- -------------
ANNUAL REPORT
- -------------
1996
1996
1996
1996
1996
Smith Barney
Muni Funds
Georgia Portfolio
Ohio Portfolio
Pennsylvania Portfolio
-----------------------
March 31, 1996
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- -----------------------------------------
Georgia, Ohio and Pennsylvania Portfolios
- -----------------------------------------
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney Muni
Funds -- Georgia, Ohio and Pennsylvania Portfolios. For your convenience, we
have summarized the period's prevailing economic and market conditions below and
outlined the various investment strategies employed by the Portfolios during
this time. A detailed summary of performance and current holdings for each
Portfolio can be found in the appropriate sections that follow in the annual
report.
Market and Economic Overview
Interest rates declined steadily over the first nine months of the fiscal year
in response to low inflation and very sluggish economic growth. Over the last
three months of the fiscal year, however, interest rates rose sharply as
economic reports pointed to much stronger growth than was expected by most
market participants and concerns over the stalemated federal budget negotiations
continued.
In the past few months, the volatility of the municipal bond market has
increased and municipal bond yields have reached their highest levels in over a
year. However, despite continued uncertainty over the direction of short-term
interest rates, there were some signs of a possible municipal bond market
turnaround as the higher yields offered by municipal bonds began to attract a
growing number of individual and institutional investors. In our view, municipal
bonds represent good value and now is the time for individuals to consider
participating in the tax-exempt market.
Georgia Economic Highlights
Georgia continues to enjoy a high credit standing from the major bond rating
agencies because of the state's sound debt financing, solid financial operations
and vibrant economic growth. Georgia has received a triple-A rating from Moody's
Investors Services, Inc. and a double-A+ rating from Standard & Poor's
Corporation, two major credit reporting and bond rating agencies. In addition,
Georgia has already begun to reap significant economic and public relations
benefits from the upcoming Summer Olympic games in Atlanta. Although there
remains some concern about Georgia's economy after the Olympics is over, we
believe the State's long-term prospects are positive because of its pro-business
environment and attractive quality of life.
1
<PAGE>
Georgia Portfolio's Performance and Investment Strategy
For the year ended March 31, 1996, the Georgia Portfolio generated a total
return of 9.67% for Class A shares which compares favorably with its Lipper
Analytical Services, Inc. peer group average of 7.44%. (Lipper Analytical
Services, Inc. is a major fund tracking organization.)
The average weighted maturity of the Georgia Portfolio was just under 19 years.
During the past year, the Georgia Portfolio favored single-family mortgages and
multi-family housing issues (roughly 15% of its assets) and approximately 15% of
the Portfolio was invested in bonds that are backed by U.S. government
obligations. With the exception of utilities issues, which were roughly 12% of
the Portfolio, the remaining sectors the Georgia Portfolio owns were all less
than 10% of total assets. In periods of market volatility such as we are
currently experiencing, the Georgia Portfolio's high-quality orientation should
help it to generate an attractive level of income while helping to minimize the
volatility of its principal.
Ohio Economic Highlights
Ohio has maintained its high credit ratings of double-A from Moody's Investors
Services, Inc. and double-A from Standard & Poor's Corporation, respectively.
Ohio has begun to attract new businesses with offers of tax credits and tax
waivers designed to help stem the erosion of its manufacturing base. In
addition, the State remains committed to its long-range strategy of diversifying
away from the cyclical heavy equipment industry and creating new employment in
the fast-growing services and high technology industries.
We expect that Ohio's economy will continue its modest recovery as many of its
manufacturers retool their facilities to improve efficiency and expand their
reach into promising foreign markets. Moreover, officials in Ohio have begun to
see some tangible benefits from their past efforts to control spending and
reduce the size of State government.
Ohio Portfolio's Performance and Investment Strategy
For the year ended March 31, 1996, the Ohio Portfolio had a total return of
7.65% for Class A shares, which exceeded its Lipper Analytical Services, Inc.
peer group average of 6.74%. With respect to the Ohio Portfolio's investment
strategy, we have maintained a high-quality portfolio with more than 89% in
investment-grade securities. (An investment-grade security is a security with a
rating of BBB/Baa or better from Standard & Poor's Corporation or Moody's
Investors Services, Inc.) As of March 31, 1996, the Ohio Portfolio's average
weighted maturity was approximately 23 years. The Portfolio focused on school,
hospital and pollution-control issues because we believe they offered good
value. In turbulent markets, the Portfolio's emphasis on high-quality
2
<PAGE>
issues should generally provide investors with a competitive stream of income
while helping to keep its principal relatively stable.
Pennsylvania Economic Highlights
Pennsylvania currently has an "A1" rating from Moody's Investors Services Inc.
and double-A rating from Standard & Poor's Corporation. Although the Keystone
State has struggled in the past few years primarily because of corporate
downsizing, the Commonwealth has since followed sound financial management
practices and, therefore, we are generally bullish on its future economic
prospects.
From the perspective of encouraging new businesses, Pennsylvania has made good
progress. For example, Pennsylvania's 12.25% corporate tax rate was one of the
highest in the U.S. until Governor Casey's administration implemented a
phased-in tax cut that will reduce the marginal corporate tax rate to 9.99% by
1997. Moreover, Pennsylvania's new governor, Thomas Ridge, wants to cut
corporate taxes even further.
Pennsylvania Portfolio's Performance
and Investment Strategy
For the year ended March 31, 1996, the Pennsylvania Portfolio posted a total
return of 8.08% for Class A shares and outperformed its Lipper peer group
average of 7.46%.
The Pennsylvania Portfolio followed a high-quality investment approach and had
excellent call protection. The Portfolio's average weighted maturity was just
over 19 years.
The Pennsylvania Portfolio was well diversified among twelve sectors and favored
hospital issues (just over 17%), industrial development revenue bonds and
general obligation issues (15%), and housing issues (roughly 10%) because these
issues, in our view, offered good upside potential with minimal risk.
In order to provide investors with an attractive level of income while helping
to minimize its net asset value volatility, the Pennsylvania Portfolio will
continue to emphasize high-quality issues that are broadly diversified by sector
and good call protection. We believe this is a prudent investment strategy,
especially in light of the turbulent market conditions of the past few months.
Outlook
While the day-to-day volatility in the fixed income markets is likely to
continue, the sharp increase in interest rates over the last two months has made
long-term municipal bonds more attractive on a relative basis. In our view,
competitive pressures in the global economy and changing demographics should
help to keep inflation in check. (Labor costs constitute roughly two-thirds of
the total
3
<PAGE>
cost of all finished goods.) We believe long-term municipal bonds currently
represent good value and offer investors a healthy risk premium over inflation.
In addition, with long-term municipal bonds providing roughly 90% of the yield
available on comparable maturity Treasury securities, investors are well
compensated for the potential risks of all but the most radical tax reform
proposals currently in circulation.
It was not too long ago that the "flat tax" issue was touted as potentially the
biggest issue of the upcoming Presidential election in November. The exit of
Republican candidate Steven Forbes from the Presidential race has caused the
flat tax to recede from the political debate. However, between now and November,
tax reform again could move into the political spotlight as the campaign
intensifies.
In closing, we believe there is little chance that radical tax reforms will be
enacted. In our view, the municipal bond market remains quite attractive and the
Portfolios are well positioned in the current environment. Thank you for
investing in the Smith Barney Muni Funds -- Georgia, Ohio and Pennsylvania
Portfolios. We look forward to helping you achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman and Vice President and
Chief Executive Officer Investment Officer
Georgia and
Pennsylvania Portfolios
/s/ Lawrence T. McDermott
Lawrence T. McDermott
Vice President and
Investment Officer
Ohio Portfolio
May 14, 1996
4
<PAGE>
Smith Barney Muni Funds
Georgia Portfolio
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns (1)
================================================================================
3/31/96 $12.10 $12.50 $0.70 $0.05 9.67%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.00 12.10 0.62 0.00 6.29+
================================================================================
Total $1.32 $0.05
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns (1)
================================================================================
3/31/96 $12.11 $12.50 $0.65 $0.05 9.09%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.27 12.11 0.49 0.00 2.88+
================================================================================
Total $1.14 $0.05
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns (1)
================================================================================
3/31/96 $12.09 $12.49 $0.64 $0.05 9.05%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.06 12.09 0.56 0.00 5.11+
================================================================================
Total $1.20 $0.05
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
5
<PAGE>
Smith Barney Muni Funds
Georgia Portfolio
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge (1)
----------------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/96 9.67% 9.09% 9.05%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 8.00 6.64 7.19
================================================================================
With Sales Charge (2)
----------------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/96 5.33% 4.59% 8.05%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 5.82 4.51 7.19
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge (1)
----------------------------------------
Class A (Inception* through 3/31/96) 16.59%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/96) 12.23
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/96) 14.62
================================================================================
(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 C
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 sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed less than
one year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are April 4, 1994, June 15,
1994 and April 14, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
6
<PAGE>
Smith Barney Muni Funds
Georgia Portfolio
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the Georgia Portfolio vs. Lehman Muni Bond Fund Index+
- --------------------------------------------------------------------------------
April 1994 -- March 1996
[The table below was represented as a line graph in the printed material.]
Lehman Muni
Georgia Bond Fund
Date Portfolio Index
---- --------- -----
4/4/94 9,600 10,000
9/94 9,662 10,147
3/95 10,193 10,903
9/95 10,778 11,405
3/96 11,222 11,733
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on April 4, 1994, assuming deduction of the maximum 4.00% sales
charge at the time of investment and reinvestment of dividends and capital
gains, if any, at net asset value through March 31,1996. The Lehman Muni
Bond Fund Index is a broad based, total return index, composed of 8,000
actual bonds which are all investment grade, fixed rate, long term
maturities (greater than two years) and are selected from issues larger
than $50 million dated since January, 1984. The index is unmanaged and is
not subject to the same management and trading expenses of a mutual fund.
The performance of the Portfolio'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 returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
7
<PAGE>
Smith Barney Muni Funds
Ohio Portfolio
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns (1)
================================================================================
3/31/96 $11.97 $12.20 $0.67 $0.00 7.65%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.00 11.97 0.48 0.00 4.04+
================================================================================
Total $1.15 $0.00
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns (1)
================================================================================
3/31/96 $11.96 $12.18 $0.62 $0.00 7.10%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.02 11.96 0.43 0.00 3.31+
================================================================================
Total $1.05 $0.00
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns (1)
================================================================================
3/31/96 $11.96 $12.19 $0.61 $0.00 7.14%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.02 11.96 0.43 0.00 3.28+
================================================================================
Total $1.04 $0.00
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
8
<PAGE>
Smith Barney Muni Funds
Ohio Portfolio
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge (1)
----------------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/96 7.65% 7.10% 7.14%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 6.49 5.79 5.75
================================================================================
With Sales Charge (2)
----------------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/96 3.33% 2.60% 6.14%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 4.11 3.64 5.75
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge (1)
----------------------------------------
Class A (Inception* through 3/31/96) 11.99%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/96) 10.64
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/96) 10.56
================================================================================
(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 C
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 sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed less than
one year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are June 13, 1994, June 14,
1994 and June 14, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
9
<PAGE>
Smith Barney Muni Funds
Ohio Portfolio
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the Ohio Portfolio vs. Lehman Muni Bond Fund Index+
- --------------------------------------------------------------------------------
June 1994 -- March 1996
[The table below was represented as a line graph in the printed material.]
Lehman Muni
Ohio Bond Fund
Date Portfolio Index
---- --------- -----
6/13/94 9,600 10,000
9/94 9,392 10,108
3/95 9,981 10,860
9/95 10,468 11,360
3/96 10,744 11,687
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on June 13, 1994, assuming deduction of the maximum 4.00% sales
charge at the time of investment and reinvestment of dividends and capital
gains, if any, at net asset value through March 31,1996. The Lehman Muni
Bond Fund Index is a broad based, total return index, composed of 8,000
actual bonds which are all investment grade, fixed rate, long term
maturities (greater than two years) and are selected from issues larger
than $50 million dated since January, 1984. The index is unmanaged and is
not subject to the same management and trading expenses of a mutual fund.
The performance of the Portfolio'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 returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
10
<PAGE>
Smith Barney Muni Funds
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns (1)
================================================================================
3/31/96 $12.40 $12.62 $0.72 $0.05 8.08%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.00 12.40 0.62 0.00 8.82+
================================================================================
Total $1.34 $0.05
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns (1)
================================================================================
3/31/96 $12.39 $12.61 $0.66 $0.05 7.61%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.35 12.39 0.48 0.00 4.43+
================================================================================
Total $1.14 $0.05
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns (1)
================================================================================
3/31/96 $12.39 $12.61 $0.66 $0.05 7.56%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.00 12.39 0.56 0.00 8.14+
================================================================================
Total $1.22 $0.05
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
11
<PAGE>
Smith Barney Muni Funds
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge (1)
----------------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/96 8.08% 7.61% 7.56%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 8.49 6.74 7.89
================================================================================
With Sales Charge (2)
----------------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/96 3.73% 3.11% 6.56%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 6.28 4.59 7.89
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge (1)
----------------------------------------
Class A (Inception* through 3/31/96) 17.61%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/96) 12.32
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/96) 16.31
================================================================================
(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 C
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 sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed less than
one year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are April 4, 1994, June 20,
1994 and April 5, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
12
<PAGE>
Smith Barney Muni Funds
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the Pennsylvania Portfolio vs. Lehman Muni Bond Fund Index+
- --------------------------------------------------------------------------------
April 1994 -- March 1996
[The table below was represented as a line graph in the printed material.]
Lehman Muni
Pennsylvania Bond Fund
Date Portfolio Index
---- --------- -----
4/4/94 9,600 10,000
9/94 9,839 10,147
3/95 10,436 10,903
9/95 10,964 11,405
3/96 11,279 11,733
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on April 4, 1994, assuming deduction of the maximum 4.00% sales
charge at the time of investment and reinvestment of dividends and capital
gains, if any, at net asset value through March 31,1996. The Lehman Muni
Bond Fund Index is a broad based, total return index, composed of 8,000
actual bonds which are all investment grade, fixed rate, long term
maturities (greater than two years) and are selected from issues larger
than $50 million dated since January, 1984. The index is unmanaged and is
not subject to the same management and trading expenses of a mutual fund.
The performance of the Portfolio'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 returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
13
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
GEORGIA PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
Education -- 7.4%
<C> <C> <S> <C>
$ 250,000 AAA Cherokee County School, AMBAC-Insured, 5.875% due 2/1/09 $ 263,437
500,000 AAA Fulton County, Development Authority Revenue, (Clark Atlanta
University Project), CONNIE LEE-Insured, 5.375% due 1/1/20 461,250
600,000 AAA Marietta Development Authority Revenue, First Mortgage, Life College,
Series B, FSA-Insured, 5.750% due 9/1/14 593,250
- -------------------------------------------------------------------------------------------------------------------
1,317,937
- -------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 14.5%
325,000 AAA Cobb County Kennestone Hospital Authority Revenue, MBIA-Insured,
(Escrowed to Maturity with U.S. Government Securities),
7.750% due 2/1/07 372,125
1,875,000 Aaa* Colquitt County Development Authority Revenue, Sub-Series C,
(Escrowed to Maturity with U.S. Government Securities),
zero coupon due 12/1/21 342,187
485,000 AAA Puerto Rico Commonwealth Aqueduct & Sewer Authority Revenue,
(Escrowed to Maturity with U.S. Government Securities),
10.250% due 7/1/09 668,694
1,025,000 Aaa* Richmond County Development Authority, Sub-Series C, (Escrowed to
Maturity with U.S. Government Securities), zero coupon due 12/1/21 184,500
185,000 Aaa* Richmond County, Water and Sewer Revenue, (Escrowed to Maturity
with U.S. Government Securities), 9.875% due 4/1/02 218,300
300,000 AAA Tri City Hospital Authority Hospital Revenue, FGIC-Insured, (Escrowed
to Maturity with U.S. Government Securities), 10.250% due 7/1/06 420,750
2,000,000 Aaa* Washington, GA Wilkes Payroll Development Authority, (Escrowed to
Maturity with U.S. Government Securities), zero coupon
due 12/1/21(b) 360,000
- -------------------------------------------------------------------------------------------------------------------
2,566,556
- -------------------------------------------------------------------------------------------------------------------
General Obligation -- 9.1%
220,000 AA+ Georgia State GO, 6.800% due 3/1/11 251,625
750,000 BBB Guam Government GO, Series A, 5.375% due 11/15/13 675,000
750,000 A Puerto Rico Commonwealth GO, 5.400% due 7/1/25 689,063
- -------------------------------------------------------------------------------------------------------------------
1,615,688
- -------------------------------------------------------------------------------------------------------------------
Government Facilities -- 3.0%
500,000 AAA Puerto Rico Public Building Authority Revenue, Government Facilities,
Series A, AMBAC-Insured, 6.250% due 7/1/14 539,375
- -------------------------------------------------------------------------------------------------------------------
Hospitals -- 8.4%
500,000 Baa1* Fulco County Hospital Authority Revenue Anticipation Certificates,
Georgia Baptist Healthcare, Series A, 6.250% due 9/1/13 490,625
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
GEORGIA PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
<C> <C> <S> <C>
Hospitals -- 8.4% (continued)
$ 500,000 BBB Puerto Rico Industrial Tourist Educational, Medical & Environmental
Control Facility Finance Authority, (Ryder Memorial Hospital Project),
Series A, 6.700% due 5/1/24 $ 503,125
500,000 BBB+ Savannah Hospital Authority, Candler Hospital, 7.000% due 1/1/11 501,250
- -------------------------------------------------------------------------------------------------------------------
1,495,000
- -------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 7.4%
1,000,000 A Atlanta Urban Residential Finance Authority, Multi-Family Housing
Revenue, (Cascade Pines Housing Project), 6.250% due 9/1/10(b) 993,750
300,000 AAA De Kalb County Housing Authority Revenue Refunding, MBIA-Insured,
7.750% due 1/1/26 319,125
- -------------------------------------------------------------------------------------------------------------------
1,312,875
- -------------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 20.3%
250,000 A Cobb County Housing Authority Refunding, (Signature Place Project),
Series A, 6.875% due 10/1/17 255,625
1,000,000 AAA Fulton County Housing Authority, Single-Family Management Revenue,
Series A, GNMA-Collateralized, 6.600% due 3/1/28(b) 1,015,000
350,000 AA+ Georgia State Housing Finance Authority Revenue, Single-Family
Mortgage, Series A, FHA-Insured, 6.600% due 12/1/23(b) 357,000
345,000 AA+ Georgia State Residential Finance Authority, Home Ownership
Mortgage, Series A, FHA-Insured, 7.250% due 12/1/21(b) 365,700
Puerto Rico Housing Bank and Finance Agency:
500,000 BBB Kidder, 7.500% due 12/1/06 551,875
500,000 AAA Single-Family Mortgage, Afford Housing Mortgage, Portfolio I,
GNMA/FNMA-Collaterized, 6.250% due 4/1/29(b) 503,750
550,000 AAA Virgin Islands Housing Finance Authority, Single-Family Mortgage,
Series A, GNMA-Insured, 6.450% due 3/1/16(a) 554,125
- -------------------------------------------------------------------------------------------------------------------
3,603,075
- -------------------------------------------------------------------------------------------------------------------
Industrial Development -- 2.9%
500,000 A-1* Savannah Economic Development Authority, IDR, 6.150% due 3/1/17 513,125
- -------------------------------------------------------------------------------------------------------------------
Pollution Control -- 2.5%
400,000 AAA Burke County PCR, (Ogelthorpe Power Co. Vogtle Project),
MBIA-Insured, 7.500% due 1/1/03 440,500
- -------------------------------------------------------------------------------------------------------------------
Pre-Refunded(a) -- 1.5%
1,000,000 Aaa* Atlanta Urban Residential Finance Authority, Single-Family
Mortgage Revenue, (Escrowed with U.S. Government Securities
to 4/1/15 Call @ 85) zero coupon due 10/1/16 267,500
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
GEORGIA PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
<C> <C> <S> <C>
Public Facilities -- 1.5%
$ 250,000 AAA Butts County COP, MBIA-Insured, 6.750% due 12/1/14 $ 269,375
- -------------------------------------------------------------------------------------------------------------------
Short-Term(c) -- 3.9%
300,000 VMIG1 Burke County Authority PCR, Georgia Power Company,
3.750% due 4/1/25 300,000
400,000 A-1 Monroe County Development Authority, PCR Gulf Power Company,
3.750% due 9/1/24 400,000
- -------------------------------------------------------------------------------------------------------------------
700,000
- -------------------------------------------------------------------------------------------------------------------
Transportation -- 1.5%
250,000 AAA Metro Atlanta Rapid Transit Authority Revenue Refunding, Series P,
AMBAC-Insured, 6.250% due 7/1/20 267,188
- -------------------------------------------------------------------------------------------------------------------
Utilities -- 11.9%
500,000 A- Georgia Muni Gas Authority Revenue, (Southern Storage Gas Project),
6.300% due 7/1/09 528,750
500,000 AAA Georgia Muni Electric Authority Power Revenue, Series EE,
AMBAC-Insured, 7.250% due 1/1/24 600,625
1,000,000 AA Hogansville Combined Public Utility System, Asset Guaranty,
5.850% due 10/1/15 990,000
- -------------------------------------------------------------------------------------------------------------------
2,119,375
- -------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 4.2%
300,000 AAA Fulton County Water & Sewer Revenue, FGIC-Insured,
6.375% due 1/1/14 326,250
850,000 AA+ Gwinnett County Water & Sewer Revenue, zero coupon due 8/1/09 412,250
- -------------------------------------------------------------------------------------------------------------------
738,500
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $17,177,615*) $17,766,069
===================================================================================================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
OHIO PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
<C> <C> <S> <C>
Education -- 16.3%
$750,000 AAA Indian Lake Local School District, FGIC-Insured, 5.375% due 12/1/23 $ 702,188
200,000 AAA Lakeview Local School District, AMBAC-Insured, 6.900% due 12/1/14 221,500
Ohio State Higher Education Facilities Revenue:
100,000 AA- Case Western University, 6.000% due 10/1/22 100,750
180,000 AAA University of Dayton, FGIC-Insured, 5.800% due 12/1/19 180,225
100,000 AAA Strongville City Schools Improvement, AMBAC-Insured,
6.000% due 12/1/14 102,500
100,000 AAA Woodbridge Local School District, AMBAC-Insured,
6.000% due 12/1/19(a) 102,750
- -------------------------------------------------------------------------------------------------------------------
1,409,913
- -------------------------------------------------------------------------------------------------------------------
General Obligation -- 19.8%
150,000 A-1* Avon Lake City School District GO, 6.250% due 12/1/19 156,563
250,000 AA Columbiana County GO, Asset Guaranty, 6.600% due 12/1/17 260,938
105,000 AAA Columbus Sewer Improvement #28, 6.000% due 5/1/12 109,069
325,000 AAA Lucas County GO, AMBAC-Insured, 5.400% due 12/1/15 308,750
250,000 AA Ohio State GO, 6.200% due 8/1/14 264,062
250,000 AAA Richland County GO, AMBAC-Insured, 5.400% due 12/1/15 236,250
400,000 Aa* Troy Capital Facilities, 5.375% due 12/1/15 379,000
- -------------------------------------------------------------------------------------------------------------------
1,714,632
- -------------------------------------------------------------------------------------------------------------------
Hospital -- 14.2%
100,000 Aa* Franklin County Hospital Revenue Refunding, Riverside
United Methodist, Series A, 5.750% due 5/15/12 98,750
350,000 BBB- Green Springs Health Care Facilities Revenue, (St. Francis Health
Care Center Project), Series A, 7.125% due 5/15/25 355,687
500,000 AAA Lucas County Hospital Revenue, Series B, MBIA-Insured,
5.250% due 8/15/20 455,625
300,000 AAA Summit County Addiction & Mental Health, AMBAC-Insured,
6.400% due 12/1/14 320,625
- -------------------------------------------------------------------------------------------------------------------
1,230,687
- -------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 6.5%
250,000 Aaa* Cuyahoga County Multi-Family Housing-Dalebridge Apartments,
6.500% due 10/20/20(a) 251,250
300,000 Aaa* Kent Multi-Family Housing, GNMA-Collateralized, FHA Supported,
7.150% due 12/20/26(a) 314,625
- -------------------------------------------------------------------------------------------------------------------
565,875
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
OHIO PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 8.6%
Ohio Housing Finance Agency Residential Mortgage, GNMA-Insured:
$250,000 AAA Series A-1, 6.100% due 9/1/14 $253,125
Series A-2:
245,000 AAA 6.125% due 9/1/24(a) 242,856
250,000 AAA 6.625% due 3/1/26(a) 252,500
- -------------------------------------------------------------------------------------------------------------------
748,481
- -------------------------------------------------------------------------------------------------------------------
Industrial Development -- 1.7%
150,000 Aa3* Toledo-Lucas County Port Authority Revenue Refunding, (Cargill Inc.
Project), 5.900% due 12/1/15 150,562
- -------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 5.5%
100,000 AAA Franklin County Convention Facilities Authority Revenue Refunding,
MBIA-Insured, 5.850% due 12/1/19 100,125
200,000 AAA Ohio State Building Authority, Juvenile Correction Facility,
Series A, AMBAC-Insured, 6.600% due 10/1/14 214,500
150,000 AAA Puerto Rico Public Buildings Authority Revenue, AMBAC-Insured,
6.250% due 7/1/15 162,188
- -------------------------------------------------------------------------------------------------------------------
476,813
- -------------------------------------------------------------------------------------------------------------------
Pollution Control -- 4.7%
250,000 AAA Ohio State Air Quality Development Authority Revenue Refunding,
Pennsylvania Power Company, AMBAC-Insured,
6.150% due 8/1/23 256,250
150,000 AAA Ohio State Water Development Authority PCR, MBIA-Insured,
5.700% due 12/1/11 151,313
- -------------------------------------------------------------------------------------------------------------------
407,563
- -------------------------------------------------------------------------------------------------------------------
Utilities -- 9.8%
Cleveland Public Power System, MBIA-Insured, First Mortgage:
200,000 AAA Series A, 7.000% due 11/15/24 222,750
195,000 AAA Series B, 7.000% due 11/15/17 214,012
400,000 BB Ohio Air Quality, Cleveland Electric, 7.700% due 8/1/25 410,500
- -------------------------------------------------------------------------------------------------------------------
847,262
- -------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 12.9%
100,000 AAA Cleveland Water Works Revenue, First Mortgage, Series 92B,
AMBAC-Insured, 6.250% due 1/1/16 103,125
300,000 AAA Northeast Ohio Regional Sewers District, AMBAC-Insured,
5.600% due 11/15/16 293,250
400,000 A Ohio Water Development Authority, (Broken Hill Project),
6.450% due 9/1/20(a) 405,500
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
OHIO PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
<C> <C> <S> <C>
Water & Sewer -- 12.9% (continued)
$200,000 A- Trumbull County Sewer Disposal Revenue,
(General Motors Corp. Project), 6.750% due 7/1/14(a) $ 218,000
100,000 AAA Warren County Water Works Revenue, MBIA-Insured,
6.000% due 12/1/19 101,625
- -------------------------------------------------------------------------------------------------------------------
1,121,500
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $8,515,917*) $8,673,288
===================================================================================================================
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
<C> <C> <S> <C>
Education -- 6.7%
Pennsylvania State Higher Education Facility Authority,
College and University Revenue:
$1,000,000 AAA College of Pharmacy and Science, MBIA-Insured,
5.400% due 11/1/15 $ 960,000
1,000,000 AAA St. Joseph's University, CONNIE LEE-Insured, 5.875% due 7/15/25 978,750
- -------------------------------------------------------------------------------------------------------------------
1,938,750
- -------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity (a) -- 8.5%
365,000 Aaa* Blair County Hospital Authority Revenue, Altoona Hospital,
(Escrowed to Maturity with U.S. Government Securities),
6.900% due 7/1/08 396,480
550,000 AAA Cambria County Hospital Development Authority, Conemaugh Valley
Memorial Hospital, (Escrowed to Maturity with U.S. Government
Securities), 7.625% due 9/1/11 644,875
435,000 AAA Lewisburg Area School District Building, AMBAC-Insured,
(Escrowed to Maturity with U.S. Government Securities),
9.750% due 2/15/04 548,100
360,000 AAA Southeastern Greene School District, (Escrowed to Maturity with
U.S. Government Securities), 9.375% due 7/1/03 427,500
1,175,000 AAA Westmoreland County Municipal Authority Service Revenue,
FGIC-Insured, (Escrowed to Maturity with U.S. Government Securities)
zero coupon due 8/15/20 282,000
120,000 AAA York County GO, Refunding, AMBAC-Insured, (Escrowed to
Maturity with U.S. Government Securities), 8.875% due 6/1/06 147,750
- -------------------------------------------------------------------------------------------------------------------
2,446,705
- -------------------------------------------------------------------------------------------------------------------
Finance -- 1.9%
500,000 A Pennsylvania State Finance Authority Revenue Refunding, (Municipal
Capital Input Project), Societe Generale, 6.600% due 11/1/09 536,250
- -------------------------------------------------------------------------------------------------------------------
General Obligation -- 18.3%
1,000,000 BBB Guam Government GO, Series A, 5.375% due 11/15/13 900,000
1,255,000 AAA Hazleton Area School District GO, Series B, FGIC-Insured,
zero coupon due 3/1/25 216,488
1,000,000 AAA Philadelphia GO, MBIA-Insured, 5.000% due 5/15/20 891,250
1,000,000 AAA Philadelphia School District GO, Series B, AMBAC-Insured,
5.500% due 9/1/25 945,000
500,000 AAA Pittsburgh GO, Series A, FGIC-Insured, 5.250% due 3/1/11 486,250
1,000,000 A Puerto Rico Commonwealth GO, 5.400% due 7/1/25 918,750
2,500,000 AAA Westmoreland County GO, Refunding Series G, FGIC-Insured,
zero coupon due 12/1/13 887,500
- -------------------------------------------------------------------------------------------------------------------
5,245,238
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
<C> <C> <S> <C>
Hospital -- 17.1%
$ 500,000 AAA Allegheny General Hospital Project, Series A, MBIA-Insured,
6.250% due 9/1/20 $ 513,750
500,000 BBB Allentown Area Hospital Authority Revenue, Sacred Heart Hospital,
6.750% due 11/15/14 495,000
1,000,000 AAA Lehigh County General Purpose Authority Revenue, Lehigh Valley
Hospital Series B, MBIA-Insured, 5.625% due 7/1/25 957,500
700,000 AAA Philadelphia Hospital & Higher Education Facilities Authority,
Frankford Hospital, CONNIE LEE-Insured, 5.750% due 1/1/19 675,500
500,000 BBB Puerto Rico Industrial Tourist Educational, Medical & Environmental
Control Facilities, (Ryder Memorial Hospital Project), Series A,
6.700% due 5/1/24 503,125
225,000 Baa* Ridley Park Hospital Authority, Taylor Hospital, Series A-Refunding,
6.000% due 12/1/13 199,969
Scranton-Lackawanna Health & Welfare Authority Revenue:
500,000 NR Allied Services Rehabilitation Hospitals, Project-A,
7.600% due 7/15/20 505,625
500,000 AAA University of Scranton Project, AMBAC-Insured,
6.800% due 11/1/14 532,500
500,000 AAA Wayne County Hospital & Health Facilities Authority,
County Guaranteed Hospital Revenue, (Wayne Memorial Hospital
Project), MBIA-Insured, 6.250% due 7/1/14 515,000
- -------------------------------------------------------------------------------------------------------------------
4,897,969
- -------------------------------------------------------------------------------------------------------------------
Housing: Single Family -- 10.8%
Allegheny County Residential Mortgage Refunding, Single-Family
1,000,000 Aaa* GNMA-Collateralized, 6.875% due 5/1/26(b) 1,035,000
2,000,000 Aaa* GNMA-Collateralized, zero coupon due 5/1/27(b) 205,000
250,000 A1* Pittsburgh Urban Redevelopment Authority, Mortgage Revenue, Series B,
6.950% due 10/1/10(b) 251,250
Puerto Rico Housing Bank & Finance Agency:
500,000 AAA Single-Family Mortgage, GNMA, FNMA & FHLMC-Collateralized,
6.250% due 4/1/29(b) 503,750
1,000,000 BBB 7.500% due 12/1/06 1,103,750
- -------------------------------------------------------------------------------------------------------------------
3,098,750
- -------------------------------------------------------------------------------------------------------------------
Industrial Development -- 14.2%
1,000,000 Baa3* Allegheny County IDA Revenue, Refunding Environmental Improvement,
USX Corporation, 6.700% due 12/1/20 1,022,500
1,000,000 AAA Cambria County IDA, PCR, (PA Electric Company Project), Series B,
MBIA-Insured, 6.050% due 11/1/25(b) 987,500
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
<C> <C> <S> <C>
Industrial Development -- 14.2% (continued)
$1,000,000 A- Erie County IDA, Environmental Improvement Revenue,
(International Paper Co. Project), Series A, 7.625% due 11/1/18(b) $1,116,250
1,000,000 AA Northampton County IDA Revenue, Moravian Hall Square, (Project A),
Asset Guaranty, 5.550% due 7/1/14 941,250
- -------------------------------------------------------------------------------------------------------------------
4,067,500
- -------------------------------------------------------------------------------------------------------------------
Pollution Control -- 7.9%
750,000 A Harrisburg Authority Resource Recovery Facility Revenue, Series A,
Municipal Government Guaranteed, 5.875% due 9/1/21 736,875
1,000,000 AAA Northhampton County Industrial Metropolitan Edison, Series A,
MBIA-Insured, 6.100% due 7/15/21 1,017,500
500,000 BBB- Pennsylvania Economic Development Financing Authority,
Resource Recovery Revenue, (Colver Project),
Series D, 7.150% due 12/1/18(b) 523,750
- -------------------------------------------------------------------------------------------------------------------
2,278,125
- -------------------------------------------------------------------------------------------------------------------
Pre-Refunded(a) -- 4.7%
1,000,000 Aaa* Philadelphia Hospital Revenue, (United Hospital Inc. Project),
(Escrowed with U.S. Government Securities to 7/1/05 Call @ 100),
10.875% due 7/1/08 1,337,500
- -------------------------------------------------------------------------------------------------------------------
Short Term(c) -- 0.3%
100,000 A-1+ Delaware County IDA Airport Facility Revenue, (United Parcel Service
Project), 3.700% due 12/1/15 100,000
- -------------------------------------------------------------------------------------------------------------------
Solid Waste -- 4.5%
250,000 A1* Lancaster County Solid Waste Management Authority, Resource
Recovery Systems Revenue Landfill, 7.875% due 12/15/09 262,813
1,000,000 A New Morgan IDA, Solid Waste Disposal, Browning Ferris Industries, Inc.,
6.500% due 4/1/19(b) 1,027,500
- -------------------------------------------------------------------------------------------------------------------
1,290,313
- -------------------------------------------------------------------------------------------------------------------
Utilities -- 1.4%
400,000 BBB Guam Power Authority Revenue, Series A, 6.750% due 10/1/24 412,500
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
Smith Barney Muni Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================================================
<C> <C> <S> <C>
Water and Sewer -- 3.7%
$ 1,000,000 AAA Philadelphia Water & Wastewater Revenue, MBIA-Insured,
6.250% due 8/1/12 $ 1,066,250
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $28,265,411*) $ 28,715,850
===================================================================================================================
</TABLE>
(a) Pre-Refunded bonds escrowed by U.S. Government Securities and bonds
escrowed to maturity with U.S. Government Securities are considered by the
manager to be triple-A rated even if issuer has not applied for new
ratings.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
* The aggregate cost for Federal income tax purposes is substantially the
same.
See pages 24 and 25 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
23
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Corporation ("Standard & Poor's"), except
that those identified by an asterisk (*) are rated by Moody's Investors Services
("Moody's"). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Ratings from "AA" to "BB" may be modified by the addition
of a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although 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 bonds in this
category than in higher rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing
uncertainties of exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest
rating within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa"
securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
24
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Short-Term Security Ratings
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
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.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
MIG 1 -- Moody's highest rating for short-term municipal obligations.
- --------------------------------------------------------------------------------
Security Descriptions
- --------------------------------------------------------------------------------
ABAG -- Association of Bay Area Governors
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
ETM -- Escrowed to Maturity
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Agency
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt 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
VRWE -- Variable Rate Wednesday Demand
25
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
=================================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost -- $17,177,615,
$8,515,917 and $28,265,411, respectively) $ 17,766,069 $ 8,673,288 $ 28,715,850
Cash 57,536 19,071 97,111
Receivable for securities sold 422,640 -- --
Interest receivable 254,027 152,015 539,035
Receivable from manager (Note 4) 56,755 59,614 23,433
Receivable for Fund shares sold 5,075 30,000 373,050
- -------------------------------------------------------------------------------------------------
Total Assets 18,562,102 8,933,988 29,748,479
- -------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares purchased -- -- 11,102
Payable for securities purchased 376,874 -- --
Dividends payable 27,965 10,643 49,391
Distribution fees payable 1,945 216 3,651
Accrued expenses 36,533 29,236 24,209
- -------------------------------------------------------------------------------------------------
Total Liabilities 443,317 40,095 88,353
- -------------------------------------------------------------------------------------------------
Total Net Assets $ 18,118,785 $ 8,893,893 $ 29,660,126
=================================================================================================
NET ASSETS:
Par value of capital shares $ 1,449 $ 729 $ 2,351
Capital paid in excess of par value 17,549,808 8,690,294 29,224,438
Undistributed (overdistributed) net
investment income (14,870) 30,199 (1,108)
Accumulated net realized gain (loss)
on security transactions (6,056) 15,300 (15,994)
Net unrealized appreciation of investments 588,454 157,371 450,439
- -------------------------------------------------------------------------------------------------
Total Net Assets $ 18,118,785 $ 8,893,893 $ 29,660,126
=================================================================================================
Shares Outstanding:
Class A 779,245 300,392 938,428
----------------------------------------------------------------------------------------------
Class B 436,738 355,685 1,041,264
----------------------------------------------------------------------------------------------
Class C 233,397 73,398 371,326
----------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 12.50 $ 12.20 $ 12.62
----------------------------------------------------------------------------------------------
Class B* $ 12.50 $ 12.18 $ 12.61
----------------------------------------------------------------------------------------------
Class C** $ 12.49 $ 12.19 $ 12.61
----------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value) $ 13.02 $ 12.71 $ 13.15
=================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed less than one year from initial purchase (See Note 4).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
26
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Statements of Operations For the Year Ended March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
=======================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 865,938 $ 439,576 $ 1,368,049
- ---------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 65,361 32,464 103,567
Distribution fees (Note 4) 54,602 31,184 101,498
Audit and legal 28,000 28,000 21,550
Shareholder communications 25,000 9,000 13,500
Shareholder and system servicing fees 20,000 19,000 18,500
Pricing fees 6,500 5,000 5,040
Registration fees 5,500 2,500 9,000
Trustees' fees 2,100 3,500 3,328
Custody 1,600 1,400 1,800
Other 2,000 2,000 3,850
- ---------------------------------------------------------------------------------------
Total Expenses 210,663 134,048 281,633
Less: Management fee waiver and
expense reimbursement (Note 4) 122,116 92,078 127,000
- ---------------------------------------------------------------------------------------
Net Expenses 88,547 41,970 154,633
- ---------------------------------------------------------------------------------------
Net Investment Income 777,391 397,606 1,213,416
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENT (NOTE 5):
Realized Gain from Security Transactions
(excluding short-term securities):
Proceeds from sales 8,899,898 2,998,629 19,872,216
Cost of securities sold 8,812,581 2,954,516 19,681,362
- ---------------------------------------------------------------------------------------
Net Realized Gain 87,317 44,113 190,854
- ---------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of year 274,742 158,585 425,686
End of year 588,454 157,371 450,439
- ---------------------------------------------------------------------------------------
Increase (Decrease) in Net
Unrealized Appreciation 313,712 (1,214) 24,753
- ---------------------------------------------------------------------------------------
Net Gain on Investments 401,029 42,899 215,607
- ---------------------------------------------------------------------------------------
Increase in Net Assets
From Operations $ 1,178,420 $ 440,505 $ 1,429,023
=======================================================================================
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
Smith Barney Muni Funds
Georgia Portfolio
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended March 31,
- --------------------------------------------------------------------------------
1996 1995(a)
================================================================================
OPERATIONS:
Net investment income $ 777,391 $ 475,775
Net realized gain (loss) 87,317 (36,179)
Increase in net unrealized appreciation 313,712 274,742
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,178,420 714,338
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (786,513) (476,952)
Net realized gain (62,942) --
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (849,455) (476,952)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 9,072,752 13,961,785
Net asset value of shares issued
for reinvestment of dividends 553,165 371,720
Cost of shares reacquired (4,202,205) (2,204,783)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 5,423,712 12,128,722
- --------------------------------------------------------------------------------
Increase in Net Assets 5,752,677 12,366,108
NET ASSETS:
Beginning of year 12,366,108 --
- --------------------------------------------------------------------------------
End of year* $ 18,118,785 $ 12,366,108
================================================================================
* Includes overdistributed net
investment income of: $ (14,870) --
================================================================================
(a) For the period from April 4, 1994 (commencement of operations) to March 31,
1995.
See Notes to Financial Statements.
28
<PAGE>
Smith Barney Muni Funds
Ohio Portfolio
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended March 31,
- --------------------------------------------------------------------------------
1996 1995(a)
================================================================================
OPERATIONS:
Net investment income $ 397,606 $ 179,307
Net realized gain (loss) 44,113 (28,813)
Increase (decrease) in net
unrealized appreciation (1,214) 158,585
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 440,505 309,079
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (379,858) (166,814)
Net realized gain (42) --
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (379,900) (166,814)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 4,195,758 5,899,431
Net asset value of shares issued
for reinvestment of dividends 282,773 121,117
Cost of shares reacquired (1,033,839) (774,217)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 3,444,692 5,246,331
- --------------------------------------------------------------------------------
Increase in Net Assets 3,505,297 5,388,596
NET ASSETS:
Beginning of year 5,388,596 --
- --------------------------------------------------------------------------------
End of year* $ 8,893,893 $ 5,388,596
================================================================================
* Includes undistributed net investment income of: $ 30,199 $ 12,493
================================================================================
(a) For the period from June 13, 1994 (commencement of operations) to March 31,
1995.
See Notes to Financial Statements.
29
<PAGE>
Smith Barney Muni Funds
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended March 31,
- --------------------------------------------------------------------------------
1996 1995(a)
================================================================================
OPERATIONS:
Net investment income $ 1,213,416 $ 681,466
Net realized gain (loss) 190,854 (114,695)
Increase in net unrealized appreciation 24,753 425,686
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,429,023 992,457
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (1,250,241) (641,755)
Net realized gain (96,147) --
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,346,388) (641,755)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 17,277,337 24,437,918
Net asset value of shares issued
for reinvestment of dividends 900,287 475,982
Cost of shares reacquired (4,761,052) (9,103,683)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 13,416,572 15,810,217
- --------------------------------------------------------------------------------
Increase in Net Assets 13,499,207 16,160,919
NET ASSETS:
Beginning of year 16,160,919 --
- --------------------------------------------------------------------------------
End of year* $ 29,660,126 $ 16,160,919
================================================================================
* Includes (overdistributed) undistributed
net investment income of: $ (1,108) $ 39,711
================================================================================
(a) For the period from April 4, 1994 (commencement of operations) to March 31,
1995.
See Notes to Financial Statements.
30
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Georgia, Ohio and Pennsylvania Portfolios ("Portfolios") are separate
investment portfolios of the Smith Barney Muni Funds ("Fund"). The Fund, a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as amended, as a non-diversified, open-end management investment company
and consists of these Portfolios and seven other separate investment portfolios:
Florida, New York, National, Limited Term, Florida Limited Term, California
Money Market and New York Money Market portfolios. The financial statements and
financial highlights for the other portfolios are presented in separate annual
reports.
The significant accounting policies consistently followed by the Fund
are: (a) securities transactions are accounted for on the trade date;(b)
securities are valued at the mean between the bid and ask prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; short-term
securities and securities maturing within 60 days are valued at cost plus
(minus) accreted discount (amortized premium), which approximates value; (c)
gains or losses on the sale of securities are calculated by using the specific
identification method; (d) interest income, adjusted for amortization of
premiums and original issue discount, is recorded on the accrual basis; market
discount is recognized upon the disposition of the security; (e) dividends and
distributions to shareholders are recorded on the ex-dividend date; (f) direct
expenses are charged to each Portfolio and each class; management fees and
general fund expenses are allocated on the basis of relative net assets; (g)
each Portfolio 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; (h) the character of income
and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles. At
March 31, 1996, reclassifications are 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 (i) 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 from
these amounts.
2. PORTFOLIO CONCENTRATION
Since each Portfolio invests primarily in obligations of issuers within
either Georgia, Ohio or Pennsylvania, each Portfolio is subject to possible
concentration risks associated with economic, political, or legal developments
or industrial or regional matters specifically affecting the respective state in
which it invests.
31
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
Each Portfolio 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 Portfolio.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager to the Fund. The
Portfolios pay SBMFM a management fee calculated at the annual rate of 0.45% of
their respective average daily net assets. This fee is calculated daily and paid
monthly. SBMFM waived all of its management fees for each of the Portfolios, for
the year ended March 31, 1996. SBMFM also has agreed to reimburse the Portfolios
for certain expenses totalling $56,755, $59,614 and $23,433 for the Georgia,
Ohio and Pennsylvania Portfolios, respectively.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. For the year ended March 31, 1996, SB received sales charges of
approximately $187,000 on purchases of the Portfolios' Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B
shares, which applies if redemption occurs less than one year from initial
purchase and declines by 0.50% the first year after purchase and by 1.00% per
year until no CDSC is incurred. Class C shares have a 1.00% CDSC if redemption
occurs within the first year of purchase. In addition, Class A shares have a
1.00% CDSC, which applies if redemption occurs within the first year of
purchase. 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 March 31, 1996, CDSCs paid to SB were approximately:
CDSCs Class A Class B Class C
================================================================================
Georgia -- $ 8,000 --
- --------------------------------------------------------------------------------
Ohio -- 7,000 --
- --------------------------------------------------------------------------------
Pennsylvania $2,000 13,000 --
================================================================================
Pursuant to a Distribution Plan, the Portfolios pay a service fee with
respect to Class A, B and C shares calculated at the annual rate of 0.15% of the
average daily net assets of each respective class. The Portfolios also pay a
distribution fee with respect to Class B and C shares calculated at the annual
rate of 0.50% and 0.55% of the average daily net assets of each class,
respectively. For the year ended March 31, 1996, total Distribution Plan fees
incurred were:
32
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Distribution Plan Fees Class A Class B Class C
================================================================================
Georgia $12,286 $26,278 $16,038
- --------------------------------------------------------------------------------
Ohio 4,842 20,300 6,042
- --------------------------------------------------------------------------------
Pennsylvania 15,018 58,999 27,481
================================================================================
All officers and two Trustees of the Fund are employees of SB.
5. INVESTMENTS
During the year ended March 31, 1996, the aggregate cost of purchases and
proceeds from sales (including maturities, but excluding short-term securities)
of investments were as follows:
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
================================================================================
Purchases $13,156,803 $6,391,912 $33,212,511
- --------------------------------------------------------------------------------
Sales 8,899,898 2,998,629 19,872,216
================================================================================
At March 31, 1996, the gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were as follows:
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
================================================================================
Gross unrealized appreciation $606,820 $256,677 $586,923
Gross unrealized depreciation (18,366) (99,306) (136,484)
- --------------------------------------------------------------------------------
Net unrealized appreciation $588,454 $157,371 $450,439
================================================================================
6. SHARES OF BENEFICIAL INTEREST
At March 31, 1996, there were an unlimited amount of shares of beneficial
interest of $0.001 par value authorized. The Portfolios have the ability to
establish multiple classes of shares. Each share of a class represents an
identical interest in its respective portfolio and has the same rights, except
that each class bears certain expenses specifically related to the distribution
of its shares. Effective November 7, 1994, the Portfolios adopted a new class
structure, renaming Class B shares as Class C shares, Class E shares as Class B
shares and exchanging the former Class C shares into Class A shares. At March
31, 1996, total paid-in capital amounted to the following for each class and
respective Portfolio:
Portfolio Class A Class B Class C
================================================================================
Georgia $ 9,380,327 $ 5,325,239 $2,845,691
- --------------------------------------------------------------------------------
Ohio 3,538,687 4,279,244 873,092
- --------------------------------------------------------------------------------
Pennsylvania 11,637,150 13,017,827 4,571,812
================================================================================
33
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
Year Ended Period Ended
March 31, 1996 March 31, 1995*
--------------------------------------------
Georgia Portfolio Shares Amount Shares Amount
================================================================================
Class A
Shares sold 329,410 $ 4,143,887 845,310 $10,050,182
Shares issued on reinvestment 24,570 308,463 25,159 294,082
Shares redeemed (278,738) (3,443,532) (166,466) (1,972,238)
- --------------------------------------------------------------------------------
Net Increase 75,242 $ 1,008,818 704,003 $ 8,372,026
================================================================================
Class B+
Shares sold 252,969 $ 3,190,010 225,294 $ 2,642,378
Shares issued on reinvestment 10,810 136,165 3,501 40,774
Shares redeemed (37,761) (480,144) (18,075) (203,875)
- --------------------------------------------------------------------------------
Net Increase 226,018 $ 2,846,031 210,720 $ 2,479,277
================================================================================
Class C++
Shares sold 139,440 $ 1,738,855 106,527 $ 1,269,225
Shares issued on reinvestment 8,613 108,537 3,151 36,864
Shares redeemed (21,760) (278,529) (2,574) (28,670)
- --------------------------------------------------------------------------------
Net Increase 126,293 $ 1,568,863 107,104 $ 1,277,419
================================================================================
Ohio Portfolio
================================================================================
Class A
Shares sold 100,478 $ 1,246,540 258,461 $ 3,004,398
Shares issued on reinvestment 10,596 130,155 6,332 72,536
Shares redeemed (41,822) (516,845) (33,653) (398,097)
- --------------------------------------------------------------------------------
Net Increase 69,252 $ 859,850 231,140 $ 2,678,837
================================================================================
Class B+
Shares sold 202,242 $ 2,495,050 199,988 $ 2,331,711
Shares issued on reinvestment 9,992 122,694 3,274 37,556
Shares redeemed (27,239) (331,647) (32,572) (376,120)
- --------------------------------------------------------------------------------
Net Increase 184,995 $ 2,286,097 170,690 $ 1,993,147
================================================================================
Class C++
Shares sold 37,400 $ 454,168 47,644 $ 563,322
Shares issued on reinvestment 2,437 29,924 963 11,025
Shares redeemed (15,046) (185,347) -- --
- --------------------------------------------------------------------------------
Net Increase 24,791 $ 298,745 48,607 $ 574,347
================================================================================
* For the Georgia Portfolio, transactions for Class A, B and C shares are for
the period from April 4, 1994, June 15, 1994 and April 14, 1994 (inception
dates), respectively, to March 31, 1995. For the Ohio Portfolio,
transactions for Class A, B and C shares are for the period from June 13,
1994, June 14, 1994 and June 14, 1994 (inception dates), respectively, to
March 31, 1995.
+ On November 7, 1994, the former Class E shares were renamed Class B shares.
++ On November 7, 1994, the former Class B shares were renamed Class C shares.
34
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Year Ended Period Ended
March 31, 1996 March 31, 1995*
------------------ -------------------
Pennsylvania Portfolio Shares Amount Shares Amount
================================================================================
Class A+
Shares sold 547,143 $7,020,582 1,367,202 $16,434,416
Shares issued on reinvestment 34,618 441,224 27,911 333,727
Shares redeemed (286,500) (3,684,082) (751,946) (8,908,717)
- --------------------------------------------------------------------------------
Net Increase 295,261 $3,777,724 643,167 $ 7,859,426
================================================================================
Class B##
Shares sold 681,907 $8,724,282 399,935 $ 4,803,754
Shares issued on reinvestment 24,518 312,971 5,025 60,078
Shares redeemed (56,465) (718,691) (13,656) (164,567)
- --------------------------------------------------------------------------------
Net Increase 649,960 $8,318,562 391,304 $ 4,699,265
================================================================================
Class C++
Shares sold 118,898 $1,532,473 265,002 $ 3,199,748
Shares issued on reinvestment 11,472 146,092 6,866 82,177
Shares redeemed (28,320) (358,279) (2,592) (30,399)
- --------------------------------------------------------------------------------
Net Increase 102,050 $1,320,286 269,276 $ 3,251,526
================================================================================
* For Class A, B and C shares, transactions are for the period from April 4,
1994, June 20, 1994 and April 5, 1994 (inception dates) to March 31, 1995,
respectively.
+ On October 10, 1994, the former Class C shares were exchanged into Class A
shares; therefore Class C share activity for the period from April 4, 1994
(inception date) to October 9, 1994 is included with Class A share
activity.
## On November 7, 1994, the former Class E shares were renamed Class B shares.
++ On November 7, 1994, the former Class B shares were renamed Class C shares.
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
The amount of long-term capital gains paid by the Fund to its shareholders
for the fiscal year ended March 31, 1996, was $25,448, $0 and $13,721, for the
Georgia, Ohio and Pennsylvania Portfolios, respectively.
For the year ended March 31, 1996, 100% of the dividends paid by each
Portfolio from net investment income was tax-exempt for regular Federal income
tax purposes.
35
<PAGE>
Smith Barney Muni Funds
Georgia Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares Class B Shares(1)
---------------- ------------------
1996 1995(2) 1996 1995(3)
======================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.10 $12.00 $12.11 $12.27
- --------------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.70 0.62 0.64 0.49
Net realized and unrealized gain (loss) 0.45 0.10* 0.45 (0.16)*
- --------------------------------------------------------------------------------------
Total Income From Operations 1.15 0.72 1.09 0.33
- --------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.70) (0.62) (0.65) (0.49)
Net realized gain (0.05) -- (0.05) --
- --------------------------------------------------------------------------------------
Total Distributions (0.75) (0.62) (0.70) (0.49)
- --------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.50 $12.10 $12.50 $12.11
- --------------------------------------------------------------------------------------
Total Return 9.67% 6.29%++ 9.09% 2.88%++
- --------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $9,744 $8,520 $5,461 $2,551
- --------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 0.38% 0.28%+ 0.92% 0.85%+
Net investment income 5.57 5.43+ 5.20 5.37+
- --------------------------------------------------------------------------------------
Portfolio Turnover Rate 63.22% 34.05% 63.22% 34.05%
======================================================================================
</TABLE>
(1) On November 7, 1994, the former Class E shares were renamed Class B shares.
(2) For the period from April 4, 1994 (inception date) to March 31, 1995.
(3) For the period from June 15, 1994 (inception date) to March 31, 1995.
(4) The manager has waived all of its fees and reimbursed expenses of $56,755
and $42,317 for the year ended March 31, 1996 and the period ended March
31,1995, respectively. If such fees were not waived and expenses not
reimbursed, the effect on net investment income and the expense ratios
would have been as follows:
Per Share Decreases Expense Ratios
In Net Investment Income Without Fee Waivers#
------------------------ --------------------
1996 1995 1996 1995
---- ---- ---- ----
Class A $0.11 $0.12 1.23% 1.20%+
Class B 0.10 0.11 1.77 1.82+
* Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
# As a result of voluntary expense limitations, expense ratios would not
exceed 0.80% and 1.30% for Class A and B shares, respectively.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
36
<PAGE>
Smith Barney Muni Funds
Georgia Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
Class C Shares(1) 1996 1995(2)
================================================================================
Net Asset Value, Beginning of Year $12.09 $12.06
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (3) 0.63 0.55
Net realized and unrealized gain 0.46 0.04*
- --------------------------------------------------------------------------------
Total Income From Operations 1.09 0.59
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.64) (0.56)
Net realized gain (0.05) --
- --------------------------------------------------------------------------------
Total Distributions (0.69) (0.56)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $12.49 $12.09
- --------------------------------------------------------------------------------
Total Return 9.05% 5.11%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $2,914 $1,295
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 0.97% 0.90%+
Net investment income 5.18 5.22+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 63.22% 34.05%
================================================================================
(1) On November 7, 1994, the former Class B shares were renamed Class C shares.
(2) For the period from April 14, 1994 (inception date) to March 31, 1995.
(3) The manager has waived all of its fees and reimbursed expenses of $56,755
and $42,317 for the year ended March 31, 1996 and the period ended March
31, 1995, respectively. If such fees were not waived and expenses not
reimbursed, the effect on net investment income and the expense ratios
would have been as follows:
Per Share Decreases Expense Ratios
In Net Investment Income Without Fee Waivers#
------------------------ --------------------
1996 1995 1996 1995
---- ---- ---- ----
Class C $0.10 $0.12 1.82% 1.85%+
* Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
# As a result of voluntary expense limitations, expense ratios would not
exceed 1.35% for Class C shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
37
<PAGE>
Smith Barney Muni Funds
Ohio Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares Class B Shares(1)
-------------- -----------------
1996 1995(2) 1996 1995(3)
======================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.97 $12.00 $11.96 $12.02
- --------------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.71 0.52 0.63 0.47
Net realized and unrealized gain (loss) 0.19 (0.07)* 0.21 (0.10)*
- --------------------------------------------------------------------------------------
Total Income From Operations 0.90 0.45 0.84 0.37
- --------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.67) (0.48) (0.62) (0.43)
Net realized gain (0.00)** -- (0.00)** --
- --------------------------------------------------------------------------------------
Total Distributions (0.67) (0.48) (0.62) (0.43)
- --------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.20 $11.97 $12.18 $11.96
- --------------------------------------------------------------------------------------
Total Return 7.65% 4.04%++ 7.10% 3.31%++
- --------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $3,665 $2,766 $4,334 $2,041
- --------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 0.30% 0.20%+ 0.83% 0.72%+
Net investment income 5.86 5.75+ 5.44 5.10+
- --------------------------------------------------------------------------------------
Portfolio Turnover Rate 41.75% 43.84% 41.75% 43.84%
======================================================================================
</TABLE>
(1) On November 7, 1994, the former Class E shares were renamed Class B shares.
(2) For the period from June 13, 1994 (inception date) to March 31, 1995.
(3) For the period from June 14, 1994 (inception date) to March 31, 1995.
(4) The manager has waived all of its fees and reimbursed expenses of $59,614
and $41,401 for the year ended March 31, 1996 and the period ended March
31, 1995, respectively. If such fees were not waived and expenses not
reimbursed, the effect on net investment income and the expense ratios
would have been as follows:
Per Share Decreases Expense Ratios
In Net Investment Income Without Fee Waivers#
------------------------ --------------------
1996 1995 1996 1995
---- ---- ---- ----
Class A $0.16 $0.21 1.58% 1.91%+
Class B 0.11 0.25 2.14 2.43+
* Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
** Amount represents less than $0.01 per share.
# As a result of voluntary expense limitations, expense ratios would not
exceed 0.80% and 1.30% for Class A and B shares, respectively.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
38
<PAGE>
Smith Barney Muni Funds
Ohio Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
Class C Shares(1) 1996 1995(2)
================================================================================
Net Asset Value, Beginning of Year $11.96 $12.02
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (3) 0.63 0.46
Net realized and unrealized gain (loss) 0.21 (0.09)*
- --------------------------------------------------------------------------------
Total Income From Operations 0.84 0.37
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.61) (0.43)
Net realized gain (0.00)** --
- --------------------------------------------------------------------------------
Total Distributions (0.61) (0.43)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $12.19 $11.96
- --------------------------------------------------------------------------------
Total Return 7.14% 3.28%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 895 $ 582
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 0.89% 0.77%+
Net investment income 5.37 5.09+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 41.75% 43.84%
================================================================================
(1) On November 7, 1994, the former Class B shares were renamed Class C shares.
(2) For the period from June 14, 1994 (inception date) to March 31, 1995.
(3) The manager has waived all of its fees and reimbursed expenses of $59,614
and $41,401 for the year ended March 31, 1996 and the period ended March
31,1995, respectively. If such fees were not waived and expenses not
reimbursed, the effect on net investment income and the expense ratios
would have been as follows:
Per Share Decreases Expense Ratios
In Net Investment Income Without Fee Waivers#
------------------------ --------------------
1996 1995 1996 1995
---- ---- ---- ----
Class C $0.16 $0.25 2.20% 2.48%+
* Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
** Amount represents less than $0.01 per share.
# As a result of voluntary expense limitations, expense ratios would not
exceed 1.35% for Class C shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
39
<PAGE>
Smith Barney Muni Funds
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
Class A Shares(1) Class B Shares(2)
----------------- -----------------
1996 1995(3) 1996(6) 1995(4)
================================================================================
Net Asset Value, Beginning of Year $12.40 $12.00 $12.39 $12.35
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (5) 0.70 0.67 0.64 0.51
Net realized and unrealized gain 0.29 0.35* 0.29 0.01*
- --------------------------------------------------------------------------------
Total Income From Operations 0.99 1.02 0.93 0.52
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.72) (0.62) (0.66) (0.48)
Net realized gain (0.05) -- (0.05) --
- --------------------------------------------------------------------------------
Total Distributions (0.77) (0.62) (0.71) (0.48)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $12.62 $12.40 $12.61 $12.39
- --------------------------------------------------------------------------------
Total Return 8.08% 8.82%++ 7.61% 4.43%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $11,847 $7,974 $13,131 $4,850
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (5) 0.38% 0.29%+ 0.88% 0.82%+
Net investment income 5.57 5.76+ 5.07 5.31+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 87.49% 37.60% 87.49% 37.60%
================================================================================
(1) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(2) On November 7, 1994, the former Class E shares were renamed Class B shares.
(3) For the period from April 4, 1994 (inception date) to March 31, 1995.
(4) For the period from June 20, 1994 (inception date) to March 31, 1995.
(5) The manager has waived all of its fees and reimbursed expenses of $23,433
and $32,063 for the year ended March 31, 1996 and the period ended March
31,1995, respectively. If such fees were not waived and expenses not
reimbursed, the effect on net investment income and of expense ratios would
have been as follows:
Per Share Decreases Expense Ratios
In Net Investment Income Without Fee Waivers#
------------------------ --------------------
1996 1995 1996 1995
---- ---- ---- ----
Class A $0.07 $0.09 0.93% 1.03%+
Class B 0.07 0.08 1.44 1.58+
(6) Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for the period
since the use of the undistributed net investment income method does not
accord with results of operations.
* Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
# As a result of voluntary expense limitations, expense ratios would not
exceed 0.80% and 1.30% for Class A and B shares, respectively.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
40
<PAGE>
Smith Barney Muni Funds
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
Class C Shares(1) 1996 1995(2)
================================================================================
Net Asset Value, Beginning of Year $12.39 $12.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (3) 0.64 0.59
Net realized and unrealized gain 0.29 0.36*
- --------------------------------------------------------------------------------
Total Income From Operations 0.93 0.95
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.66) (0.56)
Net realized gain (0.05) --
- --------------------------------------------------------------------------------
Total Distributions (0.71) (0.56)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $12.61 $12.39
- --------------------------------------------------------------------------------
Total Return 7.56% 8.14%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $4,682 $3,337
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 0.94% 0.86%+
Net investment income 5.00 5.04+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 87.49% 37.60%
================================================================================
(1) On November 7, 1994, the former Class B shares were renamed Class C shares.
(2) For the period from April 5, 1994 (inception date) to March 31, 1995.
(3) The manager has waived all of its fees and reimbursed expenses of $23,433
and $32,063 for the year ended March 31, 1996 and the period ended March
31,1995, respectively. If such fees were not waived and expenses not
reimbursed, the effect on net investment income and the expense ratios
would have been as follows:
Per Share Decreases Expense Ratios
In Net Investment Income Without Fee Waivers#
------------------------ --------------------
1996 1995 1996 1995
---- ---- ---- ----
Class C $0.07 $0.09 1.49% 1.56%+
* Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
# As a result of voluntary expense limitations, expense ratios would not
exceed 1.35% for Class C shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
41
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Smith Barney Muni Funds:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Georgia, Ohio and Pennsylvania
Portfolios of Smith Barney Muni Funds as of March 31, 1996, the related
statements of operations for the year then ended, statements of changes in net
assets and financial highlights for the year then ended and for the period from
April 4, 1994 (commencement of operations) to March 31, 1995 with respect to the
Georgia Portfolio, for the period from June 13, 1994 (commencement of
operations) to March 31, 1995 with respect to the Ohio Portfolio, and for the
period from April 4, 1994 (commencement of operations) to March 31, 1995 with
respect to the Pennsylvania Portfolio. These financial statements and financial
highlights are the responsibility of the Funds' 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 March
31, 1996, by correspondence with the custodian. As to securities purchased and
sold but not received or 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 referred to above present fairly,
in all material respects, the financial position of the Georgia, Ohio and
Pennsylvania Portfolios of Smith Barney Muni Funds as of March 31, 1996, the
results of their operations for the year then ended, the changes in their net
assets and the financial highlights for the year then ended and for the period
from April 4, 1994 to March 31, 1995 with respect to the Georgia Portfolio, for
the period from June 13, 1994 to March 31, 1995 with respect to the Ohio
Portfolio, and for the period from April 4, 1994 to March 31, 1995 with respect
to the Pennsylvania Portfolio, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 14, 1996
42
<PAGE>
(This page intentionally left blank.)
<PAGE>
(This page intentionally left blank.)
<PAGE>
Smith Barney SMITH BARNEY
Muni Funds ------------
A Member of TravelersGroup [Logo]
Trustees
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P. Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
C. Richard Youngdahl
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
and Investment Officer
Karen Mahoney-Malcomson
Vice President
and Investment Officer
Larry T. McDermott
Vice President
and Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for
the general information of the
shareholders of Smith Barney
Muni Funds: Georgia, Ohio and
Pennsylvania Portfolios. It is not
authorized for distribution to prospective
investors unless accompanied or preceded
by a current Prospectus for the Fund,
which contains information concerning
the Fund's investment policies and
expenses as well as other pertinent
information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
FD0798 5/96
- ---------------
ANNUAL REPORT
- ---------------
1996
1996
1996 [PHOTOGRAPH]
1996
1996
Smith Barney
Muni Funds
New York Money
Market Portfolio
New York Portfolio
------------------------------------------------------------
March 31, 1996
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
================================================================================
New York Money Market and New York Portfolios
================================================================================
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney Muni
Funds New York Money Market Portfolio and New York Portfolio. For your
convenience, we have summarized the period's prevailing economic and market
conditions below and outlined our portfolio strategy during this time. A
detailed summary of performance and current holdings can be found in the
appropriate sections that follow in the annual report.
New York Money Market Portfolio
As of March 31, 1996, the New York Money Market Portfolio's 7-day current yield
was 2.72% and its 7-day effective yield, which reflects compounding, was 2.76%.
For the same period, the Portfolio's tax-equivalent yield, the yield you would
have to earn on a similar taxable investment to match the tax-free yield, was
5.25%, assuming you are in the 39.6% federal tax bracket. During the year ended
March 31, 1996, the Portfolio's monthly tax-exempt dividend distributions
resulted in a tax-exempt annualized yield of 3.17%.
The New York Money Market Portfolio invests only in short-term securities which
carry minimal credit risk. All of the Portfolio's holdings are rated within the
top two short-term rating categories or are of comparable quality. The
Portfolio's average maturity, which fluctuated throughout the year, is typically
in the 30- to 60-day range.
Please note than an investment in the New York Money Market Portfolio is neither
insured nor guaranteed by the U.S. government and there can be no assurance that
the Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
New York Portfolio's Performance and
Investment Strategy
For the year ended March 31, 1996, the New York Portfolio generated a total
return of 8.71% for Class A shares, which compares very favorably with its
Lipper Analytical Services, Inc. peer group average of 6.90%. (Lipper Analytical
Services, Inc. is a major fund tracking organization.)
With more than 94% of its assets invested in investment-
1
grade securities, the New York Portfolio has maintained a high-quality
portfolio. (An investment-grade security is a security with a rating of BBB/Baa
or better from Standard & Poor's Corporation or Moody's Investors Services,
Inc., two major credit reporting and bond rating agencies.) In addition, roughly
29% of the New York Portfolio has a triple-A rating. In a turbulent municipal
bond market, we believe the Portfolio's high-quality orientation should help it
achieve its goal of providing investors with a competitive level of income while
helping to keep its net asset value relatively stable. As of March 31, 1996, the
New York Portfolio's average weighted maturity was just over 21 years.
At the end of the period covered by this report, the New York Portfolio,
although fully diversified, had invested more than 10% of its assets in the
following types of issues: hospitals (just under 23%), education (roughly 18%)
and housing (about 10%) because we believed they represented good value.
Market and Economic Overview
Interest rates declined steadily over the first nine months of the fiscal year
in response to low inflation and very sluggish economic growth. Over the last
three months of the fiscal year, however, interest rates rose sharply as
economic reports pointed to much stronger growth than was expected by most
market participants and concerns over the stalemated federal budget negotiations
continued.
In the past few months, the volatility of the municipal bond market has
increased and municipal bond yields have reached their highest levels in over a
year. However, despite continued uncertainty over the direction of short-term
interest rates, there were some signs of a possible municipal bond market
turnaround as the higher yields offered by municipal bonds began to attract a
growing number of individual and institutional investors. In our view, municipal
bonds represent a good value and now may be the time for individuals to consider
participating in the tax-exempt market.
New York Economic Highlights
Corporate downsizing has hurt New York's economy in the 1990s. Since its
employment peak, New York has lost roughly one-third of its jobs. In addition,
consolidation among retailers and mergers among some large financial
organizations has highlighted the continuing fragility of New York's economic
recovery, which has trailed that of the national average.
However, we believe New York's prospects are improving partly because Governor
George Pataki's administration is committed to fiscal discipline, serious budget
cutting and reducing rather than increasing taxes. New York has long been known
as the "Tax Capitol of the United States" and historically that has hurt the
state economically and resulted in the loss of businesses as well as in an
erosion of the state's tax base.
2
Outlook
While the day-to-day volatility in the fixed income markets is likely to
continue, the sharp increase in interest rates over the last two months has made
long-term municipal bonds more attractive on a relative basis. In our view,
competitive pressures in the global economy and changing demographics should
help to keep inflation in check. (Labor costs constitute roughly two-thirds of
the total cost of all finished goods.) We believe long-term municipal bonds
currently represent good value and offer investors a healthy risk premium over
inflation. In addition, with long-term municipal bonds providing roughly 90% of
the yield available from Treasury securities, investors are well compensated for
the potential risks of all but the most radical tax reform proposals currently
in circulation.
It was not too long ago that the "flat tax" issue was touted as potentially the
biggest issue of the upcoming Presidential election in November. The exit of
Republican candidate Steve Forbes from the Presidential race has caused the flat
tax to recede from the political debate. However, between now and November, tax
reform again could move into the political spotlight as the campaign
intensifies. In closing, we believe there is little chance that radical tax
reforms will be enacted. In our view, the municipal bond market remains quite
attractive and the Portfolio is well positioned in the current environment.
In closing, thank you for investing in the Smith Barney Muni Funds -- New York
Money Market Portfolio and New York Portfolio. We look forward to helping you
achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman and Vice President
Chief Executive Officer New York Portfolio
/s/ Karen Mahoney-Malcomson
Karen Mahoney-Malcomson
Vice President
New York Money Market Portfolio
April 15, 1996
3
Smith Barney Muni Funds
New York Portfolio
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
3/31/96 $12.83 $13.19 $0.74 8.71%
- --------------------------------------------------------------------------------
3/31/95 12.83 12.83 0.77 6.32
- --------------------------------------------------------------------------------
3/31/94 13.25 12.83 0.79 2.66
- --------------------------------------------------------------------------------
3/31/93 12.33 13.25 0.81 14.48
- --------------------------------------------------------------------------------
3/31/92 11.80 12.33 0.81 11.98
- --------------------------------------------------------------------------------
3/31/91 11.67 11.80 0.85 8.74
- --------------------------------------------------------------------------------
3/31/90 11.48 11.67 0.87 9.28
- --------------------------------------------------------------------------------
3/31/89 11.25 11.48 0.86 10.03
- --------------------------------------------------------------------------------
3/31/88 12.46 11.25 0.85 (2.63)
- --------------------------------------------------------------------------------
Inception* - 3/31/87 12.50 12.46 0.13 0.52+
================================================================================
Total $7.48
================================================================================
</TABLE>
Historical Performance -- Class B Shares
====================================================
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
3/31/96 $12.84 $13.18 $0.68 8.05%
- --------------------------------------------------------------------------------
Inception* - 3/31/95 11.96 12.84 0.29 9.92+
================================================================================
Total $0.97
================================================================================
</TABLE>
==========================================================================
Historical Performance -- Class C Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
3/31/96 $12.83 $13.17 $0.68 8.07%
- --------------------------------------------------------------------------------
3/31/95 12.82 12.83 0.68 5.66
- --------------------------------------------------------------------------------
3/31/94 13.24 12.82 0.70 1.96
- --------------------------------------------------------------------------------
Inception* - 3/31/93 12.84 13.24 0.12 4.04+
================================================================================
Total $2.18
================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly
and capital gains, if any, annually.
4
<PAGE>
Smith Barney Muni Funds
New York Portfolio
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
--------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Year Ended 3/31/96 8.71% 8.05% 8.07%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/96 8.75 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/96 7.50 13.10 6.11
================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2)
--------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Year Ended 3/31/96 4.40% 3.55% 7.07%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/96 7.87 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/96 7.02 10.36 6.11
================================================================================
=======================================================================
Cumulative Total Return
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 3/31/96) 94.60%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/96) 18.78
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/96) 21.11
================================================================================
(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 C
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% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed less than
one year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are January 16, 1987, November
11, 1994 and January 8, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
5
<PAGE>
Smith Barney Muni Funds
New York Portfolio
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of
the New York Portfolio vs.
Lehman Municipal Bond Fund Index+
- --------------------------------------------------------------------------------
January 1987 -- March 1996
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
[GRAPH APPEARS HERE]
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on January 16, 1987, assuming deduction of the maximum 4.00%
sales charge at the time of investment and reinvestment of dividends (after
deduction of applicable sales charges through November 6, 1994 and
thereafter at net asset value) and capital gains, if any, at net asset
value through March 31, 1996. The Lehman Municipal Bond Fund Index is a
broad based, total return index, comprised of 8,000 actual bonds which are
all investment grade, fixed rate, long term maturities (greater than two
years) and are selected from issues larger than $50 million dated since
January, 1984. The index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund. The performance of the
Portfolio'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 returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
6
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
============================================================================
<S> <C> <C> <C>
$ 1,000,000 AAA Albany County New York FGIC-Insured
3.750% due 10/1/96 $ 999,496
Albany County New York BAN Renewal Notes:
2,870,000 MIG 1* Series A 3.400% due 6/14/96 2,869,954
1,785,000 MIG 1* Series C 3.500% due 2/19/97 1,786,450
Albany IDA IDR:
1,285,000 A-1 PBS Development Co. Project
4.250% due 12/1/96(a)(g) 1,285,000
1,390,000 A-1 540 Broadway Project:
Series B-2 4.250% due 12/1/96(a)(g) 1,390,000
1,380,000 A-1 Series B-3 4.250% due 12/1/96(a)(g) 1,380,000
7,000,000 MIG 1* Averill Park New York CSD BAN 4.000% due 1/3/97 7,012,750
1,500,000 MIG 1* Baldwin Union Free School District TAN
4.250% due 6/28/96 1,501,045
3,750,000 MIG 1* Board Cooperative Educational Services Onodaga,
Cortland and Madison County First Supervisory
District RAN Series A 4.250% due 6/21/96 3,752,789
2,000,000 MIG 1* Brentwood NY Union Free School District TAN
4.500% due 6/28/96 2,003,930
4,000,000 MIG 1* Brockport CSD BAN 4.25% due 6/27/96 4,004,094
6,865,000 MIG 1* Central Islip Union Free School District TAN
4.375% to 4.500% due 6/28/96 6,872,325
5,000,000 MIG 1* Chatauqua County New York GO TAN
3.750% due 12/20/96 5,012,234
5,000,000 A-1 Columbia County New York IDA IDR (Rural
Manufacturing Co. Inc. Project) Series A
3.450%(b) 5,000,000
8,500,000 MIG 1* Commack Union Free School District
TAN 4.250% due 6/28/96 8,507,873
3,525,000 A-2 Corinth New York IDA Solid Waste Display Revenue
(International Paper Co. Project) Series A
3.400% due 3/1/97(a)(g) 3,525,000
4,000,000 MIG 1* Delhi CSD BAN 4.250% due 6/28/96 4,000,925
Eagle Tax-Exempt Trust:
18,000,000 A-1 New York State Environment Muni Trust Receipts
CGIC-Insured 3.470%(b) 18,000,000
12,000,000 A-1+ New York City Muniwater Muni Trust Receipts
FGIC-Insured 3.470%(b) 12,000,000
2,330,000 VMIG 1* Erie County IDA (Rosina Food Products, Inc.)
3.450%(a)(b) 2,330,000
See Notes to Financial Statements.
7
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
$ 1,100,000 A-1 Franklin County IDA IDR (Kes Chateaugay LP
Project) Series A 3.450%(a)(b) $ 1,100,000
3,200,000 A-1 Fulton County IDR (Fiber Conversion Inc.) 3.450%(a)(b) 3,200,000
3,610,000 A-1 Geneva IDA Civic Facilities Revenue (Colleges of the
Seneca Series A) 3.450%(b) 3,610,000
14,800,000 VMIG 1* Great Neck North New York Water Authority Water
System Revenue Series A FGIC-Insured 3.100%(b) 14,800,000
1,100,000 AAA Huntington New York Public Impt Series C
FGIC-Insured 5.600% due 11/1/96 1,111,570
7,400,000 MIG 1* Islip GO BAN 4.250% due 7/26/96 7,407,877
6,000,000 MIG 1* Islip Union Free School District TAN 4.500%
due 6/28/96 6,008,333
1,955,000 A-1 Jefferson County IDA IDR (The Climax Manufacturing
Co. Project) 3.450%(a)(b) 1,955,000
4,550,000 MIG 1* Levittown Union Free School District TAN
3.820% to 3.860% due 6/26/96 4,552,554
3,900,000 A-1 Lewis County IDA IDR (The Climax Manufacturing Co.
Project) 3.450%(a)(b) 3,900,000
21,000,000 MIG 1* Lindenhurst Union Free School District TAN
4.250% due 6/21/96 21,011,138
10,000,000 MIG 1* Long Beach County School District 4.250%
due 6/27/96 10,004,614
Metropolitan Transit Authority Commuter
Facilities Revenue:
50,400,000 VMIG 1* 3.200%(b) 50,400,000
2,275,000 AAA AMBAC-Insured (Pre-Refunded -- Escrowed
with U.S. Government Securities to
7/1/96 Call @ 102), 8.375% due 7/1/16(e) 2,347,473
8,624,000 MIG 1* Miller Place Union Free School District BAN
4.500% due 10/18/96 8,639,826
Monarch Construction Corp. Project:
1,770,000 VMIG 1* Series 89G 3.250%(a)(b) 1,770,000
1,100,000 VMIG 1* Series 89O 3.250%(a)(b) 1,100,000
5,415,000 P-1* Monroe County IDA (Granite Building) 3.350%(b) 5,415,000
17,590,000 SP-1 Nassau County BAN Series A 3.500% due 11/15/96 17,616,688
New York RAN:
15,000,000 SP-1+ Series A 4.500% due 4/11/96 15,002,589
5,000,000 SP-1 Series B 4.750% due 6/28/96 5,012,667
7,800,000 VMIG 1 New York City GO Muni Trust Receipts Series C 3.300%(b) 7,800,000
See Notes to Financial Statements.
8
<PAGE>
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Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
New York City GO:
$ 14,500,000 VMIG 1* Sub-Series B-8 3.500%(b) $ 14,500,000
14,000,000 VMIG 1* Sub-Series B-10 3.200%(b) 14,000,000
7,200,000 VMIG 1* Sub-Series D FGIC-Insured 3.100%(b) 7,200,000
15,000,000 VMIG 1* Sub-Series F-2 3.250%(b) 15,000,000
3,800,000 VMIG 1* Sub-Series F-4 3.250%(b) 3,800,000
4,300,000 VMIG 1* Sub-Series F-5 3.500%(b) 4,300,000
7,800,000 VMIG 1* Sub-Series F-6 3.450%(b) 7,800,000
New York Muni Trust Receipts:
5,000,000 A-1+ Series (SAK 1) AMBAC-Insured 3.500%(b) 5,000,000
2,500,000 A-1+ Series (SAK 2) FGIC-Insured 3.500%(b) 2,500,000
21,300,000 VMIG 1* New York City Housing Development
(East 96th Street Project)-Series A 3.250%(b) 21,300,000
New York City HDC Mortgage Revenue Multi-Family:
10,000,000 A-1 400 West 59th Series A-1 3.350%(a)(b) 10,000,000
10,000,000 A-1 400 West 59th Series A-2 3.300%(a)(b) 10,000,000
4,800,000 A-1 Columbus Gardens Project Series A 3.200%(b) 4,800,000
3,700,000 A-1 James Tower Development Series A 3.250%(b) 3,700,000
16,890,000 VMIG 1* Parkgate Towers Series A 3.250%(b) 16,890,000
2,000,000 VMIG 1* Queenswood Apartments Series A 3.450%(b) 2,000,000
1,200,000 A-1+ New York City IDA Civic Facilities Revenue
(Childrens Oncology Society) 3.050%(b) 1,200,000
New York City IDA IDR:
3,450,000 VMIG 1* Andin International Inc. Series 87A 3.250%(a)(b) 3,450,000
1,085,000 P-1* William E Martin & Sons Co. 3.250%(a)(b) 1,085,000
7,255,000 A-1+ New York City Muni Water Finance Authority
Water & Sewer System Muni Trust Receipts
AMBAC-Insured 3.500%(b) 7,255,000
2,700,000 VMIG 1* New York City Trust for Cultural Resources
Revenue (Museum of Broadcasting)
3.450%(b) 2,700,000
13,300,000 VMIG 1* New York City Water & Sewer Certificate
Series 1992A Muni Trust Receipts 3.350%
MBIA-Insured(b) 13,300,000
New York State Dormitory Authority Revenue:
4,325,000 A-1+ Muni Trust Receipts Colgate University Series
(SGA 15) FGIC-Insured 3.500%(b) 4,325,000
2,000,000 A-1+ Muni Trust Receipts-Series (SAK 3)
FGIC-Insured 3.500%(b) 2,000,000
See Notes to Financial Statements.
9
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Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
$ 1,050,000 AAA Special Activity District Program FGIC-Insured
6.375% due 7/1/96 $ 1,057,013
5,000,000 A-1 Cerebral Palsy Incorporated 3.100%(b) 5,000,000
5,900,000 VMIG 1* New York State Energy Research & Development
Electricity Facilities Revenue (Long Island Lighting Co.)
3.100% to 3.300%(a)(b) 5,900,000
New York State Energy Research & Development
Authority Pollution Control Revenue:
6,000,000 P-1* Central-Hudson Gas & Electricity
Series 85B 3.200%(a)(b) 6,000,000
1,100,000 P-1* Niagara Mohawk Power Corp. Series A 3.500%(b) 1,100,000
1,000,000 P-1* Rochester Gas & Electricity 3.200%(b) 1,000,000
17,222,500 AAA New York State Environmental Facilities Corp.
Pollution Control Revenue 3.600% due 1/1/97(g) 17,222,500
New York State HFA Revenue Multi-Family Housing:
35,100,000 VMIG 1* Normandie Court I Project 3.100%(b) 35,100,000
1,900,000 VMIG 1* Series 1988A AMBAC-Insured 3.300%(b) 1,900,000
New York State Local Government Assistance Corp.:
38,700,000 VMIG 1* Series A 3.150%(b) 38,700,000
5,000,000 VMIG 1* Series B 3.150%(b) 5,000,000
25,000,000 VMIG 1* Series C 3.150%(b) 25,000,000
16,400,000 VMIG 1* Series D 3.150%(b) 16,400,000
2,500,000 VMIG 1* New York State Medical Care Facilities Finance Agency
Revenue-Lenox Hill Hospital Series A 3.100%(b) 2,500,000
New York State Mortgage Agency Revenue:
20,255,000 VMIG 1* Muni Trust Receipts 3.550%(a)(b) 20,255,000
4,260,000 VMIG 1* Muni Trust Receipts 3.650% due 6/7/96(a)(g) 4,260,000
10,165,000 A-1 New York State Throughway Authority Muni Trust
Receipts FGIC-Insured 3.450%(b) 10,165,000
12,342,000 VMIG 1* New York State Urban Development Corp. Revenue
Variable Rate Certificate-Correctional Facilities
Muni Trust Receipts 3.450%(b) 12,342,000
1,900,000 A-1 Newburgh IDA Civic Facility Revenue
(Saint Mary's College) 3.350%(b) 1,900,000
Niagara County IDA (American Re-Fuel):
22,700,000 VMIG 1* 3.250% due 4/10/96 TECP(a)(g) 22,698,937
33,400,000 VMIG 1* 3.300%(b) 33,400,000
10,000,000 VMIG 1* 3.400% due 5/16/96 TECP(a)(g) 10,000,000
See Notes to Financial Statements.
10
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================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
$ 3,500,000 P-1* Niagara County IDA IDR (General Abrasive Tribacher)
3.500%(a)(b) $ 3,500,000
1,500,000 VMIG 1* North Hempstead Solid Waste Management Authority
Solid Waste Management Revenue Refunding
Series A 3.100%(b) 1,500,000
2,760,000 MIG 1* North Hempstead BAN 4.000% due 11/1/96 2,764,470
1,950,000 MIG 1* Patchogue-Medford Union Free School District
TAN 4.500% due 6/27/96 1,952,226
3,000,000 MIG 1* Plainview-Old Bethpage CSD TAN 3.870% due 6/28/96 3,002,433
6,400,000 VMIG 1* Port Authority of New York & New Jersey Special
Obligation Revenue 3rd Installment Series 3
3.250%(a)(b) 6,400,000
6,000,000 AAA Puerto Rico Industrial Medical PCR (Abbot Laboratory)
Series 1983 3.410% due 3/1/97(g) 6,000,000
1,320,000 VMIG 1* Rensselaer County IDA IDR (Millers Supermarket Inc.
Project) 3.750% due 3/3/97(a)(g) 1,320,000
11,000,000 MIG 1* Riverhead CSD TAN 4.250% CSD due 6/28/96 11,007,656
2,690,000 MIG 1* Rochester TOB Short (BTB-72) Muni Trust Receipts
AMBAC-Insured 3.500%(b) 2,690,000
11,273,000 MIG 1* Schenectady County BAN Series A 3.500% due 2/14/97 11,282,484
2,000,000 P-1* Schenectady County IDA IDR Refunding Scotia
Industrial Park Project Series A 3.250%(b) 2,000,000
11,000,000 MIG 1* South Country CSD TAN 4.500% due 6/28/96 11,010,921
10,750,000 MIG 1* Three Village CSDTAN 4.250% due 6/28/96 10,762,443
Triborough Bridge & Tunnel Authority Revenue:
19,800,000 A-1+ Certificates General Purpose Series C
Muni Trust Receipts MBIA-Insured 3.700%(b) 19,800,000
5,475,000 AAA MBIA-Insured 3.450% due 4/15/96(g) 5,475,000
26,500,000 VMIG 1* Special Obligation FGIC-Insured 3.100%(b) 26,500,000
5,000,000 MIG 1* Utica BAN 1995 Series I 6.150% due 8/23/96 5,009,311
2,140,000 MIG 1* Wantagh Union Free School District TAN
4.250% due 6/27/96 2,141,176
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $876,122,764*) $876,122,764
===========================================================================================================
See Notes to Financial Statements.
11
<PAGE>
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================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Education -- 18.3%
$ 700,000 AAA Central Square, Central School District, FGIC-
Insured, 6.500% due 6/15/00 $ 756,875
3,000,000 AAA CUNY COP, John Jay College, AMBAC-Insured,
5.000% due 8/15/09 2,887,500
1,000,000 AAA New York City IDA, Civil Facilities Revenue, (New School
for Social Research Project), MBIA-Insured, Series A,
6.200% due 9/1/14 1,033,750
New York State Dormitory Authority, Revenue Bonds:
City University:
2,500,000 Baa1* 7.500% due 7/1/10(d) 2,887,500
3,000,000 Baa1* 7.625% due 7/1/14 3,090,120
4,250,000 AAA AMBAC-Insured, 6.300% due 7/1/24 4,398,750
Series A:
2,500,000 Baa1* 7.500% due 7/1/06 2,574,350
2,000,000 Baa1* 5.625% due 7/1/16 1,905,000
7,000,000 Baa1* Series B, 6.000% due 7/1/14 6,947,500
2,000,000 BBB Series C, 8.200% due 7/1/14 2,187,500
1,250,000 Baa1* Series U, 6.250% due 7/1/02 1,321,875
3,000,000 AAA Series 2, MBIA-Insured, 6.875% due 7/1/14 3,292,500
2,855,000 AAA Comsewogue Public Library, MBIA-Insured,
6.000% due 7/1/15 2,897,825
3,000,000 AAA Cooper Union, FSA-Insured, 7.200% due 7/1/20 3,303,750
Cornell University, Series A:
2,000,000 AA 7.375% due 7/1/20 2,222,500
1,000,000 AA 7.375% due 7/1/30 1,111,250
1,230,000 AAA Crouse Community Center, FHA-Insured,
7.500% due 8/1/29 1,354,538
2,000,000 AAA Culinary Institute of America, CONNIE LEE-Insured,
6.000% due 7/1/22 1,980,000
Department of Health, State of New York Issue:
200,000 A+ 7.250% due 7/1/02 219,250
3,150,000 A+ 5.500% due 7/1/20 2,866,500
4,500,000 Baa1* Educational Revenue Bonds, 6.250% due 5/15/14 4,528,125
3,500,000 AAA Episcopal Health, FHA-Insured, 5.900% due 8/1/20 3,416,875
Genesee Valley, FHA-Insured:
1,000,000 AA Series A, 6.900% due 2/1/32 1,043,750
685,000 AA Series B, 6.850% due 8/1/16 740,656
800,000 AA- Ideal Senior Living Center, FHA-Insured,
7.625% due 8/1/28 872,000
See Notes to Financial Statements.
12
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================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Education -- 18.3% (continued)
$ 1,600,000 A+ Irving Medical Hospital, 10.500% due 7/1/17 $ 1,635,520
2,370,000 AAA Jewish Geriatric Center, FHA-Insured,
7.150% due 8/1/14 2,618,850
2,000,000 AAA Long Island Medical Center, Series A,
FHA-Insured, 7.750% due 8/15/27 2,140,000
2,700,000 AA Manhattan College, 6.500% due 7/1/19 2,781,000
1,500,000 Aa* New Hope Community, FHA-Insured,
5.700% due 7/1/17 1,438,125
New York Medical College:
220,000 AA 6.700% due 7/1/01 240,350
1,150,000 AAA 7.250% due 10/1/03 1,219,000
6,000,000 A+ Revenue Department, Series A, 6.250% due 7/1/24 6,000,000
5,000,000 Baa1* State of New York Issue, Series 1991,
7.750% due 7/1/21 5,556,250
State University Educational Facility, Series A:
1,000,000 A+ 7.500% due 5/15/11 1,152,500
11,620,000 A+ 6.375% due 5/15/14 11,808,825
12,110,000 A+ 5.875% due 5/15/17 11,913,212
5,000,000 A+ 5.250% due 5/15/19 4,500,000
4,000,000 A+ 6.000% due 5/15/22 3,870,000
2,450,000 AAA St. Vincent's Hospital & Medical Center, FHA-Insured,
7.400% due 8/1/30 2,649,063
7,370,000 A+ University of Rochester, Series A, 6.500% due 7/1/19 7,839,837
285,000 BBB- Upstate Community College, Series B,
7.100% due 7/1/01 311,006
New York State, Urban Development Corp.:
3,125,000 BBB Center for Individual Innovation, 5.500% due 1/1/13 2,968,750
3,660,000 BBB Syracuse University Center, 5.500% due 1/1/15 3,458,700
1,600,000 AAA Niagara Falls, FHA-Insured, Series B, 6.200% due 2/1/15 1,646,000
- -----------------------------------------------------------------------------------------------------------
135,587,227
- -----------------------------------------------------------------------------------------------------------
Escrowed to Maturity(e) -- 1.3%
1,495,000 AAA Commonwealth of Puerto Rico, Aqueduct & Sewer
Authority Revenue Bonds, (Escrowed to maturity with
U.S. Government Securities), 10.250% due 7/1/09 2,061,231
New York City GO, AMBAC-Insured, Series I,
(Escrowed to maturity with U.S. Government Securities):
3,150,000 AAA 7.250% due 8/15/14 3,472,875
945,000 AAA 7.250% due 8/15/15 1,028,869
See Notes to Financial Statements.
13
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Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Escrowed to Maturity(e) -- 1.3% (continued)
$ 2,775,000 AAA New York State Power Authority Revenue and
General Purpose, (Escrowed to maturity with U.S.
Government Securities), 9.500% due 1/1/01 $ 3,108,000
- -----------------------------------------------------------------------------------------------------------
9,670,975
- -----------------------------------------------------------------------------------------------------------
Finance -- 3.5%
500,000 AA- Municipal Assistance Corp., New York City, Series 64,
7.625% due 7/1/08 553,750
New York State Local Government Assistance Corp.:
14,345,000 A 1992 Series A, 6.875% due 4/1/19 15,582,256
1993 Series C:
3,225,000 A 5.500% due 4/1/17 3,083,906
8,055,000 A 5.000% due 4/1/21 7,017,919
- -----------------------------------------------------------------------------------------------------------
26,237,831
- -----------------------------------------------------------------------------------------------------------
General Obligation -- 7.1%
500,000 AAA Buffalo Refunding Bonds, FGIC-Insured,
6.250% due 2/1/16 520,625
1,350,000 A Commonwealth of Puerto Rico GO, 8.000% due 7/1/08 1,464,750
860,000 A- Commonwealth of Puerto Rico Municipal Finance Agency,
Series A, 8.250% due 7/1/08 932,025
Green Island GO:
100,000 Baa* 9.375% due 11/1/01 118,500
125,000 Baa* 9.375% due 11/1/02 150,000
Guam Government GO, Series A:
1,000,000 BBB 5.375% due 11/15/13 900,000
1,935,000 BBB 5.400% due 11/15/18 1,710,056
New Rochelle GO, MBIA-Insured:
1,250,000 AAA Series B, 6.200% due 8/15/20 1,310,938
450,000 AAA Series C, 6.250% due 3/15/20 461,250
New York City Refunding Bonds:
4,000,000 AAA MBIA-Insured, 6.950% due 8/15/12 4,485,000
3,000,000 AAA Series B, FSA-Insured, 5.850% due 10/1/07 3,097,500
5,000,000 Baa1* Series C, 6.660% due 8/1/09 5,075,000
255,000 AAA Series D, BIG-Insured, 8.000% due 8/1/04 271,575
Series F:
10,000,000 A+ 5.750% due 2/1/19 9,225,000
1,600,000 A+ 6.625% due 2/15/25 1,626,000
5,500,000 BBB+ Series H, 7.000% due 2/1/21 5,795,625
See Notes to Financial Statements.
14
<PAGE>
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================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
General Obligation -- 7.1% (continued)
Series I, AMBAC-Insured:
$ 1,850,000 AAA 7.250% due 8/15/14 $ 1,995,687
555,000 AAA 7.250% due 8/15/15 599,400
New York State GO:
6,485,000 A* 7.000% due 11/15/02 7,287,519
1,000,000 A* 12.000% due 11/15/03 1,433,750
2,750,000 A* 9.875% due 11/15/05 3,719,375
- -----------------------------------------------------------------------------------------------------------
52,179,575
- -----------------------------------------------------------------------------------------------------------
Government Facilities -- 3.2%
New York State Dormitory Authority Revenue,
Lease-Series A:
8,660,000 Baa1* 5.375% due 5/15/16 7,794,000
10,000,000 Baa1* 5.250% due 5/15/21 8,687,500
New York State Urban Development Corp. Revenue,
Correctional Facilities, Series 6:
2,500,000 BBB 5.375% due 1/1/15 2,271,875
5,500,000 AAA FSA-Insured, 5.375% due 1/1/25 5,094,375
- -----------------------------------------------------------------------------------------------------------
23,847,750
- -----------------------------------------------------------------------------------------------------------
Hospitals -- 22.8%
990,000 B1 Monroe County IDA, Revenue Civic Facilities-Genesee
Hospital, Series A, 6.500% due 11/1/99 999,900
6,615,000 Baa* New York City Local Government Revenue, Health &
Hospitals Corp., Series A, 6.300% due 2/15/20 6,342,132
New York State Dormitory Authority:
2,400,000 A+ Department of Health, Rosewell Project,
5.500% due 7/1/25 2,169,000
3,655,000 AAA Devereux Foundation, MBIA-Insured,
5.000% due 7/1/10 3,449,407
470,000 BBB+ Manhattan Eye, Ear & Throat Hospital,
11.500% due 7/1/09 478,432
3,000,000 AA St. Lukes Home, 6.375% due 8/1/35 3,090,000
990,000 AAA United Health Service Inc., FHA-Insured,
7.350% due 8/1/29 1,069,200
New York State Medical Care Facilities Finance Agency:
Revenue Bonds:
5,075,000 BBB+ 8.875% due 8/15/07 5,449,281
4,615,000 BBB+ 6.500% due 2/15/19 4,788,063
See Notes to Financial Statements.
15
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Hospitals -- 22.8% (continued)
AMBAC/FHA-Insured:
$ 8,500,000 AAA 6.800% due 8/15/24 $ 9,233,125
7,600,000 AAA 6.500% due 8/15/29 8,075,000
2,500,000 AAA 6.900% due 8/15/34 2,731,250
FHA-Insured:
1,985,000 AAA 6.400% due 8/15/14 2,042,069
14,450,000 AAA 6.200% due 2/15/28 14,558,375
990,000 AA Series B, 7.000% due 8/15/32 1,059,300
2,000,000 AA+ Series C, 6.100% due 8/15/15 2,005,000
3,000,000 AAA Beth Israel Medical Center, Series A, MBIA-Insured,
7.500% due 11/1/10 3,378,750
4,000,000 BBB Brookdale Hospital, 6.800% due 8/15/12 4,125,000
2,500,000 BBB Central Suffolk Hospital Project, Series A,
6.125% due 11/1/16 2,350,000
Hospital & Nursing Home, FHA-Insured, Series A:
160,000 AA 6.100% due 2/15/02 165,800
770,000 AA- 8.750% due 2/15/15 789,373
11,805,000 AAA 6.200% due 2/15/21 11,908,294
1,000,000 AAA 8.000% due 2/15/28 1,090,000
4,100,000 AA 7.450% due 8/15/31 4,433,125
3,000,000 AA 6.375% due 8/15/33 2,996,250
Long Term Healthcare, CGIC-Insured:
1,860,000 AAA Series B, 6.450% due 11/1/14 1,939,050
140,000 AAA Series C, 6.400% due 11/1/14 145,600
Mental Health Service Facilities,
485,000 AAA Series A, MBIA-Insured, 7.750% due 2/15/20 535,925
4,720,000 BBB+ Series F, 6.500% due 8/15/12 4,908,800
6,800,000 AA Methodist Hospital, FHA-Insured, 6.700% due 8/15/23 7,106,000
4,000,000 AA Mortgage Project, Series A, FHA-Insured,
6.375% due 8/15/24 4,100,000
Second Mortgage Healthcare Project,
1,000,000 Aa* 6.375% due 11/15/19 1,006,250
5,000,000 Baa* Secured Hospital Revenue Bonds, Series 91-A,
7.400% due 8/15/21 5,281,250
Series A:
1,185,000 BBB+ 7.700% due 2/15/18 1,256,100
1,840,000 BBB+ 7.750% due 2/15/20 2,019,400
1,570,000 Baa* 6.250% due 2/15/24 1,497,387
6,000,000 Aa* SONYMA-Insured, 5.850% due 2/15/33 5,715,000
3,500,000 AA Series B, FHA-Insured, 6.100% due 2/15/15 3,495,625
See Notes to Financial Statements.
16
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Hospitals -- 22.8% (continued)
$ 2,500,000 AA Series C, FHA-Insured, 6.650% due 8/15/32 $ 2,584,375
Series D, FHA-Insured:
460,000 AAA 5.950% due 8/15/09 469,200
8,300,000 AAA 6.375% due 8/15/29 8,424,500
5,000,000 AA 6.450% due 2/15/32 5,075,000
1,220,000 AA+ 6.200% due 2/15/35 1,226,100
1,640,000 AAA St. Mary's Hospital Project, Series A, AMBAC-Insured,
6.200% due 11/1/14 1,701,500
Newark-Wayne Community Hospital Inc.,
Hospital Revenue:
2,890,000 NR Series A, 7.600% due 9/1/15 2,792,462
2,400,000 AAA Series B, FHA-Insured, 5.875% due 1/15/33 2,283,000
4,700,000 BBB New York Downtown Hospital, Series A,
6.800% due 2/15/20 4,770,500
550,000 Baa* Onondaga County IDA, Civic Facility Revenue Bonds,
1993 Series B, 6.625% due 1/1/18 548,625
535,000 A- Puerto Rico Industrial, Medical & Environmental
Pollution Control Facilities Finance Authority,
(St. Lukes Hospital Project), Series A,
6.100% due 6/1/01 551,050
720,000 A Valley Health Development Corp. Revenue Bonds,
FHA-Insured, Mortgage Loan, 11.300% due 2/1/23 864,000
- -----------------------------------------------------------------------------------------------------------
169,072,825
- -----------------------------------------------------------------------------------------------------------
Housing -- 10.5%
6,470,000 BBB Commonwealth of Puerto Rico, Urban Renewal
& Housing Corp. Revenue Bonds,
7.875% due 10/1/04 7,197,875
10,200,000 AA Housing New York Corp. Revenue Refunding,
5.500% due 11/1/20 9,396,750
1,820,000 NR Lincoln Towers Housing Corp., 11.250% 1/1/15 1,904,084
3,350,000 Aa* New York State Dormitory Authority Revenue,
Nursing Home, Wesley Garden, FHA-Insured,
6.125% due 8/1/35 3,366,750
New York City Housing Development Corp.,
Multi-Family Housing, Pass-Through Certificates:
1,908,129 AAA AMBAC-Insured, 6.500% due 12/20/01 1,931,980
1,620,805 NR Cadman Project, 6.500% due 11/15/18 1,624,858
FHA-Insured:
5,000,000 AAA 7.350% due 6/1/19 5,250,000
See Notes to Financial Statements.
17
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Housing -- 10.5% (continued)
$ 1,028,911 NR Heywood Towers Project, 6.500% due 8/15/17 $ 1,031,484
1,305,167 NR Kelly Project, 6.500% due 2/15/18 1,308,430
1,676,856 NR Riverside Project, 6.500% due 11/15/18 1,674,758
7,650,000 AA Series B, FHA-Insured, 5.850% due 5/1/26 7,363,125
New York State Housing Finance Agency, Multi-Family
Housing, FHA-Insured:
2,000,000 Aa* 6.200% due 8/15/15 2,020,000
Second Mortgage Project, Multi-Family
Housing, SONYMA-Insured:
Series A:
500,000 Aa* 7.000% due 8/15/12(a) 527,500
500,000 Aa* 7.050% due 8/15/24(a) 520,625
1,750,000 Aa* Series C, 6.600% due 8/15/27 1,798,125
1,250,000 Aa* Series D, 6.250% due 8/15/23 1,264,062
2,905,000 Aa* Series A, 10.000% due 11/15/25 2,975,882
1,500,000 AAA Series C, 6.500% due 8/15/24 1,541,250
New York State Mortgage Agency Revenue:
320,000 Aa* 8.100% due 10/1/17 334,800
1,345,000 Aa* 9th Series A, 7.300% due 4/1/17(a) 1,365,175
2,625,000 Aa* Series 37-A, 6.375% due 10/1/14(a) 2,726,719
1,000,000 Aa* Series 41-A, 6.450% due 10/1/14 1,041,250
4,550,000 Aa* Series 41-B, 6.300% due 10/1/17 4,669,438
4,000,000 Aa* Series 42, FHA-Insured, 6.650% due 4/1/26(a) 4,150,000
4,250,000 Aa* Series 48, 6.100% due 4/1/25(a) 4,218,125
850,000 Aa* Series SS, Homeowner Mortgage, 7.950% due 10/1/22 908,437
1,000,000 A* Rensselear Multi-Family Housing Mortgage Revenue,
Rensselear Multi-Family Housing Apartments,
Series A, 7.750% due 1/1/11 1,048,750
280,000 A White Plains, Battle Hill Housing Development Corp.,
Housing Revenue Bonds, Section 8, FHA-Insured,
9.875% due 4/1/25 288,336
- -----------------------------------------------------------------------------------------------------------
77,498,568
- -----------------------------------------------------------------------------------------------------------
Industrial Development -- 6.8%
355,000 NR Albany County IDA, Historic Hudson River Heritage
Office Building, 9.500% due 12/1/95 347,659
3,795,000 D Babylon IDA, Recycling Facilities Revenue,
Babylon Recycling Center, Inc.,
Series A, 8.875% due 3/1/11(a)(d)(f) 1,518,000
See Notes to Financial Statements.
18
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Industrial Development -- 6.8% (continued)
Battery Park City Authority Housing Revenue:
$ 6,715,000 AA 5.000% due 11/1/13 $ 5,967,957
5,000,000 AA Series A, 5.250% due 11/1/17 4,481,250
500,000 A Brookhaven IDA, 8.100% due 4/1/08 530,000
1,300,000 A Grand Central, District Management Association Refunding-
Business Import District Capital, 5.125% due 1/1/14 1,192,750
4,650,000 A- Hempstead Town IDA, Resource Recovery Revenue Bonds:
American Fuel Company, 7.400% due 12/1/10 4,806,566
1,000,000 AA Nassau District Energy Corp.,
7.750% due 9/15/15(a) 1,038,750
500,000 A+ Monroe County IDA, Revenue Public Improvement,
Canal Ponds Park, Series A, 7.000% due 6/15/13 544,375
New York City IDA, Civil Facility Revenue,
(The Lighthouse Project), LOC Barclay's Bank:
1,000,000 AA 6.375% due 7/1/10 1,047,500
2,250,000 AA 6.500% due 7/1/22 2,359,688
3,000,000 AAA Onondaga County IDA, (Bristol Meyers Squibb
Co. Project), 5.750% due 3/1/24(a) 3,015,000
945,000 Aa1* Prime Laboratories Inc. IDR, LOC Algamene Bank
Nederland, NV, 7.700% Mandatory tender 11/1/10 965,733
1,410,000 A Rensselear County IDA, Albany International Corp.,
7.550% due 6/1/07(a) 1,575,675
2,000,000 A Terminal One Group Association, 6.000% due 1/1/15 1,945,000
United Nations Development Corp., Revenue Bonds,
Senior Lien, Series A:
1,490,000 A* 6.000% due 7/1/07 1,557,050
1,170,000 A* 6.000% due 7/1/12 1,174,387
9,500,000 A* 6.000% due 7/1/26 9,393,125
4,000,000 NR++ Visy Paper Inc. Project, 7.950% due 1/1/28(a) 4,045,000
2,500,000 B* Warren & Washington Counties IDA, Resource Recovery,
Revenue Bonds, Series A, 7.900% due 12/15/07 2,556,250
- -----------------------------------------------------------------------------------------------------------
50,061,715
- -----------------------------------------------------------------------------------------------------------
Life Care Systems -- 1.9%
New York State Dormitory Authority, Revenue Bonds,
FHA-Insured:
1,345,000 AAA Heritage House Nursing Center, 7.000% due 8/1/31 1,472,775
2,450,000 AA- Iroquois Nursing, 7.050% due 2/1/31 2,673,563
1,945,000 AA James G. Johnston Nursing Home,
5.750% due 8/1/23 1,884,219
See Notes to Financial Statements.
19
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Life Care Systems -- 1.9% (continued)
$ 1,185,000 BBB New York State Medical Care Facilities, Finance Agency
Revenue Bonds, Arden Hill, FHA-Insured
9.500% due 1/15/24 $ 1,199,172
2,160,000 A Oneida-Herkimer Solid Waste Management Authority,
Solid Waste System Revenue Bonds, FHA-Insured,
7.200% due 8/1/31 2,251,800
1,250,000 AAA Syracuse GO, IDA, James Square Association,
FHA-Insured, 7.000% due 8/1/25 1,320,312
3,150,000 AA Warburg Home Project, 5.800% due 2/1/28 2,976,750
- -----------------------------------------------------------------------------------------------------------
13,778,591
- -----------------------------------------------------------------------------------------------------------
Miscellaneous -- 0.7%
2,250,000 AAA Leake & Watts Services Inc., MBIA-Insured,
6.000% due 7/1/14 2,295,000
New York State Municipal Bond Bank Agency, Series A,
Special Revenue Program:
1,000,000 BBB+ City of Buffalo, 6.875% due 3/15/06 1,078,750
1,500,000 A+ City of Rochester, 6.750% due 3/15/11 1,605,000
- -----------------------------------------------------------------------------------------------------------
4,978,750
- -----------------------------------------------------------------------------------------------------------
Pollution Control Revenue -- 5.1%
4,500,000 AAA Dutchess County Resource Recovery Agency,
Revenue Bonds, Solid Waste Management,
Series A, FGIC-Insured, 7.500% due 1/1/09 4,921,875
New York State Energy, Research & Development Authority:
2,660,000 AAA FSA-Insured, 8.375% due 12/1/28(a) 2,962,575
MBIA-Insured:
4,000,000 AAA 6.150% due 7/1/26(a) 4,035,000
1,100,000 AAA Series B, 7.375% due 10/1/14 1,215,500
1,000,000 A- Series C, 8.375% due 12/1/28(a)(c) 1,098,750
New York State Environmental Facilities Corp.,
State Water Revolving Fund:
5,765,000 Baa* Huntington Project, Series A, 7.375% due 10/1/99 6,053,250
Series A:
8,250,000 A* 7.250% due 6/15/10 9,322,500
1,950,000 A* 7.500% due 6/15/12 2,162,063
1,000,000 AAA 5.200% due 5/15/14 947,500
1,000,000 AAA Series B, 5.200% due 6/15/15 961,250
See Notes to Financial Statements.
20
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
</TABLE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Pollution Control Revenue -- 5.1% (continued)
$ 2,200,000 BBB Oneida-Herkimer Solid Waste Management Authority,
Solid Waste System, Revenue Bonds,
6.750% due 4/1/14 $ 2,230,250
2,085,000 BB+ Puerto Rico Industrial, Medical & Environmental
Pollution Control Facilities Finance Authority,
Revenue Bonds, Series A, American Airlines,
8.750% due 12/1/25 2,139,772
- -----------------------------------------------------------------------------------------------------------
38,050,285
- -----------------------------------------------------------------------------------------------------------
Public Facilities -- 1.0%
1,000,000 A Albany Parking Authority, New York Revenue Refunding,
(Green & Hudson St. Garage Project) LOC Key Bank,
7.150% due 9/15/16 1,062,500
915,000 BBB New York State COP, (Hanson Redevelopment Project),
8.375% due 5/1/8 1,064,831
New York State Urban Development:
1,800,000 BBB Pine Barrens, 5.250% due 4/1/12 1,665,000
1,500,000 AAA Sports Facilities, Series A, MBIA-Insured,
5.500% due 4/1/19 1,445,625
2,000,000 BBB Youth Facilities, 6.000% due 4/1/15 1,945,000
- -----------------------------------------------------------------------------------------------------------
7,182,956
- -----------------------------------------------------------------------------------------------------------
Pre-Refunded(e) -- 3.8%
495,000 AAA Babylon IDA, Series B, FHA-Insured, (Escrowed
with U.S. Government Securities to 7/1/98 Call @ 103),
8.500% due 1/1/19 553,782
35,000 AAA Battery Park City Authority, FHA-Insured, (Escrowed
with U.S. Government Securities to 6/1/05 Call @ 100),
8.625% due 6/1/23 44,100
2,700,000 AAA Monroe County IDA, Series A, (Escrowed with U.S.
Government Securities to 12/15/96 Call @ 102),
8.000% due 12/15/03 2,833,812
200,000 AAA New York City GO, (Escrowed with U.S. Government
Securities to 11/1/97 Call @ 101.5), 8.750% due 11/1/17 217,750
750,000 AAA New York City Municipal Water Finance Authority,
Water & Sewer System, (Escrowed with U.S.
Government Securities to 6/15/97 Call @ 102),
9.000% due 6/15/17 810,938
580,000 AAA New York State Housing Finance Agency, State University
Construction, Series A, (Escrowed with U.S. Government
Securities to 5/1/96 Call @ 102), 8.000% due 11/1/16 593,607
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Pre-Refunded(e) -- 3.8% (continued)
$ 800,000 AAA New York State Local Government Assistance Corp.,
Series D, (Escrowed with U.S. Government Securities
to 4/1/02 Call @ 102), 7.000% due 4/1/18 $ 912,000
New York State Medical Care Facilities Finance
Agency Revenue:
480,000 AAA MBIA-Insured, (Escrowed with U.S. Government
Securities to 2/15/00 Call @ 102), 7.750%
due 2/15/20 544,800
Series A, FHA-Insured:
1,025,000 AAA Insured Mortgage Hospital, (Escrowed with
U.S. Government Securities to 8/15/97
Call @ 102), 8.000% due 2/15/25 1,103,156
6,500,000 AAA Hospital & Nursing Home Mortgage, FHA-Insured
(Escrowed with U.S. Government Securities to
8/15/97 Call @ 102), 8.000% due 2/15/27 6,930,625
9,345,000 AAA Hospital & Nursing Home Mortgage, FHA-Insured
(Escrowed with U.S. Government Securities to
8/15/98 Call @ 102), 8.000% due 2/15/28 10,244,456
1,700,000 AAA St. Lukes Hospital, Series B, (Escrowed with
U.S. Government Securities to 2/15/00
Call @ 102), 7.450% due 2/15/29 1,910,375
500,000 AAA New York State Urban Development Corporation
Revenue, Correctional Facilities, (Escrowed with
U.S. Government Securities to 1/1/00 Call @ 102),
7.000% due 1/1/17 553,125
1,000,000 AAA Orangetown Housing Authority, Rockland, Senior
Housing Center, 1990 Series, (Escrowed with
U.S. Government Securities to 4/1/00 Call @ 102),
7.600% due 4/1/30 1,143,750
- -----------------------------------------------------------------------------------------------------------
28,396,276
- -----------------------------------------------------------------------------------------------------------
Short-Term(b) -- 0.4%
1,600,000 AAA New York City GO, Series B, 3.250% due 8/15/23 1,600,000
1,200,000 AAA New York City Water Finance Authority, FGIC-Insured,
3.700% due 6/15/24 1,200,000
- -----------------------------------------------------------------------------------------------------------
2,800,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Transportation -- 6.2%
Metropolitan Transportation Authority Transit
Facilities Revenue:
$ 3,555,000 A+ Commuter Facilities Revenue, Series A,
6.500% due 7/1/24 $ 3,634,988
Service Contract:
4,800,000 BBB Series 5, 6.500% due 7/1/16 4,902,000
5,440,000 BBB Series N, 7.125% due 7/1/09 5,916,000
2,300,000 BBB Series O, 5.750% due 7/1/13 2,256,875
2,250,000 AAA Monroe County Airport Authority, Airport Revenue,
Greater Rochester International, MBIA-Insured,
7.250% due 1/1/19(a)(c) 2,455,313
1,450,000 BB+ New York City IDA, Special Facilities Revenue,
(American Airlines Inc. Project) 1990 Series A,
8.000% due 7/1/20(a) 1,556,936
New York State Highway Authority, Emergency Services,
Construction and Reconstruction:
4,230,000 AAA Series A, FSA-Insured, 6.600% due 3/1/01 4,605,413
1,500,000 AAA Series C, FGIC-Insured, 6.000% due 1/1/25 1,515,000
1,600,000 AAA Niagara Falls Bridge Authority, Toll Revenue, Series B,
FGIC-Insured, 5.250% due 10/1/15 1,534,000
8,000,000 BB Port Authority of New York & New Jersey,
Delta Airlines, Series 1R, 6.950% due 6/1/08 8,480,000
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Refunding:
3,245,000 A 5.500% due 7/1/15 3,074,637
1,000,000 A 5.500% due 7/1/36 910,000
Triborough Bridge & Tunnel Authority:
1,500,000 BBB Convention Center Project, Series E,
7.250% due 1/1/10 1,704,375
500,000 A+ Refunding, Series L, 8.125% due 1/1/12(d) 538,750
2,455,000 A+ Series Y, 6.125% due 1/1/21 2,580,819
- -----------------------------------------------------------------------------------------------------------
45,665,106
- -----------------------------------------------------------------------------------------------------------
Utilities -- 6.2%
500,000 BBB Guam Power Authority Revenue, Series A,
6.300% due 10/1/22 495,000
3,270,000 AAA New York City Municipal Finance Authority, Water &
Sewer System Revenue, Series A, FSA-Insured,
7.000% due 6/15/15 3,580,650
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Utilities -- 6.2% (continued)
New York State Energy, Research & Development
Authority, Electric Facilities Revenue Bonds:
Consolidated Edison Co. Project, Series A:
$ 4,500,000 A+ 6.100% due 8/15/20(c) $ 4,505,625
2,250,000 A+ 7.125% due 3/15/22 2,336,445
5,750,000 A+ 7.125% due 12/1/29 6,317,812
Long Island Lighting Co. Project:
Series A:
4,900,000 BB+ 7.150% due 12/1/20 4,998,000
1,000,000 BB+ 7.150% due 2/1/22 1,020,000
3,000,000 BB+ Series B, 7.150% due 2/1/22 3,060,000
1,000,000 BB+ Series D, 6.900% due 8/1/22 1,005,000
New York Electric & Gas Co.:
1,500,000 Baa2* Corning National Gas Corp., Series A,
8.250% due 12/1/18 1,651,875
Pollution Control Revenue Bonds,
Brooklyn Union Gas Co. Project:
3,000,000 A 7.050% due 7/1/26 3,240,000
6,000,000 AAA Series A, MBIA-Insured, 5.500% due 1/1/21 5,752,500
1,500,000 A Series B, RIBS, 6.952% due 7/1/26(c) 1,777,500
5,000,000 A Series 1, 7.125% due 12/1/20 5,170,850
1,000,000 AAA Puerto Rico Electric Power Authority, Revenue Refunding,
Linked Acrs & Levers, FSA-Insured, 5.929% due 7/1/23 1,017,500
- -----------------------------------------------------------------------------------------------------------
45,928,757
- -----------------------------------------------------------------------------------------------------------
Water and Sewer -- 1.2%
3,000,000 Baa1* Commonwealth of Puerto Rico, Aqueduct and
Sewer Authority, 5.000% due 7/1/19 2,651,250
1,000,000 AAA Buffalo Municipal Water Finance Authority,
Water Systems Revenue, FGIC-Insured,
5.750% due 7/1/19 988,750
2,150,000 AAA Monroe County Water Authority Revenue,
AMBAC-Insured, 7.000% due 8/1/19 2,319,312
New York City Municipal Water Finance Authority,
Water & Sewer System Revenue:
2,000,000 AAA Series A, MBIA-Insured, zero coupon due 6/15/11 842,500
2,390,000 A- Series B, 6.375% due 6/15/22 2,437,800
- -----------------------------------------------------------------------------------------------------------
9,239,612
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $717,034,832*) $740,176,799
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
Smith Barney Muni Funds
================================================================================
Schedules of Investments (continued) March 31, 1996
================================================================================
(a) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(c) Residual interest bonds--coupon varies inversely with level of
short-term tax-exempt interest rates.
(d) Securities segregated by Custodian for open purchase commitments.
(e) Pre-Refunded bonds escrowed by U.S. Government Securities and bonds
escrowed to maturity by U.S. Government Securities are considered by
Manager to be triple-A rated even if issuer has not applied for new
ratings.
(f) Security is in default and has been valued by the Fund's Board of
Directors (See Note 10.)
(g) Variable rate obligations payable at par on demand on the date
indicated.
* Aggregate cost for Federal income tax purposes is substantially the
same.
++ Security is not been rated by either Moody's Investors Services or
Standard & Poor's, however, the manager has determined the equivalent
rating to be A-1+/VMIG-1 due to enhancement features such as insurance
and/or irrevocable letters of credit.
+ Finch Investor Services, Inc.
See pages 25 and 26 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
25
<PAGE>
Smith Barney Muni Funds
================================================================================
Bond Ratings
================================================================================
All ratings are by Standard & Poor's Corporation ("Standard &Poor's"), except
those identified by an asterisk (*) that are by Moody's Investors Services
("Moody's"). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Rating from "AA" to "BB" 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 issue 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 bonds in this
category than in higher rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments.
D -- Bonds rated "D" are in default, and payment of interest and/or
repayment of principal is in arrears.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest
ranking within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge". Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
26
<PAGE>
Smith Barney Muni Funds
================================================================================
Short-Term Security Ratings
================================================================================
SP-1 -- Standard & Poor's highest rate 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.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
VMIG 1 -- Moody's highest rating for issues having a demand feature --
VRDO.
MIG 1 -- Moody's highest rating for short-term municipal obligations.
MIG 2 -- Moody's second highest rating for short-term municipal
obligations.
================================================================================
Security Descriptions
================================================================================
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CSD -- Central School District
COP -- Certificate of Participation
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 Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
IRB -- Industrial Revenue Bonds
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCFA -- Pollution Control Financing Authority
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
SONYMA -- State of New York Mortgage Association
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bond
TRAN -- Tax and Revenue Anticipation Notes
VRDD -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday Demand
27
<PAGE>
<TABLE>
<CAPTION>
Smith Barney Muni Funds
====================================================================================================================================
Statements of Assets and Liabilities March 31, 1996
====================================================================================================================================
New York Money New York
Market Portfolio Portfolio
====================================================================================================================================
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $876,122,764
and $717,034,832) $ 876,122,764 $ 740,176,799
Cash 129,513 36,723
Interest receivable 8,118,930 12,325,446
Receivable for Fund shares sold -- 362,186
Receivable for securities sold -- 10,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 884,371,207 752,911,154
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 1,376,593 1,224,988
Management fees payable 386,417 356,027
Distribution fees payable 31,225 72,438
Payable for Fund shares purchased -- 354,458
Payable for securities purchased -- 2,952,092
Accrued expenses 84,734 67,189
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 1,878,969 5,027,192
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 882,492,238 $ 747,883,962
====================================================================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 882,789 $ 56,720
Capital paid in excess of par value 881,906,888 730,353,829
Undistributed net investment income -- 141,293
Accumulated net realized loss from
security transactions (297,439) (5,809,847)
Net unrealized appreciation of investments -- 23,141,967
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 882,492,238 $ 747,883,962
====================================================================================================================================
Shares Outstanding:
Class A 882,789,677 42,299,011
---------------------------------------------------------------------------------------------------------------------------------
Class B -- 13,742,485
---------------------------------------------------------------------------------------------------------------------------------
Class C -- 678,322
---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $1.00 $13.19
---------------------------------------------------------------------------------------------------------------------------------
Class B * -- $13.18
---------------------------------------------------------------------------------------------------------------------------------
Class C ** -- $13.17
---------------------------------------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) -- $13.74
====================================================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed less than one year from initial purchase (See Note 4).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSCif shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
28
<PAGE>
Smith Barney Muni Funds
================================================================================
Statements of Operations For the Year Ended March 31, 1996
================================================================================
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest $30,371,612 $ 13,148,026
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 4,035,418 996,273
Distribution fees (Note 4) 807,051 532,733
Shareholder and system servicing fees 251,148 47,016
Registration fees 123,513 14,822
Shareholder communications 50,022 26,123
Audit and legal 26,238 11,531
Custody 18,087 12,696
Trustees' fees 15,006 5,806
Pricing service fees -- 17,048
Other 27,169 6,097
- --------------------------------------------------------------------------------
Total Expenses 5,353,652 1,670,145
Net Investment Income 25,017,960 11,477,881
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities*):
Proceeds from sales 89,105,261 72,098,156
Cost of securities sold 89,102,907 71,053,961
- --------------------------------------------------------------------------------
Net Realized Gain 2,354 1,044,195
Decrease in Net Unrealized Appreciation (Note 8) -- (16,335,761)
- --------------------------------------------------------------------------------
Net Gain (Loss) on Investments 2,354 (15,291,566)
Increase (Decrease) in Net Assets From Operations $25,020,314 $ (3,813,685)
================================================================================
</TABLE>
* Represents only short-term securities for the New York Money Market
Portfolio.
See Notes to Financial Statements.
29
<PAGE>
Smith Barney Muni Funds
================================================================================
Statements of Changes in Net Assets
================================================================================
For the Years Ended March 31,
<TABLE>
<CAPTION>
New York Money
Market Portfolio
--------------------------------------------
1996 1995
================================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 25,017,960 $ 9,003,131
Net realized gain (loss) 2,354 (338,320)
- ---------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 25,020,314 8,664,811
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (25,017,960) (8,962,020)
- ---------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (25,017,960) (8,962,020)
- ---------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 3,174,176,362 1,427,039,238
Net asset value of shares issued in connection
with the transfer of the Smith Barney Shearson
New York Municipal Money Market Fund's
net assets (Note 7) -- 605,581,400
Net asset value of shares issued
for reinvestment of dividends 24,164,797 8,014,448
Cost of shares reacquired (3,024,242,064) (1,414,406,279)
- ---------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 174,099,095 626,228,807
- ---------------------------------------------------------------------------------------------------------------
Increase in Net Assets 174,101,449 625,931,598
NET ASSETS:
Beginning of year 708,390,789 82,459,191
- ---------------------------------------------------------------------------------------------------------------
End of year $ 882,492,238 $ 708,390,789
===============================================================================================================
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
Smith Barney Muni Funds
================================================================================
Statements of Changes in Net Assets (continued)
================================================================================
For the Years Ended March 31,
<TABLE>
<CAPTION>
New York
Portfolio
-------------------------------------
1996 1995
===================================================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 11,477,881 $ 4,965,162
Net realized gain (loss) 1,044,195 (804,270)
Increase (decrease) in net unrealized appreciation (16,335,761) 1,186,302
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (3,813,685) 5,347,194
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (11,339,968) (5,027,432)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (11,339,968) (5,027,432)
- -----------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 43,180,915 34,196,422
Net asset value of shares issued in
connection with the transfer of the
Smith Barney New York Municipals
Fund Inc.'s net assets (Note 8) 651,752,267
Net asset value of shares issued for
reinvestment of dividends 6,775,955 2,496,848
Cost of shares reacquired (31,148,509) (22,088,943)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 670,560,628 14,604,327
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 655,406,975 14,924,089
NET ASSETS:
Beginning of year 92,476,987 77,552,898
- -----------------------------------------------------------------------------------------------------------------------------------
End of year* $ 747,883,962 $ 92,476,987
===================================================================================================================================
* Includes undistributed net investment income of: $ 141,293 $ 3,788
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
Smith Barney Muni Funds
================================================================================
Notes to Financial Statements
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
The New York Money Market and New York Portfolios ("Portfolios") are
separate investment portfolios of the Smith Barney Muni Funds ("Fund"). The
Fund, a Massachusetts business trust, is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, open-end management investment
company and consists of these Portfolios and eight other separate investment
portfolios: Florida, Georgia, Ohio, Pennsylvania, Limited Term, National,
Florida Limited Term and California Money Market Portfolios. The financial
statements and financial highlights for the other portfolios are presented in
separate annual reports.
The significant accounting policies consistently followed by the Portfolios
are: (a) securities transactions are accounted for on the trade date; (b)
securities are valued at mean between the quoted bid and asked prices provided
by an independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
short-term investments and securities maturing within 60 days are valued at cost
plus (minus) accreted discount (amortized premium), which approximates market
value; (d) gains or losses on the sale of securities are calculated by using the
specific identification method; (e) interest income, adjusted for amortization
of premiums and accretion of original issue discount, is recorded on the accrual
basis; market discount is recognized upon the disposition of the security; (f)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (g) direct expenses are charged to each portfolio and each class;
management fees and general fund expenses are allocated on the basis of relative
net assets; (h) the Portfolios intend to comply with the applicable provisions
of the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; (i) the
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. At March 31, 1996, reclassifications were made to the Portfolios'
capital accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, a portion
of accumulated net realized gains amounting to $1,833 and a portion of
undistributed net investment income amounting to $408 has been reclassified to
paid-in capital for the New York Portfolio. Net investment income, net realized
gains and net assets were not affected by this change; (j) estimates and
assumptions are
32
<PAGE>
Smith Barney Muni Funds
================================================================================
Notes to Financial Statements (continued)
================================================================================
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 from these
amounts; and (k) certain prior year numbers have been restated to reflect
current year's presentation. Net investment income, net realized gains, and net
assets were not affected by this change.
2. PORTFOLIO CONCENTRATION
Since each Portfolio invests primarily in obligations of issuers within New
York, it is subject to possible concentration risks associated with economic,
political, or legal developments or industrial or regional matters specifically
affecting New York.
3. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The New York Money Market Portfolio declares and records a dividend of
substantially all its net investment income on each business day. Such dividends
are paid or reinvested monthly in Portfolio shares on the payable date.
Furthermore, each Portfolio 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 Portfolio.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager to the Fund. The New
York Money Market Portfolio pays SBMFM a management fee calculated at the annual
rate of 0.50% of its average daily net assets. The shareholders for the New York
Portfolio approved an increase in the management fee from an annual rate of
0.45% to 0.50% of average daily net assets which became effective on December
18, 1995. These fees are calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. For the year ended March 31, 1996, SB received sales charges of
approximately $357,000 on sales of the New York Portfolio's Class A shares.
33
<PAGE>
Smith Barney Muni Funds
================================================================================
Notes to Financial Statements (continued)
================================================================================
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B
shares of the New York Portfolio, which applies if redemption occurs less than
one year from initial purchase. This CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. Class C
shares have a 1.00% CDSC, which applies if redemption occurs within the first
year of purchase. For the year ended March 31, 1996, CDSCs paid to SB were:
<TABLE>
<CAPTION>
Class B Class C
================================================================================
<S> <C> <C>
CDSCs $49,000 $2,000
================================================================================
</TABLE>
Pursuant to a Distribution Plan, the New York Portfolio pays a service fee
with respect to Class A, B and C shares calculated at the annual rate of 0.15%
of the average daily net assets of each respective class. In addition, the New
York Portfolio pays a distribution fee with respect to Class B and C shares
calculated at the annual rates of 0.50% and 0.55% of the average daily net
assets of each class, respectively. The New York Money Market Portfolio pays a
distribution fee calculated at the annual rate of 0.10% of the average daily net
assets of its Class A shares. For the year ended March 31, 1996, total
Distribution Plan fees incurred by the New York Portfolio were:
<TABLE>
<CAPTION>
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Distribution Plan Fees $243,626 $240,773 $48,334
================================================================================
</TABLE>
All officers and two Trustees of the Fund are employees of SB.
5. INVESTMENTS
During the year ended March 31, 1996, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term investments) were as follows:
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
================================================================================
<S> <C> <C>
Purchases -- $99,238,523
- --------------------------------------------------------------------------------
Sales -- 72,098,156
================================================================================
</TABLE>
34
<PAGE>
Smith Barney Muni Funds
================================================================================
Notes to Financial Statements (continued)
================================================================================
At March 31, 1996, the gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were approximately as follows:
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
================================================================================
<S> <C> <C>
Gross unrealized appreciation -- $32,014,179
Gross unrealized depreciation -- 8,872,212
- --------------------------------------------------------------------------------
Net unrealized appreciation -- $23,141,967
================================================================================
</TABLE>
6. CAPITAL LOSS CARRYFORWARD
At March 31, 1996 the New York Money Market and New York Portfolios had,
for Federal income tax purposes, $299,000 and $5,780,000, respectively, of
unused loss carryforwards available to offset future capital gains. To the
extent that these carryforward losses are used to offset capital gains, it is
possible that the gains so offset will not be distributed. The amount and
expiration of the carryovers are indicated below. Expiration occurs on March 31,
of the year indicated below:
<TABLE>
<CAPTION>
2001 2002 2003
================================================================================
<S> <C> <C> <C>
New York Money Market Portfolio $299,000 -- --
New York Portfolio -- $1,079,000 $4,701,000
================================================================================
</TABLE>
7. TRANSFER OF NET ASSETS NEW YORK MONEY MARKET PORTFOLIO
On November 18, 1994, the New York Money Market Portfolio acquired the
assets and certain liabilities of the Smith Barney Shearson New York Municipal
Money Market Fund ("Shearson New York Municipal") pursuant to a plan of
reorganization dated August 2, 1994. Total shares issued by the Portfolio and
the total net assets of Shearson New York Municipal Fund and the New York Money
Market Portfolio on the date of the transfer were as follows:
<TABLE>
<CAPTION>
Total Net
Shares Assets of Total Net
Issued by Acquired Assets of
Acquired Fund the Portfolio Fund the Portfolio
================================================================================
<S> <C> <C> <C>
Shearson New York Municipal 605,581,400 $605,581,400 $84,529,395
================================================================================
</TABLE>
The total net assets of Shearson New York Municipal before acquisition
included a net realized loss of $345,721. The total net assets of the Portfolio
immediately after the transfer were $690,110,795. The transaction was structured
for tax purposes to qualify as a tax-free reorganization under the Internal
Revenue Code of 1986, as amended.
35
<PAGE>
Smith Barney Muni Funds
================================================================================
Notes to Financial Statements (continued)
================================================================================
8. TRANSFER OF NET ASSETS NEW YORK PORTFOLIO
On February 2, 1996, the New York Portfolio acquired the assets and certain
liabilities of the Smith Barney New York Municipals Fund Inc. ("New York
Municipals") pursuant to an Agreement and a Plan of Reorganization dated October
23, 1995. Total shares issued by the Portfolio and the total net assets of New
York Municipals and the New York Portfolio on the date of the transfer were as
follows:
<TABLE>
<CAPTION>
Total Net
Shares Assets of Total Net
Issued by Acquired Assets of
Acquired Fund the Portfolio Fund the Portfolio
================================================================================
<S> <C> <C> <C>
New York Municipals 48,095,606 $651,752,267 $117,671,692
================================================================================
</TABLE>
The total net assets of New York Municipals before acquisition included
unrealized appreciation of $36,306,817 and a net realized loss of $5,542,090.
The total net assets of the Portfolio immediately after the transfer were
$769,423,959. The transaction was structured for tax purposes to qualify as a
tax-free reorganization under the Internal Revenue Code of 1986, as amended.
9. SHARES OF BENEFICIAL INTEREST
At March 31, 1996, the Fund had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Portfolios have
the ability to issue multiple classes of shares. Each share of a class
represents an identical interest in its respective Portfolio and has the same
rights, except that each class bears certain expenses specifically related to
the distribution of its shares. On October 10, 1994 the former Class C shares
were exchanged into Class A shares. Effective November 7, 1994, the Portfolios
adopted a new class structure, renaming Class B shares as Class C shares.
At March 31, 1996, total paid-in capital amounted to the following for each
class and respective Portfolio:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
================================================================================
<S> <C> <C> <C>
New York Money Market $882,789,677 -- --
New York 532,500,080 $188,851,486 $9,058,983
================================================================================
</TABLE>
36
<PAGE>
Smith Barney Muni Funds
================================================================================
Notes to Financial Statements (continued)
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1996 March 31, 1995
New York ----------------------------------- -------------------------------------
Money Market Portfolio Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 3,174,176,362 $ 3,174,176,362 1,427,039,238 $ 1,427,039,238
Net asset value of shares issued
in connection with transfer
of Shearson New York
Municipal Fund's
net assets (Note 7) -- -- 605,581,400 605,581,400
Shares issued on reinvestment 24,164,797 24,164,797 8,014,448 8,014,448
Shares redeemed (3,024,242,064) (3,024,242,064) (1,414,406,279) (1,414,406,279)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 174,099,095 $ 174,099,095 626,228,807 $ 626,228,807
====================================================================================================================================
</TABLE>
37
<PAGE>
Smith Barney Muni Funds
================================================================================
Notes to Financial Statements (continued)
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1996 March 31, 1995*
------------------------------- --------------------------------
New York Portfolio Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Class A+
Shares sold 1,504,192 $ 20,057,339 2,286,499 $ 28,645,014
Net asset value of shares issued in
connection with the transfer of
the New York Municipals
Fund net assets (Note 8) 35,871,333 486,159,506 -- --
Shares issued on reinvestment 401,580 5,319,636 177,827 2,228,332
Shares redeemed (1,927,282) (25,676,286) (1,632,862) (20,362,510)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 35,849,823 $ 485,860,195 831,464 $ 10,510,836
===================================================================================================================================
Class B
Shares sold 1,486,523 $ 19,753,173 300,125 $ 3,675,800
Net asset value of shares issued in
connection with the transfer of
the New York Municipals
Fund net assets (Note 8) 12,167,274 164,821,012 -- --
Shares issued on reinvestment 91,512 1,216,365 2,867 35,862
Shares redeemed (299,760) (4,018,685) (6,056) (76,693)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 13,445,549 $ 181,771,865 296,936 $ 3,634,969
===================================================================================================================================
Class C++
Shares sold 253,093 $ 3,370,403 148,675 $ 1,875,608
Net asset value of shares issued in
connection with the transfer of
the Smith Barney New York
Municipals Fund Inc.'s
net assets (Note 8) 56,999 771,749 -- --
Shares issued on reinvestment 18,201 239,954 18,547 232,654
Shares redeemed (109,624) (1,453,538) (133,522) (1,649,740)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 218,669 $ 2,928,568 33,700 $ 458,522
===================================================================================================================================
</TABLE>
* For the New York Portfolio, transactions for Class B shares are for the
period from November 11, 1994 (inception date) to March 31, 1995.
+ On October 10, 1994, the former Class C shares were exchanged into Class A
shares; therefore Class C share activity for the period from April 1, 1994
to October 9, 1994 is included with Class A share activity.
++ On November 7, 1994, the former Class B shares were renamed Class C shares.
38
<PAGE>
Smith Barney Muni Funds
================================================================================
Notes to Financial Statements (continued)
================================================================================
10. SECURITY VALUED BY THE FUND'S BOARD OF TRUSTEES
One of the New York Portfolio's investments is valued at the direction of
the Fund's Board of Trustees; this security is currently in default, and has
been valued in good faith, taking into consideration the appropriate economic,
financial and other pertinent available information pertaining to the defaulted
security. The table below shows the security valued by the Fund's Board of
Trustees:
<TABLE>
<CAPTION>
Value as of
Acquisition Par 3/31/96 Percentage
Security Date Amount Value of Net Assets Cost
================================================================================
<S> <C> <C> <C> <C> <C>
Babylon IDA,
Recycling
Facilities
Revenue 10/14/91 $3,795,000 $1,518,000 0.203% $3,755,592
================================================================================
</TABLE>
39
<PAGE>
Smith Barney Muni Funds
New York Money Market Portfolio
================================================================================
Financial Highlights
================================================================================
For a share of beneficial interest outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Shares 1996 1995 1994 1993(a)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(1) 0.038 0.025 0.018 0.010
Dividends from net investment income (0.038) (0.025) (0.018) (0.010)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 3.17% 2.49% 1.77% 1.01%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 882,492 $ 708,391 $ 82,459 $ 59,510
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(1) 0.67% 0.68% 0.60% 0.56%+
Net investment income 3.11 2.94 1.73 1.84 +
====================================================================================================================================
</TABLE>
(a) For the period from September 17, 1992 (inception date) to March 31, 1993.
(1) The manager has waived all or part of its fees for each of the years in the
two-year period ended March 31, 1994. If such fees were not waived, the per
share effect on net investment income would have been a decrease of $0.001
and $0.001 for 1994 and 1993, respectively, and the expense ratios would
have been 0.67% and 0.69% (annualized) for 1994 and 1993, respectively.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
40
<PAGE>
Smith Barney Muni Funds
New York Portfolio
================================================================================
Financial Highlights
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1996 1995(1) 1994 1993 1992
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.83 $ 12.83 $ 13.25 $ 12.33 $ 11.80
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.75 0.76 0.78 0.81 0.83
Net realized and unrealized gain (loss) 0.35 0.01* (0.41) 0.92 0.51
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.10 0.77 0.37 1.73 1.34
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.74) (0.77) (0.79) (0.81) (0.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.77) (0.79) (0.81) (0.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.19 $ 12.83 $ 12.83 $ 13.25 $ 12.33
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 8.71% 6.32% 2.66% 14.48% 11.98%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 557,809 $ 82,768 $ 70,065 $ 61,532 $ 40,370
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.72% 0.63% 0.55% 0.55% 0.48%
Net investment income 5.84 6.00 5.79 6.32 6.86
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 36.31% 30.38% 19.65% 21.91% 23.80%
====================================================================================================================================
</TABLE>
(1) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(2) The manager waived all or part of its fees for the year ended March 31,
1992. If such fees were not waived, the per share effect on net investment
income would have been a decrease of $0.007 and the expense ratio would
have been 0.53% for 1992. As a result of voluntary expense limitations, the
expense ratio will not exceed 0.80% for Class A shares.
* Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
41
<PAGE>
Smith Barney Muni Funds
New York Portfolio
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class B Shares 1996 1995(1)
===============================================================================
<S> <C> <C>
Net Asset Value, Beginning of Year $ 12.84 $ 11.96
- -------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.67 0.31
Net realized and unrealized gain 0.35 0.86*
- -------------------------------------------------------------------------------
Total Income From Operations 1.02 1.17
- -------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.68) (0.29)
- -------------------------------------------------------------------------------
Total Distributions (0.68) (0.29)
- -------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.18 $ 12.84
- -------------------------------------------------------------------------------
Total Return 8.05% 9.92%++
- -------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 181,144 $ 3,813
- -------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.25% 1.27%+
Net investment income 5.45 5.76+
- -------------------------------------------------------------------------------
Portfolio Turnover Rate 36.31% 30.38%
===============================================================================
</TABLE>
(1) For the period from November 11, 1994 (inception date) to March 31, 1995.
(2) As a result of voluntary expense limitations, the expense ratio will not
exceed 1.30% for Class B shares.
* Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
42
<PAGE>
Smith Barney Muni Funds
New York Portfolio
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class C Shares 1996 1995(1) 1994 1993(2)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.83 $ 12.82 $ 13.24 $ 12.84
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.66 0.68 0.68 0.15
Net realized and unrealized gain (loss) 0.36 0.01* (0.40) 0.37
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.02 0.69 0.28 0.52
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.68) (0.68) (0.70) (0.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.68) (0.68) (0.70) (0.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.17 $ 12.83 $ 12.82 $ 13.24
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 8.07% 5.66% 1.96% 4.04%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 8,931 $ 5,896 $ 5,461 $ 1,368
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.28% 1.28% 1.23% 1.23%+
Net investment income 5.02 5.38 4.98 5.37+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 36.31% 30.38% 19.65% 21.91%
====================================================================================================================================
</TABLE>
(1) On November 7, 1994, the former Class B shares were renamed Class C shares.
(2) For the period from January 8, 1993 (inception date) to March 31, 1993.
(3) As a result of voluntary expense limitations, the expense ratio will not
exceed 1.35% for Class C shares.
* Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
43
<PAGE>
Smith Barney Muni Funds
================================================================================
Independent Auditors' Report
================================================================================
To the Shareholders and Board of Trustees of the New York Money Market and New
York Portfolios of Smith Barney Muni Funds:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the New York Money Market and New
York Portfolios of Smith Barney Muni Funds as of March 31, 1996, the related
statements 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 the
financial highlights for each of the years in the three-year period then ended
and the period from September 17, 1992 (commencement of operations) to March 31,
1993 with respect to the New York Money Market Portfolio and each of the years
in the five-year period then ended with respect to the New York Portfolio. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 March
31, 1996, by correspondence with the custodian. As to securities purchased and
sold but not received or 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.
44
<PAGE>
Smith Barney Muni Funds
================================================================================
Independent Auditors' Report (continued)
================================================================================
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the New York Money Market
and New York Portfolios of Smith Barney Muni Funds as of March 31, 1996, the
results of their operations for the year then ended, the changes in net assets
for each of the years in the two-year period then ended and the financial
highlights for each of the years in the three-year period then ended and the
period from September 17, 1992 to March 31, 1993 with respect to the New York
Money Market Portfolio and for each of the years in the five-year period then
ended with respect to the New York Portfolio, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 15, 1996
45
<PAGE>
Smith Barney Muni Funds
================================================================================
Additional Shareholder Information (unaudited)
================================================================================
On December 15, 1995, a special meeting of the shareholders of the Fund was
held for the purpose of voting on the following matter:
1. To approve or disapprove a new management agreement between the Fund on
behalf of the New York Portfolio and SBMFM.
The results of the vote on the Proposal were as follows:
<TABLE>
<CAPTION>
% of Outstanding % of Outstanding Votes % of Outstanding
Votes For Shares Voted Votes Against Shares Voted Abstaining Shares Voted
=====================================================================================================
<S> <C> <C> <C> <C> <C>
3,179,973.002 77.86% 576,755.576 14.12% 327,391.514 8.02%
=====================================================================================================
</TABLE>
================================================================================
Tax Information (unaudited)
================================================================================
100% of the dividends paid by the New York Portfolio and New York Money
Market Portfolio from net investment income for the year ended March 31, 1996,
were tax-exempt for regular Federal income tax purposes.
46
<PAGE>
Smith Barney
Muni Funds
Trustees
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P.Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
C. Richard Youngdahl
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Karen L. Mahoney-Malcomson
Vice President and Investment Officer
Lawrence T. McDermott
Vice President and Investment Officer
Irving P. David
Controller
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
SMITH BARNEY
------------
A Member of TravelersGroup [LOGO]
Investment Manager
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds--New York Money Market and New York Portfolios. It is
not authorized for distribution to prospective investors unless accompanied or
preceded by a current Prospectus for the Portfolios, which contains information
concerning the Portfolios' investment policies and expenses as well as other
pertinent information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
FD2397 5/96
<PAGE>
ANNUAL REPORT
1996
1996 [PHOTO APPEARS HERE]
1996
1996
1996
Smith Barney
Muni Funds
California Money
Market Portfolio
-----------------------------------------------
March 31, 1996
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- --------------------------------------------------------------------------------
California Money Market Portfolio
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney Muni
Funds-California Money Market Portfolio for the year ended March 31, 1996. For
your convenience, we have summarized the period's prevailing economic and market
conditions below. A detailed summary of performance and current holdings can be
found in the appropriate sections that follow in the annual report.
As of March 31, 1996, the California Money Market Portfolio's 7-day current
yield was 2.73% and its 7-day effective yield, which reflects compounding, was
2.76%. For the same period, the Portfolio's tax-equivalent yield, the yield you
would have to earn on a similar taxable investment to match the tax-free yield,
was 5.33%, assuming you were in the 39.6% federal tax bracket. During the year
ended March 31, 1996, the Portfolio's monthly tax-exempt dividend distributions
resulted in a tax-exempt yield of 3.22%.
The California Money Market Portfolio invests only in short-term securities
which carry minimal credit risk. All of the Portfolio's holdings are rated
within the top two short-term rating categories or are of comparable quality.
The Portfolio's average maturity, which fluctuated throughout the year, is
typically in the 30-to-60 day range.
Please note than an investment in the California Money Market Portfolio is
neither insured nor guaranteed by the U.S. government and there can be no
assurance that the Portfolio will be able to maintain a stable net asset value
of $1.00 per share.
Economic Overview
It appears as though the U.S. economy has stopped slowing down and is now
growing. The sharp increase in employment in the first quarter of 1996 is
evidence that the trend in net hiring continues to improve to some degree.
During the first quarter of 1996, the average monthly gain in payroll employment
was roughly 206,000 jobs as compared to the estimate of 140,000 jobs created
during the fourth quarter of 1995. This recent upturn in job growth in the U.S.
economy has important implications, especially as it relates to the outlook for
consumer spending.
However, in our view, recent evidence of an improving economy does not
necessarily mean that a shift by the Federal Reserve Board from an easing
monetary policy to a more restrictive stance is imminent. Instead, we believe
Federal Reserve monetary policy is likely to remain on hold over the next few
months as Federal Reserve officials assess the strength and durability of this
1
<PAGE>
apparent rebound in economic activity. However, because of the Federal Reserve
Board's strong commitment to address any signs of inflationary pressures with
decisive action, a tighter Federal Reserve Board monetary policy may develop and
interest rates may edge higher over the next six months.
With the U.S. economy apparently on firmer economic footing, our outlook remains
cautious with respect to the short-term market. However, as we stated
previously, a tighter Federal Reserve Board monetary policy is not necessarily
going to happen. In addition, we expect that the financial markets will not want
to react to the first tangible signal of tightening, but rather the markets will
discount anticipated actions by the Federal Reserve well in advance.
California Economic Highlights
Housing sales and construction in California are showing signs of a solid
rebound, one of the strongest pieces of evidence that the state's gradual
economic recovery is turning into a sustained expansionparticularly in Southern
California. The good news is that California's continuing economic recovery
appears less dependent on manufacturing and based more on entertainment,
advanced technology and international trade. We remain generally positive about
California's economic prospects.
In closing, we thank your for your investment in the California Money Market
Portfolio. We look forward to continue to help you achieve your investment
goals.
Sincerely,
/s/ Heath B. McLendon /s/ Karen Mahoney-Malcomson
Heath B. McLendon Karen Mahoney-Malcomson
Chairman and Vice President
Chief Executive Officer
April 15, 1996
2
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
$ 1,300,000 A-1 Anaheim Housing Authority Multi-Family Housing
Revenue (Park Vista Apartments-A) 3.40%(a)(b) $ 1,300,000
9,700,000 SP-1+ Antioch USD, Transportation 4.75% due 7/5/96 9,722,650
10,600,000 SP-1+ Berkley USD, Transportation 4.75% due 7/5/96 10,624,752
1,100,000 A-1+ Burbank Redevelopment Agency Multi-Family Housing
Revenue Series A 3.15%(b) 1,100,000
California Alternative Energy Source Finance Authority:
Cogeneration Revenue Refunding:
15,960,000 A-1+ Arroyo Energy Series A 2.90%(a)(b) 15,960,000
4,900,000 VMIG 1* Hydroelectric Rock Creek Limited 3.60%(a)(b) 4,900,000
18,900,000 A-1 Modesto Energy Project Series 85A 3.10%(b) 18,900,000
3,400,000 SP-1+ California Community College Financing Authority
TOB Muni Trust Receipts 3.62%(b) 3,400,000
California Housing Finance Agency Revenue:
12,120,000 VMIG 1* Muni Trust Receipts 3.55%(a)(b) 12,120,000
3,000,000 VMIG 1* Multi-Family Housing Series 95A 3.00%(a)(b) 3,000,000
3,695,000 VMIG 1* California Housing Finance Authority Muni Trust
Receipts 3.55%(a)(b) 3,695,000
2,900,000 VMIG 1* California Health Facilities St Joseph Series B 3.30%(b) 2,900,000
California Health Facility Financing Authority Revenue:
5,000,000 VMIG 1* Adventist Health Series 91B 3.00%(b) 5,000,000
1,500,000 VMIG 1* Facility Childrens Hospital 1991 3.05%(b) 1,500,000
1,700,000 VMIG 1* Granada Hills Community Hospital 3.30%(b) 1,700,000
1,300,000 VMIG 1* Kaiser Permanente Series 93B 3.00%(b) 1,300,000
2,100,000 VMIG 1* Pool Program Series 90A 3.10%(b) 2,100,000
California Pollution Control Financial Authority:
6,300,000 A-1+ PCR (Southdown Inc. Project) 3.25%(b) 6,300,000
7,000,000 P-1* PCR Refunding (Sierra Pacific Project) 3.40%(b) 7,000,000
4,250,000 Aa2* Resource Recovery (Sanger Project)
Series A 3.30%(a)(b) 4,250,000
Resource Recovery (Wadham Energy Project):
5,300,000 A-1 Series 87A 3.35%(a)(b) 5,300,000
1,900,000 A-2 Series 87B 3.35%(a)(b) 1,900,000
1,900,000 A-2 Series 87C 3.35%(a)(b) 1,900,000
2,500,000 A-1+ PCR (Pacific Gas & Electric 1988A) TECP
3.30% due 8/15/96(c) 2,500,000
2,000,000 A-1+ PCR (Pacific Gas & Electric 1988D) TECP
3.40% due 7/31/96(c) 2,000,000
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Solid Waste Disposal Revenue:
Colmac Energy Project:
$ 17,900,000 VMIG 1* Series 90A 3.30%(a)(b) $ 17,900,000
18,400,000 VMIG 1* Series 90B 3.30%(a)(b) 18,400,000
7,000,000 VMIG 1* Series 90C 3.30%(a)(b) 7,000,000
8,675,000 P-1* Sierra Pacific Project 3.50%(a)(b) 8,675,000
2,500,000 VMIG 1* California PCR Finance Authority Shell Oil -
Martinez 3.20%(a)(b) 2,500,000
20,000,000 VMIG 1* California Public Capital Improvement Financing
Authority Series C 3.40% due 6/17/96(c) 20,000,000
66,780,000 MIG 1* California State RAN Series C 5.75% due 4/25/96 66,822,789
94,200,000 VMIG 1* California State RAW Muni Trust Receipts 3.57%(b) 94,200,000
24,500,000 VMIG 1* California State GO Series 1992A(b) 24,500,000
6,255,000 A-1+ California State Muni Trust Receipts 3.55%(b) 6,255,000
California Statewide Community Development Authority
Apartment Development Revenue:
23,000,000 A-1+ Subseries A - 4 2.95%(b) 23,000,000
7,000,000 A-1+ Subseries A - 7 3.15%(a)(b) 7,000,000
1,600,000 P-1* California Statewide Community Development Authority
(Chevron Solid Waste) 3.20%(b) 1,600,000
25,000,000 VMIG 1* California Statewide Community Development Authority
Multi-Family Revenue (Canyon Creek Apartments)
3.40%(b) 25,000,000
35,900,000 VMIG 1* California Statewide Community Development Authority
(Kaiser Permanente) 3.00%(b) 35,900,000
1,400,000 VMIG 1* California Statewide Development Authority
(St Joseph) 3.30%(b) 1,400,000
2,545,000 SP-1+ Chula Vista Industrial Development Authority Industrial
Revenue (Sutherland/Palumbo Project) 3.70%(a)(b) 2,545,000
26,500,000 VMIG 1* Chula Vista IDR (San Diego Gas & Electric Co.)
3.15%(a)(b) 26,500,000
14,000,000 VMIG 1* Clipper California Tax Exempt TR 961 3.15%(b) 14,000,000
3,500,000 A-1+ Concord Multi-Family Mortgage Revenue
(Crossroads Apartments) Series 88B 3.15%(b) 3,500,000
17,000,000 VMIG 1* Contra Costa County Multi-Family Housing Revenue
(Park Regency) Series 92A 3.30%(a)(b) 17,000,000
4,500,000 A-1 Contra Costa County Multi-Family Housing Revenue
Refunding (Del Norte Apartments) Series 94A
3.45%(a)(b) 4,500,000
8,000,000 SP-1+ Contra Costa County TRAN 4.50% due 7/3/96 8,016,658
1,500,000 A-1+ Delmar Racetrack Authority TECP 3.05%
due 5/20/96(c) 1,500,000
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
$ 2,000,000 VMIG 1* Fairfield IDA (R. Dakin & Company Project) 3.25%(b) $ 2,000,000
3,910,000 NR++ Fairfield Redevelopment Agency Highway 12 8.00%
Pre-Refunded @ 102 due 10/1/96 4,068,607
3,975,000 NR++ Fairfield Redevelopment Agency Highway 12 8.50%
Pre-Refunded @ 102 due 10/1/96 4,145,927
2,100,000 NR++ Fairfield Redevelopment Agency Highway 12 9.00%
Pre-Refunded @ 102 due 10/1/96 2,195,416
5,300,000 VMIG 1* Fresno Multi-Family HSG (Heron Pointe) 3.25%(b) 5,300,000
15,000,000 SP-1+ Fresno USD TANS 4.50% due 10/11/96 15,080,086
Fontana Multi-Family Housing Revenue Bonds:
100,000 VMIG 1* Citrus Avenue Apartments - Series A 3.10%(b) 100,000
500,000 A-1+ Springtime Apartments PJ - Series A 3.35%(a)(b) 500,000
800,000 VMIG 1* Garden Grove Multi-Family Housing (Valley View
Senior Villas) 3.45%(b) 800,000
2,900,000 A-1 Hayward Housing Authority Multi-Family Revenue
Refunding Mortgage (Huntwood Terrace Apartments)
3.55%(b) 2,900,000
1,220,000 A-1 Healdsburg Community Redevelopment Agency Revenue
Refunding (Vineyard Plaza Project - A Shopping
Center) 3.55%(b) 1,220,000
1,225,000 VMIG 1* Indio Housing Authority Revenue (Smoketree
Apartments) 3.60%(b) 1,225,000
20,600,000 VMIG 1* Irvine Public Facility & Infrastructure Authority Lease
Revenue Capital Improvement Project 3.40%(b) 20,600,000
7,255,000 NR++ Irwindale Community 8.00% Pre-Refunded @ 102
due 5/1/96 7,424,554
3,250,000 VMIG 1* Kings California HSG Multifamily (Edgewater Isle) 3.25% 3,250,000
8,000,000 P-1* Lodi IDA (Dart Container) 3.30%(b) 8,000,000
9,500,000 VMIG 1* Long Beach Health Facility Revenue (Memorial Health
Services) Series 1991 3.00%(b) 9,500,000
100,000 VMIG 1* Los Angeles Community Redevelopment Agency COP
(Broadway Spring Center Project) 3.25%(a)(b) 100,000
Los Angeles Convention & Exhibition Center
Authority COP:
2,800,000 A-1+ Muni Trust Receipts Series 89A(D) 3.50%(b) 2,800,000
25,740,000 A-1+ Muni Trust Receipts Series 95B 3.65%(b) 25,740,000
Los Angeles Department of Water & Power Electric
Muni Trust Receipts:
4,075,000 A-1+ SGA - 4 3.55%(b) 4,075,000
4,005,000 A-1+ SGA - 6 3.55%(b) 4,005,000
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
$ 8,765,000 A-1+ Los Angeles Department of Water & Power 3.30%(b) $ 8,765,000
Los Angeles Multi-Family Housing Revenue:
2,700,000 NR++ Beverly Park Apartments 3.20%(a)(b) 2,700,000
2,000,000 VMIG 1* Masselin Manor 3.05%(b) 2,000,000
2,900,000 A-1+ Los Angeles Multifamily - HSG Loans to Lender
Program A 3.10%(a)(b) 2,900,000
18,100,000 A-1+ Los Angeles Multifamily Revenue HSG Series 85K 3.00%(b) 18,100,000
55,900,000 MIG 1* Los Angeles Unified School District TRAN
4.50% due 7/3/96 56,001,671
20,000,000 A-1 Los Angeles Waste Water Revenue (Series 95H) Muni
Trust Receipt 3.30%(b) 20,000,000
Los Angeles County Housing Authority Multi-Family
Housing Revenue:
13,300,000 A-1 Diamond Apartments Project Series A 3.30% (a)(b) 13,300,000
5,000,000 A-1 Malibu Meadows II Project Series B 3.25%(b) 5,000,000
7,705,000 SP-1+ Los Angeles County Local Education Agency Partnership
Certificates Pooled TRAN Series 95A 4.75% due 7/5/96 7,715,406
21,100,000 VMIG 1* Los Angeles County Metropolitan Transportation Authority
(General Union Station Gateway) Series A 2.90%(b) 21,100,000
5,000,000 MIG 1* Los Angeles County Metropolitan Transportation Authority
Series A 5.00% due 4/25/96 5,004,700
58,300,000 MIG 1* Los Angeles County TRAN 4.50% due 7/01/96 58,404,446
8,750,000 A-1+ Los Angeles County Sanitation District 93A Muni Trust
Receipt 3.30%(b) 8,750,000
4,000,000 A-1+ Los Angeles County Transportation 1996 Muni Trust
Receipt 3.55%(b) 4,000,000
14,620,000 A-1+ Metropolitan Water District of South California Muni Trust
Receipt 3.55%(b) 14,620,000
11,475,000 VMIG 1* Metropolitan Water District of South California 2.95%(b) 11,475,000
6,015,000 SP-1+ Morgan Hill Unified School District 4.50% due 7/5/96 6,024,769
4,875,000 A-1+ Modesto Multi-Family Housing Revenue Refunding (Live
Oak Apartments Project) 3.25%(a)(b) 4,875,000
13,500,000 VMIG 1* Mountain View Multi-Family Housing Revenue
(Villa Mariposa Project) 3.25%(b) 13,500,000
5,000,000 SP-1+ New Haven Unified School District 4.50% due 7/5/96 5,008,745
12,100,000 VMIG 1* Newport News Redevelopment & Housing Authority
Multi-Family Housing Revenue (Newport Oxford
Project) 3.50%(b) 12,100,000
3,519,000 MIG 1* North Monterey County Union School District TRAN
4.50% due 7/5/96 3,524,715
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
$ 2,400,000 A-1+ Oakland Revenue (Childrens Hospital Medical Center)
3.10%(b) $ 2,400,000
8,000,000 SP-1+ Oakland TRAN 4.50% due 7/31/96 8,015,028
1,600,000 VMIG 1* Orange County Housing Authority Apartment
Development Revenue 3.78%(b) 1,600,000
Orange County Apartment Development Revenue:
16,400,000 A-1+ Monarch Bay Apartments 3.50%(b) 16,400,000
2,700,000 A-1 The Lakes Project Series 91A 3.35%(b) 2,700,000
1,700,000 VMIG 1* Wood Canyon Villas 3.15%(a)(b) 1,700,000
10,000,000 NR Pasadena California Transportation 4.50% due 10/25/96 10,035,389
8,060,000 A-1+ Pleasanton Multi-Family Mortgage Revenue
(Valley Plaza) 3.15%(b) 8,060,000
6,330,000 A-1+ Puerto Rico Public Buildings Muni Trust Receipts 3.20%(b) 6,330,000
500,000 VMIG 1* Rancho Mirage Redevelopment Agency COP 3.45%(a)(b) 500,000
12,100,000 VMIG 1* Riverside California Series 1985A COP Series A 3.10%(b) 12,100,000
3,285,000 VMIG 1* Riverside California Sewer Revenue Muni Trust Receipts
3.20%(b) 3,285,000
900,000 VMIG 1* Riverside County Public Facilities 3.10%(b) 900,000
3,840,000 A-1+ Riverside County Housing Authority Multi-Family
Mortgage Revenue (Woodcreek Village)
Series 85D 3.15%(b) 3,840,000
35,000,000 SP-1+ Riverside County Transportation Series 1995
4.75% due 7/1/96 35,064,568
950,000 A-1+ Roseville Finance Authority Hospital Lease Revenue
(Roseville Hospital) Series 89A 3.10%(b) 950,000
9,400,000 A-1+ Sacramento California Utilities Muni Trust Receipts
3.55%(b) 9,400,000
500,000 VMIG 1* Sacramento County Housing Authority Multi-Family
Housing Revenue Refunding (Grouse Run Apartments)
3.05%(b) 500,000
Sacramento County Multi-Family Housing Revenue:
2,200,000 VMIG 1* Series 1985A 3.45%(b) 2,200,000
200,000 VMIG 1* Series 1985B 3.45%(b) 200,000
1,200,000 VMIG 1* Series 1985C 3.45%(b) 1,200,000
5,000,000 VMIG 1* Saint Charles County IDA Revenue (Sun River Village
Apartments Project) Series 85 3.30%(b) 5,000,000
490,000 VMIG 1* San Bernardino IDR (Gate City Beverage Distributor
Inc.) 3.60%(b) 490,000
950,000 A-1 San Bernardino Multi-Family Housing Revenue (Castle
Park Apartments Project) 3.75%(b) 950,000
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
$ 18,945,000 A-1 San Bernardino California (Alta Park Apts) 89A 3.25% $18,945,000
2,550,000 A-1+ San Bernardino County California Mortgage -
Quail Point Apt 3.15% 2,550,000
San Bernardino County IDA:
1,875,000 P-1* Master Halco Series 1986 II 3.10%(a)(b) 1,875,000
960,000 P-1* Tower Industries Series IV 3.10%(a)(b) 960,000
10,000,000 MIG 1* San Diego (City of) TAN 4.75% due 7/03/96 10,020,181
1,500,000 A-1+ San Diego Multi-Family Mortgage Revenue (La Hoya
Point) 3.00%(b) 1,500,000
100,000 VMIG 1* San Diego Multi-Family Housing Revenue Refunding
(University Town Center Apartments) 3.05%(b) 100,000
3,000,000 A-1 San Dimas Redevelopment Agency (San Dimas
Community Center) 3.25%(b) 3,000,000
2,300,000 A-1 San Francisco (City & County of) Multi-Family Housing,
(Winterland Project) Series 1985C 3.20%(b) 2,300,000
8,500,000 A-1 San Francisco (City & County of) Redevelopment
Agency Multi-Family Housing (Fillmore Center)
Series 92A-1 3.20%(b) 8,500,000
11,010,000 VMIG 1* San Francisco Cal-Yerbe Buena Gardens 3.25%(b) 11,010,000
300,000 VMIG 1* San Jose Mortgage Revenue Multi-Family
(Somerset Park) Series A 3.20%(a)(b) 300,000
3,300,000 VMIG 1* San Jose Multi-Family Housing Revenue
(Fairway Glen) Series A 3.25%(b) 3,300,000
6,690,000 A-1+ San Jose - Santa Clara Water Financing Authority Sewer
Revenue Muni Trust Receipt 3.50%(b) 6,690,000
1,125,000 A-1+ San Leandro Multi-Family Revenue (Parkside
Commons) Series A 3.15%(b) 1,125,000
4,350,000 NR++ San Luis Obispo California 8.25% Pre-Refunded @ 102
due 6/1/96 4,468,459
7,900,000 VMIG 1* Santa Ana California Housing Authority Vintage
Apartments Series A 3.20%(a)(b) 7,900,000
10,000,000 NR++ Santa Clara California Certified 7.875%
Pre-Refunded @ 102 due 7/1/96 10,301,755
2,800,000 VMIG 1* Santa Clara Co. Apartment Development Revenue Lincoln
Pajaro 85A 3.30%(b) 2,800,000
2,100,000 A-1 Santa Clara County Multi-Family Housing Revenue
Refunding (Grove Garden Apartments) 3.20%(b) 2,100,000
13,400,000 A-1 Santa Clara County Financing Authority Lease Revenue
(VMC Facility Replacement Project) Series B 3.00%(b) 13,400,000
8,315,000 A-1+ Santa Cruz Co. Public Financing Authority Revenue
Muni Trust Receipts 3.30%(b) 8,315,000
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
$ 3,865,000 NR++ Santa Maria California Certified 7.20%
Pre-Refunded @ 102 due 6/1/96 $ 3,963,613
6,000,000 A-1 Simi Valley MFH Lincoln Wood Ranch 3.25%(b) 6,000,000
5,015,000 NR++ Southern California Public Power 7.875%
Pre-Refunded @ 102 due 7/1/96 5,205,794
3,360,000 VMIG 1* Southern California Public Power Transmission Project
Revenue 3.30%(b) 3,360,000
20,029,000 SP-1+ Stanislaus County (Office of Education) TRAN
4.50% due 7/5/96 20,061,529
2,200,000 VMIG 1* Turlock Irrigation District Series 96A 3.00%(b) 2,200,000
1,480,000 NR++ University of California HSG 7.70% Pre-Refunded @
102 due 11/1/96 1,543,369
4,300,000 SP-1+ Val Verde USD Transportation 4.50% due 10/31/96 4,314,479
1,200,000 VMIG 1* Visilia IDR (Akers West Association) 3.35%(a)(b) 1,200,000
3,440,000 VMIG 1* West Covina Lease Revenue Refunding (The Lake
Public Parking Project) 3.45%(b) 3,440,000
2,200,000 VMIG 1* Western Riverside County Regional Waste Water
Authority 3.20%(b) 2,200,000
1,000,000 A-1 Windsor Multi (Oakmont At Windsor) 3.35%(a)(b) 1,000,000
3,320,000 A-1+ Woodland Multi-Family Mortgage Revenue
(Crossroads Village) Series A 3.15%(b) 3,320,000
3,130,000 SP-1+ Yuba California Transportation 4.25% due 11/21/96 3,142,443
15,400,000 A-1+ Puerto Rico GDB TECP 3.25% due 5/17/96(c) 15,400,000
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
Cost-- ($1,329,617,498*) $1,329,617,498
===========================================================================================================
</TABLE>
(a) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Variable rate obligations payable at par on demand at any time on no more
than seven days notice.
(c) Variable rate obligations payable at par on demand on the date indicated.
++ Security has not been rated by either Moody's Investors Services or
Standard & Poors, however, the manager has determined the equivalent rating
to be VMIG 1*/A-1+ due to insurance and other enhancement features such as
letters of credit from accredited institutions.
* The aggregate cost for Federal income tax purposes is substantially the
same.
See pages 10 and 11 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
9
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Corporation ("Standard & Poor's"), except
those identified by an asterisk (*) are rated by Moody's Investors Services
("Moody's"). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Rating from "AA" to "BB" 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 issue 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 exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the
lowest ranking within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
10
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Short-Term Security Ratings
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined
to possess overwhelming safety characteristics are denoted with a
plus (+) sign.
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.
A-2 -- Standard & Poor's second highest commercial paper and 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.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
VMIG 1 -- Moody's highest rating for issues having a demand feature-- VRDO.
MIG 1 -- Moody's highest rating for short-term municipal obligations.
MIG 2 -- Moody's second highest rating for short-term municipal
obligations.
- --------------------------------------------------------------------------------
Security Descriptions
- --------------------------------------------------------------------------------
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE LEE-- College Construction Loan Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
HSG -- Housing
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
RAW -- Revenue Anticipation
Warrants
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
USD -- Unified School District
VA -- Veterans Administration
VRWE -- Variable Rate Wednesday Demand
11
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at amortized cost $1,329,617,498
Cash 41,266
Interest receivable 18,817,120
Other assets 25,992
- --------------------------------------------------------------------------------
Total Assets 1,348,501,876
- --------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 2,070,624
Management fees payable 568,078
Distribution fees payable 48,988
- --------------------------------------------------------------------------------
Total Liabilities 2,687,690
- --------------------------------------------------------------------------------
Total Net Assets $1,345,814,186
- --------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $1,346,188
Capital paid in excess of par value 1,344,841,989
Accumulated net realized loss on
security transactions (373,991)
- --------------------------------------------------------------------------------
Total Net Assets $1,345,814,186
================================================================================
Shares Outstanding 1,346,188,177
- --------------------------------------------------------------------------------
Net Asset Value Per Share $1.00
================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended March 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest $44,389,153
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 5,870,779
Distribution fees (Note 4) 1,174,160
Shareholder communications 245,220
Registration fees 224,513
Shareholder and system servicing fees 75,390
Audit and legal 31,110
Trustees' fees 15,006
Other 7,729
- --------------------------------------------------------------------------------
Total Expenses 7,643,907
Less: Management fee waiver (Note 4) 170,872
- --------------------------------------------------------------------------------
Net Expenses 7,473,035
- --------------------------------------------------------------------------------
Net Investment Income 36,916,118
- --------------------------------------------------------------------------------
Net Realized Loss From Security Transactions (47,018)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $36,869,100
================================================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended March 31,
- --------------------------------------------------------------------------------
1996 1995
================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 36,916,118 $ 14,112,880
Net realized loss (47,018) (1,435)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 36,869,100 14,111,445
- --------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (36,916,118) (14,075,680)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (36,916,118) (14,075,680)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 5,101,071,082 2,335,326,000
Net asset value of shares issued in
connection with the transfer of
the Smith Barney Shearson
California Municipal Money
Market Fund net assets (Note 6) -- 830,711,463
Net asset value of shares issued
for reinvestment of dividends 35,790,180 12,583,409
Cost of shares reacquired (4,744,319,892) (2,415,119,839)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 392,541,370 763,501,033
- --------------------------------------------------------------------------------
Increase in Net Assets 392,494,352 763,536,798
NET ASSETS:
Beginning of year 953,319,834 189,783,036
- --------------------------------------------------------------------------------
End of year $ 1,345,814,186 $ 953,319,834
================================================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The California Money Market ("Portfolio") is a separate investment portfolio
of the Smith Barney Muni Funds ("Fund"). The Fund, a Massachusetts business
trust, is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company and consists of this
Portfolio and nine other separate investment portfolios: Florida, Georgia, New
York, National, Ohio, Pennsylvania, Limited Term, Florida Limited Term and New
York Money Market Portfolios. The financial statements and financial highlights
for the other portfolios are presented in separate annual reports.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on the trade date; (b) securities
are valued at bid prices provided by an independent pricing service that are
based on transactions in municipal obligations, quotations from municipal bond
dealers, market transactions in comparable securities and various relationships
between securities; (c) short-term investments and securities maturing within 60
days are valued at cost plus (minus) accreted discount (amortized premium),
which approximates value; (d) gains or losses on the sale of securities are
calculated by using the specific identification method; (e) interest income,
adjusted for amortization of premiums and accretion of original issue discount,
is recorded on the accrual basis; market discount is recognized upon the
disposition of the security; (f) dividends and distributions to shareholders are
recorded on the ex-dividend date; (g) direct expenses are charged to each
portfolio and each class; management fees and general fund expenses are
allocated on the basis of relative net assets; (h) the Portfolio 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; and (i) 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 from these amounts.
2. PORTFOLIO CONCENTRATION
Since the Portfolio invests primarily in obligations of issuers within
California, it is subject to possible concentration risks associated with
economic, political, or legal developments or industrial or regional matters
specifically affecting California.
15
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
3. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The Portfolio declares and records a dividend of substantially all its net
investment income on each business day. Such dividends are paid or reinvested
monthly in fund shares on the payable date. Furthermore, the Portfolio intends
to satisfy conditions that will enable interest from municipal securities, which
is exempt from regular Federal income tax and from designated state income
taxes, to retain such tax-exempt status when distributed to the shareholders of
the Portfolio.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager to the Fund. The
Portfolio pays SBMFM a management fee calculated at an annual rate of 0.50% on
the first $2.5 billion of average daily net assets; 0.475% on the next $2.5
billion; and 0.45% on the average daily net assets in excess of $5 billion. This
fee is calculated daily and paid monthly. SBMFM waived $170,872 of its
management fees for the Portfolio for the year ended March 31, 1996.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. Pursuant to a Distribution Plan, the Portfolio pays a distribution
fee calculated at the annual rate of 0.10% of the average daily net assets.
All officers and two Trustees of the Fund are employees of SB.
5. CAPITAL LOSS CARRYFORWARDS
At March 31, 1996, the Portfolio had for Federal tax purposes $365,337 of
unused loss carryforwards available to offset future capital gains. To the
extent that these carryforward losses are used to offset capital gains, it is
possible that the gains so offset will not be distributed. The amount and
expiration of the carryovers are indicated below. Expiration occurs on March 31,
of the year indicated:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California Money
Market Portfolio $93,180 $58,601 $7,368 $74,192 $10,769 $81,428 $1,435 $38,364
==============================================================================================================
</TABLE>
16
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
6. TRANSFER OF NET ASSETSCALIFORNIA MONEY MARKET PORTFOLIO
On November 18, 1994, the Portfolio acquired the assets and certain
liabilities of the Smith Barney Shearson California Muncipal Money Market Fund
("California Municipal Money Market") pursuant to an Agreement and a Plan of
Reorganization dated August 2, 1994. Total shares issued by the Portfolio and
the total net assets of California Municipal Money Market and the Portfolio on
the date of the transfer were as follows:
<TABLE>
<CAPTION>
Total Net
Shares Assets of Total Net
Issued by Acquired Assets of
Acquired Fund the Portfolio Fund the Portfolio
===========================================================================================================
<S> <C> <C> <C>
California Municipal Money Market 831,064,777 $830,711,463 $204,121,741
===========================================================================================================
</TABLE>
The total net assets of the California Municipal Money Market Fund before
the transfer includes a net realized loss of $316,114 and overdistributed net
investment income of $37,200. The total net assets of the Fund immediately after
the transfer were $1,034,833,204. The transaction was structured for tax
purposes to qualify as a tax-free reorganization under the Internal Revenue Code
of 1986, as amended.
7. SHARES OF BENEFICIAL INTEREST
At March 31, 1996, there were an unlimited amount of shares of beneficial
interest of $0.001 par value authorized.
Transactions in shares of the Portfolio were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1996 March 31, 1995
======================================================================================================
<S> <C> <C>
Class A
Shares sold 5,101,071,082 2,335,326,000
Net asset value of shares
issued in connection
with transfer of the
California Municipal
Money Market Fund (Note 6) -- 831,064,777
Shares issued on
reinvestment 35,790,180 12,583,409
Shares redeemed (4,744,319,892) (2,415,119,839)
- ------------------------------------------------------------------------------------------------------
Net Increase 392,541,370 763,854,347
======================================================================================================
</TABLE>
17
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Shares 1996 1995 1994 1993 1992
================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------
Net investment income (1) 0.032 0.026 0.018 0.021 0.035
Dividends from net investment income (0.032) (0.026) (0.018) (0.021) (0.035)
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------
Total Return 3.22% 2.66% 1.84% 2.05% 3.51%
- ----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $1,345,814 $953,320 $189,783 $159,681 $167,172
Ratios to Average Net Assets:
Expenses (1) 0.64% 0.61% 0.64% 0.67% 0.60%
Net investment income 3.15 3.02 1.82 2.05 3.46
================================================================================================================
</TABLE>
(1) The manager waived all or part of its fees for years ended March 31, 1996
and March 31, 1995. If such fees were not waived, the effect on net
investment income and expense ratios would have been as follows:
<TABLE>
<CAPTION>
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
------------------------ -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
$0.000* $0.002 0.65% 0.63%
</TABLE>
* Amount represents less than $0.001.
18
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
of the California Money Market
Portfolio of Smith Barney Muni Funds:
We have audited the accompanying statements of assets and liabilities,
including the schedule of investments, of the California Money Market Portfolio
of Smith Barney Muni Funds as of March 31, 1996, 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 the 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 Funds'
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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 March
31, 1996, by correspondence with the custodian. 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 referred to above present
fairly, in all material respects, the financial position of the California Money
Market Portfolio of Smith Barney Muni Funds as of March 31, 1996, the results of
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 the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
New York, New York
May 14, 1996
19
<PAGE>
Smith Barney Muni Funds
California Money Market Portfolio
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended March 31, 1996, 100% of the dividends paid by the
Portfolio from net investment income were tax-exempt for regular Federal income
tax purposes.
20
<PAGE>
Smith Barney SMITH BARNEY
Muni Funds ------------
A Member of TravelersGroup [LOGO]
Trustees
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P.Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
C. Richard Youngdahl
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Karen L. Mahoney-Malcomson
Vice President
Lawrence T. McDermott
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Manager
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney, Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investors Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds - California Money Market Portfolio. It is not
authorized for distribution to prospective investors unless accompanied or
preceded by a current Prospectus for the Portfolio, which contains information
concerning the Portfolio's investment policies and expenses as well as other
pertinent information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
FD2309 5/96
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
1996
1996
1996 [GRAPHIC APPEARS HERE]
1996
1996
Smith Barney
Muni Funds
National
Portfolio
-----------------------------------
March 31,1996
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- --------------------------------------------------------------------------------
National Portfolio
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney Muni
FundsNational Portfolio. For your convenience, we have summarized the period's
prevailing economic and market conditions and outlined the Portfolio's
investment strategy employed during this time.
Portfolio's Performance and
Investment Strategy
For the year ended March 31, 1996, the National Portfolio had a total return of
8.83% for Class A shares which compares favorably with its Lipper Analytical
Services, Inc. peer group average of 7.17%. (Lipper Analytical Services, Inc. is
a major fund tracking organization.) The National Portfolio's five-year total
return of 51.38% (Class A shares) significantly outperformed the average total
return of 44.70% for all general municipal bond funds as tracked by Lipper for
the period ended March 31, 1996.
We emphasized high credit quality and a balanced coupon and maturity structure
in the National Portfolio. Approximately 60% of the Portfolio is invested in
municipal bonds rated in the double-A and triple-A categories by Standard &
Poor's Corporation and Moody's Investors Services, two major credit reporting
and bond rating agencies. The average maturity of the National Portfolio is just
over 19 years with excellent call protection of slightly more than 10 years.
The three largest sectors of the National Portfolio were housing (roughly 15%),
hospitals (approximately 15%) and bonds escrowed with U.S. government securities
(roughly 13%). Some of the National Portfolio's escrowed-to-maturity bonds were
sinking fund bonds and some were non-callable, zero coupon issues with a high
degree of interest-rate sensitivity that have attractive yield potential and
good performance potential in a rising market. (Sinking fund bonds are issued
under a sinking fund, which requires the debtor organization (obligor) to
periodically set aside out of earnings a sum which, with interest, will be
sufficient to redeem the issue in whole or part at maturity.)
In light of the recent uncertainty and increased volatility in the municipal
bond market, the National Portfolio remains committed to its high-quality
orientation, broad sector diversification and good call protection. In addition,
the National Portfolio will continue to emphasize higher coupon issues trading
at a premium for the high income they are producing and the measure of
protection they afford should interest rates rise.
Market and Economic Overview
Interest rates declined steadily over the first nine months of the fiscal year
in response to low inflation and very sluggish economic growth. Over the last
1
<PAGE>
three months of the fiscal year, however, interest rates rose sharply as
economic reports pointed to much stronger growth than was expected by most
market participants and concerns over stalemated federal budget negotiations
continued.
In the past few months, the volatility of the municipal bond market has
increased and municipal bond yields have reached their highest levels in over a
year. However, despite continued uncertainty over the direction of short-term
interest rates, there were some signs of a possible municipal bond market
turnaround as the higher yields offered by municipal bonds began to attract a
growing number of individual and institutional investors. In our view, municipal
bonds represent good value and now may be the time for individuals to consider
participating in the tax-exempt market.
Outlook
While the day-to-day volatility in the fixed income markets is likely to
continue, the sharp increase in interest rates over the last two months has made
long-term municipal bonds more attractive on a relative basis. In our view,
competitive pressures in the global economy and changing demographics should
help to keep inflation in check. (Labor costs constitute roughly two-thirds of
the total cost of all finished goods.) We believe long-term municipal bonds
currently represent good value and offer investors a healthy risk premium over
inflation. In addition, with long-term municipal bonds providing roughly 90% of
the yield available on comparable maturity Treasury securities, investors are
being well compensated for the potential risks of all but the most radical tax
reform proposals currently in circulation.
It was not too long ago that the "flat tax" issue was touted as potentially the
biggest issue of the upcoming Presidential election in November. The exit of
Republican candidate Steven Forbes from the Presidential race has caused the
flat tax to recede from the political debate. However, between now and November,
tax reform again could well move into the political spotlight as the campaign
intensifies. However, although we believe the tax-exempt market is currently
attractive regardless of the final outcome of the tax reform debate, this issue
will continue to be an important one for the municipal bond market over the next
two to three years.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman and Vice President and
Chief Executive Officer Investment Officer
May 14, 1996
2
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
<S> <C> <C> <C> <C> <C>
3/31/96 $13.32 $13.67 $0.81 $0.00 8.83%
- --------------------------------------------------------------------------------
3/31/95 13.35 13.32 0.84 0.00 6.38
- --------------------------------------------------------------------------------
3/31/94 13.81 13.35 0.86 0.06 3.17
- --------------------------------------------------------------------------------
3/31/93 12.95 13.81 0.89 0.00 13.96
- --------------------------------------------------------------------------------
3/31/92 12.49 12.95 0.90 0.00 11.21
- --------------------------------------------------------------------------------
3/31/91 12.24 12.49 0.83 0.00 9.13
- --------------------------------------------------------------------------------
3/31/90 12.11 12.24 0.98 0.00 9.60
- --------------------------------------------------------------------------------
3/31/89 11.82 12.11 0.96 0.00 10.93
- --------------------------------------------------------------------------------
3/31/88 12.95 11.82 0.94 0.20 (0.92)
- --------------------------------------------------------------------------------
Inception*- 3/31/87 12.50 12.95 0.50 0.00 7.07+
================================================================================
Total $8.51 $0.26
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<CAPTION>
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
<S> <C> <C> <C> <C> <C>
3/31/96 $13.33 $13.67 $0.74 $0.00 8.26%
- --------------------------------------------------------------------------------
Inception*- 3/31/95 12.41 13.33 0.32 0.00 10.11+
================================================================================
Total $1.06 $0.00
================================================================================
<CAPTION>
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
<S> <C> <C> <C> <C> <C>
3/31/96 $13.32 $13.65 $0.74 $0.00 8.13%
- --------------------------------------------------------------------------------
3/31/95 13.33 13.32 0.74 0.00 5.80
- --------------------------------------------------------------------------------
3/31/94 13.80 13.33 0.77 0.06 2.40
- --------------------------------------------------------------------------------
Inception*- 3/31/93 13.47 13.80 0.20 0.00 3.98+
================================================================================
Total $2.45 $0.06
================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
3
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charge(1)
---------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Year Ended 3/31/96 8.83% 8.26% 8.13%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/96 8.65 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/96 8.19 13.39 6.29
- --------------------------------------------------------------------------------
<CAPTION>
Without Sales Charge(1)
---------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Year Ended 3/31/96 4.44% 3.76% 7.13%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/96 7.76 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/96 7.72 10.66 6.29
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 3/31/96) 113.05%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/96) 19.20
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/96) 21.81
- --------------------------------------------------------------------------------
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions 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 Class C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions at net
asset value. In addition, Class A shares reflect the deduction of the
maximum initial sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed less than
one year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are August 20, 1986, November
7, 1994 and January 5, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
4
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the National Portfolio vs.
Lehman Muni Bond Fund Index+
- --------------------------------------------------------------------------------
August 1986 - March 1996
[GRAPHIC APPEARS HERE]
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on August 20, 1986, assuming deduction of the maximum 4.00% sales charge at
the time of investment and reinvestment of dividends (after deduction of
applicable sales charges through November 6, 1994, and thereafter at net asset
value) and capital gains (at net asset value) through March 31, 1996. The
Lehman Muni Bond Fund Index is a broad based, total return index, comprised of
8,000 actual bonds which are all investment grade, fixed rate, long term
maturities (greater than two years) and are selected from issues larger than
$50 million dated since January 1984. The index is unmanaged and is not
subject to the same management and trading expenses of a mutual fund. The
performance of the Portfolio'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 returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
5
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Education -- 5.8%
$ 5,000,000 AAA Chicago, IL Board of Education Lease
Certificates, Series A Refunding,
6.000% due 1/1/20 $ 5,075,000
1,575,000 AAA Clear Creek, TX ISD, PSF Guaranty,
4.250% due 2/1/14 1,315,125
1,000,000 Baa* Indiana State Educational Facilities Revenue,
Evansville University, 5.650% due 2/15/11 943,750
1,000,000 AAA Missouri Higher Educational Authority,
AMBAC-Insured, 5.650% due 2/15/09 (a) 972,500
2,000,000 AA Nebraska Higher Education Loan Program Inc.,
Subseries A-5A, 6.200% due 6/1/13 (a) 1,997,500
1,500,000 Baa* New Hampshire Higher Education & Health,
Brewster Academy, 6.750% due 7/1/25 1,462,500
1,500,000 BBB+ New York State Dormitory Authority Revenue,
State University Educational Facilities,
Series B, 7.500% due 5/15/11 1,728,750
Noblesville, IN High School Building
Corporation, AMBAC-Insured:
2,600,000 AAA Zero coupon due 2/15/17 744,250
4,040,000 AAA Zero coupon due 2/15/18 1,085,750
2,625,000 Aa* North Texas Higher Education Authority Inc.,
Student Loan Revenue, Series C, 6.100%
due 4/1/08(a) 2,618,438
1,500,000 AA South Carolina Education Facilities Authority
Revenue, Series 1995, Asset Guaranty, 5.875%
due 7/1/15 1,462,500
Texas State Higher Education Coordinating
Board, College Student Loan Revenue:
2,685,000 A* 7.450% due 10/1/06(a) 2,782,331
380,000 A* 7.700% due 10/1/25(a) 391,875
1,000,000 AAA Utah Student Loan Revenue, Series 1991F,
AMBAC-Insured, 7.450% due 11/1/08(a) 1,067,500
- --------------------------------------------------------------------------------
23,647,769
- --------------------------------------------------------------------------------
Escrowed To Maturity (b) -- 12.9%
5,000,000 AAA Arapahoe County, CO Single-Family Mortgage
Revenue, 1984 Series A, (Escrowed to Maturity
with U.S. Government Securities) zero coupon
due 9/1/10 2,162,500
1,060,000 AAA Boston, MA Water and Sewer Revenue, Series A,
(Escrowed to Maturity with U.S. Government
Securities) 10.875% due 1/1/09 1,478,700
1,170,000 AAA Douglas County, NE Hospital Authority No. 2,
Bergan Mercy, (Escrowed to Maturity with
U.S. Government Securities) 9.500% due 7/1/10 1,573,650
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Escrowed To Maturity (b) -- 12.9% (continued)
$ 1,750,000 AAA Fairmont, WV Virginia Water and Sewer Revenue,
AMBAC-Insured, (Escrowed to Maturity with
U.S. Government Securities) 9.250%
due 11/1/11 $ 2,187,500
25,400,000 AAA Illinois Development Finance Authority,
Retirement Housing Revenue, Regency Park,
Series B, (Escrowed to Maturity with Refco
Strips), zero coupon due 7/15/25 3,587,750
5,685,000 AAA Indiana Bond Bank, AMBAC-Insured, (Escrowed to
Maturity with U.S. Government Securities)
9.750% due 8/1/09 7,468,669
5,000,000 AAA Kansas City, KS Single-Family Mortgage Revenue
Bonds, Series 1993 A, FHLMC-Collateralized,
(Escrowed to Maturity with Refco Strips), zero
coupon due 12/1/14 1,643,750
7,750,000 AAA Labette County, KS Single-Family Mortgage
Revenue, Series A, (Escrowed to Maturity
with U.S. Government Securities) zero coupon
due 12/1/14 2,547,813
5,000,000 AAA Maricopa County, AZ IDA Single-Family Mortgage
Revenue, Series 1983A, (Escrowed to Maturity
with Refco Strips), zero coupon due 12/31/14 1,618,750
3,735,000 AAA Mississippi Housing Finance, Single-Family
Mortgage, (Escrowed to Maturity with U.S.
Government Securities) zero coupon
due 9/15/16 1,139,175
1,370,000 AAA New Jersey Turnpike Authority, (Escrowed to
Maturity with U.S. Government Securities)
10.375% due 1/1/03 1,657,700
1,670,000 AAA Ohio State Water Development Authority Revenue,
Safe Water, Series 2, (Escrowed to Maturity
with U.S. Government Securities) 9.375%
due 12/1/10 2,089,588
7,000,000 AAA Perris County, CA Single-Family Housing
Mortgage, GNMA-Collateralized, (Escrowed to
Maturity with U.S. Government Securities)
8.300% due 6/1/13(a) 9,030,000
1,000,000 AAA Philadelphia, PA Hospital and Higher Education
Facilities Authority, Presbyterian Medical
Center, (Escrowed to Maturity with U.S.
Government Securities) 6.650% due 12/1/19 1,122,500
3,000,000 AAA Richmond County, GA Development Authority, Sub-
Series C, (Escrowed to Maturity with U.S.
Government Securities) zero coupon due 12/1/21 540,000
3,985,000 AAA Riverside County, CA Single-Family Mortgage
Revenue, Series 89A, GNMA-Collateralized,
(Escrowed to Maturity with U.S. Government
Securities) 7.800% due 5/1/21(a) 4,971,288
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Escrowed To Maturity (b) -- 12.9% (continued)
$ 1,000,000 AAA Rogers County, OK HFA Multi-Family Mortgage
Revenue, Series A, FNMA-Collateralized,
(Escrowed to Maturity with U.S. Government
Securities) 7.750% due 8/1/23 $ 1,257,500
2,235,000 AAA St. Louis County, MO Mortgage Revenue,
Series H, (Escrowed to Maturity with U.S.
Government Securities) 5.400% due 1/1/16 (a) 2,156,775
9,000,000 AAA Saline County, KS Single-Family Mortgage,
(Escrowed to Maturity with U.S. Government
Securities) zero coupon due 12/1/15 2,790,000
880,000 AAA Weber County, UT Hospital Revenue, St.
Benedict's Hospital, (Escrowed to Maturity
with U.S. Government Securities) 10.000%
due 3/1/10 1,168,200
- --------------------------------------------------------------------------------
52,191,808
- --------------------------------------------------------------------------------
Finance -- 0.8%
3,000,000 A Pennsylvania Finance Authority, Beaver County
Municipal Capital Improvements Program,
Societe Generale-GIC, 6.600% due 11/1/09 3,217,500
- --------------------------------------------------------------------------------
General Obligation -- 1.2%
2,000,000 AAA Berks County, PA GO MVRICS, FGIC-Insured,
8.731% due 11/10/20(c) 2,267,500
2,000,000 BBB+ New York City GO, Series D, 7.500% due 2/1/16 2,170,000
500,000 Aa* Oregon State Veterans Welfare, 5.850% due 10/1/15 505,000
- --------------------------------------------------------------------------------
4,942,500
- --------------------------------------------------------------------------------
Hospital -- 13.2%
Colorado Health Facilities Authority, Hospital
Revenue Bonds:
5,000,000 BBB Rocky Mountain Adventist Health, Series
1993, 6.625% due 2/1/13 5,100,000
1,000,000 BBB Vail Valley Medical Center, 6.500%
due 1/15/13 1,006,250
3,500,000 A1* Elkhart County, IN Hospital Authority Revenue,
Elkhart General Hospital Insured,
7.000% due 7/1/12 3,692,500
Harris County, TX Health Facilities Development
Corporation:
2,000,000 A* Memorial Hospital Systems Project,
7.125% due 6/1/15 2,137,500
2,000,000 AA Sisters of Charity of the Incarnate Word,
7.100% due 7/1/21 2,135,000
Illinois Health Facilities Authority Hospital
Revenue:
937,000 AAA Community Provider Pooled Loan Program,
CGIC-Insured, 7.350% due 8/15/10 1,047,098
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Hospital -- 13.2% (continued)
$ 3,500,000 A- Mercy Hospital and Medical Center,
7.000% due 1/1/07 $ 3,705,625
1,000,000 AAA Methodist Health System, Series B,
AMBAC-Insured, RIBS Variable Rate, 9.983%
due 5/01/21(c) 1,143,750
4,000,000 AAA Rush-Presbyterian St. Luke's Medical Center
INFLOS, MBIA-Insured, Variable Rate, 9.863%
due 10/1/24(c) 4,570,000
500,000 NR United Medical Center, 8.375% due 7/1/12 603,125
900,000 BBB+ Klamath Falls, OR Inter-Community Hospital Merle
West, 7.100% due 9/1/24 945,000
4,510,000 BBB Louisiana Public Facilities Authority Hospital
Revenue Refunding, (Touro Infirmary Project),
Series B, 6.125% due 8/15/23 4,188,663
Massachusetts State Health and Education
Facilities Authority Revenue:
1,000,000 AAA St. Elizabeth Hospital, LEVRRS, FSA-Insured,
9.720% due 8/15/21(c) 1,131,250
1,470,000 AAA Valley Regional Health, Series A,
CONNIE LEE-Insured, 7.000% due 7/1/07 1,672,125
2,000,000 BBB Michigan State Hospital Finance Authority Revenue,
Pontiac Osteopathic Hospital, Series A,
6.000% due 2/1/24 1,735,000
4,835,000 AA Missouri State Health & Educational Facilities
Authority, BJC Health Systems, 6.750%
due 5/15/13 5,336,631
1,635,000 BBB+ New York State Medical Care Facilities Financing
Agency, Long Term Health Care, Medical Health
Services, Series 91B, 7.400% due 2/15/18 1,810,763
1,000,000 BBB+ Rhode Island State Health & Education Building
Corporation Revenue, Westerly Hospital,
6.000% due 7/1/14 910,000
1,250,000 AAA Richland County, SC Hospital Revenue Bonds,
Community Provider Pooled Loan, CGIC-Insured,
7.125% due 7/1/17 1,360,938
2,375,000 AA+ Vermont Educational & Health Building Finance
Agency, H. Porter, FHA-Insured, 7.100%
due 2/1/31 2,517,500
1,300,000 AAA Washington State Health, Sisters of Providence,
FGIC-Insured, 6.375% due 10/1/09 1,410,500
1,500,000 A Washington Health Care Facilities Authority
Refunding 1990, Our Lady of Lourdes Health
Center, Pasco, LOC Banque Paribas,
7.875% due 12/1/09(d) 1,644,375
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Hospital -- 13.2% (continued)
$ 2,420,000 AAA Wisconsin Health & Educational Facilities
Authority, Wheaton Franciscan Services, Inc.,
System Revenue Bonds, Series 1992,
MBIA-Insured, 6.100% due 8/15/09 $ 2,568,225
1,000,000 AAA Wisconsin State Health & Educational Facilities
Authority Revenue, Waukesha Memorial Hospital,
Series A, AMBAC-Insured, 5.250% due 8/15/19 910,000
- --------------------------------------------------------------------------------
53,281,818
- --------------------------------------------------------------------------------
Housing: Multi-Family -- 6.0%
865,000 A* Atlanta, GA Urban Multi-Family Housing, Cascade
Pines, 6.250% due 9/1/10 859,594
1,165,000 BBB+ Chicago, IL Multi-Family Housing Revenue, Jeffrey
Apartments, FHA-Insured, 8.125% due 8/1/30(a) 1,199,950
1,500,000 A+ Illinois Housing Development Authority Refunding,
Multi-Family Housing, Series 91A,
8.125% due 7/1/10 1,590,000
1,500,000 AA- Indiana State HFA, Multi-Family Housing Mortgage
Revenue, Hunters Run, FHA-Insured,
7.250% due 5/1/18(a) 1,584,375
5,000,000 Aa* Iowa Finance Authority, Prestwick Apartments,
FHA-Insured, 7.500% due 12/1/36(a) 5,750,000
1,000,000 A King County, WA Housing Authority Revenue,
Series A, 6.800% due 9/1/26 1,008,750
Massachusetts State HFA, Multi-Family Residential
Housing, Series A, FHA-Insured:
1,995,000 A+ 8.800% due 8/1/21(a) 2,067,319
2,000,000 A+ 7.800% due 8/1/22(a) 2,122,500
1,970,000 AAA Mohave County, AZ Industrial Development Agency,
Multi-Family Housing, Copper Ridge Apartments,
FHA-Insured, 7.375% due 4/1/32 2,100,513
500,000 A1* Portland, OR Multi-Family Housing, (Cherry Ridge
Apartments Project), 6.250% due 5/1/12 502,500
1,000,000 BBB+ Roanoke, VA Redevelopment and Housing Authority,
Multi-Family Housing Revenue Refunding, United
Dominion-Laurel Ridge, 6.625% due 5/1/23(a) 1,012,500
1,000,000 A Salt Lake City, UT Housing Authority,
Multi-Family Revenue, 6.125% due 4/1/30 973,750
2,352,000 AAA Seattle Housing Authority, Low Income Housing
Revenue, GNMA-Collateralized, 7.400%
due 1/20/36 2,501,940
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Housing: Multi-Family -- 6.0% (continued)
$ 1,250,000 AA- South Carolina Multi-Family Housing, (Runaway
Bay Apartments Project), 6.125%
due 12/15/15 $ 1,221,875
- --------------------------------------------------------------------------------
24,495,566
- --------------------------------------------------------------------------------
Housing: Single-Family -- 9.1%
170,000 AAA Adams County, CO Multi-County Single-Family
Mortgage Revenue, Series 86B,
GNMA-Collateralized, 9.250% due 11/1/17(a) 174,962
605,000 AAA Alaska State Housing Finance Corporation, Home
Mortgage, Single-Family Revenue,
GNMA/FNMA-Collateralized, 8.750% due 12/1/16 626,931
720,000 AAA Arkansas Housing Development, Single-Family
Mortgage Revenue, Series A, GNMA-Collateralized,
7.400% due 9/1/23(a) 752,400
610,000 Aaa* Aurora Kane & Dupage, IL Single-Family Mortgage
Revenue, Series A, 7.950% due 10/1/25(a) 666,425
1,190,000 Aa* Colorado HFA, Single-Family Program Refunding,
Senior Bonds, 1994 Series D-1, 8.000%
due 12/1/24 1,328,338
1,500,000 Aa* Colorado HFA, Single-Family Housing Revenue,
Series B1, 7.900% due 12/1/25 1,650,000
5,250,000 AAA Cowley & Shawnee Counties Mortgage Revenue,
Series B, AMBAC-Insured, GNMA-Collateralized,
zero coupon due 6/1/22(a) 702,188
770,000 AAA District of Columbia HFA Collateralized Revenue,
Single-Family, Series 90C, GNMA, FHLMC & FNMA-
Collateralized, 8.100% due 12/1/23(a) 814,275
1,040,000 AAA Fort Worth, TX Housing Finance Corp.,
Single-Family Mortgage Revenue, Series A,
GNMA-Collateralized, zero coupon
due 6/1/21(a) 143,000
1,535,000 AA Idaho Housing Agency, Single-Family Mortgage,
Series C-2, 7.900% due 1/1/22(a) 1,611,750
1,305,000 Aa* Illinois Housing Development Authority,
Residential Mortgage Revenue, Series 89A,
7.400% due 2/1/20(a) 1,339,256
930,000 A1 Labette County, KS Single-Family Mortgage
Revenue Refunding, Series A, 8.400%
due 12/1/11 992,775
Maryland State Community Development
Administration:
2,000,000 Aa* Single-Family Mortgage Revenue, FHA-Insured,
7.450% due 4/1/32(a)2,075,000
125,000 A* Housing & Community Development, Single-Family,
9.500% due 6/1/07 126,455
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 9.1% (continued)
$ 660,000 AAA Missouri Housing Development Commission Mortgage
Purchase Refunding Bonds, GNMA-Collateralized,
zero coupon due 7/1/23 $ 94,875
3,755,043 AAA Montgomery County, TX Housing Finance
Corporation, Single-Family Mortgage Revenue,
MBIA-Insured, zero coupon due 9/1/15 450,605
Nebraska Investments Finance Authority:
700,000 AAA GNMA-Collateralized, RIBS Variable Rate,
10.187% due 10/17/23(a)(c) 758,625
600,000 AAA Single-Family Mortgage Revenue, GNMA
Mortgage Backed Securities Program, 1990
Series 3, RIBS Variable Rate, 11.441%
due 9/10/30(a)(c) 675,750
3,378,378 AA Nevada Housing Development, Single-Family
Mortgage Revenue, Series 1983 B,
FHA-Insured, zero coupon due 4/1/15 498,311
1,900,000 Aa* New Hampshire State HFA, Single-Family
Residential Mortgage, 7.250% due 7/1/15(a) 1,968,875
Oregon State Housing & Community Services
Department Mortgage Revenue, Single-Family
Mortgage Program:
850,000 Aa* Series B, 6.875% due 7/1/28 892,500
500,000 Aa* Series D, 6.500% due 7/1/24 517,500
275,000 BBB- Panhandle, TX Regional Housing Finance
Corporation, Single-Family Mortgage Revenue,
10.375% due 3/1/09 282,906
1,000,000 AA+ Pennsylvania HFA, Single-Family Mortgage Revenue,
Series 39B, 6.875% due 10/1/24 (Mandatory
Tender 6/1/97)(a) 1,036,250
835,000 AAA Prince Georges County, MD Housing Authority,
Single-Family Mortgage Revenue Refunding,
Series A, GNMA-Collateralized, 8.000%
due 1/1/17 872,575
500,000 AAA Puerto Rico Housing Finance Agency,
GNMA-Collateralized, 6.250% due 4/1/29 503,750
5,425,000 AAA Reno County, KS Single-Family Mortgage
Revenue, Series A, AMBAC-Insured, zero
coupon due 12/1/14 684,906
Rhode Island Housing & Mortgage Financing
Corporation:
1,430,000 AA+ Home Ownership, Series 88-ID,
7.875% due 10/1/21(a) 1,481,838
1,500,000 AA+ Home Ownership Opportunity Bonds, Series 8,
INFLOS, Variable Rate 10.337%
due 4/1/24 (a)(c) 1,648,125
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 9.1% (continued)
$ 713,124 A1* St. Bernard Parish, LA Home Mortgage Authority,
Single-Family Mortgage Revenue Refunding,
Series A, 8.000% due 3/25/12 $ 735,409
2,500,000 AAA South Dakota Housing Development Authority,
Home Ownership Mortgage Board, Series C,
7.300% due 5/1/24(a) 2,587,500
1,270,000 Aa* Tennessee Housing Development Authority, Home
Ownership Bonds, Series H, 7.825%
due 7/1/15(a) 1,296,988
1,000,000 AAA Travis County, TX Housing Finance Corporation,
Single-Family Mortgage Revenue, Series B,
GNMA/FNMA-Collateralized, 7.100%
due 10/1/27(a) 1,048,750
Utah HFA, Single-Family Mortgage Revenue:
1,110,000 AA 7.300% due 7/1/16 1,162,725
820,000 AA FHA-Insured, 9.000% due 1/1/19(a)(d) 842,550
3,000,000 AA+ Virginia State Housing Development Authority,
Commonwealth Mortgage, Series A, 7.150%
due 1/1/33 3,146,250
795,000 AA Wyoming Community Development Authority,
FHA-Insured, 8.125% due 6/1/21(a) 833,756
- --------------------------------------------------------------------------------
37,025,074
- --------------------------------------------------------------------------------
Industrial Development -- 4.7%
1,000,000 A- Bradford, PA IDA, Solid Waste, International
Paper Company Projects, 6.600% due 3/1/19(a) 1,016,250
2,750,000 BBB Columbus, MS IDR Refunding Bonds, Series 1994,
(Beloit Corporation Project), Harnischfeger
Industries, 5.900% due 12/1/11 2,746,563
3,355,000 AA Fairfax, VA IDA (INOVA Health System Project),
5.000% due 8/15/23 2,902,075
2,500,000 BBB+ Greenville County, SC Industrial Revenue,
(Lockheed Aeromod Center Inc. Project),
7.100% due 11/1/11(a) 2,671,875
850,000 AA Hempstead, NY IDA & IDR Bonds, (1990 Nassau
District Energy Corporation Project), LOC
Toronto Dominion, 7.750% due 9/15/15(a) 882,938
2,650,000 A+ Iowa Finance Authority, (Governor Square
Project), 7.250% due 4/1/14 2,848,750
1,500,000 Baa2* New York City IDA Special Facilities Revenue,
(American Airlines Project), 7.750%
due 7/1/19(a) 1,601,250
1,000,000 A Rensselaer County, NY IDA Albany International
Corporation-Insured, 7.550% due 6/1/07(a) 1,117,500
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Industrial Development -- 4.7% (continued)
$ 1,000,000 A2* Tucson Airport Authority Inc., Special
Facilities Revenue Bonds, Lockheed Aeromod
Center Inc., Series 1990, 8.700%
due 9/1/19(a) $ 1,142,500
2,000,000 A West Chicago IDR, (Leggett & Platt Inc.
Project), 6.900% due 9/1/24(a) 2,077,500
- --------------------------------------------------------------------------------
19,007,201
- --------------------------------------------------------------------------------
Lease Backed -- 0.3%
1,000,000 A Pendleton County, KY Multi-County Lease Revenue,
KY Association of Counties, Series 93A,
6.500% due 3/1/19 1,022,500
- --------------------------------------------------------------------------------
Life Care 0.6%
2,500,000 BBB Illinois Development Finance Authority Health
Facilities, Community Living, 7.125% due 3/1/1 2,562,500
Miscellaneous -- 5.3%
2,280,000 AAA Chicago, IL Motor Fuel Tax Revenue Refunding,
AMBAC-Insured, 5.375% due 1/1/14 2,180,250
4,000,000 BBB- Clarksville National Gas Acquisition
Corporation, 7.500% due 11/1/04 4,190,000
1,000,000 Baa* Delaware County, PA Authority Revenue, (Elwyn
Inc. Project), 8.350% due 6/1/15 1,083,750
Illinois Development Finance Authority
Revenue Refunding:
2,000,000 A- City of East St. Louis, 7.250% due 11/15/09 2,177,500
1,000,000 A1* Marriott Retirement Communities Inc.,
(Church Creek Project), LOC Allied Irish
Bank, 7.750% due 8/1/10, (Mandatory
Put 8/1/03) 1,038,750
2,000,000 AAA Illinois State Sales Tax Revenue, Series P,
6.500% due 6/15/13 2,177,500
1,500,000 A Indiana Bond Bank Guaranty State Revolving Fund,
Series B, 6.875% due 2/1/12 1,638,750
1,000,000 Baa1* Indianapolis, IN Economic Development Revenue
Refunding & Improvement, National Benevolent,
7.625% due 10/1/22 1,048,750
2,000,000 Aa* Intermountain Power Agency, UT Power Supplies,
5.000% due 7/1/23 1,750,000
400,000 A* Oregon State Bond Bank, Economic Development
Department, Series 1, 6.700% due 1/1/15 428,500
2,500,000 A- Summit County, CO Sports Facilities Refunding
Revenue, (Keystone Resorts Management Inc.
Project), Ralston Purina Company Guaranteed,
7.750% due 9/1/06 2,843,750
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Miscellaneous -- 5.3% (continued)
$ 895,000 AAA Texas National Research Lab Community Financing
Corporation Lease Revenue, Series 91,
7.100% due 12/1/21 $ 1,016,944
- --------------------------------------------------------------------------------
21,574,444
- --------------------------------------------------------------------------------
Pollution Control -- 7.5%
1,500,000 BBB+ Brazos River Authority, TX Utility Electric,
8.250% due 1/1/19(a) 1,623,750
5,000,000 Aa3* Brazos River, TX Navigation District PCR, (BASF
Corp. Project), 6.750% due 2/1/10 5,593,750
1,500,000 BBB Lancaster, PA Solid Waste Resource Recovery,
Series A, 8.500% due 12/15/10(a) 1,595,625
2,000,000 AAA Matagorda County, TX Navigational District
No. 2, PCR, Houston Power & Light, Series D,
FGIC-Insured, 7.600% due 10/1/19(a)(d) 2,210,000
1,500,000 AAA Monroe County, MI PCR, (Detroit Edison Co.
Project), FGIC-Insured, 7.650% due 9/1/20(a) 1,657,500
2,000,000 AA Mount Vernon, IN PCR, Southern Indiana Gas,
7.250% due 3/1/14 2,182,500
2,000,000 A* Northeast Maryland Waste Disposal, Montgomery Co.
Resource Revenue, 6.000% due 7/1/07 2,092,500
1,500,000 AAA Ohio State Water Development Authority,
Pollution Control Facilities Revenue,
Cleveland Electric, FGIC-Insured, 8.000% due
10/1/23 (Mandatory Tender 10/1/99)(a) 1,665,000
3,200,000 Aa2* Petersburg, IN PCR Refunding, Indianapolis
Power & Light, 5.400% due 8/1/17 3,028,000
3,440,000 BBB- Port of Corpus Christi, TX Industrial Development
Corporation Revenue, Valero Refining &
Marketing Co., Series A, 10.250% due 6/1/17 3,732,400
1,945,000 BBB Saint Charles Parish, LA PCR, Union Carbide,
7.350% due 11/1/22(a) 2,081,150
2,550,000 A- Trumbull County, OH Sewer Disposal Revenue,
(General Motors Corporation Project),
6.750% due 7/1/14(a) 2,779,500
- --------------------------------------------------------------------------------
30,241,675
- --------------------------------------------------------------------------------
Power -- 3.3%
3,880,000 AAA Clark County, NV IDR, (Nevada Power Co.
Project), Series 1990, FGIC-Insured, 7.800%
due 6/1/20(a) 4,369,850
Georgia Municipal Electric Authority Power
Revenue:
1,500,000 AAA Series EE, AMBAC-Insured, 7.250% due 1/1/24 1,801,875
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Power -- 3.3% (continued)
$2,500,000 A+ Special Obligation Fourth Crossover, (Series
Project 1), 6.500% due 1/1/12 $ 2,665,625
4,250,000 AA Washington Public Power Supply System, (Nuclear
Power Project No. 2), Refunding Bonds, Series
1990 B, 7.000% due 7/1/12 4,574,063
- --------------------------------------------------------------------------------
13,411,413
- --------------------------------------------------------------------------------
Pre-Refunded (b) -- 8.7%
1,000,000 AAA Alton, IL Health Facilities, FGIC-Insured,
7.200% due 2/15/21 1,126,250
1,500,000 AAA Boston, MA Boston City Hospital, FHA-Insured,
(Escrowed with U.S. Government Securities to
8/15/00 Call @ 102), 7.625% due 2/15/21(c) 1,708,125
1,500,000 AAA Chattanooga-Hamilton County, TN Hospital
Authority Revenue, FSA-Insured, (Escrowed
with U.S. Government Securities to 5/1/01
Call @ 104), 10.281% due 5/25/21(c) 1,845,000
2,000,000 AAA Fairfax County VA IDA, Hospital Revenue, RIBS
Variable Rate, 9.877% due 8/29/23(c) 2,467,500
1,500,000 AAA Franklin County, OH Hospital Facilities Refunding
& Improvement Revenue, Series 1990B, Riverside
United Methodist Hospital, (Escrowed with U.S.
Government Securities to 5/15/00 Call @ 102),
7.600% due 5/15/20 1,700,625
4,120,000 AAA Georgia Municipal Electric Authority Power
Revenue, Series P, (Escrowed with U.S.
Government Securities to 1/1/98 @ 102),
8.125% due 1/1/20 4,475,350
1,000,000 AAA Harris County, TX Toll Road Senior Lien Revenue,
(Escrowed with U.S. Government Securities to
8/1/98 Call @ 102), 8.125% due 8/1/15 1,102,500
4,000,000 AAA Indiana Health Facilities Financing Authority
Hospital Revenue, (Bartholomew County Hospital
Project), CGIC-Insured, (Escrowed with U.S.
Government Securities to 8/15/00 Call @ 102),
7.750% due 8/15/20 4,565,000
2,000,000 AAA Louisiana Public Facilities Authority, Tulane
University, Series A, (Escrowed with U. S.
Government Securities to 5/15/98 Call @ 102),
8.200% due 5/15/18 2,190,000
1,000,000 AAA Michigan State Hospital Finance Authority
Revenue, Sisters of Mercy, (Escrowed with
U.S. Government Securities to 2/15/01 Call
@ 102), 7.500% due 2/15/18 1,141,250
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Pre-Refunded (b) -- 8.7% (continued)
$ 1,000,000 AAA New York State Dormitory Authority Revenue,
State University Educational Facilities,
(Escrowed with U.S. Government Securities
to 5/15/00 Call @ 102), 7.700% due 5/15/12 $ 1,140,000
2,000,000 AAA New York State Local Government Assistance
Corporation, (Escrowed with U.S. Government
Securities to 4/1/01 Call @ 102),
7.500% due 4/1/20 2,297,500
North Carolina Eastern Municipal Power Agency,
Power System Revenue Refunding:
1,000,000 AAA Escrowed with U.S. Government Securities
to 1/1/97 Call @ 100, 4.500% due 1/1/24 851,250
1,310,000 AAA Escrowed with U.S. Government Securities
to 1/1/22 Call @ 100, 6.000% due 1/1/26 1,372,225
2,965,000 AAA Utah Associated Municipal Power System Revenue,
(Central St. George Transmission Project),
AMBAC-Insured, (Escrowed with U.S. Government
Securities to 12/1/99 Call @ 101),
7.375% due 12/1/09(a) 3,265,206
2,850,000 AAA Washington County, PA Hospital Authority Revenue,
(Washington Hospital Project), (Escrowed with
U.S. Government Securities to 7/1/97 Call
@ 101), 9.500% due 7/1/17 (d) 3,067,313
1,000,000 AAA West Virginia State Water Development Authority,
Water Development Revenue, CGIC-Insured,
(Escrowed with U.S. Government Securities to
11/1/96 Call @ 102), 8.125% due 11/1/16 1,044,890
- --------------------------------------------------------------------------------
35,359,984
- --------------------------------------------------------------------------------
Public Facilities -- 5.5%
1,000,000 AAA Cobb-Marietta Georgia Colliseum Revenue,
MBIA-Insured, 5.625% due 10/1/26 992,500
2,500,000 A Dekalb County, IN (Redevelopment Mini-Mill Local
Public Improvement Project), 6.500%
due 1/15/14 2,596,875
3,750,000 AA- George L. Smith II Georgia World Congress
Authority Revenue Bonds, (Domed Stadium
Project), Series 1990, LOC Industrial Bank
of Japan, 7.875% due 7/1/20(a) 4,125,000
Indianapolis, IN Local Public Improvement
Bond Bank:
3,000,000 AA+ Series B, 6.000% due 1/10/13 3,093,750
3,685,000 A+ Series 1992 D, 6.750% due 2/1/14 3,965,981
1,095,000 BBB- Portland, TX Community Center Sales Tax Gross
Revenue, 7.000% due 2/15/25 1,099,106
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Public Facilities -- 5.5% (continued)
$ 2,000,000 Baa1* Triborough Bridge & Tunnel Authority, NY
(Convention Center Project), Series E,
7.250% due 1/1/10 $ 2,272,500
3,960,000 A Tulsa, OK Public Facilities Authority, Lease
Payment Revenue Refunding, Assembly Center,
6.600% due 7/1/14 4,321,350
- --------------------------------------------------------------------------------
22,467,062
- --------------------------------------------------------------------------------
Short-Term (e) -- 0.1%
100,000 VMIG1* Pinnellas County, FL Health Facilities Authority
Revenue, 3.850% due 12/1/15 100,000
- --------------------------------------------------------------------------------
Solid Waste -- 2.0%
1,000,000 A Lancaster County, PA Solid Waste Management
Authority, Resource Recovery System Revenue
Landfill, 7.875% due 12/15/09 1,051,250
400,000 A New Morgan, PA IDA, Solid Waste Disposal, (New
Morgan Landfill Company Inc. Project), Browning
Ferris, 6.500% due 4/1/19(a) 411,000
1,850,000 A1* Richland County, SC Solid Waste Disposal
Facilities Revenue, (Union Camp Corporation
Project), Series B, 7.125% due 9/1/21(a) 1,977,180
1,130,000 A- Southwestern, Illinois Development Authority,
Solid Waste Disposal Revenue, (Laclede Steel
Company Project), 8.500% due 8/1/20(a) 1,248,650
3,200,000 BBB Sweetwater County, WY Solid Waste Disposal
Revenue Bonds, (FMC Corporation Project),
Series 1994 A, 7.000% due 6/1/24(a) 3,332,000
- --------------------------------------------------------------------------------
8,020,080
- --------------------------------------------------------------------------------
Tax Allocation -- 1.2%
1,000,000 AAA La Quinta, CA Redevelopment Agency,
MBIA-Insured, 7.300% due 9/1/12 1,177,500
Wisconsin Central District Tax Revenue:
5,000,000 AAA MBIA-Insured, zero coupon due 12/15/16 1,456,250
2,300,000 A Series B, 5.750% due 12/15/27 2,187,875
- --------------------------------------------------------------------------------
4,821,625
- --------------------------------------------------------------------------------
Transportation 7.1%
3,000,000 Baa2* Alliance Airport Authority Inc., TX Special
Facilities Revenue, (American Airlines Inc.
Project), 7.500% due 12/1/29(a) 3,195,000
1,680,000 Baa1* Arapahoe, CO Capital Improvement Highway
Revenue, 6.950% due 8/31/20 1,780,800
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Transportation 7.1% (continued)
$ 2,000,000 Baa2* Chicago, IL O'Hare International Airport,
Special Facility Revenue, International
Terminal, Series 1985A, (American Airlines
Project), 7.875% due 11/1/25(a) $ 2,132,500
2,010,000 NR Connecticut Development Authority, Airport
Facilities Revenue, 6.625% due 12/1/14 2,004,975
City and County of Denver, CO Airport Systems
Revenue:
1,000,000 Baa* Series A, 8.500% due 11/15/23(a) 1,157,500
3,500,000 Baa* Series 1992B, 7.250% due 11/15/07(a) 3,771,250
New Hampshire State Turnpike Systems Revenue
Refunding:
2,500,000 AAA FGIC-Insured, 6.750% due 11/1/11 2,743,750
1,000,000 AAA RIBS, Series C, 9.836% due 11/1/17(c) 1,177,500
3,000,000 AAA Port Everglades, FL Port Improvement Authority,
7.125% due 11/1/16 3,592,500
Regional Transit Authority, IL:
2,000,000 AAA Series A, AMBAC-Insured, 6.400% due 6/1/12 2,147,500
1,045,000 AAA Series C, FGIC-Insured, 7.750% due 6/1/20 1,315,394
3,240,000 AAA Rhode Island Port Authority & Economic
Development, Shepard Building, 6.750%
due 6/1/25 3,474,900
- --------------------------------------------------------------------------------
28,493,569
- --------------------------------------------------------------------------------
Utilities 2.3%
3,000,000 AAA Brownsville, TX Utility System Revenue Priority
Refunding, MBIA-Insured, 6.250% due 9/1/14 3,202,500
465,000 AA Hogansville, GA Combined Public Utility Systems,
Asset Guaranty, 5.850% due 10/1/15 460,350
1,000,000 A+ New York State Energy Research & Development,
(Con Edison Project A), 7.125% due 12/1/29(a) 1,098,750
3,000,000 AA Oklahoma City Industrial and Cultural Facility
Trust, District Heating and Cooling Revenue
Bonds, Series 92, Trigen-Oklahoma District
Energy Corporation, LOC Societe Generale,
6.750% due 9/15/17(a) 3,123,750
1,235,000 AAA Piedmont Municipal Power Agency, Electric
Revenue Refunding, FGIC-Insured, 6.750%
due 1/1/20 1,384,744
- --------------------------------------------------------------------------------
9,270,094
- --------------------------------------------------------------------------------
Water & Sewer -- 2.4%
2,400,000 A Dauphin County, PA IDA, General Water Works
Corporation-Insured, 6.900% due 6/1/24(a) 2,652,000
2,000,000 A Idaho State Water Resources Board, Water
Revenue Resource Development, Borse Water
Corporation, 7.250% due 12/1/21(a) 2,150,000
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Schedule of Investments(continued) March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
<C> <C> <S> <C>
Water & Sewer -- 2.4% (continued)
$ 970,000 A New Jersey State EDA Sewer Facility, Atlantic
City Sewer, 7.250% due 12/1/11 (a) $ 1,059,725
3,400,000 Aa1* Port of Umatilla, OR Water Project Revenue,
Series 1994, LOC ABN Ambro Bank,
6.650% due 8/1/22(a) 3,604,000
350,000 A+ Portland, OR Sewer System Revenue Bonds,
Series 1994 A, 6.250% due 6/1/15 366,625
9,832,350
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS 100%
(Cost $377,779,690*) $404,986,532
- --------------------------------------------------------------------------------
</TABLE>
(a) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Pre-refunded bonds escrowed by U.S. Government Securities and bonds
escrowed to maturity by U.S. Government Securities are considered by
manager to be triple-A rated even if issuer has not applied for new
ratings.
(c) Residual interest bonds-coupon varies inversely with level of short-term
tax-exempt interest rates.
(d) Securities segregated by Custodian for open purchase commitment.
(e) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
* Aggregate cost for Federal income tax purposes is substantially the same.
See pages 21 and 22 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
20
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Corporation ("Standard & Poors"), except
those identified by an asterisk (*) are rated by Moody's Investors Services
("Moody's"). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Rating from "AA" to "BBB" 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 differs from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for bonds
in this category than in higher rated categories.
Moody's-- Numerical modifiers 1, 2 and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest
ranking within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge". Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
21
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Short-Term Securities Ratings
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
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.
- --------------------------------------------------------------------------------
Security Descriptions
- --------------------------------------------------------------------------------
ABA -- Association of Bay Area Governors
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility
Construction Loan Insurance
COP -- Certificate of Participation
EDA -- Economic Development Authority
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage
Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS-- Inverse Floaters
ISD -- Independent School District
LEVRRS-- Leveraged Reverse Rate Securities
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS-- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PSF -- Permanent School Fund
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation
Notes
SYCC -- Structured Yield Curve Certificate
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
22
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (Cost-- $377,779,690) $404,986,532
Cash 99,945
Receivable for securities sold 377,899
Receivable for Fund shares sold 123,313
Interest receivable 6,900,426
Other assets 3,221
- --------------------------------------------------------------------------------
Total Assets 412,491,336
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 4,589,045
Dividends payable 950,745
Management fees payable 243,202
Payable for Fund shares redeemed 66,172
Distribution fees payable 21,033
Accrued expenses 32,284
Total Liabilities 5,902,481
- --------------------------------------------------------------------------------
Total Net Assets $406,588,855
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 29,744
Capital paid in excess of par value 383,568,997
Undistributed net investment income 114,578
Accumulated net realized loss on security transactions (4,331,306)
Net unrealized appreciation of investments 27,206,842
- --------------------------------------------------------------------------------
Total Net Assets $406,588,855
================================================================================
Shares Outstanding:
Class A 27,682,271
- --------------------------------------------------------------------------------
Class B 848,418
- --------------------------------------------------------------------------------
Class C 1,212,786
- --------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $13.67
- --------------------------------------------------------------------------------
Class B* $13.67
- --------------------------------------------------------------------------------
Class C** $13.65
- --------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) $14.24
================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed less than one year from initial purchase (See Note 3).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
23
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $27,618,800
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 1,893,904
Distribution fees (Note 3) 773,449
Registration fees 123,250
Shareholder and system servicing fees 115,247
Shareholder communications 70,272
Pricing service fees 37,475
Custody 16,330
Audit and legal 14,274
Trustees' fees 10,980
Other 13,078
- --------------------------------------------------------------------------------
Total Expenses 3,068,259
- --------------------------------------------------------------------------------
Net Investment Income 24,550,541
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 143,920,366
Cost of securities sold 142,340,501
- --------------------------------------------------------------------------------
Net Realized Gain 1,579,865
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 17,638,553
End of year 27,206,842
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 9,568,289
- --------------------------------------------------------------------------------
Net Gain on Investments 11,148,154
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $35,698,695
================================================================================
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets For the Years Ended March 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 24,550,541 $ 26,832,159
Net realized gain (loss) 1,579,865 (5,093,818)
Increase in net unrealized appreciation 9,568,289 4,640,521
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 35,698,695 26,378,862
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE2):
Net investment income (24,435,963) (27,215,082)
Net realized gains -- (52,488)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions To Shareholders (24,435,963) (27,267,570)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (Note 6):
Net proceeds from sale of shares 64,710,502 110,670,640
Net asset value of shares issued for
reinvestment of dividends 12,222,596 13,437,809
Cost of shares reacquired 108,474,584) 136,182,090)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (31,541,486) (12,073,641)
- --------------------------------------------------------------------------------
Decrease in Net Assets (20,278,754) (12,962,349)
NET ASSETS:
Beginning of year 426,867,609 439,829,958
- --------------------------------------------------------------------------------
End of year* $406,588,855 $426,867,609
================================================================================
*Includes undistributed net investment income of: $ 114,578 --
================================================================================
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The National Portfolio ("Portfolio") is a separate investment portfolio of
the Smith Barney Muni Funds ("Fund"). The Fund, a Massachusetts business trust,
is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company and consists of this
Portfolio and nine other separate investment portfolios: Florida, Georgia,
Limited Term, New York, Ohio, Pennsylvania, Florida Limited Term, California
Money Market and New York Money Market Portfolios. The financial statements and
financial highlights for the other portfolios are presented in separate annual
reports.
The significant accounting policies consistently followed by the Fund are:
(a) securities transactions are accounted for on the trade date; (b) securities
are valued at the mean between the bid and ask prices provided by an independent
pricing service which are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; (c) short-term
securities maturing within 60 days are valued at cost plus (minus) accreted
discount (amortized premium), if any, which approximates value; (d) gains or
losses on the sale of securities are calculated by using the specific
identification method; (e) interest income, adjusted for amortization of premium
and accretion of original issue discount, is recorded on the accrual basis;
market discount is recognized upon the disposition of the security; (f)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (g) direct expenses are charged to each Portfolio and each class;
management fees and general fund expenses are allocated on the basis of relative
net assets; (h) the Portfolio 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; and (i)
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 from these amounts.
2. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The Portfolio 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 Portfolio.
26
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH
AFFILIATED PERSONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager to the Fund. The
Portfolio pays SBMFM a management fee calculated at the annual rate of 0.45% of
the average daily net assets. This fee is calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. For the year ended March 31, 1996, SB received sales charges of
approximately $353,000 on purchases of the Portfolio's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B
shares, which applies if redemption occurs less than one year from initial
purchase and thereafter declines by 0.50% the first year after purchase and
thereafter by 1.00% per year until no CDSC is incurred. Class C shares have a
1.00% CDSC, which applies if redemption occurs within the first year of
purchase. In addition, Class A shares have a 1.00% CDSC, which applies if
redemption occurs within the first year of purchase. 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 March 31, 1996, CDSCs paid to
SB were approximately:
<TABLE>
<CAPTION>
Class A Class B Class C
===============================================================================
<S> <C> <C> <C>
CDSCs $1,000 $21,000 $1,000
===============================================================================
</TABLE>
Pursuant to a Distribution Plan, the Portfolio pays a service fee with
respect to Class A, B and C shares calculated at the annual rate of 0.15% of the
average daily net assets of each respective class. In addition, the Portfolio
pays a distribution fee with respect to Class B and C shares calculated at the
annual rates of 0.50% and 0.55%, respectively, of the average daily net assets
of each class. For the year ended March 31, 1996, total Distribution Plan fees
incurred were:
<TABLE>
<CAPTION>
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Distribution Plan Fees $591,305 $58,602 $123,542
================================================================================
</TABLE>
All officers and two Trustees of the Fund are employees of SB.
27
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
4. INVESTMENTS
During the year ended March 31, 1996, the aggregate cost of purchases and
proceeds from sales (including maturities, but excluding short-term securities)
of investments were as follows:
<TABLE>
<CAPTION>
================================================================================
<S> <C>
Purchases $112,269,788
- --------------------------------------------------------------------------------
Sales 143,920,366
================================================================================
</TABLE>
At March 31, 1996, the gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were as follows:
<TABLE>
<CAPTION>
================================================================================
<S> <C>
Gross unrealized appreciation $28,398,339
Gross unrealized depreciation (1,191,497)
- --------------------------------------------------------------------------------
Net unrealized appreciation $27,206,842
================================================================================
</TABLE>
5. CAPITAL LOSS CARRYFORWARD
At March 31, 1996, the Fund had for Federal tax purposes approximately
$4,174,000 of 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 the expiration for each carryforward loss is indicated
below:
<TABLE>
<CAPTION>
3/31/03 3/31/04
================================================================================
<S> <C> <C>
Carryforward Amount $4,134,000 $40,000
================================================================================
</TABLE>
6. SHARES OF BENEFICIAL INTEREST
At March 31, 1996, there were an unlimited amount of shares of beneficial
interest of $0.001 par value authorized. The Portfolio has the ability to issue
multiple classes of shares. Each share of a class represents an identical
interest in the Portfolio and has the same rights, except that each class bears
certain expenses specifically related to the distribution of its shares.
Effective November 7, 1994, the Portfolio adopted a new class structure,
renaming Class B shares as Class C shares, and exchanging the
28
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
former Class C
shares into Class A shares. At March 31, 1996, total paid-in capital amounted to
the following for each class:
<TABLE>
<CAPTION>
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Total Paid-in Capital $355,415,319 $11,045,570 $17,137,852
================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1996 March 31, 1995*
--------------------------- ---------------------------
Shares Amount Shares Amount
================================================================================================
<S> <C> <C> <C> <C>
Class A+
Shares sold 4,117,372 $ 56,693,521 7,504,759 $ 97,563,455
Shares issued on reinvestment 823,510 11,267,741 966,818 12,589,740
Shares redeemed (7,388,331) (101,570,060) (9,937,436) (129,217,695)
- ------------------------------------------------------------------------------------------------
Net Decrease (2,447,449) $ (33,608,798) (1,465,859) $ (19,064,500)
================================================================================================
Class B
Shares sold 410,533 $ 5,682,469 529,056 $ 6,600,141
Shares issued on reinvestment 24,745 339,516 7,222 93,836
Shares redeemed (104,690) (1,438,128) (18,448) (237,885)
- ------------------------------------------------------------------------------------------------
Net Increase 330,588 $ 4,583,857 517,830 $ 6,456,092
================================================================================================
Class C++
Shares sold 170,117 $ 2,334,512 497,598 $ 6,507,044
Shares issued on reinvestment 45,027 615,339 57,948 754,233
Shares redeemed (398,879) (5,466,396) (522,970) (6,726,510)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) (183,735) $ (2,516,545) 32,576 $ 534,767
================================================================================================
</TABLE>
+ On October 10, 1994, the former Class C shares were exchanged into Class A
shares; therefore Class C share activity for the period from April 1, 1994
to October 9, 1994 is included with Class A share activity.
* For Class B shares, transactions are for the period from November 7, 1994
(inception date) to March 31, 1995.
++ On November 7, 1994, the former Class B shares were renamed Class C shares.
29
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Shares 1996 1995 (a) 1994 1993 1992
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $13.32 $13.35 $13.81 $12.95 $12.49
- --------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.81 0.82 0.85 0.88 0.90
Net realized and unrealized
GAIN (LOSS) 0.35 (0.01) (0.39) 0.87 0.46
- --------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.16 0.81 0.46 1.75 1.36
- --------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.81) (0.84) (0.86) (0.89) (0.90)
Net realized gains -- -- (0.06) -- --
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.81) (0.84) (0.92) (0.89) (0.90)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.67 $13.32 $13.35 $13.81 $12.95
- --------------------------------------------------------------------------------------------------------------
Total Return 8.83% 6.38% 3.17% 13.96% 11.21%
- --------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $378,421 $401,364 $412,681 $382,875 $260,718
- --------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.70% 0.60% 0.52% 0.53% 0.50%
Net investment income 5.88 6.30 6.05 6.58 6.88
- --------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27.08% 54.16% 42.33% 52.73% 95.29%
==============================================================================================================
</TABLE>
(a) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
30
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year:
<TABLE>
<CAPTION>
Class B Shares 1996 1995(a)
================================================================================
<S> <C> <C>
Net Asset Value, Beginning of Year $13.33 $12.41
- -------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.73 0.33
Net realized and unrealized gain 0.35 0.91
- -------------------------------------------------------------------------------
Total Income From Operations 1.08 1.24
- -------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.74) (0.32)
- -------------------------------------------------------------------------------
Total Distributions (0.74) (0.32)
- -------------------------------------------------------------------------------
Net Asset Value, End of Year $13.67 $13.33
- -------------------------------------------------------------------------------
Total Return 8.26% 10.11%++
- -------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $11,605 $6,905
- -------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.19% 1.19%+
Net investment income 5.37 5.75+
- -------------------------------------------------------------------------------
Portfolio Turnover Rate 27.08% 54.16%
===============================================================================
</TABLE>
(a) For the period from November 7, 1994 (inception date) to March 31, 1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
31
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year:
<TABLE>
<CAPTION>
Class C Shares 1996 1995(a) 1994 1993(b)
========================================================================================================
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $13.32 $13.33 $13.80 $13.47
- --------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.73 0.74 0.76 0.22
Net realized and unrealized gain (loss) 0.34 (0.01) (0.40) 0.31
- --------------------------------------------------------------------------------------------------------
Total Income From Operations 1.07 0.73 0.36 0.53
- --------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.74) (0.74) (0.77) (0.20)
Realized gain (0.06)
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.74) (0.83) (0.20)
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.65 $13.32 $13.33 $13.80
- --------------------------------------------------------------------------------------------------------
Total Return 8.13% 5.80% 2.40% 3.98%++
- --------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $16,563 $18,599 $18,185 $5,738
- --------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.27% 1.23% 1.22% 1.20%+
Net investment income 5.31 5.69 5.29 5.68+
- --------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 27.08% 54.16% 42.33% 52.73%
========================================================================================================
</TABLE>
(a) On November 7, 1994, the former Class B shares were renamed Class C shares.
(b) For the period from January 5, 1993 (inception date) to March 31, 1993.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
32
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
100% of the dividends paid by the Portfolio from net investment income for
the year ended March 31, 1996, are tax exempt for regular Federal income tax
purposes.
33
<PAGE>
Smith Barney Muni Funds
National Portfolio
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Smith Barney Muni Funds:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the National Portfolio of Smith Barney
Muni Funds as of March 31, 1996, 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 the financial highlights for each of the
years in the five-year period then ended. These financial statements are the
responsibility of the Funds 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit also 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 March 31, 1996, by correspondence with the custodian. As to securities
purchased and sold but not received or 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
National Portfolio of Smith Barney Muni Funds as of March 31, 1996, 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 the financial highlights
for each the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
New York,New York
May 14, 1996
34
<PAGE>
Smith Barney SMITH BARNEY
Muni Funds ------------------
A Memebr of Travelers Group[LOGO]
Trustees
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P.Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
C. Richard Youngdahl
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
and Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds--National Portfolio. It is not authorized for
distribution to prospective investors unless accompanied or preceded by a
current Prospectus for the Portfolio, which contains information concerning the
Portfolio's investment policies and expenses as well as other pertinent
information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
FD2304 5/96
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
Smith Barney
Muni Funds
Florida Limited
Term Portfolio
Florida Portfolio
--------------------------
March 31, 1996
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- --------------------------------------------------------------------------------
Florida Limited Term and Florida Portfolios
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney Muni
Funds -- Florida Limited Term and Florida Portfolios for the year ended March
31, 1996. For your convenience, we have summarized the period's prevailing
economic and market conditions below and outlined the various investment
strategies employed by the Portfolios during this time. A detailed summary of
performance and current holdings for each Portfolio can be found in the
appropriate sections that follow in the annual report.
Market and Economic Overview
Interest rates declined steadily over the first nine months of the fiscal year
in response to low inflation and very sluggish economic growth. Over the last
three months of the fiscal year, however, interest rates rose sharply as
economic reports pointed to much stronger growth than was expected by most
market participants and concerns over the stalemated federal budget negotiations
continued.
In the past few months, the volatility of the municipal bond market has
increased and municipal bond yields have reached their highest levels in over a
year. However, despite continued uncertainty over the direction of short-term
interest rates, there were some signs of a possible municipal bond market
turnaround as the higher yields offered by municipal bonds began to attract a
growing number of individual and institutional investors. In our view, municipal
bonds represent good value and now may be the time for individuals to consider
participating in the tax-exempt market.
Florida Economic Highlights
Strong growth in service employment and trade have helped to keep Florida's
economic growth robust. Florida's economy continues to broaden and diversify
with substantial activity in the insurance and banking industries and
export-related industries on top of the Sunshine State's solid base of
agriculture and tourism. In addition, Florida has begun to attract a younger
population and we believe this changing demographic mix should be positive for
the State's economy over the long term.
Florida currently has a double-A rating from Moody's Investors Services, Inc.
and a double-A rating from Standard & Poor's Corporation, two major credit
report and bond rating agencies. We are confident that Florida's strong economy
will enable it to maintain its solid, double-A credit rating for the foreseeable
future.
1
<PAGE>
Florida Limited Term Portfolio's Performance
and Investment Strategy
For the year ended March 31, 1996, the Florida Limited Term Portfolio had a
total return of 7.35% and outperformed its intermediate-term Florida municipal
bond fund peer group average of 6.49%. Over 94% of the Florida Limited Term
Portfolio was in investment-grade securities. (An investment-grade security is a
security with a rating of BBB/Baa or better from S&P or Moody's.)
As an intermediate-term municipal bond fund, the Florida Limited Term Portfolio
is restricted to an average life no longer than ten years. As of March 31, 1996,
the Portfolio's weighted average maturity was just over 8 years and the
Portfolio had a heavy emphasis on premium bonds in the intermediate range
because these types of issues generally provide attractive income while offering
some protection from market volatility. The largest sectors of the Florida
Limited Term Portfolio were various types of bonds escrowed with U.S. government
securities (roughly 30%), hospitals (21%), housing (about 12%) and
pollution-control revenue bonds (approximately 14%).
As turbulence in the municipal bond market has increased, we have continued to
emphasize a high-quality credit orientation and a slightly defensive posture in
the Florida Limited Term Portfolio. In addition, we believe certain types of
intermediate-term municipal bonds can provide investors with an attractive level
of income without the higher interest rate risk of longer-term maturity issues.
Florida Portfolio's Performance
and Investment Strategy
For the year ended March 31, 1996, the Florida Portfolio generated a total
return of 8.65% for Class A shares which compares favorably with its Lipper
Analytical Services, Inc. peer group average of 7.13%. (Lipper Analytical
Services, Inc. is a major fund tracking organization.)
During the period covered by this report, the Florida Portfolio maintained its
high credit quality. Over 82% of the Portfolio was in investment-grade
securities. Approximately 50% of the Florida Portfolio had a triple-A rating and
most of these issues were credit-enhanced and insured primarily with the
Municipal Bond Insurance Association (MBIA), the American Bond Assurance
Corporation (AMBAC) or the Financial Guarantee Insurance Corporation (FGIC).
The average weighted maturity of the Florida Portfolio was just over 19 years
and the Portfolio had excellent call protection. The three largest sectors of
the broadly diversified Florida Portfolio were housing (just under 17%),
hospitals (just below 13%) and prerefunded bonds (just under 12%) because we
believe these issues represented good value.
Because of recent increased turbulence in the municipal bond market, we
2
<PAGE>
believe the Portfolio's high credit-quality orientation, good call protection
and broad sector diversification is a prudent investment strategy. In our view,
this investment approach should continue to provide investors with a competitive
stream of income while at the same time helping to minimize the fluctuation of
the Portfolio's net asset value in a volatile market.
Outlook
While the day-to-day volatility in the fixed income markets is likely to
continue, the sharp increase in interest rates over the last two months has made
long-term municipal bonds more attractive on a relative basis. In our view,
competitive pressures in the global economy and changing demographics should
help to keep inflation in check. (Labor costs constitute roughly two-thirds of
the total cost of all finished goods.) We believe long-term municipal bonds
currently represent good value and offer investors a healthy risk premium over
inflation. In addition, with long-term municipal bonds providing roughly 90% of
the yield available on comparable maturity Treasury securities, we believe
investors are well compensated for the potential risks of all but the most
radical tax reform proposals currently in circulation.
It was not too long ago that the "flat tax" issue was touted as potentially the
biggest issue of the upcoming Presidential election in November. The exit of
Republican candidate Steven Forbes from the Presidential race has caused the
flat tax to recede from the political debate. However, between now and November,
tax reform again could move into the political spotlight as the campaign
intensifies. In closing, we believe there is little chance that radical tax
reforms will be enacted. In our view, the municipal bond market remains quite
attractive and we believe the Portfolios are well positioned in the current
environment.
Thank you for investing in the Smith Barney Muni Funds -- Florida Limited Term
and Florida Portfolios. We look forward to helping you achieve your financial
goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman and Vice President
Chief Executive Officer
April 15, 1996
3
<PAGE>
Smith Barney Muni Funds
Florida Limited Term Portfolio
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------------
Beginning End of Income Total
Year Ended of Year Year Dividends Returns (1)
================================================================================
3/31/96 $6.56 $6.71 $0.33 7.35%
- --------------------------------------------------------------------------------
3/31/95 6.44 6.56 0.33 7.17
- --------------------------------------------------------------------------------
Inception* - 3/31/94 6.50 6.44 0.24 2.74+
================================================================================
Total $0.90
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------------
Beginning End of Income Total
Year Ended of Year Year Dividends Returns (1)
================================================================================
3/31/96 $6.55 $6.70 $0.31 7.17%
- --------------------------------------------------------------------------------
3/31/95 6.43 6.55 0.31 6.84
- --------------------------------------------------------------------------------
Inception* - 3/31/94 6.51 6.43 0.23 2.17+
================================================================================
Total $0.85
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
4
<PAGE>
Smith Barney Muni Funds
Florida Limited Term Portfolio
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-------------------------
Class A Class C
================================================================================
Year Ended 3/31/96 7.35% 7.17%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 5.88 5.54
- --------------------------------------------------------------------------------
Without Sales Charge(2)
-------------------------
Class A Class C
================================================================================
Year Ended 3/31/96 5.27% 6.17%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 5.16 5.54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-----------------------
Class A (Inception* through 3/31/96) 18.20%
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/96) 16.97
- --------------------------------------------------------------------------------
(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 C 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 2.00% and Class C shares reflect the
deduction of a 1.00% CDSC, which applies if shares are redeemed within the
first year of purchase.
* Inception dates for Class A and C shares are April 27, 1993 and May 4,
1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
5
<PAGE>
Smith Barney Muni Funds
Florida Limited Term Portfolio
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A
Shares of the Florida Limited
Term Portfolio vs.
Lehman 10 Year General Obligation Index+
- --------------------------------------------------------------------------------
April 1993 -- March 1996
[The following table was represented as a line graph in the printed material.]
Florida Limited Lehman 10 Year General
Term Portfolio Obligation Index
-------------- ----------------
4/27/93 $ 9800 $10000
3/94 10073 10265
3/95 10780 11032
3/96 $11573 $12012
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on April 27, 1993, assuming deduction of the maximum 2.00% sales
charge at the time of investment and reinvestment of dividends (after
deduction of applicable sales charges through November 6, 1994, and
thereafter at net asset value) and capital gains, if any, at net asset
value through March 31, 1996. The Lehman 10 Year General Obligation Index
is a broad based, total return index, comprised of all investment grade
fixed rate, long term maturities (9-12 years) and are selected from issues
larger than $50 million dated since January, 1984. The index is unmanaged
and is not subject to the same management and trading expenses of a mutual
fund. The performance of the Portfolio'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 returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
6
<PAGE>
Smith Barney Muni Funds
Florida Portfolio
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/96 $ 12.89 $ 13.24 $ 0.74 $ 0.00 8.65%
- --------------------------------------------------------------------------------
3/31/95 12.82 12.89 0.76 0.00 6.77
- --------------------------------------------------------------------------------
3/31/94 13.21 12.82 0.77 0.00 2.75
- --------------------------------------------------------------------------------
3/31/93 12.32 13.21 0.80 0.01 14.21
- --------------------------------------------------------------------------------
Inception* - 3/31/92 12.00 12.32 0.70 0.00 8.70+
================================================================================
Total $ 3.77 $ 0.01
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/96 $ 12.89 $ 13.23 $ 0.69 $ 0.00 8.09%
- --------------------------------------------------------------------------------
Inception* - 3/31/95 11.91 12.89 0.29 0.00 10.77+
================================================================================
Total $ 0.98 $ 0.00
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/96 $ 12.89 $ 13.22 $ 0.68 $ 0.00 7.96%
- --------------------------------------------------------------------------------
3/31/95 12.81 12.89 0.67 0.00 6.12
- --------------------------------------------------------------------------------
3/31/94 13.20 12.81 0.68 0.00 2.05
- --------------------------------------------------------------------------------
Inception* - 3/31/93 12.86 13.20 0.18 0.00 4.05+
================================================================================
Total $ 2.21 $ 0.00
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
7
<PAGE>
Smith Barney Muni Funds
Florida Portfolio
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
---------------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/96 8.65% 8.09% 7.96%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 8.15 7.82 4.78
- --------------------------------------------------------------------------------
Without Sales Charge(2)
---------------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/96 4.28% 3.59% 6.96%
- --------------------------------------------------------------------------------
Inception* through 3/31/96 7.27 4.97 4.78
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
---------------------------------------
Class A (Inception* through 3/31/96) 47.95%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/96) 10.89
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/96) 16.32
- --------------------------------------------------------------------------------
(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 C
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% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed less than
one year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are April 2, 1991, November 16,
1994 and January 5, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
8
<PAGE>
Smith Barney Muni Funds
Florida Portfolio
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the Florida Portfolio vs.
Lehman Muni Bond Fund Index+
- --------------------------------------------------------------------------------
April 1991 -- March 1996
[The following table was represented as a line graph in the printed material.]
Lehman Muni
Florida Portfolio Bond Fund Index
----------------- ---------------
4/2/91 $ 9600 $10000
3/92 10410 11139
3/93 11857 12768
3/94 12156 12915
3/95 12961 14081
3/96 $14084 $15153
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on April 2, 1991, assuming deduction of the maximum 4.00% sales
charge at the time of investment and reinvestment of dividends (after
deduction of applicable sales charges through November 6, 1994, and
thereafter at net asset value) and capital gains, if any, at net asset
value through March 31, 1996. The Lehman Muni Bond Fund Index is a broad
based, total return index, comprised of 8,000 actual bonds which are all
investment grade, fixed rate, long term maturities (greater than two years)
and are selected from issues larger than $50 million dated since January,
1984. The index is unmanaged and is not subject to the same management and
trading expenses of a mutual fund. The performance of the Portfolio'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 returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
9
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Education -- 4.8%
$600,000 AAA Hillsborough County School Board COP, MBIA-Insured,
5.500% due 7/1/04 $ 623,250
- ---------------------------------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 31.4%
500,000 AAA Alachua County Health Facilities Revenue Refunding,
Santa Fe Healthcare Facility, (Escrowed to Maturity with U.S.
Government Securities), 6.000% due 11/15/09 523,750
635,000 AAA Altamonte Springs Health Facility Authority Hospital Revenue,
Adventist Health System, (Escrowed to Maturity with U.S.
Government Securities), 13.000% due 10/1/01 788,988
290,000 AAA Cape Coral Health Facility Authority Hospital Revenue,
(Escrowed to Maturity with U.S. Government Securities),
8.125% due 11/1/08 337,125
400,000 AAA Escambia County HFA, Multi-Family Housing Revenue,
Genesis Health, Series A, (Escrowed to Maturity with U.S.
Government Securities), zero coupon due 4/15/01 293,500
Jacksonville Health Facilities Authority Revenue:
155,000 AAA Hospital Holmes Regulated Medical Center Project, (Escrowed to
Maturity with U.S. Government Securities), 9.125% due 1/1/03 177,088
200,000 AAA St. Vincents Medical Center, Inc., (Escrowed to Maturity with U.S.
Government Securities), 9.125% due 1/1/03 229,500
145,000 AAA Loxahatchee River Environmental Control Sewer Revenue, (Escrowed
to Maturity with U.S. Government Securities), 7.750% due 10/1/13 171,100
590,000 AAA Orange County Health Facility Authority Revenue, Southern Adventist
Hospital, (Escrowed to Maturity with U.S. Government Securities),
8.750% due 10/1/09 (b) 736,025
405,000 AAA Palm Beach County Health Facility Authority Revenue, John F.
Kennedy Memorial Hospital, Inc., (Escrowed to Maturity with
U.S. Government Securities), 9.500% due 8/1/13 547,256
270,000 AAA Virgin Islands Territory GO, (Escrowed to Maturity with U.S.
Government Securities), 8.000% due 3/1/98 289,574
- ---------------------------------------------------------------------------------------------------------------
4,093,906
- ---------------------------------------------------------------------------------------------------------------
General Obligation -- 3.9%
475,000 A1* Guam Government Limited Obligation Revenue, Series A, LOC
Fuji Bank, 7.000% due 11/15/04 503,500
- ---------------------------------------------------------------------------------------------------------------
Hospital -- 22.7%
685,000 Baa Bay County Hospital Systems Revenue Refunding,
(Bay Medical Center Project), 6.875% due 10/1/99 708,975
725,000 A1* Brevard County Health Facilities Authority Revenue, (Hospital-
Holmes Regulated Medical Center Project), 5.400% due 10/1/03 734,062
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Hospital -- 22.7% (continued)
$600,000 BBB+ Collier County Health Facilities Authority Revenue Refunding,
(The Moorings Inc. Project), 6.125% due 12/1/06 $ 606,750
400,000 Baa1 Jacksonville Health Facilities Authority Development Revenue,
National Benevolent Association Cypress Village Program,
6.000% due 12/1/04 399,500
500,000 A+ Palm Beach County Health Facilities Authority Revenue, Good
Samaritan Health Systems, 5.700% due 10/1/02 510,000
- ---------------------------------------------------------------------------------------------------------------
2,959,287
- ---------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 2.3%
300,000 AAA Escambia County, HFA Multi-Family Refunding, (Meadow Run
Project), LOC Federal Home Loan Bank of Atlanta,
5.500% due 5/1/10 mandatory tender 5/1/03 302,625
- ---------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 5.9%
130,000 AAA Duval County HFA Single-Family Mortgage Revenue, Mortgage
Backed Securities Program, GNMA-Collateralized,
8.000% due 6/1/00(b) 133,575
180,000 AAA Escambia County HFA, Single-Family Mortgage Revenue,
Multi-County Program, Series A, 6.150% due 4/1/00(b) 183,375
65,000 AAA Leon County HFA Single-Family Mortgage Revenue, (Multi-County
Project 84), Series A, MBIA-Insured, zero coupon due 3/1/03 33,718
410,000 AAA Orange County HFA Single-Family Mortgage Revenue, Mortgage
Backed Securities Program, GNMA/FNMA-Collateralized,
6.100% due 10/1/05(b) 423,838
- ---------------------------------------------------------------------------------------------------------------
774,506
- ---------------------------------------------------------------------------------------------------------------
Industrial Development -- 3.3%
400,000 AAA Osceola County IDA, Community Provider Pooled Loan
Program, Series A, CGIC-Insured, 7.500% due 7/1/02 429,000
- ---------------------------------------------------------------------------------------------------------------
Pollution Control -- 16.1%
515,000 A* Broward County Resource Recovery Revenue, Broward Waste
Energy-LP North, 7.950% due 12/1/08 571,006
715,000 A* Brevard County Solid Waste Disposal System Revenue,
5.200% due 4/1/04 720,363
640,000 AAA Palm Beach County Solid Waste Authority, 10.000% due 12/1/04 801,600
- ---------------------------------------------------------------------------------------------------------------
2,092,969
- ---------------------------------------------------------------------------------------------------------------
Short-Term(e) -- 1.5%
200,000 VMIG 1* Hillsborough County FL PCR, Tampa Electric Company,
3.850% due 9/1/25 200,000
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Tax Allocation -- 4.0%
$500,000 AAA Orange County Tourist Development Tax Revenue Refunding,
Series A, MBIA-Insured, 5.400% due 10/1/04 $ 518,125
- ---------------------------------------------------------------------------------------------------------------
Transporation -- 4.1%
300,000 NR Sanford, Airport Authority, Industrial Development
Revenue, (FL Terminal Inc. Project), Series A,
7.500% due 5//06(b) 295,000
250,000 A Puerto Rico Commonwealth Highway & Transportation
Authority, Highway Revenue, Series W,
5.500% due 7/15/15 240,938
- ---------------------------------------------------------------------------------------------------------------
536,438
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $12,613,790*) $ 13,033,606
===============================================================================================================
</TABLE>
See page 22 for footnote disclosures.
See Notes to Financial Statements.
12
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Education -- 4.9%
$1,625,000 AAA Brevard County School Board Authority COP, Series B,
AMBAC-Insured, 5.500% due 7/1/21 $ 1,539,687
1,000,000 AAA Broward County Educational Facilities Authority, NOVA
Southeastern University, CONNIE LEE-Insured,
6.000% due 4/1/13 1,008,750
1,125,000 AAA Hillsborough County School Board COP, MBIA-Insured,
6.000% due 7/1/14 1,153,125
1,250,000 NR North Miami Educational Facilities Revenue, (Johnson &
Wales University Project), Series A, 6.100% due 4/1/13 1,223,438
1,510,000 Baa* Palm Bay Lease Revenue Refunding, Education and Research,
Series A, 6.850% due 9/1/13 1,543,975
445,000 A+ Pensacola Junior College Foundation, Education Facility Revenue,
LOC Bank of Tokyo, 7.125% due 7/1/09 462,243
Voulsia County Educational Facilities Authority Revenue,
Embry Riddle Aeronautical University:
500,000 AAA CONNIE LEE-Insured, 6.500% due 10/15/15 526,250
750,000 Baa* Series A, 6.125% due 10/15/16 748,125
- ---------------------------------------------------------------------------------------------------------------
8,205,593
- ---------------------------------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 5.7%
640,000 BBB+ Alachua County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project), (Escrowed to Maturity
with U.S. Government Securities), 6.050% due 11/15/16 663,200
Bradford County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project), (Escrowed to Maturity
with U.S. Government Securities):
1,000,000 BBB+ 6.000% due 11/15/09 1,042,500
860,000 BBB+ 6.050% due 11/15/16 896,550
3,000,000 AAA Escambia County HFA, Multi-Family Housing Revenue,
Genesis Healthcare, FGIC-Insured, Principal Custodial
Receipts, (Escrowed to Maturity with U.S. Government Securities),
zero coupon due 10/15/18 716,250
360,000 NR Florida State Community Service Suburban Utilities, (Escrowed to
Maturity with U.S. Government Securities), 8.125% due 10/1/98 382,950
1,500,000 AAA Gainsville Florida Utility System Revenue, (Escrowed to Maturity with
U.S. Government Securities), 8.125% due 10/1/14 1,933,125
510,000 AAA Jacksonville Health Facilities Authority Hospital Revenue,
(Methodist Hospital Project), (Escrowed to Maturity with U.S.
Government Securities), 10.000% due 10/1/97 543,788
665,000 AAA Palm Beach County HFA, (John F. Kennedy Memorial
Hospital Inc. Project), Series C, (Escrowed to Maturity with U.S.
Government Securities), 9.500% due 8/1/13 898,581
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Escrowed to Maturity(a) -- 5.7% (continued)
$2,000,000 AAA Port Everglades Authority Port Improvement, (Escrowed to Maturity
with U.S. Government Securities), 7.125% due 11/1/16 $ 2,395,000
- ---------------------------------------------------------------------------------------------------------------
9,471,944
- ---------------------------------------------------------------------------------------------------------------
Finance -- 1.3%
485,000 AA Florida State Board of Education Capital Outlay Refunding,
Series A, 7.250% due 6/1/23(c) 533,500
500,000 AAA Gulf Breeze Local Government Revenue, FGIC-Insured,
7.750% due 12/1/15 561,250
1,000,000 AA St. Lucie County Special Assessment, South Hutchinson Island,
Asset Guaranteed, 6.200% due 11/1/25 1,015,000
- ---------------------------------------------------------------------------------------------------------------
2,109,750
- ---------------------------------------------------------------------------------------------------------------
General Obligation -- 4.1%
400,000 AAA Brevard County School Board Authority COP, Series A,
AMBAC-Insured, 6.500% due 7/1/12 430,500
500,000 NR Brevard County Tourist Development Tax Revenue,
4th Century Marlins Spring, 6.875% due 3/1/13 511,250
1,000,000 AA Florida State Broward County, Series 1984 10.000% due 7/1/14 1,457,500
180,000 AAA Florida State Turnpike Authority Revenue, Series A, FGIC-Insured,
6.350% due 7/1/22 186,750
445,000 AAA Fort Lauderdale Central Beach Community Redevelopment Agency,
AMBAC-Insured, 6.150% due 9/1/08 468,363
2,000,000 BBB Guam Government GO, Series A, 5.400% due 11/15/18 1,767,500
Puerto Rico Commonwealth GO:
1,000,000 A 5.400% due 7/1/25 918,750
1,000,000 AAA MBIA-Insured, Series A, 6.250% due 7/1/13 1,088,750
- ---------------------------------------------------------------------------------------------------------------
6,829,363
- ---------------------------------------------------------------------------------------------------------------
Government Facilities -- 0.5%
750,000 AAA Florida State Department of Corrections COP, Okeechobee
Correctional, AMBAC-Insured, 6.250% due 3/1/15 781,875
- ---------------------------------------------------------------------------------------------------------------
Hospital -- 12.3%
1,500,000 BBB Bay County Hospital Revenue, (Bay County Medical Center Project),
8.000% due 10/1/12 1,681,875
500,000 AAA Dade County Health Facilities Authority, Hospital Revenue,
(North Shore Medical Center Project), AMBAC-Insured,
6.500% due 8/15/15 528,125
1,750,000 BBB+ Escambia County Health and Education Financing Authority,
(Baptist Hospital & Manor Project), 6.750% due 10/1/14 1,785,000
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Hospital -- 12.3% (continued)
Jacksonville Health Facilities Authority Hospital Revenue:
$2,000,000 AA+ St. Luke's Hospital, FHA-Insured, 7.125% due 11/15/20 $ 2,145,000
750,000 Baa1* National Benevolent Association, Cypress Hill Village Program,
6.400% due 12/1/16 730,313
310,000 AAA University Medical Center Inc. Project, CONNIE LEE-Insured,
6.600% due 2/1/21 326,275
Lee County Hospital Board of Directors, Hospital Revenue Bonds,
(Lee Memorial Hospital Project):
2,000,000 AAA MBIA-Insured, Linked SAVRS&RIBS, 6.350 due 3/26/20(d) 2,090,000
1,000,000 AAA INFLOS, CONNIELEE-Insured, 91 Series A, 9.570% due 4/1/20 1,122,500
Orange County Health Facilities Authority Hospital Revenue Bonds:
1,500,000 AAA Adventist Health Systems, CGIC-Insured, FLAIRS,
6.050% due 11/15/07(d) 1,569,375
2,000,000 AAA MBIA-Insured, Linked SAVRS &RIBS, 6.416% due 10/29/21 2,100,000
1,000,000 AAA Series 1991B, Adventist Health Systems/Sunbelt Inc.,
CGIC-Insured, 6.750% due 11/15/21 1,077,500
1,000,000 A+ Palm Beach County Health Facilities Authority,
(Good Samaritan Health Systems Project), 6.300% due 10/1/22 1,010,000
1,000,000 Aa* Pensacola Health Facilities Authority, Daughters of Charity,
5.250% due 1/1/11 946,250
920,000 BBB- Pinellas County Health Facilities Authority, Sun Coast Health System
Revenue, Sun Coast Hospital Guaranteed, Series A,
8.500% due 3/1/20(c) 969,450
South Broward Hospital District Revenue Bonds, AMBAC-Insured:
1,150,000 AAA 7.500% due 5/1/08 1,338,312
1,000,000 AAA Series 1991C, RIBS, 9.396%due 5/13/21(d) 1,212,500
- ---------------------------------------------------------------------------------------------------------------
20,632,475
- ---------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.3%
1,000,000 A+ Broward County HFA Multi-Family Housing Revenue,
(Waterford Park Project), Series 1991, Policy of Indemnity
Commercial Union Assurance Co. PLC, Reinsured by Trygg-Hansa
Insurance Co. of Sweden, 7.200% mandatory tender 5/1/02 1,036,250
1,165,000 BBB- Broward County HFA Revenue Home Mortgage, VEREX Mortgage
Insurance, GNMA-Collateralized, Series A, zero coupon due 4/1/14 186,400
395,000 AAA Clearwater Multi-Family Housing Revenue, (Drew Gardens Project),
Series A, FHA-Insured, 6.500% due 10/1/25 399,444
Florida Housing Finance Agency General Mortgage, AMBAC-Insured:
1,000,000 AAA Turtle Creek Apartments, Series C, 6.200% due 5/1/36 1,003,750
750,000 AAA Williamsburg Village Apartments, 6.100% due 12/1/20 756,562
1,000,000 AAA Oceanside Housing Development Corporation, Multi-Family Housing
and Funding, FHA-Insured, Section 8 Assisted, 6.875% due 2/1/20 1,041,250
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 3.3% (continued)
$1,095,000 AAA Southwest Housing Development Corporation, Multi-Family Housing
Revenue Refunding, FHA-Insured, Section 8 Assisted,
6.875% due 2/1/20 $ 1,130,587
- ---------------------------------------------------------------------------------------------------------------
5,554,243
- ---------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 13.0%
750,000 Aaa* Brevard County Housing Finance Authority, Single-Family Mortgage
Revenue, 6.600% due 9/1/16 763,125
1,000,000 Aaa* Broward County HFA Revenue Home Mortgage, GNMA/FNMA-
Collateralized, 6.650% due 8/1/21(b) 1,012,500
85,000 Aaa* Clay County HFA 0Single-Family Mortgage Revenue, Series 89A,
Investment Agreement with AIG, GNMA-Collateralized,
8.000% due 12/1/12(b) 89,250
Dade County HFA Single-Family Mortgage Revenue:
355,000 Aaa* Series 91B, GNMA/FNMA-Collateralized, 7.250% due 9/1/23(b) 370,531
35,000 Aaa* Series 91E, GNMA-Collateralized, 7.000% due 3/1/24 36,269
1,500,000 AAA GNMA/FNMA-Collateralized, 6.700% due 4/1/28 1,533,750
2,355,000 AAA Dade County IDR Refunding Susanna Wesley, FHA-Insured,
6.625% due 7/1/30 2,443,312
Duval County HFA:
405,000 AAA Single-Family Mortgage Revenue, GNMA-Collateralized,
8.500% due 9/1/19(b) 423,731
740,000 Aaa* Single-Family Housing Revenue, 6.700% due 10/1/26 763,125
275,000 Aaa* Escambia County HFA Single-Family Mortgage Revenue, Series
90A, GNMA-Collateralized, 7.800% due 4/1/22(b) 290,469
Florida Housing Finance Agency General Mortgage, Series A:
1,085,000 AAA AMBAC-Insured, 6.750% due 8/1/14 1,122,975
250,000 AAA FHA-Insured, 6.350% due 6/1/14 258,750
170,000 Aaa* Home Ownership Revenue, GNMA-Collateralized, Series 90,
7.800% due 9/1/10(b) 180,200
1,465,000 AA Residential Mortgage Series 1 of 83, GEMICO Mortgage Insurance
Cap. Appreciation, zero coupon due 11/1/12(d) 283,844
1,400,000 AAA Single Family Mortgage, Series B, 6.650% due 7/1/26 1,445,500
1,000,000 BBB+ The Vinyards, Series H, 6.500% due 11/1/25 975,000
440,000 Aaa* Hillsborough County HFA Single-Family Mortgage Revenue,
Series A5, GNMA-Collateralized, 7.700% due 4/1/23(a) 462,550
1,000,000 AAA Leon County HFA Single-Family Mortgage Revenue,
Series B, GNMA/FHLMC-Collateralized, 7.300% due 1/1/28 1,055,000
Orange County Housing Finance Authority, Single-Family
Mortgage Revenue, GNMA/FNMA Mortgage Backed
Securities Program:
1,250,000 AAA 6.750% due 10/1/18 1,284,375
1,500,000 AAA Series A, 6.300% due 4/1/28 1,505,625
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Housing: Single-Family --13.0% (continued)
$ 490,000 Aaa* Palm Beach HFA Single-Family Mortgage Revenue Bonds,
Series 1991 A, GNMA-Collateralized, 7.875% due 4/1/23(b) $ 492,450
1,600,000 Aaa* Pinellas County HFA Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 6.550% due 8/1/24(b) 1,628,000
1,200,000 BBB Puerto Rico Housing Bank & Finance Agency, Single-Family
Mortgage, 7.500% due 12/1/06 1,324,500
1,000,000 AAA Tampa Alleganey Health Systems, (St. Joseph's Project),
MBIA-Insured, 6.700% due 12/1/18 1,103,750
1,000,000 AAA Virgin Islands HFA Single-Family Mortgage, GNMA-Collateralized,
6.500% due 3/1/25 1,007,500
- ---------------------------------------------------------------------------------------------------------------
21,856,081
- ---------------------------------------------------------------------------------------------------------------
Industrial Development -- 4.6%
2,225,000 NR Homestead IDR, Community Rehabilitation Providers Program,
Series A, 7.950% due 11/1/18 2,255,594
1,250,000 BBB+ Lake County Resource Recovery, Industrial Revenue, Series 1993-A,
5.950% due 10/1/13 1,184,375
1,500,000 BBB- Martin County IDA, Indiantown, (Cogeneration Project),
7.875% due 12/15/25 1,683,750
500,000 NR Northern Palm Beach County Water Control District,
Unit Development No. 31, Program 1, 6.750% due 11/1/07 510,625
799,000 AAA Osceola County IDA Revenue Community Provider Pooled Loan
Program, FSA-Insured, Series A, 7.750% due 7/1/10 850,935
Tampa Sports Authority Revenue:
750,000 AAA Interlock Agreement-Tampa Bay, AMBAC-Insured,
6.100% due 10/1/20 769,687
500,000 AAA Tampa Bay Arena Project, MBIA-Insured, 6.050% due 10/1/20 525,000
- ---------------------------------------------------------------------------------------------------------------
7,779,966
- ---------------------------------------------------------------------------------------------------------------
Miscellaneous -- 6.8%
250,000 A1* Boca Raton Special Assessment Improvement, (Visions 90 Project),
6.000% due 7/1/22 256,562
1,000,000 AAA Dade County Aviation Facilities Revenue, Series B, MBIA-Insured,
6.600% due 10/1/22 1,060,000
4,000,000 NR Dade County IDR, (Miami Cerebral Palsy Services Project),
8.000% due 6/1/22 4,095,000
750,000 AAA Florida State Correctional Commission, Glades County
Correctional Facility, MBIA-Insured, 6.000% due 8/1/14 765,938
500,000 BB Hillsborough County Aviation Authority, Special Purpose,
(Delta Airlines Project), 6.800% due 1/1/24 511,250
1,000,000 AAA Miami Sports Exhibition Authority, FGIC-Insured,
6.150% due 10/1/20 1,028,750
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Miscellaneous -- 6.8% (continued)
$1,200,000 AAA North Springs Improvement District , MBIA-Insured,
7.000% due 10/1/09 $ 1,398,000
1,745,000 BBB Tampa Capital Improvement Program, Series B, 8.375% due 10/1/18 1,851,881
500,000 NR Tampa Revenue (Florida Aquarium Inc. Project), 7.750% due 5/1/27 500,000
- ---------------------------------------------------------------------------------------------------------------
11,467,381
- ---------------------------------------------------------------------------------------------------------------
Nursing Home -- 0.6%
1,000,000 A1* Broward County Health Facilities Authority Revenue Refunding,
County Nursing Home, LOC 91 Allied Irish Banks Ltd.,
7.500% due 8/15/20(c) 1,080,000
- ---------------------------------------------------------------------------------------------------------------
Pollution Control -- 9.3%
1,980,000 A Broward County Resource Recovery Revenue, (Broward Waste
Energy North Project), 7.950% due 12/1/08(c) 2,195,325
Citrus County PCR, Florida Power Corporation, (Crystal River Project):
400,000 A+ 6.350% due 2/1/22 416,000
2,000,000 A+ 6.625% due 1/1/27 2,110,000
Escambia County PCR, (Champion International Corporation Project):
500,000 BBB 6.950% due 11/1/07 526,875
3,500,000 BBB 6.900% due 8/1/22 3,653,125
705,000 AAA Lee County Solid Waste, MBIA-Insured, 7.000% due 10/1/11(b) 779,907
Nassau County PCR, ITT Rayonier:
1,000,000 BBB Project, 6.200% due 7/1/15 996,250
595,000 BBB Project 6, 6.250% due 6/1/10 600,206
100,000 AAA Orange County Solid Waste Facilities Revenue Bonds,
FGIC-Insured, 6.375% due 10/1/17 105,625
1,000,000 A+ Pinellas County PCR, Florida Power Corporation,
(Anclote & Bartlow Plants Project), 7.200% due 12/1/14 1,091,250
1,390,000 Baa2 Putnam County Development Authority PCR, Georgia Pacific
Corporation 1984, 7.000% due 12/1/05 1,529,000
1,500,000 AA- St. Lucie County Solid Waste Disposal Revenue, (Florida Power
& Light Co. Project), 7.150% due 2/1/23(b) 1,603,125
- ---------------------------------------------------------------------------------------------------------------
15,606,688
- ---------------------------------------------------------------------------------------------------------------
Pre-Refunded(a) -- 11.8%
Alachua County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project):
195,000 BBB+ Escrowed with U.S. Government Securities to 11/15/00
Call @102, 6.875% due 11/15/02 216,450
1,000,000 BBB+ Escrowed with U.S. Government Securities to 11/15/00
Call @102, 7.600% due 11/15/13 1,142,500
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Pre-Refunded(a) -- 11.8% (continued)
$1,000,000 AAA Broward County School Board COP, Series 90A, MBIA-Insured,
(Escrowed with U.S. Government Securities to 7/1/00 Call
@ 102), 7.125% due 7/1/10 $ 1,118,750
1,750,000 A+ Charlotte County Hospital Revenue, Bon Secours Health,
St. Joseph's, Series 88A, (Escrowed with U.S. Government
Securities to 8/15/98 Call @ 102), 8.250% due 8/15/18 1,940,313
1,060,000 AAA Dunedin Hospital Revenue, Mease Health Care, MBIA-Insured,
(Escrowed with U.S. Government Securities to 11/15/01
Call @ 102), 6.750% due 11/15/11 1,191,175
1,365,000 AAA Edgewater Water & Sewer Authority, MBIA-Insured,
(Escrowed with U.S. Government Securities to 10/1/01 Call
@ 102), 7.000% due 10/1/21 1,547,569
515,000 AAA Florida State Board of Education Capital Outlay Refunding, Series A,
(Escrowed with U.S. Government Securities to 6/1/00 Call
@ 102), 7.250% due 6/1/23(c) 577,444
1,105,000 AA Florida State Pollution Control, Series X, (Escrowed with U.S.
Government Securities to 7/1/01 Call @ 101), 6.400% due 7/1/09 1,208,594
1,000,000 AAA Florida State Turnpike Authority Revenue, AMBAC-Insured,
Series 91A, (Escrowed with U.S. Government Securities to 7/1/01
Call @ 102), 7.200% due 7/1/11 1,137,500
1,050,000 AAA Fort Pierce Utilities Authority Revenue Refunding, AMBAC-Insured,
Series 91, (Escrowed with U.S. Government Securities to 10/1/01
Call @ 102), 6.500% due 10/1/16 1,165,500
820,000 A Hillsborough County (County Center Project), Second Series,
(Escrowed with U.S. Government Securities to 7/1/02
Call @ 102), 6.750% due 7/1/22 919,425
190,000 BBB+ Hillsborough County Utilities Revenue, Refunding and Improvement,
(Escrowed with U.S. Government Securities to 8/1/01 Call @ 102),
7.000% due 8/1/14 214,225
1,000,000 AAA Lee County Capital Improvement & Transportation Facilities Revenue
Bonds, Series 1991, MBIA-Insured, (Escrowed with
U.S. Government Securities to 10/1/00 Call @ 102),
6.500% due 10/1/21 1,098,750
1,000,000 AAA Miami Sports & Exhibition Authority Special Obligation Refunding,
FGIC-Insured, (Escrowed with U.S. Government Securities to
4/1/00 Call @ 102), 7.200% due 10/1/20 1,116,250
835,000 AAA Pinellas County Health Facilities Authority, Sun Coast Guaranteed,
Series A, (Escrowed with U.S. Government Securities to 3/1/00
Call @ 102), 8.500% due 3/1/20(c) 967,556
1,500,000 AAA Port of Orange Water & Sewer Revenue, AMBAC-Insured,
(Escrowed with U.S. Government Securities to 4/1/01
Call @ 24.4), zero coupon due 10/1/21 288,750
</TABLE>
19
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Pre-Refunded(a) -- 11.8% (continued)
$1,000,000 AAA St. Lucie County Sales Tax Revenue, FGIC-Insured, (Escrowed with
U.S. Government Securities to 10/1/02 Call @ 102),
6.500% due 10/1/22 $ 1,117,500
70,000 AAA Tampa, Water and Sewer Revenue Bonds, FGIC-Insured, (Escrowed
with U.S. Government Securities to 10/1/02 Call @ 101),
6.250% due 10/1/12 76,913
2,000,000 A Venice, Health Facility Revenue, (Escrowed with U.S. Government
Securities to 12/1/04 Call @ 102), 6.000% due 12/1/14 2,172,500
445,000 AAA Volusia County Airport System Revenue, Daytona Beach Regional
Airport, MBIA-Insured, (Escrowed with U.S. Government
Securities to 10/1/00 Call @ 102), 7.000% due 10/1/21(b) 495,062
- ---------------------------------------------------------------------------------------------------------------
19,712,726
- ---------------------------------------------------------------------------------------------------------------
Public Facilities -- 0.7%
1,185,000 A Puerto Rico Public Buildings Authority Revenue, Series L,
5.500% due 7/1/21 1,118,344
- ---------------------------------------------------------------------------------------------------------------
Short-Term(e) -- 2.3%
500,000 VMIG 1* Dade County IDR, Florida Power & Light Revenue,
3.750% due 6/1/21 500,000
300,000 VMIG 1* Pinellas County Health Facilities Authority Revenue,
3.850% due 12/1/15 300,000
1,200,000 VMIG 1* Putnam County PCR, Florida Power & Light Company,
zero coupon due 9/1/24 1,200,000
1,900,000 VMIG 1* St. Lucie County Solid Waste Disposal Revenue,
Florida Power & Light Company, 3.900% due 1/1/27 1,900,000
- ---------------------------------------------------------------------------------------------------------------
3,900,000
- ---------------------------------------------------------------------------------------------------------------
Transportation -- 8.5%
1,250,000 Aa* Dade County Aviation Facilities Revenue Bonds, Series 91U,
6.750% due 10/1/06(b) 1,323,438
Dade County Seaport, GO MBIA-Insured:
1,500,000 AAA 5.125% due 10/1/21 1,363,125
1,000,000 AAA Refunded Revenue, 5.750% due 10/1/15 997,500
1,250,000 NR Florida State Mid-Bay Bridge Revenue, Series A,
6.100% due 10/1/22 1,221,875
750,000 AA Florida Department of Transportation, Right of Way,
6.500% due 7/1/21 796,875
Guam Airport Authority Revenue:
750,000 BBB Series A, 6.500% due 10/1/23 756,562
1,000,000 BBB Series B, 6.600% due 10/1/10 1,012,500
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Transportation -- 8.5% (continued)
$1,500,000 AA Ocean Highway and Port Authority, Nassau County, Adjustable
Demand Revenue Bonds, Series 1990, LOC ABN
Amro Bank NV, 6.250% mandatory tender 12/1/02(b) $ 1,612,500
1,000,000 A Puerto Rico Commonwealth Highway & Transportation Authority
Revenue, Series Y, 5.500% due 7/1/36 910,000
Sanford, Airport Authority Industrial Development Revenue,
Project A:
1,000,000 NR 7.500% due 5/1/15 946,250
2,000,000 NR 7.750% due 5/1/21 1,892,500
1,355,000 AAA Volusia County Airport System Revenue, Daytona Beach Regional
Airport, MBIA-Insured, 7.000% due 10/1/21(b) 1,463,400
- ---------------------------------------------------------------------------------------------------------------
14,296,525
- ---------------------------------------------------------------------------------------------------------------
Utilities -- 6.7%
1,000,000 AAA Atlantic Beach Utilities Systems Revenue, MBIA-Insured,
5.500% due 10/1/25 955,000
500,000 AAA Boynton Beach Utility System Revenue Bonds, FGIC-Insured,
6.250% due 11/1/20 517,500
500,000 AAA Crystal River Water and Sewer Revenue Bonds, AMBAC-Insured,
6.250% due 10/1/22 515,625
Escambia County Utility System Authority Revenue Bonds,
FGIC-Insured:
500,000 AAA Series A, 6.300% due 1/1/23 519,375
3,000,000 AAA Series B, 6.250% due 1/1/15 3,217,500
1,350,000 BBB Guam Power Authority Revenue, Series A, 6.750% due 10/1/24 1,392,187
930,000 BBB+ Hillsborough County Utilities Revenue, Refunding and Improvement,
7.000% due 8/1/14 993,938
1,265,000 AA Jacksonville Electric Authority Revenue Refunding, St. John's River
Power Park Services Refunding, Issue 2-Series 5,
6.900% due 10/1/13 1,380,431
500,000 AAA North Port Utility Revenue, FGIC-Insured, 6.250% due 10/1/22 519,375
1,000,000 Aa1* Orlando Utility Commission Water & Electric Revenue Refunding,
6.000% due 10/1/10 1,056,250
200,000 BBB Pace Property Finance Authority, Utility Systems Refunding &
Improvement, 6.250% due 9/1/13 199,500
- ---------------------------------------------------------------------------------------------------------------
11,266,681
- ---------------------------------------------------------------------------------------------------------------
Water & Sewer -- 3.6%
1,000,000 AAA Coral Springs Improvement District, Broward County
Water and Sewer Refunding, Series 92, MBIA-Insured,
6.000% due 6/1/10 1,056,250
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Water & Sewer -- 3.6% (continued)
$1,500,000 AAA Escambia County Water and Sewer District IV Revenue,
(Escrowed with U.S. Government Securities) 7.300%
due 1/1/08 $ 1,717,500
1,000,000 AAA Miramar Wastewater Improvement Authority, FGIC-Insured,
6.750% due 10/1/16 1,090,000
2,000,000 AAA Seminole County Water & Sewer Refunding & Improvement,
MBIA-Insured, 6.000% due 10/1/12 2,102,500
30,000 AAA Tampa, Water and Sewer Revenue Bonds, FGIC-Insured,
6.250% due 10/1/12 31,350
- ---------------------------------------------------------------------------------------------------------------
5,997,600
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $159,427,373*) $167,667,235
===============================================================================================================
</TABLE>
(a) Pre-Refunded bonds escrowed by U.S. Government Securities and bonds
escrowed to maturity by U.S. Government Securities are considered by
manager to be triple-A rated even if issuer has not applied for new
ratings.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Securities segregated by Custodian for open purchase commitment.
(d) Residual interest bonds -- coupon varies inversely with level of short-term
tax-exempt interest rates.
(e) Variable rate obligation payable at par on demand at anytime on no more
than seven days notice.
* Aggregate cost for Federal income tax purposes is substantially the same.
See page 23 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
22
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Corporation, except those identified by an
asterisk (*) are rated by Moody's Investors Services. The definitions of the
applicable rating symbols are set forth below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA"' have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated 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 bonds in this category than in
higher rated categories.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest
rating within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's
Corporation or Moody's Investor's Services.
- --------------------------------------------------------------------------------
Short-Term Securities Ratings
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and 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 (+)
sign.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
VMIG 1 -- Moody's highest rating for issues having demand feature --
variable-rate demand obligation (VRDO).
SECURITY DESCRIPTIONS
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
CGIC -- Capital Guaranty Insurance Company
CONNIE LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
FLAIRS -- 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
FSA -- Financial Security Assurance
GEMICO -- General Electric Mortgage Insurance Company
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
IDA -- Industrial Development Agency
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
PCFA -- Pollution Control Financing Authority
PCR -- Pollution Control Revenue
RIBS -- Residual Interest Bonds
SAVRS -- Select Auction Variable Rate Securities
VRDD -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday Demand
23
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities March 31, 1996
- --------------------------------------------------------------------------------
Florida
Limited Term Florida
Portfolio Portfolio
================================================================================
ASSETS:
Investments, at value (Cost -- $12,613,790 and
$159,427,373, respectively) $ 13,033,606 $167,667,235
Cash 64,562 6,142
Interest receivable 322,440 3,445,711
Receivable for Fund shares sold 20,000 615,730
Receivable for securities sold 5,000 2,219,741
Receivable from manager 11,130 --
Other assets -- 163,929
- --------------------------------------------------------------------------------
Total Assets 13,456,738 174,118,488
- --------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 22,244 457,043
Management fees payable -- 71,338
Distribution fees payable 700 20,269
Payable for Fund shares purchased -- 79,681
Payable for securities purchased -- 7,073,052
Accrued expenses 48,965 12,080
- --------------------------------------------------------------------------------
Total Liabilities 71,909 7,713,463
- --------------------------------------------------------------------------------
Total Net Assets $ 13,384,829 $166,405,025
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 1,995 $ 12,570
Capital paid in excess of par value 13,321,642 158,282,224
Undistributed net investment income 182,862 44,481
Accumulated net realized loss on security
transactions (541,486) (174,112)
Net unrealized appreciation of investments 419,816 8,239,862
- --------------------------------------------------------------------------------
Total Net Assets $ 13,384,829 $166,405,025
================================================================================
Shares Outstanding:
Class A 1,590,703 8,871,636
- --------------------------------------------------------------------------------
Class B -- 3,497,091
- --------------------------------------------------------------------------------
Class C 405,278 201,512
- --------------------------------------------------------------------------------
Net Asset Value:
Class A (redemption price) $ 6.71 $ 13.24
- --------------------------------------------------------------------------------
Class B* -- $ 13.23
- --------------------------------------------------------------------------------
Class C** $ 6.70 $ 13.22
- --------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 2.04% and 4.17% of
net asset value per share, respectively) $ 6.85 $ 13.79
================================================================================
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed less than one year from initial purchase (See Note 4).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
24
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Statements of Operations For the Year Ended March 31, 1996
- --------------------------------------------------------------------------------
Florida
Limited Term Florida
Portfolio Portfolio
================================================================================
INVESTMENT INCOME:
Interest $ 889,323 $ 8,350,254
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 68,723 622,090
Distribution fees (Note 4) 28,786 291,473
Audit and legal 25,000 8,725
Shareholder communications 12,000 16,045
Shareholder and system servicing fees 11,460 33,503
Pricing service fees 5,000 15,043
Registration fees 2,500 14,040
Trustees' fees 1,693 3,009
Custody 1,500 12,034
Other 10,000 2,708
- --------------------------------------------------------------------------------
Total Expenses 166,662 1,018,670
Less: Expense reimbursement and management
fee waiver (Note 4) 79,853 --
- --------------------------------------------------------------------------------
Net Expenses 86,809 1,018,670
- --------------------------------------------------------------------------------
Net Investment Income 802,514 7,331,584
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE5):
Realized Gain (Loss) From Security Transactions
(excluding short-term securities):
Proceeds from sales 7,660,419 60,590,533
Cost of securities sold 7,687,578 60,039,180
- --------------------------------------------------------------------------------
Net Realized Gain (Loss) (27,159) 551,353
Increase in Net Unrealized Appreciation (Note8) 371,031 1,242,266
- --------------------------------------------------------------------------------
Net Gain on Investments 343,872 1,793,619
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 1,146,386 $ 9,125,203
================================================================================
See Notes to Financial Statements.
25
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended March 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Florida
Limited Term Florida
Portfolio Portfolio
===================================================================================================
1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 802,514 $ 1,091,585 $ 7,331,584 $ 6,428,488
Net realized gain (loss) (27,159) (511,066) 551,353 (270,642)
Increase in net unrealized
appreciation 371,031 748,302 1,242,266 1,196,626
- ---------------------------------------------------------------------------------------------------
Increase in Net Assets
From Operations 1,146,386 1,328,821 9,125,203 7,354,472
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM
(NOTE 3):
Net investment income (726,602) (1,059,373) (7,380,106) (6,449,732)
Net realized gains -- -- (14,166) (5,896)
- ---------------------------------------------------------------------------------------------------
Decrease in Net Assets
From Distributions
to Shareholders (726,602) (1,059,373) (7,394,272) (6,455,628)
- ---------------------------------------------------------------------------------------------------
FUND SHARE
TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 1,718,984 8,700,699 28,188,708 28,605,984
Net asset value of shares issued in
connection with the transfer of
the Smith Barney
Florida Municipals Fund's net
assets (Note 8) -- -- 53,554,309 --
Net asset value of shares issued
for reinvestment of dividends 399,416 509,582 2,718,508 2,040,050
Cost of shares reacquired (7,676,274) (14,454,248) (32,251,471) (29,493,648)
- ---------------------------------------------------------------------------------------------------
Increase (Decrease) in Net
Assets From Fund Share
Transactions (5,557,874) (5,243,967) 52,210,054 1,152,386
- ---------------------------------------------------------------------------------------------------
Increase (Decrease) in
Net Assets (5,138,090) (4,974,519) 53,940,985 2,051,230
NET ASSETS:
Beginning of year 18,522,919 23,497,438 112,464,040 110,412,810
- ---------------------------------------------------------------------------------------------------
End of year* $ 13,384,829 $ 18,522,919 $ 166,405,025 $ 112,464,040
===================================================================================================
* Includes undistributed net
investment income of: $ 182,862 $ 107,040 $ 44,481 $ 114,089
===================================================================================================
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Florida Limited Term and Florida Portfolio ("Portfolios") are separate
investment portfolios of the Smith Barney Muni Funds ("Fund"). The Fund, a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as amended, as a non-diversified, open-end management investment company.
The Fund consists of these Portfolios and eight other separate investment
portfolios: Georgia, Limited Term, National, New York, Ohio, Pennsylvania, New
York Money Market and California Money Market portfolios. The financial
statements and financial highlights for the other portfolios are presented in
separate annual reports.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) securities are
valued at the mean between the quoted bid and asked prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
short-term investments and securities maturing within 60 days are valued at cost
plus (minus) accreted discount (amortized premium), which approximates value;
(d) gains or losses on the sale of securities are calculated by using the
specific identification method; (e) interest income, adjusted for amortization
of premiums and accretion of original issue discount, is recorded on the accrual
basis; market discount is recognized upon the disposition of the security; (f)
direct expenses are charged to each Portfolio and each class; management fees
and general fund expenses are allocated on the basis of relative net assets; (g)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (h) each Portfolio intends to comply with the applicable provisions of the
Internal Revenue Code of 1986, as amended, pertaining to regulated investment
companies and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes; (i) the character of
income and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
Reclassifications are made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Accordingly, a portion of undistributed net investment
income amounting to $90 and $3,564 for Florida Limited Term and Florida
Portfolio, respectively, has been reclassified to paid-in capital. Net
investment income, net realized gains and net assets were not affected by this
change; and (j) estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from operations when
financial statements are prepared. Changes in the economic environment,
financial markets and any other parameters used in determining these estimates
could cause actual results to differ from these amounts.
27
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
2. PORTFOLIO CONCENTRATION
Since each Portfolio invests primarily in obligations of issuers within
Florida, it is subject to possible concentration risks associated with economic,
political, or legal developments or industrial or regional matters specifically
affecting Florida.
3. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The Portfolios intend to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the respective Portfolios.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager to the Fund. The
Florida Limited Term and the Florida Portfolios pay SBMFMa management fee
calculated at the annual rate of 0.45% and 0.50%, respectively of their average
daily net assets. This fee is calculated daily and paid monthly. SBMFM waived
all of its management fees for the Florida Limited Portfolio. SBMFM has also
agreed to reimburse the Florida Limited Term Portfolio for certain expenses
totaling $11,130.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. For the year ended March 31, 1996, SB received sales charges of
approximately $167,000 on purchases of the Portfolios' Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B
shares of the Florida Portfolio if redemption occurs less than one year from
initial purchase. This CDSC declines by 0.50% the first year after purchase and
thereafter by 1.00% per year until no CDSC is incurred. The Portfolios' Class C
shares have a 1.00% CDSC, which applies if redemption occurs within the first
year of purchase. In addition, Class A shares have a 1.00% CDSC, which applies
if redemption occurs within the first year of purchase. 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 March 31, 1996, CDSCs paid
to SB were:
CDSCs Class A Class B Class C
================================================================================
Florida Limited Term Portfolio -- -- $1,000
- --------------------------------------------------------------------------------
Florida Portfolio $12,000 $19,000 --
================================================================================
Pursuant to a Distribution Plan, the Florida and Florida Limited Term
Portfolio pay a service fee with respect to each Portfolios Class A and C shares
calculated at the annual rate of 0.15% of the average daily net assets of each
class. In addition, the Florida Limited Term Portfolio pays a distribution fee
with respect to Class C shares
28
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
calculated at the annual rate of 0.20% of the average daily net assets. The
Florida Portfolio pays a distribution fee with respect to Class B and C shares
calculated at the annual rates of 0.50% and 0.55%, respectively, of the average
daily net assets of each class. For the year ended March 31, 1996, total
Distribution Plan fees incurred were:
Class A Class B Class C
================================================================================
Florida Limited Term Portfolio $ 18,643 -- $10,143
- --------------------------------------------------------------------------------
Florida Portfolio 167,196 $107,248 17,029
================================================================================
All officers and two Trustees of the Fund are employees of SB.
5. INVESTMENTS
During the year ended March 31, 1996, the aggregate cost of purchases and
proceeds from sales (including maturities, but excluding short-term securities)
of investments were as follows:
Florida
Limited Term Florida
Portfolio Portfolio
================================================================================
Purchases $1,933,343 $59,066,636
- --------------------------------------------------------------------------------
Sales 7,660,419 60,590,533
================================================================================
At March 31, 1996, the gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were approximately as follows:
Florida
Limited Term Florida
Portfolio Portfolio
================================================================================
Gross unrealized appreciation $434,153 $8,506,175
Gross unrealized depreciation (14,337) (266,313)
- --------------------------------------------------------------------------------
Net unrealized appreciation $419,816 $8,239,862
================================================================================
6. CAPITAL LOSS CARRYFORWARD
At March 31, 1996, the Florida Limited Term and Florida Portfolios had for
Federal tax purposes approximately $537,000 and $250,000, respectively, of
unused loss carryforwards available to offset future capital gains. To the
extent that these carryforward losses are used to offset capital gains, it is
possible that the gains so offset will not be distributed. The amount and
expiration of the carryforwards are indicated below. Expiration occurs on March
31, of the year indicated:
2002 2003 2004
================================================================================
Florida Limited Term Portfolio $ 2,000 $197,000 $338,000
- --------------------------------------------------------------------------------
Florida Portfolio 250,000 -- --
================================================================================
29
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
7. SHARES OF BENEFICIAL INTEREST
At March 31, 1996, there were an unlimited amount of shares of beneficial
interest of $0.001 par value authorized. The Portfolios have the ability to
issue multiple classes of shares. Each share of a class represents an identical
interest in its respective Portfolio and has the same rights, except that each
class bears certain expenses related to the distribution of its shares.
Effective November 7, 1994, the Portfolios adopted a new class structure,
renaming Class B shares as Class C shares, and exchanging the former Class C
shares into Class A shares. At March 31, 1996, total paid-in capital amounted to
the following for each class and respective Portfolio:
Portfolio Class A Class B Class C
================================================================================
Florida Limited Term $ 10,608,625 -- $2,715,012
- --------------------------------------------------------------------------------
Florida 109,946,847 $45,625,409 2,722,538
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1996 March 31, 1995
----------------------- ------------------------
Florida Limited Term Portfolio Shares Amount Shares Amount
========================================================================================================
<S> <C> <C> <C> <C>
Class A+
Shares sold 205,154 $ 1,389,765 1,317,436 $ 8,400,374
Shares issued on reinvestment 49,521 332,180 68,245 436,507
Shares redeemed (993,665) (6,678,167) (2,113,417) (13,459,174)
- --------------------------------------------------------------------------------------------------------
Net Decrease (738,990) $ (4,956,222) (727,736) $ (4,622,293)
========================================================================================================
Class C++
Shares sold 48,742 $ 329,219 46,614 $ 300,325
Shares issued on reinvestment 10,020 67,236 11,437 73,075
Shares redeemed (148,851) (998,107) (155,645) (995,074)
- --------------------------------------------------------------------------------------------------------
Net Decrease (90,089) $ (601,652) (97,594) $ (621,674)
========================================================================================================
Florida Portfolio
========================================================================================================
Class A+
Shares sold 869,445 $ 11,575,125 2,038,171 $ 25,235,982
Net asset value of shares issued
in connection with transfer of
the Smith Barney
Florida Municipals Fund's net
assets (Note 8) 1,232,903 16,735,524 -- --
Shares issued on reinvestment 154,317 2,042,024 153,840 1,937,080
Shares redeemed (1,739,593) (23,107,880) (2,258,420) (28,184,592)
- --------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 517,072 $ 7,244,793 (66,409) $ (1,011,530)
========================================================================================================
</TABLE>
30
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1996 March 31, 1995*
----------------------- ------------------------
Florida Limited Term Portfolio Shares Amount Shares Amount
========================================================================================================
<S> <C> <C> <C> <C>
Class B
Shares sold 810,922 $ 10,843,286 177,570 $ 2,186,727
Net asset value of shares issued
in connection with transfer of
the Smith Barney
Florida Municipals Fund's net
assets (Note 8) 2,708,689 36,746,689 -- --
Shares issued on reinvestment 34,686 464,491 1,046 13,159
Shares redeemed (211,578) (2,857,130) (24,244) (309,519)
- --------------------------------------------------------------------------------------------------------
Net Increase 3,342,719 $ 45,197,336 154,372 $ 1,890,367
========================================================================================================
Class C++
Shares sold 57,613 $ 770,025 92,926 $ 1,183,275
Net asset value of shares issued
in connection with transfer of
the Smith Barney
Florida Municipals Fund's net
assets (Note 8) 5,317 72,096 -- --
Shares issued on reinvestment 5,027 66,483 7,147 89,811
Shares redeemed (79,796) (1,053,167) (80,891) (999,537)
- --------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (11,839) $ (144,563) 19,182 $ 273,549
========================================================================================================
Class Y**
Shares sold 376,790 $ 5,000,272 -- --
Net asset value of shares issued
in connection with transfer of
the Smith Barney Florida Municipals
Fund's net assets (Note 8) -- -- -- --
Shares issued on reinvestment 10,861 145,510 -- --
Shares redeemed (387,651) (5,233,294) -- --
Net Decrease -- $ (87,512) -- --
=========================================================================================================
</TABLE>
+ On October 10, 1994, the former Class C shares were exchanged into Class A
shares; therefore the Class C share activity for the period from April 1,
1994 to October 9, 1994 is included with Class A share activity.
* For Class B shares, transactions are for the period from November 16, 1994
(inception date) to March 31, 1995.
** For Class Y shares, transactions are for the period from September 20, 1995
(inception date) to March 31, 1996.
++ On November 7, 1994, the former Class B shares were renamed Class C shares.
31
<PAGE>
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
8. TRANSFER OF NET ASSETS
On December 8, 1995, the Fund, on behalf of the Florida Portfolio, acquired
the assets and certain liabilities of the Smith Barney Florida Municipals Fund
("Florida Municipals Fund") pursuant to an Agreement and Plan of Reorganization
dated October 23, 1995. Total shares issued by the Portfolio and the total net
assets of Florida Municipals Fund and the Portfolio on the date of transfer
were:
Total Net
Shares Assets of Total Net
Issued by Acquired Assets of
Acquired Fund the Portfolio Fund the Portfolio
================================================================================
Florida Municipals Fund 3,946,909 $53,554,309 $118,966,365
================================================================================
The total net assets of the Florida Municipals Fund before acquisition
included unrealized appreciation of $2,731,277 and a net realized loss of
$421,951. Total net assets of the Portfolio immediately after the transfer were
$172,520,674. The transaction was structured for tax purposes to qualify as a
tax-free reorganization under the Internal Revenue Code of 1986, as amended.
32
<PAGE>
Smith Barney Muni Funds
Florida Limited Term Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
Class A Shares 1996 1995(a) 1994(b)
================================================================================
Net Asset Value, Beginning of Year $ 6.56 $ 6.44 $ 6.50
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (1) 0.37 0.34 0.26
Net realized and unrealized gain (loss) 0.11 0.11 (0.08)
- --------------------------------------------------------------------------------
Total Income From Operations 0.48 0.45 0.18
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.33) (0.33) (0.24)
- --------------------------------------------------------------------------------
Total Distributions (0.33) (0.33) (0.24)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $ 6.71 $ 6.56 $ 6.44
- --------------------------------------------------------------------------------
Total Return 7.35% 7.17% 2.74%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 10,669 $ 15,277 $ 13,147
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (1) 0.53% 0.44% 0.20%+
Net investment income 5.29 5.37 4.90+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 12.92% 54.65% 16.28%
================================================================================
(a) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(b) For the period from April 27, 1993 (inception date) to March 31, 1994.
(1) The manager has waived all or part of its fees for the years ended March
31, 1996, March 31, 1995 and the period ended March 31, 1994 and reimbursed
expenses of $11,130 for the year ended March 31, 1996. If such fees were
not waived, the effect on net investment income and expense ratios would
have been as follows:
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers*
------------------------- ---------------------------
1996 1995 1994 1996 1995 1994
----- ---- ---- ----- ---- ----
Class A $0.040 $0.010 $0.029 1.05% 0.82% 0.71%+
* As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.80% for Class A shares.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
33
<PAGE>
Smith Barney Muni Funds
Florida Limited Term Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
Class C Shares 1996 1995(a) 1994(b)
================================================================================
Net Asset Value, Beginning of Year $ 6.55 $ 6.43 $ 6.51
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (1) 0.35 0.32 0.24
Net realized and unrealized gain (loss) 0.11 0.11 (0.09)
- --------------------------------------------------------------------------------
Total Income From Operations 0.46 0.43 0.15
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.31) (0.23)
- --------------------------------------------------------------------------------
Total Distributions (0.31) (0.31) (0.23)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $ 6.70 $ 6.55 $ 6.43
- --------------------------------------------------------------------------------
Total Return 7.17% 6.84% 2.17%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 2,716 $ 3,246 $ 3,815
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (1) 0.74% 0.70% 0.52%+
Net investment income 5.08 4.98 4.28+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 12.92% 54.65% 16.28%
================================================================================
(a) On November 7, 1994, the former Class B shares were renamed Class C shares.
(b) For the period from May 4, 1993 (inception date) to March 31, 1994.
(1) The manager has waived all or part of its fees for the years period ended
March 31, 1996, March 31, 1995 and the period ended March 31, 1994. If such
fees were not waived, the effect on net investment income and expense
ratios would have been as follows:
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers*
------------------------- ---------------------------
1996 1995 1994 1996 1995 1994
----- ---- ---- ----- ---- ----
Class C $0.040 $0.025 $0.033 1.26% 1.09% 1.04%+
* As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.00% for Class C shares.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
34
<PAGE>
Smith Barney Muni Funds
Florida Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1996(a) 1995(b) 1994 1993 1992(c)
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.89 $ 12.82 $ 13.21 $ 12.32 $ 12.00
- -----------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(1) 0.74 0.75 0.77 0.79 0.73
Net realized and unrealized gain (loss) 0.35 0.08# (0.39) 0.91 0.29
- -----------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.09 0.83 0.38 1.70 1.02
- -----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.74) (0.76) (0.77) (0.80) (0.70)
Net realized gains -- -- -- (0.01) --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.76) (0.77) (0.81) (0.70)
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.24 $ 12.89 $ 12.82 $ 13.21 $ 12.32
- -----------------------------------------------------------------------------------------------------------------
Total Return 8.65% 6.77% 2.75% 14.21% 8.70%++
- -----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 117,473 $ 107,724 $ 104,681 $ 102,202 $ 67,998
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(1) 0.70% 0.61% 0.54% 0.46% 0.23%+
Net investment income 5.62 5.97 5.71 6.15 6.70+
- -----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 46.92% 43.23% 20.40% 25.57% 41.72%
=================================================================================================================
Class B Shares 1996(a) 1995(d)
=================================================================================================================
Net Asset Value, Beginning of Year $ 12.89 $ 11.91
- -----------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.68 0.30
Net realized and unrealized gain 0.35 0.97#
- -----------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.03 1.27
- -----------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income (0.69) (0.29)
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.69) (0.29)
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.23 $ 12.89
- -----------------------------------------------------------------------------------------------------------------
Total Return 8.09% 10.77%++
- -----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year(000s) $ 46,267 $ 1,990
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.20% 1.20%+
Net investment income 5.00 5.57+
- -----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 46.92% 43.23%
=================================================================================================================
</TABLE>
(a) Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for the period
since the use of the undistributed net investment income method does not
accord with results of operations.
(b) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(c) For the period from April 2, 1991 (inception date) to March 31, 1992.
(d) For the period from November 16, 1994 (inception date) to March 31, 1995.
(1) See page 36 for Note 1.
# Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
35
<PAGE>
Smith Barney Muni Funds
Florida Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
Class C Shares 1996(a) 1995(b) 1994 1993(c)
================================================================================
Net Asset Value, Beginning of Year $ 12.89 $ 12.81 $ 13.20 $ 12.86
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.66 0.67 0.68 0.19
Net realized and unrealized
gain (loss) 0.35 0.08# (0.39) 0.33
- --------------------------------------------------------------------------------
Total Income From Operations 1.01 0.75 0.29 0.52
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.68) (0.67) (0.68) (0.18)
- --------------------------------------------------------------------------------
Total Distributions (0.68) (0.67) (0.68) (0.18)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.22 $ 12.89 $ 12.81 $ 13.20
- --------------------------------------------------------------------------------
Total Return 7.96% 6.12% 2.05% 4.05%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 2,665 $ 2,750 $ 2,487 $ 691
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (1) 1.28% 1.25% 1.24% 1.24%+
Net investment income 5.04 5.40 4.95 5.21+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 46.92% 43.23% 20.40% 25.57%
================================================================================
(a) Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for the period
since the use of the undistributed net investment income method does not
accord with results of operations.
(b) On November 7, 1994 the former Class B shares were renamed Class C shares.
(c) For the period from January 5, 1993 (inception date) to March 31, 1993.
(1) The manager waived all or part of its fees for the year ended March 31,
1993 and the period ended March 31, 1992. If such fees were not waived, the
effect on net investment income and expense ratios would have been as
follows:
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers*
------------------------ --------------------
1993 1992 1993 1992
---- ---- ---- ----
Class A $0.012 $0.040 0.56% 0.59%+
* As a result of voluntary expense limitations, the ratios of expenses to
average net assets will not exceed 0.80%, 1.30% and 1.35% for Class A, B
and C shares, respectively.
# Includes the net per share effect of shareholder sales and redemptions
activity during the period, most of which occurred at a net asset value
less than the net asset value at the beginning of the period.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
36
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
of the Florida Limited Term and Florida Portfolios
of Smith Barney Muni Funds:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Florida Limited Term and Florida
Portfolios of Smith Barney Muni Funds as of March 31, 1996, the related
statements 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 the
financial highlights for each of the years in the four-year period then ended
and for the period from April 2, 1991 (commencement of operations) to March 31,
1992 with respect to the Florida Portfolio and for the two-year period ended
March 31, 1996 and for the period from April 27, 1993 (commencement of
operations) to March 31, 1994 with respect to the Florida Limited Term
Portfolio. These financial statements and financial highlights are the
responsibility of the Funds' 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 March
31, 1996, by correspondence with the custodian. As to securities purchased and
sold, but not received or 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 referred to above present fairly,
in all material respects, the financial position of the Florida Limited Term and
Florida Portfolios of Smith Barney Muni Funds as of March 31, 1996, the results
of their operations for the year then ended, the changes in net assets for each
of the years in the two-year period then ended and the financial highlights for
each of the years in the four-year period then ended and for the period from
April 2, 1991 to March 31, 1992 with respect to the Florida Portfolio and for
the two-year period ended March 31, 1996 and for the period from April 27, 1993
to March 31, 1994 with respect to the Florida Limited Term Portfolio, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 14, 1996
37
<PAGE>
Smith Barney Muni FundS
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On December 15, 1995 a special meeting of shareholders of the Fund was held for
the purpose of voting on the following matter:
1. To approve or disapprove a new management agreement between the Fund on
behalf of the Florida Portfolio and Smith Barney Mutual Funds Management
Inc. (the Portfolio's manager).
The results of the vote on proposal 1 were as follows:
% of % of % of
Outstanding Votes Outstanding Votes Outstanding
Votes For Shares Voted Against Shares Voted Abstaining Shares Voted
- --------------------------------------------------------------------------------
3,986,620.847 75.81% 1,038,124.826 19.74% 233,843.632 4.45%
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended March 31, 1996, 100% of the dividends paid by the
Florida Limited Term and Florida Portfolios from net investment income were
tax-exempt for regular income tax purposes.
38
<PAGE>
(This page intentionally left blank.)
<PAGE>
(This page intentionally left blank.)
<PAGE>
Smith Barney SMITH BARNEY
Muni Funds ------------
Trustees A Member of Travelers Group {Logo}
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P. Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
C. Richard Youngdahl
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Larry T. McDermott
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Smith Barney Mutual Funds Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the
general information of the
shareholders of Smith Barney Muni
Funds - Florida Limited Term and
Florida Portfolios. It is not
authorized for distribution to
prospective investors unless
accompanied or preceded by a
current Prospectus for each
Portfolio, which contains
information concerning the Fund's
investment policies and expenses
as well as other pertinent
information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
FD2398 5/96
<PAGE>
Annual Report
1996
1996 [PHOTO APPEARS HERE]
1996
1996
1996
Smith Barney
Muni Funds
Limited Term
Portfolio
----------------------------------------------
March 31, 1996
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
- --------------------------------------------------------------------------------
Limited Term Portfolio
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney Muni
Funds - Limited Term Portfolio for the fiscal year ended March 31, 1996. For
your convenience, we have summarized the period's prevailing economic and market
conditions below and outlined our portfolio strategy during this time. A
detailed summary of performance and current holdings can be found in the
appropriate sections that follow in the annual report.
Portfolio Performance Update
and Investment Strategy
The Smith Barney Muni Funds - Limited Term Portfolio had a one-year total return
of 6.65% for Class A shares, which performed in line with its intermediate-term
municipal bond fund peer group average of 6.74%, as reported by Lipper
Analytical Services, Inc., a major fund tracking organization. The Portfolio's
weighted average maturity as of March 31, 1996 was just over 6 years.
In order to keep its principal relatively stable, the Limited Term Portfolio has
maintained a high-quality portfolio this past year with a strong emphasis on
non-callable, "AA"- or "AAA" rated issues in the eight-to-ten year maturity
range. These types of issues tend to be highly liquid and generally offer good
principal protection without having to give up too much income. We believe these
types of municipal bonds are a good way to achieve our objective of providing
the highest tax-free income consistent with prudent investment risk.
The Limited Term Portfolio's top-three sectors were education issues (13.7%),
general obligations bonds (11.8%) and industrial issues (10.8%) because we
believed they represented good value.
In a turbulent municipal bond market, we expect the Portfolio's high-quality
orientation and broad sector and issue diversification should provide investors
with a competitive level of income, while helping to keep its net asset value
relatively stable.
Municipal Bond Market Outlook
The two main issues affecting the municipal bond market today are the economy
and, to a lesser extent since the beginning of the year, potential tax reform.
So far in 1996, the U.S. economy has been stronger than many had originally
anticipated and although the rate of inflation appears to be under control,
stronger-than-expected economic growth has exerted upward pressure on long-term
interest rates. In our view, continued strength in the economy
1
<PAGE>
should help to keep long-term interest rates high throughout the remainder of
1996 and into 1997.
This increase in interest rates could provide investors with a window of
opportunity in the municipal bond market. Supply and demand in the tax-exempt
market is as balanced as it has been in a long time, and there does not appear
to be any real weak spots or weak sectors of the economy. In addition, if the
stock market and interest rates go up, bonds should begin to look relatively
more attractive to a larger number of investors, and that should help municipal
bonds.
Supply and demand fundamentals are increasingly favorable for the tax-exempt
market. New municipal bond issuance is light, with only $150 billion in new
municipal bonds expected to be issued in 1996 with an equivalent amount of
municipal bonds projected to be retired. As interest rates have moved higher and
the supply of municipal bonds has gone down, investor demand for tax-exempt
securities has risen. In fact, in some higher-tax states, shortages of municipal
bonds have begun to develop. We expect municipal bonds will continue to
outperform taxable securities in part because of the lower volume of municipal
bonds being issued today.
Reforming the complex U.S. tax code remains a popular idea among politicians and
their constituents, especially in an election year. Concerns about what impact
any tax changes might have on interest from municipal bonds have caused their
yields to approach 90% of what Treasuries are currently yielding. With respect
to the flat tax, the exit of Republican candidate Steve Forbes from the
Presidential race has caused that issue to recede from the political debate.
However, between now and November, tax reform will probably move in and out of
the political spotlight as the campaign intensifies. In all probability, tax
reform will be a gradual, long-term process, with meaningful reforms unlikely to
be enacted until 1997 to 1998 at the earliest. In the meantime, the municipal
bond market will be rewarding for investors who we believe are now well
compensated for any potential downside risk from most aspects of tax reform.
Although we believe the tax-exempt market is currently attractive regardless of
the final outcome of the tax reform debate, this issue will continue to be an
important one for the municipal bond market over the next two or three years.
Over the near term, we believe the municipal bond market will remain in its
current trading range until the Federal Reserve Board acts. However, because
this is an election year, there is also a good chance that the Federal Reserve
Board may pursue a neutral interest-rate policy and take no action until after
the Presidential election is held in November.
2
<PAGE>
In closing, thank you for investing in the Smith Barney Muni Funds: Limited Term
Portfolio and we look forward to helping you achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Lawrence T. McDermott
Heath B. McLendon Lawrence T. McDermott
Chairman and Vice President
Chief Executive Officer
April, 15, 1996
- --------------------------------------------------------------------------------
Special Shareholder Notice
A change has been made with respect to the portfolio manager of the Limited Term
Portfolio. On February 1, 1996, Lawrence T. McDermott, a Managing Director of
Tax-Exempt Fixed-Income Management at Greenwich Street Advisors, took over as
the portfolio manager of the Limited Term Portfolio from Peter Coffey, a Smith
Barney Managing Director who has been with the firm since 1985. Mr. Coffey
continues to manage a variety of Smith Barney municipal bond funds.
- --------------------------------------------------------------------------------
3
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
3/31/96 $6.54 $6.61 $0.36 6.65%
- --------------------------------------------------------------------------------
3/31/95 6.55 6.54 0.37 5.69
- --------------------------------------------------------------------------------
3/31/94 6.68 6.55 0.37 3.65
- --------------------------------------------------------------------------------
3/31/93 6.45 6.68 0.39 9.82
- --------------------------------------------------------------------------------
3/31/92 6.38 6.45 0.42 7.99
- --------------------------------------------------------------------------------
3/31/91 6.28 6.38 0.40 8.23
- --------------------------------------------------------------------------------
3/31/90 6.20 6.28 0.46 9.07
- --------------------------------------------------------------------------------
Inception* - 3/31/89 6.25 6.20 0.13 1.09+
================================================================================
Total $2.90
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
3/31/96 $6.54 $6.61 $0.34 6.45%
- --------------------------------------------------------------------------------
3/31/95 6.54 6.54 0.35 5.51
- --------------------------------------------------------------------------------
3/31/94 6.68 6.54 0.35 3.15
- --------------------------------------------------------------------------------
Inception* - 3/31/93 6.62 6.68 0.09 2.28+
================================================================================
Total $1.13
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Inception* - 3/31/96 $6.56 $6.62 $0.37 6.63%+
================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
4
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
------------------------------
Class A Class C Class Y
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended 3/31/96 6.65% 6.45% N/A
- --------------------------------------------------------------------------------
Five Years Ended 3/31/96 6.74 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/96 7.09 5.39 6.63%+
================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2)
------------------------------
Class A Class C Class Y
================================================================================
<S> <C> <C> <C>
Year Ended 3/31/96 4.57% 5.45% N/A
- --------------------------------------------------------------------------------
Five Years Ended 3/31/96 6.32 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/96 6.79 5.39 6.63%+
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
<TABLE>
<CAPTION>
<S> <C>
Class A (Inception* through 3/31/96) 65.39%
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/96) 18.05
- --------------------------------------------------------------------------------
Class Y (Inception* through 3/31/96) 6.63+
================================================================================
</TABLE>
(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 C 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 2.00% and Class C shares reflect the
deduction of a 1.00% CDSC, which applies if shares are redeemed less than
one year from initial purchases.
* Inception dates for Class A, C and Y shares are November 28, 1988,
January 5, 1993 and April 4, 1995, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
5
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the Limited Term Portfolio vs.
Lehman Municipal 5 Year Bond Index and
Lehman Municipal Bond Fund Index+
- --------------------------------------------------------------------------------
November 1988 -- March 1996
[GRAPH APPEARS HERE]
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on November 28, 1988, assuming deduction of the maximum 2.00%
sales charge at the time of investment and reinvestment of dividends (after
deduction of applicable sales charge through November 6, 1994, afterwards
at net asset value) and capital gains, if any, at net asset value through
March 31, 1996. The Lehman Municipal 5 Year Bond Index is a broad based
total return index comprised of all investment grade, fixed rate, long term
maturities of 4-6 years and are selected from issues larger than $50
million dated since January, 1984. The Lehman Municipal Bond Fund Index is
a broad based total return index, comprised of all investment grade, fixed
rate, long term maturities (greater than two years) and are selected from
issues larger than $50 million dated since January, 1984. The indexes are
unmanaged and are not subject to the same management and trading expenses
of a mutual fund. The performance of the Portfolio'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 returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
6
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
Education -- 13.7%
$2,825,000 A* Arizona Education Loan Marketing Corp., Education
Loan Revenue Bonds, 7.000% due 3/1/02(a)(b) $2,998,031
3,000,000 A* Arkansas State Student Loan Authority Revenue,
Sub-Series A-2, 6.125% due 12/1/00(a) 3,060,000
Brazos, TX Higher Education Authority:
1,000,000 Aa* Series A-1, 5.300% due 12/1/97(a) 1,021,250
955,000 Aa* Series C-1, 6.000% due 11/1/99(a) 993,200
850,000 AAA Broward County, FL Educational Facilities Authority
Revenue, (Nova Southeastern University Project),
CONNIE LEE-Insured, 5.150% due 4/1/99 867,000
Colorado Student Obligation Board Authority, Student
Loan Revenue:
320,000 A* Series A, 6.625% due 6/1/99 332,800
1,350,000 A* Series A-1, 6.600% due 9/1/98 1,393,875
2,000,000 AAA Dade County, FL School District GO, MBIA-Insured,
6.000% due 7/15/06 2,155,000
1,150,000 AA Fairfield County, SC School District, COP, 5.500%
due 3/1/07 1,132,750
1,000,000 A+ Illinois Student Assistance Commission, Student
Loan Revenue, Series H, 6.100% due 3/1/01(a) 1,035,000
350,000 Aa1* Iowa Student Loan Liquidity Corporation, Student
Loan Revenue, Series A, 6.000% due 3/1/98 357,000
1,000,000 Aa* Kentucky Higher Education Student Loan Corp.,
Insured Student Loan Revenue, Series 91B,
6.500% due 12/1/00(a) 1,051,250
215,000 AAA Louisiana Public Facilities Authority Revenue,
Supplemental Student Loan C, AMBAC-Insured,
8.125% due 12/1/99 233,006
250,000 AAA Maine Health & Higher Educational Facilities, Special
Obligation Revenue, Medium Term Facilities,
FSA-Insured, 5.500% due 7/1/97 255,000
250,000 A* Michigan Higher Education Student Loan, Education
Revenue, Series XIV-A, 5.400% due 10/1/96(a) 251,037
1,395,000 A* Montana State Higher Education Student Assistance
Corp., Student Loan Revenue, Series 92B,
7.050% due 6/1/04(a) 1,492,650
New England Education Loan Marketing Corp.,
Massachusetts Student Loan Revenue Refunding:
1,000,000 A1* Series B, 5.000% due 6/1/98 1,010,000
1,000,000 A1* Series C, 4.750% due 7/1/98 1,005,000
1,100,000 AAA New Jersey Educational Facilities Authority Revenue,
Higher Education Facilities, Series A, AMBAC-
Insured, 5.125% due 9/1/06 1,104,125
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Education -- 13.7% (continued)
North Texas Higher Education Authority Inc.,
Student Loan Revenue, AMBAC-Insured:
$1,475,000 AAA 7.000% due 4/1/01(a) $1,545,063
1,000,000 Aaa* Series B, 4.850% due 4/1/98(a) 1,002,500
2,000,000 AAA Pennsylvania State Higher Education Assistance
Agency, Student Loan Revenue Refunding,
Series A, FGIC-Insured, 6.800% due 12/1/00 2,155,000
500,000 Aa* Pennsylvania State Higher Education, (Thomas
Jefferson University), Series A, 5.500% due 8/15/97 509,375
Rhode Island Student Loan Authority Revenue
Refunding:
500,000 A* Series A, 5.700% due 12/1/96 503,505
1,500,000 A* Series 92B, 6.750% due 12/1/01(a) 1,578,750
1,000,000 AAA San Juan County, NM ISD #22, GO, MBIA-Insured,
6.750% due 8/15/00 1,081,250
1,500,000 AAA Schuylkill, PA Redevelopment Authority Revenue,
Commonwealth Lease Revenue Bonds, Series 91A,
FGIC-Insured, 6.850% due 6/1/03 1,640,625
3,125,000 A South Dakota Student Loan Assistance Corp.,
Student Loan Revenue, 7.350% due 8/1/98(a)(b) 3,246,094
1,000,000 AA State of Texas College Student Loan Bonds, Series
1991, zero coupon due 2/1/01(a) 796,250
755,000 A* Texas State Higher Education Coordinating Board,
College Student Loan Revenue, 6.800% due 4/1/98(a) 778,594
990,000 AA- University of Louisville, KY Series J, 4.875% due 5/1/98
Utah State School District Co-op Revenue Financing
Pool, LOC Swiss Bank:
875,000 AAA 8.300% mandatory tender 2/15/98 934,062
945,000 AAA 8.300% mandatory tender 2/15/00 1,054,856
2,220,000 AAA 8.375% due 2/15/10(b) 2,367,075
- ------------------------------------------------------------------------------------------------------
41,942,110
- ------------------------------------------------------------------------------------------------------
Escrowed to Maturity(c) -- 8.0%
280,000 AAA Austin, TX ISD, (Escrowed to Maturity with U.S.
Government Securities), 9.000% due 7/1/00 326,900
120,000 AAA Austin, TX Water, Sewer & Electric Revenue,
(Escrowed to Maturity with U.S. Government
Securities), 14.000% due 11/15/01 160,050
1,450,000 AAA Babylon, NY IDA, Babylon Community Waste
Management, Series A, (Escrowed to Maturity with
U.S. Government Securities), 7.650% due 7/1/97 1,520,686
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Escrowed to Maturity(c) -- 8.0% (continued)
$1,990,000 AAA Boston, MA Water & Sewer Community Revenue,
Series A, (Escrowed to Maturity with U.S.
Government Securities), 10.650% due 1/1/99(b) $2,193,975
750,000 AAA Detroit, MI District State Aid, (Escrowed
to Maturity with U.S. Government Securities),
5.625% due 5/1/97 763,890
170,000 AAA Enid, OK Hospital Authority Revenue, St. Mary's
Hospital Crossover Refunding, (Escrowed to Maturity
with U.S. Government Securities), 8.000% due 7/1/98 176,800
1,190,000 AAA Erie County, OH Hospital Improvement, Sandusky
Memorial Hospital, (Escrowed to Maturity
with U.S. Government Securities), 8.750% due 1/1/06 1,460,725
1,555,000 AAA Galveston, TX Sewer System Revenue Refunding,
Series B, (Escrowed to Maturity with U.S.
Government Securities), 7.800% due 5/1/99 1,661,906
1,050,000 Aaa* Illinois Educational Facilities Authority Revenue,
Chicago Osteopathic Medical, Series A, (Escrowed
to Maturity with U.S. Government Securities),
8.750% due 7/1/05 1,277,063
1,090,000 AAA Kalamazoo, MI Hospital Finance Authority, (Escrowed
to Maturity with U.S. Government Securities),
6.750% due 4/1/03 1,170,388
885,000 AAA Michigan State Hospital Finance Authority Revenue,
St. Joseph's Mercy Hospital, Series A, (Escrowed to
Maturity with U.S. Government Securities),
9.250% due 7/1/03 1,070,850
1,535,000 AAA New Jersey Educational Facilities Authority Revenue,
Fairleigh Dickinson University, Series C, (Escrowed
to Maturity with U.S. Government Securities),
7.750% due 7/1/01 1,659,719
2,260,000 AAA New Jersey State Turnpike Authority Revenue
Refunding, (Escrowed to Maturity with U.S.
Government Securities), 10.375% due 1/1/03(b) 2,734,600
30,000 AAA New York City GO, Series F, (Escrowed with U.S.
Government Securities), 8.100% due 11/15/99 33,675
210,000 AAA North Country, NY Solid Waste Development Authority
1992A, (Escrowed to Maturity with U.S. Government
Securities), 6.000% due 7/1/97 216,038
1,130,000 AAA Ohio State Water Development Authority Revenue,
Safe Water, Series A, (Escrowed to Maturity with
U.S. Government Securities), 9.375% due 12/1/10 1,413,912
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Escrowed to Maturity(c) -- 8.0% (continued)
$2,120,000 AAA Owensboro, KY Electric, Light & Power, (Escrowed
to Maturity with U.S. Government Securities),
10.500% due 1/1/04(b) $2,612,900
295,000 AAA Philadelphia, PA Hospitals and Higher Education
Facilities Authority Revenue, St. Agnes Medical
Center, FHA-Insured, (Escrowed to Maturity with
U.S. Government Securities), 6.750% due 8/15/01 322,655
875,000 AAA San Francisco, CA Airport Improvement Corp.,
Lease Revenue, United Airlines, (Escrowed to
Maturity with U.S. Government Securities),
7.875% due 7/1/99 945,000
1,145,000 AAA Sullivan County, TN Health & Educational Facilities,
Holston Valley Community Hospital, (Escrowed to
Maturity with U.S. Government Securities),
7.000% due 9/1/99 1,242,325
945,000 AAA Tom Green County, TX Hospital Authority, (Escrowed
to Maturity with U.S. Government Securities),
7.875% due 2/1/06 1,078,481
395,000 Aaa* Virginia Educational Loan Authority, Guaranteed
Revenue, Series C, (Escrowed to Maturity with
U.S. Government Securities), 4.850% due 3/1/98 400,925
- ------------------------------------------------------------------------------------------------------
24,443,463
- ------------------------------------------------------------------------------------------------------
Finance -- 1.0%
1,000,000 A New York State Local Government Assistance Corp.,
6.600% due 4/1/98 1,047,500
2,000,000 AAA Texas State Public Finance Authority Building Revenue,
Series B, AMBAC-Insured, 6.200% due 2/1/05 2,165,000
- ------------------------------------------------------------------------------------------------------
3,212,500
- ------------------------------------------------------------------------------------------------------
General Obligation -- 11.8%
1,000,000 AA+ Anne Arundel County, MD GO, 6.000% due 9/1/06 1,082,500
610,000 AAA Arapahoe County, CO COP, AMBAC-Insured,
5.400% due 12/1/96 615,282
California State GO:
1,000,000 A1* 6.250% due 9/1/08 1,093,750
1,000,000 AAA FGIC-Insured, 6.400% due 9/1/07 1,113,750
1,000,000 AAA Chicago, IL GO, AMBAC-Insured, 5.600% due 1/1/06 1,031,250
355,000 B- District of Columbia, COP, 6.000% due 1/1/97 355,419
250,000 Ba* District of Columbia, GO, Series A, 5.000% due 6/1/98 244,688
3,000,000 Aaa* Georgia State GO, 6.250% due 4/1/06(b) 3,303,750
1,800,000 BBB Government of Guam GO, Series A, 5.750% due 8/15/99 1,833,750
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
General Obligation -- 11.8% (continued)
$1,500,000 Aa* Houston, TX GO, Series A, 6.000% due 3/1/06 $1,610,625
Indiana Bond Bank, Special Project:
415,000 A Series F, 5.800% due 8/1/97 424,856
500,000 A Guaranteed Revolving, 4.900% due 2/1/99 505,000
1,710,000 AAA Iowa State COP, Series 1992A, AMBAC-Insured,
5.750% due 7/1/98 1,763,438
500,000 AA+ Kings County, WA Unlimited Tax Obligation,
9.000% due 12/1/98 561,250
500,000 AAA Louisiana State GO Refunding Bond, Series A,
CGIC-Insured, 6.600% due 8/1/97 516,250
750,000 Baa1* Lowell, MA GO, 5.500% due 8/15/97 765,938
500,000 A3* Meridian, CO Metropolitan District, GO, Refunding
Bonds, 7.000% due 12/1/97 516,250 New Haven, CT
GO, Series B:
625,000 Baa* 5.700% due 12/1/97 639,063
2,000,000 Baa* 9.000% due 12/1/01(b) 2,390,000
New York City, NY GO:
1,500,000 BBB+ Series D, 7.200% due 2/1/00 1,605,000
970,000 BBB+ Series F, 8.100% due 11/15/99 1,071,850
1,000,000 BBB+ Series H, 6.500% due 3/15/06 1,042,500
2,000,000 BBB+ Series I, 6.500% due 3/15/06 2,070,000
900,000 AAA North Slope Borough, AK GO, Unlimited Tax Obligation
Refunding, Series G, AMBAC-Insured, 7.500%
due 6/30/97 936,000
550,000 AAA Old Bridge Township, NJ GO, FGIC-Insured, 4.350%
due 7/15/05 529,375
Puerto Rico Commonwealth GO, MBIA-Insured:
2,180,000 AAA 5.500% due 7/1/06 2,283,550
1,650,000 AAA 6.500% due 7/1/07 1,860,375
720,000 Baa* Springfield, MA GO School Project Loan, Series B,
5.300% due 9/1/97 733,500
460,000 AA Texas State Veterans Housing Assistance, GO
FHA-Insured, 6.050% due 12/1/12(a) 462,875
2,000,000 AA Washington State GO, Motor Vehicle Fuel Tax, Series
1995D, DD-15 & R-95C, 6.500% due 9/1/04 2,225,000
810,000 AAA Yuma & La Paz County, AZ Community College District,
GO, (Arizona Western College), AMBAC-Insured,
6.200% due 7/1/98 845,437
- ------------------------------------------------------------------------------------------------------
36,032,271
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
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Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Hospitals -- 9.7%
$600,000 A- Bexar County, TX Health Facilities Development Corp.,
Health Facilities Revenue Refunding, Independence
Hill Project, LOC Banque Paribas, 7.500% mandatory
tender 12/1/98 $645,750
1,000,000 AAA Calcasieu Parish LA Memorial Hospital Services
District Revenue, Lake Charles Memorial Hospital,
Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 1,157,500
675,000 A California Finance Authority Nonprofit Corps, ABAG-
Insured COP, Rehabilitation Mental Health Services Inc.
Project, 6.100% due 6/1/02 707,062
3,500,000 Baa* Colorado Health Facilities Authority Hospital Revenue
Bonds, Series 1993, Rocky Mountain Adventist
Health Guaranteed, 6.250% due 2/1/04(b) 3,565,625
35,000 AAA Falls Township, PA Hospital Authority Revenue,
(Delaware Valley Medical), FHA-Insured, 6.000%
due 8/1/01 35,481
2,135,000 A* Harris County, TX Health Facilities Development Corp.,
Memorial Health System Guaranteed, 7.125%
due 6/1/05(b) 2,321,813
Illinois Health Facilities Authority Revenue Refunding:
1,040,000 AAA Children's Memorial Hospital, MBIA-Insured,
6.000% due 8/15/98 1,077,700
1,000,000 Baa* Trinity Medical Center, 6.500% due 7/1/00 1,015,000
1,425,000 Ba* Langhorne Manor Higher Education & Health
Authority, Bucks County, (Lower Bucks Hospital),
6.375% due 7/1/99 1,400,063
Massachusetts Health & Education Facilities Authority
Revenue, Series A:
1,000,000 Ba1* Massachusetts Eye & Ear Infirmary,
7.000% due 7/1/98 1,008,750
445,000 A Medical Center of Central Massachusetts,
6.000% due 7/1/97 455,013
234,347 NR Metropolitan Government of Nashville and Davidson
County, TN Health and Educational Facilities Board
Revenue, (Cooke County, Baptist Hospital),
7.250% due 9/1/96 235,144
275,000 AAA New Hampshire Higher Education & Health Authority
Revenue, (Elliot Hospital of Manchester),
AMBAC-Insured, 5.700% due 10/1/97 282,219
New Jersey Healthcare Facilities Financing Authority:
1,000,000 Baa1* Elizabeth General Medical Center, Series C,
7.100% due 7/1/99 1,040,000
1,030,000 BBB+ Pascack Valley Hospital, Series 91, 6.500% due 7/1/01 1,082,788
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
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Limited Term Portfolio
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Hospitals -- 9.7% (continued)
New York Medical Care Facilities Finance Agency
Revenue, Mental Health Facilities:
$1,045,000 BBB+ Series 1991B, 7.100% due 2/15/99 $1,111,619
640,000 BBB+ Series D, 6.300% due 8/15/97 656,000
320,000 A- Ouachita Parish, LA Hospital Services District #1,
Hospital Revenue Bonds, Glenwood Regional
Medical Center, Series 1991, 7.250% due 7/1/00 340,400
2,170,000 A+ Palm Beach County, FL Health Facilities Authority
Revenue, Good Samaritan Health System
Guaranteed, 6.150% due 10/1/06(b) 2,240,525
Philadelphia, PA Hospitals and Higher Education
Facilities Authority Revenue, Albert Einstein
Medical Center:
365,000 A* 6.300% due 10/1/96 367,445
390,000 A* 6.500% due 10/1/97 396,338
1,000,000 BBB+ Graduate Health Systems, 6.500% due 7/1/97 1,017,500
1,750,000 A Riverside, CA Asset Leasing Corp. Leasehold Revenue
Bonds, 1993 Series A, Riverside Hospital Project,
6.000% due 6/1/04 1,802,500
3,000,000 BBB++ Scranton-Lackawanna, PA Health & Welfare Authority
Revenue, Allied Services Rehabilitation Hospitals,
7.125% due 7/15/05(b) 3,063,750
1,190,000 AAA Sioux City, IA Hospital Revenue Refunding, (Sisters of
Mercy Health), Series D, MBIA-Insured, 5.000%
due 8/15/98 1,209,337
1,300,000 BBB++ Valley Health System, CA COP Refunding Project,
6.250% due 5/15/99 1,311,375
- ------------------------------------------------------------------------------------------------------
29,546,697
- ------------------------------------------------------------------------------------------------------
Housing -- 9.9%
10,000 AA Alaska State Housing Finance Corp., State Guaranteed
Veterans Mortgage Program, Third Series 83,
9.100% due 12/1/97 10,226
3,000,000 A Aurora, IL Multi-Family Revenue Refunding Housing,
(Fox Village Unit 18D Project), LOC Banque
Paribas, 7.750% due 9/1/98(b) 3,093,750
2,500,000 Aa* California State Department of Veterans Affairs, Home
Purchase Revenue, Series A, 7.500% due 8/1/98(a) 2,606,250
2,930,000 A+ City of Burnsville, MN Multi-Family Housing Revenue
Refunding Bonds, (The Atrium Project), Policy of
Indemnity Commercial Union Insurance Co. PLC
Reinsured by Trygg-Hansa Ins. Co. of Sweden,
7.200% mandatory tender 5/1/02(b) 3,048,811
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
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Limited Term Portfolio
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Housing -- 9.9% (continued)
Cleveland County, OK Home Loan Authority, Single-
Family Mortgage Revenue:
$150,000 A* 6.000% due 8/1/96 $150,345
135,000 A* 6.100% due 2/1/97 135,824
160,000 A* 6.100% due 8/1/97 161,600
335,000 AA Colorado HFA, Single-Family Project, Series A3,
5.750% due 5/1/97(a) 337,553
2,250,000 AAA Dekalb County, GA HFA, Multi-Family Housing Revenue,
(Chimney Trace Project), FNMA-Collateralized,
5.625% due 5/1/25 2,289,375
970,000 AAA Fairfax County, VA Redevelopment & Housing
Authority, Multi-Family Refunding, Kingsley,
Series 91A, 6.500% due 11/1/01 1,006,375
135,000 AA Idaho Housing Agency, Single-Family Mortgage,
Refunding Bonds, 5.500% due 1/1/97 136,381
1,000,000 Aa2* Illinois Development Financing Authority, Adjustable
Demand Revenue Bonds, (Catholic Charities
Housing), Series A, 5.000% due 1/1/28 1,006,250
390,000 AAA Iowa State, HFA, Single-Family Mortgage, Series F,
AMBAC-Insured, 5.150% due 1/1/98 396,338
2,995,000 A+ Lombard, IL Multi-Family Housing, Clover Creek
Apartments, Surety Bond-Continental Casualty Co.,
6.500% mandatory tender 12/15/96(b) 3,018,151
70,000 Aaa* Louisiana Housing Finance Agency Mortgage Revenue,
GNMA-Collateralized, Single-Family, 7.600% due
11/1/97(a) 71,225
1,800,000 AA Louisiana Public Facilities Authority Revenue, Multi-
Family Housing, Oakleigh Apartments, Series A,
5.950% due 3/15/19 1,867,500
1,000,000 AA- Maine State Housing Authority, Series A-3,
6.900% due 11/15/98 1,038,750
500,000 AAA Nashville & Davidson County, TN Metropolitan
Government IDB Revenue, Multi-Family Housing
(Club Bellevue), FNMA-Collateralized, 8.500%
mandatory tender 5/1/97 505,905
1,040,858 AAA Monroe-West Monroe, Ouachita Parish, LA Public
Trust Financing Authority, Single-Family Housing,
FHLMC Guaranteed, 8.500% due 5/20/02 1,078,589
320,000 AA- Montgomery County, MD Housing Authority, Multi-
Family, Series 85A, (Hunt Club), 6.000%
mandatory tender 2/1/97 320,717
370,000 AA New Mexico Mortgage Finance Authority, Single-Family,
Series A1, 5.500% due 1/1/97 371,920
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
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Limited Term Portfolio
- -------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Housing -- 9.9% (continued)
$540,000 A* Odessa, TX Housing Development Corp. #2, Multi-
Family Revenue Refunding, Chaparral Village,
Series A, 6.375% due 12/1/03 $545,400
2,015,000 AAA Onterie Center Housing Finance Corp., IL Mortgage
Revenue Refunding, (Onterie Center Project),
Series A, MBIA-Insured, 6.500% due 7/1/02(b) 2,110,713
2,500,000 AAA Prince Georges County, MD Housing Authority,
Mortgage Revenue Refunding, Cambridge
Crossing Apartments, Series A, LOC Federal Home
Loan Bank Atlanta, 5.900% mandatory tender 2/1/04(b) 2,540,625
230,000 AAA St. Louis County, MO Single-Family Mortgage
Revenue, MBIA-Insured, 9.750% due 4/1/03 231,150
1,000,000 AAA Texas Department of Housing & Community Affairs,
GNMA & FNMA-Collateralized, Home Mortgage
Revenue Bonds, Series B, RIBS Variable Rate,
9.898% due 6/18/23(a)(d) 1,047,500
130,000 AA Texas State Housing Agency Mortgage Revenue
Single-Family, 1987D, 7.750% due 7/1/99(a) 133,900
425,000 AAA Washington State Housing Finance Community,
Single-Family Mortgage Revenue, GNMA & FNMA-
Collateralized, Series D, 5.800% due 7/1/97 425,531
250,000 A1* Wisconsin Housing EDA, Series A, 5.400% due 11/1/97 252,188
410,000 AA Wyoming Community Development Authority,
Single-Family Mortgage, Series 1988C,
7.800% due 6/1/99(a) 421,275
- ------------------------------------------------------------------------------------------------------
30,360,117
- ------------------------------------------------------------------------------------------------------
Industrial Development -- 10.8%
1,500,000 A Bel Air, MD IDR Refunding, (May Department
Stores Co. Project), 6.375% due 10/1/99 1,578,750
1,000,000 A Belmont County, OH IDR Refunding, (May Department
Stores Project), Series 91, 6.500% due 1/1/00 1,057,500
2,000,000 AA+ Clarion County, PA IDA Energy Development Revenue,
(Piney Creek Project), LOC Swiss Bank, 7.250%
mandatory tender 12/1/00(a) 2,195,000
1,000,000 Baa* Delaware County, PA Development Authority Revenue,
(Elwyn Inc. Project), 7.750% due 6/1/00 1,053,750
3,000,000 Ba1* Griffin-Spalding County, GA Development Authority
Revenue Refunding, (Borden Inc. Project),
Borden Inc. Guaranteed, 7.200% due 6/1/00 3,093,750
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
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Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Industrial Development -- 10.8% (continued)
$2,000,000 A+ Iowa Finance Authority, (Governors Square Project),
Policy of Indemnity Commercial Union Assurance
Co. PLC Reinsured by Trygg-Hansa Insurance Co.
of Sweden, 7.250% mandatory tender 4/1/02 $2,150,000
2,500,000 A Kanawha, WV Commercial Development Revenue,
May Department Stores Guaranteed,
5.700% due 6/1/97(b) 2,540,625
500,000 BBB- Lehigh County, PA IDA Revenue, (Strawbridge
Project), 7.200% due 12/15/01 530,000
3,000,000 A+ Marion, IA Commercial Development Revenue,
(Collins Road Project), Commercial Union Insured/
Reinsured by Trygg-Hansa Insurance Co. of
Sweden, 7.250% mandatory tender 7/1/02(b) 3,150,000
3,500,000 BBB+ Metropolitan Government Nashville & Davidson
County, TN IDB Revenue Refunding &
Improvement, Osco Treatment Inc. Guaranteed,
6.000% due 5/1/03(a) 3,517,500
2,150,000 Aa3* New Jersey EDA, Growth Bonds, LOC Banque
Nationale de Paris, 6.200% due 12/1/02(a)(b) 2,252,125
New York City IDA:
1,440,000 Aa1* Keystone Electric, LOC Ambro Bank, 7.500%
mandatory tender 3/1/98(a) 1,456,718
470,000 Aa1* SuperFlex, Ltd. Project, Composite Offering XVIII
1989, Series A, LOC Algemene Bank Netherlands,
NV, 7.750% optional tender 11/1/99(a) 475,504
725,000 Aa1* IDR Oakdale Knitting Mills Inc., Composite Offering
XXX 1990, Series G, LOC Algemene Bank
Netherlands, NV, 7.700% mandatory tender
11/1/00(a) 740,638
Ohio State Economic Development Revenue,
Ohio Enterprise Bond Fund:
300,000 A- Series 1989-5B, Sponge Inc. Project,
7.750% due 6/1/99(a) 306,984
125,000 A- Superior Forge & Steel Corp. Project,
6.750% due 6/1/96(a) 125,339
1,170,000 AAA Pennsylvania State IDA Revenue, AMBAC-Insured,
6.000% due 1/1/99 1,215,338
90,000 Ba2* Pocahontas, IA IDR International Harvester Co.,
10.250% due 10/1/00 91,926
3,040,000 NR Seaford, DE Economic Development Revenue
Refunding, (Seaford Association Project),
6.375% due 1/1/04 3,135,000
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
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Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Industrial Development -- 10.8% (continued)
$2,350,000 AAA Sioux City, IA IDR, (Terra Centre Project),
6.800% due 5/1/07(b) $2,505,688
- ------------------------------------------------------------------------------------------------------
33,172,135
- ------------------------------------------------------------------------------------------------------
Lifecare -- 0.8%
1,355,000 BBB Illinois Development Finance Authority Health
Facilities Revenue, Community Living Options,
6.375% due 3/1/00 1,375,325
1,000,000 AAA Rio Grande Valley, TX Health Facilities, Valley Baptist
Medical Center Series, Short RITES, MBIA-Insured,
coupon varies weekly till 8/1/02 then converts to
6.250%, 8.190% due 8/1/06(d) 1,097,500
- ------------------------------------------------------------------------------------------------------
2,472,825
- ------------------------------------------------------------------------------------------------------
Miscellaneous -- 6.5%
2,595,000 BBB- Clarksville, TN Natural Gas Acquisition Corporation,
Gas Revenue, Series A, 6.500% due 11/1/00(b) 2,666,363
300,000 AAA Dallas-Fort Worth, TX Regional Airport Revenue,
Series A, FGIC-Insured, 5.875% due 11/1/07(a) 309,750
2,500,000 AAA Greater Detroit Resource Recovery Authority,
AMBAC-Insured, 6.250% due 12/13/06 2,690,625
1,605,000 AAA Hillsborough County, FL Capital Improvement Program
Revenue, (County Center Project), Series B,
MBIA-Insured, 6.000% due 7/1/05 1,731,393
2,750,000 A* Hoffman Estate, IL Tax Increment Junior Lien,
Hoffman Estate Development, Series 91,
6.500% due 5/15/01(b) 2,928,750
2,700,000 A- Illinois Development Finance Authority Revenue,
Debt Restructure-East St. Louis, 6.875% due
11/15/05(b) 2,865,375
500,000 Aa3* Illinois Educational Facilities Authority, Adjustable
Demand Revenue Bonds, (Museum of Science
and Industry), 5.625% due 10/1/26 501,940
1,500,000 Aaa* Indianapolis, IN Local Public Improvement Board,
Series B, 5.000% due 2/1/00 1,530,000
1,010,000 AAA Jacksonville, FL Excise Tax Revenue, Series A,
FGIC-Insured, 5.500% due 10/1/05 1,057,975
420,000 NR Lehigh County, PA General Purpose Authority, Wiley
House Revenue, Series 1991, 8.500% due 11/1/96 423,301
1,500,000 Baa1* New York State Urban Development Corporation
Revenue, Correctional Capital Facilities, Series 6,
5.500% due 1/1/01 1,516,875
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
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Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Miscellaneous -- 6.5% (continued)
$635,000 NR Virgin Islands Public Financing Authority, Matching
Revenue Funding, Series A, 6.250% due 10/1/96 $640,677
1,000,000 AA Tuscon, AZ COP, Asset Guaranty, 6.000% due 7/1/04 1,056,250
19,919,274
Pollution Control -- 5.2%
500,000 Ba* Atlantic County, NJ Utilities Authority, Solid Waste
Revenue, Series 1992A, 6.250% due 3/1/97 502,375
1,200,000 AAA Burke County, GA Development Authority PCR,
Refunding, Ogelthorpe Power Co., 7.500%
due 1/1/03 1,321,500
435,000 BBB+ Camden County, NJ PCFA, Solid Waste Resource
Recovery Revenue, Series D, 6.350% due 12/1/97 437,719
Detroit, MI Economic Development Corp., Facilities
Recovery Revenue, FSA-Insured:
3,000,000 AAA Series A, 7.000% due 5/1/01(b) 3,311,250
1,000,000 AAA Series 91A, 6.600% due 5/1/02(a) 1,085,000
1,075,000 BBB- Hudson County, NJ Improvement Authority,
5.750% due 1/1/98 1,075,000
1,500,000 A+ Illinois Development Financing Authority, Solid Waste
Disposal Revenue Bonds, Waste Management Inc.
Project, Series 1990, 7.125% due 1/1/01(a) 1,638,750
1,000,000 Baa2* Massachusetts State IDB Finance Agency, PCR,
(Eastern Edison Co. Project), 5.875% due 8/1/08 980,000
1,500,000 AAA Montgomery, AL IDB, PCR, (General Electric Co.
Project), 7.000% mandatory tender 9/15/00(a) 1,638,750
600,000 BB Ohio State Water Development Authority, Pollution
Control Facilities Revenue, Cleveland Electric
Illuminating Co., 9.750% due 11/1/22(a) 630,750
2,000,000 Baa* Onondaga County, NY Resource Recovery Agency
Project Revenue Bonds, Series 1992, 6.625%
due 5/1/00(a)(b) 2,055,000
420,000 A- Puerto Rico Industrial Medical & Environmental
Pollution Control Facilities Financing Authority
Revenue, (St. Lukes Hospital Project), Series A,
5.400% due 6/1/97 422,100
750,000 AA Warrick County, IN Environmental Improvement,
(Southern Indiana Gas & Electric Project),
Series A, 4.650% due 5/1/28(a) 752,812
- ------------------------------------------------------------------------------------------------------
15,851,006
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Pre-Refunded(c) -- 4.6%
$1,725,000 AAA Alachua County, FL Health Facilities Authority
Revenue, Santa Fe Healthcare Facilities Project,
(Escrowed to Maturity with U.S. Government
Securities to 11/15/00 Call @ 102) 6.875%
due 11/15/02 $1,914,750
80,000 AAA Austin, TX Water, Sewer & Electric Revenue,
(Escrowed to Maturity with U.S. Government
Securities to 5/15/98 Call @ 100), 14.000%
due 11/15/01 106,000
1,500,000 AAA Berks County, PA Municipal Authority, Lutheran
Home at Topton, Series B, LOC Meridian Bank,
(Escrowed with U.S. Government Securities to
4/1/98 Call @ 100), 7.250% due 4/1/01 1,584,375
3,025,000 AAA Gila County, AZ IDA PCR, (Escrowed with U.S.
Government Securities to 2/15/01 Call @ 101),
11.250% due 4/1/01(b) 3,248,094
Illinois Health Facilities Authority Revenue:
1,000,000 AAA Lutheran Social Services, LOC Industrial Bank of
Japan, (Escrowed with U.S. Government
Securities to 8/1/00 Call @ 102),
7.650% due 8/1/20 1,135,000
750,000 AAA Servantcor Hospital, Series B, (Escrowed with
U.S. Government Securities to 8/15/99
Call @ 102), 7.500% due 8/15/01 835,312
1,000,000 AAA Mississippi Hospital Equipment & Facilities Authority
Revenue, MBIA-Insured, (Mississippi Baptist
Medical Center), Series A, (Escrowed with U.S.
Government Securities to 5/1/00 Call @ 102),
7.300% due 5/1/01 1,120,000
330,000 AAA New York Medical Care Facilities Finance Agency
Revenue, Hospital & Nursing Home Mortgage,
FHA-Insured, (Escrowed with U.S. Government
Securities to 2/15/97 Call @ 102), 7.750% due 2/15/02 353,513
345,000 AAA Ohio State Building Authority, Toledo Government
Office Building, Series A, (Escrowed with U.S.
Government Securities to 4/1/03 Call @ 100),
10.125% due 10/1/06 433,406
3,000,000 AAA Texas National Research Lab Finance Corp., Lease
Revenue, (Superconducting Supercollider Project),
(Escrowed with U.S. Government Securities to
12/1/01 Call @ 102), 6.550% due 12/1/02(a)(b) 3,326,250
- ------------------------------------------------------------------------------------------------------
14,056,700
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Public Facilities -- 2.8%
$40,000 A- Concord Santa Cruz Southgate, CA COP, ABAG
Finance Corp., 7.100% due 6/1/99 $40,066
2,000,000 AA+ Highlands Rancho Metro District #2, Douglas County,
CO GO Refunding, Series 1991, LOC Swiss Bank,
6.700% due 6/15/01 1,992,500
4,000,000 Aa* Mt. Stearling, KY Lease Revenue, Kentucky League
of Cities 1993A, Transamerica Life Guaranteed,
5.625% due 3/1/03(b) 4,115,000
1,060,000 AAA South Dakota State Lease Revenue Certificates,
Series A, CGIC-Insured, 8.200% due 9/1/02 1,244,175
1,050,000 BBB Tampa, FL Capital Improvement Program Revenue,
Series 88B, 7.400% due 10/1/97 1,082,813
8,474,554
Transportation -- 7.4%
1,000,000 AAA Clark County, NV Airport Improvement Revenue,
BIG-Insured, 7.900% due 7/1/00(a) 1,080,000
Denver, CO City & County Airport Revenue:
1,590,000 Baa* Series 1992B, 7.000% due 11/15/01(a) 1,703,288
1,000,000 Baa* Series 1992B, 7.000% due 11/15/02(a) 1,073,750
1,000,000 Baa* Series 1994A, 7.200% due 11/15/02(a) 1,085,000
1,510,000 AAA Series B, MBIA-Insured, 6.250% due 11/15/06(a) 1,596,825
2,445,000 AAA Hawaii Airport System Revenue, MBIA-Insured,
Second Series of 91, 6.100% due 7/1/99(a)(b) 2,558,081
1,250,000 A Indiana Transportation Finance Authority, Airport
Facilities Lease Revenue, Series A, United Air,
6.125% due 11/1/02 1,334,375
1,000,000 AAA Massachusetts Port Authority Revenue, Series A,
FGIC-Insured, 7.200% due 7/1/03(a) 1,106,250
2,500,000 MIG 1 *Massachusetts State Turnpike Authority, Series A,
5.000% due 6/1/99(b) 2,554,950
1,000,000 AAA Metropolitan Transit Authority, NY Commuter Facilities
Revenue, Grand Central Terminal 2, FSA-Insured,
4.550% due 7/1/01(a) 1,001,250
3,000,000 AA- Ocean Highway and Port Authority, Nassau County, FL
Adjustable Demand Revenue Bonds, Series 1990,
LOC ABN AMRO Bank NV, 6.250% mandatory
tender 12/1/02(a)(b) 3,225,000
750,000 AA Port of Houston Authority, Harris County, TX Port
Improvement, Unlimited Tax Obligation, 8.500%
due 11/1/98(a) 827,813
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=======================================================================================================
<S> <C> <C> <C>
Transportation -- 7.4% (continued)
$2,205,000 AA- Simi Valley, CA Community Development Agency
COP, Simi Valley Business Center, 6.050%
due 10/1/18(b) $2,262,881
1,295,000 AAA Washington, D.C. Metropolitan Area Transportation
Authority Gross Revenue, FGIC-Insured, 6.000%
due 7/1/98 1,345,181
- ------------------------------------------------------------------------------------------------------
22,754,644
- ------------------------------------------------------------------------------------------------------
Utilities 6.1%
500,000 AAA Arlington, TX Waterworks & Sewer Revenue,
Refunding and Improvement, FGIC-Insured,
5.400% due 6/1/97 508,125
5,030,000 A* Austin, TX Water, Sewer and Electric Refunding
Revenue, 14.000% due 11/15/01(b) 6,645,888
1,500,000 A+ Chelan County, WA Public Utility District #1, Chelan
Hydro Consolidated System Revenue Bonds,
7.000% mandatory tender 7/1/01(a) 1,644,375
600,000 A- Georgia Muni Gas Authority Revenue, (Southern
Storage Gas Project), 6.300% due 7/1/09 634,500
Massachusetts Municipal Electric Wholesale
Company, Power Supply System Revenue:
Series C:
285,000 A* 5.800% due 7/1/96 286,046
205,000 A* 6.000% due 7/1/97 208,844
100,000 A* Series E, 5.100% due 7/1/97 100,750
3,000,000 AAA Mohave, AZ IDA, IDR Bonds, (Citizens Utilities Co.
Project 1988B), 6.875% due 9/1/26(a)(b) 3,142,500
180,000 Baa* North Country, NY Solid Waste Development
Authority 1992A, 6.000% due 7/1/97 184,500
770,000 Baa1* Philadelphia, PA Gas Works Revenue Bonds, 13th
Series, 7.400% due 6/15/00 837,375
1,500,000 A Platte County, WY PCR, 4.200% due 1/1/99 1,486,875
1,000,000 Ba* Sam Rayburn, TX Municipal Power Supply System
Revenue Refunding, Series A, 6.200% due 10/1/01 961,250
500,000 Aa* South Carolina State, Public Service Authority
Revenue, (Santee-Cooper Project), Series D,
5.500% due 7/1/98 512,500
1,500,000 AA Washington State Public Power Supply, Series B,
(Nuclear Project No. 3), 7.000% due 7/1/97 1,545,000
- ------------------------------------------------------------------------------------------------------
18,698,528
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- -------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
======================================================================================================
<S> <C> <C> <C>
Water & Sewer 1.7%
1,000,000 AA+ Centennial Water and Sanitation District Douglas
County, CO GO, Water & Sewer Refunding Bonds,
LOC Swiss Bank Corp., 6.625% due 6/15/98 $ 1,014,700
1,500,000 NR New Jersey EDA Water Facilities Revenue, Series
1991, (New Jersey American Water Co. Inc.
Project), 7.400% due 11/1/01(a) 1,606,875
250,000 AA Regional Waste Systems Inc., Maine Solid Waste
Resource Recovery System, 7.550% due 7/1/98(a) 266,250
1,175,000 AAA South Essex, MA Sewer District, Series A,
MBIA-Insured, 6.000% due 6/15/05 1,263,125
985,000 A Texas Water Resource Finance Authority Revenue,
Series 89, 7.400% due 8/15/00 1,071,187
- ------------------------------------------------------------------------------------------------------
5,222,137
- ------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT 100%
(Cost $298,417,749*) $306,158,961
======================================================================================================
</TABLE>
(a) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Securities segregated by Custodian for open market purchase commitment.
(c) Pre-Refunded bonds escrowed by U.S. Government Securities and bonds
escrowed to maturity by U.S. Government Securities are considered by
manager to be triple-A rated even if issuer has not applied for new
ratings.
(d) Residual interest bonds-coupon varies inversely with level of short-term
tax-exempt interest rates.
* Aggregate cost for Federal income tax purposes is substantially the same.
+ Duff & Phelps Credit Rating Co.
++ Fitch Investors Services, Inc.
See pages 23 and 24 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
22
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Bond Rating
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Corporation ("Standard & Poor's"), except
those identified by an asterisk (*) are rated by Moody's Investors Services
("Moody's"). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Ratings from "AA" to "BB" 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 issue 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 bonds in this
category than in higher rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the
lowest ranking within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
23
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Bond Ratings (continued)
- --------------------------------------------------------------------------------
Ba -- Bonds which are 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 therefore not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
Short-Term Securities Rating
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rate 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.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
VMIG 1 -- Moody's highest rating for issues having a demand feature --
VRDO.
MIG 1 -- Moody's highest rating for short-term municipal obligations.
- --------------------------------------------------------------------------------
Security Descriptions
- --------------------------------------------------------------------------------
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CONNIE
LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
FLAIRS -- 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
FSA -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
ISD -- Independant School District
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCFA -- Pollution Control Financing Authority
PCR -- Pollution Control Revenue
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
VA -- Veterans Administration
VRDD -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday Demand
24
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (Cost--$298,417,749) $ 306,158,961
Receivable for securities sold 4,470,000
Interest receivable 5,560,661
Receivable for Fund shares sold 632,710
Receivable from investment manager 25,088
Other receivables 6,301
- --------------------------------------------------------------------------------
Total Assets 316,853,721
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 6,005,692
Payable to bank 2,695,928
Dividends payable 589,035
Management fees payable 143,304
Payable for Fund shares purchased 71,161
Distribution fees payable 15,274
Accrued expenses 48,576
Total Liabilities 9,568,970
- --------------------------------------------------------------------------------
Total Net Assets $ 307,284,751
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 46,469
Capital paid in excess of par value 305,409,456
Undistributed net investment income 183,209
Accumulated net realized loss on security transactions (6,095,595)
Net unrealized appreciation of investments 7,741,212
- --------------------------------------------------------------------------------
Total Net Assets $ 307,284,751
================================================================================
Shares Outstanding:
Class A 42,075,447
-----------------------------------------------------------------------------
Class C 4,361,337
-----------------------------------------------------------------------------
Class Y 32,264
-----------------------------------------------------------------------------
Net Asset Value:
Class A (redemption price) $ 6.61
-----------------------------------------------------------------------------
Class C * $ 6.61
-----------------------------------------------------------------------------
Class Y (redemption price) $ 6.62
-----------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 2.04% of net asset value per share) $ 6.74
================================================================================
</TABLE>
* Redemption price is NAV of Class C share reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchases.
See Notes to Financial Statements.
25
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended March 31, 1996
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest $ 16,700,269
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 1,260,753
Distribution fees (Note 3) 459,382
Registration fees 136,636
Shareholder and system servicing fees 74,056
Pricing service fees 37,265
Shareholder communications 36,680
Custody 15,877
Audit and legal 15,502
Trustees' fees 10,028
Other 30,917
- --------------------------------------------------------------------------------
Total Expenses 2,077,096
- --------------------------------------------------------------------------------
Net Investment Income 14,623,173
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 77,289,021
Cost of securities sold 77,402,547
- --------------------------------------------------------------------------------
Net Realized Loss (113,526)
Increase in Net Unrealized Appreciation (Note 7) 2,264,491
- --------------------------------------------------------------------------------
Net Gain on Investments 2,150,965
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 16,774,138
================================================================================
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended March 31,
- --------------------------------------------------------------------------------
1996 1995
================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,623,173 $ 16,768,280
Net realized loss (113,526) (3,741,476)
Increase in net unrealized appreciation 2,264,491 2,606,136
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 16,774,138 15,632,940
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (14,441,996) (17,091,230)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (14,441,996) (17,091,230)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 36,197,918 48,752,624
Net asset value of shares issued in
connection with the transfer of
the Smith Barney Investment Trust -
Smith Barney Limited Maturity Municipals
Fund's net assets (Note 7) 50,182,191 --
Net asset value of shares issued
for reinvestment of dividends 7,807,761 9,178,863
Cost of shares reacquired (60,675,920) (113,025,019)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions 33,511,950 (55,093,532)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 35,844,092 (56,551,822)
NET ASSETS:
Beginning of year 271,440,659 327,992,481
- --------------------------------------------------------------------------------
End of year* $ 307,284,751 $ 271,440,659
================================================================================
*Includes undistributed net investment
income of: $ 183,209 $ 37,862
================================================================================
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Limited Term Portfolio ("Portfolio") is a separate investment portfolio
of the Smith Barney Muni Funds ("Fund"). The Fund, a Massachusetts business
trust, is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company and consists of this
Portfolio and nine other separate investment portfolios: Florida, Georgia, New
York, Ohio, Pennsylvania, National, Florida Limited Term, California Money
Market and New York Money Market portfolios. The financial statements and
financial highlights for the other portfolios are presented in separate annual
reports.
The significant accounting policies consistently followed by the Portfolio
are: (a) securities transactions are accounted for on the trade date; (b)
securities are valued at the mean between the quoted bid and ask prices provided
by an independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
short-term securities maturing within 60 days are valued at cost plus (minus)
accreted discount (amortized premium), which approximates market value; (d)
gains or losses on the sale of securities are calculated by using the specific
identification method; (e) interest income, adjusted for amortization of
premiums and accretion of original issue discount, is recorded on the accrual
basis; market discount is recognized upon the disposition of the security; (f)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (g) direct expenses are charged to the Portfolio and each class;
management fees and general fund expenses are allocated on the basis of relative
net assets; (h) the Portfolio intends to comply with the applicable provisions
of the Internal Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes; (i) the
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. At March 31, 1996, reclassifications are made to the Portfolios'
capital accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, a portion
of accumulated net realized loss amounting to $36 and a portion of undistributed
net investment income amounting to $35,830 has been reclassified to paid-in
capital. Net investment income, net realized gains and net assets were not
affected by this change; and (j) estimates and assumptions are required to be
made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment,
28
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
financial markets and any other parameters used in determining these estimates
could cause actual results to differ from these amounts.
2. Exempt-Interest Dividends and Other Distributions
The Portfolio intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Portfolio.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Management Agreement and Transactions with Affiliated Persons
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment manager to the Fund. The
Portfolio pays SBMFM a management fee calculated at the annual rate of 0.50% of
its average daily net assets. This fee is calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. For the year ended March 31, 1996, SB received sales charges of
approximately $375,000 on purchases of the Portfolio's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 1.00% on Class C
shares of the Portfolio if redemption occurs less than one year from initial
purchase. For the year ended March 31, 1996, CDSCs paid to SB were approximately
$4,000 for Class C shares.
Pursuant to a Distribution Plan, the Portfolio pays a service fee with
respect to Class A and C shares calculated at the annual rate of 0.15% of the
average daily net assets of each class. In addition, the Portfolio pays a
distribution fee with respect to Class C shares calculated at the annual rate of
0.20% of the average daily net assets. For the year ended March 31, 1996, total
Distribution Plan fees incurred were:
<TABLE>
<CAPTION>
Class A Class C
================================================================================
<S> <C> <C>
Distribution Plan Fees $366,567 $92,815
================================================================================
</TABLE>
All officers and two Trustees of the Fund are employees of SB.
4. Investments
During the year ended March 31, 1996, the aggregate cost of purchases and
proceeds from sales of investments (including maturities,
29
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
but excluding short-term securities) were as follows:
<TABLE>
<CAPTION>
================================================================================
<S> <C>
Purchases $68,072,798
- --------------------------------------------------------------------------------
Sales 77,289,021
================================================================================
</TABLE>
At March 31, 1996, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were approximately
as follows:
<TABLE>
<CAPTION>
================================================================================
<S> <C>
Gross unrealized appreciation $8,941,205
Gross unrealized depreciation (1,199,993)
- --------------------------------------------------------------------------------
Net unrealized appreciation $7,741,212
================================================================================
</TABLE>
5. Capital Loss Carryforward
At March 31, 1996, the Portfolio had for Federal income tax purposes
approximately $6,083,000 of capital loss carryforwards available to offset
future capital gains. To the extent that these carryforward losses are used to
offset capital gains, it is possible that the gains so offset will not be
distributed. The amount and expiration of the carryovers are indicated below.
Expiration occurs on March 31, of the year indicated:
<TABLE>
<CAPTION>
2001 2002 2003 2004
================================================================================
<S> <C> <C> <C> <C>
Carryforward Amounts $920,000 $577,000 $2,846,000 $1,740,000
================================================================================
</TABLE>
6. Shares of Beneficial Interest
At March 31, 1996, the Fund had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Portfolio has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest in the Portfolio and has the same rights, except that each
class bears certain expenses specifically related to the distribution of its
shares. Effective November 7, 1994, the Fund adopted a new class structure,
renaming Class B shares as Class C shares and exchanging the former Class C
shares into Class A shares.
At March 31, 1996, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class C Class Y
================================================================================
<S> <C> <C> <C>
Total Paid-In Capital $275,756,826 $ 29,487,588 $211,511
================================================================================
</TABLE>
30
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1996* March 31, 1995
-------------------------- --------------------------
Shares Amount Shares Amount
====================================================================================================
<S> <C> <C> <C> <C>
Class A+
Shares sold 4,460,506 $ 29,767,813 6,753,825 $ 43,787,327
Net asset value of shares issued
in connection with the transfer
of the Smith Barney Investment
Trust - Smith Barney Limited
Maturity Municipals Fund's
net assets (Note 7) 7,239,377 48,596,354 -- --
Shares issued on reinvestment 1,037,716 6,883,693 1,257,227 8,139,136
Shares redeemed (8,105,534) (53,911,260) (16,560,560) (106,844,106)
- ----------------------------------------------------------------------------------------------------
Net Increase (Decrease) 4,632,065 $ 31,336,600 (8,549,508) $ (54,917,643)
====================================================================================================
Class C++
Shares sold 933,359 $ 6,230,105 763,796 $ 4,965,297
Net asset value of shares issued
in connection with the transfer
of the Smith Barney Investment
Trust - Smith Barney Limited
Maturity Municipals Fund's
net assets (Note 7) 236,434 1,585,837 -- --
Shares issued on reinvestment 137,628 912,585 160,710 1,039,727
Shares redeemed (1,018,889) (6,764,660) (958,968) (6,180,913)
- ----------------------------------------------------------------------------------------------------
Net Increase (Decrease) 288,532 $ 1,963,867 (34,462) $ (175,889)
====================================================================================================
Class Y
Shares sold 30,535 $ 200,000 -- --
Shares issued on reinvestment 1,729 11,483 -- --
- ----------------------------------------------------------------------------------------------------
Net Increase 32,264 $ 211,483 -- --
====================================================================================================
</TABLE>
* For Class Y shares, transactions are for the period from April 4, 1995
(inception date) to March 31, 1996.
+ On October 10, 1994, the former Class C shares were exchanged into Class A
shares; therefore the Class C share activity for the period from April 1,
1994 to October 9, 1994 is included with the Class A share activity.
++ On November 7, 1994, the former Class B shares were renamed Class C shares.
31
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
7. Transfer of Net Assets
On February 2, 1996, the Fund acquired the assets and certain liabilities
of the Smith Barney Investment Trust - Smith Barney Limited Maturity Municipals
Fund ("Limited Maturity Fund") pursuant to an Agreement and Plan of
Reorganization dated December 14, 1995. Total shares issued by the Portfolio and
the total net assets of Limited Maturity Fund on the date of transfer were as
follows:
<TABLE>
<CAPTION>
Shares Total Net Total Net
Issued by Assets of Assets of
Acquired Fund the Portfolio Acquired Fund the Portfolio
================================================================================
<S> <C> <C> <C>
Limited Maturity Fund 7,475,811 $50,182,191 $260,062,548
================================================================================
</TABLE>
The total net assets of the Limited Maturity Fund before acquisition
included unrealized appreciation of $772,816 and a net realized loss of
$851,038. Total net assets of the Portfolio immediately after the transfer were
$310,244,739. The transaction was structured to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended.
32
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1996 1995(1) 1994 1993 1992
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $6.54 $6.55 $6.68 $6.45 $6.38
- --------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.36 0.36 0.37 0.39 0.42
Net realized and unrealized gain (loss) 0.07 -- (0.13) 0.23 0.07
- --------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.43 0.36 0.24 0.62 0.49
- --------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36) (0.37) (0.37) (0.39) (0.42)
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.37) (0.37) (0.39) (0.42)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $6.61 $6.54 $6.55 $6.68 $6.45
- --------------------------------------------------------------------------------------------------------------------------
Total Return 6.65% 5.69% 3.65% 9.82% 7.99%
- --------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $278,247 $244,818 $281,771 $242,491 $157,426
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.75% 0.61% 0.53% 0.55% 0.49%
Net investment income 5.43 5.61 5.53 5.90 6.42
- --------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25.72% 21.80% 24.72% 24.53% 26.27%
==========================================================================================================================
</TABLE>
(1) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
33
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
Financial Highlights (continued)
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class C Shares 1996 1995(1) 1994 1993(2)
===============================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $6.54 $6.54 $6.68 $6.62
- ---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.35 0.35 0.35 0.10
Net realized and unrealized gain (loss) 0.06 -- (0.14) 0.05
- ---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.41 0.35 0.21 0.15
- ---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.35) (0.35) (0.09)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.35) (0.35) (0.09)
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $6.61 $6.54 $6.54 $6.68
- ---------------------------------------------------------------------------------------------------------------
Total Return 6.45% 5.51% 3.15% 2.28%++
- ---------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $28,824 $26,622 $26,869 $5,738
- ---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.96% 0.89% 0.88% 0.88%+
Net investment income 5.22 5.34 5.10 5.35+
- ---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25.72% 21.80% 24.72% 24.53%
===============================================================================================================
</TABLE>
(1) On November 7, 1994, the former Class B shares were renamed Class C shares.
(2) For the period from January 5, 1993 (inception date) to March 31, 1993.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
34
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class Y Shares 1996(1)
================================================================================
<S> <C>
Net Asset Value, Beginning of Year $6.56
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.37
Net realized and unrealized gain 0.06
- --------------------------------------------------------------------------------
Total Income From Operations 0.43
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.37)
- --------------------------------------------------------------------------------
Total Distributions (0.37)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $6.62
- --------------------------------------------------------------------------------
Total Return 6.63%++
- --------------------------------------------------------------------------------
Net Assets, End of Year (000s) $214
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.58%+
Net investment income 5.56+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 25.72%
================================================================================
</TABLE>
(1) For the period from April 4, 1995 (inception date) to March 31, 1996.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On December 15, 1995 a special meeting of shareholders of the Fund was held
for the purpose of voting on the following matter:
1. To approve or disapprove a new management agreement between the Fund on
behalf of the Limited Term Portfolio and Smith Barney Mutual Funds
Management Inc. (the Portfolio manager).
The results of the vote on proposal 1 were as follows:
<TABLE>
<CAPTION>
% of % of % of
Outstanding Votes Outstanding Votes Outstanding
Votes For Shares Voted Against Shares Voted Abstaining Shares Voted
=====================================================================================
<S> <C> <C> <C> <C> <C>
15,555,132,716 79.41% 2,489,254,023 12.71% 1,545,096,185 7.88%
=====================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For the year ended March 31, 1996, 100% of the dividends paid by the Fund
from net investment income were tax-exempt for regular Federal income tax
purposes.
35
<PAGE>
Smith Barney Muni Funds
Limited Term Portfolio
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of the
Limited Term Portfolio of Smith Barney Muni Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Limited Term Portfolio of Smith Barney Muni
Funds as of March 31, 1996, 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 the financial highlights for each of the years in
the five-year period then ended. These financial statements 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit also 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 March 31, 1996, by correspondence with the custodian. As to securities
purchased and sold but not received or 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
Limited Term Portfolio of Smith Barney Muni Funds as of March 31, 1996, the
result 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 the financial
highlights for each of the years in the five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 14, 1996
36
<PAGE>
Smith Barney
Muni Funds
Trustees
Jessica M. Bibliowicz
Joseph H. Fleiss
Donald R. Foley
Paul Hardin
Francis P. Martin, M.D.
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
C. Richard Youngdahl
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Lawrence T. McDermott
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
SMITH BARNEY
------------
A Member of TravelersGroup [LOGO]
Investment Manager
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds-Limited Term Portfolio. It is not authorized for
distribution to prospective investors unless accompanied by a current Prospectus
for the Portfolio, which contains information concerning the Portfolio's
investment policies and expenses as well as other pertinent information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
FD2305 5/96
