- ----------------------------------------------
SEMI-ANNUAL REPORT
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Smith Barney
Muni Funds
Florida Limited
Term and
Florida Portfolios
------------------------
September 30, 1996
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
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Florida Limited Term and Florida Portfolios
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Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Muni Funds - Florida Limited Term and Florida Portfolios for the period ended
September 30, 1996. In this report, we summarize the period's prevailing
economic and market conditions and outline each Portfolio's investment strategy.
A detailed summary of each Portfolio's performance can be found in the
appropriate sections that follow in the semi-annual report.
Market and Economic Overview
Because of the uncertainty surrounding the future direction of the U.S. economy,
the bond markets have continued to experience significant volatility over the
past six months. However, this heightened volatility has been confined to a
narrow trading range of between 6.75% and 7.20% on 30-year U.S. Treasury yields.
In our view, this heightened bond market volatility stems from several
conditions in the U.S. economy with the most important being the underlying
strength of the U.S. economy. For example, gross domestic product (GDP) in the
U.S. for the second quarter of 1996 grew at an annualized rate of 4.7%, up from
2.0% in the first quarter. This pace of economic growth has caused pressures on
both labor and capital to increase, yet there have been no signs of a pick-up in
inflation. Bond market investors have closely monitored recent U.S. economic
data for signs of whether the rate of U.S. economic growth will moderate, or
whether the economy will continue to grow at its current pace. The latter
scenario would most likely cause the Federal Reserve Board to tighten monetary
policy by raising short-term interest rates. While the majority of key U.S.
economic announcements over the past six months points toward a strengthening
rather than a weakening economy, government reports released during the month of
September suggest that the economy may be headed for a slowdown. In response,
interest rates have since declined from their higher levels in June and July.
Florida Economic Highlights
During the period covered by this report, Florida's service-based economy
continued to grow at a steady pace, with performance exceeding national levels.
While the Sunshine State's strong economic growth has increased pressure to
build more infrastructure and educational facilities, the State's debt and
financial operations have remained balanced. Moreover, Florida's economy has
diversified away from its traditional base of agriculture and seasonal tourism
1
<PAGE>
into a solid service and trade economy, led by fast-growing businesses in
insurance, banking and export-related industries.
As of September 30, 1996, Florida's general obligation debt is rated double-A by
Moody's Investors Service Inc., Standard & Poor's Ratings Services and Fitch
Investors Service Inc., the three major credit reporting and bond rating
agencies. In our opinion, Florida should be able to maintain its double-A credit
rating because of its solid and more broadly diversified economy.
Florida Limited Term Portfolio's Performance
and Investment Strategy
For the six months ended September 30, 1996, the Class A shares of the Florida
Limited Term Portfolio had a total return of 2.24%. In comparison, the
Portfolio's Lipper Analytical Services, Inc. intermediate-term Florida municipal
bond fund peer average had a total return of 1.92% for the same time period.
(Lipper is an independent fund tracking organization.) As of September 30, 1996,
approximately 98% 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 Standard & Poor's Ratings Services or Moody's Investors Service
Inc.)
Over the six-month period covered by this report, the Florida Limited Term
Portfolio distributed dividends totaling $0.1683 per share; based on its net
asset value (NAV) of $6.69 as of September 30, 1996 for Class A shares, this
equates to an annualized distribution rate of 5.03%. For a Florida resident in
the federal income tax bracket of 36%, the Florida Limited Term Portfolio's tax
free yield of 5.03% is equivalent to a taxable yield of 7.89%.
Florida currently imposes an "intangibles tax" on certain securities and other
intangible assets owned by Florida residents. The Florida Limited Term Portfolio
will seek generally to select investments that will enable its shares to be
exempt from the Florida intangibles tax and will attempt to ensure that all of
its assets held on the annual assessment date are exempt from this tax.
As an intermediate-term municipal bond fund, the Florida Limited Term Portfolio
is restricted to an average weighted maturity of no longer than ten years. As of
September 30, 1996, the Portfolio's average weighted maturity was just over 8
years. During the period covered by this report, the Portfolio maintained its
high-quality credit orientation and strong emphasis on premium bonds in the
intermediate-maturity range because these types of issues generally provide
attractive income while offering investors a degree of protection from market
volatility. The largest sectors of the Florida Limited Term Portfolio were
various types of bonds escrowed with U.S. government securities (28.7%),
hospital bonds (20.4%), pollution control revenue bonds (17.6%) and
single-family mortgage bonds (9%).
2
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Florida Portfolio's Performance and Investment Strategy
For the six-months ended September 30, 1996, the Florida Portfolio posted a
total return of 3.24% for Class A shares. This compares favorably to its Lipper
Analytical Services, Inc. peer group average of 2.96%.
Over the six-month period covered by this report, the Florida Portfolio
distributed dividends totaling $0.372 per share; based on its net asset value
(NAV) of $13.29 as of September 30, 1996 for Class A shares, this equates to an
annualized distribution rate of 5.59%. For a Florida resident in the federal
income tax bracket of 36%, the Florida Portfolio's tax free yield of 5.59% is
equivalent to a taxable yield of 8.73%.
Florida currently imposes an "intangibles tax" on certain securities and other
intangible assets owned by Florida residents. The Florida Portfolio will seek
generally to select investments that will enable its shares to be exempt from
the Florida intangibles tax and will attempt to ensure that all of its assets
held on the annual assessment date are exempt from this tax.
During the period covered by this report, the Florida Portfolio maintained its
high credit quality. Approximately 92% of the Portfolio's holdings were in
investment-grade securities and roughly 50% of the Portfolio's investments had a
triple-A rating. The average weighted maturity of the Florida Portfolio was just
under 21 years and it had excellent call protection. The three largest sectors
of the broadly diversified Florida Portfolio were hospital bonds (12.4%),
multi-family housing bonds (10.6%) and pre-refunded bonds (10%). The Portfolio
continues to follow a prudent investment management strategy that has an
emphasis on high-quality issues, good call protection and broad sector
diversification. We believe our strategy should continue to provide investors
with a competitive income stream, while at the same time helping to minimize the
fluctuation of the Portfolio's NAV when the market is volatile.
Municipal Bond Market Update and Outlook
Although this has been a challenging period for the fixed income markets, the
municipal bond market has outperformed the U.S. government bond market. In our
view, the municipal bond market's better relative performance can be attributed
primarily to higher demand and modest supply. In recent months, investors have
been seeking to reinvest proceeds of municipal bonds that have either matured or
been called, back into the municipal bond market. This increased demand combined
with light supply has caused municipal bond prices to stay higher, and yields to
conversely remain lower, relative to those of U.S. Treasury securities.
Going forward, we expect the municipal bond market should benefit from a
comfortably low annual inflation rate and municipalities that continue to issue
3
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new debt sparingly. In our view, competitive pressures in the global economy and
changing demographics should further help to keep inflation in check. (Labor
costs constitute roughly two-thirds of the total cost of all finished goods.) In
addition, the Federal Reserve seems content with the current level of interest
rates because economic growth is not overly robust. For these reasons, we
maintain a positive outlook on the market for the balance of 1996.
Proposed Reorganization of Florida
Limited Term Portfolio
On September 4, 1996, the Board of Trustees of Smith Barney Muni Funds approved
a proposal to merge the Florida Limited Term Portfolio into the Florida
Portfolio.
In connection with the proposed reorganization of the Florida Limited Term
Portfolio, enclosed is a Prospectus/Proxy Statement which we ask that you take
the time to read carefully. In that regard, we also ask that you complete, sign
and return the enclosed Proxy card as soon as possible.
In closing, thank you for investing in the Smith Barney Muni Funds - Florida
Limited Term and Florida Portfolios. We look forward to continuing to help 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
October 11, 1996
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Announcing a New Systematic Investment Program Monthly Minimum
If you are a shareholder purchasing shares of the Florida Portfolio through
Smith Barney's Systematic Investment Program on a monthly basis or if you plan
to do so in the future, the minimum initial investment for Class A, Class B and
Class C shares is now $25. If you are purchasing shares on a quarterly basis,
the minimum initial investment for Class A, Class B and Class C shares is $50.
Please contact your Smith Barney Financial Consultant for more information about
the Systematic Investment Program. However, please note that participating in
the Systematic Investment Program does not ensure a profit or protect you
against a loss in declining markets.
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4
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Florida Limited Term Portfolio
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Historical Performance -- Class A Shares
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Net Asset Value
--------------------
Beginning End of Income Total(1)
Period Ended of Period Period Dividends Returns(1)
================================================================================
9/30/96 $6.71 $6.69 $0.17 2.24%+
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3/31/96 6.56 6.71 0.33 7.35
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3/31/95 6.44 6.56 0.33 7.17
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Inception* - 3/31/94 6.50 6.44 0.24 2.74+
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Total $1.07
================================================================================
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Historical Performance -- Class C Shares
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Net Asset Value
--------------------
Beginning End of Income Total(1)
Period Ended of Period Period Dividends Returns(1)
================================================================================
9/30/96 $6.70 $6.68 $0.16 2.15%+
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3/31/96 6.55 6.70 0.31 7.17
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3/31/95 6.43 6.55 0.31 6.84
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Inception* - 3/31/94 6.51 6.43 0.23 2.17+
================================================================================
Total $1.01
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
5
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Florida Limited Term Portfolio
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Average Annual Total Return
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Without Sales Charge(1)
-----------------------
Class A Class C
================================================================================
Six Months Ended 9/30/96+ 2.24% 2.15%
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Year Ended 9/30/96 4.41 4.22
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Inception* through 9/30/96 5.68 5.36
================================================================================
With Sales Charge(2)
-----------------------
Class A Class C
================================================================================
Six Months Ended 9/30/96+ 0.15% 1.15%
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Year Ended 9/30/96 2.28 3.22
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Inception* through 9/30/96 5.07 5.36
================================================================================
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Cumulative Total Return
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Without Sales Charge(1)
================================================================================
Class A (Inception* through 9/30/96) 20.85%
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Class C (Inception* through 9/30/96) 19.49
================================================================================
(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 charges 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.
6
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Historical Performance (unaudited)
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[The following information was depicted as a line graph in the printed material]
Growth of $10,000 Invested in Class A Shares of the
Florida Limited Term Portfolio vs.
Lehman 10 Year General Obligation Index+
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April 1993 -- September 1996
Florida Limited Lehman Long Bond Index
4/27/93 9800 10000
3/94 10073 10265
3/95 10780 11032
3/96 11573 12012
9/96 11833 12291
+ 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 September 30, 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.
7
<PAGE>
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Florida Portfolio
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Historical Performance -- Class A Shares
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Net Asset Value
-------------------
Beginning End of Income Capital Gain Total(1)
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $13.24 $13.29 $0.37 $0.00 3.24%+
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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
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3/31/94 13.21 12.82 0.77 0.00 2.75
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3/31/93 12.32 13.21 0.80 0.01 14.21
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Inception* - 3/31/92 12.00 12.32 0.70 0.00 8.70+
================================================================================
Total $4.14 $0.01
================================================================================
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Historical Performance -- Class B Shares
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Net Asset Value
-------------------
Beginning End of Income Capital Gain Total(1)
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $13.23 $13.28 $0.34 $0.00 3.02%+
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3/31/96 12.89 13.23 0.69 0.00 8.09
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Inception* - 3/31/95 11.91 12.89 0.29 0.00 10.77+
================================================================================
Total $1.32 $0.00
================================================================================
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Historical Performance -- Class C Shares
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Net Asset Value
-------------------
Beginning End of Income Capital Gain Total(1)
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $13.22 $13.27 $0.34 $0.00 2.99%+
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3/31/96 12.89 13.22 0.68 0.00 7.96
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3/31/95 12.81 12.89 0.67 0.00 6.12
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3/31/94 13.20 12.81 0.68 0.00 2.05
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Inception* - 3/31/93 12.86 13.20 0.18 0.00 4.05+
================================================================================
Total $2.55 $0.00
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
8
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Florida Portfolio
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Historical Performance -- Class Y Shares
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Net Asset Value
-------------------
Beginning End of Income Capital Gain Total(1)
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
Inception* - 9/30/96 $13.34 $13.29 $0.13 $0.00 0.58%+
================================================================================
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Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-------------------------------------------
Class A Class B Class C Class Y
================================================================================
Six Months Ended 9/30/96+ 3.24% 3.02% 2.99% N/A
- --------------------------------------------------------------------------------
Year Ended 9/30/96 6.62 6.16 5.95 N/A
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Five Years Ended 9/30/96 7.75 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 9/30/96 8.00 7.36 4.95 0.58%+
================================================================================
With Sales Charge(2)
-------------------------------------------
Class A Class B Class C Class Y
================================================================================
Six Months Ended 9/30/96+ (0.88)% (1.48)% 1.99% N/A
- --------------------------------------------------------------------------------
Year Ended 9/30/96 2.35 1.66 4.95 N/A
- --------------------------------------------------------------------------------
Five Years Ended 9/30/96 6.88 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 9/30/96 7.21 5.34 4.95 0.58%+
================================================================================
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Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 9/30/96) 52.75%
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Class B (Inception* through 9/30/96) 14.23
- --------------------------------------------------------------------------------
Class C (Inception* through 9/30/96) 19.80
- --------------------------------------------------------------------------------
Class Y (Inception* through 9/30/96) 0.58+
================================================================================
(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 charges 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, C and Y shares are April 2, 1991, November
16, 1994, January 5, 1993 and August 5, 1996, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
9
<PAGE>
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Historical Performance (unaudited)
- --------------------------------------------------------------------------------
[The following information was depicted as a line graph in the printed material]
Growth of $10,000 Invested in Class A Shares of
the Florida Portfolio vs.
Lehman Long Bond Index+
- --------------------------------------------------------------------------------
April 1991 -- September 1996
Florida Lehman Long Bond 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
9/96 14540 15808
+ 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 September 30, 1996. The Lehman Long Bond 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 twenty 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>
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Schedules of Investments (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Education -- 4.6%
$ 600,000 AAA Hillsborough County School Board COP, MBIA-Insured,
5.500% due 7/1/04 $ 622,500
- -----------------------------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 28.7%
500,000 AAA Alachua County Health Facilities Revenue Refunding,
Santa Fe Healthcare Facilities, 6.000% due 11/15/09 511,250
545,000 AAA Altamonte Springs Health Facility Authority Hospital Revenue,
Adventist Health System, 13.000% due 10/1/01 660,811
290,000 AAA Cape Coral Health Facility Authority Hospital Revenue,
8.125% due 11/1/08 329,150
400,000 AAA Escambia County HFA, Multi-Family Housing Revenue,
Genesis Health, Series A, zero coupon due 4/15/01 314,500
Jacksonville Health Facilities Authority Revenue:
155,000 AAA Hospital Holmes Regulated Medical Center Project,
9.125% due 1/1/03 173,600
200,000 AAA St. Vincents Medical Center, Inc., 9.125% due 1/1/03 225,000
140,000 AAA Loxahatchee River Environmental Control Sewer Revenue,
7.750% due 10/1/13 160,650
570,000 AAA Orange County Health Facility Authority Revenue,
Southern Adventist Hospital, 8.750% due 10/1/09 693,262
395,000 AAA Palm Beach County Health Facility Authority Revenue,
John F. Kennedy Memorial Hospital, Inc.,
9.500% due 8/1/13 512,019
270,000 AAA Virgin Islands Territory GO, 8.000% due 3/1/98 284,513
- -----------------------------------------------------------------------------------------------------------
3,864,755
- -----------------------------------------------------------------------------------------------------------
General Obligation -- 3.7%
475,000 A- Guam Government Limited Obligation Revenue, Series A,
LOC Fuji Bank, 7.000% due 11/15/04 499,344
- -----------------------------------------------------------------------------------------------------------
Hospital -- 20.4%
685,000 Baa* Bay County Hospital Systems Revenue Refunding,
(Bay Medical Center Project), 6.875% due 10/1/99 708,119
600,000 BBB+ Collier County Health Facilities Authority Revenue Refunding,
(The Moorings Inc. Project), 6.125% due 12/1/06 612,750
400,000 Baa1* Jacksonville Health Facilities Authority Development
Revenue, National Benevolent Association Cypress
Village Program, 6.000% due 12/1/04 407,000
500,000 A+ Palm Beach County Health Facilities Authority Revenue,
Good Samaritan Health Systems, 5.700% due 10/1/02 516,250
500,000 AA Volusia County Health Facilities Authority Revenue,
John Knox Village, Series A, 5.600% due 6/1/06 505,625
- -----------------------------------------------------------------------------------------------------------
2,749,744
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</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA LIMITED TERM PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Housing: Multi-Family -- 2.2%
$ 300,000 Aaa* Escambia County, HFA Multi-Family Housing Refunding,
(Meadow Run Project), LOC Federal Home Loan Bank
of Atlanta, 5.500% due 5/1/10 mandatory tender 5/1/03 $ 303,750
- -----------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 9.0%
500,000 Aaa* Brevard County, HFA Single-Family Mortgage,
Series B, 5.700% due 9/1/05(b) 503,750
110,000 AAA Duval County HFA, Single-Family Mortgage Revenue, Mortgage
Backed Securities Program, GNMA-Collateralized,
8.000% due 6/1/00(b) 113,025
175,000 Aaa* Escambia County HFA, Single-Family Mortgage Revenue,
Multi-County Program, Series A, 6.150%, due 4/1/00(b) 178,281
410,000 Aaa* Orange County HFA, Single-Family Mortgage Revenue,
Mortgage Backed Securities Program,
GNMA/FNMA-Collateralized, 6.100% due 10/1/05(b) 425,888
- -----------------------------------------------------------------------------------------------------------
1,220,944
- -----------------------------------------------------------------------------------------------------------
Industrial Development -- 3.2%
400,000 AAA Osceola County IDA, Community Provider Pooled
Loan Program, Series A, CGIC-Insured, 7.500% due 7/1/02 426,500
- -----------------------------------------------------------------------------------------------------------
Pollution Control -- 17.6%
515,000 A Broward County Resource Recovery Revenue, Broward
Waste Energy-LP North, 7.950% due 12/1/08 567,144
500,000 BBB+ Nassau County, Pollution Control, Ref-ITT
Rayonier Inc., 6.100% due 6/1/05 516,250
640,000 AAA Palm Beach County Solid Waste Authority, MBIA-Insured,
10.000% due 12/1/04(a) 783,200
500,000 AAA Pinellas County, Resource Recovery
MBIA-Insured, 5.100%, due 10/1/03(b) 501,250
- -----------------------------------------------------------------------------------------------------------
2,367,844
- -----------------------------------------------------------------------------------------------------------
Short-Term(c) -- 4.5%
600,000 VMIG 1* Pinellas County Health Facilities Authority Revenue,
Pooled Hospital, 5.000% due 12/1/15 600,000
- -----------------------------------------------------------------------------------------------------------
Tax Allocation -- 3.8%
500,000 AAA Orange County Tourist Development Tax Revenue Refunding,
Series A, MBIA-Insured, 5.400% due 10/1/04 517,500
- -----------------------------------------------------------------------------------------------------------
Transportation -- 2.3%
300,000 NR Sanford Airport Authority, IDR, (FL Terminal Inc.
Project), Series A, 7.500% due 5/1/06(b) 304,500
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $13,109,891**) $13,477,381
===========================================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Education -- 3.9%
$1,250,000 NR North Miami Educational Facilities Revenue,
(Johnson & Wales University Project),
Series A, 6.100% due 4/1/13 $1,276,562
1,510,000 Baa* Palm Bay Lease Revenue Refunding, Education and
Research, Series A, 6.850% due 9/1/13 1,538,312
430,000 AA- Pensacola Junior College Foundation, Education Facility
Revenue, LOC Bank of Tokyo, 7.125% due 7/1/09 480,524
Volusia County Educational Facilities Authority Revenue,
Embry Riddle Aeronautical University:
500,000 AAA CONNIE LEE-Insured, 6.500% due 10/15/15 530,000
2,875,000 Baa* Series A, 6.125% due 10/15/16 2,910,937
- -----------------------------------------------------------------------------------------------------------
6,736,335
- -----------------------------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 5.3%
640,000 BBB+ Alachua County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project),
6.050% due 11/15/16 644,000
Bradford County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project):
860,000 BBB+ 6.000% due 11/15/09 869,675
1,000,000 BBB+ 6.050% due 11/15/16 1,017,500
3,000,000 AAA Escambia County HFA, Multi-Family Housing Revenue,
Genesis Healthcare, FGIC-Insured, Principal
Custodial Receipts, zero coupon due 10/1/518 802,500
250,000 NR Florida State Community Service Suburban Utilities,
8.125% due 10/1/98 261,875
1,500,000 AAA Gainsville Utility System Revenue,
8.125% due 10/1/14 1,876,875
320,000 AAA Jacksonville Health Facilities Authority Hospital Revenue,
(Methodist Hospital Project), 10.000% due 10/1/97 333,427
100,000 AAA Lee County Justice Center, MBIA-Insured,
11.125% due 1/1/11 141,500
650,000 AAA Palm Beach County HFA, (John F. Kennedy Memorial
Hospital Inc. Project), Series C, 9.500% due 8/1/13 842,563
2,000,000 AAA Port Everglades Authority Port Improvement,
7.125% due 11/1/16 2,322,500
- -----------------------------------------------------------------------------------------------------------
9,112,415
- -----------------------------------------------------------------------------------------------------------
Finance -- 1.2%
485,000 AA Florida State Board of Education Capital Outlay
Refunding, Series A, 7.250% due 6/1/23(d) 533,500
- -----------------------------------------------------------------------------------------------------------
500,000 AAA Gulf Breeze Local Government Revenue, FGIC-Insured,
7.750% due 12/1/15 557,500
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Finance -- 1.2% (continued)
$ 1,000,000 AA St. Lucie County Special Assessment, South Hutchinson
Island, Asset Guaranteed, 6.200% due 11/1/25 $1,028,750
- -----------------------------------------------------------------------------------------------------------
2,119,750
- -----------------------------------------------------------------------------------------------------------
General Obligation -- 2.9%
500,000 NR Brevard County Tourist Development Tax Revenue,
4th Century Marlins Spring, 6.875% due 3/1/13 516,250
Commonwealth of Puerto Rico GO:
2,000,000 A 5.400% due 7/1/25 1,882,500
1,000,000 AAA MBIA-Insured, Series A, 6.250% due 7/1/13 1,075,000
1,000,000 AA Florida State Broward County, Series 1984,
10.000% due 7/1/14 1,486,250
- -----------------------------------------------------------------------------------------------------------
4,960,000
- -----------------------------------------------------------------------------------------------------------
Government Facilities -- 0.5%
750,000 AAA Florida State Department of Corrections COP, Okeechobee
Correctional, AMBAC-Insured, 6.250% due 3/1/15 790,313
- -----------------------------------------------------------------------------------------------------------
Hospital -- 12.4%
1,500,000 BBB Bay County Hospital Revenue, (Bay County Medical
Center Project), 8.000% due 10/1/12 1,680,000
500,000 AAA Dade County Health Facilities Authority, Hospital
Revenue, (North Shore Medical Center Project),
AMBAC-Insured, 6.500% due 8/15/15 532,500
1,750,000 BBB+ Escambia County Health and Education Financing
Authority, (Baptist Hospital & Manor Project),
6.750% due 10/1/14 1,800,313
Jacksonville Health Facilities Authority Hospital Revenue:
National Benevolent Association, Cypress Hill
Village Program:
750,000 Baa1* 6.400% due 12/1/16 751,875
310,000 AAA 6.400% due 12/1/16 328,600
1,000,000 Baa1* 6.250% due 12/1/26 983,750
2,000,000 AA+ St. Luke's Hospital, FHA-Insured, 7.125% due 11/15/20 2,175,000
Lee County Hospital Board of Directors, Hospital Revenue
Bonds, (Lee Memorial Hospital Project):
1,000,000 AAA CONNIE-LEE Insured, INFLOS 91 Series A,
9.570% due 4/1/20(e) 1,115,000
2,000,000 AAA MBIA-Insured, Linked SAVRS & RIBS,
6.350% due 3/26/20(e) 2,082,500
1,500,000 Aa3* North Miami Catholic Health, 6.000% due 8/15/24 1,485,000
Orange County Health Facilities Authority
Hospital Revenue Bonds:
1,500,000 AAA Adventist Health Systems, CGIC-Insured,
FLAIRS, 7.100% due 11/15/07(e) 1,550,625
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Hospital -- 12.4% (continued)
$2,000,000 AAA MBIA-Insured, 6.416% due 10/29/21 $2,095,000
1,000,000 AAA Series 1991B, Adventist Health Systems/Sunbelt Inc.,
CGIC-Insured, 6.750% due 11/15/21 1,080,000
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(d) 984,400
1,000,000 AAA South Broward Hospital District Revenue Bonds, Series
1991C, AMBAC-Insured, 8.700% due 5/13/21(e) 1,192,500
1,620,000 AAA Volusia County Florida Health Facilities, AMBAC-Insured,
5.500% due 11/15/26 1,565,325
- -----------------------------------------------------------------------------------------------------------
21,402,388
- -----------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 10.6%
Broward County HFA Multi-Family Housing Revenue:
900,000 AAA Boardwalk Apartments, FNMA-Collateralized,
6.200% due 8/1/16 911,250
900,000 AAA Tamarc Pointe, GNMA-Collateralized, 6.250% due 7/1/26 907,875
1,000,000 A+ Waterford Park Project, Series 1991, Policy of Indemnity
Commercial Union Assurance Co. PLC, Reinsured by
Trygg-Hansa Insurance Co. of Sweden,
7.200% mandatory tendor 5/1/02 1,040,000
2,355,000 AAA Dade County IDR Susanna Wesley Health, FHA-Insured,
6.625% due 7/1/30 2,460,975
395,000 AAA Clearwater Multi-Family Housing Revenue, (Drew Gardens
Project), Series A, FHA-Insured, 6.500% due 10/1/25 402,900
Florida Housing Finance Agency:
1,085,000 AAA Antique Club Apartments, Series A-1, AMBAC-Insured,
6.750% due 8/1/14(b) 1,128,400
3,000,000 A Multi-Family Housing, Sr. Lien, Series I-1,
6.625% due 7/1/28(b) 3,018,750
3,000,000 AAA Stoddert Arms Apartments, Series O, AMBAC-Insured,
6.300% due 9/1/36(b) 3,018,750
1,000,000 BBB+ The Vinyards Project, Series H, 6.500% due 11/1/25 993,750
1,000,000 AAA Turtle Creek Apartments, Series C-1, AMBAC-Insured,
6.200% due 5/1/36(b) 1,001,250
1,000,000 AAA Oceanside Housing Development Corp., Multi-Family
Housing and Funding, FHA-Insured, 6.875% due 2/1/20 1,043,750
1,095,000 AAA Southwest Housing Development Corp., Multi-Family
Housing Revenue Refunding, FHA-Insured,
6.875% due 2/1/20 1,134,694
1,000,000 AAA Tampa Revenue Allegany Health State, MBIA-Insured,
6.700% due 12/1/18 1,111,250
- -----------------------------------------------------------------------------------------------------------
18,173,594
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 10.2%
Brevard County Housing Finance Authority, Single-Family
Mortgage Revenue:
$ 750,000 Aaa* 6.600% due 9/1/16(b) $ 763,125
1,000,000 Aaa* 6.400% due 9/1/23(b) 1,020,000
Broward County HFA Revenue Home Mortgage:
1,000,000 Aaa* GNMA/FNMA-Collateralized, 6.650% due 8/1/21(b) 1,035,000
1,035,000 Aa* Zero coupon due 4/1/14 172,069
40,000 Aaa* Clay County HFA Single-Family Mortgage Revenue,
Series 89A, Investment Agreement with AIG,
GNMA-Collateralized, 8.000% due 12/1/12(b) 42,050
Dade County HFA Single-Family Mortgage Revenue:
355,000 Aaa* Series 91B, GNMA/FNMA-Collateralized,
7.250% due 9/1/23(b) 371,419
35,000 Aaa* Series 91E, GNMA-Collateralized, 7.000% due 3/1/24 36,356
1,500,000 AAA GNMA/FNMA-Collateralized, 6.700% due 4/1/28 (b) 1,548,750
Duval County HFA:
735,000 Aaa* Single-Family Housing Revenue, 6.700% due 10/1/26(b) 764,400
405,000 AAA Single-Family Mortgage Revenue, GNMA-Collateralized,
8.500% due 9/1/19(b) 423,731
Escambia County HFA Single-Family Mortgage Revenue:
255,000 Aaa* GNMA-Collateralized, Series 90A, 7.800% due 4/1/22(b) 269,663
635,000 AA Residential Mortgage Series 1, GEMICO Mortgage
Insurance, zero coupon due 11/1/12(e) 125,413
Florida Housing Finance Agency:
500,000 AA Homeowner Mortgage, Series 2, 6.350% due 7/1/28(b) 509,375
155,000 Aaa* Home Ownership Revenue, GNMA-Collateralized,
7.800% due 9/1/10(d) 164,106
1,500,000 AAA Mariner Club Apartments, 6.375% due 9/1/36 1,503,750
1,380,000 AAA Single Family Mortgage, Series B, 6.650% due 7/1/26 1,417,950
415,000 Aaa* Hillsborough County HFA Single-Family Mortgage Revenue,
Series A5, GNMA-Collateralized, 7.700% due 4/1/23(b) 436,788
1,000,000 AAA Leon County HFA Single-Family Mortgage Revenue, Series B,
GNMA/FHLMC-Collateralized, 7.300% due 1/1/28(b) 1,067,500
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(b) 1,295,313
1,500,000 AAA Series A, 6.300% due 4/1/28(b) 1,522,500
465,000 Aaa* Palm Beach HFA Single-Family Mortgage Revenue Bonds,
Series 1991 A, GNMA-Collateralized, 7.875% due 4/1/23(b) 467,906
1,600,000 Aaa* Pinnellas County HFA Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 6.550% due 8/1/24(b) 1,642,000
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 10.2% (continued)
$1,000,000 Aaa* Virgin Islands HFA Single-Family Mortgage,
GNMA-Collateralized, 6.500% due 3/1/25 $ 1,017,500
- -----------------------------------------------------------------------------------------------------------
17,616,664
- -----------------------------------------------------------------------------------------------------------
Industrial Development -- 4.0%
2,225,000 NR Homestead IDR, Community Rehabilitation Providers
Program, Series A, 7.950% due 11/1/18 2,247,250
1,500,000 BBB- Martin County IDA, Indiantown, (Cogeneration Project),
7.875% due 12/15/25(b) 1,698,750
500,000 NR Northern Palm Beach County Water Control District, Unit
Development No. 31, Program 1, 6.750% due 11/1/07 509,375
799,000 AAA Osceola County IDA, Revenue Community Provider
Pooled Loan Program, FSA-Insured, Series A,
7.750% due 7/1/10 845,941
Tampa Sports Authority Revenue, Tampa Bay Arena Project,
MBIA-Insured:
500,000 AAA 6.050% due 10/1/20 530,625
1,000,000 AAA 6.100% due 10/1/26 1,068,750
- -----------------------------------------------------------------------------------------------------------
6,900,691
- -----------------------------------------------------------------------------------------------------------
Miscellaneous -- 7.2%
1,000,000 AAA Dade County Aviation Facilities Revenue, Series B,
MBIA-Insured, 6.600% due 10/1/22(b) 1,068,750
4,000,000 NR Dade County IDR, (Miami Cerebral Palsy Services Project),
8.000% due 6/1/22 4,090,000
5,000,000 AAA Dade County Special Obligation, AMBAC-Insured,
zero coupon due 10/1/16 1,518,750
500,000 BB Hillsborough County Aviation Authority, Special Purpose,
(Delta Airlines Project), 6.800% due 1/1/24 515,625
1,200,000 AAA North Springs Improvement District, MBIA-Insured,
7.000% due 10/1/09 1,395,000
1,200,000 Baa* Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,365,000
1,745,000 BBB Tampa Capital Improvement Program, Series B,
8.375% due 10/1/18 1,845,338
500,000 NR Tampa Revenue (Florida Aquaruim Inc. Project),
7.750% due 5/1/27 543,125
- -----------------------------------------------------------------------------------------------------------
12,341,588
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Nursing Home -- 1.2%
$1,000,000 A1* Broward County Health Facilities Authority Revenue
Refunding, County Nursing Home, LOC Allied Irish
Banks Ltd., 7.500% due 8/15/20(d) $1,080,000
1,000,000 AA Volusia County Health Facilities, (John Knox Projects),
6.000% due 6/1/17 1,021,250
- -----------------------------------------------------------------------------------------------------------
2,101,250
- -----------------------------------------------------------------------------------------------------------
Pollution Control -- 7.9%
1,980,000 A Broward County Resource Recovery Revenue,
(Broward Waste Energy North Project),
7.950% due 12/1/08(d) 2,180,475
2,000,000 A+ Citrus County PCR, Florida Power Corp.,
(Crystal River Project), 6.625% due 1/1/27 2,122,500
Escambia County PCR, (Champion International
Corp. Project):
500,000 BBB 6.950% due 11/1/07 531,250
3,500,000 BBB 6.900% due 8/1/22(b) 3,675,000
705,000 AAA Lee County Solid Waste, MBIA-Insured,
7.000% due 10/1/11(b) 777,263
1,000,000 A+ Pinellas County PCR, Florida Power Corp.,
(Anclote & Bartlow Plants Project), 7.200% due 12/1/14 1,091,250
1,390,000 Baa3* Putnam County Development Authority PCR, Georgia Pacific
Corp. 1984, 7.000% due 12/1/05 1,530,738
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
- -----------------------------------------------------------------------------------------------------------
13,511,601
- -----------------------------------------------------------------------------------------------------------
Pre-Refunded(f) -- 10.0%
Alachua County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project):
195,000 BBB+ Call 11/15/00 @ 102, 6.875% due 11/15/02 212,794
1,000,000 BBB+ Call 11/15/00 @ 102, 7.600% due 11/15/13 1,132,500
1,000,000 AAA Broward County School Board COP, Series 90A,
MBIA-Insured, (Call 7/1/00 @) 102), 7.125% due 7/1/10 1,106,250
1,750,000 AAA Charlotte County Hospital Revenue, Bon Secours Health,
St. Joseph's, Series 88 A, (Call 8/15/98 @ 102),
8.250% due 8/15/18 1,907,500
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Pre-Refunded(f) -- 10.0% (continued)
$1,060,000 AAA Dunedin Hospital Revenue, Mease Health Care,
MBIA-Insured, (Call 11/15/01 @ 102),
6.750% due 11/15/11 $ 1,179,250
1,365,000 AAA Edgewater Water & Sewer Authority, MBIA-Insured,
(Call 10/1/01 @ 102), 7.000% due 10/1/21 1,532,213
515,000 AAA Florida State Board of Education Capital Outlay Refunding,
Series A, (Call 6/1/00 @ 102), 7.250% due 6/1/23 571,006
1,105,000 AAA Florida State Pollution Control, Series X,
(Call 7/1/01 @ 101), 6.400% due 7/1/09 1,197,544
1,000,000 AAA Florida State Turnpike Authority Revenue, AMBAC-Insured,
Series A (Call 7/1/01 @ 102), 7.200% due 7/1/11 1,126,250
1,050,000 AAA Fort Pierce Utilities Authority Revenue Refunding,
AMBAC-Insured, (Call 10/1/01 @ 102),
6.500% due 10/1/16 1,155,000
820,000 A Hillsborough County (County Center Project), Second Series,
(Call 7/1/02 @ 102), 6.750% due 7/1/22 912,250
190,000 BBB+ Hillsborough County Utilities Revenue, Refunding and
Improvement, (Call 8/1/01 @ 102), 7.000% due 8/1/14 212,088
1,000,000 AAA Lee County Capital Improvement & Transportation Facilities
Revenue Bonds, Series 1991, MBIA-Insured,
(Call 10/1/00 @ 102), 6.500% due 10/1/21 1,088,750
1,000,000 AAA Miami Sports & Exhibition Authority Special Obligation
Refunding, FGIC-Insured, (Call 4/1/00 @ 102),
7.200% due 10/1/20 1,103,750
835,000 AAA Pinellas County Health Facilities Authority, Sun Coast
Health System Revenue, Sun Coast Hospital
Guaranteed, Series A, (Call 3/1/00 @ 102),
8.500% due 3/2/20 951,900
1,500,000 AAA Port of Orange Water & Sewer Revenue, AMBAC-Insured,
(Call 4/1/01 @ 24.4), zero coupon due 10/1/21 296,250
1,000,000 AAA St. Lucie County Sales Tax Revenue, FGIC-Insured,
(Call 10/1/02 @ 102), 6.500% due 10/1/22 1,108,750
445,000 AAA Volusia County Airport System Revenue, Daytona Beach
Regional Airport, MBIA-Insured, (Call 10/1/00 @ 102),
7.000% due 10/1/21(b) 490,056
- -----------------------------------------------------------------------------------------------------------
17,284,101
- -----------------------------------------------------------------------------------------------------------
Public Facilities -- 3.0%
3,000,000 AAA Broward County Sports Facilities Civic Center,
MBIA-Insured, 5.625% due 9/1/28 2,958,750
1,000,000 Baa* Miami Beach Redevelopment Tax Increment Revenue,
6.350% due 12/1/22 1,005,000
1,185,000 A Puerto Rico Public Buildings Authority Revenue, Series L,
5.500% due 7/1/21 1,143,525
- -----------------------------------------------------------------------------------------------------------
5,107,275
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Short-Term(c) -- 0.5%
$ 400,000 VMIG 1* Dade County IDR, Florida Power & Light Revenue,
3.750% due 6/1/21 $ 400,000
100,000 VMIG 1* Pinellas County Health Facilities Authority Revenue,
3.875% due 12/1/15 100,000
300,000 VMIG 1* St. Lucie County, PCR, Power & Light Project,
5.000% due 3/1/27 300,000
- -----------------------------------------------------------------------------------------------------------
800,000
- -----------------------------------------------------------------------------------------------------------
Transportation -- 9.4%
1,250,000 Aa* Dade County Aviation Facilities Revenue Bonds,
Series U, 6.750% due 10/1/06(b) 1,312,500
1,500,000 AAA Dade County Seaport GO, MBIA-Insured,
5.125% due 10/1/21 1,398,750
Guam Airport Authority Revenue:
750,000 BBB Series A, 6.500% due 10/1/23 761,250
1,000,000 BBB Series B, 6.600% due 10/1/10(b) 1,025,000
1,000,000 AAA Hillsborough County Tampa International Airport,
FGIC-Insured, 6.000% due 10/1/23 1,025,000
1,500,000 Aa1* 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) 1,601,250
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series Y:
2,000,000 A 5.500% due 7/1/15 1,957,500
3,000,000 A 5.000% due 7/1/36 2,621,250
Sanford, Airport Authority Industrial Development Revenue,
Project A:
1,000,000 NR 7.500% due 5/1/15(b) 987,500
2,000,000 NR 7.750% due 5/1/21(b) 1,985,000
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
- -----------------------------------------------------------------------------------------------------------
16,138,400
- -----------------------------------------------------------------------------------------------------------
Utilities -- 6.4%
1,000,000 AAA Atlantic Beach Utilities Systems Revenue, MBIA-Insured
5.500% due 10/1/25 977,500
3,000,000 AAA Escambia County Utility System Authority Revenue Bonds,
FGIC-Insured, Series B, 6.250% due 1/1/15 3,251,250
2,000,000 AA Gainsville Utility System Revenue, 5.200% due 10/1/22 1,885,000
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<C> <C> <S> <C>
Utilities -- 6.4% (continued)
$1,350,000 BBB Guam Power Authority Revenue, Series A,
6.750% due 10/1/24 $ 1,402,312
930,000 BBB+ Hillsborough County Utilities Revenue, Refunding and
Improvement, 7.000% due 8/1/14 997,424
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 1,361,455
1,000,000 AAA Lakeland Electric & Water Revenue, FGIC-Insured,
6.000% due 10/1/14 1,068,750
- -----------------------------------------------------------------------------------------------------------
10,943,691
- -----------------------------------------------------------------------------------------------------------
Water & Sewer -- 3.4%
1,000,000 AAA Coral Springs Improvement District, Broward County
Water and Sewer Refunding, Series 92,
MBIA-Insured, 6.000% due 6/1/10 1,061,250
1,500,000 AAA Escambia County Water and Sewer District IV Revenue,
7.300% due 1/1/08(f) 1,676,250
1,000,000 AAA Miramar Wastewater Improvement Authority,
FGIC-Insured, 6.750% due 10/1/16 1,097,500
2,000,000 AAA Seminole County Water & Sewer Refunding &
Improvement, MBIA-Insured, 6.000% due 10/1/12 2,115,000
- -----------------------------------------------------------------------------------------------------------
5,950,000
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $163,460,794**) $171,990,056
===========================================================================================================
</TABLE>
(a) Bonds are escrowed to maturity with U.S. Government securities and are
considered by the Manager to be triple-A rated even if the 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 anytime on no more
than seven days notice.
(d) Securities segregated by Custodian for open purchase commitment.
(e) Residual interest bonds - coupon varies inversely with level of short-term
tax-exempt interest rates.
(f) Bonds are escrowed with U.S. Government securities and are considered by
the Manager to be triple-A rated even if the issuer has not applied for new
ratings.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 22 and 23 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Services ("Standard & Poor's")
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA"' have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated 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.
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 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 Investor's.
22
<PAGE>
- --------------------------------------------------------------------------------
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.
VMIG 1 -- Moody's highest rating for issues having demand feature --
variable-rate demand obligation (VRDO).
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
- --------------------------------------------------------------------------------
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>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Florida
Limited Term Florida
Portfolio Portfolio
==============================================================================================
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $13,109,891 and
$163,460,794, respectively) $ 13,477,381 $ 171,990,056
Cash 91,608 97,287
Interest receivable 307,816 3,468,600
Receivable for securities sold 130,267 1,392,355
Receivable for Fund shares sold -- 261,890
Other assets -- 136,710
- ----------------------------------------------------------------------------------------------
Total Assets 14,007,072 177,346,898
- ----------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased -- 4,005,579
Management fees payable -- 72,130
Distribution fees payable 905 24,240
Accrued expenses 47,598 40,776
- ----------------------------------------------------------------------------------------------
Total Liabilities 48,503 4,142,725
- ----------------------------------------------------------------------------------------------
Total Net Assets $ 13,958,569 $ 173,204,173
==============================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 2,087 $ 13,036
Capital paid in excess of par value 13,937,275 164,491,066
Undistributed (overdistributed) net investment income 204,227 (102,043)
Accumulated net realized gain (loss) on security transactions (552,510) 272,852
Net unrealized appreciation of investments 367,490 8,529,262
- ----------------------------------------------------------------------------------------------
Total Net Assets $ 13,958,569 $ 173,204,173
==============================================================================================
Shares Outstanding:
Class A 1,662,068 8,749,313
-------------------------------------------------------------------------------------------
Class B -- 3,664,121
-------------------------------------------------------------------------------------------
Class C 425,366 244,362
-------------------------------------------------------------------------------------------
Class Y -- 378,419
-------------------------------------------------------------------------------------------
Net Asset Value:
Class A (redemption price) $ 6.69 $ 13.29
-------------------------------------------------------------------------------------------
Class B* -- $ 13.28
-------------------------------------------------------------------------------------------
Class C** $ 6.68 $ 13.27
-------------------------------------------------------------------------------------------
Class Y (redemption price) -- $ 13.29
-------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 2.04% and 4.17% of
net asset value per share, respectively) $ 6.83 $ 13.84
==============================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within 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>
- --------------------------------------------------------------------------------
Statements of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996
<TABLE>
<CAPTION>
Florida
Limited Term Florida
Portfolio Portfolio
=========================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 408,439 $ 5,286,619
- -----------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 30,424 419,567
Distribution fees (Note 4) 12,925 250,730
Audit and legal 8,750 24,247
Shareholder communications 7,500 17,450
Shareholder and system servicing fees 6,630 24,473
Registration fees 5,000 65,291
Pricing service fees 2,130 11,261
Trustees' fees 1,864 2,174
Custody 540 4,239
Other 3,216 4,660
- -----------------------------------------------------------------------------------------
Total Expenses 78,979 824,092
Less: Management fee waiver (Note 4) (30,424) --
- -----------------------------------------------------------------------------------------
Net Expenses 48,555 824,092
- -----------------------------------------------------------------------------------------
Net Investment Income 359,884 4,462,527
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE5):
Realized Gain (Loss) From Security Transactions
(excluding short-term securities):
Proceeds from sales 3,318,508 47,254,184
Cost of securities sold 3,329,532 46,807,220
- -----------------------------------------------------------------------------------------
Net Realized Gain (Loss) (11,024) 446,964
- -----------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of period 419,816 8,239,862
End of period 367,490 8,529,262
- -----------------------------------------------------------------------------------------
Increase (Decrease) in Net Unrealized Appreciation (52,326) 289,400
- -----------------------------------------------------------------------------------------
Net Gain (Loss) on Investments (63,350) 736,364
- -----------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 296,534 $ 5,198,891
=========================================================================================
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
<TABLE>
<CAPTION>
Florida Limited Term Portfolio September 30 March 31
==================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 359,884 $ 802,514
Net realized loss (11,024) (27,159)
Increase (decrease) in net unrealized appreciation (52,326) 371,031
- ----------------------------------------------------------------------------------
Increase in Net Assets From Operations 296,534 1,146,386
- ----------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (338,519) (726,602)
Net realized gains -- --
- ----------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (338,519) (726,602)
- ----------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 862,340 1,718,984
Net asset value of shares issued for reinvestment
of dividends 199,164 399,416
Cost of shares reacquired (445,779) (7,676,274)
- ----------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions 615,725 (5,557,874)
- ----------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 573,740 (5,138,090)
NET ASSETS:
Beginning of period 13,384,829 18,522,919
- ----------------------------------------------------------------------------------
End of period* $ 13,958,569 $ 13,384,829
==================================================================================
* Includes undistributed net investment income of: $ 204,227 $ 182,862
==================================================================================
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
<TABLE>
<CAPTION>
Florida Portfolio September 30 March 31
========================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,462,527 $ 7,331,584
Net realized gain 446,964 551,353
Increase in net unrealized appreciation 289,400 1,242,266
- ----------------------------------------------------------------------------------------
Increase in Net Assets From Operations 5,198,891 9,125,203
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (4,609,051) (7,380,106)
Net realized gains -- (14,166)
- ----------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (4,609,051) (7,394,272)
- ----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 15,256,084 28,188,708
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 1,812,182 2,718,508
Cost of shares reacquired (10,858,958) (32,251,471)
- ----------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 6,209,308 52,210,054
- ----------------------------------------------------------------------------------------
Increase in Net Assets 6,799,148 53,940,985
NET ASSETS:
Beginning of period 166,405,025 112,464,040
- ----------------------------------------------------------------------------------------
End of period* $ 173,204,173 $ 166,405,025
========================================================================================
* Includes undistributed (overdistributed) net
investment income of: $ (102,043) $ 44,481
========================================================================================
</TABLE>
See Notes to Financial Statements
27
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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 semi-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 ask prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus 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 premium 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. At March 31, 1996,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. 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.
28
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (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 SBMFM a 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.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. For the six months ended September 30, 1996, SB received sales
charges of approximately $67,000 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. For the six months ended September 30, 1996, CDSCs paid to SB
for Class B shares of the Florida Portfolio were approximately $31,000.
29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Pursuant to a Distribution plan, the Florida Limited Term and Florida
Portfolio pay a service fee with respect to each Portfolios Class A, B 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 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 six
months ended September 30, 1996, total Distribution Plan fees incurred were:
Class A Class B Class C
================================================================================
Florida Limited Term Portfolio $ 8,053 $ -- $ 4,872
- --------------------------------------------------------------------------------
Florida Portfolio 87,200 152,880 10,650
================================================================================
All officers and two Trustees of the Fund are employees of SB.
5. INVESTMENTS
During the six months ended September 30, 1996, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
Florida
Limited Term Florida
Portfolio Portfolio
================================================================================
Purchases $3,445,760 $53,908,088
- --------------------------------------------------------------------------------
Sales 3,318,508 47,254,184
================================================================================
At September 30, 1996, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
Florida
Limited Term Florida
Portfolio Portfolio
================================================================================
Gross unrealized appreciation* $378,733 $8,597,565
Gross unrealized depreciation* (11,243) (68,303)
- --------------------------------------------------------------------------------
Net unrealized appreciation* $367,490 $8,529,262
================================================================================
* Substantially the same for Federal income tax purposes.
30
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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:
Portfolio 2002 2003 2004
================================================================================
Florida Limited Term $ 2,000 $197,000 $338,000
- --------------------------------------------------------------------------------
Florida 250,000 -- --
================================================================================
7. SHARES OF BENEFICIAL INTEREST
At September 30, 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 related to the
distribution of its shares. At September 30, 1996, total paid-in capital
amounted to the following for each class and respective Portfolio:
Portfolio Class A Class B Class C Class Y
================================================================================
Florida Limited Term $ 11,091,059 $ -- $2,848,303 $ --
- --------------------------------------------------------------------------------
Florida 108,339,535 47,832,123 3,284,728 5,047,716
================================================================================
Transactions in shares of each class were as follows:
Six Months Ended Year Ended
September 30, 1996 March 31, 1996
------------------- ---------------------
Florida Limited Term Portfolio Shares Amount Shares Amount
=============================================================================
Class A
Shares sold 106,258 $ 715,167 205,154 $ 1,389,765
Shares issued on reinvestment 24,239 161,765 49,521 332,180
Shares redeemed (59,132) (394,498) (993,665) (6,678,167)
- -----------------------------------------------------------------------------
Net Increase (Decrease) 71,365 $ 482,434 (738,990) $(4,956,222)
=============================================================================
Class C
Shares sold 22,166 $ 147,173 48,742 $ 329,219
Shares issued on reinvestment 5,611 37,399 10,020 67,236
Shares redeemed (7,689) (51,281) (148,851) (998,107)
- -----------------------------------------------------------------------------
Net Increase (Decrease) 20,088 $ 133,291 (90,089) $ (601,652)
=============================================================================
31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1996* March 31, 1996**
--------------------- -------------------------
Florida Portfolio Shares Amount Shares Amount
=====================================================================================
Class A
<S> <C> <C> <C> <C>
Shares sold 419,058 $ 5,538,103 869,445 $ 11,575,125
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 82,797 1,091,808 154,317 2,042,024
Shares redeemed (624,178) (8,237,223) (1,739,593) (23,107,880)
- -------------------------------------------------------------------------------------
Net Increase (Decrease) (122,323) $(1,607,312) 517,072 $ 7,244,793
=====================================================================================
Class B
Shares sold 305,853 $ 4,036,621 810,922 $ 10,843,286
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 47,716 628,754 34,686 464,491
Shares redeemed (186,539) (2,458,661) (211,578) (2,857,130)
- -------------------------------------------------------------------------------------
Net Increase 167,030 $ 2,206,714 3,342,719 $ 45,197,336
=====================================================================================
Class C
Shares sold 51,935 $ 681,360 57,613 $ 770,025
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 3,334 43,904 5,027 66,483
Shares redeemed (12,419) (163,074) (79,796) (1,053,167)
- -------------------------------------------------------------------------------------
Net Increase (Decrease) 42,850 $ 562,190 (11,839) $ (144,563)
=====================================================================================
Class Y
Shares sold 374,812 $ 5,000,000 376,790 $ 5,000,272
Shares issued on reinvestment 3,607 47,716 10,861 145,510
Shares redeemed -- -- (387,651) (5,233,294)
- -------------------------------------------------------------------------------------
Net Increase (Decrease) 378,419 $ 5,047,716 -- $ (87,512)
=====================================================================================
</TABLE>
* For Class Y shares, transactions are for the period from August 5, 1996
(inception date) to September 30, 1996.
** For Class Y shares, transactions are for the period from September 20, 1995
to March 31, 1996.
32
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(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.
33
<PAGE>
- --------------------------------------------------------------------------------
Florida Limited Term Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1996 1995(2) 1994(3)
==========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 6.71 $ 6.56 $ 6.44 $ 6.50
- ------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.18 0.37 0.34 0.26
Net realized and unrealized gain (loss) (0.03) 0.11 0.11 (0.08)
- ------------------------------------------------------------------------------------------
Total Income From Operations 0.15 0.48 0.45 0.18
- ------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.17) (0.33) (0.33) (0.24)
- ------------------------------------------------------------------------------------------
Total Distributions (0.17) (0.33) (0.33) (0.24)
- ------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 6.69 $ 6.71 $ 6.56 $ 6.44
- ------------------------------------------------------------------------------------------
Total Return 2.24%++ 7.35% 7.17% 2.74%++
- ------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $11,117 $10,669 $15,277 $13,147
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4)(5) 0.67%+ 0.53% 0.44% 0.20%+
Net investment income 5.36+ 5.29 5.37 4.90+
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25.61% 12.92% 54.65% 16.28%
==========================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(3) For the period from April 27, 1993 (inception date) to March 31, 1994.
(4) The manager has waived all or part of its fees for the six months ended
September 30, 1996 and the years ended March 31, 1996, March 31, 1995 and
the six months 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 1996 1995 1994 1996 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
Class A $0.020 $0.040 $0.010 $0.029 1.10%+ 1.05% 0.82% 0.71%+
(5) 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.
34
<PAGE>
- --------------------------------------------------------------------------------
Florida Limited Term Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
Class C Shares 1996(1) 1996 1995(2) 1994(3)
=======================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 6.70 $ 6.55 $ 6.43 $ 6.51
- ---------------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.17 0.35 0.32 0.24
Net realized and unrealized gain (loss) (0.03) 0.11 0.11 (0.09)
- ---------------------------------------------------------------------------------------
Total Income From Operations 0.14 0.46 0.43 0.15
- ---------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.16) (0.31) (0.31) (0.23)
- ---------------------------------------------------------------------------------------
Total Distributions (0.16) (0.31) (0.31) (0.23)
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 6.68 $ 6.70 $ 6.55 $ 6.43
- ---------------------------------------------------------------------------------------
Total Return 2.15%++ 7.17% 6.84% 2.17%++
- ---------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $2,842 $2,716 $3,246 $3,815
- ---------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4)(5) 0.88%+ 0.74% 0.70% 0.52%+
Net investment income 5.16+ 5.08 4.98 4.28+
- ---------------------------------------------------------------------------------------
Portfolio Turnover Rate 25.61% 12.92% 54.65% 16.28%
=======================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
(3) For the period from May 4, 1993 (inception date) to March 31, 1994.
(4) The manager has waived all or part of its fees for the six months ended
September 30, 1996 and the years 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 1996 1995 1994 1996 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
Class C $0.020 $0.040 $0.025 $0.033 1.30%+ 1.26% 1.09% 1.04%+
(5) 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.
35
<PAGE>
- --------------------------------------------------------------------------------
Florida Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1996(2) 1995(3) 1994 1993 1992(4)
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.24 $ 12.89 $ 12.82 $ 13.21 $ 12.32 $ 12.00
- ------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (5) 0.36 0.74 0.75 0.77 0.79 0.73
Net realized and unrealized
gain (loss) 0.06 0.35 0.08# (0.39) 0.91 0.29
- ------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.42 1.09 0.83 0.38 1.70 1.02
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.37) (0.74) (0.76) (0.77) (0.80) (0.70)
Net realized gains -- -- -- -- (0.01) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.37) (0.74) (0.76) (0.77) (0.81) (0.70)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 13.29 $ 13.24 $ 12.89 $ 12.82 $ 13.21 $ 12.32
- ------------------------------------------------------------------------------------------------------------
Total Return 3.24%++ 8.65% 6.77% 2.75% 14.21% 8.70%++
- ------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $116,289 $117,473 $107,724 $104,681 $102,202 $ 67,998
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (5)(6) 0.83%+ 0.70% 0.61% 0.54% 0.46% 0.23%+
Net investment income 5.46+ 5.62 5.97 5.71 6.15 6.70+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 28.77% 46.92% 43.23% 20.40% 25.57% 41.72%
============================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) 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.
(3) On October 10, 1994 the former Class C shares were exchanged into Class A
Shares.
(4) For the period from April 2, 1991 (inception date) to March 31, 1992.
(5) 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%+
(6) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.85%.
# 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.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
36
<PAGE>
- --------------------------------------------------------------------------------
Florida Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
Class B Shares 1996(1) 1996(2) 1995(3)
================================================================================
Net Asset Value, Beginning of Period $13.23 $12.89 $11.91
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.33 0.68 0.30
Net realized and unrealized gain 0.06 0.35 0.97#
- --------------------------------------------------------------------------------
Total Income From Operations 0.39 1.03 1.27
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.69) (0.29)
- --------------------------------------------------------------------------------
Total Distributions (0.34) (0.69) (0.29)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $13.28 $13.23 $12.89
- --------------------------------------------------------------------------------
Total Return 3.02%++ 8.09% 10.77%++
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $48,643 $46,267 $1,990
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 1.33%+ 1.20% 1.20%+
Net investment income 4.96+ 5.00 5.57+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 28.77% 46.92% 43.23%
================================================================================
(1) For the six months ended from September 30, 1996 (unaudited).
(2) 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.
(3) For the period from November 16, 1994 (inception date) to March 31, 1995.
(4) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.35%.
# 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 it may not be representative of the
total return for the year.
+ Annualized.
37
<PAGE>
- --------------------------------------------------------------------------------
Florida Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class C Shares 1996(1) 1996(2) 1995(3) 1994 1993(4)
===================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.22 $12.89 $12.81 $13.20 $12.86
- ---------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.32 0.66 0.67 0.68 0.19
Net realized and unrealized gain (loss) 0.07 0.35 0.08# (0.39) 0.33
- ---------------------------------------------------------------------------------------------------
Total Income From Operations 0.39 1.01 0.75 0.29 0.52
- ---------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.68) (0.67) (0.68) (0.18)
- ---------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.68) (0.67) (0.68) (0.18)
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.27 $13.22 $12.89 $12.81 $13.20
- ---------------------------------------------------------------------------------------------------
Total Return 2.99%++ 7.96% 6.12% 2.05% 4.05%++
- ---------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,242 $2,665 $2,750 $2,487 $ 691
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (5) 1.40%+ 1.28% 1.25% 1.24% 1.24%+
Net investment income 4.89+ 5.04 5.40 4.95 5.21+
- ---------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 28.77% 46.92% 43.23% 20.40% 25.57%
===================================================================================================
</TABLE>
(1) For the six months ended from September 30, 1996 (unaudited).
(2) 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.
(3) On November 7, 1994 the former Class B shares were renamed Class C shares.
(4) For the period from January 5, 1993 (inception date) to March 31, 1993.
(5) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.40%.
# 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.
38
<PAGE>
- --------------------------------------------------------------------------------
Florida Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
Class Y Shares 1996(1)
================================================================================
Net Asset Value, Beginning of Period $13.34
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.08
- --------------------------------------------------------------------------------
Total Income From Operations 0.08
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.13)
- --------------------------------------------------------------------------------
Total Distributions (0.13)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $13.29
- --------------------------------------------------------------------------------
Total Return++ 0.58%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $5,030
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses (2) 0.67%
Net investment income 5.72
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 28.77%
================================================================================
(1) For the period from August 5, 1996 (inception date) to September 30, 1996
(unaudited).
(2) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.70%.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
39
<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
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
FD0787 11/96
- ---------------------------------------------
SEMI-ANNUAL REPORT
- ----------------------------------------------
Smith Barney
Muni Funds
Georgia Portfolio
Ohio Portfolio
Pennsylvania Portfolio
----------------------
September 30, 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 semi-annual report for the Smith Barney
Muni Funds - Georgia, Ohio and Pennsylvania Portfolios for the period ended
September 30, 1996. In this report, we summarize the period's prevailing
economic and market conditions and outline our portfolio strategy. A detailed
summary of each Portfolio's performance can be found in the appropriate sections
that follow in the semi-annual report.
Market and Economic Overview
Because of the uncertainty surrounding the future direction of the U.S. economy,
the bond markets have continued to experience significant volatility. However,
this heightened volatility has been confined to a narrow trading range of 6.75%
to 7.20% on 30-year U.S. Treasury yields over the past six months.
In our view, this increased bond market volatility stems from several conditions
in the U.S. economy, with the most important being the underlying strength of
the U.S. economy. For example, gross domestic product (GDP) in the U.S. for the
second quarter of 1996 grew at an annualized rate of 4.7%, up from 2.0% in the
first quarter. This pace of economic growth has caused pressures on both labor
and capital to increase, yet there have been no signs of a pick-up in inflation.
Bond market investors have closely monitored recent U.S. economic data for signs
of whether the rate of economic growth will moderate, or whether the economy
will continue to grow at its current pace. The latter scenario would most likely
cause the Federal Reserve Board (the Fed) to tighten monetary policy by raising
short-term interest rates. While the majority of key U.S. economic announcements
over the past six months point toward a strengthening rather than a weakening
economy, government reports released during the month of September suggest that
the U.S. economy may be headed for a slowdown, and rates have since declined
from their higher levels seen in June and July.
Municipal Bond Market Update
Although this has been a challenging period for the fixed income markets, the
municipal bond market has outperformed the U.S. government bond market. In our
view, this can be attributed to the modest supply of municipal bonds that have
been issued. In recent months, investors have been seeking to reinvest proceeds
of municipal bonds that have either matured or been called, back into the
municipal bond market. However, at the same time, the supply of new issues has
been far below recent averages, and is very close to the low for the
1
<PAGE>
year. This increased demand combined with light supply has caused municipal bond
prices to stay higher, and yields to conversely remain lower, relative to those
of U.S. Treasury securities.
Georgia Economic Highlights
Georgia's economy has continued its strong expansion. The state ranks among the
top-five U.S. states in employment and total population growth. Georgia's robust
economic growth has contributed to rising state revenues, and the rebuilding of
reserves. Although much of the growth in Georgia's economy over the past few
years was a result of the 1996 Summer Olympics, we believe the state possesses
excellent future potential for development. In recent months, a greater
percentage of state budget appropriations have been re-directed to build up the
necessary state infrastructure, particularly educational facilities.
Georgia Portfolio Performance Update
For the six months ended September 30, 1996, the Class A shares of the Georgia
Portfolio had a total return of 3.46% and outperformed the Portfolio's Lipper
Analytical Services, Inc. peer group average total return of 3.01% for the same
time period. (Lipper is an independent fund tracking organization.) Over the
six-month period covered by this report, the Portfolio distributed dividends
totaling $0.345 per share; based on its net asset value (NAV) of $12.58 as of
September 30, 1996 for Class A shares, this equates to an annualized
distribution rate of 5.48%. For a Georgia state resident in the combined federal
and state income tax bracket of 42%, the tax free yield of 5.48% is equivalent
to a taxable yield of 9.45%.
The Georgia Portfolio has a bias toward good quality, higher coupon bonds, with
a focus of current income more so than on total return. As a general rule, we
concentrate on the coupon, maturity and call features of the Portfolio's
holdings rather than the specific purpose for which these municipal bonds are
being issued. However, the Portfolio remains broadly diversified across various
sectors.
As of September 30, 1996, approximately 94% of the Georgia Portfolio's holdings
were rated investment grade (BBB/Baa and higher) by either Standard and Poor's
Ratings Services or Moody's Investors Service Inc., with approximately 48% of
the Portfolio invested in AAA-rated bonds, the highest rating. (Standard and
Poor's and Moody's are two major credit reporting and bond rating agencies.) The
Portfolio's largest holdings are concentrated in escrowed-to-maturity bonds
(13.7%), single-family mortgage bonds (13.7%), utility bonds (10.3%), and
pollution control revenue bonds (9.9%). As of September 30, 1996, the Georgia
Portfolio's average weighted maturity was just over 20 years.
2
<PAGE>
Ohio Economic Highlights
Ohio has experienced strong economic growth over the past few years. The state
ranks seventh in the nation in terms of population and is considered to be one
of most important manufacturing states in the U.S. However, in recent years, the
state's economy has diversified away from manufacturing; where Ohio was once
very vulnerable to economic slowdowns, the state now appears to be less prone to
the type of recessions associated with manufacturing. Because of healthy
economic growth, Ohio has had a state budget surplus for three years in a row.
In addition, the state has been able to set up a health care reserve and has
initiated several state income tax cuts.
Ohio Portfolio Performance Update
For the six months ended September 30, 1996, the Class A shares of the Ohio
Portfolio had a total return of 3.72% and outperformed the Portfolio's Lipper
Analytical Services, Inc. peer group average total return of 3.04% for the same
time period. (Lipper is an independent fund tracking organization.) Over the
six-month period covered by this report, the Portfolio distributed dividends
totaling $0.336 per share; based on its net asset value (NAV) of $12.31 as of
September 30, 1996 for Class A shares, this equates to an annualized
distribution rate of 5.46%. For a Ohio state resident in the combined federal
and state income tax bracket of 43.5%, the tax free yield of 5.46% is equivalent
to a taxable yield of 9.66%.
As of September 30, 1996, the Ohio Portfolio's average weighted maturity was
just over 21 years. Approximately 91% of the Ohio Portfolio's holdings were
rated investment grade (BBB/Baa and higher) by either Standard and Poor's
Ratings Services or Moody's Investors Service Inc., with about 61% of the
Portfolio invested in AAA-rated bonds, the highest rating. (Standard and Poor's
and Moody's are two major credit reporting and bond rating agencies.) The
Portfolio's largest holdings are concentrated in general obligation bonds
(27.3%), water and sewer bonds (17.6%), housing bonds (15.1%), and hospital
bonds (9.1%).
Proposed Reorganization of the Ohio Portfolio
On September 4, 1996 the Board of Trustees of Smith Barney Muni Funds approved a
proposal to merge the Ohio Portfolio into the National Portfolio. In connection
with the proposed reorganization of the Ohio Portfolio, in the months ahead we
will be sending a Prospectus/Proxy Statement which we ask that you take the time
to read carefully. In that regard, we also ask that you sign and return the
Proxy card after you receive it.
3
<PAGE>
Pennsylvania Economic Highlights
The Commonwealth of Pennsylvania has enjoyed relatively strong economic
development over the past decade. While manufacturing continues to be the
dominant industry in the state, it has become less important as significant
growth in service industries has helped to further diversify its economy. Jobs
lost during the last recession have been recovered, and the state's economy now
more closely resembles that of the U.S. The state has set up promising programs
such as the Ben Franklin Partnership and an economic revitalization fund, as
well as industrial resource centers to help develop a strong high technology
industry within the state. We believe Pennsylvania's focus on economic
development as well as investment in state infrastructure are positive first
steps in building a more promising future for its residents.
Pennsylvania Portfolio Update
For the six months ended September 30, 1996, the Class A shares of the
Pennsylvania Portfolio had a total return of 3.63%. In comparison, the
Portfolio's Lipper Analytical Services, Inc. peer group average posted a total
return of 2.97% for the same time period. (Lipper is an independent fund
tracking organization.) Over the six-month period covered by this report, the
Portfolio distributed dividends totaling $0.36 per share; based on its net asset
value (NAV) of $12.71 as of September 30, 1996, this equates to an annualized
distribution rate of 5.66% for Class A shares. For a Pennsylvania state resident
in the combined federal and state income tax bracket of 38.8%, the tax free
yield of 5.66% is equivalent to a taxable yield of 9.25%.
Throughout the period covered by this report the Pennsylvania Portfolio
continued to emphasize good quality, higher coupon bonds. In addition the
Portfolio retained its broad sector diversification and good call protection.
Approximately 94% of the Portfolio's holdings were rated investment grade
(BBB/Baa and higher) by either Standard and Poor's Ratings Services or Moody's
Investors Service Inc., with about 44% of the Fund invested in AAA bonds, the
highest rating. (Standard and Poor's and Moody's are two major credit reporting
and bond rating agencies.) The Portfolio's largest holdings are concentrated in
hospital bonds (22.2%), industrial development revenue bonds (12.0%), general
obligation bonds (11.7%), and transportation bonds (9.2%). As of September 30,
1996, the Pennsylvania Portfolio's average weighted maturity was just over 21
years.
Municipal Bond Market Outlook
Going forward, we expect that the municipal bond market should benefit from a
comfortably low annual inflation rate and municipalities that will continue to
issue new debt sparingly. In addition, the Federal Reserve seems content with
the current level of interest rates because economic growth is not overly
robust.
4
<PAGE>
Although it has been widely anticipated by many analysts and investors
that the Fed would increase short-term interest rates, it is our opinion that
monetary policy is on hold for now. For these reasons, we maintain a positive
outlook on the market for the balance of 1996. In addition, the market at
today's levels is attractively priced and, with limited supply, should provide
investors with attractive after-tax yields.
In closing, thank you for investing in the Smith Barney Muni Funds - Georgia,
Ohio and Pennsylvania Portfolios. We look forward to continuing to help 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 Georgia and
Pennsylvania Portfolios
/s/ Lawrence T. McDermott
Lawrence T. McDermott
Vice President
Ohio Portfolio
October 11, 1996
- --------------------------------------------------------------------------------
Announcing a New Systematic Investment Program Monthly Minimum
If you are a shareholder purchasing shares of the Georgia or Pennsylvania
Portfolios through Smith Barney's Systematic Investment Program on a monthly
basis or if you plan to do so in the future, the minimum investment for Class A,
Class B and Class C shares is now $25. If you are purchasing shares on a
quarterly basis, the minimum investment for Class A, Class B and Class C shares
is $50. Please contact your Smith Barney Financial Consultant for more
information about the Systematic Investment Program. However, please note that
participating in the Systematic Investment Program does not ensure a profit or
protect you against a loss in declining markets.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Georgia Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $12.50 $12.58 $0.35 $0.00 3.46%+
- --------------------------------------------------------------------------------
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 $1.67 $0.05
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $12.50 $12.58 $0.31 $0.00 3.20%+
- --------------------------------------------------------------------------------
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 $1.45 $0.05
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $12.49 $12.57 $0.31 $0.00 3.17%+
- --------------------------------------------------------------------------------
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 $1.51 $0.05
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
6
<PAGE>
- --------------------------------------------------------------------------------
Georgia Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
------------------------------
Class A Class B Class C
================================================================================
Six Months Ended 9/30/96+ 3.46% 3.20% 3.17%
- --------------------------------------------------------------------------------
Year Ended 9/30/96 7.32 6.79 6.78
- --------------------------------------------------------------------------------
Inception* through 9/30/96 7.81 6.64 7.09
================================================================================
- --------------------------------------------------------------------------------
Without Sales Charge(2)
------------------------------
Class A Class B Class C
================================================================================
Six Months Ended 9/30/96+ (0.67)% (1.30)% 2.17%
- --------------------------------------------------------------------------------
Year Ended 9/30/96 3.01 2.29 5.78
- --------------------------------------------------------------------------------
Inception* through 9/30/96 6.06 5.39 7.09
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 9/30/96) 20.63%
- --------------------------------------------------------------------------------
Class B (Inception* through 9/30/96) 15.82
- --------------------------------------------------------------------------------
Class C (Inception* through 9/30/96) 18.40
================================================================================
(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 charges 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 within 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.
7
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
[The following information was depicted as a line graph in the printed material]
Growth of $10,000 Invested in Class A Shares of
the Georgia Portfolio vs. Lehman Long Bond Index+
- --------------------------------------------------------------------------------
April 1994 -- September 1996
Date Georgia Index
---- ------- -----
4/4/94 9600 10000
9/94 9662 10147
3/95 10193 10903
9/95 10778 11405
3/96 11222 11733
9/96 11567 12240
+ 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 September 30, 1996. The Lehman Long Bond 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 twenty
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.
8
<PAGE>
- --------------------------------------------------------------------------------
Ohio Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $12.20 $12.31 $0.34 $0.00 3.72%+
- --------------------------------------------------------------------------------
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 $1.49 $0.00
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $12.18 $12.28 $0.31 $0.00 3.41%+
- --------------------------------------------------------------------------------
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 $1.36 $0.00
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $12.19 $12.29 $0.31 $0.00 3.39%+
- --------------------------------------------------------------------------------
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 $1.35 $0.00
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
9
<PAGE>
- --------------------------------------------------------------------------------
Ohio Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
------------------------------
Class A Class B Class C
================================================================================
Six Months Ended 9/30/96+ 3.72% 3.41% 3.39%
- --------------------------------------------------------------------------------
Year Ended 9/30/96 6.45 5.83 5.78
- --------------------------------------------------------------------------------
Inception* through 9/30/96 6.72 6.03 6.03
================================================================================
Without Sales Charge(2)
------------------------------
Class A Class B Class C
================================================================================
Six Months Ended 9/30/96+ (0.44)% (1.09)% 2.39%
- --------------------------------------------------------------------------------
Year Ended 9/30/96 2.18 1.33 4.78
- --------------------------------------------------------------------------------
Inception* through 9/30/96 4.85 4.81 6.03
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 9/30/96) 16.16%
- --------------------------------------------------------------------------------
Class B (Inception* through 9/30/96) 14.41
- --------------------------------------------------------------------------------
Class C (Inception* through 9/30/96) 14.40
- --------------------------------------------------------------------------------
(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 charges 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 within 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.
10
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
[The following information was depicted as a line graph in the printed material]
Growth of $10,000 Invested in Class A Shares of
the Ohio Portfolio vs. Lehman Long Bond Index+
- --------------------------------------------------------------------------------
June 1994 -- September 1996
Date Ohio Index
---- ---- -----
6/13/94 9600 10000
9/94 9392 10108
3/95 9981 10860
9/95 10468 11360
3/96 10744 11687
9/96 11143 12192
+ 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 September 30, 1996. The Lehman Long Bond 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 twenty
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.
11
<PAGE>
- --------------------------------------------------------------------------------
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $12.62 $12.71 $0.36 $0.00 3.63%+
- --------------------------------------------------------------------------------
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 $1.70 $0.05
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $12.61 $12.69 $0.33 $0.00 3.32%+
- --------------------------------------------------------------------------------
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 $1.47 $0.05
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/96 $12.61 $12.69 $0.33 $0.00 3.30%+
- --------------------------------------------------------------------------------
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 $1.55 $0.05
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
12
<PAGE>
- --------------------------------------------------------------------------------
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
------------------------------
Class A Class B Class C
================================================================================
Six Months Ended 9/30/96+ 3.63% 3.32% 3.30%
- --------------------------------------------------------------------------------
Year Ended 9/30/96 6.60 6.06 6.01
- --------------------------------------------------------------------------------
Inception* through 9/30/96 8.26 6.79 7.65
================================================================================
With Sales Charge(2)
------------------------------
Class A Class B Class C
================================================================================
Six Months Ended 9/30/96+ (0.54)% (1.18)% 2.30%
- --------------------------------------------------------------------------------
Year Ended 9/30/96 2.32 1.56 5.01
- --------------------------------------------------------------------------------
Inception* through 9/30/96 6.50 5.57 7.65
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 9/30/96) 21.88%
- --------------------------------------------------------------------------------
Class B (Inception* through 9/30/96) 16.17
- --------------------------------------------------------------------------------
Class C (Inception* through 9/30/96) 20.15
================================================================================
(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 charges 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 within 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.
13
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
[The following information was depicted as a line graph in the printed material]
Growth of $10,000 Invested in Class A Shares of
the Pennsylvania Portfolio vs. Lehman Long Bond Index+
- --------------------------------------------------------------------------------
April 1994 -- September 1996
Penn Index
---- -----
4/4/94 9600 10000
9/94 9839 10147
3/95 10436 10903
9/95 10964 11405
3/96 11279 11733
9/96 11700 12240
+ 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 September 30, 1996. The Lehman
Long Bond 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 twenty 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.
14
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<C> <C> <S> <C>
Education -- 5.9%
$ 250,000 AAA Cherokee County School, AMBAC-Insured,
5.875% due 2/1/09 $ 260,625
1,000,000 AAA Fulton County Development Authority Revenue, (Clark
Atlanta University Project), CONNIE LEE-Insured,
5.375% due 1/1/20 943,750
- -----------------------------------------------------------------------------------------
1,204,375
- -----------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 13.7%
350,000 AAA Cobb County Kennestone Hospital Authority Revenue,
MBIA-Insured, 10.250% due 2/1/02 392,875
1,875,000 Aaa* Colquitt County Development Authority Revenue,
Sub-Series C, zero coupon due 12/1/21 328,125
485,000 AAA Puerto Rico Commonwealth Aqueduct & Sewer
Authority Revenue, 10.250% due 7/1/09 669,906
1,025,000 Aaa* Richmond County Development Authority, Sub-Series C,
zero coupon due 12/1/21 181,938
185,000 Aaa* Richmond County, Water and Sewer Revenue,
9.875% due 4/1/02 213,675
1,500,000 Aa* Savannah Economic Development Authority,
zero coupon due 12/1/21 262,500
300,000 AAA Tri City Hospital Authority Hospital Revenue,
FGIC-Insured, 10.250% due 7/1/06 414,750
2,000,000 Aaa* Washington, GA Wilkes Payroll Development Authority,
zero coupon due 12/1/21 355,000
- -----------------------------------------------------------------------------------------
2,818,769
- -----------------------------------------------------------------------------------------
General Obligation -- 5.8%
220,000 AA+ Georgia State GO, 6.800% due 3/1/11 251,075
1,000,000 A Puerto Rico Commonwealth GO, 5.400% due 7/1/25 941,250
- -----------------------------------------------------------------------------------------
1,192,325
- -----------------------------------------------------------------------------------------
Government Facilities -- 2.7%
500,000 AAA Puerto Rico Public Building Authority Revenue,
Government Facilities, Series A, AMBAC-Insured,
6.250% due 7/1/14 545,000
- -----------------------------------------------------------------------------------------
Hospitals -- 7.4%
500,000 Baa1* Fulco County Hospital Authority Revenue Anticipation
Certificates, Georgia Baptist Healthcare, Series A,
6.250% due 9/1/13 497,500
500,000 BBB Puerto Rico Industrial Tourist Educational, Medical &
Environmental Control Facility Finance Authority,
(Ryder Memorial Hospital Project), Series A,
6.700% due 5/1/24 507,500
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<C> <C> <S> <C>
Hospitals -- 7.4% (continued)
$ 500,000 BBB+ Savannah Hospital Authority, Candler Hospital,
7.000% due 1/1/11 $ 518,750
- -----------------------------------------------------------------------------------------
1,523,750
- -----------------------------------------------------------------------------------------
Housing: Multi-Family -- 7.5%
965,000 A Atlanta Urban Residential Finance Authority, Multi-Family
Housing Revenue, (Cascade Pines Housing Project),
6.250% due 9/1/10(b) 967,412
250,000 A Cobb County Housing Authority Refunding, (Signature
Place Project), Series A, 6.875% due 10/1/17 257,500
300,000 AAA De Kalb County Housing Authority Revenue Refunding,
MBIA-Insured, 7.750% due 1/1/26 319,500
- -----------------------------------------------------------------------------------------
1,544,412
- -----------------------------------------------------------------------------------------
Housing: Single-Family -- 13.7%
1,000,000 AAA Fulton County Housing Authority, Single-Family
Management Revenue, Series A, GNMA-Collateralized,
6.600% due 3/1/28(b) 1,025,000
350,000 AA+ Georgia State Housing Finance Authority Revenue,
Single-Family Mortgage, Series A, FHA-Insured,
6.600% due 12/1/23(b) 356,125
345,000 AA+ Georgia State Residential Finance Authority, Home
Ownership Mortgage, Series A, FHA-Insured,
7.250% due 12/1/21(b) 366,562
500,000 AAA Puerto Rico Housing Bank and Finance Agency,
Single-Family Mortgage, Afford Housing Mortgage,
Portfolio I, GNMA/FNMA-Collateralized,
6.250% due 4/1/29(b) 506,250
550,000 AAA Virgin Islands Housing Finance Authority, Single-Family
Mortgage, Series A, GNMA-Collateralized,
6.450% due 3/1/16(b) 557,562
- -----------------------------------------------------------------------------------------
2,811,499
- -----------------------------------------------------------------------------------------
Industrial Development -- 2.5%
500,000 A1* Savannah EDA, IDR, 6.150% due 3/1/17 518,750
- -----------------------------------------------------------------------------------------
Miscellaneous -- 2.8%
500,000 BBB Puerto Rico Housing Bank and Finance Agency,
Kidder, 7.500% due 12/1/06 568,750
- -----------------------------------------------------------------------------------------
Pollution Control -- 9.9%
400,000 AAA Burke County PCR, (Ogelthorpe Power Co. Vogtle Project),
MBIA-Insured, 7.500% due 1/1/03 439,500
500,000 A+ Monroe County Development Authority PCR,
6.800% due 1/1/12 559,375
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<C> <C> <S> <C>
Pollution Control -- 9.9% (continued)
$1,000,000 NR Rockdale County Development Authority, Solid Waste
Disposal Revenue, (Visy Paper Project),
7.500% due 1/1/26 $ 1,025,000
- ------------------------------------------------------------------------------------------
2,023,875
- ------------------------------------------------------------------------------------------
Pre-Refunded(c) -- 1.4%
1,000,000 Aaa* Atlanta Urban Residential Finance Authority,
Single-Family Mortgage Revenue, (Call 4/1/15 @ 85),
zero coupon due 10/1/16 281,250
- ------------------------------------------------------------------------------------------
Public Facilities -- 6.2%
250,000 AAA Butts County COP, MBIA-Insured, 6.750% due 12/1/14 272,188
1,000,000 AAA Cobb-Marietta Counties Coliseum and Exhibit Hall
Authority Revenue, MBIA-Insured, 5.625% due 10/1/26 1,006,250
- ------------------------------------------------------------------------------------------
1,278,438
- ------------------------------------------------------------------------------------------
Short-Term(d) -- 2.9%
Burke County Authority PCR, Georgia Power Company:
300,000 VMIG 1* 3.850% due 7/1/24 300,000
300,000 A-1 4.000% due 4/1/25 300,000
- ------------------------------------------------------------------------------------------
600,000
- ------------------------------------------------------------------------------------------
Transportation -- 1.3%
250,000 AAA Metro Atlanta Rapid Transit Authority Revenue Refunding,
Series P, AMBAC-Insured, 6.250% due 7/1/20 271,875
- ------------------------------------------------------------------------------------------
Utilities -- 10.3%
500,000 AAA Georgia Municipal Electric Authority Power Revenue,
Series EE, AMBAC-Insured, 7.250% due 1/1/24(e) 606,250
500,000 A- Georgia Municipal Gas Authority Revenue,
(Southern Storage Gas Project), 6.300% due 7/1/09 523,125
1,000,000 AA Hogansville Combined Public UtiIity System,
Asset Guaranty, 5.850% due 10/1/15 996,250
- ------------------------------------------------------------------------------------------
2,125,625
- ------------------------------------------------------------------------------------------
Water & Sewer -- 6.0%
300,000 AAA Fulton County Water & Sewer Revenue, FGIC-Insured,
6.375% due 1/1/14 328,500
1,000,000 A Puerto Rico Commonwealth Aqueduct & Sewer Authority
Revenue, 5.000% due 7/1/19 902,500
- ------------------------------------------------------------------------------------------
1,231,000
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $19,877,398**) $20,539,693
==========================================================================================
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
OHIO PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================
<C> <C> <S> <C>
Education -- 4.6%
$ 200,000 AAA Lakeview Local School District, AMBAC-Insured,
6.900% due 12/1/14 $ 223,000
100,000 AA- Ohio State Higher Education Facilities Revenue,
Case Western University, 6.000% due 10/1/22 101,000
100,000 AAA Strongville City Schools Improvement, AMBAC-Insured,
6.000% due 12/1/14 103,625
- ------------------------------------------------------------------------------------------
427,625
- ------------------------------------------------------------------------------------------
General Obligation -- 27.3%
150,000 A1* Avon Lake City School District GO, 6.250% due 12/1/19 158,062
500,000 AAA Cleveland GO, AMBAC-Insured, 5.500% due 9/1/16(e) 495,000
250,000 AA Columbiana County GO, Asset Guaranty,
6.600% due 12/1/17 263,438
105,000 AAA Columbus SewerImprovement #28, 6.000% due 5/1/12 109,069
325,000 AAA Lucas County GO,AMBAC-Insured, 5.400% due 12/1/15 311,594
250,000 AA Ohio State GO, 6.200%due 8/1/14 264,375
250,000 AAA Richland County GO, AMBAC-Insured,
5.400% due 12/1/15 243,437
300,000 AAA Summit County Addiction & Mental Health Facilities,
AMBAC-Insured, 6.400% due 12/1/14 322,875
400,000 Aa* Troy Capital Facilities, 5.375% due 12/1/15 382,000
- ------------------------------------------------------------------------------------------
2,549,850
- ------------------------------------------------------------------------------------------
Hospital -- 9.1%
350,000 BBB- Green Springs Health Care Facilities Revenue,
(St. Francis Health Care Center Project),
Series A, 7.125% due 5/15/25 356,125
500,000 Baa* Miami County Hospital Facilities Refunding &
Improvement, Upper Valley Medical Center,
Series A, 6.375% due 5/15/26 493,750
- ------------------------------------------------------------------------------------------
849,875
- ------------------------------------------------------------------------------------------
Housing: Multi-Family -- 6.1%
250,000 Aaa* Cuyahoga County Multi-Family Housing-Dalebridge
Apartments, GNMA-Collateralized, FHA Supported,
6.500% due 10/20/20(b) 254,062
300,000 Aaa* Kent Multi-Family Housing, GNMA-Collateralized,
FHA Supported, 7.150% due 12/20/26(b) 317,250
- ------------------------------------------------------------------------------------------
571,312
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
OHIO PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==============================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 9.0%
Ohio Housing Finance Agency Residential Mortgage,
GNMA-Collateralized:
$ 250,000 AAA Series A-1, 6.100% due 9/1/14 $ 250,625
Series A-2:
240,000 AAA 6.125% due 9/1/24(b) 234,000
250,000 AAA 6.625% due 3/1/26(b) 255,625
100,000 AAA Single-Family Housing Mortgage Revenue,
Series A, GNMA-Collateralized, 6.000% due 2/1/16 101,000
- ----------------------------------------------------------------------------------------------
841,250
- ----------------------------------------------------------------------------------------------
Industrial Development -- 1.6%
150,000 Aa3* Toledo-Lucas County Port Authority Revenue Refunding,
(Cargill Inc. Project), 5.900% due 12/1/15 152,250
- ----------------------------------------------------------------------------------------------
Miscellaneous -- 4.1%
200,000 AAA Ohio State Building Authority, Juvenile Correction
Facility, Series A, AMBAC-Insured, 6.600% due 10/1/14 217,000
150,000 AAA Puerto Rico Public Buildings Authority Revenue,
AMBAC-Insured, 6.250% due 7/1/15 163,125
- ----------------------------------------------------------------------------------------------
380,125
- ----------------------------------------------------------------------------------------------
Pollution Control -- 1.7%
150,000 AAA Ohio State Water Development Authority PCR,
MBIA-Insured, 5.700% due 12/1/11 152,438
- ----------------------------------------------------------------------------------------------
Public Facilities -- 5.4%
500,000 AAA Toledo-Lucas County, (Lodging Tax - Convention Center
Project), MBIA-Insured, 5.700% due 10/1/15 499,375
- ----------------------------------------------------------------------------------------------
Short-Term(d) -- 3.2%
300,000 VMIG 1* Puerto Rico Commonwealth Government Development
Bank, 3.250% due 12/1/15 300,000
- ----------------------------------------------------------------------------------------------
Solid Waste -- 5.6%
500,000 NR Ohio State Solid Waste Revenue, Republic Engineered
Steels Inc., 9.000% due 6/1/21(b)(e) 522,500
- ----------------------------------------------------------------------------------------------
Utilities -- 4.7%
Cleveland Public Power System, MBIA-Insured,
First Mortgage:
200,000 AAA Series A, 7.000% due 11/15/24 224,750
195,000 AAA Series B, 7.000% due 11/15/17 214,500
- ----------------------------------------------------------------------------------------------
439,250
- ----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
OHIO PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================
<C> <C> <S> <C>
Water & Sewer -- 17.6%
$ 100,000 AAA Cleveland Water Works Revenue, First Mortgage,
Series 92B, AMBAC-Insured, 6.250% due 1/1/16 $ 104,375
400,000 AAA Cleveland Water Works Revenue Refunding &
Improvement, First Mortgage, Series H,
MBIA-Insured, 5.750% due 1/1/26 398,500
400,000 A Ohio Water Development Authority, (Broken Hill Project),
6.450% due 9/1/20(b) 410,500
500,000 AAA Toledo Water Works Revenue, FGIC-Insured,
5.750% due 11/15/13 506,250
200,000 A- Trumbull County Sewer Disposal Revenue,
(General Motors Corp. Project), 6.750% due 7/1/14(b) 221,000
- ---------------------------------------------------------------------------------------------
1,640,625
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $9,029,539**) $9,326,475
=============================================================================================
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================
<C> <C> <S> <C>
Education -- 5.9%
$1,000,000 AAA Abington School District, GO Unlimited,
FGIC-Insured, 6.000% due 5/15/21 $1,021,250
1,000,000 AAA Pennsylvania State Higher Education Facility Authority,
MBIA-Insured, 5.700% due 11/15/11 1,018,750
- ---------------------------------------------------------------------------------------------
2,040,000
- ---------------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 6.8%
340,000 Aaa* Blair County Hospital Authority Revenue,
Altoona Hospital, 6.900% due 7/1/08 370,600
540,000 AAA Cambria County Hospital Development Authority,
Conemaugh Valley Memorial Hospital,
7.625% due 9/1/11 633,825
435,000 AAA Lewisburg Area School District Building,
AMBAC-Insured, 9.750% due 2/15/04(e) 534,506
325,000 AAA Southeastern Greene School District,
9.375% due 7/1/03 377,406
1,175,000 AAA Westmoreland County Municipal Authority Service
Revenue, FGIC-Insured, zero coupon due 8/15/20 286,406
145,000 AAA York County GO, Refunding, AMBAC-Insured,
8.875% due 6/1/06 174,363
- ---------------------------------------------------------------------------------------------
2,377,106
- ---------------------------------------------------------------------------------------------
Finance -- 1.5%
500,000 A Pennsylvania State Finance Authority Revenue
Refunding, (Municipal Capital Input Project),
Societe Generale, 6.600% due 11/1/09 530,625
- ---------------------------------------------------------------------------------------------
General Obligation -- 11.7%
1,255,000 AAA Hazleton Area School District GO, Series B, FGIC-Insured,
zero coupon due 3/1/25 229,038
1,455,000 AAA Philadelphia GO, Series B, AMBAC-Insured,
5.500% due 9/1/25 1,402,256
1,600,000 A Puerto Rico Commonwealth GO, 5.400% due 7/1/25 1,506,000
2,500,000 AAA Westmoreland County GO, Refunding Series G,
FGIC-Insured, zero coupon due 12/1/13 918,750
- ---------------------------------------------------------------------------------------------
4,056,044
- ---------------------------------------------------------------------------------------------
Hospital -- 22.2%
1,000,000 AAA Allegheny County Hospital Development Authority,
Mercy Health System, AMBAC-Insured,
5.625% due 8/15/26 970,000
500,000 AAA Allegheny Hospital Development Authority,
(General Hospital Project), Series A,
MBIA-Insured, 6.250% due 9/1/20 518,750
</TABLE>
See Notes to Fiancial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================
<C> <C> <S> <C>
Hospital -- 22.2% (continued)
$1,000,000 BBB Allentown Area Hospital Authority Revenue,
Sacred Heart Hospital, 6.750% due 11/15/14 $1,013,750
1,000,000 BBB- McKean County Hospital Authority Revenue,
(Bradford Hospital Project), 6.100% due 10/1/20 950,000
1,000,000 AA Potter County Hospital Authority Revenue, Asset
Guaranty Insured, 6.050% due 8/1/24 1,003,750
500,000 BBB Puerto Rico Industrial, Tourist, Educational,
Medical & Environmental Control Facilities,
(Ryder Memorial Hospital Project), Series A,
6.700% due 5/1/24 507,500
225,000 AAA Ridley Park Hospital Authority, Taylor Hospital,
Series A-Refunding, 6.000% due 12/1/13 205,875
Scranton-Lackawanna Health & Welfare
Authority Revenue:
500,000 NR Allied Services Rehabilitation Hospitals,
Project-A, 7.600% due 7/15/20 514,375
500,000 AAA University of Scranton Project, AMBAC-Insured,
6.800% due 11/1/14(e) 536,875
1,000,000 A- Union County Hospital Authority, (Evangelical
Community Hospital Project), 5.850% due 7/1/11 980,000
500,000 AAA Wayne County Hospital & Health Facilities Authority,
County Guaranteed Hospital Revenue,
(Wayne Memorial Hospital Project), MBIA-Insured,
6.250% due 7/1/14 520,625
- ---------------------------------------------------------------------------------------------
7,721,500
- ---------------------------------------------------------------------------------------------
Housing: Single Family -- 7.0%
Allegheny County Residential Mortgage Refunding,
Single-Family Housing, GNMA-Collateralized:
975,000 Aaa* 6.875% due 5/1/26(b) 1,018,875
2,000,000 Aaa* Zero coupon due 5/1/27(b) 207,500
205,000 A1* Pittsburgh Urban Redevelopment Authority,
Mortgage Revenue, Series B, 6.950% due 10/1/10(b) 207,050
1,000,000 AAA Puerto Rico Housing Bank & Finance Agency,
Single-Family Housing Mortgage, GNMA, FNMA, &
FHLMC-Collateralized, 6.250% due 4/1/29(b) 1,012,500
- ---------------------------------------------------------------------------------------------
2,445,925
- ---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================
<C> <C> <S> <C>
Industrial Development -- 12.0%
$ 1,000,000 Baa3* Allegheny County IDA Revenue, Refunding
Environmental Improvement, USX Corporation,
6.700% due 12/1/20(e) $ 1,032,500
1,000,000 A- Bradford IDA Solid Waste, International Paper,
6.600% due 3/1/19(b) 1,035,000
1,000,000 A- Erie County IDA, Environmental Improvement Revenue,
(International Paper Co. Project), Series A,
7.625% due 11/1/18(b)(e) 1,121,250
1,000,000 AA Northampton County IDA Revenue, (Moravian Hall Square,
Project A), Asset Guaranty, 5.550% due 7/1/14 953,750
- ---------------------------------------------------------------------------------------------
4,142,500
- ---------------------------------------------------------------------------------------------
Miscellaneous -- 3.3%
1,000,000 BBB Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,137,500
- ---------------------------------------------------------------------------------------------
Pollution Control -- 4.5%
1,000,000 AAA Northampton County IDA, Metropolitan Edison,
Series A, MBIA-Insured, 6.100% due 7/15/21 1,026,250
500,000 BBB- Pennsylvania Economic Development Financing
Authority, Resource Recovery Revenue,
(Culver Project), Series D, 7.150% due 12/1/18(b) 523,750
- ---------------------------------------------------------------------------------------------
1,550,000
- ---------------------------------------------------------------------------------------------
Pre-Refunded(c) -- 3.6%
960,000 AAA Philadelphia Hospital Revenue, (United Hospital Inc.
Project), (Call 7/1/05 @ 100), 10.875% due 7/1/08(e) 1,251,600
- ---------------------------------------------------------------------------------------------
Short-Term(d) -- 1.7%
600,000 VMIG 1* Pennsylvania State Higher Education Facility, College
and University Revenue, 5.000% due 10/1/09 600,000
- ---------------------------------------------------------------------------------------------
Solid Waste -- 3.7%
250,000 A Lancaster County Solid Waste Management Authority,
Resource Recovery Systems Revenue Landfill,
7.875% due 12/15/09 260,625
1,000,000 A New Morgan IDA Solid Waste Disposal, Browning Ferris
Industries, Inc., 6.500% due 4/1/19(b) 1,032,500
- ---------------------------------------------------------------------------------------------
1,293,125
- ---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================
<C> <C> <S> <C>
Transportation -- 9.2%
Puerto Rico Commonwealth Highway & Transportation
Authority:
$1,245,000 A 5.500% due 7/1/16 $ 1,218,544
1,000,000 A 5.500% due 7/1/36 950,000
1,000,000 BB+ Puerto Rico Ports Authority Revenue, American Airlines,
Series A, 6.250% due 6/1/26(b) 1,011,250
- ---------------------------------------------------------------------------------------------
3,179,794
- ---------------------------------------------------------------------------------------------
Utilities -- 1.2%
400,000 BBB Guam Power Authority Revenue, Series A,
6.750% due 10/1/24 415,500
- ---------------------------------------------------------------------------------------------
Water & Sewer -- 5.7%
1,000,000 AAA Philadelphia Water & Wastewater Revenue,
MBIA-Insured, 6.250% due 8/1/12 1,071,250
1,000,000 A Puerto Rico Commonwealth Aqueduct & Sewer
Revenue, 5.000% due 7/1/19 902,500
- ---------------------------------------------------------------------------------------------
1,973,750
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $33,873,639**) $34,714,969
=============================================================================================
</TABLE>
(a) Bonds are escrowed to maturity with U.S. Government securities and are
considered by the Manager to be triple-A rated even if the 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) Bonds are escrowed with U.S. Government securities and are considered by
the Manager to be triple-A rated even if the issuer has not applied for new
ratings.
(d) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(e) Securities segregated by Custodian for open purchase commitment.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 25 and 26 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
24
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Services ("Standard & Poor's"),
except that those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("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.
25
<PAGE>
- --------------------------------------------------------------------------------
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
26
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
=============================================================================================
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost -- $19,877,398,
$9,029,539 and $33,873,639, respectively) $ 20,539,693 $ 9,326,475 $ 34,714,969
Cash 79,180 75,255 57,145
Receivable for securities sold 994,998 -- 1,412,955
Interest receivable 311,208 158,085 594,802
Receivable from manager -- 8,874 --
Receivable for Fund shares sold 19,420 -- 51,530
Other assets 3,867 -- --
- ---------------------------------------------------------------------------------------------
Total Assets 21,948,366 9,568,689 36,831,401
- ---------------------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares purchased -- -- 1,959,670
Payable for securities purchased 1,529,925 -- --
Distribution fees payable 2,776 1,436 5,334
Accrued expenses 33,480 21,690 16,876
- ---------------------------------------------------------------------------------------------
Total Liabilities 1,566,181 23,126 1,981,880
- ---------------------------------------------------------------------------------------------
Total Net Assets $ 20,382,185 $ 9,545,563 $ 34,849,521
=============================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 1,620 $ 776 $ 2,745
Capital paid in excess of par value 19,666,188 9,263,530 34,179,135
Undistributed (overdistributed) net
investment income (12,328) 25,176 (25,181)
Accumulated net realized gain (loss)
on security transactions 64,410 (40,855) (148,508)
Net unrealized appreciation of investments 662,295 296,936 841,330
- ---------------------------------------------------------------------------------------------
Total Net Assets $ 20,382,185 $ 9,545,563 $ 34,849,521
- ---------------------------------------------------------------------------------------------
Shares Outstanding:
Class A 874,198 359,156 1,138,740
- ---------------------------------------------------------------------------------------------
Class B 511,241 338,891 1,201,556
- ---------------------------------------------------------------------------------------------
Class C 234,556 78,348 404,503
- ---------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 12.58 $ 12.31 $ 12.71
- ---------------------------------------------------------------------------------------------
Class B* $ 12.58 $ 12.28 $ 12.69
- ---------------------------------------------------------------------------------------------
Class C** $ 12.57 $ 12.29 $ 12.69
- ---------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value) $ 13.10 $ 12.82 $ 13.24
=============================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within 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.
27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996
<TABLE>
<CAPTION>
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
============================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 586,218 $ 271,406 $ 963,756
- --------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 43,602 20,437 72,080
Distribution fees (Note 4) 37,695 19,356 73,220
Shareholder and system servicing fees 8,725 7,670 10,478
Audit and legal 6,500 7,500 8,200
Shareholder communications 4,000 2,500 5,500
Pricing fees 2,600 2,500 3,114
Trustees' fees 1,225 1,475 2,000
Registration fees 1,100 2,750 5,000
Custody 800 500 1,513
Other 5,475 1,875 743
- --------------------------------------------------------------------------------------------
Total Expenses 111,722 66,563 181,848
Less: Management fee waiver and
expense reimbursement (Note 4) (43,602) (29,311) (72,080)
- --------------------------------------------------------------------------------------------
Net Expenses 68,120 37,252 109,768
- --------------------------------------------------------------------------------------------
Net Investment Income 518,098 234,154 853,988
- --------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT (NOTE 5):
Realized Gain (Loss) From Security Transactions
(excluding short-term securities):
Proceeds from sales 4,584,801 3,858,425 19,040,490
Cost of securities sold 4,514,335 3,914,580 19,173,004
- --------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 70,466 (56,155) (132,514)
- --------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of period 588,454 157,371 450,439
End of period 662,295 296,936 841,330
- --------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 73,841 139,565 390,891
- --------------------------------------------------------------------------------------------
Net Gain on Investments 144,307 83,410 258,377
- --------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 662,405 $ 317,564 $ 1,112,365
============================================================================================
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
Georgia Portfolio September 30 March 31
================================================================================
OPERATIONS:
Net investment income $ 518,098 $ 777,391
Net realized gain 70,466 87,317
Increase in net unrealized appreciation 73,841 313,712
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 662,405 1,178,420
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (515,556) (786,513)
Net realized gains -- (62,942)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (515,556) (849,455)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 2,784,849 9,072,752
Net asset value of shares issued
for reinvestment of dividends 325,261 553,165
Cost of shares reacquired (993,559) (4,202,205)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 2,116,551 5,423,712
- --------------------------------------------------------------------------------
Increase in Net Assets 2,263,400 5,752,677
NET ASSETS:
Beginning of period 18,118,785 12,366,108
- --------------------------------------------------------------------------------
End of period* $20,382,185 $18,118,785
================================================================================
* Includes overdistributed net investment income of: $ (12,328) $ (14,870)
================================================================================
See Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
Ohio Portfolio September 30 March 31
================================================================================
OPERATIONS:
Net investment income $ 234,154 $ 397,606
Net realized gain (loss) (56,155) 44,113
Increase (decrease) in net unrealized appreciation 139,565 (1,214)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 317,564 440,505
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (239,177) (379,858)
Net realized gains -- (42)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (239,177) (379,900)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 1,261,553 4,195,758
Net asset value of shares issued
for reinvestment of dividends 173,616 282,773
Cost of shares reacquired (861,886) (1,033,839)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 573,283 3,444,692
- --------------------------------------------------------------------------------
Increase in Net Assets 651,670 3,505,297
NET ASSETS:
Beginning of period 8,893,893 5,388,596
- --------------------------------------------------------------------------------
End of period* $ 9,545,563 $ 8,893,893
================================================================================
* Includes undistributed net investment income of: $ 25,176 $ 30,199
================================================================================
See Notes to Financial Statements.
30
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
Pennsylvania Portfolio September 30 March 31
================================================================================
OPERATIONS:
Net investment income $ 853,988 $ 1,213,416
Net realized gain (loss) (132,514) 190,854
Increase in net unrealized appreciation 390,891 24,753
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,112,365 1,429,023
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (878,061) (1,250,241)
Net realized gains -- (96,147)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (878,061) (1,346,388)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 5,830,759 17,277,337
Net asset value of shares issued
for reinvestment of dividends 551,628 900,287
Cost of shares reacquired (1,427,296) (4,761,052)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 4,955,091 13,416,572
- --------------------------------------------------------------------------------
Increase in Net Assets 5,189,395 13,499,207
NET ASSETS:
Beginning of period 29,660,126 16,160,919
- --------------------------------------------------------------------------------
End of period* $34,849,521 $29,660,126
================================================================================
* Includes overdistributed net investment income of: $ (25,181) $ (1,108)
================================================================================
See Notes to Financial Statements.
31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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
semi-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 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; (c) securities maturing
within 60 days are valued at cost plus accreted discount or minus 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 premium and 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) 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. At March 31, 1996, reclassifications were made to the
Fund's capital accounts to reflect permanent book/tax differences and income and
gains available for distributions under income tax regulations. Net investment
income, net realized gains and net assets were not affected by this change; and
(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.
2. PORTFOLIO CONCENTRATION
Since each Portfolio invests primarily in obligations of issuers within
either Georgia, Ohio or Pennsylvania, each portfolio is subject to possible
32
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
concentration risks associated with economic, political, or legal developments
or industrial or regional matters specifically affecting the respective state in
which it invests.
3. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
Each 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
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 six months ended September 30, 1996. In addition, SBMFM has agreed to
reimburse the Ohio Portfolio for certain expenses totaling $8,874 for the six
months ended September 30, 1996.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. For the six months ended September 30, 1996, SB received sales
charges of approximately $82,000 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.
For the six months ended September 30, 1996, CDSCs paid to SB were
approximately:
Portfolio Class B Class C
================================================================================
Georgia $ 5,000 $1,000
- --------------------------------------------------------------------------------
Ohio 17,000 --
- --------------------------------------------------------------------------------
Pennsylvania 38,000 --
================================================================================
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.
33
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
For the six months ended September 30, 1996, total Distribution Plan fees
incurred were:
Portfolio Class A Class B Class C
================================================================================
Georgia $7,805 $19,624 $10,266
- --------------------------------------------------------------------------------
Ohio 3,120 12,958 3,278
- --------------------------------------------------------------------------------
Pennsylvania 9,632 46,599 16,989
================================================================================
All officers and two Trustees of the Fund are employees of SB.
5. INVESTMENTS
During the six months ended September 30, 1996, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
================================================================================
Purchases $7,276,746 $4,127,653 $24,250,146
- --------------------------------------------------------------------------------
Sales 4,584,801 3,858,425 19,040,490
================================================================================
At September 30, 1996, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
================================================================================
Gross unrealized appreciation* $ 672,382 $ 315,104 $ 854,513
Gross unrealized depreciation* (10,087) (18,168) (13,183)
- -------------------------------------------------------------------------------
Net unrealized appreciation* $ 662,295 $ 296,936 $ 841,330
================================================================================
* Substantially the same for Federal income tax purposes.
6. SHARES OF BENEFICIAL INTEREST
At September 30, 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 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.
At September 30, 1996, total paid-in capital amounted to the following for
each class:
Portfolio Class A Class B Class C
================================================================================
Georgia $10,559,673 $ 6,247,630 $2,860,505
- --------------------------------------------------------------------------------
Ohio 4,247,961 4,083,048 933,297
- --------------------------------------------------------------------------------
Pennsylvania 14,167,567 15,028,786 4,985,527
================================================================================
34
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
Six Months Ended Year Ended
September 30, 1996 March 31, 1996
--------------------- --------------------
Georgia Portfolio Shares Amount Shares Amount
================================================================================
Class A
Shares sold 126,349 $ 1,570,409 329,410 $ 4,143,887
Shares issued on reinvestment 13,796 171,662 24,570 308,463
Shares redeemed (45,192) (562,725) (278,738) (3,443,532)
- --------------------------------------------------------------------------------
Net Increase 94,953 $ 1,179,346 75,242 $ 1,008,818
================================================================================
Class B
Shares sold 86,789 $ 1,075,040 252,969 $ 3,190,010
Shares issued on reinvestment 7,066 87,927 10,810 136,165
Shares redeemed (19,352) (240,576) (37,761) (480,144)
- --------------------------------------------------------------------------------
Net Increase 74,503 $ 922,391 226,018 $ 2,846,031
================================================================================
Class C
Shares sold 11,238 $ 139,400 139,440 $ 1,738,855
Shares issued on reinvestment 5,286 65,672 8,613 108,537
Shares redeemed (15,365) (190,258) (21,760) (278,529)
- --------------------------------------------------------------------------------
Net Increase 1,159 $ 14,814 126,293 $ 1,568,863
================================================================================
Ohio Portfolio
================================================================================
Class A
Shares sold 62,239 $ 752,160 100,478 $ 1,246,540
Shares issued on reinvestment 7,200 87,708 10,596 130,155
Shares redeemed (10,675) (130,594) (41,822) (516,845)
- --------------------------------------------------------------------------------
Net Increase 58,764 $ 709,274 69,252 $ 859,850
================================================================================
Class B
Shares sold 32,302 $ 398,997 202,242 $ 2,495,050
Shares issued on reinvestment 5,691 69,212 9,992 122,694
Shares redeemed (54,787) (664,405) (27,239) (331,647)
- --------------------------------------------------------------------------------
Net Increase (Decrease) (16,794) $ (196,196) 184,995 $ 2,286,097
================================================================================
Class C
Shares sold 9,045 $ 110,396 37,400 $ 454,168
Shares issued on reinvestment 1,372 16,696 2,437 29,924
Shares redeemed (5,467) (66,887) (15,046) (185,347)
- --------------------------------------------------------------------------------
Net Increase 4,950 $ 60,205 24,791 $ 298,745
================================================================================
35
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
September 30, 1996 March 31, 1996
---------------------- ---------------------
Pennsylvania Portfolio Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Class A
Shares sold 218,032 $ 2,752,926 547,143 $ 7,020,582
Shares issued on reinvestment 20,031 251,702 34,618 441,224
Shares redeemed (37,751) (474,211) (286,500) (3,684,082)
- --------------------------------------------------------------------------------
Net Increase 200,312 $ 2,530,417 295,261 $ 3,777,724
================================================================================
Class B
Shares sold 202,737 $ 2,545,152 681,907 $ 8,724,282
Shares issued on reinvestment 17,611 221,008 24,518 312,971
Shares redeemed (60,056) (755,201) (56,465) (718,691)
- --------------------------------------------------------------------------------
Net Increase 160,292 $ 2,010,959 649,960 $ 8,318,562
================================================================================
Class C
Shares sold 42,568 $ 532,681 118,898 $ 1,532,473
Shares issued on reinvestment 6,290 78,918 11,472 146,092
Shares redeemed (15,681) (197,884) (28,320) (358,279)
- --------------------------------------------------------------------------------
Net Increase 33,177 $ 413,715 102,050 $ 1,320,286
================================================================================
36
<PAGE>
- --------------------------------------------------------------------------------
Georgia Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------------------- ----------------------------------------
1996(1) 1996 1995(2) 1996(1) 1996 1995(3)(4)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.50 $ 12.10 $ 12.00 $ 12.50 $ 12.11 $ 12.27
- ---------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (5) 0.35 0.70 0.62 0.31 0.64 0.49
Net realized and unrealized
gain (loss) 0.08 0.45 0.10* 0.08 0.45 (0.16)*
- ---------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.43 1.15 0.72 0.39 1.09 0.33
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.35) (0.70) (0.62) (0.31) (0.65) (0.49)
Net realized gains -- (0.05) -- -- (0.05) --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.35) (0.75) (0.62) (0.31) (0.70) (0.49)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 12.58 $ 12.50 $ 12.10 $ 12.58 $ 12.50 $ 12.11
- ---------------------------------------------------------------------------------------------------------------------
Total Return 3.46%++ 9.67% 6.29%++ 3.20%++ 9.09% 2.88%++
- ---------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $ 11,001 $ 9,744 $ 8,520 $ 6,433 $ 5,461 $ 2,551
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (5) 0.46%+ 0.38% 0.28%+ 0.98%+ 0.92% 0.85%+
Net investment income 5.66+ 5.57 5.43+ 5.14+ 5.20 5.37+
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 24.68% 63.22% 34.05% 24.68% 63.22% 34.05%
=====================================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) For the period from April 4, 1994 (inception date) to March 31, 1995.
(3) On November 7, 1994, the former Class E shares were renamed Class B shares.
(4) For the period from June 15, 1994 (inception date) to March 31, 1995.
(5) The manager has waived all of its fees for the six months ended September
30, 1996, the year ended March 31, 1996 and the period ended March 31,
1995. In addition, the Manager 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:
Expense Ratios
Per Share Decreases Without Fee Waivers
In Net Investment Income and Expense Reimbursements#
------------------------- ----------------------------
1996 1996 1995 1996 1996 1995
---- ---- ---- ---- ---- ----
Class A $0.03 $0.11 $0.12 0.92%+ 1.23% 1.20%+
Class B 0.03 0.10 0.11 1.44+ 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.
37
<PAGE>
- --------------------------------------------------------------------------------
Georgia Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
Class C Shares 1996(1) 1996 1995(2)(3)
================================================================================
Net Asset Value, Beginning of Period $ 12.49 $ 12.09 $ 12.06
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.30 0.63 0.55
Net realized and unrealized gain 0.09 0.46 0.04*
- --------------------------------------------------------------------------------
Total Income From Operations 0.39 1.09 0.59
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.64) (0.56)
Net realized gains -- (0.05) --
- --------------------------------------------------------------------------------
Total Distributions (0.31) (0.69) (0.56)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 12.57 $ 12.49 $ 12.09
- --------------------------------------------------------------------------------
Total Return 3.17%++ 9.05% 5.11%++
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 2,948 $ 2,914 $ 1,295
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 1.02%+ 0.97% 0.90%+
Net investment income 5.04+ 5.18 5.22+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 24.68% 63.22% 34.05%
================================================================================
(1) For the six months ended September 30, 1996 (unaudited).
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
(3) For the period from April 14, 1994 (inception date) to March 31, 1995.
(4) The manager has waived all of its fees for the six months ended September
30, 1996, the year ended March 31, 1996 and the period ended March 31,
1995. In addition, the Manager reimbursed expenses of $56,755 and $42,317
for the period ended September 30, 1996, 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:
Expense Ratios
Per Share Decreases Without Fee Waivers
In Net Investment Income and Expense Reimbursements#
------------------------ ---------------------------
1996 1996 1995 1996 1996 1995
----- ----- ----- ----- ----- -----
Class C $0.03 $0.10 $0.12 1.48%+ 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.
38
<PAGE>
- --------------------------------------------------------------------------------
Ohio Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------------------------- ---------------------------------
1996(1) 1996 1995(2) 1996(1) 1996 1995(3)(4)
======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.20 $ 11.97 $ 12.00 $ 12.18 $ 11.96 $ 12.02
- ------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (5) 0.32 0.71 0.52 0.30 0.63 0.47
Net realized and unrealized
gain (loss) 0.13 0.19 (0.07)* 0.11 0.21 (0.10)*
- ------------------------------------------------------------------------------------------------------
Total Income From Operations 0.45 0.90 0.45 0.41 0.84 0.37
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.67) (0.48) (0.31) (0.62) (0.43)
Net realized gains -- (0.00)** -- -- (0.00)** --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.67) (0.48) (0.31) (0.62) (0.43)
- ------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 12.31 $ 12.20 $ 11.97 $ 12.28 $ 12.18 $ 11.96
- ------------------------------------------------------------------------------------------------------
Total Return 3.72%++ 7.65% 4.04%++ 3.41%++ 7.10% 3.31%++
- ------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $ 4,420 $ 3,665 $ 2,766 $ 4,163 $ 4,334 $ 2,041
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (5) 0.54%+ 0.30% 0.20%+ 1.05%+ 0.83% 0.72%+
Net investment income 5.44+ 5.86 5.75+ 4.92+ 5.44 5.10+
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 43.28% 41.75% 43.84% 43.28% 41.75% 43.84%
======================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) For the period from June 13, 1994 (inception date) to March 31, 1995.
(3) On November 7, 1994, the former Class E shares were renamed Class B shares.
(4) For the period from June 14, 1994 (inception date) to March 31, 1995.
(5) The manager has waived all of its fees and reimbursed expenses of $8,874,
$59,614 and $41,401 for the six months ended September 30, 1996, 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:
Expense Ratios
Per Share Decreases Without Fee Waivers
In Net Investment Income and Expense Reimbursements#
------------------------ ---------------------------
1996 1996 1995 1996 1996 1995
----- ----- ----- ----- ----- -----
Class A $0.04 $0.16 $0.21 1.18%+ 1.58% 1.91%+
Class B 0.04 0.11 0.25 1.70+ 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.
# 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.
39
<PAGE>
- --------------------------------------------------------------------------------
Ohio Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
Class C Shares 1996(1) 1996 1995(2)(3)
================================================================================
Net Asset Value, Beginning of Period $12.19 $11.96 $12.02
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.34 0.63 0.46
Net realized and unrealized gain (loss) 0.07 0.21 (0.09)*
- --------------------------------------------------------------------------------
Total Income From Operations 0.41 0.84 0.37
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.61) (0.43)
Net realized gains -- (0.00)** --
- --------------------------------------------------------------------------------
Total Distributions (0.31) (0.61) (0.43)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $12.29 $12.19 $11.96
- --------------------------------------------------------------------------------
Total Return 3.39%++ 7.14% 3.28%++
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 963 $ 895 $ 582
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 1.10%+ 0.89% 0.77%+
Net investment income 4.88+ 5.37 5.09+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 43.28% 41.75% 43.84%
================================================================================
(1) For the six months ended September 30, 1996 (unaudited).
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
(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 $8,874,
$59,614 and $41,401 for the six months ended September 30, 1996, 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:
Expense Ratios
Per Share Decreases Without Fee Waivers
In Net Investment Income and Expense Reimbursements#
------------------------ ---------------------------
1996 1996 1995 1996 1996 1995
----- ----- ----- ----- ----- -----
Class C $0.04 $0.16 $0.25 1.74%+ 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.
40
<PAGE>
- --------------------------------------------------------------------------------
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------ -------------------------
1996(1) 1996 1995(2)(3) 1996(1) 1996(4) 1995(5)(6)
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.62 $12.40 $12.00 $12.61 $12.39 $12.35
- -----------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (7) 0.35 0.70 0.67 0.31 0.64 0.51
Net realized and
unrealized gain 0.10 0.29 0.35* 0.10 0.29 0.01*
- -----------------------------------------------------------------------------------------------------
Total Income From Operations 0.45 0.99 1.02 0.41 0.93 0.52
- -----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36) (0.72) (0.62) (0.33) (0.66) (0.48)
Net realized gains -- (0.05) -- -- (0.05) --
- -----------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.77) (0.62) (0.33) (0.71) (0.48)
- -----------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $12.71 $12.62 $12.40 $12.69 $12.61 $12.39
- -----------------------------------------------------------------------------------------------------
Total Return 3.63%++ 8.08% 8.82%++ 3.32%++ 7.61% 4.43%++
- -----------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $14,471 $11,847 $7,974 $15,247 $13,131 $4,850
- -----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (7) 0.37%+ 0.38% 0.29%+ 0.88%+ 0.88% 0.82%+
Net investment income 5.64+ 5.57 5.76+ 5.13+ 5.07 5.31+
- -----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 60.71% 87.49% 37.60% 60.71% 87.49% 60.71%
=====================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(3) For the period from April 4, 1994 (inception date) to March 31, 1995.
(4) 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.
(5) On November 7, 1994, the former Class E shares were renamed Class B shares.
(6) For the period from June 20, 1994 (inception date) to March 31, 1995.
(7) The manager has waived all of its fees for the six months ended September
30, 1996, the year ended March 31, 1996 and the period ended March 31,
1995. In addition, the Manager 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:
Expense Ratios
Per Share Decreases Without Fee Waivers
In Net Investment Income and Expense Reimbursements#
------------------------ ---------------------------
1996 1996 1995 1996 1996 1995
----- ----- ----- ----- ----- -----
Class A $0.03 $0.07 $0.09 0.82%+ 0.93% 1.03%+
Class B 0.03 0.07 0.08 1.33+ 1.44 1.58+
* 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.
41
<PAGE>
- --------------------------------------------------------------------------------
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
Class C Shares 1996(1) 1996 1995(2)(3)
================================================================================
Net Asset Value, Beginning of Period $ 12.61 $ 12.39 $ 12.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.31 0.64 0.59
Net realized and unrealized gain 0.10 0.29 0.36*
- --------------------------------------------------------------------------------
Total Income From Operations 0.41 0.93 0.95
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.33) (0.66) (0.56)
Net realized gains -- (0.05) --
- --------------------------------------------------------------------------------
Total Distributions (0.33) (0.71) (0.56)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 12.69 $ 12.61 $ 12.39
- --------------------------------------------------------------------------------
Total Return 3.30%++ 7.56% 8.14%++
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 5,132 $ 4,682 $ 3,337
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 0.94%+ 0.94% 0.86%+
Net investment income 5.07+ 5.00 5.04+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 60.71% 87.49% 37.60%
================================================================================
(1) For the six months ended September 30, 1996 (unaudited).
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
(3) For the period from April 5, 1994 (inception date) to March 31, 1995.
(4) The manager has waived all of its fees for the six months ended September
30, 1996, the year ended March 31, 1996 and the period ended March 31,
1995. In addition, the Manager 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:
Expense Ratios
Per Share Decreases Without Fee Waivers
In Net Investment Income and Expense Reimbursements#
------------------------ ---------------------------
1996 1996 1995 1996 1996 1995
----- ----- ----- ----- ----- -----
Class C $0.03 $0.07 $0.09 1.40%+ 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.
42
<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
Lawrence 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 -- Georgia, Ohio and
Pennsylvania Portfolios. It is not
authorized for distribution to prospective
investors unless accompanied or preceded
by acurrent 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 11/96
[front cover]
S E M I - A N N U A L R E P O R T
Smith Barney
Muni Funds
California Money
Market Portfolio
September 30, 1996
[Smith Barney 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 semi-annual report for the Smith
Barney Muni Funds-California Money Market Portfolio for the period ended
September 30, 1996. In this report, we summarize the period's prevailing
economic and market conditions and outline our portfolio strategy. A detailed
summary of the Portfolio's performance can be found in the appropriate
sections that follow in the semi-annual report.
Market and Economic Overview
It appears that the U.S. economy is showing some signs of slowing from its
4.7% second quarter growth rate and we expect the third quarter's annual
growth rate to be in the 1.5% to 2% range. However, the extent of the U.S.
economic slowdown remains uncertain. Currently, weakness is evident in
consumer spending. Although retail sales rose slightly in the months of July
and August, department store sales dropped during the first two weeks of
September. In our view, rising debt levels and credit card delinquencies may
be taking its toll on consumers.
During his July 18, 1996 Humphrey-Hawkins testimony, Federal Reserve Board
Chairman Alan Greenspan cited two key issues to watch: additional evidence
suggesting higher wage inflation and the sustainability of above-average
growth after the surge in the Gross Domestic Product (GDP) annual growth rate
(4.7%) during the second quarter of 1996. It is unlikely that many U.S.
corporations will be able to sustain earnings growth if wages continue to
increase without cutting expenses or passing on the costs to consumers in the
form of higher prices. However, since that time, several new reports released
point to slower GDP growth during the third quarter of 1996. Yet, the debate
continues about whether the apparent slowdown in the annual rate of U.S.
economic growth will be large enough and soon enough to alleviate building
wage pressures in an increasingly tight labor market.
As we stated previously, while there are some clear signs that the U.S.
economic growth slowed during the third quarter of 1996, we believe there are
still pockets of growth that may warrant some concern. Many consumers
continue to purchase big ticket items, with spending on housing and
automobiles, despite higher borrowing costs, showing solid momentum.
Moreover, the U.S. unemployment rate fell to a seven-year low of 5.1% in
August. Non-farm payrolls have averaged a monthly growth rate of more
1
<PAGE>
than 230,000 for the first eight months of 1996. During the same time period
in 1995, non-farm payrolls grew at a monthly rate of 185,000.
Portfolio Performance Update
As of September 30, 1996, the California Money Market Portfolio's 7-day
current yield was 2.99%. The Portfolio's 7-day effective yield--which
reflects compounding--was 3.03%. This means that California state residents
in the combined federal and effective state income tax bracket of 45.30%
would have to earn a taxable yield of 5.22% to match the tax-free income
provided by the Portfolio.
While the California Money Market Portfolio tries to maintain a stable net
asset value of $1.00 per share, there can be no assurance this goal will be
achieved. The U.S. government does not insure or guarantee an investment in
the California Money Market Portfolio.
California Economic Highlights
Both the California economy and California municipal bonds are back in an
enviable position. Gone is the economic torpor of a few years ago, as well as
the taint of Orange County's fiscal difficulties. One of the most notable
improvements in the California economy has been strong state employment
gains. Although total employment still lags significantly behind California's
pre-recessionary 1990 peak, the employment increases in the last two years
have been impressive.
The aerospace and defense industries were devastated by defense cutbacks and
the relocation of several major companies to lower-cost states during the
past six years. However, these job losses have been offset by significant
employment gains in the entertainment, import, export and transportation
industries. In our view, the employment patterns in California indicate that
the state now has a more diversified and vibrant economy which is well on its
way to stable growth.
With respect to the state's municipal bonds, it was not too long ago that
many investors avoided local California municipal issues. There issues are
now in higher demand and in relatively short supply. The bottom line is that
the California municipal bond market is benefiting from today's attractive
rate structure and should more than hold its own in any rate environment as
we head toward the late 1990s.
2
<PAGE>
Portfolio's Investment Strategy
The California Money Market Portfolio seeks to provide investors with income
exempt from federal income tax and California personal income taxes by
investing in a portfolio of high quality, short-term California municipal
obligations selected for liquidity and stability of principal. The average
maturity of the Portfolio's holdings is expected to remain between 50 and 60
days over the near term.
While concerns earlier in the year of major changes in the tax code made many
investors leery of the tax-exempt market, we are confident that with the
elections over that tax reform or a flat tax is behind us in the near future.
We believe that state and local government access to the debt market is
essential to maintain the aging infrastructure of the country.
In closing, thank you for investing in the California Money Market Portfolio.
We look forward to continuing to help you achieve your financial goals.
Sincerely,
/s/Heath B. McLendon /s/Joseph Benevento
Heath B. McLendon Joseph Benevento
Chairman and Vice President
Chief Executive Officer
October 15, 1996
3
<PAGE>
Schedule of Investments (unaudited) September 30, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
-------------- --------- ------------------------------------------------------------ ---------------
<S> <C> <C> <C>
$ 4,000,000 A-1 Anaheim Housing Authority Multi-Family Housing
Revenue (Park Vista Apartments-A) 3.85% (a)(b) $ 4,000,000
California Alternative Energy Source Finance Authority:
Cogeneration Revenue Refunding:
25,330,000 A-1+ Arroyo Energy Series A 3.75% (a)(b) 25,330,000
7,400,000 A-1+ Arroyo Energy Series B 3.70% (a)(b) 7,400,000
4,900,000 VMIG 1* Hydroelectric Rock Creek Limited 3.85% (a)(b) 4,900,000
18,100,000 A-1 Modesto Energy Project Series 85A 3.80% (b) 18,100,000
1,000,000 A-1+ California County IDA IDR (Image Labs Project)
3.65% (a)(b) 1,000,000
California Department of Water TECP:
7,537,000 A-1+ 3.35% due 11/13/96 7,537,000
5,000,000 A-1+ 3.25% due 10/22/96 5,000,000
California GO TECP Notes:
11,000,000 A-1 3.50% due 10/30/96 11,000,000
6,600,000 A-1 3.35% due 11/20/96 6,600,000
California Health Facilities Financing Authority Revenue:
1,600,000 A-1+ Catholic Healthcare - Series 88A 3.65% (b) 1,600,000
2,000,000 A-1+ Catholic Healthcare - Series 88C 3.65% (b) 2,000,000
7,000,000 A-1+ Catholic Healthcare - B 3.65% (b) 7,000,000
2,300,000 A-1+ Catholic Healthcare - C 3.65% (b) 2,300,000
17,700,000 A-1+ Catholic Healthcare - D 3.65% (b) 17,700,000
6,000,000 A-1+ Catholic West - C 3.65% (b) 6,000,000
6,200,000 A-1+ Catholic West - D 3.65% (b) 6,200,000
1,700,000 VMIG 1* Granada Hills Community Hospital 3.90% (b) 1,700,000
1,950,000 A-1+ St. Joseph's Health System Series B 3.80% (b) 1,950,000
California Health Facility Financing Authority Revenue:
3,750,000 SP-1+ Childrens Hospital of Orange County 3.65% (b) 3,750,000
3,100,000 A-1+ Pool Program Series 90A 3.70% (b) 3,100,000
California Housing Finance Agency Revenue:
15,815,000 VMIG 1* Muni Trust Receipts 4.00% (a)(b) 15,815,000
22,720,000 VMIG 1* 3.85% (b) 22,720,000
California Pollution Control Financing Authority:
2,700,000 P-1* PCR (Homestake Mining) 3.80% (b) 2,700,000
10,000,000 A-1+ PCR (Pacific Gas & Electric 96D) TECP
3.30% due 11/20/96 10,000,000
25,000,000 A-1+ PCR (Pacific Gas & Electric) TECP Series E
3.50% due 11/12/96 25,000,000
27,000,000 A-1+ PCR (Pacific Gas & Electric) Series A 3.85% (a)(b) 27,000,000
15,000,000 A-1+ PCR (Pacific Gas & Electric) Series B 3.75% (a)(b) 15,000,000
4,900,000 A-1+ PCR (Southdown Inc. Project) 3.55% (b) 4,900,000
1,100,000 A-1+ PCR (Southdown Inc. Project) Series B 3.55% (b) 1,100,000
7,000,000 P-1* PCR Refunding (Sierra Pacific Project) 3.75% (b) 7,000,000
See Notes to Financial Statements.
4
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1996
FACE
AMOUNT RATING SECURITY VALUE
-------------- --------- ------------------------------------------------------------ ---------------
$ 4,250,000 VMIG 1* Resource Recovery (Sangier Project) Series A
3.80% (a)(b) $ 4,250,000
Resource Recovery (Wadham Energy Project):
6,605,000 A-1 Series 87A 3.90% (a)(b) 6,605,000
9,300,000 A-1 Series 87B 3.90% (a)(b) 9,300,000
1,900,000 A-1 Series 87C 3.90% (a)(b) 1,900,000
8,675,000 P-1* Sierra Pacific Project 3.85% (a)(b) 8,675,000
Solid Waste Disposal Revenue:
Colmac Energy Project:
17,900,000 A-1+ Series 90A 3.80% (a)(b) 17,900,000
7,000,000 A-1+ Series 90C 3.80% (a)(b) 7,000,000
20,000,000 VMIG 1* California Public Capital Improvement Financing
Authority Series C 3.80% due 12/16/96 (c) 20,000,000
28,500,000 SP-1+ California School Cash Reserve Program Authority
(Series A) 4.75% due 7/2/97 28,681,629
California State GO:
6,235,000 A-1+ Muni Trust Receipts 3.95% (b) 6,235,000
6,255,000 A-1+ Muni Trust Receipts Series 95 3.85% (b) 6,255,000
5,000,000 A-1+ TECP 3.45% due 11/13/96 5,000,000
2,200,000 A-1+ TECP 3.55% due 12/11/96 2,200,000
29,520,000 SP-1+ California State RAN Series-A 4.50% due 6/30/97 29,644,993
10,000,000 A-1+ California State RAN Series C-2 3.80% (b) 10,000,000
10,400,000 A-1+ California State RAN Series C-3 3.70% (b) 10,400,000
31,000,000 A-1+ California State RAN Series C-4 3.70% (b) 31,000,000
20,000,000 A-1+ California State RAN Series C-5 3.45% (b) 20,000,000
California Statewide Community Development
Corporation Revenue:
1,560,000 A-1+ Contech Construction 3.65% (a)(b) 1,560,000
1,430,000 A-1+ J. Michelle Series B 3.65% (a) 1,430,000
3,200,000 NR Supreme Truck 3.85% (a)(b) 3,200,000
California Statewide Community Development Authority:
Irvine Apartment Development Revenue:
13,000,000 A-1+ Subseries A-4 3.80% (b) 13,000,000
7,000,000 A-1+ Subseries A-7 3.85% (a)(b) 7,000,000
25,900,000 A-1+ Kaiser Permanente 3.80% (b) 25,900,000
25,000,000 A-1+ Multi-Family Revenue (Canyon Creek Apartments)
3.85% (b) 25,000,000
10,000,000 SP-1+ TRAN Series A 4.75% due 6/30/97 10,053,727
1,300,000 SP-1+ Chowchilla Union High School District Transportation 4.25%
due 6/30/97 1,304,665
26,500,000 A-1 Chula Vista IDR (San Diego Gas & Electric Co.) 3.90% (a)(b) 26,500,000
1,000,000 A-1 Chula Vista IDR (San Diego Gas & Electric Co.) Series A
3.70% (b) 1,000,000
2,365,000 A-1 Chula Vista Industrial Development Authority Industrial
Revenue (Sutherland/Palumbo Project) 4.00% (a)(b) 2,365,000
See Notes to Financial Statements.
5
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1996
FACE
AMOUNT RATING SECURITY VALUE
-------------- --------- ------------------------------------------------------------ ---------------
Clipper California Tax-Exempt Muni Trust Receipts:
$ 6,890,000 VMIG 1* Series 96-6B 3.95% (b) $ 6,890,000
20,730,000 VMIG 1* Series 96 3.85% (b) 20,730,000
3,500,000 A-1+ Concord Multi-Family Mortgage Revenue (Crossroads
Apartments) Series 88B 3.70% (b) 3,500,000
2,300,000 MIG 1* Contra Costa California Community College District
TRAN 4.50% due 6/30/97 2,311,550
Contra Costa County Multi-Family Housing Revenue:
17,000,000 VMIG 1* Park Agency Series 92A 4.05% (a)(b) 17,000,000
4,500,000 A-1 Del Norte Apartments Series 94A 3.95% (a)(b) 4,500,000
13,700,000 SP-1+ Contra Costa County TRAN 4.50% due 7/3/97 13,771,540
East Bay California Municipal Utility District TECP:
10,000,000 A-1+ 3.50% due 10/24/96 10,000,000
21,650,000 A-1+ 3.50% due 10/30/96 21,650,000
2,000,000 A-1+ Fairfield IDA (R. Dakin & Company Project) 3.55% (b) 2,000,000
Fairfield Redevelopment Agency Highway 12:
3,910,000 NR Pre-Refunded - Escrowed with U.S. Government Securities to
10/1/10 Call @ 102, 8.00% due 10/1/96 (d) 3,988,200
3,975,000 NR Pre-Refunded - Escrowed with U.S. Government Securities to
10/1/16 Call @ 102, 8.50% due 10/1/96 (d) 4,054,500
2,100,000 NR Pre-Refunded - Escrowed with U.S. Government Securities to
10/1/18 Call @ 102, 9.00% due 10/1/96 (d) 2,142,000
5,200,000 VMIG 1* Fresno Multi-Family Housing (Heron Pointe) 3.75% (b) 5,200,000
15,000,000 SP-1+ Fresno USD TANS 4.50% due 10/11/96 15,004,150
2,900,000 A-1 Hayward Housing Authority Multi-Family Revenue Refunding
Mortgage (Huntwood Terrace Apartments) 4.05% (b) 2,900,000
1,220,000 A-1 Healdsburg Community Redevelopment Agency Revenue Refunding
(Vineyard Plaza Project - A Shopping Center) 3.80% (b) 1,220,000
6,400,000 VMIG 1* Hermosa Beach California Parking Authority Certificates
3.75% (b) 6,400,000
19,450,000 SP-1+ Huntington Beach California TRANS Series 1996-97 4.50% due
10/1/97 19,548,806
1,225,000 VMIG 1* Indio Housing Authority Revenue (Smoketree Apartments)
3.90% (b) 1,225,000
33,800,000 A-1+ Irvine California Improvement Board Act 1915 (Assessment
District 85-7-1) 3.60% (b) 33,800,000
3,250,000 VMIG 1* Kings California Multi-Family Housing (Edgewater Isle)
3.75% (b) 3,250,000
8,000,000 P-1* Lodi IDA (Dart Container) 3.30% (b) 8,000,000
1,500,000 A-1+ Long Beach Harbor Revenue TECP 3.40% due 10/10/96 1,500,000
8,400,000 A-1+ Long Beach Health Facility Revenue (Memorial Health
Services) Series 1991 3.80% (b) 8,400,000
See Notes to Financial Statements.
6
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1996
FACE
AMOUNT RATING SECURITY VALUE
-------------- --------- ------------------------------------------------------------ ---------------
$20,000,000 SP-1+ Los Angeles County California TRAN Series A 4.50%
due 6/30/97 $20,101,436
13,300,000 A-1 Los Angeles County Housing Authority Multi-Family Housing
Revenue, Diamond Apartments Project Series A 3.75% (a)(b) 13,300,000
Los Angeles County Metropolitan Transportation Authority:
20,000,000 A-1+ Muni Trust Receipts 3.85% (b) 20,000,000
2,300,000 A-1 Series A TECP 3.40% due 10/29/96 2,300,000
8,750,000 A-1+ Los Angeles County Sanitation District 93A Muni Trust
Receipts 3.85% (b) 8,750,000
4,000,000 A-1+ Los Angeles County TRAN Muni Trust Receipts 4.00% (b) 4,000,000
2,000,000 A-1+ Los Angeles Department of Airport Muni Trust Receipts
3.95% (a)(b) 2,000,000
Los Angeles Department of Water & Power Electric
Muni Trust Receipts:
8,765,000 A-1+ SG-20 3.85% (b) 8,765,000
4,075,000 A-1+ SGA-4 3.85% (b) 4,075,000
4,005,000 A-1+ SGA-6 3.85% (b) 4,005,000
Los Angeles Multi-Family Housing Revenue:
2,700,000 NR Beverly Park Apartments 3.80% (a)(b) 2,700,000
2,000,000 VMIG 1* Masselin Manor 3.70% (b) 2,000,000
9,000,000 SP-1+ Los Angeles Unified School District Series-A 4.50% due
6/30/97 9,045,194
35,000,000 A-1 Los Angeles Wastewater TECP 3.40% due 11/18/96 35,000,973
Metropolitan Water District of Southern California:
11,475,000 A-1+ 3.65% (b) 11,475,000
14,620,000 A-1+ Muni Trust Receipts 3.85% (b) 14,620,000
2,500,000 SP-1+ Milpitas California Unified School District TRAN 4.50%
due 7/1/97 2,512,244
14,000,000 A-1+ Modesto California IDR District Finance Authority Revenue
Muni Trust Receipts 3.85% (b) 14,000,000
10,000,000 A-1 Modesto Irrigation District 96 COP TECP 3.70% due 10/8/96 10,000,000
5,075,000 A-1+ Modesto Multi-Family Housing Revenue Refunding
(Live Oak Apartments Project) 3.80% (a)(b) 5,075,000
4,100,000 VMIG 1* Modesto Multi-Family Housing Revenue
Shadow Brook Apartments 3.80% (b) 4,100,000
4,000,000 SP-1+ Moorpark California Unified School District TRAN 4.50% due
7/1/97 4,019,590
6,080,000 SP-1+ Morgan Hill Unified School District 4.50% due 6/30/97 6,101,762
13,500,000 VMIG 1* Mountain View Multi-Family Housing Revenue
(Villa Mariposa Project) 3.65% (b) 13,500,000
12,100,000 VMIG 1* Newport News Redevelopment & Housing Authority Multi-Family
Housing Revenue (Newport Oxford Project) 3.90% (b) 12,100,000
See Notes to Financial Statements.
7
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1996
FACE
AMOUNT RATING SECURITY VALUE
-------------- --------- ------------------------------------------------------------ ---------------
$ 3,000,000 SP-1+ North Monterey County Union School District TRAN 4.50% due
6/30/97 $ 3,010,738
Orange County Apartment Development Revenue:
16,400,000 A-1 Monarch Bay Apartments 3.90% (b) 16,400,000
2,700,000 A-1 The Lakes Project Series 91A 3.80% (b) 2,700,000
1,700,000 VMIG 1* Wood Canyon Villas 3.75% (a)(b) 1,700,000
1,600,000 VMIG 1* Orange County Housing Authority Apartment Development
Revenue 3.85% (b) 1,600,000
2,000,000 AAA Orange County Recovery COP Series-A 4.25% due 7/1/97 2,002,133
1,900,000 A-1+ Oakland Revenue (Childrens Hospital Medical Center)
3.80% (b) 1,900,000
21,200,000 VMIG 1* Pasadena California COP (Rose Bowl Improvements Project)
3.65% (b) 21,200,000
10,000,000 NR Pasadena California Transportation 4.50% due 10/25/96 10,004,103
7,960,000 A-1+ Pleasanton Multi-Family Housing Mortgage Revenue
(Valley Plaza) 3.70% (b) 7,960,000
2,200,000 A-1+ Puerto Rico Government Development Bank 3.50% (b) 2,200,000
6,330,000 A-1+ Puerto Rico Public Buildings Authority Revenue
Muni Trust Receipts 3.65% (b) 6,330,000
9,380,000 A-1+ Puerto Rico Public Buildings Authority Series 95
Muni Trust Receipts 3.65% (b) 9,380,000
5,000,000 SP-1+ Redlands California Unified School District TRAN 4.50% due
6/30/97 5,024,398
3,000,000 SP-1+ Rim World California Unified School District TRAN 4.50% due
6/30/97 3,014,639
3,840,000 A-1+ Riverside County Housing Authority Multi-Family Housing
Mortgage Revenue (Woodcreek Village) Series 85D 3.70% (b) 3,840,000
9,400,000 A-1+ Sacramento California MUD Muni Trust Receipts 3.85% (b) 9,400,000
Sacramento County Multi-Family Housing Revenue:
2,200,000 VMIG 1* Series 1985A 3.90% (b) 2,200,000
1,200,000 VMIG 1* Series 1985C 3.90% (b) 1,200,000
Sacramento MUD TECP Series-1:
4,000,000 A-1+ 3.25% due 11/14/96 4,000,000
6,979,000 A-1+ 3.60% due 1/14/97 6,979,000
5,000,000 VMIG 1* Saint Charles County IDA Revenue (Sun River Village
Apartments Project) Series 85 3.80% (b) 5,000,000
2,275,000 SP-1+ Salinas California Unified High School District TRAN 4.50%
due 10/2/97 2,286,375
2,550,000 A-1+ San Bernardino County California Mortgage Quail Point
Apartments 3.70% (b) 2,550,000
1,100,000 VMIG 1* San Bernardino County California Multi-Family Housing
Revenue (Western Project - II) 3.40% (b) 1,100,000
3,355,000 A-1+ San Bernardino County California Transportation Authority
Sales Tax Revenue 3.70% (b) 3,355,000
See Notes to Financial Statements.
8
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1996
FACE
AMOUNT RATING SECURITY VALUE
-------------- --------- ------------------------------------------------------------ ---------------
$ 1,875,000 A-1+ San Bernardino County IDA
Master Halco Series 1986 II 3.55% (a)(b) $ 1,875,000
San Diego California Multi-Family Housing Revenue:
4,400,000 A-1+ Flores 3.75% (b) 4,400,000
1,000,000 VMIG 1* Lusk Mesa Apartments 3.75% (b) 1,000,000
8,000,000 SP-1+ San Diego (City of) TAN 4.50% due 7/2/97 8,043,360
3,300,000 VMIG 1* San Diego Multi-Family Housing Revenue Refunding (University
Town Center Apartments) 3.70% (b) 3,300,000
3,000,000 NR San Dimas Redevelopment Agency (San Dimas Community Center)
3.60% (b) 3,000,000
2,300,000 A-1 San Francisco (City & County of) Multi-Family Housing
(Winterland Project) Series 1985C 3.65% (b) 2,300,000
8,500,000 A-1 San Francisco (City & County of) Redevelopment Agency
Multi-Family Housing (Fillmore Center) 3.65% (b) 8,500,000
1,100,000 NR San Joaquin County California IDR (Carl Karcher Enterprise)
3.80% (b) 1,100,000
3,300,000 VMIG 1* San Jose Multi-Family Housing Revenue (Fairway Glen) Series
A 3.65% (b) 3,300,000
1,125,000 A-1+ San Leandro Multi-Family Housing Revenue (Parkside Commons)
Series A 3.70% (b) 1,125,000
7,900,000 VMIG 1* Santa Ana California Housing Authority Vintage Apartments
Series A 3.70% (a)(b) 7,900,000
2,800,000 VMIG 1* Santa Clara County Apartment Development Revenue Lincoln
Parajo 85A 3.70% (b) 2,800,000
3,000,000 A-1 Santa Clara County Financing Authority Lease Revenue (VMC
Facility Replacement Project) Series B 3.80% (b) 3,000,000
2,100,000 A-1 Santa Clara County Multi-Family Housing Revenue Refunding
(Grove Garden Apartments) 3.65% (b) 2,100,000
8,315,000 A-1+ Santa Cruz Co. Public Financing Authority Revenue Muni Trust
Receipts 3.85% (b) 8,315,000
6,000,000 A-1 Simi Valley Multi-Family Housing Lincoln Wood Ranch
3.90% (b) 6,000,000
2,400,000 A-1 Simi Valley Multi-Family Housing (Series-A) 3.55% (b) 2,400,000
5,000,000 SP-1+ Sonoma County California TRAN 4.25% due 11/1/96 5,002,022
3,360,000 VMIG 1* Southern California Public Power Transmission Project
Revenue Muni Trust Receipts 3.85% (b) 3,360,000
2,200,000 A-1+ Turlock Irrigation District Ca Series 96A 3.60% (b) 2,200,000
1,480,000 NR University of California Housing (Pre-Refunded - Escrowed
with U.S. Government Securities to 11/1/05 Call @ 102),
7.70% due 11/1/96 (d) 1,514,492
4,300,000 NR Val Verde USD Transportation 4.50% Due 10/31/96 4,302,039
6,000,000 SP-1+ Ventura County California Community College District TRAN
4.25% due 6/30/97 6,022,839
1,200,000 VMIG 1* Visilia IDR (Akers West Association) 3.70% (a)(b) 1,200,000
3,395,000 VMIG 1* West Covina Lease Revenue Refunding (The Lake Public Parking
Project) 3.95% (b) 3,395,000
See Notes to Financial Statements.
9
<PAGE>
Schedule of Investments (unaudited) (continued) September 30, 1996
FACE
AMOUNT RATING SECURITY VALUE
-------------- --------- ------------------------------------------------------------ ---------------
$ 1,000,000 A-1 Windsor Multi-Family Housing (Oakmont At Windsor)
4.00% (a)(b) $ 1,000,000
3,320,000 A-1+ Woodland Multi-Family Housing Mortgage Revenue (Crossroads
Village) Series A 3.70% (b) 3,320,000
3,130,000 SP-1+ Yuba California Transportation 4.25% due 11/21/96 3,132,712
-------------- --------- ------------------------------------------------------------ ---------------
TOTAL INVESTMENTS -- 100%
Cost -- ($1,312,537,809**) $1,312,537,809
-------------- --------- ------------------------------------------------------------ ---------------
</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.
(d) Pre-Refunded bonds escrowed by U.S. Government securities and bonds
escrowed to maturity by U.S. Government securities are considered by the
investment adviser to be triple-A rated even if issuer has not applied
for new ratings.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 11 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
10
<PAGE>
Short-Term Security Ratings
<TABLE>
<S> <C> <C>
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.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
</TABLE>
Security Descriptions
<TABLE>
<S> <C> <C> <C> <C> <C>
ABAG -- Association of Bay Area Governments GO -- General Obligation
AIG -- American International Guaranty HDC -- Housing Development Corporation
AMBAC -- American Municipal Bond Assurance HFA -- Housing Finance Authority
Corporation IDA -- Industrial Development Authority
BAN -- Bond Anticipation Notes IDB -- Industrial Development Board
BIG -- Bond Investors Guaranty IDR -- Industrial Development Revenue
CGIC -- Capital Guaranty Insurance Company INFLOS -- Inverse Floaters
CHFCLI -- California Health Facility Construction LOC -- Letter of Credit
Loan Insurance MBIA -- Municipal Bond Investors Assurance Corporation
CONNIE -- College Construction Loan Insurance MUD -- Municipal Utilities District
LEE Association MVRICS -- Municipal Variable Rate Inverse Coupon Security
COP -- Certificate of Participation PCR -- Pollution Control Revenue
EDA -- Economic Development Authority RAN -- Revenue Anticipation Notes
ETM -- Escrowed To Maturity RAW -- Revenue Anticipation Warrants
FGIC -- Financial Guaranty Insurance Company RIBS -- Residual Interest Bonds
FHA -- Federal Housing Administration RITES -- Residual Interest Tax-Exempt Securities
FHLMC -- Federal Home Loan Mortgage Corporation TAN -- Tax Anticipation Notes
FLAIRS -- Floating Adjustable Interest Rate TECP -- Tax Exempt Commercial Paper
Securities TOB -- Tender Option Bonds
FNMA -- Federal National Mortgage Association TRAN -- Tax and Revenue Anticipation Notes
FRTC -- Floating Rate Trust Certificates USD -- Unified School District
FSA -- Federal Savings Association VA -- Veterans Administration
GIC -- Guaranteed Investment Contract VRWE -- Variable Rate Wednesday Demand
GNMA -- Government National Mortgage Association
</TABLE>
11
<PAGE>
Statement of Assets and Liabilities (unaudited) September 30, 1996
ASSETS:
Investments, at amortized cost $1,312,537,809
Cash 59,216
Interest receivable 7,808,180
---------------------------------------------------------- ---------------
Total Assets 1,320,405,205
---------------------------------------------------------- ---------------
LIABILITIES:
Payable for securities purchased 21,835,181
Dividends payable 1,550,574
Management fees payable 533,606
Distribution fees payable 94,563
Accrued expenses 77,873
---------------------------------------------------------- ---------------
Total Liabilities 24,091,797
---------------------------------------------------------- ---------------
Total Net Assets $1,296,313,408
---------------------------------------------------------- ---------------
NET ASSETS:
Par value of shares of beneficial interest $ 1,296,726
Capital paid in excess of par value 1,295,428,820
Accumulated net realized loss on security transactions (412,138)
---------------------------------------------------------- ---------------
Total Net Assets $1,296,313,408
---------------------------------------------------------- ---------------
Shares Outstanding 1,296,725,546
---------------------------------------------------------- ---------------
Net Asset Value Per Share $1.00
---------------------------------------------------------- ---------------
See Notes to Financial Statements.
12
<PAGE>
Statement of Operations (unaudited)
For the Six Months Ended September 30, 1996
INVESTMENT INCOME:
Interest $22,357,741
-------------------------------------------- --------------
EXPENSES:
Management fees (Note 4) 3,269,649
Distribution fees (Note 4) 653,803
Registration fees 274,500
Shareholder communications 122,610
Shareholder and system servicing fees 66,795
Custody fees 55,677
Audit and legal 15,555
Trustees' fees 7,503
Other 4,941
-------------------------------------------- --------------
Total Expenses 4,471,033
-------------------------------------------- --------------
Net Investment Income 17,886,708
-------------------------------------------- --------------
Net Realized Loss on Security Transactions (38,147)
-------------------------------------------- --------------
Increase in Net Assets From Operations $17,848,561
-------------------------------------------- --------------
See Notes to Financial Statements.
13
<PAGE>
Statements of Changes in Net Assets
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
<TABLE>
<CAPTION>
September 30 March 31
- ----------------------------------------------------- ---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 17,886,708 $ 36,916,118
Net realized loss (38,147) (47,018)
- ----------------------------------------------------- ---------------- ----------------
Increase in Net Assets From Operations 17,848,561 36,869,100
- ----------------------------------------------------- ---------------- ----------------
DISTRIBUTION TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (17,886,708) (36,916,118)
- ----------------------------------------------------- ---------------- ----------------
Decrease in Net Assets From
Distributions To Shareholders (17,886,708) (36,916,118)
- ----------------------------------------------------- ---------------- ----------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 2,730,953,193 5,101,071,082
Net asset value of shares issued for reinvestment
of dividends 17,981,007 35,790,180
Cost of shares reacquired (2,798,396,831) (4,744,319,892)
- ----------------------------------------------------- ---------------- ----------------
Increase (Decrease) in Net Assets From Fund Share
Transactions (49,462,631) 392,541,370
- ----------------------------------------------------- ---------------- ----------------
Increase (Decrease) in Net Assets (49,500,778) 392,494,352
NET ASSETS:
Beginning of period 1,345,814,186 953,319,834
- ----------------------------------------------------- ---------------- ----------------
End of period $ 1,296,313,408 $ 1,345,814,186
- ----------------------------------------------------- ---------------- ----------------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Notes to Financial Statements (unaudited)
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 semi-annual reports.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on the trade date; (b) the
Portfolio uses the amortized cost method for valuing investments;
accordingly, the cost of securities plus accepted discount, or minus
amortized premium, approximates market value; (c) securities maturing within
60 days are valued at cost plus accreted discount or minus 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.
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>
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.
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 income 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>
Notes to Financial Statements (unaudited) (continued)
6. Shares of Beneficial Interest
At September 30, 1996, the Fund had an unlimited amount of shares of
beneficial interest authorized with a par value of $0.001 per share.
Transactions in shares of the Portfolio were as follows:
Six Months Ended Year Ended
September 30, 1996* March 31, 1996
------------------------------- -------------------- ----------------
Class A
Shares sold 2,715,032,272 5,101,071,082
Shares issued on reinvestment 17,975,287 35,790,180
Shares redeemed (2,782,623,253) (4,744,319,892)
------------------------------- -------------------- ----------------
Net Increase (Decrease) (49,615,694) 392,541,370
------------------------------- -------------------- ----------------
Class Y
Shares sold 15,920,921 --
Shares issued on reinvestment 5,720 --
Shares redeemed (15,773,578) --
------------------------------- -------------------- ----------------
Net Increase 153,063 --
------------------------------- -------------------- ----------------
*For Class Y shares, transactions are for the period from July 19, 1996
(inception date) to September 30, 1996.
17
<PAGE>
Financial Highlights
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1996 1995 1994 1993 1992
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment income (2) 0.014 0.032 0.026 0.018 0.021 0.035
Dividends from net investment
income (0.014) (0.032) (0.026) (0.018) (0.021) (0.035)
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total Return 1.37%++ 3.22% 2.66% 1.84% 2.05% 3.51%
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Assets, End of
Period (millions) $1,278 $1,346 $953 $190 $160 $167
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Ratios to Average Net Assets:
Expenses (2) 0.68%+ 0.64% 0.61% 0.64% 0.67% 0.60%
Net investment income 2.73+ 3.15 3.02 1.82 2.05 3.46
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Class Y Shares 1996(3)
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, Beginning of
Period $1.00
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment income 0.006
Dividends from net investment
income (0.006)
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period $1.00
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Total Return 1.30%++
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Net Assets, End of
Period (millions) $18
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
Ratios to Average Net Assets:
Expenses 0.57%+
Net investment income 2.60+
------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) 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:
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
--------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
Class A Shares $0.000* $0.002 0.65% 0.63%
(3) For the period July 19, 1996 (inception date) to September 30, 1996
(unaudited).
++ Total return is not annualized, as the result may not be representative
of the total return for the year.
+ Annualized.
* Amount represents less than $0.001 per share.
18
<PAGE>
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<PAGE>
(This page intentionally left blank.)
<PAGE>
[back cover]
Smith Barney [Smith Barney logo]
Muni Funds A Member of Travelers Group[logo]
Trustees Investment Manager
Jessica M. Bibliowicz Smith Barney Mutual Funds
Joseph H. Fleiss Management Inc.
Donald R. Foley
Paul Hardin Distributor
Francis P. Martin, M.D. Smith Barney, Inc.
Heath B. McLendon, Chairman
Roderick C. Rasmussen Custodian
John P. Toolan PNC Bank, N.A.
C. Richard Youngdahl
Shareholder
Officers Servicing Agent
Heath B. McLendon First Data Investors Services
Chief Executive Officer Group, Inc.
P.O. Box 9134
Jessica M. Bibliowicz Boston, MA 02205-9134
President
Lewis E. Daidone
Senior Vice President This report is submitted for the general
and Treasurer information of the shareholders of Smith
Barney Muni Funds - California Money
Joseph Benevento Market Portfolio. It is not authorized for
Vice President distribution to prospective investors
unless accompanied or preceded by a cur-
Irving P. David rent Prospectus for the Portfolio, which
Controller contains information concerning the
Portfolio's investment policies and
Christina T. Sydor expenses as well as other pertinent
Secretary information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
FD0805 11/96
SEMI-ANNUAL REPORT
[GRAPHIC]
SMITH BARNEY
MUNI FUNDS
LIMITED TERM
PORTFOLIO
- ------------------
September 30, 1996
[LOGO] SMITH BARNEY MUTUAL FUNDS
Investing for your future.
Everyday.
<PAGE>
- --------------------------------------------------------------------------------
LIMITED TERM PORTFOLIO
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Muni Funds -- Limited Term Portfolio for the period ended September 30, 1996. In
this report, we summarize the periods prevailing economic and market conditions
and outline our portfolio strategy. A detailed summary of the Portfolio's
performance can be found in the appropriate sections that follow in the semi-
annual report.
Portfolio Performance Update
For the six months ended September 30, 1996, the Class A shares of the Limited
Term Portfolio had a total return of 2.21%. In comparison, the Portfolio's
Lipper Analytical Services, Inc. peer group average posted a total return of
2.14% for the same time period. (Lipper is an independent fund tracking
organization.) Over the six-month period covered by this report, the Portfolio
distributed dividends totaling $0.174 per share; based on its net asset value
(NAV) of $6.58 as of September 30, 1996, this equates to an annualized
distribution rate of 5.29% for Class A shares. For an individual in the Federal
income tax bracket of 36%, the Portfolio's tax free yield of 5.29% is equivalent
to a taxable yield of 8.27%.
Market and Economic Overview
The bond markets have continued to experience significant volatility over the
past six months with the yield on the 30-year U.S. Treasuries trading between
6.75% and 7.20%. In our view, this heightened bond market volatility stems from
several conditions in the U.S. economy with the most important being the
underlying strength of the U.S. economy. For example, gross domestic product
(GDP) in the U.S. for the second quarter of 1996 grew at an annualized rate of
4.70%, up from 2.00% in the first quarter. This pace of economic growth has
caused pressures on both labor and capital to increase, yet there have been no
signs of a pick-up in inflation. Bond market investors have closely monitored
recent U.S. economic data for signs of whether the rate of U.S. economic growth
will moderate, or whether the economy will continue to grow at its current pace.
The latter scenario would most likely cause the Federal Reserve Board to tighten
monetary policy by raising short-term interest rates. While the majority of key
U.S. economic announcements over the past six months points toward a
strengthening rather than a weakening economy, government reports released
during the month of September suggest that the economy may be headed for a
slowdown. In response, interest rates have since declined from the high levels
of June and July.
1
<PAGE>
Municipal Bond Market Update
Although this has been a challenging period for the fixed income markets, the
municipal bond market has outperformed the U.S. government bond market. In our
view, the municipal bond market's better relative performance can be attributed
primarily to the modest supply of municipal bonds that have been issued. In
recent months, investors have been seeking to reinvest proceeds of municipal
bonds that have either matured or been called, back into the municipal bond
market. However, at the same time, the supply of new issues has been far below
recent averages, and is very close to the low for the year. This increased
demand combined with light supply has caused municipal bond prices to stay
higher, and yields to conversely remain lower, relative to those of U.S.
Treasury securities.
Portfolio's Investment Strategy
The Smith Barney Muni Funds-Limited Term Portfolio is an intermediate-term
municipal bond fund that seeks to provide investors with as high a level of
current income exempt from federal income taxes as is consistent with a prudent
investment approach. The Portfolio invests primarily in high-grade municipal
securities with maturities of less than ten years. The combination of this
intermediate-term, high-quality portfolio structure helps to reduce credit risk
and NAV price volatility, while still maintaining a competitive dividend yield.
During the six-month period covered by this report, the high NAV of Class A
shares of the Limited Term Portfolio was $6.64 and the low was $6.51, and the
dividend yield fluctuated between 5.24% and 5.35%.
As of September 30, 1996, the Portfolio's average weighted maturity was 6.4
years, and approximately 93% of the Portfolio's holdings were rated investment
grade (BBB/Baa and higher) by either Standard and Poor's Corporation or Moody's
Investors Service Inc. (Standard and Poor's and Moody's are two major credit
reporting and bond rating agencies.) The Portfolio's largest holdings are
concentrated in education bonds (12.6%), general obligation bonds (12.9%),
industrial development revenue bonds (9.8%), and hospital bonds (10.2%).
Municipal Bond Market Outlook
Going forward, we expect that the municipal bond market should benefit from a
comfortably low annual inflation rate and municipalities continue to issue new
debt sparingly. In addition, the Federal Reserve seems content with the current
level of interest rates because economic growth is not overly robust. For these
reasons, we maintain a positive outlook on the market for the balance of 1996.
Moreover, we believe the yields offered by intermediate-term
2
<PAGE>
municipal bonds remain attractive investment alternatives, relative to the low
returns of approximately 3% in the tax-exempt money markets or current long-term
municipal yields.
In closing, thank you for investing in the Smith Barney Muni Funds--Limited Term
Portfolio. We look forward to continuing to help 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
October 9, 1996
ANNOUNCING A NEW SYSTEMATIC INVESTMENT
PROGRAM MONTHLY MINIMUM
If you are a shareholder purchasing shares of the Limited Term Portfolio through
Smith Barney's Systematic Investment Program on a monthly basis or if you plan
to do so in the future, the minimum investment for Class A, Class B and Class C
shares is now $25. If you are purchasing shares on a quarterly basis, the
minimum investment for Class A, Class B and Class C shares is $50. Please
contact your Smith Barney financial consultant for more information about Smith
Barney's Systematic Investment Program. However, please note that participating
in Smith Barney's Systematic Investment Program does not ensure a profit or
protect you against a loss in declining markets.
3
<PAGE>
- -------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
===============================================================================
<S> <C> <C> <C> <C>
9/30/96 $6.61 $6.58 $0.17 2.21%+
- -------------------------------------------------------------------------------
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 $3.07
===============================================================================
</TABLE>
- -------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
9/30/96 $6.61 $6.57 $0.17 1.96%+
- --------------------------------------------------------------------------------
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 $1.30
================================================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
4
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charge(1)
-----------------------
Class A Class C
===================================================================
<S> <C> <C>
Six Months Ended 9/30/96+ 2.21% 1.96%
- ------------------------------------------------------------------
Year Ended 9/30/96 4.48 4.12
- ------------------------------------------------------------------
Five Years Ended 9/30/96 6.39 N/A
- ------------------------------------------------------------------
Inception* through 9/30/96 6.92 5.19
==================================================================
With Sales Charge(2)
--------------------
Class A Class C
==================================================================
Six Months Ended 9/30/96+ 0.24% 0.96%
- ------------------------------------------------------------------
Year Ended 9/30/96 2.32 3.12
- ------------------------------------------------------------------
Five Years Ended 9/30/96 5.96 N/A
- ------------------------------------------------------------------
Inception* through 9/30/96 6.64 5.19
==================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
=====================================================================
Class A (Inception* through 9/30/96) 69.05%
- ---------------------------------------------------------------------
Class C (Inception* through 9/30/96) 20.82
=====================================================================
</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 charges 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 one
year from initial purchases.
* Inception dates for Class A and C shares are November 28, 1988 and January
5, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
5
<PAGE>
- --------------------------------------------------------------------------------
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 Long Bond Index+
- --------------------------------------------------------------------------------
November 1988-September 1996
<TABLE>
<CAPTION>
[GRAPHIC]
Lehman Long Bond Lehman Municipal Limited Term
Index 5-year Bond Index Portfolio
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
11/28/88 $10,000 $10,000 $ 9,796
3/89 10,100 10,024 9,900
3/90 11,200 10,994 10,720
3/91 12,071 12,022 11,653
3/92 13,440 13,046 12,568
3/93 15,402 14,395 13,786
3/94 15,574 14,821 14,273
3/95 16,980 15,667 15,076
3/96 18,457 16,808 16,078
9/30/96 $19,254 $17,176 $16,434
</TABLE>
+ 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 September 30,
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 Long Bond Index is a broad based total return
index, comprised of all investment grade, fixed rate, long term maturities
(greater than twenty 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>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Education -- 12.6%
$2,825,000 A* Arizona Education Loan Marketing Corp., Education
Loan Revenue Bonds, 7.000% due 3/1/02(a) $ 2,990,969
3,000,000 A* Arkansas State Student Loan Authority Revenue,
Sub-Series A-2, 6.125% due 12/1/00(a) 3,063,750
955,000 Aa* Brazos, TX Higher Education Authority, Series C-1,
6.000% due 11/1/99(a) 989,619
2,940,000 AAA Chicago, IL Board of Education, Chicago School
Reform, MBIA-Insured, 6.000% due 12/1/07 3,138,450
Colorado Student Obligation Board Authority,
Student Loan Revenue:
270,000 A* Series A, 6.625% due 6/1/99 279,450
1,350,000 A* Series A-1, 6.600% due 9/1/98 1,387,125
2,000,000 AAA Dade County, FL School District GO, MBIA-Insured,
6.000% due 7/15/06 2,142,500
1,150,000 AA Fairfield County, SC School District, COP, 5.500%
due 3/1/07 1,142,813
1,000,000 A+ Illinois Student Assistance Commission, Student
Loan Revenue, Series H, 6.100% due 3/1/01(a) 1,033,750
350,000 Aa1* Iowa Student Loan Liquidity Corp., Student
Loan Revenue, Series A, 6.000% due 3/1/98 356,562
1,000,000 Aa* Kentucky Higher Education Student Loan Corp.,
Insured Student Loan Revenue, Series 91B,
6.500% due 12/1/00(a) 1,050,000
215,000 AAA Louisiana Public Facilities Authority Revenue,
Supplemental Student Loan C, AMBAC-Insured,
8.125% due 12/1/99 231,125
250,000 A* Michigan Higher Education Student Loan, Education
Revenue, Series XIV-A, 5.400% due 10/1/96(a) 250,000
1,300,000 A* Montana State Higher Education Student Assistance
Corp., Student Loan Revenue,
Series 92B, 7.050% due 6/1/04(a) 1,379,625
535,000 AAA Montana State University Revenues, Refunding and
Improvement, Higher Educational Facilities,
Series D, MBIA-Insured, 5.000% due 11/15/07 526,306
1,100,000 AAA New Jersey Educational Facilities Authority Revenue,
Higher Education Facilities, Series A, AMBAC-
Insured, 5.125% due 9/1/06 1,095,875
1,475,000 AAA North Texas Higher Education Authority Inc., Student
Loan Revenue, AMBAC-Insured, 7.000% due
4/1/01(a) 1,543,219
2,000,000 AAA Pennsylvania State Higher Education Assistance
Agency, Student Loan Revenue Refunding,
Series A, FGIC-Insured, 6.800% due 12/1/00 2,125,000
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
============================================================================================
<S> <C> <C> <C>
Education -- 12.6% (continued)
Rhode Island Student Loan Authority Revenue
Refunding:
$ 500,000 A* Series A, 5.700% due 12/1/96 $ 501,315
1,500,000 A* Series 92B, 6.750% due 12/1/01(a) 1,593,750
1,000,000 AAA San Juan County, NM ISD #22, GO, MBIA-Insured,
6.750% due 8/15/00 1,068,750
1,500,000 AAA Schuylkill, PA Redevelopment Authority Revenue,
Commonwealth Lease Revenue Bonds, Series A,
FGIC-Insured, 6.850% due 6/1/03 1,638,750
2,540,000 A South Dakota Student Loan Assistance Corp.,
Student Loan Revenue, 7.350% due 8/1/98(a) 2,628,900
715,000 A* Texas State Higher Education Coordinating Board,
College Student Loan Revenue, 6.800% due
4/1/98(a) 732,875
Utah State School District Co-op Revenue Financing
Pool, LOC Swiss Bank:
875,000 AAA 8.300% due 2/15/98 917,656
945,000 AAA 8.300% due 2/15/00 1,038,319
2,220,000 AAA 8.375% due 2/15/10 2,333,775
- --------------------------------------------------------------------------------------------
37,180,228
- --------------------------------------------------------------------------------------------
Escrowed to Maturity(b) -- 7.6%
280,000 AAA Austin, TX ISD, 9.000% due 7/1/00 322,000
120,000 AAA Austin, TX Water, Sewer & Electric Revenue,
14.000% due 11/15/01 145,950
1,450,000 AAA Babylon, NY IDA, Babylon Community Waste
Management, Series A, 7.650% due 7/1/97 1,492,079
1,990,000 AAA Boston, MA Water & Sewer Community Revenue,
Series A, 10.650% due 1/1/99(d) 2,149,200
115,000 AAA Enid, OK Hospital Authority Revenue, St. Mary's
Hospital Crossover Refunding, 8.000% due 7/1/98 118,163
1,190,000 AAA Erie County, OH Hospital Improvement, Sandusky
Memorial Hospital, 8.750% due 1/1/06 1,426,512
1,555,000 AAA Galveston, TX Sewer System Revenue Refunding,
Series B, 7.800% due 5/1/99 1,636,638
1,050,000 Aaa* Illinois Educational Facilities Authority Revenue,
Chicago Osteopathic Medical, Series A,
8.750% due 7/1/05 1,248,188
1,095,000 AAA Kalamazoo, MI Hospital Finance Authority,
6.750% due 4/1/03 1,155,225
500,000 AAA Lehigh County, PA IDA Revenue, (Strawbridge Project),
7.200% due 12/15/01 541,875
805,000 AAA Michigan State Hospital Finance Authority Revenue,
St. Joseph's Mercy Hospital, Series A, 9.250%
due 7/1/03 951,912
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==============================================================================================
<S> <C> <C> <C>
Escrowed to Maturity(b) -- 7.6% (continued)
$1,420,000 AAA New Jersey Educational Facilities Authority Revenue,
Fairleigh Dickinson University, Series C,
7.750% due 7/1/01 $ 1,512,300
2,260,000 AAA New Jersey State Turnpike Authority Revenue
Refunding, 10.375% due 1/1/03 2,675,275
30,000 AAA New York City GO, Series F, 8.100% due 11/15/99 33,113
210,000 AAA North Country, NY Solid Waste Development Authority
1992A, 6.000% due 7/1/97 213,576
1,130,000 AAA Ohio State Water Development Authority Revenue, Safe
Water, Series A, 9.375% due 12/1/10 1,378,600
2,120,000 AAA Owensboro, KY Electric, Light & Power,
10.500% due 1/1/04 2,551,950
665,000 AAA San Francisco, CA Airport Improvement Corp., Lease
Revenue, United Airlines, 7.875% due 7/1/99 705,731
1,020,000 AAA Sullivan County, TN Health & Educational
Facilities, Holston Valley Community Hospital,
7.000% due 9/1/99 1,092,675
945,000 AAA Tom Green County, TX Hospital Authority,
7.875% due 2/1/06 1,056,038
- ----------------------------------------------------------------------------------------------
22,407,000
- ----------------------------------------------------------------------------------------------
Finance -- 1.1%
1,000,000 A New York State Local Government Assistance Corp.,
6.600% due 4/1/98 1,033,750
2,000,000 AAA Texas State Public Finance Authority Building Revenue,
Series B, AMBAC-Insured, 6.200% due 2/1/05 2,140,000
- ----------------------------------------------------------------------------------------------
3,173,750
- ----------------------------------------------------------------------------------------------
General Obligation -- 12.9%
1,000,000 AA+ Anne Arundel County, MD GO, 6.000% due 9/1/06 1,071,250
1,000,000 AAA Arizona COP Refunding GO, FSA-Insured,
6.500% due 3/1/08 1,072,500
California State GO:
1,000,000 A1* 6.250% due 9/1/08 1,086,250
1,000,000 AAA FGIC-Insured, 6.400% due 9/1/07 1,102,500
1,000,000 AAA Chicago, IL GO, AMBAC-Insured, 5.600% due 1/1/06 1,028,750
355,000 B- District of Columbia, COP, GO, 6.000% due 1/1/97 355,043
250,000 Ba* District of Columbia, GO, Series A, 5.000% due 6/1/98 248,125
1,800,000 BBB Government of Guam GO, Series A, 5.750% due 8/15/99 1,829,250
1,500,000 Aa* Houston, TX GO, Series A, 6.000% due 3/1/06 1,593,750
1,710,000 AAA Iowa State COP GO, Series 1992A, AMBAC-Insured,
5.750% due 7/1/98 1,748,475
500,000 AA+ Kings County, WA GO Unlimited Tax Obligation,
9.000% due 12/1/98 548,125
750,000 Baa1* Lowell, MA GO, 5.500% due 8/15/97 759,023
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
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Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
General Obligation -- 12.9% (continued)
$ 500,000 A3* Meridian, CO Metropolitan District, GO, Refunding
Bonds, 7.000% due 12/1/97 $ 511,250
New Haven, CT GO, Series B:
625,000 Baa* 5.700% due 12/1/97 633,594
2,000,000 Baa* 9.000% due 12/1/01 2,347,500
1,000,000 AA+ New Jersey State Refunding GO, Series E,
6.000% due 7/15/07 1,070,000
New York City GO:
2,500,000 BBB+ Series A, 6.250% due 8/1/08 2,540,625
1,500,000 BBB+ Series D, 7.200% due 2/1/00 1,603,125
970,000 BBB+ Series F, 8.100% due 11/15/99 1,063,362
1,000,000 BBB+ Series H, 6.500% due 3/15/06 1,046,250
900,000 AAA North Slope Borough, AK GO, Unlimited Tax Obligation,
Refunding, Series G, AMBAC-Insured, 7.500% due
6/30/97 922,014
2,750,000 A1* Passaic County, NJ Refunding, GO, Series A,
6.000% due 9/1/07 2,945,938
2,815,000 AAA Rhode Island State Conservation Capital Development
Loan GO, Series A, 6.000% due 8/1/06 3,001,493
1,650,000 AAA Puerto Rico Commonwealth GO, MBIA-Insured,
6.500% due 7/1/07 1,837,688
1,020,000 AAA Springfield, MA Municipal Purpose Loan, GO, AMBAC-
Insured, 6.250% due 8/1/06 1,099,050
720,000 Baa* Springfield, MA (School Project), Series B,
5.300% due 9/1/97 727,495
2,770,000 AA Texas State Veterans Housing Assistance Fund IID GO,
5.650% due 12/1/14 2,790,775
435,000 AA Texas State Veterans Housing Assistance GO,
FHA-Insured, 6.050% due 12/1/12(a) 438,261
810,000 AAA Yuma & La Paz County, AZ GO Community College
District, (Arizona Western College), AMBAC-Insured,
6.200% due 7/1/98 835,312
- -----------------------------------------------------------------------------------------
37,856,773
- -----------------------------------------------------------------------------------------
Government Facilities -- 0.4%
1,200,000 AAA Pennsylvania Intergovernmental Co-Op Authority,
Special Tax Revenue Refunding, Philadelphia
Funding Program, FGIC-Insured, 6.000% due
6/15/06 1,272,000
- -----------------------------------------------------------------------------------------
Hospitals -- 10.2%
595,000 A ABAG Finance Authority Nonprofit Corps, CA Insured
COP, Rehabilitation Mental Health Services Inc.
Project, 6.100% due 6/1/02 621,775
600,000 AA- Bexar County, TX Health Facilities Development Corp.,
Health Facilities Revenue Refunding, Independence
Hill Project, LOC Banque Paribas, 7.500% mandatory
tender 12/1/98 636,000
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
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Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Hospitals -- 10.2% (continued)
$ 1,000,000 AAA Calcasieu Parish Louisiana Memorial Hospital Services
District Revenue, Lake Charles Memorial Hospital,
Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 $1,142,500
3,500,000 Baa* Colorado Health Facilities Authority Hospital Revenue
Bonds, Series 1993, Rocky Mountain Adventist
Health Guaranteed, 6.250% due 2/1/04 3,613,750
1,200,000 Aaa* Connecticut State Health & Educational Facilities
Authority Revenue, Veterans Memorial Medical
Center, Series A, MBIA-Insured, 6.250% due 7/1/06 1,290,000
1,000,000 AAA Cuyahoga County, OH Hospital Revenue Refunding &
Improvement, University Hospitals, Series A,
MBIA-Insured, 6.000% due 1/15/06 1,063,750
2,135,000 A* Harris County, TX Health Facilities Development
Corp., Memorial Health System Guaranteed,
7.125% due 6/1/05 2,324,481
Illinois Health Facilities Authority Revenue Refunding:
1,040,000 AAA Children's Memorial Hospital, MBIA-Insured,
6.000% due 8/15/98 1,067,300
1,000,000 Baa* Trinity Medical Center, 6.500% due 7/1/00 1,017,500
1,425,000 Ba* Langhorne Manor Higher Education & Health Authority,
Bucks County, Lower Bucks Hospital, 6.375% due
7/1/99 1,423,219
Massachusetts Health & Education Facilities Authority
Revenue, Series A:
1,000,000 Ba1* Massachusetts Eye & Ear Infirmary,
7.000% due 7/1/98 1,006,250
445,000 A Medical Center of Central Massachusetts,
6.000% due 7/1/97 450,807
New Jersey Healthcare Facilities Financing Authority:
1,000,000 Baa1* Elizabeth General Medical Center, Series C,
7.100% due 7/1/99 1,037,500
1,030,000 BBB+ Pascack Valley Hospital, Series 91,
6.500% due 7/1/01 1,084,075
New York Medical Care Facilities Finance Agency
Revenue, Mental Health Facilities:
640,000 BBB+ Series D, 6.300% due 8/15/97 650,291
1,045,000 BBB+ Series 1991B, 7.100% due 2/15/99 1,101,169
320,000 A- Ouachita Parish, LA Hospital Services District #1,
Hospital Revenue Bonds, Glenwood Regional
Medical Center, Series 1991, 7.250% due 7/1/00 347,600
2,170,000 A+ Palm Beach County, FL Health Facilities Authority
Revenue, Good Samaritan Health System Guaranteed,
6.150% due 10/1/06 2,262,225
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
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Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Hospitals -- 10.2% (continued)
Philadelphia, PA Hospitals and Higher Education
Facilities Authority Revenue:
Albert Einstein Medical Center:
$ 365,000 A* 6.300% due 10/1/96 $ 365,000
390,000 A* 6.500% due 10/1/97 394,735
1,000,000 BBB+ Graduate Health Systems, 6.500% due 7/1/97 1,011,020
270,000 Aa* St. Agnes Medical Center Project, FHA-Insured,
6.750% due 8/15/01 293,288
1,750,000 A Riverside, CA Asset Leasing Corp. Leasehold Revenue
Bonds, Riverside Hospital Project, 1993 Series A,
6.000% due 6/1/04 1,815,625
3,000,000 BBB++ Scranton-Lackawanna, PA Health & Welfare Authority
Revenue, Allied Services Rehabilitation Hospitals,
7.125% due 7/15/05 3,071,250
1,000,000 BBB++ Valley Health System, CA COP Refunding Project,
6.250% due 5/15/99 1,010,000
- -----------------------------------------------------------------------------------------
30,101,110
- -----------------------------------------------------------------------------------------
Housing -- 9.4%
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 3,078,750
2,500,000 Aa* California State Department of Veterans Affairs, Home
Purchase Revenue, Series A, 7.500% due 8/1/98(a) 2,587,500
2,885,000 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 3,002,189
Cleveland County, OK Home Loan Authority, Single-
Family Mortgage Revenue:
125,000 A* 6.100% due 2/1/97 125,326
150,000 A* 6.100% due 8/1/97 151,029
2,250,000 AAA Dekalb County, GA HFA, Multi-Family Housing Revenue,
(Chimney Trace Project), FNMA-Collateralized,
5.625% due 5/1/25 2,303,438
835,000 AAA Fairfax County, VA Redevelopment & Housing Authority,
Multi-Family Refunding, Kingsley 91A, 6.500%
due 11/1/01 867,356
115,000 AA Idaho Housing Agency, Single-Family Mortgage,
Refunding Bonds, 5.500% due 1/1/97 115,404
1,000,000 Aa2* Illinois Development Financing Authority, Adjustable
Demand Revenue Bonds, (Catholic Charities
Housing), Series A, 5.000% due 1/1/28 1,002,970
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Housing -- 9.4% (continued)
$2,995,000 AA- Lombard, IL Multi-Family Housing, Clover Creek
Apartments, Surety Bond-Continental Casualty Co.,
6.500% due 12/15/96 $ 3,001,769
60,000 Aaa* Louisiana Housing Finance Agency Mortgage Revenue,
GNMA-Collateralized, Single-Family, 7.600% due
11/1/97(a) 60,771
1,800,000 AA Louisiana Public Facilities Authority Revenue, Multi-
Family Housing, Oakleigh Apartments, Series A,
5.950% due 3/15/19 1,872,000
1,000,000 AA- Maine State Housing Authority, Series A-3, 6.900%
due 11/15/98 1,033,750
911,261 AAA Monroe-West Monroe, Ouachita Parish, LA Public
Trust Financing Authority, FHLMC Guaranteed,
8.500% due 5/20/02 945,433
320,000 AA- Montgomery County, MD Housing Authority, Multi-
Family, Hunt Club, Series 85A, 6.000% due 2/1/97 320,810
500,000 AAA Nashville & Davidson County, TN Metropolitan
Government IDB Revenue, (Club Bellvue), FNMA-
Collateralized, 8.500% mandatory tender 5/1/97 503,425
2,000,000 AA North Carolina Housing Finance Agency-Single-Family,
Series JJ, FHA-Insured, 5.750% due 3/1/23(a) 2,007,500
515,000 A* Odessa, TX Housing Development Corp. #2, Multi-
Family Revenue Refunding, Chaparral Village,
Series A, 6.375% due 12/1/03 522,725
1,885,000 AAA Onterie Center Housing Finance Corp., IL Mortgage
Revenue Refunding, (Onterie Center Project),
Series A, MBIA-Insured, 6.500% due 7/1/02 1,976,894
230,000 AAA St. Louis County, MO Single-Family Mortgage Revenue,
MBIA-Insured, 9.750% due 4/1/03 232,012
1,000,000 AAA Texas Department of Housing & Community Affairs,
Home Mortgage Revenue Bonds, Series B,
GNMA & FNMA-Collateralized, RIBS Variable Rate,
9.853% due 6/18/23(a)(e) 1,073,750
105,000 AA Texas State Housing Agency Mortgage Revenue Single-
Family, 1987D, 7.750% due 7/1/99 107,887
415,000 AAA Washington State Housing Finance Community,
Single-Family Mortgage Revenue, Series D, GNMA &
FNMA-Collateralized, 5.800% due 7/1/97 415,436
410,000 AA Wyoming Community Development Authority, Single-
Family Mortgage, Series 1988C, 7.800% due
6/1/99(a) 420,250
- -----------------------------------------------------------------------------------------
27,728,374
- -----------------------------------------------------------------------------------------
Industrial Development -- 9.8%
1,500,000 A Bel Air, MD Revenue Refunding, (May Department
Stores Co. Project), 6.375% due 10/1/99 1,573,125
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
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Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Industrial Development -- 9.8% (continued)
$1,000,000 A Belmont County, OH IDR Refunding, (May Department
Stores Co. Project), Series 91, 6.500% due 1/1/00 $ 1,055,000
2,000,000 AAA Clarion County, PA IDA Energy Development Revenue,
(Piney Creek Project), LOC Swiss Bank, 7.250%
mandatory tender 12/1/00(a) 2,167,500
1,000,000 Baa* Delaware County, PA Development Authority Revenue,
(Elwyn Inc. Project), 7.750% due 6/1/00 1,047,500
3,000,000 Ba1* Griffin-Spalding County, GA Development Authority
Revenue Refunding, (Borden Inc. Project) Borden
Inc. Guaranteed, 7.200% due 6/1/00 3,105,000
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 2,127,500
2,500,000 A Kanawha, WV Commercial Development Revenue, May
Department Stores Guaranteed, 5.700% due 6/1/97 2,525,500
3,000,000 A Marion, IA Commercial Development Revenue, (Collins
Road Project), Policy of Indemnity Aetna Casualty &
Surety Co., Reinsured by Trygg-Hansa Insurance Co.
of Sweden, 7.250% mandatory tender 7/1/02 3,142,500
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) 3,539,375
2,150,000 Aa3* New Jersey EDA, Growth Bonds, LOC Banque Nationale
de Paris, 6.200% due 12/1/02(a) 2,230,625
New York City IDA:
715,000 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) 723,237
1,440,000 Aa1* Keystone Electric, LOC ABN AMRO Bank NV, 7.500%
due 3/1/98(a) 1,456,013
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) 470,775
1,170,000 AAA Pennsylvania State IDA Revenue, AMBAC-Insured,
6.000% due 1/1/99 1,210,950
2,350,000 AAA Sioux City, IA IDR, (Terra Centre Project), 6.800%
due 5/1/07 2,479,250
- -----------------------------------------------------------------------------------------
28,853,850
- -----------------------------------------------------------------------------------------
Life Care -- 0.8%
1,355,000 BBB Illinois Development Finance Authority Health Facilities
Revenue, Community Living Options, 6.375% due
3/1/00 1,370,244
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
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Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Life Care -- 0.8% (continued)
$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%, 7.710% due 8/1/06(e) $ 1,090,000
- -----------------------------------------------------------------------------------------
2,460,244
- -----------------------------------------------------------------------------------------
Miscellaneous -- 7.5%
2,595,000 BBB- Clarksville, TN Natural Gas Acquisition Corporation,
Gas Revenue, Series A, 6.500% due 11/1/00 2,646,900
300,000 AAA Dallas-Fort Worth, TX Regional Airport Revenue,
Series A, FGIC-Insured, 5.875% due 11/1/07(a) 306,375
2,500,000 AAA Greater Detroit Resource Recovery Authority, AMBAC-
Insured, 6.250% due 12/13/06 2,696,875
1,605,000 AAA Hillsborough County, FL Capital Improvement Program
Revenue, (County Center Project), Series B, MBIA-
Insured, 6.000% due 7/1/05 1,727,381
2,750,000 A* Hoffman Estate, IL Tax Increment Junior Lien, Hoffman
Estate Development, Series 91, 6.500% due 5/15/01 2,901,250
2,700,000 A- Illinois Development Finance Authority Revenue, Debt
Restructure-East St. Louis, 6.875% due 11/15/05 2,828,250
500,000 Aa3* Illinois Educational Facilities Authority, Adjustable
Demand Revenue Bonds, (Museum of Science and
Industry), 5.625% due 10/1/26 500,000
1,010,000 AAA Jacksonville, FL Excise Tax Revenue, Series A, FGIC-
Insured, 5.500% due 10/01/05 1,056,712
420,000 NR Lehigh County, PA General Purpose Authority, Wiley
House Revenue, Series 1991, 8.500% due 11/1/96 420,365
Municipal Assistance Corp. for City of New York, NY:
2,000,000 Aa* 6.000% due 7/1/06 2,155,000
1,000,000 Aa* 5.200% due 7/1/08 1,001,250
670,000 Aa3* New Jersey EDA Revenue, LOC Banque Nationale de
Paris, Series A, 6.250% due 12/1/01(a) 687,588
1,500,000 Baa1* New York State Urban Development Corporation
Revenue, Correctional Capital Facilities, Series 6,
5.500% due 1/1/01 1,531,875
1,000,000 AA Tucson, AZ COP, Asset Guaranty, 6.000% due 7/1/04 1,043,750
635,000 NR Virgin Islands Public Financing Authority, Matching
Revenue Funding, Series A, 6.250% due 10/1/96 635,000
- -----------------------------------------------------------------------------------------
22,138,571
- -----------------------------------------------------------------------------------------
Pollution Control -- 5.0%
500,000 Ba* Atlantic County, NJ Utilities Authority, Solid Waste
Revenue, Series 1992A, 6.250% due 3/1/97 500,960
1,200,000 AAA Burke County, GA Development Authority PCR
Refunding, Ogelthorpe Power Co., 7.500% due
1/1/03 1,318,500
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
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Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Pollution Control -- 5.0% (continued)
$ 435,000 BBB+ Camden County, NJ PCFA, Solid Waste Resource
Recovery Revenue, Series D, 6.350% due 12/1/97 $ 436,087
Detroit, MI Economic Development Corp., Facilities
Recovery Revenue, FSA-Insured:
3,000,000 AAA Series A, 7.00% due 5/1/01 3,202,500
1,000,000 AAA Series 91A, 6.60% due 5/1/02(a) 1,072,500
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) 1,635,000
1,000,000 Baa2* Massachusetts State IDB Finance Agency, PCR,
(Eastern Edison Co. Project), 5.875% due 8/1/08 967,500
1,500,000 AAA Montgomery, AL IDB, PCR, (General Electric Co.
Project), 7.000% mandatory tender 9/15/00(a)(d) 1,633,125
600,000 BB Ohio State Water Development Authority, Pollution
Control Facilities Revenue, Cleveland Electric
Illuminating Co., 9.750% mandatory tender 11/1/97(a ) 623,406
1,650,000 Baa* Onondaga County, NY Resource Recovery Agency
Project Revenue Bonds, Series 1992,
6.625% due 5/1/00(a) 1,699,500
420,000 A- Puerto Rico Industrial Medical & Environmental
Pollution Control Facilities Financing Authority
Revenue, (St. Lukes Hospital Project), Series A,
5.400% due 6/1/97 421,642
- -----------------------------------------------------------------------------------------
14,585,720
- -----------------------------------------------------------------------------------------
Pre-Refunded(c) -- 3.1%
1,725,000 AAA Alachua County, FL Health Facilities Authority Revenue,
Santa Fe Healthcare Facilities Project,
(Call 11/15/00 @ 102), 6.875% due 11/15/02 1,882,406
80,000 AAA Austin, TX Water, Sewer & Electric Revenue,
(Call 5/15/98 @ 100), 14.000% due 11/15/01 101,700
1,500,000 AAA Berks County, PA Municipal Authority, Lutheran Home
at Topton, Series B, LOC Meridian Bank, (Call 4/1/98
@ 100), 7.250% due 4/1/01 1,565,625
1,740,000 AAA Gila County, AZ IDA PCR, (Call 2/15/01 @ 101),
11.250% due 4/1/01 1,879,200
Illinois Health Facilities Authority Revenue:
1,000,000 AAA Lutheran Social Services, LOC Industrial Bank of
Japan, (Call 8/1/00 @ 102), 7.650% mandatory
tender 8/1/02 1,122,500
750,000 AAA Servantcor Hospital, Series B, (Call 8/15/99 @ 102),
7.500% due 8/15/01 824,063
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
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Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Pre-Refunded(c) -- 3.1% (continued)
$1,000,000 AAA Mississippi Hospital Equipment & Facilities Authority
Revenue, (Mississippi Baptist Medical Center),
Series A, MBIA-Insured, (Call 5/1/00 @ 102),
7.300% due 5/1/01 $ 1,108,750
95,000 AAA New York Medical Care Facilities Finance Agency
Revenue, Hospital & Nursing Home Mortgage,
FHA-Insured, (Call 2/15/97 @ 102), 7.750%
due 2/15/02 100,128
345,000 AAA Ohio State Building Authority, Toledo Government
Office Building, Series A, (Call 4/1/03 @ 100),
10.125% due 10/1/06 423,056
- -----------------------------------------------------------------------------------------
9,007,428
- -----------------------------------------------------------------------------------------
Public Facilities -- 3.3%
40,000 A- Concord Santa Cruz Southgate, CA COP, ABAG Finance
Corp., 7.100% due 6/1/99 40,066
4,000,000 Aa* Mt. Stearling, KY Lease Revenue, Kentucky League of
Cities 1993A, Transamerica Life Guaranteed, 5.625%
due 3/1/03 4,060,000
1,060,000 AAA South Dakota State Lease Revenue Certificates,
Series A, CGIC-Insured, 8.200% due 9/1/02 1,225,625
1,050,000 BBB Tampa, FL Capital Improvement Program Revenue,
Series 88B, 7.400% due 10/1/97 1,072,197
Washington State Public Power Supply System,
Revenue Refunding, Series A:
1,500,000 AAA Nuclear Project No. 2, AMBAC-Insured,
6.000% due 7/1/07 1,558,125
1,655,000 AAA Nuclear Project No. 3, MBIA-Insured,
6.000% due 7/1/06 1,723,269
- -----------------------------------------------------------------------------------------
9,679,282
- -----------------------------------------------------------------------------------------
Short-Term(f) -- 0.4%
1,300,000 VMIG 1* Massachusetts State Health Educational Facilities
Authority Revenue, (Capital Asset Project),
Series E, 3.550% due 1/1/35 1,300,000
- -----------------------------------------------------------------------------------------
Solid Waste -- 0.1%
180,000 Baa* North Country, NY Solid Waste Development Authority
1992A, 6.000% due 7/1/97 182,561
- -----------------------------------------------------------------------------------------
Transportation -- 8.3%
1,000,000 AAA Clark County, NV Airport Improvement Revenue,
BIG-Insured, 7.900% due 7/1/00(a) 1,066,250
Denver, CO City & County Airport Revenue:
1,590,000 Baa* Series 1992B, 7.000% due 11/15/01(a) 1,725,150
1,000,000 Baa* Series 1992B, 7.000% due 11/15/02(a) 1,093,750
1,000,000 Baa* Series 1994A, 7.200% due 11/15/02(a) 1,103,750
1,510,000 AAA Series B, MBIA-Insured, 6.250% due 11/15/06(a) 1,611,925
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
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Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Transportation -- 8.3% (continued)
$2,445,000 AAA Hawaii Airport System Revenue, Second Series of 91,
MBIA-Insured, 6.100% due 7/1/99(a) $ 2,542,800
1,250,000 A Indiana Transportation Finance Authority, Airport
Facilities Lease Revenue, United Air, Series A,
6.125% due 11/1/02 1,325,000
2,000,000 AAA Maine State Turnpike Authority, Special Obligation,
AMBAC-Insured, 6.000% due 7/1/06 2,112,500
1,000,000 AAA Massachusetts Port Authority Revenue, Series A,
FGIC-Insured, 7.200% due 7/1/03(a) 1,093,750
3,500,000 Baa1* New York State Thruway Authority Service Contract
Revenue, Local Highway & Bridge, Special
Obligation Bonds, 5.625% due 4/1/07 3,469,375
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) 3,202,500
750,000 AA Port of Houston Authority, Harris County, TX Port
Improvement, Unlimited Tax Obligation, 8.500%
due 11/1/98(a) 810,937
1,000,000 AAA Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series Y, MBIA-Insured, 6.250%
due 7/1/06 1,090,000
2,095,000 AA- Simi Valley, CA Community Development Agency COP,
Simi Valley Business Center, 6.050% due 10/1/18 2,165,706
- -----------------------------------------------------------------------------------------
24,413,393
- -----------------------------------------------------------------------------------------
Utilities -- 6.1%
Austin, TX Water, Sewer and Electric Refunding
Revenue:
5,030,000 A* 14.000% due 11/15/01 6,450,975
3,000,000 AAA MBIA-Insured, 6.000% due 11/15/06 3,165,000
1,500,000 A+ Chelan County, WA Public Utility District #1, Chelan
Hydro Consolidated System Revenue Bonds,
7.000% due 7/1/25 (a) 1,625,625
600,000 A- Georgia Muni Gas Authority Revenue, (Southern
Storage Gas Project), 6.300% due 7/1/09 627,750
1,500,000 AAA Intermountain Power Agency Utah Power Supply
Revenue Refunding, Series E, FSA-Insured,
6.250% due 7/1/07 1,625,625
770,000 Baa1* Philadelphia, PA Gas Works Revenue Bonds, 13th
Series, 7.400% due 6/15/00 826,788
1,000,000 Aa* Phoenix, AZ Civic Improvement Corporation Water
System Revenue, 6.500% due 7/1/06 1,098,750
1,000,000 Ba* Sam Rayburn, TX Municipal Power Supply System
Revenue Refunding, Series A, 6.200% due 10/1/01 962,500
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Utilities -- 6.1% (continued)
$1,500,000 AA Washington State Public Power Supply, Series B,
(Nuclear Project No. 3), 7.000% due 7/1/97 $ 1,529,880
- -----------------------------------------------------------------------------------------
17,912,893
- -----------------------------------------------------------------------------------------
Water & Sewer -- 1.4%
1,500,000 NR New Jersey EDA Water Facilities Revenue,
(New Jersey American Water Co. Inc. Project),
Private Placement, Series 1991, 7.400% due 5/1/01(a) 1,595,626
250,000 AA Regional Waste Systems Inc., Maine Solid Waste
Resource Recovery System, 7.550% due 7/1/98(a)(d) 262,500
1,175,000 AAA South Essex, MA Sewer District, Series A, MBIA-
Insured, 6.000% due 6/15/05 1,257,250
970,000 A Texas Water Resource Finance Authority Revenue,
Series 89, 7.400% due 8/15/00 1,042,750
- -----------------------------------------------------------------------------------------
4,158,126
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $288,231,465**) $294,411,303
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Bonds are escrowed to maturity with U.S. Government securities and are
considered by the Manager to be triple-A rated even if the issuer has not
applied for new ratings.
(c) Bonds are escrowed with U.S. Government securities and are considered by
the Manager to be triple-A rated even if the issuer has not applied for new
ratings.
(d) Securities segregated by Custodian for open market purchase commitment.
(e) Residual interest bonds-coupon varies inversely with level of short-term
tax-exempt interest rates.
(f) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
+++ Fitch Investor Services Inc.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 20 and 21 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Services ("Standard & Poor's"),
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("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.
B -- Bonds that are rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contact over any long period of
time may be small.
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.
20
<PAGE>
- --------------------------------------------------------------------------------
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 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.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
MIG 1 -- Moody's highest rating for short-term municipal obligations.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
- -------------------------------------------------------------------------------
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 -- Independent 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
21
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) September 30,1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (Cost--$288,231,465) $294,411,303
Cash 59,966
Interest receivable 5,368,412
Receivable for securities sold 1,536,425
Receivable for Fund shares sold 222,694
Other assets 2,731
- ----------------------------------------------------------------------------------
Total Assets 301,601,531
- ----------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 3,170,575
Management fees payable 142,146
Distribution fees payable 18,133
Accrued expenses 29,773
- ----------------------------------------------------------------------------------
Total Liabilities 3,360,627
- ----------------------------------------------------------------------------------
Total Net Assets $298,240,904
==================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 45,363
Capital paid in excess of par value 298,127,358
Undistributed net investment income 35,184
Accumulated net realized loss on security transactions (6,146,839)
Net unrealized appreciation of investments 6,179,838
- ----------------------------------------------------------------------------------
Total Net Assets $298,240,904
==================================================================================
Shares Outstanding:
Class A 40,924,020
-------------------------------------------------------------------------------
Class C 4,438,558
-------------------------------------------------------------------------------
Net Asset Value:
Class A (redemption price) $6.58
-------------------------------------------------------------------------------
Class C* $6.57
-------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 2.04% of net asset value per share) $6.71
==================================================================================
</TABLE>
* Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchases.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended September 30, 1996
<S> <C>
INVESTMENT INCOME:
Interest $ 8,928,335
- -------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 753,328
Distribution fees (Note 3) 254,854
Registration fees 57,500
Shareholder and system servicing fees 40,411
Pricing service fees 19,764
Shareholder communications 16,470
Audit and legal 7,716
Custody 6,288
Trustees' fees 5,014
Other 6,720
- -------------------------------------------------------------------------------
Total Expenses 1,168,065
- -------------------------------------------------------------------------------
Net Investment Income 7,760,270
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 64,670,332
Cost of securities sold 64,721,576
- -------------------------------------------------------------------------------
Net Realized Loss (51,244)
- -------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 7,741,212
End of period 6,179,838
- -------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (1,561,374)
- -------------------------------------------------------------------------------
Net Loss on Investments (1,612,618)
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 6,147,652
===============================================================================
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
<TABLE>
<CAPTION>
September 30 March 31
========================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 7,760,270 $ 14,623,173
Net realized loss (51,244) (113,526)
Increase (decrease) in net unrealized appreciation (1,561,374) 2,264,491
- ----------------------------------------------------------------------------------------
Increase in Net Assets From Operations 6,147,652 16,774,138
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (7,908,295) (14,441,996)
- ----------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (7,908,295) (14,441,996)
- ----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 16,754,153 36,197,918
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 4,482,357 7,807,761
Cost of shares reacquired (28,519,714) (60,675,920)
- ----------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (7,283,204) 33,511,950
- ----------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (9,043,847) 35,844,092
NET ASSETS:
Beginning of period 307,284,751 271,440,659
- ----------------------------------------------------------------------------------------
End of period* $298,240,904 $307,284,751
========================================================================================
* Includes undistributed net investment income of: $ 35,184 $ 183,209
========================================================================================
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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 semi-
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 the mean between the quoted bid and ask prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates market value; (d) gains or losses on
the sale of securities are calculated by using the specific identification
method; (e) interest income, adjusted for amortization of 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. As of 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
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
25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (countinued)
- --------------------------------------------------------------------------------
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. Exempt-Interest Dividends and Other Distributions
The 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 six months ended September 30, 1996, SB received sales
charges of approximately $139,000 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. 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 six months ended September 30, 1996,
CDSCs paid to SB were approximately:
Class A Class C
================================================================================
CDSCs $5,000 $7,000
================================================================================
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
26
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
rate of 0.20% of the average daily net assets. For the six months ended
September 30, 1996, total Distribution Plan fees incurred were:
Class A Class C
================================================================================
Distribution Plan Fees $204,340 $50,514
================================================================================
All officers and two Trustees of the Fund are employees of SB.
4. Investments
During the six months ended September 30, 1996, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
================================================================================
Purchases $54,294,889
- --------------------------------------------------------------------------------
Sales 64,670,332
================================================================================
At September 30, 1996, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
================================================================================
Gross unrealized appreciation $ 7,449,524 *
Gross unrealized depreciation (1,269,686)*
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 6,179,838 *
================================================================================
* Substantially the same for Federal income tax purposes.
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:
2001 2002 2003 2004
================================================================================
Carryforward Amounts $920,000 $577,000 $2,846,000 $1,740,000
================================================================================
6. Shares of Beneficial Interest
At September 30, 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.
27
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
At September 30, 1996, total paid-in capital amounted to the following for each
class:
Class A Class C
================================================================================
Total Paid-in Capital $268,179,404 $29,993,317
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1996 March 31, 1996*
------------------- --------------------
Shares Amount Shares Amount
=========================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 2,024,065 $ 13,311,042 4,460,506 $ 29,767,813
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 607,021 3,984,074 1,037,716 6,883,693
Shares redeemed (3,782,513) (24,872,538) (8,105,534) (53,911,260)
- ------------------------------------------------------------------------------------------
Net Increase (Decrease) (1,151,427) $ (7,577,422) 4,632,065 $ 31,336,600
==========================================================================================
Class C
Shares sold 523,614 $ 3,443,111 933,359 $ 6,230,105
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 75,939 498,283 137,628 912,585
Shares redeemed (522,332) (3,435,665) (1,018,889) (6,764,660)
- ------------------------------------------------------------------------------------------
Net Increase 77,221 $ 505,729 288,532 $ 1,963,867
==========================================================================================
Class Y
Shares sold -- $ -- 30,535 $ 200,000
Shares issued on reinvestment -- -- 1,729 11,483
Shares redeemed (32,264) (211,511) -- --
- ------------------------------------------------------------------------------------------
Net Increase (Decrease) (32,264) $ (211,511) 32,264 $ 211,483
==========================================================================================
</TABLE>
* For Class Y shares, transactions are for the period from April 4, 1995
(inception date) to March 31, 1996.
28
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (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:
Shares Total Net Total Net
Issued by Assets of Assets of
Acquired Fund the Portfolio Acquired Fund the Portfolio
================================================================================
Limited Maturity Fund 7,475,811 $50,182,191 $260,062,548
================================================================================
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.
29
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1996 1995(2) 1994 1993 1992
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 6.61 $ 6.54 $ 6.55 $ 6.68 $ 6.45 $ 6.38
- ------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.17 0.36 0.36 0.37 0.39 0.42
Net realized and
unrealized gain (loss) (0.03) 0.07 -- (0.13) 0.23 0.07
- ------------------------------------------------------------------------------------------------
Total Income From
Operations 0.14 0.43 0.36 0.24 0.62 0.49
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.17) (0.36) (0.37) (0.37) (0.39) (0.42)
- ------------------------------------------------------------------------------------------------
Total Distributions (0.17) (0.36) (0.37) (0.37) (0.39) (0.42)
- ------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 6.58 $ 6.61 $ 6.54 $ 6.55 $ 6.68 $ 6.45
- ------------------------------------------------------------------------------------------------
Total Return 2.21%+++ 6.65% 5.69% 3.65% 9.82% 7.99%
- ------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $269,077 $278,247 $244,818 $281,771 $242,491 $157,426
- ------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses 0.75%+ 0.75% 0.61% 0.53% 0.55% 0.49%
Net investment income 5.17+ 5.43 5.61 5.53 5.90 6.42
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 18.19% 25.72% 21.80% 24.72% 24.53% 26.27%
================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
+++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
30
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class C Shares 1996(1) 1996 1995(2) 1994 1993(3)
================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 6.61 $ 6.54 $ 6.54 $ 6.68 $ 6.62
- ------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.16 0.35 0.35 0.35 0.10
Net realized and unrealized gain (loss) (0.03) 0.06 -- (0.14) 0.05
- ------------------------------------------------------------------------------------------------
Total Income From Operations 0.13 0.41 0.35 0.21 0.15
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.17) (0.34) (0.35) (0.35) (0.09)
- ------------------------------------------------------------------------------------------------
Total Distributions (0.17) (0.34) (0.35) (0.35) (0.09)
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 6.57 $ 6.61 $ 6.54 $ 6.54 $ 6.68
- ------------------------------------------------------------------------------------------------
Total Return 1.96%+++ 6.45% 5.51% 3.15% 2.28%+++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $29,164 $28,824 $26,622 $26,869 $5,738
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.97%+ 0.96% 0.89% 0.88% 0.88%+
Net investment income 4.95+ 5.22 5.34 5.10 5.35+
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 18.19% 25.72% 21.80% 24.72% 24.53%
================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
(3) 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.
31
<PAGE>
[This page intentionally left blank]
<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
Lawrence T. McDermott
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
SMITH BARNEY
- -----------------------------------
A member of Travelers Group [LOGO]
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--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
FD0804 11/96
SEMI -- ANNUAL REPORT
[GRAPHIC]
SMITH BARNEY
MUNI FUNDS
NEW YORK MONEY
MARKET AND
NEW YORK PORTFOLIOS
- -------------------
September 30, 1996
[LOGO] SMITH BARNEY MUTUAL FUNDS
Investing for your future.
Every day.
<PAGE>
- --------------------------------------------------------------------------------
NEW YORK MONEY MARKET AND NEW YORK PORTFOLIOS
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Muni Funds-New York Money Market and New York Portfolios for the period ended
September 30, 1996. In this report, we summarize the period's prevailing
economic and market conditions and outline each Portfolio Strategy. A detailed
summary of each Portfolio's performance can be found in the appropriate sections
that follow in the semi-annual report.
Market and Economic Overview
Because of the uncertainty surrounding the future direction of the U.S. economy,
the bond markets have continued to experience significant volatility over the
past six months. However, this heightened volatility has been confined to a
narrow trading range of 6.75% and 7.20% on 30-Year U.S. Treasury yields.
In our view, this heightened bond market volatility stems from several
conditions in the U.S. economy, with the most important being the underlying
strength of the U.S. economy which many investors fear could lead to higher
inflation. For example, gross domestic product (GDP) in the U.S. for the second
quarter of 1996 grew at an annualized rate of 4.7%, up from 2.0% in the first
quarter. This pace of economic growth has caused pressures on both labor and
capital to increase; however, there have been no signs of a pick-up in
inflation. Bond market investors continue to closely monitor recent U.S.
economic data for indications whether the rate of U.S. economic growth will
moderate, or whether the economy will continue to grow at its current pace. The
latter scenario would most likely cause the Federal Reserve Board (the Fed) to
tighten monetary policy by raising short-term interest rates. While the majority
of key U.S. economic announcements over the past six months points toward a
strengthening rather than a weakening economy, government reports released
during the month of September suggest that the economy may be headed for a
slowdown. In response, interest rates have since declined from their higher
levels in June and July.
Although this has been a challenging period for the fixed income markets, the
municipal bond market has outperformed the U.S. government bond market. In our
view, the municipal bond market's better relative performance can be attributed
primarily higher demand and modest supply. In recent months, investors have been
seeking to reinvest proceeds of municipal bonds that have either matured or been
called, back into the municipal bond market. This increased demand combined with
light supply has caused municipal bond
1
<PAGE>
prices to stay higher, and yields to conversely remain lower, relative to those
of U.S. Treasury securities.
New York Money Market Portfolio Performance
Update and Strategy
The New York Money Market Portfolio seeks to provide investors with income
exempt from federal income tax (other than the alternative minimum tax) and New
York State and City personal income taxes by investing in a portfolio of high
quality, short-term New York municipal obligations selected for liquidity and
stability of principal.
As of September 30, 1996, the New York Money Market Portfolio's 7-day current
yield was 3.04%. The Portfolio's 7-day effective yield--which reflects
compounding--was 3.09%. This means that New York state residents in the combined
federal and effective state income tax bracket of 43.22% would have to earn a
5.20% taxable yield to match the tax-free income provided by the Portfolio. The
average maturity of the Portfolio's holdings is expected to remain between 50
and 60 days over the near term.
While the New York Money Market Portfolio tries to maintain a stable net asset
value of $1.00 per share, there can be no assurance this goal will be achieved.
The U.S. government does not insure or guarantee an investment in the New York
Money Market Portfolio.
New York Portfolio's Performance and
Investment Strategy
The New York Portfolio seeks to pay its shareholders as high a level of monthly
income exempt from Federal income taxes and from New York State and New York
City personal income taxes as is consistent with prudent investing.
For the six months ended September 30, 1996, the Class A shares of the New York
Portfolio posted a total return of 3.29%. In comparison, the Portfolio's Lipper
Analytical Services, Inc. New York municipal bond fund peer group average had a
total return of 2.91% for the same time period. (Lipper is an independent fund
tracking organization.)
Over the six-month period covered by this report, the New York Portfolio
distributed dividends totaling $0.366 per share; based on its net asset value
(NAV) of $13.25 as of September 30, 1996, this equates to an annualized
distribution rate of 5.52% on Class A shares. For a New York state resident in
the top combined federal and effective state income tax bracket of 43.22%, the
New York Portfolio's tax-free yield of 5.52% is equivalent to a taxable yield of
9.30%.
2
<PAGE>
The Portfolio's average weighted maturity as of September 30, 1996 was just over
21 years. During the period covered by this report, the New York Portfolio
maintained its high-quality credit orientation and broad sector diversification
including, but not limited to, general obligation and revenue bonds. As of
September 30, 1996, approximately 94% of the New York Portfolio was in
investment-grade securities with approximately 27% of the Portfolio's
investments rated AAA. (An investment grade security has a rating of BBB/BAA or
better from Standard & Poor's Ratings Services or Moody's Investors Service
Inc., two major credit rating and reporting agencies). The largest sectors of
the New York Portfolio were hospital bonds (22.4%), education bonds (16.8%),
multi-family housing bonds (8.0%) and transportation bonds (8.0%).
New York Economic Highlights
Standard & Poor's Ratings Services recently affirmed its single A-minus rating
on New York State's general obligation debt and their outlook for the state's
economy remains positive. However, an upgrade appears unlikely due to the record
long delay in passing the fiscal 1997 budget as well as structural imbalances in
the budget. In our view, the key to New York State's future is continued fiscal
restraint and dealing with the challenge of additional burdens that will come
from the recently enacted welfare reforms at the federal level.
In closing, thank you for investing in the New York Money Market and New York
Portfolios. We look forward to continuing to help 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/ Joseph Benevento
Joseph Benevento
Vice President
New York Money Market Portfolio
October 15, 1996
3
<PAGE>
Announcing a New Systematic Investment
Program Monthly Minimum
If you are a shareholder purchasing shares of the New York Portfolio through
Smith Barney's Systematic Investment Program on a monthly basis or if you plan
to do so in the future, the minimum initial investment for Class A, Class B and
Class C shares is now $25. If you are purchasing shares on a quarterly basis,
the minimum initial investment for Class A, Class B and Class C shares is $50.
Please contact your Smith Barney Financial Consultant for more information about
the Systematic Investment Program. However, please note that participating in
Smith Barney's Systematic Investment Program does not ensure a profit or protect
you against a loss in declining markets.
4
<PAGE>
- --------------------------------------------------------------------------------
New York Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
====================================================================================
<S> <C> <C> <C> <C>
9/30/96 $13.19 $13.25 $0.37 3.29%+
- ------------------------------------------------------------------------------------
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 $ 7.85
====================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
====================================================================================
<S> <C> <C> <C> <C>
9/30/96 $13.18 $13.24 $0.33 3.03%+
- -----------------------------------------------------------------------------------
3/31/96 12.84 13.18 0.68 8.05
- -----------------------------------------------------------------------------------
Inception* - 3/31/95 11.96 12.84 0.29 9.92+
===================================================================================
Total $1.30
===================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
====================================================================================
<S> <C> <C> <C> <C>
9/30/96 $13.17 $13.23 $0.33 3.01%+
- ------------------------------------------------------------------------------------
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 $2.51
====================================================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY
AND CAPITAL GAINS, IF ANY, ANNUALLY.
5
<PAGE>
- --------------------------------------------------------------------------------
New York Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
----------------------------------
Class A Class B Class C
========================================================================
Six Months Ended 9/30/96+ 3.29% 3.03% 3.01%
- ------------------------------------------------------------------------
Year Ended 9/30/96 6.96 6.26 6.38
- ------------------------------------------------------------------------
Five Years Ended 9/30/96 7.77 N/A N/A
- ------------------------------------------------------------------------
Inception* through 9/30/96 7.45 11.22 6.11
========================================================================
With Sales Charge(2)
----------------------------------
Class A Class B Class C
========================================================================
Six Months Ended 9/30/96+ (0.85)% (1.47)% 2.08%
- ------------------------------------------------------------------------
Year Ended 9/30/96 2.64 1.79 5.38
- ------------------------------------------------------------------------
Five Years Ended 9/30/96 6.90 N/A N/A
- ------------------------------------------------------------------------
Inception* through 9/30/96 7.00 9.29 6.11
========================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
========================================================================
Class A (Inception* through 9/30/96) 100.99%
- ------------------------------------------------------------------------
Class B (Inception* through 9/30/96) 22.37
- ------------------------------------------------------------------------
Class C (Inception* through 9/30/96) 24.75
========================================================================
(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 charges 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 within 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.
6
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the New York Portfolio vs.
Lehman Long Bond Index+
- --------------------------------------------------------------------------------
January 1987 -- September 1996
[GRAPHIC]
NY Portfolio Lehman Long Bond Index
$ 9,549 $10,000
9,596 10,212
9,315 10,381
10,219 11,362
11,135 12,599
12,073 13,580
13,481 15,120
15,394 17,327
15,767 17,521
16,740 19,103
18,184 20,557
18,796 21,445
+ 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 September 30, 1996. The Lehman Long Bond 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 twenty
three 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>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=====================================================================================
<S> <C> <C> <C>
Albany County New York FGIC-Insured:
$ 1,000,000 AAA 3.750% due 10/1/96 $ 1,000,000
1,785,000 MIG 1* Series C 3.500% due 2/19/97 1,785,630
8,000,000 NR Albany NY CSD 4.00% due 10/18/96 8,001,017
Albany IDA IDR:
1,285,000 A- PBS Development Co. Project
4.250% due 12/1/96(a) 1,285,000
540 Broadway Project:
1,390,000 A- Series B-2 4.250% due 12/1/96(a) 1,390,000
1,380,000 A- Series B-3 4.250% due 12/1/96(a) 1,380,000
7,000,000 NR Averill Park New York CSD BAN 4.000%
due 1/3/97 7,004,327
Baldwin UFSD:
5,000,000 NR BAN 3.750% due 11/1/96 5,000,412
6,900,000 NR TAN 4.250% due 6/30/97 6,914,987
4,250,000 NR Bayport-Blue Point Union School District
4.500% due 6/19/97 4,265,071
Board Cooperative Educational Services:
1,300,000 NR District RAN Series A 4.250% due 6/26/97 1,302,291
10,000,000 NR District RAN Series A 4.500% due 6/26/97 10,010,537
8,929,000 NR Brentwood NY UFSD TAN 4.250% due 12/20/96 8,938,577
2,350,000 NR Clinton UFSD BAN 4.250% due 6/27/97 2,355,819
5,000,000 NR Chatauqua County New York GO TAN
3.750% due 12/20/96 5,003,722
5,000,000 A-1 Columbia County New IDA IRA (Rural
Manufacturing Co. Inc. Project)
Series A 3.700%(a)(b) 5,000,000
12,000,000 NR Commack UFSD TAN 4.250% due 6/27/97 12,042,586
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
11,810,000 NR Dover UFSD BAN 4.500% due 9/12/97 11,852,990
3,000,000 NR Eastern Suffolk BOCES 4.500% due 6/26/97 3,011,207
Energy Resource & Development for NYS
Tax-Exempt Eagle Trust Muni Trust Receipts:
8,000,000 A-1 Series 7059A 3.950%(b) 8,000,000
9,500,000 A-1 Series 7066A 3.950%(b) 9,500,000
18,000,000 A-1 Series 7057A 3.950%(b) 18,000,000
2,160,000 VMIG 1* Erie County IDA (Rosina Food Products, Inc.)
3.700%(a)(b) 2,160,000
11,300,000 A-1 Franklin County IDA IDR (Kes Chateaugay LP
Project) Series A 3.800%(a)(b) 11,300,000
2,880,000 A-1 Fulton County IDR (Fiber Conversion Inc.)
3.700%(a)(b) 2,880,000
3,590,000 A-1 Geneva IDA Civic Facilities Revenue
(Colleges of the Seneca Series A ) 3.800%(b) 3,590,000
2,785,000 NR Grand Island Erie County BAN 4.500%
due 7/31/97 2,796,128
1,800,000 NR Highland Falls Fort Montgomery CSD
TAN 4.250% due 6/20/97 1,802,475
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 2,800,000 NR Hoosick Valley NY CSD BAN 4.000% due
6/20/97 $ 2,802,318
1,100,000 AAA Huntington New York Public Improvement
Series C FGIC-Insured 5.600%
due 11/1/96 1,101,676
1,955,000 A-1 Jefferson County IDA IDR (The Climax
Manufacturing Co. Project) 3.700%(a)(b) 1,954,996
3,050,000 NR Johnsburg CSD BAN 4.00% due 12/20/96 3,051,631
3,900,000 A-1 Lewis County IDA IDR (The Climax
Manufacturing Co. Project) 3.700%(a)(b) 3,900,000
8,225,000 NR Little Falls CSD BAN Series C 4.250% due
10/9/96 8,225,666
8,500,000 NR Long Beach CSD BAN 4.250% due 6/26/97 8,525,431
3,500,000 NR Mamaroneck UFSD TAN 4.000% due 2/6/97 3,503,550
Metropolitan Transit Authority Commuter
Facilities Revenue:
30,500,000 A-1 3.750%(b) 30,500,000
5,000,000 SP-1 RAN Series 1996 A 4.250% due 12/12/96 5,006,245
8,624,000 NR Miller Place UFSD BAN 4.500% due 10/18/96 8,625,345
5,000,000 VMIG 1* Monroe County IDA (Canal Ponds) 3.700%(b) 5,000,000
5,415,000 P-1* Monroe County IDA (Granite Building)
3.600%(b) 5,415,000
3,500,000 A-1 Monroe County Public Improvement BAN
Series 1996 4.500% due 6/6/97 3,519,482
10,000,000 A-1+ Municipal Assistance Corp Series F Bonds
AMBAC-Insured 3.500% TECP 10,000,000
Nassau County:
17,590,000 SP-1 BAN Series A 3.500% due 11/15/96 17,595,268
6,500,000 SP-1 BAN Series B 4.250% due 11/15/96 6,505,060
8,500,000 SP-1 BAN Series C 4.250% due 3/14/97 8,517,927
15,000,000 SP-1 RAN Series B 4.250% due 4/15/97 15,040,807
3,100,000 AAA New York City GO TOB Series H-6 3.960%(b) 3,100,000
New York City GO:
14,000,000 A-1+ Sub-Series B-10 3.750%(b) 14,000,000
8,200,000 A-1+ Sub-Series D FGIC-Insured 3.750%(b) 8,200,000
15,000,000 A-1+ Sub-Series F-2 3.950%(b) 15,000,000
3,800,000 A-1+ Sub-Series F-4 3.800%(b) 3,800,000
4,300,000 A-1+ Sub-Series F-5 3.800%(b) 4,300,000
5,900,000 A-1+ Sub-Series F-6 3.800%(b) 5,900,000
1,000,000 A-1+ Sub-Series F-7 3.800%(b) 1,000,000
16,400,000 VMIG 1* New York City Housing Development
(East 96th Street Project) Series A
3.700%(a)(b) 16,400,000
New York City HDC Mortgage Revenue
Multi-Family Housing:
10,000,000 A-1 400 West 59th Series A-1 3.700%(a)(b) 10,000,000
10,000,000 A-1 400 West 59th Series A-2 3.800%(a)(b) 10,000,000
3,600,000 A-1+ James Tower Development Series A 3.700%(b) 3,600,000
9,590,000 A-1+ Parkgate Towers Series A 3.650%(b) 9,590,000
1,875,000 VMIG 1* Queenswood Apartments Series A 3.850%(b) 1,875,000
New York City IDA IDR:
3,450,000 VMIG 1* Series 87A 3.800%(a)(b) 3,450,000
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited)(continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=====================================================================================
<S> <C> <C> <C>
$ 1,100,000 VMIG 1* Series 89-0 3.800%(a)(b) $ 1,100,000
1,770,000 VMIG 1* Series 89-G 3.800%(a)(b) 1,770,000
New York City Muni Finance Authority:
11,100,000 A-1+ 3.450% TECP 11,100,000
7,255,000 A-1+ Series (SGA 13) 3.800%(b) 7,255,000
New York City Muni Trust Receipts:
5,000,000 A-1+ Series (SAK 1) AMBAC-Insured 3.900%(b) 5,000,000
2,500,000 A-1+ Series (SAK 2) MBIA-Insured 3.900%(b) 2,500,000
3,000,000 AAA New York City Muni Water Finance Authority:
(Pre-Refunded Call 6/15/97 @ 101.50)
7.625% due 6/15/016(e) 3,124,503
3,500,000 A-1+ 3.600% due 11/12/96 3,500,000
12,000,000 A-1+ New York City Muni Water Tax-Exempt
Eagle Trust Muni Trust Receipts
FGIC-Insured 3.950%(b) 12,000,000
13,300,000 A-1 New York City Water & Sewer Certificate
Series 92 AMBAC-Insured Muni Trust
Receipts 3.900%(b) 13,300,000
6,500,000 SP-1+ New York City TAN Series A 4.500% due
2/12/97 6,518,581
New York State Dormitory Authority
Revenue:
4,325,000 A-1+ Muni Trust Receipts Colgate University
Series (SGA 15) FGIC-Insured 3.800%(b) 4,325,000
2,000,000 A-1+ Muni Trust Receipts Series (SAK 3)
FGIC-Insured 3.900%(b) 2,000,000
Memorial Sloan Kettering:
20,000,000 AAA 3.450% due 11/12/96 20,000,000
13,000,000 AAA 3.450% due 11/20/96 13,000,000
26,500,000 VMIG 1* New York State Energy Research &
Development Electricity Facilities
Revenue (Long Island Lighting Co.)
3.750% to 3.850%(a)(b) 26,500,000
6,000,000 P-1 * New York State Energy Research &
Development Authority Pollution Control
Revenue Central-Hudson Gas & Electricity
Series 85B 3.650%(b) 6,000,000
17,222,500 AAA New York State Environmental Facilities Corp.
Pollution Control Revenue 3.600% due 1/1/97 17,222,500
New York State HFA Revenue Multi-Family
Housing:
21,100,000 A-1+ Normandie Court I Project 3.700%(b) 21,100,000
1,900,000 A-1+ Series 1988A AMBAC-Insured 3.800%(b) 1,900,000
New York State Local Government
Assistance Corp.:
22,200,000 A-1+ Series A 3.700%(b) 22,200,000
4,900,000 A-1+ Series B 3.750%(b) 4,900,000
11,200,000 A-1+ Series C 3.750%(b) 11,200,000
16,200,000 A-1+ Series D 3.750%(b) 16,200,000
12,400,000 A-1+ Series E 3.750%(b) 12,400,000
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===================================================================================
<S> <C> <C>
$ 32,725,000 VMIG 1* New York State Mortgage Agency Revenue,
Muni Trust Receipts 4.000% (a)(b) $ 32,725,000
5,000,000 A-1+ New York State Power Authority Series
SG-4 3.800%(b) 5,000,000
10,165,000 A-1+ New York State Throughway Authority
Muni Trust Receipts
FGIC-Insured 3.800%(b) 10,165,000
12,342,000 VMIG 1* New York State Urban Development Corp.
Revenue Variable Rate
Certificate-Correctional Facilities
Muni Trust Receipts 3.950%(b) 12,342,000
1,900,000 A-1 Newbrugh IDA Civic Facility Revenue
(Saint Mary's College) 3.700%(b) 1,900,000
Niagara County IDA (American Re-Fuel):
3,600,000 VMIG 1* 3.600% due 10/8/96 TECP(a) 3,600,000
4,500,000 VMIG 1* 3.750% due 10/7/96 TECP(a) 4,500,000
33,410,000 VMIG 1* 4.000%(b) 33,410,000
3,500,000 P-1* Niagara County IDA IDR (General Abrasive
Tribacher) 3.950%(a)(b) 3,500,000
2,760,000 NR North Hempstead BAN 4.000% due 11/1/96 2,760,648
500,000 VMIG 1* North Hempstead Solid Waste Management
Authority Solid Waste Management
Revenue Refunding Series A 3.750%(b) 500,000
3,000,000 NR Pelham NY UFSD BAN 4.000% due 11/1/96 3,001,086
6,000,000 AAA Puerto Rico Industrial Medical PCR (Abbott
Laboratory) Series 1983 3.410% due 3/3/97 6,000,000
1,320,000 NR Rensselaer County IDA IDR (Millers
Supermarket Inc. Project) 3.750%
due 3/3/97(a) 1,320,000
1,000,000 P-1* Rochester Gas & Electricity 3.450%(b) 1,000,000
2,690,000 MIG 1* Rochester TOB Muni Trust Receipts
AMBAC-Insured 3.950%(b) 2,690,000
11,273,000 NR Schenectady County BAN Series A 3.500%
due 2/14/97 11,277,043
2,000,000 P-1* Schenectady County IDA IDR Refunding
Scotia Industrial Park Project Series A
3.600%(b) 2,000,000
5,000,000 MIG 1* South Country CSD TAN 4.000% due 6/25/97 5,000,000
20,000,000 SP-1+ Suffolk County NY 4.500% due 9/11/97 20,102,251
Triborough Bridge & Tunnel Authority
Revenue, Certificates General Purpose,
Series C:
6,930,000 A-1+ Muni Trust Receipts MBIA-Insured
3.800%(b) 6,930,000
23,500,000 VMIG 1* Special Obligation FGIC-Insured
3.800%(b) 23,500,000
7,475,000 NR West Seneca CSD BAN 4.250% due 6/26/97 7,493,441
- -----------------------------------------------------------------------------------
TOTAL INVESTMENT -- 100%
(Cost --$866,935,231**) $866,935,231
===================================================================================
</TABLE>
See Notes to financial Statements.
11
<PAGE>
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Schedules of Investments (unaudited)(continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================
<S> <C> <C> <C>
Education -- 16.8%
New York State Dormitory Authority Revenue Bonds,
City University:
$ 2,500,000 Baa1* 7.500% due 7/1/10(d) $ 2,878,125
5,000,000 AAA AMBAC-Insured, 5.375% due 7/1/25 4,756,250
3,000,000 AAA Series 2, MBIA-Insured, 6.875% due 7/1/14 3,322,500
Series A:
5,625,000 Baa1* 5.625% due 7/1/16 5,428,125
2,975,000 AAA FSA-Insured, 5.750% due 7/1/18 3,012,188
7,000,000 Baa1* Series B, 6.000% due 7/1/14 7,043,750
2,000,000 BBB Series C, 8.200% due 7/1/14 2,147,500
1,250,000 Baa1* Series U, 6.250% due 7/1/02 1,309,375
2,855,000 AAA Comsewogue Public Library, MBIA-Insured,
6.000% due 7/1/15 2,929,944
3,000,000 AAA Cooper Union, FSA-Insured, 7.200% due 7/1/20 3,311,250
Cornell University, Series A:
2,000,000 AA 7.375% due 7/1/20 2,207,500
1,000,000 AA 7.375% due 7/1/30 1,103,750
1,230,000 AAA Crouse Community Center, FHA-Insured,
7.500% due 8/1/29 1,345,313
200,000 A+ Department of Health, State of New York Issue,
7.250% due 7/1/02 217,250
3,500,000 AAA Episcopal Health, FHA-Insured, 5.900% due 8/1/20 3,425,625
Genessee Valley, FHA-Insured:
1,000,000 AA Series A, 6.900% due 2/1/32 1,050,000
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 8/1/28 863,000
1,600,000 A+ Irving Memorial Hospital, 10.500% due 7/1/17 1,635,952
2,335,000 AAA Jewish Geriatric Center, FHA-Insured,
7.150% due 8/1/14 2,591,850
2,000,000 AAA Long Island Medical Center, Series A, FHA-Insured,
7.750% due 8/15/27 2,117,500
2,700,000 AA Manhattan College, Asset Guarantee-Insured,
6.500% due 7/1/19 2,808,000
New York Medical College:
220,000 AA Asset Guarantee-Insured, 6.700% due 7/1/01 237,600
1,140,000 AAA 7.250% due 10/1/03 1,195,575
1,600,000 AAA Niagara Falls, FHA-Insured, Series B,
6.200% due 2/1/15 1,660,000
New York State Urban Development Corp.:
7,950,000 BBB Center for Individual Innovation,
5.500% due 1/1/13 7,602,187
3,660,000 BBB Syracuse University Center, 5.500% due 1/1/15 3,467,850
5,000,000 Baa1* State of New York Issue, Series 1991,
7.750% due 7/1/21 5,731,250
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
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Schedules of Investments (unaudited)(continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=====================================================================================
<S> <C> <C> <C>
Education -- 16.8% (continued)
State University Educational Facility,
Series A:
$ 1,000,000 A+ 7.500% due 5/15/11 $ 1,167,500
9,000,000 A+ 6.375% due 5/15/14 9,180,000
12,110,000 A+ 5.875% due 5/15/17 12,019,175
5,000,000 A+ 5.250% due 5/15/19 4,575,000
5,000,000 A+ Series B, 5.250% due 5/15/11 4,756,250
2,375,000 A+ Series C, 5.400% due 5/15/23 2,158,281
2,450,000 AAA St. Vincent's Hospital & Medical
Center, FHA-Insured, 7.400% due 8/1/30 2,661,312
7,370,000 A+ University of Rochester, Series A, 6.500% due
7/1/19 7,830,625
285,000 BBB- Upstate Community College, Series B,
7.100% due 7/1/01 310,294
- -------------------------------------------------------------------------------------
120,798,302
- -------------------------------------------------------------------------------------
Escrowed to Maturity(f) -- 1.3%
1,495,000 AAA Commonwealth of Puerto Rico, Aqueduct &
Sewer Authority Revenue Bonds, 10.250%
due 7/1/09 2,064,969
New York City GO, AMBAC-Insured, Series I:
3,150,000 AAA 7.250% due 8/15/14 3,429,562
945,000 AAA 7.250% due 8/15/15 1,018,238
2,775,000 AAA New York State Power Authority Revenue &
General Purpose, 9.500% due 1/1/01 3,021,281
- -------------------------------------------------------------------------------------
9,534,050
- -------------------------------------------------------------------------------------
Finance -- 3.4%
500,000 AA- Municipal Assistance Corp., New York
City, Series 64, 7.625% due 7/1/08 547,500
New York State Local Government Assistance
Corp.:
14,345,000 A 1992 Series A, 6.875% due 4/1/19 15,618,119
8,225,000 A 1993 Series C, 5.500% due 4/1/17 8,060,500
- -------------------------------------------------------------------------------------
24,226,119
- -------------------------------------------------------------------------------------
General Obligation -- 7.3%
500,000 AAA Buffalo Refunding Bonds, FGIC-Insured,
6.250% due 2/1/16 518,125
1,000,000 A Commonwealth of Puerto Rico GO, 8.000% due
7/1/08 1,072,500
860,000 A- Commonwealth of Puerto Rico Municipal Finance
Agency, Series A, 8.250% due 7/1/08 929,875
Green Island GO:
100,000 Baa* 9.375% due 11/1/01 116,375
125,000 Baa* 9.375% due 11/1/02 147,656
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
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Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================
<S> <C> <C> <C>
General Obligation -- 7.3% (continued)
New York City Refunding Bonds:
$ 4,000,000 AAA MBIA 6.950% due 8/15/12 $ 4,475,000
5,000,000 A- Series A, 6.250% due 8/1/09 5,056,250
Series B:
800,000 AAA FSA-Insured 5.850% due 10/1/07 818,000
5,000,000 A- 5.875% due 8/15/16 4,750,000
5,000,000 Baa1* Series C, 6.660% due 8/1/09 5,043,750
255,000 AAA Series D,BIG-Insured 8.000% due 8/1/04 267,406
10,000,000 A- Series F, 5.750% due 2/1/19 9,337,500
5,500,000 BBB+ Series H, 7.000% due 2/1/21 5,761,250
Series I, AMBAC-Insured:
1,850,000 AAA 7.250% due 8/15/14 1,981,813
555,000 AAA 7.250% due 8/15/15 595,237
5,000,000 A- Series J 5.500% due 2/15/26 4,462,500
New York State GO:
2,000,000 A* 7.000% due 11/15/02 2,222,500
1,000,000 A* 12.000% due 11/15/03 1,405,000
2,750,000 A* 9.875% due 11/15/05(d) 3,667,812
- ------------------------------------------------------------------------------------------
52,628,549
- ------------------------------------------------------------------------------------------
Government Facilities -- 4.2%
New York State Dormitory Authority Revenue,
Lease-Series A:
3,400,000 Baa1* 5.375% due 5/15/16 3,106,750
10,000,000 Baa1* 5.250% due 5/15/21 8,825,000
New York State Urban Development Corp. Revenue,
Correctional Facilities:
7,195,000 A 5.250% due 1/1/21 6,394,556
Series 6:
1,615,000 Baa1* 5.375% due 1/1/25 5,128,750
5,000,000 AAA AMBAC-Insured, 5.500% due 1/1/14 4,975,000
5,500,000 AAA FSA-Insured, 5.375% due 1/1/25 1,449,462
- ------------------------------------------------------------------------------------------
29,879,518
- ------------------------------------------------------------------------------------------
Hospitals -- 22.4%
3,000,000 AAA Beth Israel Medical Center, Series A, MBIA-Insured,
7.500% due 11/1/10 3,348,750
4,000,000 BBB Brookdale Hospital, 6.800% due 8/15/12 4,160,000
2,500,000 BB Central Suffolk Hospital Project, Series A,
6.125% due 11/1/16 2,343,750
Hospital & Nursing Home, FHA-Insured:
Series A:
14,250,000 AAA 1995A, 6.200% due 2/15/28 14,481,563
145,000 AA 6.100% due 2/15/02 150,800
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================
<S> <C> <C> <C>
Hospitals -- 22.4% (continued)
$ 11,805,000 AAA 6.200% due 2/15/21 $ 12,085,369
1,000,000 AAA 8.000% due 2/15/28 1,077,500
4,100,000 AA 7.450% due 8/15/31 4,479,250
990,000 AA Series B, 7.000% due 8/15/32 1,063,012
Series C:
1,975,000 AAA 6.400% due 8/15/14 2,049,063
2,000,000 AA+ 6.100% due 8/15/15 2,037,500
Long Term Healthcare, CGIC-Insured:
1,860,000 AAA Series B, 6.450% due 11/1/14 1,957,650
140,000 AAA Series C, 6.400% due 11/1/14 147,000
Mental Health Services Facilities:
485,000 AAA Series A, MBIA-Insured, 7.750% due 2/15/20 534,106
Series F:
4,720,000 BBB+ 6.500% due 8/15/12 4,897,000
4,615,000 BBB+ 6.500% due 2/15/19 4,776,525
6,800,000 AA Methodist Hospital, FHA-Insured, 6.700% due 8/15/23 7,148,500
990,000 B1* Monroe County IDA, Revenue Civic Facilities-Genesee
Hospital, Series A, 6.500% due 11/1/99 997,425
4,000,000 AA Mortgage Project, Series A, FHA-Insured,
6.375% due 8/15/24 4,135,000
4,750,000 Baa* New York City Local Government Revenue, Health &
Hospitals Corp., Series A, 6.300% due 2/15/20 4,619,375
4,700,000 BBB New York Downtown Hospital, Series A,
6.800% due 2/15/20 4,817,500
New York Hospital, AMBAC/FHA-Insured Mortgage, Series A:
8,500,000 AAA 6.800% due 8/15/24 9,296,875
7,600,000 AAA 6.500% due 8/15/29 8,151,000
2,500,000 AAA 6.900% due 8/15/34 2,750,000
New York State Dormitory Authority:
10,000,000 BBB Department of Health, Rosewell Project,
5.500% due 7/1/25 9,150,000
3,655,000 AAA Devereux Foundation, MBIA-Insured, 5.000% due 7/1/10 3,431,131
2,000,000 AAA John T. Mather Memorial Hospital, CONNIE LEE-Insured,
5.375% due 7/1/19 1,882,500
455,000 BBB- Manhattan Eye, Ear & Throat Hospital,
11.500% due 7/1/09 463,049
3,000,000 AA St. Lukes Home, 6.375% due 8/1/35 3,082,500
990,000 AAA United Health Service Inc., FHA-Insured,
7.350% due 8/1/29 1,066,725
5,075,000 BBB+ New York State Medical Care Facilities Finance Agency,
Revenue Bonds, 8.875% due 8/15/07 5,351,181
2,825,000 NR Newark-Wayne Community Hospital Inc., Hospital Revenue,
Series A, 7.600% due 9/1/15 2,697,875
550,000 Baa* Onondaga County IDA, Civic Facility Revenue Bonds,
1993 Series B, 6.625% due 1/1/18 551,375
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
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Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================
<S> <C> <C> <C>
Hospitals -- 22.4% (continued)
$ 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 $ 552,387
1,000,000 Aa* Second Mortgage Healthcare Project,
6.375% due 11/15/19 1,038,750
5,000,000 Baa* Secured Hospital Revenue Bonds, Series 91-A,
7.400% due 8/15/21 5,300,000
Series A:
1,185,000 BBB+ 7.700% due 2/15/18 1,247,213
1,840,000 BBB+ 7.750% due 2/15/20 2,012,500
1,570,000 Baa* 6.250% due 2/15/24 1,522,900
6,000,000 Aa* SONYMA-Insured, 5.850% due 2/15/33 5,827,500
3,500,000 AA Series B, FHA-Insured, 6.100% due 2/15/15 3,552,500
2,500,000 AA Series C, FHA-Insured, 6.650% due 8/15/32 2,603,125
Series D, FHA-Insured:
420,000 AAA 5.950% due 8/15/09 428,400
5,000,000 AA 6.450% due 2/15/32 5,112,500
1,640,000 AAA St. Mary's Hospital Project, Series A, AMBAC-Insured,
6.200% due 11/1/14 1,724,050
720,000 A Valley Health Development Corp. Revenue Bonds,
FHA-Insured, Mortgage Loan, 11.300% due 2/1/23 860,400
- -------------------------------------------------------------------------------------------
160,963,074
- -------------------------------------------------------------------------------------------
Housing: Multi-Family -- 8.0%
6,470,000 BBB Commonwealth of Puerto Rico, Urban Renewal & Housing
Corp. Revenue Bonds, 7.875% due 10/1/04 7,108,913
10,200,000 AA Housing New York Corp. Revenue Refunding,
5.500% due 11/1/20 9,435,000
New York City Housing Development Corp.,
Multi-Family Housing, Pass-Through Certificates:
1,775,393 AAA AMBAC-Insured, 6.500% due 12/20/01 1,793,147
1,606,421 NR Cadman Project, 6.500% due 11/15/18 1,624,494
FHA-Insured:
5,000,000 AAA 7.350% due 6/1/19 5,262,500
4,000,000 AAA 6.600% due 4/1/30 4,085,000
1,019,803 NR Heywood Towers Project, 6.500% due 10/15/17 1,031,275
1,294,166 NR Kelly Project, 6.500% due 2/15/18 1,308,726
1,661,973 NR Riverside Project, 6.500% due 11/15/18 1,686,902
New York State Housing Finance Agency,
Multi-Family Housing:
FHA-Insured:
2,000,000 Aa* 6.200% due 8/15/15(a) 2,032,500
2,905,000 Aa* Series A, 10.000% due 11/15/25 2,947,297
1,500,000 AAA Series C, 6.500% due 8/15/24 1,552,500
</TABLE>
See Notes to Finanical Statements.
16
<PAGE>
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Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 8.0% (continued)
FSA-Insured:
$ 3,450,000 AAA Series A, 6.125% due 11/1/20 $ 3,454,313
Second Mortgage Project, Multi-Family Housing,
SONYMA-Insured, Series A:
500,00 Aa* 7.000% due 8/15/12(a) 528,750
500,000 Aa* 7.050% due 8/15/24(a) 522,500
6,870,000 Aa* Series B, 6.250% due 8/15/29 6,870,000
1,750,000 Aa* Series C, 6.600% due 8/15/27 1,813,437
4,240,000 Baa1* Service Contract Obligation Revenue,
Series D, 5.375% due 3/15/23 3,800,100
1,000,000 A* Rensselaer Multi-Family Housing Mortgage Revenue,
Rensselaer Multi-Family Housing Apartments,
Series A, 7.750% due 1/1/11 1,052,500
- ------------------------------------------------------------------------------------------
57,909,854
- ------------------------------------------------------------------------------------------
Housing: Single-Family -- 3.1%
1,820,000 NR Lincoln Towers Housing Corp., 11.250% due 1/1/15 1,904,193
3,350,000 Aa* New York State Dormitory Authority Revenue,
Nursing Home, Wesley Garden, FHA-Insured,
6.125% due 8/1/35 3,404,438
New York State Mortgage Agency Revenue:
2,625,000 Aa* Series 37-A, 6.375% due 10/1/14 2,739,844
1,000,000 Aa* Series 41-A, 6.450% due 10/1/14 1,033,750
4,000,000 Aa* Series 42, FHA-Insured, 6.650% due 4/1/26(a) 4,115,000
4,250,000 Aa* Series 48, 6.100% due 4/1/25(a) 4,260,625
2,000,000 Aa* Series 54, 6.100% due 10/1/15 2,015,000
835,000 Aa* Series SS, Homeowner Mortgage, 7.950% due 10/1/22 891,363
320,000 Aa* 8th Series A, Pool-Insured, 8.100% due 10/1/17 333,200
1,345,000 Aa* 9th Series A, 7.300% due 4/1/17(a) 1,360,131
- ------------------------------------------------------------------------------------------
22,057,544
- ------------------------------------------------------------------------------------------
Industrial Development -- 6.7%
355,000 NR Albany County IDA, Historic Hudson River Heritage
Office Building, 9.500% due 12/1/95 355,000
Battery Park City Authority Housing Revenue:
6,715,000 AA 5.000% due 11/1/13 6,077,075
5,000,000 AA Series A, 5.250% due 11/1/17 4,593,750
500,000 A Brookhaven IDA, 8.100% due 4/1/08 524,375
1,800,000 A Grand Central, District Management Association
Refunding-Business Import District Capital,
5.125% due 1/1/14 1,678,500
Hempstead Town IDA, Resource Recovery Revenue Bonds:
4,650,000 A American Fuel Company, 7.400% due 12/1/10 4,759,042
1,000,000 AA Nassau District Energy Corp., 7.750% due 9/15/15(a) 1,024,690
500,000 AA Monroe County IDA, Revenue Public Improvement,
Canal Ponds Park, Series A, 7.000% due 6/15/13 545,625
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
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Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================
<S> <C> <C> <C>
Industrial Development -- 6.7% (continued)
New York City IDA, Civil Facility Revenue,
(The Lighthouse Project):
LOC Barclay's Bank:
$ 1,000,000 AA 6.375% due 7/1/10 $ 1,037,500
3,000,000 AA 6.500% due 7/1/22 3,116,250
940,000 Aa1* Prime Laboratories Inc., IDR:
LOC Algamene Bank Nederland, NV,
7.700% mandatory 11/1/10 951,167
5,000,000 NR Visy Paper Inc. Project, 7.950% due 1/1/28(a) 5,293,750
3,000,000 AAA Onondaga County IDA, (Bristol Meyers Squibb Co.
Project), 5.750% due 3/1/24(a) 2,988,750
1,410,000 A Rensselaer County IDA, Albany International Corp.,
7.550% due 6/1/07(a) 1,556,287
United Nations Development Corp. Revenue Bonds,
Senior Lien, Series A:
1,490,000 A* 6.000% due 7/1/07 1,542,150
9,500,000 A* 6.000% due 7/1/26 9,428,750
2,500,000 B* Warren & Washington Counties IDA, Resource Recovery
Revenue Bonds Series A, 7.900% due 12/15/07 2,550,000
- ------------------------------------------------------------------------------------------
48,022,661
- ------------------------------------------------------------------------------------------
Life Care Systems -- 1.5%
New York State Dormitory Authority, Revenue Bonds,
FHA-Insured:
1,335,000 AAA Heritage House Nursing Center,
7.000% due 8/1/31 1,458,487
2,450,000 AA- Iroquois Nursing, 7.050% due 2/1/31 2,664,375
1,915,000 AA James G. Johnston Nursing Home,
5.750% due 8/1/23 1,888,669
1,185,000 BBB New York State Medical Care Facilities,
Finance Agency Revenue Bonds,
Arden Hill, FHA-Insured, 9.500% due 1/15/24 1,199,623
2,160,000 A Oneida Health Care Corp. Mortgage Revenue,
FHA-Insured, 7.200% due 8/1/31 2,262,600
1,250,000 AAA Syracuse GO, IDA, James Square Association,
FHA-Insured, 7.000% due 8/1/25 1,325,000
- ------------------------------------------------------------------------------------------
10,798,754
- ------------------------------------------------------------------------------------------
Miscellaneous -- 0.4%
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 1,068,750
1,500,000 A+ City of Rochester, 6.750% due 3/15/11 1,599,375
- ------------------------------------------------------------------------------------------
2,668,125
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================
<S> <C> <C> <C>
Pollution Control Revenue -- 4.8%
$ 4,500,000 AAA Dutchess County Resource Recovery Agency
Revenue Bonds, Solid Waste Management,
Series A, FGIC-Insured, 7.500 due 1/1/09 $ 4,876,875
New York State Energy, Research & Development
Authority:
2,660,000 AAA FSA-Insured, 8.375% due 12/1/28(a) 2,929,325
MBIA-Insured:
4,000,000 AAA 6.150% due 7/1/26(a) 4,080,000
1,100,000 AAA Series B, 7.375% due 10/1/14(d) 1,210,000
1,000,000 A- Series C, 8.375% due 12/1/28(a)(c) 1,087,500
New York State Environmental Facilities Corp., PCR,
State Water Revolving Fund:
Series A:
8,250,000 A* 7.250% due 6/15/10 9,219,375
1,950,000 A* 7.500% due 6/15/12 2,154,750
4,440,000 Baa* Huntington Project, 7.375% due 10/1/99 4,650,900
2,200,000 BBB Oneida-Herkimer Solid Waste Management Authority,
Solid Waste System, Revenue Bonds,
6.750% due 4/1/14 2,246,750
1,710,000 BB+ Puerto Rico Industrial, Medical & Environmental
Pollution Control Facilities Finance Authority,
Revenue Bonds, Series A, American Airlines,
6.450% due 12/1/25 1,767,713
- ---------------------------------------------------------------------------------------------
34,223,188
- ---------------------------------------------------------------------------------------------
Public Facilities -- 0.9%
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 1,052,500
2,960,000 A- Essex County IDA, Solid Waste Disposal, Series A,
5.800% due 12/1/19 2,874,900
915,000 BBB New York State COP, (Hanson Redevelopment Project),
8.375% due 5/1/08 1,047,675
1,500,000 BBB Triborough Bridge & Tunnel Authority, Convention Center
Project, Series E, 7.250% due 1/1/10 1,698,750
- ---------------------------------------------------------------------------------------------
6,673,825
- ---------------------------------------------------------------------------------------------
Pre-Refunded(e) -- 3.8%
495,000 BBB+ Babylon IDA, Series B, FHA-Insured,
(Call 7/1/98 @ 103),
8.500% due 1/1/19 543,881
35,000 NR Battery Park City Authority, FHA-Insured,
(Call 6/1/05 @ 100),
8.625% due 6/1/23 43,531
2,700,000 A Monroe County IDA, Series A, (Call 12/15/96 @ 102),
8.000% due 12/15/03 2,776,734
200,000 AAA New York City GO, (Call 11/1/97 @ 102),
8.750% due 11/1/17 213,228
</TABLE>
See Notes to Financial Statements
19
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited)(continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
======================================================================================================
<S> <C> <C> <C>
Pre-Refunded(e) -- 3.8% (continued)
$ 750,000 AAA New York City Municipal Water Finance Authority, Water &
Sewer System, (Call 6/15/97 @ 102), 9.000% due 6/15/17(d) $ 791,760
800,000 AAA New York State Local Government Assistance Corp.,
Series D, (Call 4/1/02 @ 102), 7.000% due 4/1/18 901,000
New York State Medical Care Facilities Finance
Agency Revenue:
480,000 AAA MBIA-Insured, (Call 2/15/00 @ 102), 7.750% due 2/15/20 536,400
1,025,000 AAA Insured Mortgage Hospital, Series A, FHA-Insured,
(Call 8/15/97 @ 102), 8.000% due 2/15/25 1,082,031
6,500,000 AAA Hospital & Nursing Home Mortgage, FHA-Insured,
(Call 8/15/97 @ 102), 8.000% due 2/15/27 6,858,800
9,345,000 AAA Hospital & Nursing Home Mortgage, FHA-Insured,
(Call 8/15/98 @ 102), 8.000% due 2/15/28 10,057,556
1,700,000 AAA St. Lukes Hospital, Series B, (Call 2/15/00 @ 102),
7.450% due 2/15/29 1,884,875
500,000 Aaa* New York State Urban Development Corporation Revenue,
Correctional Facilities, (Call 1/1/00 @ 100),
7.000% due 1/1/17 546,250
1,000,000 A* Orangetown Housing Authority, Rockland, Senior Housing
Center, 1990 Series, (Call 4/1/00 @ 102),
7.600% due 4/1/30 1,127,500
- ------------------------------------------------------------------------------------------------------
27,363,546
- ------------------------------------------------------------------------------------------------------
Transportation -- 8.0%
Metropolitan Transportation Authority Transit
Facilities Revenue:
3,555,000 A Commuter Facilities Revenue, Series A,
6.500% due 7/1/24 3,648,319
Service Contract:
5,440,000 BBB Series N, 7.125% due 7/1/09 5,922,800
2,300,000 BBB Series O, 5.750% due 7/1/13 2,271,250
2,250,000 AAA Monroe County Airport Authority, Airport Revenue,
Greater Rochester International, MBIA-Insured,
7.250% due 1/1/19(a)(c) 2,449,687
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) 1,547,875
4,230,000 AAA New York State Highway Authority, Emergency Services,
Construction and Reconstruction, Series A,
FSA-Insured, 6.600% due 3/1/01 4,563,112
1,600,000 AAA Niagara Falls Bridge Authority, Toll Revenue, Series B,
FGIC-Insured, 5.250% due 10/1/15 1,554,000
Port Authority of New York & New Jersey:
8,000,000 BB+ Delta Airlines, Series 1R, 6.950% due 6/1/08 8,530,000
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited)(continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Transportation -- 8.0% (continued)
$11,000,000 NR KIAC Project, 5th Installment, Special Project,
6.750% due 10/1/19(a) $ 11,082,500
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Refunding:
4,000,000 A 5.000% due 7/1/36 3,495,000
10,000,000 A Series Y, 5.500% due 7/1/36 9,500,000
Triborough Bridge & Tunnel Authority:
500,000 A+ Refunding, Series L, 8.125% due 1/1/12(d) 531,250
2,455,000 A+ Series Y, 6.125% due 1/1/21 2,626,850
- ----------------------------------------------------------------------------------------------------
57,722,643
- ----------------------------------------------------------------------------------------------------
Utilities -- 6.6%
4,750,000 BBB Guam Power Authority Revenue, Series A,
5.250% due 10/1/13 4,286,875
3,270,000 AAA New York City Municipal Finance Authority, Water &
Sewer System Revenue, Series A, FSA-Insured,
7.000% due 6/15/15 3,588,825
New York State Energy, Research & Development Authority,
Electric Facilities Revenue Bonds:
Consolidated Edison Co. Project, Series A:
4,500,000 AAA MBIA-Insured, 6.100% due 8/15/20 4,590,000
2,250,000 A+ 7.125% due 3/15/22(a) 2,317,208
5,750,000 A+ 7.125% due 12/1/29(a) 6,346,563
Long Island Lighting Co. Project:
Series A:
4,900,000 BB+ 7.150% due 12/1/20(a) 4,967,375
1,000,000 BB+ 7.150% due 2/1/22(a) 1,013,750
3,000,000 BB+ Series B, 7.150% due 2/1/22(a) 3,041,250
1,000,000 BB+ Series D, 6.900% due 8/1/22(a) 1,003,750
1,500,000 Baa2* New York State Electric & Gas Co., Corning National
Gas Corp., Series A, 8.250% due 12/1/18 1,636,875
PCR Bonds:
Brooklyn Union Gas Co. Project:
3,000,000 A 7.050% due 7/15/26 3,236,250
5,000,000 AAA Series A, MBIA-Insured, 5.500% due 1/1/21 4,862,500
1,500,000 A Series B, RIBS, 6.952% due 7/1/26(c) 1,771,875
5,000,000 A Series 1, 7.125% due 12/1/20 5,117,850
- ----------------------------------------------------------------------------------------------------
47,780,946
- ----------------------------------------------------------------------------------------------------
Water & Sewer -- 0.8%
1,000,000 AAA Buffalo Municipal Water Finance Authority, Water Systems
Revenue, FGIC-Insured, 6.100% due 7/1/26 1,028,750
2,150,000 AAA Monroe County Water Authority Revenue, AMBAC-Insured,
7.000% due 8/1/19 2,340,813
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
========================================================================================
<S> <C> <C> <C>
Water & Sewer -- 0.8% (continued)
$ 2,390,000 A- New York City Municipal Water Finance Authority,
Water & Sewer System Revenue, Series B,
6.375% due 6/15/22 $ 2,458,713
- ----------------------------------------------------------------------------------------
5,828,276
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $690,410,409**) $719,078,974
========================================================================================
</TABLE>
(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) Bonds are escrowed with U.S. Government securities and are considered by the
Manager to be triple-A rated even if the issuer has not applied for new
ratings.
(f) Bonds are escrowed to maturity with U.S. Government securities and are
considered by the Manager to be triple A-rated even if the issuer has not
applied for new ratings.
(g) Variable rate obligations payable at par on demand on the date indicated.
+ Fitch Investor Services, Inc.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 23 and 24 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Services ("Standard & Poor's"),
except those identified by an asterisk (*) that are rated by Moody's Investors
Service Inc. ("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 "B", 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.
B -- Bonds that are rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
23
<PAGE>
- --------------------------------------------------------------------------------
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
BOCES -- Board of Cooperative Education Services
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
UFSD -- Union Free School District
VRDD -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday Demand
24
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
=============================================================================
<S> <C> <C>
ASSETS:
Investments, at value (Cost--$866,935,231
and $690,410,409) $866,935,231 $719,078,974
Receivable for securities sold 24,600,000 2,837,153
Interest receivable 6,516,053 11,790,300
Receivable for Fund shares sold -- 144,821
Other assets 83,377 145,629
- -----------------------------------------------------------------------------
Total Assets 898,134,661 733,996,877
- -----------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 12,400,000 1,479,740
Dividends payable 1,075,675 --
Management fees payable 375,482 342,870
Distribution fees payable -- 85,213
Payable to bank 22,699 137,772
Accrued expenses 168,189 53,383
- -----------------------------------------------------------------------------
Total Liabilities 14,042,045 2,098,978
- -----------------------------------------------------------------------------
Total Net Assets $884,092,616 $731,897,899
=============================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 884,363 $ 55,246
Capital paid in excess of par value 883,478,866 711,055,793
Undistributed net investment income -- 561,554
Accumulated net realized loss from
security transactions (270,613) (8,443,259)
Net unrealized appreciation of investments -- 28,668,565
- -----------------------------------------------------------------------------
Total Net Assets $884,092,616 $731,897,899
=============================================================================
Shares Outstanding:
Class A 884,363,229 40,676,197
- -----------------------------------------------------------------------------
Class B -- 13,864,970
- -----------------------------------------------------------------------------
Class C -- 704,757
- -----------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $1.00 $13.25
- -----------------------------------------------------------------------------
Class B * -- $13.24
- -----------------------------------------------------------------------------
Class C ** -- $13.23
- -----------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset
value per share) -- $13.80
=============================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within 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.
25
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months September 30, 1996
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
======================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest $15,592,951 $ 23,556,887
- --------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 2,242,257 1,840,406
Distribution fees (Note 4) 448,452 1,029,428
Shareholder and system servicing fees 180,255 129,310
Registration fees 80,060 124,391
Audit and legal 26,257 26,407
Shareholder communications 15,233 13,995
Custody 15,225 17,308
Trustees' fees 7,503 4,591
Pricing service fees 3,888 14,430
Other 2,479 4,427
- --------------------------------------------------------------------------------------
Total Expenses 3,021,609 3,204,693
- --------------------------------------------------------------------------------------
Net Investment Income 12,571,342 20,352,194
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 5):
Realized Gain (Loss) From Security Transactions
(excluding short-term securities*):
Proceeds from sales 17,851,274 178,797,714
Cost of securities sold 17,824,448 181,431,126
- --------------------------------------------------------------------------------------
Net Realized Gain (Loss) 26,826 (2,633,412)
- --------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period -- 23,141,967
End of period -- 28,668,565
- --------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation -- 5,526,598
- --------------------------------------------------------------------------------------
Net Gain on Investments 26,826 2,893,186
- --------------------------------------------------------------------------------------
Increase in Net Assets From Operations $12,598,168 $23,245,380
======================================================================================
</TABLE>
* Represents only gains from the sale of short-term securities for the New York
----
Money Market Portfolio.
See Notes to Financial Statements.
26
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
<TABLE>
<CAPTION>
New York Money Market Portfolio September 30 March 31
==============================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 12,571,342 $ 25,017,960
Net realized gain 26,826 2,354
- ------------------------------------------------------------------------------
Increase in Net Assets From Operations 12,598,168 25,020,314
- ------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (12,571,342) (25,017,960)
- ------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (12,571,342) (25,017,960)
- ------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 1,801,431,083 3,174,176,362
Net asset value of shares issued
for reinvestment of dividends 12,449,693 24,164,797
Cost of shares reacquired (1,812,307,224) (3,024,242,064)
- ------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 1,573,552 174,099,095
- ------------------------------------------------------------------------------
Increase in Net Assets 1,600,378 174,101,449
NET ASSETS:
Beginning of period 882,492,238 708,390,789
- ------------------------------------------------------------------------------
End of period $ 884,092,616 $ 882,492,238
==============================================================================
See Notes to Financial Statements.
</TABLE>
27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
<TABLE>
<CAPTION>
New York Portfolio September 30 March 31
=====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 20,352,194 $ 11,477,881
Net realized gain (loss) (2,633,412) 1,044,195
Increase (decrease) in net unrealized appreciation 5,526,598 (16,335,761)
- -------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations 23,245,380 (3,813,685)
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (19,931,933) (11,339,968)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (19,931,933) (11,339,968)
- -------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 27,544,018 43,180,915
Net asset value of shares issued in connection
with the transfer of the Smith Barney New
York Municipals Fund Inc.'s net assets (Note 7) -- 651,752,267
Net asset value of shares issued
for reinvestment of dividends 12,520,687 6,775,955
Cost of shares reacquired (59,364,215) (31,148,509)
- -------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (19,299,510) 670,560,628
- -------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (15,986,063) 655,406,975
NET ASSETS:
Beginning of period 747,883,962 92,476,987
- -------------------------------------------------------------------------------------
End of period* $731,897,899 $747,883,962
=====================================================================================
* Includes undistributed net investment income of: $561,554 $141,293
=====================================================================================
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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 semi-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 mean between the quoted bid and ask prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium which approximates market value; (d) gains or losses on
the sale of securities are calculated by using the specific identification
method; (e) interest income, adjusted for amortization of 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 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,
29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
- --------------------------------------------------------------------------------
financial markets and any other parameters used in determining
these estimates could cause actual results to differ; 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 and the New York Portfolios pay SBMFM a management fee
calculated at the annual rate of 0.50% of its average daily net assets. These
fees are calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares. For the six months ended September 30, 1996, SB received sales
charges of approximately $161,000 on sales of the New York Portfolio's Class A
shares.
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.
30
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Class C shares have a 1.00% CDSC, which applies if redemption occurs within the
first year of purchase. For the six months ended September 30, 1996, CDSCs paid
to SB were:
Class B Class C
================================================================================
CDSCs $194,000 $ 2,000
================================================================================
Pursuant to a Distribution Plan, 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. 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. For the six months ended September 30, 1996,
total Distribution Plan fees incurred were:
Distribution Plan Fees Class A Class B Class C
================================================================================
New York Money Market Portfolio $448,452 $ -- $ --
- --------------------------------------------------------------------------------
New York Portfolio 409,619 587,647 32,162
================================================================================
All officers and two Trustees of the Fund are employees of SB.
5. Investments
During the six months ended September 30, 1996, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
New York Money New York
Market Portfolio Portfolio
================================================================================
Purchases -- $157,772,891
- --------------------------------------------------------------------------------
Sales -- 178,797,714
================================================================================
At September 30, 1996, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
New York Money New York
Market Portfolio Portfolio
================================================================================
Gross unrealized appreciation -- $31,801,520 *
Gross unrealized depreciation -- (3,132,955)*
- --------------------------------------------------------------------------------
Net unrealized appreciation -- $28,668,565 *
================================================================================
* Substantially the same for Federal income tax purposes.
31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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 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:
2001 2002 2003
================================================================================
New York Money Market Portfolio $ 299,000 $ -- $ --
- --------------------------------------------------------------------------------
New York Portfolio -- 1,079,000 4,701,000
================================================================================
7. 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:
Total Net
Shares Assets of Total Net
Issued by Acquired Assets of
Acquired Fund the Portfolio Fund the Portfolio
================================================================================
New York Municipals 48,095,606 $651,752,267 $117,671,692
================================================================================
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.
8. Shares of Beneficial Interest
At September 30, 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.
32
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
- --------------------------------------------------------------------------------
At September 30, 1996, total paid-in capital amounted to the following for
each class and their respective Portfolio:
Portfolio Class A Class B Class C
================================================================================
New York Money Market $ 884,363,229 $ -- $ --
- --------------------------------------------------------------------------------
New York Portfolio 511,240,693 190,460,480 9,409,866
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1996 March 31, 1996
New York ------------------------------- --------------------------------
Money Market Portfolio Shares Amount Shares Amount
============================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 1,801,431,083 $ 1,801,431,083 3,174,176,362 $ 3,174,176,362
Shares issued on reinvestment 12,449,693 12,449,693 24,164,797 24,164,797
Shares redeemed (1,812,307,244) (1,812,307,224) (3,024,242,064) (3,024,242,064)
- ------------------------------------------------------------------------------------------------------------
Net Increase 1,573,552 $ 1,573,552 174,099,095 $ 174,099,095
============================================================================================================
New York Portfolio
============================================================================================================
Class A
Shares sold 1,079,742 $ 14,183,280 1,504,192 $ 20,057,339
Net asset value of shares issued in
connection with the transfer of
the New York Municipals
Fund net assets (Note 7) -- -- 35,871,333 486,159,506
Shares issued on reinvestment 728,037 9,560,353 401,580 5,319,636
Shares redeemed (3,430,593) (45,003,020) (1,927,282) (25,676,286)
- ------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (1,622,814) $ (21,259,387) 35,849,823 $ 485,860,195
============================================================================================================
Class B
Shares sold 931,135 $ 12,222,985 1,486,523 $ 19,753,173
Net asset value of shares issued in
connection with the transfer of
the New York Municipals
Fund net assets (Note 7) -- -- 12,167,274 164,821,012
Shares issued on reinvestment 212,865 2,793,933 91,512 1,216,365
Shares redeemed (1,021,515) (13,407,924) (299,760) (4,018,685)
- ------------------------------------------------------------------------------------------------------------
Net Increase 122,485 $ 1,608,994 13,445,549 $ 181,771,865
============================================================================================================
Class C
Shares sold 86,733 $ 1,137,753 253,093 $ 3,370,403
Net asset value of shares issued in
connection with the transfer of
the New York Municipals
Fund net assets (Note 7) -- -- 56,999 771,749
Shares issued on reinvestment 12,694 166,401 18,201 239,954
Shares redeemed (72,992) (953,271) (109,624) (1,453,538)
- ------------------------------------------------------------------------------------------------------------
Net Increase 26,435 $ 350,883 218,669 $ 2,928,568
============================================================================================================
</TABLE>
33
<PAGE>
- --------------------------------------------------------------------------------
New York Money Market Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1996 1995 1994 1993(2)
================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------
Net investment income(3) 0.014 0.038 0.025 0.018 0.010
Dividends from net investment income (0.014) (0.038) (0.025) (0.018) (0.010)
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------
Total Return 1.41%+++ 3.17% 2.49% 1.77% 1.01%+++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $884,093 $882,492 $708,391 $82,459 $59,510
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.67%+ 0.67% 0.68% 0.60% 0.56%+
Net investment income 2.80 3.11 2.94 1.73 1.84
================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) For the period from September 17, 1992 (inception date) to March 31, 1993.
(3) 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.
34
<PAGE>
- --------------------------------------------------------------------------------
New York Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1996 1995(2) 1994 1993 1992
===============================================================================================
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period $ 13.19 $ 12.83 $ 12.83 $ 13.25 $ 12.33 $ 11.80
- ------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.37 0.75 0.76 0.78 0.81 0.83
Net realized and
unrealized gain (loss) 0.06 0.35 0.01* (0.41) 0.92 0.51
- ------------------------------------------------------------------------------------------------
Total Income From Operations 0.43 1.10 0.77 0.37 1.73 1.34
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.37) (0.74) (0.77) (0.79) (0.81) (0.81)
- ------------------------------------------------------------------------------------------------
Total Distributions (0.37) (0.74) (0.77) (0.79) (0.81) (0.81)
- ------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 13.32 $ 13.19 $ 12.83 $ 12.83 $ 13.25 $ 12.33
- ------------------------------------------------------------------------------------------------
Total Return 3.29%+++ 8.71% 6.32% 2.66% 14.48% 11.98%
- ------------------------------------------------------------------------------------------------
Net Assets, End of
Period (000s) $538,963 $557,809 $82,768 $70,065 $61,532 $40,370
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.74%+ 0.72% 0.63% 0.55% 0.55% 0.48%
Net investment income 5.65 5.84 6.00 5.79 6.32 6.86
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 21.81% 36.31% 30.38% 19.65% 21.91% 23.80%
================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(3) 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.
+++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
35
<PAGE>
- --------------------------------------------------------------------------------
New York Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
<TABLE>
<CAPTION>
Class B Shares 1996(1) 1996 1995(2)
========================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.18 $ 12.84 $11.96
- ------------------------------------------------------------------------
Income From Operations:
Net investment income 0.34 0.67 0.31
Net realized and unrealized gain 0.05 0.35 0.86*
- ------------------------------------------------------------------------
Total Income From Operations 0.39 1.02 1.17
- ------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.33) (0.68) (0.29)
- ------------------------------------------------------------------------
Total Distributions (0.33) (0.68) (0.29)
- ------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.24 $ 13.18 $12.84
- ------------------------------------------------------------------------
Total Return 3.03%+++ 8.05% 9.92%+++
- ------------------------------------------------------------------------
Net Assets, End of Period (000s) $183,613 $181,144 $3,813
- ------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.26%+ 1.25% 1.27%+
Net investment income 5.16+ 5.45 5.76+
- ------------------------------------------------------------------------
Portfolio Turnover Rate 21.81% 36.31% 30.38%
=======================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) For the period from November 11, 1994 (inception date) to March 31, 1995.
(3) 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.
36
<PAGE>
- --------------------------------------------------------------------------------
New York Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
<TABLE>
<CAPTION>
Class C Shares 1996(1) 1996 1995(2) 1994 1993(3)
==============================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.17 $12.83 $12.82 $13.24 $12.84
- ----------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.33 0.66 0.68 0.68 0.15
Net realized and unrealized gain (loss) 0.06 0.36 0.01* (0.40) 0.37
- ----------------------------------------------------------------------------------------------
Total Income From Operations 0.39 1.02 0.69 0.28 0.52
- ----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.33) (0.68) (0.68) (0.70) (0.12)
- ----------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.68) (0.68) (0.70) (0.12)
- ----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.23 $13.17 $12.83 $12.82 $13.24
- ----------------------------------------------------------------------------------------------
Total Return 3.01%+++ 8.07% 5.66% 1.96% 4.04%+++
- ----------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $9,322 $8,931 $5,896 $5,461 $1,368
- ----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.31%+ 1.28% 1.28% 1.23% 1.23%+
Net investment income 5.14+ 5.02 5.38 4.98 5.37+
- ----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 21.81% 36.31% 30.38% 19.65% 21.91%
==============================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
(3) For the period from January 8, 1993 (inception date) to March 31, 1993.
(4) 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.
37
<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
Joseph Benevento
Vice President
Irving P. David
Controller
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
SMITH BARNEY
- ----------------------------------
A Member of Travelers Group [LOGO]
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 -- 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
FD0807 11/96
SEMI-ANNUAL REPORT
[GRAPHIC]
SMITH BARNEY
MUNI FUNDS
NATIONAL
PORTFOLIO
- ------------------
September 30, 1996
SMITH BARNEY MUTUAL FUNDS
[LOGO] Investing for your future.
Every day.
<PAGE>
- --------------------------------------------------------------------------------
NATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Muni Funds-National Portfolio for the period ended September 30, 1996. In this
report, we summarize the period's prevailing economic and market conditions and
outline our portfolio strategy. A detailed summary of the Portfolio's
performance can be found in the appropriate sections that follow in this report.
Market and Economic Overview
Because of the uncertainty surrounding the future direction of the U.S. economy,
the bond markets have continued to experience significant volatility over the
past six months. However, this heightened volatility has been confined to a
narrow trading range of between 6.75% and 7.20% on 30-Year U.S. Treasury yields.
In our view, this heightened bond market volatility stems from several
conditions in the U.S. economy with the most important being the underlying
strength of the U.S. economy. For example, gross domestic product (GDP) in the
U.S. for the second quarter of 1996 grew at an annualized rate of 4.7%, up from
2.0% in the first quarter. This pace of economic growth has caused pressures on
both labor and capital to increase, yet there have been no signs of a pick-up in
inflation. Bond market investors have closely monitored recent U.S. economic
data for signs of whether the rate of U.S. economic growth will moderate, or
whether the economy will continue to grow at its current pace. The latter
scenario would most likely cause the Federal Reserve Board to tighten monetary
policy by raising short-term interest rates. While the majority of key U.S.
economic announcements over the past six months points toward a strengthening
rather than a weakening economy, government reports released during the month of
September suggest that the economy may be headed for a slowdown. In response,
interest rates have since declined from their higher levels in June and July.
Although this has been a challenging period for the fixed income markets, the
municipal bond market has outperformed the U.S. government bond market. In our
view, the municipal bond market's better relative performance can be attributed
primarily to the modest supply of municipal bonds that have been issued. In
recent months, investors have been seeking to reinvest proceeds of municipal
bonds that have either matured or been called, back into the municipal bond
market. However, at the same time, the supply of new issues has been far below
recent averages, and is very close to the low for the year. This increased
demand combined with light supply has caused municipal bond prices to stay
higher, and yields to conversely remain lower, relative to those of U.S.
Treasury securities.
1
<PAGE>
Portfolio Performance Update
For the six months ended September 30, 1996, the Class A shares of the National
Portfolio generated a total return of 2.88%. In comparison, the Portfolio's
Lipper Analytical Services, Inc. peer group average posted a total return of
2.79% for the same time period. (Lipper is an independent fund tracking
organization.)
Over the six-month period covered by this report, the National Portfolio
distributed dividends totaling $0.396 per share; based on its net asset value
(NAV) of $13.66 as of September 30, 1996 for Class A shares, this equates to an
annualized distribution rate of 5.79%. For an individual in the federal income
tax bracket of 36%, the Portfolio's tax free yield of 5.79% is equivalent to a
taxable yield of 9.04%.
Portfolio's Investment Strategy
The Smith Barney Muni Funds--National Portfolio seeks to provide investors with
as high a level of current income exempt from federal income taxes as is
consistent with a prudent investment approach. The Portfolio has a bias towards
good quality, higher coupon bonds and we tend to err on the side of income
rather than reaching for total return via capital gains. As a general rule, we
pay more attention to the coupon, maturity and call structures of the
Portfolio's holdings rather than the specific purpose for which these municipal
bonds are being issued. During the period covered by this report, the Portfolio
retained its high-quality orientation, broad sector diversification and good
call protection.
As of September 30, 1996, the National Portfolio's average weighted maturity was
just over 19 years, and approximately 97% of the Portfolio's holdings were rated
investment grade (BBB/Baa and higher) by either Standard and Poor's Ratings
Service or Moody's Investors Service Inc., with approximately 39% of the Fund's
investments rated AAA. (Standard and Poor's and Moody's are two major credit
reporting and bond rating agencies.) The Portfolio's largest holdings are
concentrated in hospital bonds (14.5%), escrowed to maturity bonds (12.4%), pre-
refunded bonds (9.2%), and single-family mortgage bonds (9.3%).
Municipal Bond Market Outlook
Going forward, we expect the municipal bond market should benefit from a
comfortably low annual inflation rate and municipalities that continue to issue
new debt sparingly. In our view, competitive pressures in the global economy and
changing demographics should further help to keep inflation in check. (Labor
costs constitute roughly two-thirds of the total cost of all finished goods.) In
addition, the Federal Reserve seems content with the current level of interest
rates because economic growth is not overly robust. For these reasons, we
maintain a positive outlook on the market for the balance of 1996.
2
<PAGE>
In closing, thank you for investing in the Smith Barney Muni Funds--National
Portfolio. We look forward to continuing to help 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
October 11, 1996
ANNOUNCING A NEW SYSTEMATIC INVESTMENT
PROGRAM MONTHLY MINIMUM
If you are a shareholder purchasing shares of the National Portfolio through
Smith Barney's Systematic Investment Program on a monthly basis or if you plan
to do so in the future, the minimum initial investment for Class A, Class B and
Class C shares is now $25. If you are purchasing shares on a quarterly basis,
the minimum initial investment for Class A, Class B and Class C shares is $50.
Please contact your Smith Barney Financial Consultant for more information about
the Systematic Investment Program. However, please note that participating in
the Systematic Investment Program does not ensure a profit or protect you
against a loss in declining markets.
3
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
========================================================================================
<S> <C> <C> <C> <C> <C>
9/30/96 13.67 $13.66 $0.40 $0.00 2.88%+
- ----------------------------------------------------------------------------------------
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 $8.91 $0.26
========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
========================================================================================
<S> <C> <C> <C> <C> <C>
9/30/96 $13.67 $13.67 $0.36 $0.00 2.69%+
- ----------------------------------------------------------------------------------------
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 $1.42 $0.00
========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
========================================================================================
<S> <C> <C> <C> <C> <C>
9/30/96 13.65 $13.65 $0.36 $0.00 2.67%+
- ----------------------------------------------------------------------------------------
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 $2.81 $0.06
========================================================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
4
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charge(1)
--------------------------------------------------------
Class A Class B Class C
========================================================================================
<S> <C> <C> <C>
Six Months Ended 9/30/96+ 2.88% 2.69% 2.67%
- ----------------------------------------------------------------------------------------
Year Ended 9/30/96 6.35 5.85 5.70
- ----------------------------------------------------------------------------------------
Five Years Ended 9/30/96 7.83 N/A N/A
- ----------------------------------------------------------------------------------------
Ten Years Ended 9/30/96 8.09 N/A N/A
- ----------------------------------------------------------------------------------------
Inception* through 9/30/96 8.06 11.23 6.17
========================================================================================
<CAPTION>
With Sales Charge(2)
--------------------------------------------------------
Class A Class B Class C
========================================================================================
<S> <C> <C> <C>
Six Months Ended 9/30/96+ (1.24)% (1.81)% 1.67%
- ----------------------------------------------------------------------------------------
Year Ended 9/30/96 2.07 1.32 4.70
- ----------------------------------------------------------------------------------------
Five Years Ended 9/30/96 6.95 N/A N/A
- ----------------------------------------------------------------------------------------
Ten Years Ended 9/30/96 7.65 N/A N/A
- ----------------------------------------------------------------------------------------
Inception* through 9/30/96 7.63 9.31 6.17
========================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
========================================================================================
<S> <C>
Class A (9/30/86 through 9/30/96) 117.62%
- ----------------------------------------------------------------------------------------
Class B (Inception* through 9/30/96) 22.41
- ----------------------------------------------------------------------------------------
Class C (Inception* through 9/30/96) 25.06
========================================================================================
</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
charges 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 within 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.
5
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the National Portfolio vs.
Lehman Long Bond Index+
- --------------------------------------------------------------------------------
September 1986 -- September 1996
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
National Portfolio Lehman Long Bond Index
------------------ --------------------------
<S> <C> <C>
9/30/86 $ 9,603 $10,000
3/87 10,196 10,622
3/88 10,069 10,785
3/89 11,134 11,922
3/90 12,162 13,246
3/91 13,238 14,498
3/92 14,680 16,148
3/93 16,684 18,512
3/94 17,169 18,723
3/95 18,238 20,345
3/96 19,849 22,215
9/96 20,420 23,175
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares on September
30, 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 September 30, 1996. The Lehman
Long Bond 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 twenty 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>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Education -- 4.8%
$ 5,000,000 AAA Chicago, IL Board of Education Lease Certificates, Series A,
Refunding, MBIA-Insured, 6.000% due 1/1/20 $ 5,125,000
3,310,000 AAA Cook & Dupage County, IL High School District,
zero coupon due 12/1/12 1,282,625
1,000,000 A East Chicago Industrial School Building Corp.,
6.375% due 1/15/10 1,036,250
2,500,000 AAA Keller, TX ISD, Series A, zero coupon due
8/15/21 581,250
2,000,000 AA Nebraska Higher Education Loan Program Inc., Subseries A-5A,
6.200%, due 6/1/13(a) 2,010,000
1,500,000 Baa* New Hampshire Higher Education & Health, Brewster Academy,
6.750%, due 6/1/25 1,466,250
1,500,000 A+++ New York State Dormitory Authority Revenue, State University
Educational Facilities, Series B, 7.500% due 5/15/11 1,751,250
Noblesville, IN High School Building Corp., AMBAC-Insured:
2,600,000 AAA Zero coupon due 2/15/17 780,000
4,040,000 AAA Zero coupon due 2/15/18 1,141,300
Texas State Higher Education Coordinating Board, College
Student Loan Revenue:
2,545,000 A* 7.450% due 10/1/06(a) 2,611,806
360,000 A* 7.700% due 10/1/25(a) 372,150
1,000,000 AAA Utah Student Loan Revenue, Series 1991F, AMBAC-Insured,
7.450% due 11/1/08(a) 1,065,000
- ----------------------------------------------------------------------------------------------------
19,222,881
- ----------------------------------------------------------------------------------------------------
Escrowed to Maturity(b) -- 12.4%
875,000 AAA Boston, MA Water & Sewer Revenue, Series A,
10.875% due 1/1/09 1,187,812
1,135,000 AAA Douglas County, NE Hospital Authority No. 2, Bergan Mercy,
9.500% due 7/1/10 1,486,850
1,750,000 AAA Fairmont, WV Virginia Water & Sewer Revenue,
9.250% due 11/1/11 2,130,625
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 3,460,750
5,685,000 AAA Indiana Bond Bank, AMBAC-Insured, 9.750% due 8/1/09 7,283,906
7,000,000 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 2,388,750
7,750,000 AAA Labette County, KS Single-Family Mortgage Revenue, Series A,
zero coupon due 12/1/14 2,673,750
3,735,000 AAA Mississippi Housing Finance, Single-Family Housing Mortgage,
zero coupon due 9/15/16 1,157,850
1,370,000 AAA New Jersey Turnpike Authority, 10.375% due 1/1/03 1,621,738
2,065,000 AAA Ohio State Water Development Authority Revenue,
Safe Water, Series 2, 9.375% due 12/1/10 2,519,300
7,000,000 AAA Perris County, CA Single-Family Housing Mortgage,
GNMA-Collateralized, 8.300% due 6/1/13(a) 8,776,250
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Escrowed to Maturity(b)--12.4% (continued)
$ 1,000,000 AAA Philadelphia Hospital & Higher Education Facility Authority,
Presbyterian Medical Center, 6.650% due 12/1/19 $ 1,113,750
3,000,000 AAA Port Everglades Florida, 7.125% due 11/1/16 3,483,750
5,000,000 AAA Richmond County, GA Development Authority, Sub Series C,
zero coupon due 12/1/21 887,500
3,985,000 AAA Riverside County, CA Single-Family Mortgage Revenue, Series
89A, GNMA-Collateralized, 7.800% due 5/1/21(a) 4,931,438
9,000,000 AAA Saline County, KS Single Family Mortgage Revenue, (Escrowed to
Maturity with Refco Strips), zero coupon due 12/1/15 2,902,500
880,000 AAA Weber County, UT Hospital Revenue, St. Benedict's Hospital,
10.000% due 3/1/10 1,138,500
- -----------------------------------------------------------------------------------------------------------
49,145,019
- -----------------------------------------------------------------------------------------------------------
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 3,183,750
- -----------------------------------------------------------------------------------------------------------
General Obligation -- 1.1%
2,000,000 AAA Berks County, PA GO, MVRICS, FGIC-Insured,
8.690% due 11/10/20(c) 2,247,500
2,000,000 BBB+ New York City GO, Series D, 7.500% due 2/1/16 2,202,500
- -----------------------------------------------------------------------------------------------------------
4,450,000
- -----------------------------------------------------------------------------------------------------------
Hospital -- 14.5%
Colorado Health Facilities Authority, Hospital Revenue Bonds:
5,000,000 BBB Rocky Mountain Adventist Health, Series 1993,
6.625% due 2/1/13 5,087,500
1,000,000 BBB Vail Valley Medical Center, 6.500% due 1/15/13 1,015,000
3,500,000 A1* Elkhart County, IN Hospital Authority Revenue, Elkhart General
Hospital-Insured, 7.000% due 7/1/12 3,710,000
Harris County, TX Health Facilities Development Corp.:
2,000,000 A* Memorial Hospital Systems Project, 7.125% due 6/1/15 2,142,500
2,000,000 AA Sisters of Charity of the Incarnate Word, 7.100% due 7/1/21 2,177,500
1,500,000 AAA Henrico County, VA IDA Revenue, (Bon Secours Health Project),
MBIA-Insured, 6.250% due 8/15/20 1,614,375
Illinois Health Facilities Authority Hospital Revenue:
937,000 AAA Community Provider Pooled Loan Program, CGIC-Insured,
7.350% due 8/15/10 1,043,583
3,500,000 A- Mercy Hospital and Medical Center, 7.000% due 1/1/07 3,723,125
1,000,000 AAA Methodist Health System, Series B, AMBAC-Insured,
RIBS Variable Rate, 9.927% due 5/18/21(c) 1,157,500
4,000,000 AAA Rush-Presbyterian St. Luke's Medical Center INFLOS,
MBIA-Insured, Variable Rate, 9.818% due 10/1/24(c) 4,610,000
900,000 BBB+ Klamath Falls, OR Inter-Community Hospital Merle West,
7.100% due 9/1/24 951,750
5,000,000 BBB Louisiana Public Facilities Authority Revenue, (General
Health Systems Project), 6.800% due 11/1/16 5,037,500
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=============================================================================================
<S> <C> <C> <C>
Hospital -- 14.5% (continued)
Massachusetts State Health and Education
Facilities Authority Revenue:
$1,000,000 AAA St. Elizabeth Hospital, LEVRRS, FSA-Insured,
9.870% due 8/15/21(c) $1,137,500
1,470,000 AAA Valley Regional Health, Series A, CONNIE LEE-
Insured, 7.000% due 7/1/07 1,675,800
5,000,000 AAA Metro Government, TN Health & Education,
AMBAC-Insured, 6.000% due 12/1/19 5,218,750
4,835,000 AA Missouri State Health & Educational
Facilities Authority, BJC Health Systems,
6.750% due 5/15/13 5,457,506
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
Corp. Revenue, Westerly Hospital, 6.000% due
7/1/14 931,250
1,250,000 AAA Richland County, SC Hospital Revenue Bonds,
Community Provider, Pooled Loan, CGIC-Insured,
7.125% due 7/1/17 1,364,062
2,375,000 AA- Vermont Educational & Health Building Finance
Agency, H. Porter, FHA-Insured, 7.100%
due 2/1/31 2,520,469
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) 1,627,500
1,300,000 AAA Washington State Health, Sisters of Providence,
FGIC-Insured, 6.375% due 10/1/09 1,399,125
2,000,000 AAA Wisconsin State Health & Educational Facilities
Authority Revenue, Waukesha Memorial Hospital,
Series A, AMBAC-Insured, 5.250% due 8/15/19 1,850,000
- ---------------------------------------------------------------------------------------------
57,263,058
- ---------------------------------------------------------------------------------------------
Housing: Multi-Family -- 6.6%
835,000 A* Atlanta, GA Urban Multi-Family Housing, Cascade
Pines, 6.250% due 9/1/10 837,087
1,160,000 BBB+ Chicago, IL Multi-Family Housing Revenue,
Jeffrey Apartments, FHA-Insured, 8.125% due
8/1/30(a) 1,193,350
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) 1,588,125
5,000,000 Aa* Iowa Finance Authority, Prestwick Apartments,
FHA-Insured, 7.500% due 12/1/36(a) 5,825,000
1,000,000 A King County, WA Housing Authority Revenue,
Series A, 6.800% due 3/1/26 1,018,750
Massachusetts State HFA, Multi-Family
Residential Housing, Series A, FHA-Insured:
1,995,000 A+ 8.800% due 8/1/21(a) 2,112,206
2,000,000 A+ 7.800% due 8/1/22(a) 2,117,500
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 6.6% (continued)
$ 1,970,000 AAA Mohave County, AZ Industrial Development Agency,
Multi-Family Housing, Copper Ridge Apartments, FHA-Insured,
7.375% due 4/1/32(a) $ 2,107,900
1,250,000 AAA Nevada Housing Division, Multi-Unit Housing,
Saratoga Palms, FNMA-Collateralized, 6.350% due 10/1/28(a) 1,231,250
500,000 A1* Portland, OR Multi-Family Housing, 6.250%, due 5/1/12(a) 505,000
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) 1,021,250
1,000,000 AAA Rodgers County, OK Housing Finance Authority, Multi-Family
Revenue, FNMA-Collateralized, Series A, FHA-Insured, 7.750%
due 8/1/23 1,247,500
2,352,000 AAA Seattle Housing Authority, Low Income Housing Revenue,
GNMA-Collateralized, 7.400% due 11/20/36 2,531,340
1,000,000 AA Texas State Housing, 6.450% due 12/1/20(a) 1,021,250
- ----------------------------------------------------------------------------------------------------
25,947,508
- ----------------------------------------------------------------------------------------------------
Housing: Single-Family -- 9.3%
170,000 AAA Adams County, CO Multi-County Single-Family Mortgage Revenue,
Series 86B, GNMA-Collateralized, 9.250% due 11/1/17(a) 173,592
485,000 AAA Alaska State Housing Finance Corp., Home Mortgage,
Single-Family Revenue, GNMA/FNMA-Collateralized, 8.750%
due 12/1/16 501,975
695,000 AAA Arkansas Housing Development, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 7.400% due 9/1/23(a) 727,144
610,000 Aaa* Aurora Kane & Dupage, IL Single-Family Mortgage Revenue,
Series A, 7.950% due 10/1/25(a) 672,525
1,460,000 Aa* Colorado HFA, Single-Family Housing Revenue, Series B1,
7.900%, due 12/1/25 1,658,925
1,115,000 Aa* Colorado HFA, Single-Family Program Refunding, Senior Bonds,
1994 Series D-1, 8.000% due 12/1/24 1,258,556
4,925,000 AAA Cowley & Shawnee Counties, KS Mortgage Revenue, Series B,
AMBAC-Insured, GNMA-Collateralized, zero coupon due 6/1/22(a) 677,188
770,000 AAA District of Columbia HFA, Collateralized Revenue, Single-Family,
Series 90A, GNMA, FHLMC & FNMA-Collateralized,
8.100% due 12/1/23(a) 814,275
840,000 AAA Fort Worth, TX Housing Finance Corp., Single-Family Mortgage
Revenue, Series A, GNMA-Collateralized, zero coupon
due 6/1/21(a) 116,500
1,425,000 AA Idaho Housing Agency, Single-Family Mortgage, Series C-2,
7.900% due 1/1/22(a) 1,494,469
1,180,000 Aa* Illinois Housing Development Authority, Residential Mortgage
Revenue, Series 89A, 7.400% due 2/1/20(a) 1,212,450
775,000 A1* Labette County, KS Single-Family Mortgage Revenue Refunding,
Series A, 8.400% due 12/1/11 829,250
1,845,000 Aa* Maryland State Community Development Administration,
Single-Family Mortgage Revenue, FHA-Insured,
7.450% due 4/1/32(a) 1,918,800
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Housing: Single-Family -- 9.3% (continued)
Missouri State Housing Development Community
Mortgage Revenue:
$ 650,000 AAA GNMA-Collateralized, Series A, zero coupon due 7/1/23(a) $ 93,437
1,000,000 AAA Series C, 7.450% due 9/1/27 1,097,500
2,830,043 AAA Montgomery County, TX Housing Finance Corp., Single-Family
Mortgage Revenue, MBIA-Insured, zero coupon due 9/1/15 353,755
Nebraska Investments Finance Authority:
700,000 AAA GNMA-Collateralized, RIBS Variable Rate,
10.014% due 10/17/23(a)(c) 755,125
600,000 AAA Single-Family Mortgage Revenue, GNMA Mortgage Backed
Securities Program, 1990 Series 3, RIBS Variable Rate,
11.415% due 9/10/30(a)(c) 666,750
2,468,815 AA Nevada Housing Development, Single-Family Mortgage Revenue,
Series 1983 B, FHA-Insured, zero coupon due 4/1/15 376,494
1,845,000 Aa* New Hampshire State HFA, Single-Family Residential
Mortgage, 7.250% due 7/1/15(a) 1,918,800
Oregon State Housing & Community Services Department
Mortgage Revenue, Single-Family Mortgage Program:
850,000 Aa* Series B, 6.875% due 7/1/28(a) 890,375
490,000 Aa* Series D, 6.500% due 7/1/24(a) 502,863
220,000 BBB- Panhandle, TX Regional Housing Finance Corp., Single-Family
Mortgage Revenue, 10.375% due 3/1/09 226,325
1,000,000 AA Pennsylvania HFA, Single-Family Mortgage Revenue, Series 39B,
6.875% due 10/1/24(a) 1,050,000
745,000 AAA Prince Georges County, MD Housing Authority, Single-Family
Mortgage Revenue Refunding, Series A, GNMA-Collateralized,
8.000% due 1/1/17 784,113
4,675,000 AAA Reno County, KS Single-Family Mortgage Revenue, Series A,
AMBAC-Insured, zero coupon due 12/1/14 613,594
Rhode Island Housing & Mortgage Financing Corp.:
1,500,000 AA+ Home Ownership Opportunity Bonds, Series 8,
INFLOS Variable Rate, 10.220% due 4/1/24(a)(c) 1,616,250
1,420,000 AA+ Home Ownership, Series 88-ID, 7.875% due 10/1/21(a) 1,485,675
2,500,000 AA+ South Dakota Housing Development Authority, Home Ownership
Mortgage Board, Series C, 7.300% due 5/1/24(a) 2,593,750
691,898 A1* St. Bernard Parish, LA Home Mortgage Authority, Single-Family
Mortgage Revenue Refunding, Series A, 8.000% due 3/25/12 717,844
1,150,000 Aa* Tennessee Housing Development Authority, Home Ownership
Bonds, Series H, 7.825% due 7/1/15(a) 1,175,875
1,000,000 AAA Travis County, TX Housing Finance Corp., Single-Family
Mortgage Revenue, Series B, GNMA/FNMA-Collateralized,
7.100% due 10/1/27(a) 1,053,750
Utah HFA, Single-Family Mortgage Revenue:
935,000 AA 7.300% due 7/1/16 980,581
680,000 AA 9.000% due 1/1/19(a)(d) 703,800
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Housing: Single-Family -- 9.3% (continued)
$ 3,000,000 AA+ Virginia State Housing Development Authority, Commonwealth
Mortgage, Series A, 7.150% due 1/1/33 $ 3,153,750
1,000,000 AA Wisconsin Housing & Economic Development Authority,
Home Ownership Revenue, Series D, 6.450% due 9/1/27(a) 1,001,250
755,000 AA Wyoming Community Development Authority,
8.125% due 6/1/21(a) 791,806
- ----------------------------------------------------------------------------------------------------
36,659,111
- ----------------------------------------------------------------------------------------------------
Industrial Development -- 5.1%
1,000,000 Baa* Delaware County, PA Authority Revenue, (Elwyn Inc. Project),
8.350% due 6/1/15 1,076,250
2,500,000 BBB+ Greenville County, SC Industrial Revenue, (Lockheed Aeromod
Center Inc. Project), 7.100% due 11/1/11(a) 2,678,125
850,000 AA Hempstead, NY IDA & IDR Bonds, (Nassau District
Energy Corp. Project), LOC Toronto Dominion,
7.750% due 9/15/15(a) 870,987
2,650,000 A+ Iowa Finance Authority, (Governor Square Project),
7.250% due 4/1/02 2,818,937
1,500,000 Baa2* New York City IDA, Special Facilities Revenue,
(American Airlines Project), 7.750% due 7/1/19(a) 1,593,750
3,000,000 AA Oklahoma City, Industrial & Culture Facilities,
6.750% due 9/15/17(a) 3,097,500
3,440,000 BBB Port Corpus Christi, TX Industrial Development Corp. Revenue,
10.250% due 6/1/17 3,654,931
1,000,000 A Rensselaer County, NY IDA, Albany International Corp.-Insured,
7.550% due 6/1/07(a) 1,103,750
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) 1,137,500
2,000,000 A West Chicago IDR, (Leggett & Platt Inc. Project),
6.900% due 9/1/24(a) 2,085,000
- ----------------------------------------------------------------------------------------------------
20,116,730
- ----------------------------------------------------------------------------------------------------
Life Care -- 0.9%
2,500,000 BBB Illinois Development Finance Authority Health Facilities,
Community Living, 7.125% due 3/1/10 2,553,125
1,000,000 Baa1* Indianapolis Industrial EDR, 7.625% due 10/1/22 1,051,250
- ----------------------------------------------------------------------------------------------------
3,604,375
- ----------------------------------------------------------------------------------------------------
Miscellaneous -- 3.8%
4,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp., Series A,
7.500% due 11/1/04 4,155,000
2,000,000 A- Illinois Development Finance Authority, Revenue Refunding,
City of East St. Louis, 7.250% due 11/15/09 2,155,000
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
125,000 A* Maryland State Community Development Administration,
Home & Energy Loan Revenue, 9.500% due 6/1/07 126,471
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Miscellaneous--3.8% (continued)
$ 400,000 A* Oregon State Bond Bank, Economic Development Department,
Series 1, 6.700% due 1/1/15 $ 431,000
1,330,000 NR Seward, AK (Sealife Center Project), 7.650% due 10/1/16 1,336,650
2,500,000 A- Summit County, CO Sports Facilities Refunding Revenue,
(Keystone Resorts Management Inc. Project), Ralston
Purina Co. Guaranteed, 7.750% due 9/1/06 2,868,750
- ----------------------------------------------------------------------------------------------------
14,889,121
- ----------------------------------------------------------------------------------------------------
Pollution Control--8.4%
1,500,000 BBB+ Brazos River Authority, TX Utility Electric, 8.250%
due 1/1/19(a) 1,610,625
5,000,000 Aa3* Brazos River, TX Navigation District PCR, (BASF Corp.
Project), 6.750% due 2/1/10 5,650,000
Lancaster, PA Solid Waste Resource Recovery:
1,500,000 BBB+ Series A, 8.500% due 12/15/10(a) 1,588,125
1,000,000 BBB 7.875% due 12/15/09 1,042,500
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) 2,187,500
1,500,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project),
7.650% due 9/1/20(a) 1,663,125
2,000,000 AA Mount Vernon, IN PCR, Southern Indiana Gas, 7.250% due 3/1/14 2,182,500
970,000 A New Jersey EDA Revenue, (Atlantic City Sewer Project),
7.250% due 12/1/11(a) 1,059,725
1,500,000 AAA Ohio State Water Development Authority, Pollution Control
Facilities Revenue, Cleveland Electric, FGIC-Insured,
8.000% due 11/1/99(a) 1,627,500
3,200,000 Aa2* Petersburg, IN PCR Refunding, Indianapolis Power & Light,
5.400% due 8/1/17 3,020,000
1,850,000 A- Richland, SC Solid Waste Facility, (Union Camp Project),
7.125% due 9/1/21(a) 1,991,062
3,000,000 NR Rockdale County, GA Solid Waste Authority Revenue,
7.500% due 1/1/26 3,075,000
1,945,000 BBB Saint Charles Parish, LA PCR, Union Carbide,
7.350% due 11/1/22(a) 2,090,875
1,130,000 A- Southwestern Illinois Development Authority, Solid Waste
Disposal Revenue, (Laclede Steel Co. Project), 8.500%
due 8/1/20(a) 1,245,825
3,200,000 BBB Sweetwater County, WY Solid Waste Disposal Revenue,
(FMC Corp. Project), 7.000% due 6/1/24(a) 3,368,000
- ----------------------------------------------------------------------------------------------------
33,402,362
- ----------------------------------------------------------------------------------------------------
Pre-Refunded (e)--9.2%
1,000,000 AAA Alton, IL Health Facility Revenue, FGIC-Insured,
(Call 2/15/01 @ 102), 7.200% due 2/15/21 1,116,250
1,500,000 AAA Boston, MA Boston City Hospital, FHA-Insured,
(Call 8/15/00 @ 102), 7.625% due 2/15/21 1,689,375
1,500,000 AAA Chattanooga-Hamilton County, TN Hospital Authority Revenue,
FSA-Insured, (Call 2/25/00 @ 104), 10.000% due 5/25/21(c) 1,815,000
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Pre-Refunded (e) -- 9.2% (continued)
$ 2,000,000 AAA Fairfax County, VA IDA, Series A, (Call 8/28/01
@ 104), 10.000% due 8/29/23(c) $ 2,427,500
1,500,000 AAA Franklin County, OH Hospital Facilities
Refunding & Improvement Revenue, Series 1990B,
Riverside United Methodist Hospital, (Call
5/15/00 @ 102), 7.600% due 5/15/20 1,681,875
4,120,000 AAA Georgia Municipal Electric Authority Power Revenue,
Series P, (Call 1/1/98 @ 102), 8.125% due 1/1/20 4,398,100
1,000,000 AAA Harris County, TX Toll Road, Senior Lien Revenue,
(Call 8/1/98 @ 102), 8.125% due 8/1/15 1,086,250
500,000 AAA Illinois Health Facility Authority Revenue, United
Medical Center, (Call 7/1/03 @ 100), 8.375%
due 7/1/12 596,875
4,000,000 AAA Indiana Health Facilities Financing Authority
Hospital Revenue, (Bartholomew County Hospital
Project), CGIC-Insured, (Call 8/15/00 @ 102),
7.750% due 8/15/20 4,515,000
2,000,000 AAA Louisiana Public Facility Authority Revenue, Tulane
University, Series A, (Call 5/15/98 @ 102), 8.200%
due 5/15/18 2,157,500
1,000,000 AAA Michigan State Hospital Finance Authority Revenue,
Sisters of Mercy, (Call 2/15/01 @ 102), 7.500%
due 2/15/18 1,130,000
1,000,000 AAA New York State Dormitory Authority Revenue, State
University Educational Facilities, (Call 5/15/00
@ 102), 7.700% due 5/15/12 1,122,500
2,000,000 AAA New York State Local Government Assistance Corp.,
(Call 4/1/01 @ 102), 7.500% due 4/1/20 2,265,000
North Carolina Eastern Municipal Power Agency,
Power System Revenue Refunding:
1,000,000 AAA Call 1/1/97 @ 100, 4.500% due 1/1/24 852,500
1,310,000 AAA Call 1/1/22 @ 100, 6.000% due 1/1/26 1,380,412
895,000 AAA Texas National Research Lab, Superconducting Super
Collider, (Call 12/1/01 @ 102), 7.100% due 12/1/21 1,009,113
2,965,000 AAA Utah Associated Municipal Power System Revenue,
(Central St. George Transmission Project), AMBAC-
Insured, (Call 12/1/96 @ 101), 7.375% due 12/1/09(a) 3,228,144
2,850,000 AAA Washington County, PA Hospital Authority Revenue,
(Washington Hospital Project), (Call 7/1/97 @ 101),
9.500% due 7/1/17(d) 2,995,521
1,000,000 AAA West Virginia State Water Development Authority, Water
Development Revenue, BIG-Insured, (Call 11/1/96
@ 102), 8.125% due 11/1/16 1,023,390
- -----------------------------------------------------------------------------------------
36,490,305
- -----------------------------------------------------------------------------------------
Public Facilities -- 6.6%
1,200,000 A- Eastern Connecticut Recovery Authority, Solid Waste
Revenue, (Wheelabrator Lisbon Project), Series A,
5.500% due 1/1/20(a) 1,089,000
2,500,000 A Dekalb County, IN Redevelopment (Mini-Mill Local
Public Improvement Project), 6.500% due 1/15/14 2,603,125
3,750,000 AA- George L. Smith II Georgia, World Congress Center
Authority Revenue Bonds, (Domed Stadium Project),
Series 1990, LOC Industrial Bank of Japan, 7.875%
due 7/1/20(a) 4,078,125
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================================
<S> <C> <C> <C>
Public Facilities -- 6.6% (continued)
Indianapolis, IN Local Public Improvement Bond Bank:
$ 3,000,000 AA+ Series B, 6.000% due 1/1/13 $ 3,097,500
3,685,000 A+ Series 1992 D, 6.750% due 2/1/14 4,002,831
3,600,000 AA- La Cross, WI Resource Recovery Revenue, (Northern State
Power Project), 6.000% due 11/1/21 3,627,025
1,095,000 BBB- Portland, TX Community Center Sales Tax Gross Revenue,
7.000% due 2/15/25 1,104,581
2,000,000 Baa1* Triborough Bridge & Tunnel Authority, NY (Convention
Center Project), Series E, 7.250% due 1/1/10 2,265,000
3,960,000 A Tulsa, OK Public Facilities Authority, Lease Payment Revenue
Refunding, Assembly Center, 6.600% due 7/1/14 4,346,100
- ----------------------------------------------------------------------------------------------------------
26,213,287
- ----------------------------------------------------------------------------------------------------------
Short-Term(f) -- 0.7%
600,000 VMIG 1* Burke County, GA PCR, 3.850% due 7/1/24(c) 600,000
2,000,000 VMIG 1* Pinnellas County, FL Health Facilities Authority Revenue,
4.000% due 12/1/15 2,000,000
- ----------------------------------------------------------------------------------------------------------
2,600,000
- ----------------------------------------------------------------------------------------------------------
Tax Allocation -- 0.6%
1,000,000 AAA La Quinta, CA Redevelopment Agency, MBIA-Insured,
7.300% due 9/1/12 1,182,500
1,000,000 BBB- Providence, RI Special Obligation, Tax Increment, Series D,
6.650% due 6/1/16 1,021,250
- ----------------------------------------------------------------------------------------------------------
2,203,750
- ----------------------------------------------------------------------------------------------------------
Transportation -- 7.3%
Alliance Airport Authority Inc., Texas Special Facilities Revenue:
3,000,000 Baa2* American Airlines Inc. Project, 7.500% due 12/1/29(a) 3,191,250
3,000,000 BBB Federal Express Corp. Project, 6.375% due 4/1/21(a) 2,970,000
2,680,000 Baa1* Arapahoe, CO Capital Improvement Highway Revenue,
6.950% due 8/31/20 2,881,000
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) 2,150,000
City and County of Denver, CO Airport Systems Revenue:
1,000,000 Baa* Series A, FGIC-Insured, 8.500% due 11/15/23(a) 1,142,527
3,500,000 Baa* Series 1992B, 7.250% due 11/15/07(a) 3,749,375
2,010,000 BBB+ Connecticut Development Authority, Airport Facilities Revenue,
6.625% due 12/1/14(a) 1,999,950
New Hampshire State Turnpike Systems Revenue Refunding,
FGIC-Insured:
2,500,000 AAA 6.750% due 11/1/11 2,759,375
1,000,000 AAA RIBS, Series C, 10.000% due 11/1/17(c) 1,202,500
Regional Transit Authority, Illinois:
2,000,000 AAA Series A, AMBAC-Insured, 6.400% due 6/1/12 2,157,500
1,045,000 AAA Series C, FGIC-Insured, 7.750% due 6/1/20 1,319,313
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================
<S> <C> <C> <C>
Transportation -- 7.3% (continued)
$3,240,000 AAA Rhode Island Port Authority & Economic Development,
Shepard Building, 6.750% due 6/1/25 $ 3,511,350
- -----------------------------------------------------------------------------------------
29,034,140
- -----------------------------------------------------------------------------------------
Utility -- 5.1%
3,000,000 AAA Brownsville, TX Utility System Revenue Priority
Refunding, MBIA-Insured, 6.250% due 9/1/14 3,247,500
3,880,000 AAA Clark County, NV IDR, (Nevada Power Company Project),
FGIC-Insured, 7.800% due 6/1/20(a) 4,355,300
1,500,000 AAA Georgia Municipal Electric Authority Power Revenue,
Series EE, AMBAC-Insured, 7.250% due 1/1/24 1,818,750
2,500,000 A+ Municipal Electric Authority, Georgia Special
Obligation, Fourth Crossover, Series X, (Project
One), 6.500% due 1/1/12 2,709,375
1,000,000 A+ New York State Energy Research & Development,
(Con Edison Project A), 7.125% due 12/1/29(a) 1,103,750
1,000,000 BBB+ North Carolina Eastern Municipal Power Agency
System Revenue, Series B, 6.000% due 1/1/22 987,500
1,235,000 AAA Piedmont, SC Municipal Power Agency, Electric
Revenue Refunding, FGIC-Insured, 6.750% due 1/1/20 1,409,444
4,250,000 AA Washington State Public Power Supply Revenue,
(Nuclear Project No. 2), 7.000% due 7/1/12 4,669,688
- -----------------------------------------------------------------------------------------
20,301,307
- -----------------------------------------------------------------------------------------
Water & Sewer -- 2.8%
2,400,000 A Dauphin County, PA IDA, General Water Works Corp.-
Insured, 6.900% due 6/1/24(a) 2,697,000
2,000,000 A Idaho State Water Resources Board, Water Revenue,
Resource Development, Borse Water Corp., 7.250% due
12/1/21(a) 2,147,500
3,400,000 Aa1* Port of Umatilla, OR Water Project Revenue, Series
1994, LOC ABN AMRO Bank, 6.650% due 8/1/22(a) 3,599,750
2,550,000 A- Trumbull County, OH Sewer Disposal Revenue, (General
Motors Corp. Project), 6.750% due 7/1/14(a) 2,817,750
- -----------------------------------------------------------------------------------------
11,262,000
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $369,092,725**) $395,988,704
=========================================================================================
</TABLE>
(a) Income from these issues is considered a preference item for purpose of
calculating the alternative minimum tax.
(b) Bonds are escrowed to maturity with U.S. Government securities and are
considered by the Manager to be triple-A rated even if the issuer has not
applied for new ratings.
(c) Residual interest bonds-coupon varies inversely with level of short-term
tax-exempt interest rates.
(d) Security segregated by Custodian for open purchase commitment.
(e) Bonds are escrowed with U.S. Government securities and are considered by
the Manager to be triple-A rated even if the issuer has not applied for new
ratings.
(f) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
+++ Fitch Investor Services, Inc.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 17 and 18 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
16
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("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.
17
<PAGE>
- --------------------------------------------------------------------------------
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
CONNIE
LEE -- College Construction Loan Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
EDR -- Economic Development Revenue
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 Bonds
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
18
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) September 30, 1996
- -----------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (Cost -- $369,092,725) $395,988,704
Cash 49,692
Receivable for securities sold 4,637,111
Interest receivable 6,842,462
Receivable for Fund shares sold 77,414
- -----------------------------------------------------------------------
Total Assets 407,595,383
- -----------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 8,791,905
Management fees payable 234,966
Distribution fees payable 25,152
Accrued expenses 51,237
- -----------------------------------------------------------------------
Total Liabilities 9,103,260
- -----------------------------------------------------------------------
Total Net Assets $398,492,123
=======================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 29,172
Capital paid in excess of par value 375,846,272
Undistributed net investment income 366,092
Accumulated net realized loss from security transactions (4,645,392)
Net unrealized appreciation of investments 26,895,979
- -----------------------------------------------------------------------
Total Net Assets $398,492,123
=======================================================================
Shares Outstanding:
Class A 27,069,472
---------------------------------------------------------------------
Class B 921,958
---------------------------------------------------------------------
Class C 1,180,644
---------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $13.66
---------------------------------------------------------------------
Class B* $13.67
---------------------------------------------------------------------
Class C** $13.65
---------------------------------------------------------------------
Class A Maximium Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) $14.23
=======================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if
shares are redeemed within 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.
19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $13,257,250
- -----------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 898,749
Distribution fees (Note 3) 373,914
Registration fees 55,485
Shareholder and system servicing fees 53,524
Shareholder communications 35,136
Pricing service fees 13,838
Audit and legal 10,233
Custody 9,986
Trustees' fees 5,490
Other 10,833
- -----------------------------------------------------------------------
Total Expenses 1,467,188
- -----------------------------------------------------------------------
Net Investment Income 11,790,062
- -----------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 75,700,492
Cost of securities sold 76,014,578
- -----------------------------------------------------------------------
Net Realized Loss (314,086)
- -----------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 27,206,842
End of period 26,895,979
- -----------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (310,863)
- -----------------------------------------------------------------------
Net Loss on Investments (624,949)
- -----------------------------------------------------------------------
Increase in Net Assets From Operations $11,165,113
=======================================================================
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited)
and the Year Ended March 31, 1996
<TABLE>
<CAPTION>
September 30 March 31
=======================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 11,790,062 $ 24,550,541
Net realized gain (loss) (314,086) 1,579,865
Increase (decrease) in net unrealized appreciation (310,863) 9,568,289
- ---------------------------------------------------------------------------------------
Increase in Net Assets From Operations 11,165,113 35,698,695
- ---------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (11,538,548) (24,435,963)
- ---------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (11,538,548) (24,435,963)
- ---------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 54,268,312 64,710,502
Net asset value of shares issued for
reinvestment of dividends 5,946,487 12,222,596
Cost of shares reacquired (67,938,096) (108,474,584)
- ---------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (7,723,297) (31,541,486)
- ---------------------------------------------------------------------------------------
Decrease in Net Assets (8,096,732) (20,278,754)
NET ASSETS:
Beginning of period 406,588,855 426,867,609
- ---------------------------------------------------------------------------------------
End of period* $398,492,123 $ 406,588,855
=======================================================================================
* Includes undistributed net investment income of: $366,092 $114,578
=======================================================================================
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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 semi-
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 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) securities maturing
within 60 days are valued at cost plus accreted discount or minus 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.
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.
22
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Management Agreement and 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 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 six months ended September 30, 1996, SB received sales
charges of approximately $134,000 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 within 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. 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 six months ended September 30, 1996,
CDSCs paid to SB were approximately:
<TABLE>
Class A Class B Class C
=======================================================================
<S> <C> <C> <C>
CDSCs $1,000 $10,000 $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% of the average daily net assets of each class,
respectively. For the six months ended September 30, 1996, total Distribution
Plan fees incurred were:
<TABLE>
Class A Class B Class C
=======================================================================
<S> <C> <C> <C>
Distribution Plan Fees $278,501 $38,615 $56,798
=======================================================================
</TABLE>
All officers and two Trustees of the Fund are employees of SB.
23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
4. Investments
During the six months ended September 30, 1996, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
<TABLE>
===========================================================================
<S> <C>
Purchases $64,333,919
- ---------------------------------------------------------------------------
Sales 75,700,492
===========================================================================
</TABLE>
At September 30, 1996, the gross unrealized appreciation and depreciation
of investments were as follows:
<TABLE>
===========================================================================
<S> <C>
Gross unrealized appreciation $27,496,805 *
Gross unrealized depreciation (600,826)*
- ---------------------------------------------------------------------------
Net unrealized appreciation $26,895,979 *
===========================================================================
</TABLE>
* Substantially the same for Federal income tax purposes.
5. Capital Loss Carryforward
At March 31, 1996, the Portfolio had, for Federal income 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>
3/31/03 3/31/04
===========================================================================
<S> <C> <C>
Carryforward Amounts $4,134,000 $40,000
===========================================================================
</TABLE>
6. Shares of Beneficial Interest
At September 30, 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.
At September 30, 1996, total paid-in capital amounted to the following for
each class:
<TABLE>
Class A Class B Class C
=============================================================================
<S> <C> <C> <C>
Total Paid-in Capital $347,130,841 $12,041,390 $16,703,213
=============================================================================
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1996 March 31, 1996
-------------------------- ------------------------
Shares Amount Shares Amount
==========================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 3,778,910 $ 51,354,598 4,117,372 $ 56,693,521
Shares issued on reinvestment 402,474 5,459,521 823,510 11,267,741
Shares redeemed (4,794,183) (65,098,597) (7,388,331) (101,570,060)
- ------------------------------------------------------------------------------------------
Net Decrease (612,799) $ (8,284,478) (2,447,449) $ (33,608,798)
==========================================================================================
Class B
Shares sold 107,828 $ 1,464,127 410,533 $ 5,682,469
Shares issued on reinvestment 15,296 207,653 24,745 339,516
Shares redeemed (49,584) (675,960) (104,690) (1,438,128)
- ------------------------------------------------------------------------------------------
Net Increase 73,540 $ 995,820 330,588 $ 4,583,857
==========================================================================================
Class C
Shares sold 106,918 $ 1,449,587 170,117 $ 2,334,512
Shares issued on reinvestment 20,609 279,313 45,027 615,339
Shares redeemed (159,669) (2,163,539) (398,879) (5,466,396)
- ------------------------------------------------------------------------------------------
Net Decrease (32,142) $ (434,639) (183,735) $ (2,516,545)
==========================================================================================
</TABLE>
25
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1996 1995(2) 1994 1993 1992
=================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.67 $ 13.32 $ 13.35 $ 13.81 $ 12.95 $ 12.49
- -------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.40 0.81 0.82 0.85 0.88 0.90
Net realized and
unrealized gain (loss) (0.01) 0.35 (0.01) (0.39) 0.87 0.46
- -------------------------------------------------------------------------------------------------
Total Income From
Operations 0.39 1.16 0.81 0.46 1.75 1.36
- -------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.40) (0.81) (0.84) (0.86) (0.89) (0.90)
Net realized gains -- -- -- (0.06) -- --
- -------------------------------------------------------------------------------------------------
Total Distributions (0.40) (0.81) (0.84) (0.92) (0.89) (0.90)
- -------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 13.66 $ 13.67 $ 13.32 $ 13.35 $ 13.81 $ 12.95
- -------------------------------------------------------------------------------------------------
Total Return 2.88%+++ 8.83% 6.38% 3.17% 13.96% 11.21%
- -------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $369,779 $378,421 $401,364 $412,681 $382,875 $260,718
- -------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses 0.70%+ 0.70% 0.60% 0.52% 0.53% 0.50%
Net investment income 5.93+ 5.88 6.30 6.05 6.58 6.88
- -------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16.48% 27.08% 54.16% 42.33% 52.73% 95.29%
=================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
+++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
26
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
<TABLE>
<CAPTION>
Class B Shares 1996(1) 1996 1995(2)
============================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.67 $ 13.33 $ 12.41
- ----------------------------------------------------------------------------
Income From Operations:
Net investment income 0.37 0.73 0.33
Net realized and unrealized gain (loss) (0.01) 0.35 0.91
- ----------------------------------------------------------------------------
Total Income From Operations 0.36 1.08 1.24
- ----------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36) (0.74) (0.32)
- ----------------------------------------------------------------------------
Total Distributions (0.36) (0.74) (0.32)
- ----------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.67 $ 13.67 $ 13.33
- ----------------------------------------------------------------------------
Total Return 2.69%+++ 8.26% 10.11%+++
- ----------------------------------------------------------------------------
Net Assets, End of Period (000s) $12,603 $11,605 $ 6,905
- ----------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.19%+ 1.19% 1.19%+
Net investment income 5.44+ 5.37 5.75+
- ----------------------------------------------------------------------------
Portfolio Turnover Rate 16.48% 27.08% 54.16%
============================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) 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.
27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
<TABLE>
<CAPTION>
Class C Shares 1996(1) 1996 1995(2) 1994 1993(3)
===================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.65 $13.32 $13.33 $13.80 $13.47
- ---------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.37 0.73 0.74 0.76 0.22
Net realized and unrealized gain (loss) (0.01) 0.34 (0.01) (0.40) 0.31
- ---------------------------------------------------------------------------------------------------
Total Income From Operations 0.36 1.07 0.73 0.36 0.53
- ---------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36) (0.74) (0.74) (0.77) (0.20)
Net realized gains -- -- -- (0.06) --
- ---------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.74) (0.74) (0.83) (0.20)
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.65 $13.65 $13.32 $13.33 $13.80
- ---------------------------------------------------------------------------------------------------
Total Return 2.67%+++ 8.13% 5.80% 2.40% 3.98%+++
- ---------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $16,110 $16,563 $18,599 $18,185 $5,738
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.27%+ 1.27% 1.23% 1.22% 1.20%+
Net investment income 5.36+ 5.31 5.69 5.29 5.68+
- ---------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16.48% 27.08% 54.16% 42.33% 52.73%
===================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
(3) 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.
28
<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
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
SMITH BARNEY
- --------------------------------------
A Member of the TravelersGroup [LOGO]
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
FD0806 11/96
