * Total expenses ................................. 3.23% 3.20% 3.48% 2.16%* 1.63%* Net investment income .......................... 4.93% 5.02% 6.80% 6.04%* 6.87%* Portfolio turnover rate .................................. 8.88% 53.27% 15.88% 51.26% 18.91% BANK LOANS Amount outstanding at end of period (000 omitted) ........ $ 0 $ 0 $1,292 $3,714 $ 0 Average amount of bank loans outstanding during the period (000 omitted) ................................... $ 989 $ 642 $1,690 $ 958 274 Average number of shares outstanding during the period (000 omitted) ........................................... 1,186 1,635 1,711 1,517 1,214 Average amount of debt per share during the period ....... $ .60 $ .39 $ .95 $ .63 $ .23 *These ratios are after expense reimbursement of .50% for each of the years ended December 31, 1993, and 1992.
8 THE CALIFORNIA MUNI FUND 90 Washington Street New York NY 10006 1-800-322-6864 Independent Accountants McGladrey & Pullen, LLP New York, New York 10017 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. The report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. THE CALIFORNIA MUNI FUND Semi-Annual Report June 30, 1996 (Unaudited) THE CALIFORNIA MUNI FUND Double Tax-Free Investing FUNDAMENTAL Fundamental Family of Funds -----END PRIVACY-ENHANCED MESSAGE-----