- ------------------------------------------------------------
- --------------------
A N N U A L R E P O R T
============================================================
====================
1997
1997
1997 [PHOTO]
1997
1997
Smith Barney
Muni Funds
Florida Portfolio
---------------------------
March 31, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Everyday.
<PAGE>
- -----------------------
Florida Portfolio
- -----------------------
Dear Shareholder:
We are pleased to provide the annual report for the Smith
Barney Muni Funds -
Florida Portfolio for the year ended March 31, 1997. For
your convenience, we
have summarized the period's prevailing economic and market
conditions below and
outlined the various investment strategies employed by the
Portfolio during this
time. A detailed summary of performance and current holdings
for the Portfolio
can be found in the appropriate sections that follow.
Portfolio's Performance and Investment Strategy
For the year ended March 31, 1997, the Florida Portfolio
generated a total
return of 5.44% for Class A shares which compares favorably
with its Lipper
Analytical Services, Inc. peer group average of 4.75%.
(Lipper Analytical
Services, Inc. is a major fund tracking organization.)
During the reporting period, we maintained the Florida
Portfolio's high
credit-quality, good call protection and broad sector
diversification. In our
view, this investment strategy should provide investors with
a steady stream of
income while at the same time helping to reduce the
fluctuation of the
Portfolio's net asset value.
With respect to its credit quality, the Florida Portfolio
had 99% of its assets
invested in investment-grade securities. (An investment-
grade security is a
security with a rating of BBB/Baa or better from Standard &
Poor's Corporation
or Moody's Investors Services, Inc. or deemed to be
comparable by the Fund's
Manager). In addition, approximately 53% of the Portfolio
had a triple-A rating.
As of March 31, 1997, the Florida Portfolio's average
weighted maturity was just
over 21 years. The three largest sectors of the broadly
diversified Portfolio
were transportation (11.7%), multi-family housing (10.8%)
and hospitals (10.4%)
because we believe these issues represented good value.
Market and Economic Overview
The U.S. bond market experienced considerable volatility
throughout the year
ended March 31, 1997. In early 1996, a significant bond
market sell-off was
precipitated by a pick-up in inflationary fears that was
caused by unexpected
strength in the U.S. economy and concerns that the Federal
Reserve Board ("Fed")
would tighten rates in response. In retrospect, those
concerns were unfounded
because Fed monetary policy did not change throughout 1996.
In fact, as U.S.
economic growth moderated and concerns about Fed tightening
eased, bond prices
improved significantly.
1
<PAGE>
After his now infamous remarks regarding "irrational
exuberance" in the stock
market in December, Fed Chairman Alan Greenspan continued to
warn investors
about the possible re-emergence of higher inflation in the
U.S. economy. In
response to a steady stream of strong economic reports, the
Fed raised the
federal funds rate by 25 basis points, or 0.25% in late
March of this year. (The
federal funds rate is the interest rate banks charge each
other for overnight
loans and is a closely watched indicator of the direction of
interest rates.)
Florida Economic Highlights
Florida's economy continues to exhibit strong growth,
although the pace of
growth has slowed somewhat over the past year. So far in
1997, the unemployment
rate has remained below 6%. Florida's economic growth has
been fueled by robust
tourist growth, increasing trade with Latin and South
America, more businesses
relocating to the Sunshine State due to its relatively low
costs and the
appreciation of stocks and bonds owned by its large
population of retirees.
As a result of the impressive growth, Florida's general
obligation bonds remain
highly rated. We continue to be bullish on the state's
economy. We expect it to
stay a national economic leader for well into the next
century. And because of
the state's excellent quality of life, favorable climate,
affordable housing and
pro-business environment, it should continue to attract
record numbers of people
and businesses. Moreover, Florida has become a crucial link
between the United
States and the growing economies of Latin and South America,
and that should
further propel its rate of economic growth going forward.
Municipal Bond Market Update
Despite the challenges faced by fixed income markets,
municipal bonds have
continued to deliver competitive performance with less
overall volatility
relative to U.S. government bonds. In our opinion, the
municipal bond market
continues to be driven primarily by many investors who may
be concerned with the
recent historically high value of the stock market. As the
equity market has
grown more turbulent, many investors have gravitated toward
bonds in an effort
to rebalance their portfolios. In our opinion, this
increased demand combined
with light supply, has tended to support municipal bond
prices.
2
<PAGE>
While we expect continued Fed vigilance and possibly more
increases in
short-term rates, we remain optimistic about select Florida
municipal bonds
because of the state's economic clout. In fact, we view the
recent rise in
market yields as an opportunity to extend the Portfolio's
call protection
without sacrificing a lot of coupon income or substantially
increasing its
downside risk. In our opinion, supply and demand, ongoing
Fed vigilance and
attractive after-tax returns continue to make a compelling
case for municipal
bonds.
Thank you for investing in the Smith Barney Muni Funds -
Florida Portfolio. We
look forward to helping you achieve your goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
April 18, 1997
3
<PAGE>
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
----------------
Beginning End of Income
Capital Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $13.24 $13.16 $ 0.73 $
0.05 5.44%
- ------------------------------------------------------------
- --------------------
3/31/96 12.89 13.24 0.74
0.00 8.65
- ------------------------------------------------------------
- --------------------
3/31/95 12.82 12.89 0.76
0.00 6.77
- ------------------------------------------------------------
- --------------------
3/31/94 13.21 12.82 0.77
0.00 2.75
- ------------------------------------------------------------
- --------------------
3/31/93 12.32 13.21 0.80
0.01 14.21
- ------------------------------------------------------------
- --------------------
Inception* - 3/31/92 12.00 12.32 0.70
0.00 8.70+
============================================================
====================
Total $ 4.50 $
0.06
============================================================
====================
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
----------------
Beginning End of Income
Capital Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $13.23 $13.14 $ 0.68 $
0.05 4.91%
- ------------------------------------------------------------
- --------------------
3/31/96 12.89 13.23 0.69
0.00 8.09
- ------------------------------------------------------------
- --------------------
Inception* - 3/31/95 11.91 12.89 0.29
0.00 10.77+
============================================================
====================
Total $ 1.66 $
0.05
============================================================
====================
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
----------------
Beginning End of Income
Capital Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $13.22 $13.14 $0.67
$0.05 4.94%
- ------------------------------------------------------------
- --------------------
3/31/96 12.89 13.22 0.68
0.00 7.96
- ------------------------------------------------------------
- --------------------
3/31/95 12.81 12.89 0.67
0.00 6.12
- ------------------------------------------------------------
- --------------------
3/31/94 13.20 12.81 0.68
0.00 2.05
- ------------------------------------------------------------
- --------------------
Inception* - 3/31/93 12.86 13.20 0.18
0.00 4.05+
============================================================
====================
Total $2.88
$0.05
============================================================
====================
It is the Fund's policy to distribute dividends monthly and
capital gains, if
any, annually.
4
<PAGE>
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
Without
Sales Charge(1)
----------
- -------------------
Class A
Class B Class C
============================================================
====================
Year Ended 3/31/97 5.44%
4.91% 4.94%
- ------------------------------------------------------------
- --------------------
Five Years Ended 3/31/97 7.50
N/A N/A
- ------------------------------------------------------------
- --------------------
Inception* through 3/31/97 7.69
6.58 4.82
============================================================
====================
With
Sales Charge(2)
---------
- -------------------
Class A
Class B Class C
============================================================
====================
Year Ended 3/31/97 1.24%
0.44% 3.95%
- ------------------------------------------------------------
- --------------------
Five Years Ended 3/31/97 6.63
N/A N/A
- ------------------------------------------------------------
- --------------------
Inception* through 3/31/97 6.96
5.41 4.82
============================================================
====================
- ------------------------------------------------------------
- --------------------
Cumulative Total Return
- ------------------------------------------------------------
- --------------------
Without
Sales Charge(1)
============================================================
====================
Class A (Inception* through 3/31/97)
56.01%
- ------------------------------------------------------------
- --------------------
Class B (Inception* through 3/31/97)
16.33
- ------------------------------------------------------------
- --------------------
Class C (Inception* through 3/31/97)
22.07
============================================================
====================
(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 and C shares are April
2, 1991, November 16,
1994 and January 5, 1993 respectively.
+ Total return is not annualized, as it may not be
representative of the
total return for the year.
5
<PAGE>
- ------------------------------------------------------------
- --------------------
Historical Performance (unaudited)
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A
Shares of
the Florida Portfolio vs.
Lehman Long Bond Index+
- ------------------------------------------------------------
- --------------------
April 1991 -- March 1997
[THE FOLLOWING TABLE WAS DEPICTED AS A LINE GRAPH IN THE
PRINTED MATERIAL]
Florida Portfolio Lehman Long
Bond Index
4/2/91 $ 9,600 $10,000
3/92 10,410 11,139
3/93 11,857 12,768
3/94 12,156 12,915
3/95 12,961 14,081
3/96 14,084 15,153
3/31/97 14,862 16,108
+ Hypothetical illustration of $10,000 invested in Class
A shares at
inception on April 2, 1991, assuming deduction of the
maximum 4.00% sales
charge at the time of investment and reinvestment of
dividends (after
deduction of applicable sales charges through November
6, 1994, and
thereafter at net asset value) and capital gains, if
any, at net asset
value through March 31, 1997. 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
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
================================
<S> <C> <C>
<C>
Education -- 3.0%
$ 1,510,000 Baa3* Palm Bay Lease Revenue Refunding,
Education and
Research, Series A, 6.850% due
9/1/13 $1,547,750
430,000 Baa3* Pensacola Junior College Foundation,
Educational
Facilities Revenue, Acquisition &
Improvement,
LOC Bank of Toyko, 7.125% due
7/1/09 474,075
Volusia County Educational
Facilities Authority Revenue,
Embry Riddle Aeronautical
University:
500,000 AAA CONNIE LEE-Insured, 6.500% due
10/15/15 525,625
2,875,000 Baa2* Series A, 6.125% due 10/15/16
2,875,000
- ------------------------------------------------------------
- --------------------------------
5,422,450
- ------------------------------------------------------------
- --------------------------------
Escrowed to Maturity (a) -- 7.7%
545,000 AAA Altamonte Springs Health Facilities
Authority Hospital
Revenue, Adventist Health System,
13.000% due 10/1/01 646,506
685,000 Aaa* Bay County Hospital Revenue, (Bay
Medical Center Project),
6.875% due 10/1/99
723,531
Bradford County Health Facilities
Authority Revenue,
(Santa Fe Healthcare Facilities
Project):
1,000,000 AAA 6.000% due 11/15/09
1,030,000
860,000 AAA 6.050% due 11/15/16
881,500
285,000 AAA Cape Coral Health Facilities
Authority Hospital Revenue,
(Cape Coral Medical Center
Project), 8.125% due 11/1/08 317,419
3,000,000 AAA Escambia County HFA, Multi-Family
Housing Revenue,
Gensis Healthcare, FGIC-Insured,
Principal
Custodial Receipts, zero coupon
due 10/15/18 832,500
1,500,000 Aaa* Escambia County Water and Sewer
District IV Revenue,
(Escrowed with U.S. Government
Securities),
7.300% due 1/1/08
1,646,250
250,000 NR Florida State Community Service
Suburban Utilities
Revenue, 8.125% due 10/1/98
258,125
1,500,000 AAA Gainesville Utility System Revenue,
8.125% due 10/1/14(b) 1,848,750
Jacksonville Health Facilities
Authority Hospital Revenue:
320,000 AAA Methodist Hospital Project,
10.000% due 10/1/97 326,454
180,000 AAA St. Vincents Medical Center Inc.
Project,
9.125% due 1/1/03
199,125
180,000 AAA Lee County Justice Center Complex
Inc., Improvement
Revenue, Series A, MBIA-Insured,
11.125% due 1/1/11 250,875
570,000 AAA Orange County Health Facility
Authority Revenue,
Southern Adventist Hospital,
8.750% due 10/1/09 679,013
1,045,000 AAA Palm Beach County Health Facilities
Authority Revenue,
(John F. Kennedy Memorial
Hospital Inc. Project),
Series C, 9.500% due 8/1/13
1,325,844
595,000 AAA Palm Beach County Solid Waste
Authority Revenue,
MBIA-Insured, 10.000% due 12/1/04
714,000
2,000,000 AAA Port Everglades Authority Port
Improvement
7.125% due 11/1/16(b)
2,297,500
- ------------------------------------------------------------
- --------------------------------
13,977,392
- ------------------------------------------------------------
- --------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
================================
<S> <C> <C>
<C>
Finance -- 1.1%
$ 485,000 AA+ Florida State Board of Education
Capital Outlay
Unrefunded Balance, Series A,
7.250% due 6/1/23(b) $ 526,831
500,000 AAA Gulf Breeze Local Government
Revenue, FGIC-Insured,
7.750% due 12/1/15
548,750
1,000,000 AA St. Lucie County Special Assessment,
South Hutchinson
Island, Asset Guaranteed, 6.200%
due 11/1/25 1,011,250
- ------------------------------------------------------------
- --------------------------------
2,086,831
- ------------------------------------------------------------
- --------------------------------
General Obligation -- 2.2%
500,000 NR Brevard County Tourist Development
Tax Revenue,
4th Century Marlins Spring,
6.875% due 3/1/13 518,750
1,000,000 AA+ Florida State Broward County,
10.000% due 7/1/14(b) 1,460,000
2,300,000 A Puerto Rico Commonwealth GO, 5.375%
due 7/1/25 2,116,000
- ------------------------------------------------------------
- --------------------------------
4,094,750
- ------------------------------------------------------------
- --------------------------------
Government Facilities -- 0.4%
750,000 AAA Florida State Department of
Corrections COP, Okeechobee
Correctional, AMBAC-Insured,
6.250% due 3/1/15 783,750
- ------------------------------------------------------------
- --------------------------------
Hospital -- 10.4%
1,750,000 BBB+ Escambia County Health Facilities
Authority Revenue,
(Baptist Hospital & Manor Project),
6.750% due 10/1/14 1,815,625
2,000,000 BBB-++ Escambia Health Facilities Authority
Revenue,
(Azalea Trace Inc. Project),
6.100% due 1/1/19 1,917,500
Jacksonville Health Facilities
Authority, Hospital Revenue:
National Benevolent Association,
IDR, Cypress Hill
Village Program:
750,000 Baa1* 6.400% due 12/1/16
750,000
1,000,000 Baa1* Series A, 6.250% due 12/1/26
980,000
2,000,000 AA+ St. Luke's Hospital
Association Project,
FHA-Insured, 7.125% due
11/15/20 2,160,000
310,000 AAA University Medical Center Inc.
Project,
CONNIE LEE-Insured, 6.600%
due 2/1/21 324,725
Lee County Hospital Board of
Directors,
Hospital Revenue, MBIA-Insured:
1,000,000 AAA 9.266% due 4/1/20(c)
1,101,250
2,000,000 AAA Regular Linked SAVRS & RIBS,
6.350% due 3/26/20(c)
2,057,500
Orange County Health Facilities
Authority, Hospital
Revenue Bonds:
Adventist Health Systems, FSA-
Insured:
1,500,000 AAA 6.900% due 11/15/07(c)
1,546,875
1,000,000 AAA Sunbelt Inc. Project, Series
B, 6.750% due 11/15/21 1,076,250
2,000,000 AAA Regular Linked SAVRS & RIBS,
MBIA-Insured,
6.416% due 10/29/21(c)
2,072,500
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
==============================
<S> <C> <C>
<C>
Hospital -- 10.4% (continued)
$ 815,000 BB+ Pinellas County Health Facilities
Authority, Sun Coast
Health System Revenue, Sun Coast
Hospital
Guaranteed, Series A, 8.500% due
3/1/20 $ 868,994
1,000,000 AAA South Broward Hospital District
Revenue Bonds, Series
1991C, RIBS, AMBAC-Insured,
8.700% due 5/13/21(c) 1,175,000
1,000,000 AAA Tampa Revenue, Allegany Health
Systems, St. Joseph's
Health, MBIA-Insured, 6.700% due
12/1/18 1,096,250
- ------------------------------------------------------------
- ------------------------------
18,942,469
- ------------------------------------------------------------
- ------------------------------
Housing: Multi-Family -- 10.8%
Broward County HFA Multi-Family
Housing Revenue:
900,000 AAA Boardwalk Apartments Project, FNMA-
Collateralized,
6.200% due 8/1/16
911,250
900,000 AAA Tamarac Pointe Apartments Project,
GNMA-Collateralized,
6.250% due 7/1/26
907,875
1,000,000 A+ Waterford Park Project, 7.200%
mandatory tender 5/1/02 1,030,590
385,000 AAA Clearwater Multi-Family Housing
Revenue, (Drew Gardens
Project), Series A, FHA-Insured,
6.500% due 10/1/25 392,700
2,355,000 AAA Dade County IDR Susanna Wesley
Health Center, Series A,
FHA-Insured, 6.625% due 7/1/30
2,452,144
Florida Housing Finance Agency,
Multi-Family
Revenue Bonds:
1,085,000 AAA Antigue Club Apartments, Series
A-1, AMBAC-Insured,
6.750% due 8/1/14(d)
1,128,400
1,000,000 AAA Indian Run Apartments, Series V,
AMBAC-Insured,
6.200% due 12/1/36
991,250
1,500,000 AAA Mariner Club Apartments, Series
K1,
6.375% due 9/1/36(d)
1,520,625
3,000,000 A Senior Lien, Series I-1, 6.625%
due 7/1/28(d) 3,078,750
3,000,000 AAA Stoddert Arms Apartments, Series
O, AMBAC-Insured,
6.300% due 9/1/36(d)
3,022,500
1,000,000 BBB+ The Vinyards Project, Series H,
6.500% due 11/1/25 995,000
1,000,000 AAA Turtle Creek Apartments, Series
C-1, AMBAC-Insured,
6.200% due 5/1/36(d)
1,002,500
1,000,000 AAA Oceanside Housing Development
Corporation, Multi-Family
Mortgage Revenue, FHA-Insured,
6.875% due 2/1/20 1,041,250
1,095,000 AAA Southwest Housing Development
Corporation, Multi-Family
Housing Mortgage Revenue
Refunding, FHA-Insured,
6.875% due 2/1/20
1,131,956
- ------------------------------------------------------------
- ------------------------------
19,606,790
- ------------------------------------------------------------
- ------------------------------
Housing: Single-Family -- 9.9%
Brevard County HFA, Single-Family
Mortgage Revenue:
750,000 Aaa* GNMA-Collateralized, 6.600% due
9/1/16(d) 767,812
1,000,000 Aaa* GNMA/FNMA-Collateralized, 6.400%
due 9/1/23(d) 1,020,000
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
==============================
<S> <C> <C>
<C>
Housing: Single-Family -- 9.9% (continued)
Broward County HFA Single-Family
Mortgage Revenue:
$ 935,000 Aa* Capital Appreciation, zero coupon
due 4/1/14 $ 163,625
1,000,000 Aaa* GNMA/FNMA-Collateralized, 6.650%
due 8/1/21(d) 1,035,000
Dade County HFA Single-Family
Mortgage Revenue,
GNMA/FNMA Collateralized:
1,500,000 AAA 6.700% due 4/1/28(d)
1,548,750
355,000 Aaa* Series B, 7.250% due 9/1/23(d)
370,531
35,000 Aaa* Series E, 7.000% due 3/1/24
36,444
Duval County HFA, Single-Family
Mortgage Revenue,
GNMA-Collateralized:
110,000 AAA 8.000% due 6/1/00(d)
112,613
730,000 Aaa* 6.700% due 10/1/26(d)
759,200
385,000 AAA Series A, 8.500% due 9/1/19(d)
400,881
Escambia County HFA Single-Family
Mortgage Revenue:
235,000 Aaa* GNMA-Collateralized, Series A,
7.800% due 4/1/22(d) 247,631
2,000,000 Aaa* Multi-County Program, Series A,
GNMA/FNMA-Collateralized,
6.100% due 4/1/30 1,997,500
Florida Housing Finance Agency:
500,000 AA Homeowner Mortgage, Series 2,
6.350% due 7/1/28(d) 508,125
145,000 Aaa* Home Ownership Revenue, Series G1,
GNMA-Collateralized, 7.800% due
9/1/10(d) 152,794
445,000 A+ Residential Mortgage, Series 1,
Capital Appreciation,
zero coupon due 11/1/12(c)
92,338
1,355,000 AAA Single-Family Mortgage, Series B,
GNMA/FNMA-Collateralized,
6.650% due 7/1/26(d) 1,404,119
440,000 Aaa* Hillsborough County HFA, Single-
Family Mortgage Revenue,
Series A, GNMA-Collateralized,
7.700% due 4/1/23(d) 461,450
1,000,000 AAA Leon County HFA Single-Family
Mortgage Revenue, Multi-
County Program, Series B,
GNMA/FHLMC-Collateralized,
7.300%, due 1/1/28(d)
1,067,500
Orange County HFA, Single-Family
Mortgage Revenue,
GNMA/FNMA Mortgage Backed
Securities Program:
1,250,000 AAA 6.750% due 10/1/18(d)
1,295,313
1,500,000 AAA Series A, 6.300% due 4/1/28(d)
1,522,500
450,000 Aaa* Palm Beach HFA, Single-Family
Mortgage Power Revenue
Bonds, Series A, GNMA-
Collateralized,
7.875% due 4/1/23(d)
452,250
1,600,000 Aaa* Pinnellas County HFA, Single-Family
Mortgage Revenue,
GNMA/FNMA-Collateralized, 6.550%
due 8/1/27(d) 1,642,000
1,000,000 Aaa* Virgin Islands HFA, Single-Family
Mortgage Revenue,
Series A, GNMA-Collateralized,
6.500% due 3/1/25(d) 1,017,500
- ------------------------------------------------------------
- ------------------------------
18,075,876
- ------------------------------------------------------------
- ------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
==============================
<S> <C> <C>
<C>
Industrial Development -- 3.9%
$ 2,105,000 NR Homestead IDR, Community
Rehabilitation Providers
Program, Series A, 7.950% due
11/1/18 $2,139,206
1,500,000 BBB- Martin County IDA, Indiantown,
(Cogeneration Project),
7.875% due 12/15/25(d)
1,708,125
500,000 NR Northern Palm Beach County Water
Control District, Unit
Development No. 31, Program 1,
6.750% due 11/1/07 511,875
Osceola County IDA Revenue,
(Community Provider Pooled
Loan Program), Series A, FSA-
Insured:
400,000 AAA 7.500% due 7/1/02
422,500
799,000 AAA 7.750% due 7/1/10
842,945
Tampa Sports Authority Revenue,
(Tampa Bay
Arena Project), MBIA-Insured:
500,000 AAA 6.050% due 10/1/20
521,250
1,000,000 AAA 6.100% due 10/1/26
1,046,250
- ------------------------------------------------------------
- ------------------------------
7,192,151
- ------------------------------------------------------------
- ------------------------------
Miscellaneous -- 7.1%
1,000,000 AAA Dade County Aviation Facilities
Revenue, Series B,
MBIA-Insured, 6.600% due
10/1/22(d) 1,063,750
4,000,000 NR Dade County IDR, (Miami Cerebral
Palsy Services Project),
8.000% due 6/1/22
4,120,000
5,000,000 AAA Dade County Special Obligation,
Series B, AMBAC-Insured,
Capital Appreciation, zero coupon
due 10/1/16 1,518,750
500,000 BB+ Hillsborough County Aviation
Authority, Special Purpose,
(Delta Airlines Project), 6.800%
due 1/1/24 512,500
1,200,000 AAA North Springs Improvement District,
MBIA-Insured,
7.000% due 10/1/09
1,390,500
2,500,000 AAA Port Palm Beach District Revenue,
Series A, MBIA-Insured,
Capital Appreciation, zero coupon
due 9/1/21 556,250
1,200,000 Baa* Puerto Rico Housing Bank & Finance
Agency,
7.500% due 12/1/06
1,359,000
1,745,000 BBB Tampa Capital Improvement Program,
Series B,
8.375% due 10/1/18
1,825,706
500,000 NR Tampa Revenue (Florida Aquarium Inc.
Project),
7.750% due 5/1/27
570,625
- ------------------------------------------------------------
- ------------------------------
12,917,081
- ------------------------------------------------------------
- ------------------------------
Nursing Home -- 2.9%
1,000,000 Aa3* Broward County Health Facilities
Authority Revenue
Refunding, County Nursing Home,
LOC 91
Allied Irish Banks Ltd., 7.500%
due 8/15/20 1,073,750
3,500,000 A- Palm Beach County Health Facilities
Authority Revenue,
Retirement Community, 5.625% due
11/15/20 3,272,500
1,000,000 AA Volusia County Health Facilities
Authority Revenue,
(John Knox Projects), Series A,
Asset Guaranty,
6.000% due 6/1/17
1,007,500
- ------------------------------------------------------------
- ------------------------------
5,353,750
- ------------------------------------------------------------
- ------------------------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
==============================
<S> <C> <C>
<C>
Pollution Control -- 8.9%
$ 2,400,000 A Broward County Resource Recovery
Revenue,
(Broward Waste Energy North
Project),
7.950% due 12/1/08(b)
$2,610,000
2,000,000 A+ Citrus County PCR, Florida Power
Corporation,
(Crystal River Project), 6.625%
due 1/1/27 2,125,000
Escambia County PCR, (Champion
International
Corporation Project):
500,000 Baa1* 6.950% due 11/1/07
536,250
3,500,000 Baa1* 6.900% due 8/1/22(d)
3,657,500
2,500,000 A+ Jacksonville Sewer & Solid Waste
Disposal
Facilities Revenue, (Anheuser-
Busch Project),
5.875% due 2/1/36(d)
2,406,250
705,000 AAA Lee County Solid Waste Revenue, MBIA-
Insured,
7.000% due 10/1/11(d)
771,975
1,000,000 Aa3* Pinellas County PCR, Florida Power
Corporation,
(Anclot & Bartlow Plants
Project), 7.200%
due 12/1/14
1,083,750
1,390,000 Baa2* Putnam County Development Authority
PCR, Georgia
Pacific Corporation 1984, 7.000%
due 12/1/05 1,522,050
1,500,000 AA- St. Lucie County Solid Waste
Disposal Revenue, (Florida
Power & Light Co. Project),
7.150% due 2/1/23(d) 1,595,625
- ------------------------------------------------------------
- ------------------------------
16,308,400
- ------------------------------------------------------------
- ------------------------------
Pre-Refunded(e) -- 8.4%
Alachua County Health Facilities
Authority Revenue,
(Santa Fe Healthcare Facilities
Project):
175,000 AAA Call 11/15/00 @102, 6.875% due
11/15/02 188,562
1,000,000 AAA Call 11/15/00 @102, 7.600% due
11/15/13 1,115,000
1,500,000 Aaa* Bay County Hospital Revenue, (Bay
Medical Center
Project), (Call 10/1/04 @ 102),
8.000% due 10/1/12 1,796,250
1,000,000 AAA Broward County School Board COP,
Series 90A,
MBIA-Insured, (Call 7/1/00 @
102), 7.125% due 7/1/10 1,091,250
1,750,000 A+ Charlotte County Hospital Revenue,
Bon Secours Health,
St. Joseph's, Series 88 A, (Call
8/15/98 @ 102),
8.250% due 8/15/18
1,876,875
1,060,000 AAA Dunedin Hospital Revenue, Mease
Health Care,
MBIA-Insured, (Call 11/15/01 @
102),
6.750% due 11/15/11
1,164,675
1,365,000 AAA Edgewater Water & Sewer Authority,
MBIA-Insured,
(Call 10/1/01 @ 102), 7.000% due
10/1/21 1,511,738
515,000 AAA Florida State Board of Education
Capital Outlay
Refunding, Series A, (Call 6/1/00
@ 102),
7.250% due 6/1/23(b)
563,281
1,000,000 AAA Florida State Turnpike Authority
Revenue, AMBAC-Insured,
(Call 7/1/01 @ 102), 7.200% due
7/1/11 1,110,000
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
==============================
<S> <C> <C>
<C>
Pre-Refunded(e) -- 8.4% (continued)
$ 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 $1,076,250
1,000,000 AAA Miami Sports & Exhibition Authority
Special Obligation
Refunding, FGIC-Insured, (Call
4/1/00 @ 102),
7.200% due 10/1/20
1,088,750
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 3/1/20 935,200
1,500,000 AAA Port of Orange Water & Sewer
Revenue, AMBAC-Insured,
(Call 4/1/01 @ 24.4), zero coupon
due 10/1/21 301,875
1,000,000 AAA St. Lucie County Sales Tax Revenue,
FGIC-Insured,
(Call 10/1/02 @ 102), 6.500% due
10/1/22 1,095,000
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(d)
483,938
- ------------------------------------------------------------
- ------------------------------
15,398,644
- ------------------------------------------------------------
- ------------------------------
Public Facilities -- 1.2%
1,000,000 Baa* Miami Beach Redevelopment Tax
Increment Revenue, City
Center-Historic Convention,
Series B, 6.350%
due 12/1/22
988,750
1,185,000 A Puerto Rico Public Buildings
Authority Revenue,
Series L, 5.500% due 7/1/21
1,124,269
- ------------------------------------------------------------
- ------------------------------
2,113,019
- ------------------------------------------------------------
- ------------------------------
Short-Term (f) -- 0.4%
Hillsborough County IDA, PCR, (Tampa
Electric Co.
Project):
200,000 VMIG 1* 4.000% due 5/15/13
200,000
300,000 VMIG 1* 3.350% due 9/1/25
300,000
100,000 VMIG 1* Jacksonville County PCR, (Florida
Power & Light Co.
Project), 4.000% due 5/1/29
100,000
200,000 VMIG 1* St. Lucie County PCR, (Florida Power
& Light Co.
Project), 4.000% due 3/1/27
200,000
- ------------------------------------------------------------
- ------------------------------
800,000
- ------------------------------------------------------------
- ------------------------------
Transportation -- 11.7%
1,250,000 Aa3* Dade County Aviation Facilities
Revenue Bonds,
Series U, 6.750% due 10/1/06(d)
1,304,687
2,295,000 AAA Florida Ports Financing Community
Revenue,
MBIA-Insured, 5.375% due
6/1/27(d) 2,108,531 Guam
Airport Authority Revenue:
750,000 BBB Series A, 6.500% due 10/1/23
762,188
1,000,000 BBB Series B, 6.600% due 10/1/10(d)
1,023,750
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
==============================
<S> <C> <C>
<C>
Transportation -- 11.7% (continued)
$ 1,000,000 AAA Hillsborough County Aviation
Authority Revenue,
Tampa International Airport,
Series A, FGIC-Insured,
6.000% due 10/1/23
$ 1,013,750
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(d)
1,593,750
Puerto Rico Commonwealth Highway &
Transportation
Authority Revenue:
2,000,000 A Series X, 5.500% due 7/1/15
1,937,500
2,000,000 A Series Y, 5.000% due 7/1/36
1,707,500
Sanford Airport Authority IDR,
Central Florida
Terminals Inc. Project:
Series A:
1,000,000 NR 7.500% due 5/1/15(d)
1,006,250
2,000,000 NR 7.750% due 5/1/21(d)
2,020,000
645,000 NR Series C, 7.500% due 5/1/21(d)
636,131
Santa Rosa Bay Bridge Authority
Revenue:
3,500,000 BBB- 6.250% due 7/1/28
3,434,375
5,000,000 BBB- Capital Appreciation, zero coupon
due 7/1/17 1,256,250
1,355,000 AAA Volusia County Airport System
Revenue,
Daytona Beach Regional Airport,
MBIA-Insured,
7.000% due 10/1/21(d)
1,446,462
- ------------------------------------------------------------
- ------------------------------
21,251,124
- ------------------------------------------------------------
- ------------------------------
Utilities -- 5.1%
3,000,000 AAA Escambia County Utility System
Authority Revenue
Bonds, FGIC-Insured, Series B,
6.250% due 1/1/15 3,221,250
Guam Power Authority Revenue, Series
A:
1,500,000 BBB 5.250% due 10/1/23
1,299,375
1,350,000 BBB 6.750% due 10/1/24
1,397,250
930,000 BBB+ Hillsborough County Utilities
Revenue, Refunding &
Improvement, 7.000% due 8/1/14
989,288
1,265,000 A1* Jacksonville Electric Authority
Revenue Refunding,
St. John's River Power Park
Services Refunding,
Issue 2-Series 5, 6.900% due
10/1/13 1,344,062
1,000,000 AAA Lakeland Electric & Water Revenue,
Jr. Sub Lien,
FGIC-Insured, 6.000% due 10/1/14
1,047,500
- ------------------------------------------------------------
- ------------------------------
9,298,725
- ------------------------------------------------------------
- ------------------------------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedule of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
==============================
<S> <C> <C>
<C>
Water & Sewer -- 4.9%
$ 1,000,000 AAA Coral Springs Improvement District,
Broward County
Water and Sewer Refunding, Series
92,
MBIA-Insured, 6.000% due 6/1/10
$ 1,058,750
5,000,000 AAA Dade County Water & Sewer Systems
Revenue,
FGIC-Insured, 5.250% due 10/1/26
4,575,000
1,000,000 AAA Miramar Wastewater Improvement
Authority,
FGIC-Insured, 6.750% due 10/1/16
1,087,500
2,000,000 AAA Seminole County Water & Sewer
Refunding &
Improvement, MBIA-Insured, 6.000%
due 10/1/12 2,115,000
- ------------------------------------------------------------
- ------------------------------
8,836,250
- ------------------------------------------------------------
- ------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $175,440,610**)
$182,459,452
============================================================
==============================
</TABLE>
(a) Bonds are escrowed to maturity by U.S. Government
securities and are
considered by the manager to be triple-A rated even if
issuer has not
applied for new ratings.
(b) Securities segregated by Custodian for open purchase
commitment.
(c) Residual interest bonds - coupon varies inversely with
level of short-term
tax-exempt interest rates.
(d) Income from these issues is considered a preference
item for purposes of
calculating the alternative minimum tax.
(e) Bonds are escrowed by U.S. Government securities and
are considered by the
manager to be triple-A rated even if issuer has not
applied for new
ratings.
(f) Variable rate obligation payable at par on demand at
anytime on no more
than seven days notice.
++ Fitch Investors Services, Inc.
** Aggregate cost for Federal income tax purposes is
substantially the same.
See pages 16 and 17 for definition of ratings and
certain security
descriptions.
See Notes to Financial Statements.
15
<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 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.
16
<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 (+) sign.
VMIG 1 -- Moody's highest rating for issues having 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
- ------------------------------------------------------------
- --------------------
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
17
<PAGE>
- ------------------------------------------------------------
- --------------------
Statements of Assets and Liabilities
March 31, 1997
- ------------------------------------------------------------
- --------------------
ASSETS:
Investments, at value (Cost -- $175,440,610)
$ 182,459,452
Cash
16,870
Interest receivable
3,721,557
Receivable for securities sold
1,871,546
Receivable for Fund shares sold
184,485
- ------------------------------------------------------------
- --------------------
Total Assets
188,253,910
- ------------------------------------------------------------
- --------------------
LIABILITIES:
Payable for securities purchased
2,166,664
Payable for Fund shares purchased
224,229
Management fees payable
82,131
Distribution fees payable
24,796
Accrued expenses
41,710
- ------------------------------------------------------------
- --------------------
Total Liabilities
2,539,530
- ------------------------------------------------------------
- --------------------
Total Net Assets
$ 185,714,380
============================================================
====================
NET ASSETS:
Par value of shares of beneficial interest
$ 14,114
Capital paid in excess of par value
178,952,173
Overdistributed net investment income
(5,728)
Accumulated net realized loss from security transactions
(265,021)
Net unrealized appreciation of investments
7,018,842
- ------------------------------------------------------------
- --------------------
Total Net Assets
$ 185,714,380
============================================================
====================
Shares Outstanding:
Class A
9,673,455
- ------------------------------------------------------------
- --------------------
Class B
3,899,854
- ------------------------------------------------------------
- --------------------
Class C
540,908
- ------------------------------------------------------------
- --------------------
Net Asset Value:
Class A (redemption price)
$ 13.16
- ------------------------------------------------------------
- --------------------
Class B*
$ 13.14
- ------------------------------------------------------------
- --------------------
Class C**
$ 13.14
- ------------------------------------------------------------
- --------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share)
$ 13.71
============================================================
====================
* 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.
18
<PAGE>
- ------------------------------------------------------------
- --------------------
Statement of Operations For the Year
Ended March 31, 1997
- ------------------------------------------------------------
- --------------------
INVESTMENT INCOME:
Interest
$ 11,004,969
- ------------------------------------------------------------
- --------------------
EXPENSES:
Management fees (Note 4)
876,101
Distribution fees (Note 4)
524,727
Registration fees
156,291
Audit and legal
55,380
Shareholder and system servicing fees
52,724
Shareholder communications
39,135
Pricing service fees
23,997
Custody
7,800
Trustees' fees
4,500
Other
8,766
- ------------------------------------------------------------
- --------------------
Total Expenses
1,749,421
- ------------------------------------------------------------
- --------------------
Net Investment Income
9,255,548
- ------------------------------------------------------------
- --------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales
106,293,724
Cost of securities sold
105,242,577
- ------------------------------------------------------------
- --------------------
Net Realized Gain
1,051,147
- ------------------------------------------------------------
- --------------------
Decrease in Net Unrealized Appreciation
(1,365,126)
- ------------------------------------------------------------
- --------------------
Net Loss on Investments
(313,979)
- ------------------------------------------------------------
- --------------------
Increase in Net Assets From Operations
$ 8,941,569
============================================================
====================
See Notes to Financial Statements.
19
<PAGE>
- ------------------------------------------------------------
- --------------------
Statement of Operations For the
Years Ended March 31,
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
1997 1996
============================================================
=====================================
<S>
<C> <C>
OPERATIONS:
Net investment income
$ 9,255,548 $ 7,331,584
Net realized gain
1,051,147 551,353
Increase (decrease) in net unrealized appreciation
(1,365,126) 1,242,266
- ------------------------------------------------------------
- -------------------------------------
Increase in Net Assets From Operations
8,941,569 9,125,203
- ------------------------------------------------------------
- -------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income
(9,310,449) (7,380,106)
Net realized gains
(793,240) (14,166)
- ------------------------------------------------------------
- -------------------------------------
Decrease in Net Assets From
Distributions to Shareholders
(10,103,689) (7,394,272)
- ------------------------------------------------------------
- -------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares
35,124,664 28,188,708
Net asset value of shares issued in connection with the
transfer of the Smith Barney Muni Funds -- Florida
Limited
Term Portfolio's net assets in 1997 and the Smith Barney
Florida Municipals Fund's net assets in 1996 (Note 8)
13,398,911 53,554,309
Net asset value of shares issued for reinvestment
of dividends
4,141,333 2,718,508
Cost of shares reacquired
(32,193,433) (32,251,471)
- ------------------------------------------------------------
- -------------------------------------
Increase in Net Assets From
Fund Share Transactions
20,471,475 52,210,054
- ------------------------------------------------------------
- -------------------------------------
Increase in Net Assets
19,309,355 53,940,985
NET ASSETS:
Beginning of year
166,405,025 112,464,040
- ------------------------------------------------------------
- -------------------------------------
End of year*
$ 185,714,380 $ 166,405,025
============================================================
=====================================
* Includes undistributed (overdistributed) net
investment income of:
$(5,728) $44,481
============================================================
=====================================
</TABLE>
See Notes to Financial
Statements.
20
<PAGE>
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements
- ------------------------------------------------------------
- --------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Florida 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. The
Fund consists of
this Portfolio and eight other separate investment port
folios: Georgia, Limited
Term, National, New York, Ohio, Pennsylvania, New York Money
Market and
California Money Market Portfolios. The financial statements
and financial
highlights for the other portfolios are presented in
separate annual reports.
The significant accounting policies consistently
followed by the Fund are:
(a) security transactions are accounted for on trade date;
(b) securities are
valued at the mean between the quoted bid and 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, 1997,
reclassifications were made to the Portfolio'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.
21
<PAGE>
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
2. PORTFOLIO CONCENTRATION
Since the 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 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 SBMFMa management fee cal cu lated at the
annual rate of 0.50% of
the average daily net assets. This fee is calculated daily
and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH,
acts as distributor of
Fund shares. For the year ended March 31, 1997, SB received
sales charges of
approximately $161,000 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 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. For the year ended March 31, 1997, CDSCs paid to
SB were
approximately:
Class B Class C
============================================================
====================
CDSCs
$60,000 $1,000
============================================================
====================
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. 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 year ended March 31, 1997, total
Distribution Plan fees
incurred were:
Class A
Class B Class C
============================================================
====================
Distribution Plan Fees $179,380
$317,521 $27,826
============================================================
====================
All officers and two Trustees of the Fund are employees
of SB.
22
<PAGE>
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
5. INVESTMENTS
During the year ended March 31, 1997, the aggregate cost
of purchases and
proceeds from sales of investments (including maturities,
but excluding
short-term securities) were as follows:
============================================================
====================
Purchases
$124,274,746
- ------------------------------------------------------------
- --------------------
Sales
106,293,724
============================================================
====================
At March 31, 1997, the aggregate gross unrealized
appreciation and
depreciation of investments for Federal income tax purposes
was substantially as
follows:
============================================================
====================
Gross unrealized appreciation
$7,556,793
Gross unrealized depreciation
(537,951)
- ------------------------------------------------------------
- --------------------
Net unrealized appreciation
$7,018,842
============================================================
====================
6. CAPITAL LOSS CARRYFORWARD
At March 31, 1997, the Florida Portfolio had for Federal
income tax purposes
approximately $192,000 of loss carryforwards available to
offset future capital
gains expiring on March 31, 2003. 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.
7. SHARES OF BENEFICIAL INTEREST
At March 31, 1997, 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 March 31, 1997, total paid-in capital amounted to the
following for each
class:
Class A Class B
Class C
============================================================
====================
Total Paid-in Capital $120,716,400
$50,992,524 $7,257,363
============================================================
====================
23
<PAGE>
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year
Ended Year Ended
March
31, 1997* March 31, 1996**
-------------
- ----------- ------------------------
Shares
Amount Shares Amount
============================================================
========================================
<S> <C>
<C> <C> <C>
Class A
Shares sold 1,224,389 $
16,307,204 869,445 $ 11,575,125
Net asset value of shares issued
in connection with transfer of
the Smith Barney Muni Funds -- Florida
Limited Term Portfolio's net assets
in 1997 and the Smith Barney Florida
Municipals Fund's net
assets in 1996 (Note 8) 799,321
10,594,240 1,232,903 16,735,524
Shares issued on reinvestment 186,644
2,477,685 154,317 2,042,024
Shares redeemed (1,408,535)
(18,699,877) (1,739,593) (23,107,880)
- ------------------------------------------------------------
- ----------------------------------------
Net Increase 801,819 $
10,679,252 517,072 $ 7,244,793
============================================================
========================================
Class B
Shares sold 887,861 $
11,815,010 810,922 $ 10,843,286
Net asset value of shares issued
in connection with transfer of
the Smith Barney Florida
Municipals Fund's net
assets in 1996 (Note 8) --
- -- 2,708,689 36,746,689
Shares issued on reinvestment 104,697
1,388,176 34,686 464,491
Shares redeemed (589,795)
(7,836,748) (211,578) (2,857,130)
- ------------------------------------------------------------
- ----------------------------------------
Net Increase 402,763 $
5,366,438 3,342,719 $ 45,197,336
============================================================
========================================
Class C
Shares sold 151,091 $
2,002,450 57,613 $ 770,025
Net asset value of shares issued
in connection with transfer of the
Smith Barney Muni Funds -- Florida Limited
Term Portfolio's net assets in
1997 and the Smith Barney
Florida Municipals
Fund's net assets in 1996 (Note 8) 212,012
2,804,671 5,317 72,096
Shares issued on reinvestment 8,648
114,600 5,027 66,483
Shares redeemed (32,355)
(429,369) (79,796) (1,053,167)
- ------------------------------------------------------------
- ----------------------------------------
Net Increase (Decrease) 339,396 $
4,492,352 (11,839) $ (144,563)
============================================================
========================================
Class Y
Shares sold 374,812 $
5,000,000 376,790 $ 5,000,272
Shares issued on reinvestment 12,070
160,872 10,861 145,510
Shares redeemed (386,882)
(5,227,439) (387,651) (5,233,294)
- ------------------------------------------------------------
- ----------------------------------------
Net Decrease -- $
(66,567) -- $ (87,512)
============================================================
========================================
</TABLE>
* For Class Y shares, transactions are for the period
from August 5, 1996
(inception date) to February 25, 1997.
** For Class Y shares, transactions are for the period
from September 20, 1995
to March 31, 1996.
24
<PAGE>
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
8. TRANSFER OF NET ASSETS
On December 8, 1995, the 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
Assets of
Shares Florida
Total Net
Issued by the Municipals
Assets of the
Acquired Fund Portfolio Fund
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.
On January 17, 1997, the Portfolio acquired the assets
and certain
liabilities of the Smith Barney Muni Funds -- Florida
Limited Term Portfolio
("Florida Limited Term Portfolio") pursuant to an Agreement
and Plan of
Reorganization dated November 12, 1996. Total shares issued
by the Portfolio and
the total net assets of Florida Limited Term Portfolio and
the Portfolio on the
date of transfer were:
Total Net
Assets of
Shares Florida
Total Net
Issued by the Limited Term
Assets of the
Acquired Portfolio Portfolio Portfolio
Portfolio
============================================================
====================
Florida Limited Term Portfolio 1,011,333 $13,398,911
$180,720,912
============================================================
====================
The total net assets of the Florida Limited Term
Portfolio before
acquisition included unrealized appreciation of $144,106 and
a net realized loss
of $341,735. Total net assets of the Portfolio immediately
after the transfer
were $194,119,823. The transaction was structured for tax
purposes to qualify as
a tax-free reorganization under the Internal Revenue Code of
1986, as amended.
25
<PAGE>
- ------------------------------------------------------------
- --------------------
Financial Highlights
- ------------------------------------------------------------
- --------------------
For a share of each class of beneficial interest outstanding
throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1997
1996(1) 1995(2) 1994 1993
============================================================
=====================================
<S> <C> <C>
<C> <C> <C>
Net Asset Value, Beginning of Year $ 13.24 $
12.89 $ 12.82 $ 13.21 $ 12.32
- ------------------------------------------------------------
- -------------------------------------
Income From Operations:
Net investment income (3) 0.73
0.74 0.75 0.77 0.79
Net realized and unrealized gain (loss) (0.03)
0.35 0.08# (0.39) 0.91
- ------------------------------------------------------------
- -------------------------------------
Total Income From Operations 0.70
1.09 0.83 0.38 1.70
- ------------------------------------------------------------
- -------------------------------------
Less Distributions From:
Net investment income (0.73)
(0.74) (0.76) (0.77) (0.80)
Net realized gains (0.05) --
- -- -- (0.01)
- ------------------------------------------------------------
- -------------------------------------
Total Distributions (0.78)
(0.74) (0.76) (0.77) (0.81)
- ------------------------------------------------------------
- -------------------------------------
Net Asset Value, End of Year $ 13.16 $
13.24 $ 12.89 $ 12.82 $ 13.21
- ------------------------------------------------------------
- -------------------------------------
Total Return 5.44%
8.65% 6.77% 2.75% 14.21%
- ------------------------------------------------------------
- -------------------------------------
Net Assets, End of Year (000s) $127,348
$117,473 $107,724 $104,681 $102,202
- ------------------------------------------------------------
- -------------------------------------
Ratios to Average Net Assets:
Expenses (3)(4) 0.85%
0.70% 0.61% 0.54% 0.46%
Net investment income 5.56
5.62 5.97 5.71 6.15
- ------------------------------------------------------------
- -------------------------------------
Portfolio Turnover Rate 62%
47% 43% 20% 26%
============================================================
=====================================
</TABLE>
(1) Per share amounts have been calculated using the
monthly average shares
method rather than the undistributed net investment
income method, because
it more accurately reflects the per share data for the
period.
(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,
1993. If such fees were not waived, the decrease in net
investment income
and the expense ratio would have been $0.012 and 0.56%,
respectively.
(4) 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.
26
<PAGE>
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of beneficial interest outstanding
throughout each
year:
Class B Shares 1997
1996(1) 1995(2)
============================================================
====================
Net Asset Value, Beginning of Year $ 13.23 $
12.89 $11.91
- ------------------------------------------------------------
- --------------------
Income From Operations:
Net investment income 0.65
0.68 0.30
Net realized and unrealized gain (loss) (0.01)
0.35 0.97#
- ------------------------------------------------------------
- --------------------
Total Income From Operations 0.64
1.03 1.27
- ------------------------------------------------------------
- --------------------
Less Distributions From:
Net investment income (0.68)
(0.69) (0.29)
Net realized gains (0.05)
- -- --
- ------------------------------------------------------------
- --------------------
Total Distributions (0.73)
(0.69) (0.29)
- ------------------------------------------------------------
- --------------------
Net Asset Value, End of Year $ 13.14 $
13.23 $12.89
- ------------------------------------------------------------
- --------------------
Total Return 4.91%
8.09% 10.77%++
- ------------------------------------------------------------
- --------------------
Net Assets, End of Year (000s) $51,261
$46,267 $1,990
- ------------------------------------------------------------
- --------------------
Ratios to Average Net Assets:
Expenses (3) 1.35%
1.20% 1.20%+
Net investment income 4.93
5.00 5.57+
- ------------------------------------------------------------
- --------------------
Portfolio Turnover Rate 62%
47% 43%
============================================================
====================
(1) Per share amounts have been calculated using the
monthly average shares
method rather than the undistributed net investment
income method, because
it more accurately reflects the per share data for the
period.
(2) For the period from November 16, 1994 (inception date)
to March 31, 1995.
(3) 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.
27
<PAGE>
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of beneficial interest outstanding
throughout each
year:
<TABLE>
<CAPTION>
Class C Shares 1997 1996(1)
1995(2) 1994 1993(3)
============================================================
=======================
<S> <C> <C> <C>
<C> <C>
Net Asset Value,
Beginning of Year $13.22 $12.89 $12.81
$13.20 $12.86
- ------------------------------------------------------------
- -----------------------
Income From Operations:
Net investment income 0.65 0.66 0.67
0.68 0.19
Net realized and unrealized
gain (loss) (0.01) 0.35
0.08# (0.39) 0.33
- ------------------------------------------------------------
- -----------------------
Total Income From Operations 0.64 1.01 0.75
0.29 0.52
- ------------------------------------------------------------
- -----------------------
Less Distributions From:
Net investment income (0.67) (0.68)
(0.67) (0.68) (0.18)
Net realized gains (0.05) -- --
- -- --
- ------------------------------------------------------------
- -----------------------
Total Distributions (0.72) (0.68)
(0.67) (0.68) (0.18)
- ------------------------------------------------------------
- -----------------------
Net Asset Value, End of Year $13.14 $13.22 $12.89
$12.81 $13.20
- ------------------------------------------------------------
- -----------------------
Total Return 4.94% 7.96%
6.12% 2.05% 4.05%++
- ------------------------------------------------------------
- -----------------------
Net Assets, End of Year (000s) $7,105 $2,665 $2,750
$2,487 $ 691
- ------------------------------------------------------------
- -----------------------
Ratios to Average Net Assets:
Expenses (4) 1.40% 1.28%
1.25% 1.24% 1.24%+
Net investment income 4.84 5.04 5.40
4.95 5.21+
- ------------------------------------------------------------
- -----------------------
Portfolio Turnover Rate 62% 47%
43% 20% 26%
============================================================
=======================
</TABLE>
(1) Per share amounts have been calculated using the
monthly average shares
method rather than the undistributed net investment
income method, because
it more accurately reflects the per share data for the
period.
(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.
(4) 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 it may not be
representative of the
total return for the year.
+ Annualized.
- ------------------------------------------------------------
- --------------------
Tax Information (unaudited)
- ------------------------------------------------------------
- --------------------
For Federal tax purposes the Fund hereby designates for
the fiscal year
ended March 31, 1997:
o long term capital gain distributions paid of
$793,240.
o 99.76% of the dividends paid by the Fund from net
investment income
as tax-exempt for regular Federal income tax
purposes.
28
<PAGE>
- ------------------------------------------------------------
- --------------------
Independent Auditors' Report
- ------------------------------------------------------------
- --------------------
To the Shareholders and Board of Trustees
of the Florida Portfolio
of Smith Barney Muni Funds:
We have audited the accompanying statement of assets and
liabilities,
including the schedule of investments, of the Florida
Portfolio of Smith Barney
Muni Funds as of March 31, 1997, the related statement of
operations for the
year then ended, the statements of changes in net assets for
each of the years
in the two-year period then ended and the financial
highlights for each of the
years in the five-year period then ended. These financial
statements and
financial highlights are the responsibility of the Funds'
management. Our
responsibility is to express an opinion on these financial
statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reason able assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of March
31, 1997, by correspondence with the custodian. As to
securities purchased and
sold, but not received or delivered we performed other
appropriate auditing
procedures. An audit also includes assessing the accounting
principles used and
significant estimates made by management, as well as
evaluating the overall
financial statement presentation. We believe that our audits
provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred
to above present fairly, in all material respects, the
financial position of the
Florida Portfolio of Smith Barney Muni Funds as of March 31,
1997, the results
of its operations for the year then ended, the changes in
its net assets for
each of the years in the two-year period then ended and the
financial highlights
for each of the years in the five-year period then ended, in
conformity with
generally accepted accounting principles.
/s/
KPMG Peat Marwick LLP
New York, New York
May 27, 1997
29
<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
Emeritus
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 Portfolio. 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
FD2298 5/97
ANNUAL REPORT
1997
1997
1997
1997
1997
[GRAPHIC]
SMITH BARNEY
MUNI FUNDS
NEW YORK MONEY
MARKET AND
NEW YORK PORTFOLIOS
- ------------------- March 31, 1997
[LOGO] SMITH BARNEY MUTUAL FUNDS
Investing for your future.
Every day.
- ---------------------------------------------
New York Money Market and New York Portfolios --------------
- -------------------------------
Dear Shareholder:
We are pleased to provide the annual report for the Smith
Barney Muni Funds-New York Money Market Portfolio and New
York Portfolio for the year ended March 31, 1997. For your
convenience, we have summarized the period's prevailing
economic and market conditions below and outlined each
Portfolio's investment strategy during this time. A detailed
summary of performance and current holdings for each
Portfolio can be found in the appropriate sections that
follow.
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 City personal income taxes as is
consistent with prudent investing.
For the one year ended March 31, 1997, the New York
Portfolio generated a total return of 5.48% for Class A
shares, which compares favorably with its Lipper Analytical
Services, Inc. peer group average of 4.82%. (Lipper
Analytical Services, Inc. is a major fund tracking
organization.)
The New York Portfolio has maintained a high-quality
portfolio with more than 91% of its assets invested in
investment-grade securities. (An investment-grade security
is a security with a rating of BBB/Baa or better from
Standard & Poor's Ratings Service or Moody's Investors
Service, Inc., two major credit reporting and bond rating
agencies.) In addition, roughly 33% of the New York
Portfolio has a triple-A rating. We believe the Portfolio's
high-quality orientation, good call protection and broad
sector diversification should provide investors with a
competitive level of income while helping to keep its net
asset value relatively stable. As of March 31, 1997, the New
York Portfolio's average weighted maturity was just over 21
years.
Over the year covered by this report, the New York Portfolio
distributed dividends totaling $0.74 per share. Based on its
net asset value (NAV) of $13.16 as of March 31, 1997 for
Class A shares and the current monthly dividend of $0.062
per share for Class A, this equates to an annualized
distribution rate of 5.65%. For a New York resident in the
combined federal and state income tax bracket of 40.36%
(assuming a federal tax bracket of 36.0%, which represents
10.0% of the U.S. federal taxpayers), the New York
Portfolio's tax-free yield of 5.65% is equivalent to a
taxable yield of 9.47%.
1
At the end of the reporting period, the New York Portfolio,
although well diversified, had invested more than 46% of its
assets in the following types of issues: hospitals (24.6%),
education (13.6%) and transportation (8.7%). The Portfolio
favored these sectors because of strong relative value and
New York state's ongoing commitment to maintaining high
level of services in these areas.
Market and Economic Overview
The U.S. bond market experienced considerable volatility
throughout the year ended March 31, 1997. In early 1996, a
significant bond market sell-off was precipitated by a pick-
up in inflationary fears that was caused by unexpected
strength in the U.S. economy and concerns that the Federal
Reserve Board ("Fed") would tighten rates in response. In
retrospect, those concerns were unfounded because Fed
monetary policy did not change throughout 1996. In fact, as
U.S. economic growth moderated and concerns about Fed
tightening eased, bond prices improved significantly.
After his now-infamous remarks regarding "irrational
exuberance" in the stock market in December, Fed Chairman
Alan Greenspan continued to warn investors about the
possible re-emergence of higher inflation in the U.S.
economy. In response to a steady stream of strong economic
reports, the Fed raised the federal funds rate by 25 basis
points, or 0.25%, in late March of this year. (The federal
funds rate is the interest rate banks charge each other for
overnight loans and is a closely watched indicator of the
direction of interest rates.)
New York Economic Highlights
While economic growth in New York remains relatively soft
compared to most other states, employment growth has begun
to pick up. In addition, economic growth in the private
sector has gained momentum. Yet despite New York's weak
performance, it is worth noting that if New York were a
country, it would be the eighth largest economy in the
world.
Yet significant challenges remain. For example, New York
hospitals are facing a major restructuring as state and
federal funds dry up and weak demand for single-family homes
has pushed residential construction to its lowest point in
years. Moreover, the Empire State's aging infrastructure and
high business costs are still important issues when one
looks ahead at New York's future economic prospects.
Outlook
The U.S. economy appears to be strengthening. Although some
analysts estimate U.S. economic growth at a 4% annual rate,
we believe growth will
2
most likely level off at around a 3.5% annual range. In our
view, this higher domestic economic growth will undoubtedly
put pressure on interest rates. In fact, we have already
seen recent yields on 30 year U.S. treasury bonds climb
above the 7.0% mark. We expect that the benchmark 30 year
bond is entering a new trading range of 7.0% to 7.25% and
that should continue to exert some upward pressure on
municipal market yields. While a stronger U.S. economy could
cause new wage pressures to rise, it is unclear whether
these trends will result in a squeeze on corporate profits
and cause prices to rise as well.
In our opinion, global competition has kept wages and prices
down. In addition, we expect continued vigilance on the part
of the Fed to contain any possible signs of inflation and
additional Fed tightening of monetary policy cannot be
discounted.
However, we remain positive on the municipal bond market in
the months ahead. In fact, we view the recent rise in market
yields as an opportunity to extend the Portfolio's call
protection without sacrificing coupon income or
substantially increasing its downside risk. In our opinion,
supply and demand, ongoing Fed vigilance and attractive
after-tax returns continue to make a compelling case for
municipal bonds.
New York Money Market Portfolio
As of March 31, 1997, the New York Money Market Portfolio's
7-day current yield was 2.80% and its 7-day effective yield,
which reflects compounding, was 2.84%. For the same period,
the Portfolio's tax-equivalent yield (the yield you would
have to earn on a similar taxable investment to match the
tax-free yield) was 4.76%, assuming you are in the 40.36%
combined federal and state income tax bracket (assuming a
federal tax bracket of 36.0%, which represents 10.0% of the
U.S. federal taxpayers). During the year ended March 31,
1997, the Portfolio's monthly tax-exempt dividend
distributions resulted in a tax-exempt annualized yield of
2.85%.
The New York Money Market Portfolio invests only in short-
term securities which carry minimal credit risk. All of the
Portfolio's holdings are rated within the top two short-term
rating categories or are of comparable quality. During the
reporting period, the Portfolio's average weighted maturity
was in the 45- to 55-day range.
Please note that an investment in the New York Money Market
Portfolio is neither insured nor guaranteed by the U.S.
government and there can be no assurance that the Portfolio
will be able to maintain a stable net asset value of $1.00
per share.
3
In closing, thank you for investing in the Smith Barney Muni
Funds - New York Money Market Portfolio and New York
Portfolio. We look forward to helping you achieve your
financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
New York Portfolio
/s/ Joseph Benevento
Joseph Benevento
Vice President
New York Money Market Portfolio
April 30, 1997
4
#
============================================================
==================== New York Portfolio
============================================================
====================
============================================================
====================
Historical Performance -- Class A Shares
============================================================
====================
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Total Year
Ended of Year of Year Dividends Returns(1)
============================================================
==================== <S> <C> <C> <C>
<C>
3/31/97 $13.19 $13.16 $0.74 5.48%
- ------------------------------------------------------------
- -------------------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)
============================================================
==================== Total
$8.09
============================================================
==================== </TABLE>
============================================================
====================
Historical Performance -- Class B Shares
============================================================
====================
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Total Year
Ended of Year of Year Dividends Returns(1)
============================================================
==================== <S> <C> <C> <C>
<C>
3/31/97 $13.18 $13.15 $0.67 4.96%
- ------------------------------------------------------------
- -------------------3/31/96 12.84 13.18
0.68 8.05
- ------------------------------------------------------------
- -------------------Inception* - 3/31/95 11.96
12.84 0.29 9.92+
============================================================
==================== Total
$1.64
============================================================
==================== </TABLE>
============================================================
====================
Historical Performance -- Class C Shares
============================================================
====================
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Total Year Ended
of Year of Year Dividends Returns(1)
============================================================
==================== <S> <C> <C> <C>
<C>
3/31/97 $13.17 $13.14 $0.67 4.91%
- ------------------------------------------------------------
- -------------------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 $2.85
============================================================
==================== </TABLE>
It is the Fund's policy to distribute dividends monthly and
capital gains, if any, annually.
5
============================================================
==================== New York Portfolio
============================================================
====================
============================================================
====================
Average Annual Total Return
============================================================
====================
<TABLE>
<CAPTION>
Without Sales Charge(1) --------------------------
- -------------Class A Class B Class C
============================================================
==================== <S> <C> <C>
<C>
Year Ended 3/31/97 5.48% 4.96%
4.91%
- ------------------------------------------------------------
- -------------------Five Years Ended 3/31/97 7.46
N/A N/A
- ------------------------------------------------------------
- -------------------Ten Years Ended 3/31/97 7.40
N/A N/A
- ------------------------------------------------------------
- -------------------Inception* through 3/31/97
7.30 9.63 5.83
============================================================
==================== </TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2) -----------------------------
- -----------Class A Class B Class C
============================================================
==================== <S> <C> <C>
<C>
Year Ended 3/31/97 1.26% 0.46%
3.91%
- ------------------------------------------------------------
- -------------------Five Years Ended 3/31/97 6.59
N/A N/A
- ------------------------------------------------------------
- -------------------Ten Years Ended 3/31/97 6.96
N/A N/A
- ------------------------------------------------------------
- -------------------Inception* through 3/31/97
6.87 8.52 5.83
============================================================
==================== </TABLE>
============================================================
====================
Cumulative Total Return
============================================================
====================
<TABLE>
<CAPTION>
Without Sales Charge(1)
============================================================
==================== <S> <C>
Class A (Inception* through 3/31/97)
104.19%
- ------------------------------------------------------------
- -------------------Class B (Inception* through 3/31/97)
24.67
- ------------------------------------------------------------
- -------------------Class C (Inception* through 3/31/97)
27.06
============================================================
==================== </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 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
- ------------------------------------------------------------
- --------------------
Historical Performance (unaudited) ------------------------
- --------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the New York Portfolio vs.
Lehman Long Bond Index+
- ------------------------------------------------------------
- -------------------March 1987 - March 1997
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE
PRINTED MATERIAL]
<TABLE>
<CAPTION>
New York Portfolio Lehman Long Bond Index --------------
- ---- ----------------------
<S> <C> <C>
3/31/87 $ 9,549 $10,000
3/88 9,269 10,252
3/89 10,168 10,990
3/90 11,079 12,150
3/91 12,013 13,270
3/92 13,414 14,596
3/93 15,318 16,423
3/94 15,689 16,804
3/95 16,656 18,054
3/96 18,108 19,567
3/31/97 19,100 20,632
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class
A shares on March
31, 1987, assuming deduction of the maximum 4.00% sales
charge at the time of investment and reinvestment of
dividends (after deduction of applicable sales charges
through November 6, 1994 and thereafter at net asset value)
and capital gains, if any, at net asset value through March
31, 1997. 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.
7
============================================================
====================
Schedules of Investments
March 31, 1997
============================================================
====================
NEW YORK MONEY MARKET
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING
SECURITY VALUE
============================================================
============================== <S> <C> <C>
<C>
Albany IDA IDR:
$1,205,000 NR++ PBS Development Co. Project,
3.900%
due 12/1/97(a)(c)
$ 1,205,000 540 Broadway Project:
1,335,000 A-1 Series B-2, 4.000%
due 12/1/97(a)(c) 1,335,000
1,325,000 A-1 Series B-3, 4.250%
due 12/1/97(a)(c) 1,325,000
6,900,000 NR+ Baldwin UFSD TAN, 4.250% due 6/30/97
6,904,959
4,250,000 NR+ Bayport-Blue Point UFSD TAN, 4.500% due
6/19/97 4,256,018
Board Cooperative Educational Services
District RAN:
1,300,000 NR+ Lot 1, 4.250% due 6/26/97
1,300,735
10,000,000 NR+ Lot 3, 4.250% due 6/26/97
10,003,381
2,350,000 NR+ Clinton UFSD BAN, 4.250% due 6/27/97
2,351,882
5,000,000 A-1 Columbia County New IDA IRB (Rural
Manufacturing
Co. Inc. Project) Series A,
3.400%(a)(b) 5,000,000
12,000,000 NR+ Commack UFSD TAN, 4.500% due 6/27/97
12,013,773
11,810,000 NR+ Dover UFSD BAN, 4.500% due 9/12/97
11,830,377
3,000,000 NR+ Eastern Suffolk BOCES RAN, 4.500%
due 6/26/97 3,003,596
Energy Resource & Development for NYS Tax-Exempt
Eagle PART:
16,300,000 A-1+ 3.500% due 1/1/98(c)
16,300,000
18,000,000 A-1+ Series 7057A,
3.560%(b) 18,000,000
9,500,000 A-1+ Series 7066A,
3.560%(b) 9,500,000
Erie County IDA:
Colad Group:
2,160,000 A-1 Series A, 3.400%
(a)(b) 2,160,000
2,229,000 A-1 Series B, 3.400%
(a)(b) 2,229,000
2,160,000 VMIG1* Rosina Food Products,
Inc., 3.400% (a)(b) 2,160,000
10,000,000 MIG1* Erie County RAN Series B, 4.250% due
11/19/97 10,039,835
11,300,000 A-1 Franklin County IDA IDR (Kes Chateaugay
LP
Project) Series A, 3.500%
(a)(b) 11,300,000
2,880,000 A-1 Fulton County IDR (Fiber Conversion Inc.
Project),
3.400% (a)(b) 2,880,000
2,785,000 NR+ Grand Island Erie County BAN, 4.500%
due 7/31/97 2,789,444
1,800,000 NR+ Highland Falls Fort Montgomery CSD TAN,
4.250%
due 6/20/97 1,800,756
2,800,000 NR+ Hoosick Valley CSD BAN, 4.000% due
6/20/97 2,800,708
1,770,000 A-1 Jefferson County IDA IDR (The Climax
Manufacturing
Co. Project), 3.400% (a)(b)
1,769,996
3,500,000 A-1 Lewis County IDA IDR (The Climax
Manufacturing Co.
Project), 3.400% (a)(b)
3,500,000
8,500,000 NR+ Long Beach CSD TAN, 4.500% due 6/26/97
8,508,161
Metropolitan Transit Authority Commuter
Facilities Revenue: 53,700,000 A-1 3.400% (b)
53,700,000
3,000,000 A-1+ NYC GO PART (SAK 4) MBIA-
Insured, 3.500% (b) 3,000,000
</TABLE>
See Notes to Financial Statements.
8
============================================================
====================
Schedules of Investments (continued)
March 31, 1997
============================================================
====================
NEW YORK MONEY MARKET
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING
SECURITY VALUE
============================================================
============================== <S> <C> <C>
<C>
$4,705,000 AAA Metropolitan Transit Authority Commuter
Service
Contract, Series 1 (Pre-
Refunded -- Escrowed with
U.S. Government Securities to
7/1/97 Call @ 102),
8.500% due 7/1/17 $
4,855,208
9,800,000 NR+ Middle County CSD TAN, 4.250% due
6/30/97 9,813,042
5,015,000 P-1* Monroe County IDA (Granite Building),
3.600% (b) 5,015,000
3,500,000 NR+ Monroe County Public Improvement BAN,
Series 1996,
4.500% due 6/6/97
3,505,185
28,305,000 NR++ Municipal Assistance Corp., Series
G Bond PART,
3.500% due 8/14/97(c)
28,305,000
15,000,000 SP-1 Nassau County, RAN Series B, 4.250% due
4/15/97 15,002,915
New York City GO:
6,025,000 SP-1+ RAN Series B, 4.500% due
6/30/97 6,040,852
4,105,000 A-1+ Sub-Series A-6, 3.300% (b)
4,105,000
5,650,000 A-1+ Sub-Series A-7, 3.700% (b)
5,650,000
3,100,000 A-1+ Sub-Series B-5 MBIA-Insured,
3.450% (b) 3,100,000
12,300,000 A-1+ Sub-Series B-8, 3.400% (b)
12,300,000
12,500,000 A-1+ Sub-Series B-10, 3.400% (b)
12,500,000
18,600,000 A-1+ Sub-Series D FGIC-Insured,
3.550% (b) 18,600,000
5,100,000 A-1+ Sub-Series E-3, 3.700% (b)
5,100,000
4,800,000 A-1+ Sub-Series E-5, 3.700% (b)
4,800,000
7,200,000 A-1+ Sub-Series F-2, 3.450% (b)
7,200,000
10,350,000 A-1+ Sub-Series F-4, 3.450% (b)
10,350,000
7,000,000 A-1+ Sub-Series F-5, 3.400% (b)
7,000,000
10,000,000 A-1+ Sub-Series F-6, 3.400% (b)
10,000,000
7,100,000 A-1+ Sub-Series F-7, 3.450% (b)
7,100,000
New York City GO TECP FSA-Insured:
15,200,000 A-1+ 3.400% due 4/14/97
15,200,000
10,900,000 A-1 Series H, 3.550% due 7/28/97
10,900,000
6,800,000 A-1+ New York City GO TECP MBIA-Insured,
3.400%
due 4/11/97
6,800,000
10,000,000 A-1 New York City HDC Mortgage
Revenue Multi-Family
Housing, 400 West 59th Series A -2, 3.400%
(a)(b) 10,000,000
New York City IDA IDR:
3,250,000 VMIG1* Series 87-A, 3.450%
(a)(b) 3,250,000
1,000,000 VMIG1* Series 89-0, 3.450%
(a)(b) 1,000,000
1,670,000 VMIG1* Series 89-G, 3.450%
(a)(b) 1,670,000
New York City Muni Water:
Finance Authority:
3,000,000 AAA Series A (Pre-Refunded -
- - Escrowed with U.S.
Government
Securities to 6/15/97 Call @ 101),
7.625% due 6/15/16
3,068,201
18,700,000 A-1+ TECP Series 4, 3.350%
due 5/30/97 18,700,000
6,300,000 A-1+ TECP Series 4, 3.200% due
5/8/97 6,300,000
</TABLE>
See Notes to Financial Statements.
9
============================================================
====================
Schedules of Investments (continued)
March 31, 1997
============================================================
====================
NEW YORK MONEY MARKET
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING
SECURITY VALUE
============================================================
============================== <S> <C> <C>
<C>
$26,200,000 A-1+ New York City Muni Water Tax-Exempt
Eagle
PART MBIA-Insured, 3.560% (b)
$26,200,000 New York City PART:
5,000,000 A-1+ SAK 1 AMBAC-Insured, 3.500%
(b) 5,000,000
2,500,000 A-1+ SAK 2 MBIA-Insured, 3.500% (b)
2,500,000
New York State Dormitory Authority
Revenue:
Memorial Sloan Kettering TECP:
20,000,000 A-1+ 3.350% due 5/7/97
20,000,000
10,000,000 A-1 3.400% due 5/8/97
10,000,000
6,100,000 A-1 3.250% due 5/9/97
6,100,000
3,000,000 A-1 3.400% due 5/19/97
3,000,000
6,300,000 A-1 3.350% due 6/12/97
6,300,000
2,000,000 A-1+ PART (SAK 3) FGIC-Insured,
3.500% (b) 2,000,000
New York State Energy Research &
Development Authority:
11,900,000 A-1+ Electric & Gas Series B,
3.200% (b) 11,900,000
12,300,000 A-1+ Electric & Gas Series C,
3.500% (b) 12,300,000
14,200,000 A-1 PART FGIC-Insured, 3.400% (b)
14,200,000
New York State Energy Research &
Development
Electricity Facilities
Revenue:
10,000,000 A-1 Brooklyn Union Gas
MBIA-Insured, 3.300% (b) 10,000,000
40,500,000 VMIG1* Long Island
Lighting Co. Series A, 3.400%-
3.550% (a)(b)
40,500,000
18,000,000 VMIG1* Long Island
Lighting Co. Series A, 3.600%
due 3/1/98 (c)
18,000,000
1,000,000 P-1* Rochester Gas &
Electric, 3.300% (b) 1,000,000
18,795,000 NR++ Rochester Gas &
Electric, 3.600% due 11/15/97 (c) 18,795,000
6,000,000 A-1+ New York State Environmental Facilities
Corp.
General Electric TECP, 3.250%
due 5/9/97 (a) 6,000,000
20,000,000 A-1+ New York State Environmental Quality
Series TECP,
3.400% due 5/22/97 20,000,000
New York State Local Government
Assistance Corp.:
15,500,000 A-1+ Series 93A, 3.350% (b)
15,500,000
4,900,000 A-1+ Series B, 3.450% (b)
4,900,000
5,000,000 A-1+ Series C, 3.400% (b)
5,000,000
25,000,000 A-1+ Series D, 3.400% (b)
25,000,000
16,200,000 A-1+ Series E, 3.400% (b)
16,200,000
New York State Medical Care Facility
Finance Agency:
3,700,000 VMIG1* Lenox Hill Hospital,
3.400% (b) 3,700,000
10,185,000 A-1+ PART PT 17, 3.450% (b)
10,185,000
1,025,000 AAA Pre-Refunded Escrowed with
U.S. Government
Securities to
8/15/97 Call @102,
8.000% due 2/15/25
1,062,178
30,885,000 VMIG1* New York State Mortgage Agency
Revenue,
PART, 3.600% (a)(b) 30,885,000
</TABLE>
See Notes to Financial Statements.
10
============================================================
====================
Schedules of Investments (continued)
March 31, 1997
============================================================
====================
NEW YORK MONEY MARKET
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING
SECURITY VALUE
============================================================
============================== <S> <C> <C> <C>
$12,342,000 VMIG1* New York State Urban Development Corp.
Correctional Facilities PART,
3.550% (b) $12,342,000
1,800,000 A-1 Newburgh IDA Civic Facility Revenue
(Saint Mary's
College), 3.450% (b)
1,800,000
3,500,000 P-1* Niagara County IDA IDR (General Abrasive
Tribacher),
3.600% (a)(b) 3,500,000
500,000 VMIG1* North Hempstead Solid Waste Management
Authority
Solid Waste Management Revenue Refunding
Series A, 3.450% (b)
500,000
2,250,000 NR++ Onadaga County IDR, 3.400% (a)(b)
2,250,000
5,000,000 NR+ Oswego BAN, 4.500% due 10/8/97
5,014,523
2,600,000 A-1+ Port Authority TECP, 3.450% due 5/20/97
(a) 2,600,000
6,000,000 NR+ Puerto Rico Industrial Medical PCR
(Abbott Laboratory)
Series 1983, 3.750% due 3/1/98
(c) 6,000,000
1,210,000 NR++ Rensselaer County IDA IDR (Millers
Supermarket Inc.
Project), 3.900% due 3/1/98
(a)(c) 1,210,000
2,690,000 NR++ Rochester TOB GO PART AMBAC-Insured,
3.950% (b) 2,690,000
2,000,000 P-1* Schenectady County IDA IDR Refunding
(Scotia
Industrial Park Project)
Series A, 3.300% (b) 2,000,000
5,000,000 NR+ South County CSD TAN, 4.000% due 6/25/97
5,000,000
20,000,000 SP-1+ Suffolk County TAN Series 2, 4.500%
due 9/11/97 20,048,310
31,600,000 A-1+ Triborough Bridge & Tunnel Authority
Revenue,
Certificates General Purpose Series C,
Special Obligation FGIC-
Insured, 3.450% (b) 31,600,000
8,336,000 NR+ Ulster County BAN, 4.250% due 5/21/97
8,339,938
7,475,000 NR+ West Seneca CSD BAN, 4.250% due 6/26/97
7,480,917
- ------------------------------------------------------------
- -----------------------------TOTAL INVESTMENTS -- 100%
(Cost-- $928,800,890**) $928,800,890
============================================================
============================== </TABLE>
See Notes to Financial Statements.
11
============================================================
====================
Schedules of Investments (continued)
March 31, 1997
============================================================
====================
NEW YORK
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING
SECURITY VALUE
============================================================
============================== <S> <C> <C>
<C>
Education -- 13.6%
New York State Dormitory Authority
Revenue Bonds:
$4,625,000 AAA Barnard College, AMBAC-
Insured, 5.250% due 7/1/26 $ 4,231,875
City University:
3,000,000 AAA Series 2, MBIA-Insured, 6.875%
due 7/1/14 3,288,750
5,625,000 Baa1* Series A, 5.625% due
7/1/16 5,357,812
7,000,000 Baa1* Series B, 6.000% due
7/1/14 7,008,750
Series C:
2,500,000 Baa1* 7.500% due
7/1/10(d) 2,887,500
2,000,000 BBB 8.200% due 7/1/14
2,120,000
1,250,000 Baa1* Series U, 6.250% due
7/1/02 1,306,250
3,000,000 AAA Cooper Union, FSA-Insured, 7.200%
due 7/1/20 3,330,000
Cornell University,
Series A:
2,000,000 AA 7.375% due 7/1/20 2,172,500
1,000,000 AA 7.375% due 7/1/30 1,086,250
1,230,000 AAA Crouse Community Center, FHA-
Insured,
7.500% due 8/1/29
1,326,863
200,000 BBB Department of Health, State of
New York Issue,
7.250% due 7/1/02
215,250
Genessee Valley, FHA-
Insured:
1,000,000 AA Series A, 6.900% due 2/1/32
1,045,000
685,000 AA Series B, 6.850% due
8/1/16 732,950
2,905,000 AAA Ithaca College, AMBAC-Insured,
5.250% due 7/1/26 2,650,812
2,295,000 AAA Jewish Geriatric Center, FHA-
Insured, 7.150% due 8/1/14 2,533,106
7,620,000 AAA Library Facilities Service
Contract, CAPMAC-Insured,
5.250% due 7/1/19
7,000,875
2,000,000 AAA Long Island Medical Center, Series
A, FHA-Insured,
7.750% due 8/15/27
2,089,280
2,700,000 AA Manhattan College, Asset Guarantee-
Insured,
6.500% due 7/1/19
2,784,375
New York Medical College:
1,140,000 AAA 7.250% due 10/1/03 1,184,357
220,000 AA Asset Guarantee-Insured,
6.700% due 7/1/01 235,675
1,600,000 AA Niagara Frontier Home, FHA-Insured,
6.200% due 2/1/15 1,654,000
State University
Educational Facility:
Series A:
9,000,000 A# 6.375% due 5/15/14
9,191,250
12,110,000 A# 5.875% due 5/15/17
12,064,587
Series B:
1,000,000 A# 7.500% due 5/15/11
1,157,500
5,000,000 AAA FGIC-Insured, 5.250% due
5/15/19 4,668,750
2,450,000 AAA St. Vincent's Hospital &
Medical Center, FHA-Insured,
7.400% due 8/1/30
2,642,938
7,370,000 A+ University of Rochester, Series A,
6.500% due 7/1/19 7,729,287
</TABLE>
See Notes to Financial
Statements.
12
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Schedules of Investments (continued)
March 31, 1997
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====================
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
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============================== <S> <C> <C>
<C>
Education -- 13.6% (continued)
$ 285,000 BBB Upstate Community College, Series
B,
7.100% due 7/1/01
$ 306,731
3,000,000 BBB New York State, Urban Development Corp.,
Syracuse
University Center, 5.500% due
1/1/15 2,838,750
- ------------------------------------------------------------
- -----------------------------96,842,023
- ------------------------------------------------------------
- -----------------------------Escrowed to Maturity (f) --
1.2%
1,495,000 AAA Commonwealth of Puerto Rico, Aqueduct &
Sewer
Authority Revenue Bonds, 10.250%
due 7/1/09 2,033,200
New York City GO, AMBAC-Insured, Series
I:
3,150,000 AAA 7.250% due 8/15/14
3,386,250
945,000 AAA 7.250% due 8/15/15 1,006,425
2,165,000 AAA New York State Power Authority Revenue &
General
Purpose, 9.500% due 1/1/01
2,321,962
- ------------------------------------------------------------
- -----------------------------8,747,837
- ------------------------------------------------------------
- -----------------------------Finance -- 3.2%
500,000 AA Municipal Assistance Corp., New York
City, Series 64,
7.625% due 7/1/08 541,875
New York State Local Government
Assistance Corp.:
14,345,000 Aaa* 1992 Series A, 6.875% due 4/1/19
15,851,225
6,450,000 A 1993 Series C, 5.500% due 4/1/17
6,208,125
- ------------------------------------------------------------
- -----------------------------22,601,225
- ------------------------------------------------------------
- -----------------------------General Obligation -- 7.1%
Commonwealth of Puerto Rico GO:
1,000,000 A 8.000% due 7/1/08 1,057,500
2,000,000 A 5.375% due 7/1/25 1,840,000
Green Island GO:
100,000 Baa* 9.375% due 11/1/01 114,625
125,000 Baa* 9.375% due 11/1/02 145,469
New York City Refunding Bonds GO:
4,000,000 AAA MBIA-Insured, 6.950% due 8/15/12
4,415,000
2,160,000 A-# Series A, 6.250% due 8/1/09
2,195,100
2,000,000 A-# Series B, 7.250% due 8/15/19
2,185,000
5,000,000 A-# Series C, 6.660% due 8/1/09
5,050,000
12,085,000 A-# Series F, 5.750% due 2/1/19
11,254,156
Series H:
5,500,000 A-# 7.000% due 2/1/21
5,802,500
10,000,000 A-# 6.125% due 8/1/25
9,650,000
1,850,000 AAA Series I, AMBAC-Insured, 7.250% due
8/15/14 1,958,687
New York State GO:
1,000,000 A# 12.000% due 11/15/03 (d)
1,376,250
2,750,000 A# 9.875% due 11/15/05 (d)
3,609,375
- ------------------------------------------------------------
- -----------------------------50,653,662
- ------------------------------------------------------------
- -----------------------------</TABLE>
See Notes to Financial Statements.
13
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March 31, 1997
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====================
NEW
YORK PORTFOLIO
<TABLE>
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Government Facilities -- 1.9%
$15,520,000 BBB+ New York State Dormitory Authority
Revenue,
Lease-Series A, 5.250%
due 5/15/21 $13,521,800 ----------------
- ------------------------------------------------------------
- -------------Hospitals -- 24.6%
990,000 B1* Monroe County IDA Revenue,
Civic Facilities, Genesee
Hospital, Series A,
6.500% due 11/1/99 1,006,087
New York State Dormitory Authority Revenue:
5,350,000 Aa3* Luthern Center at
Poughkeepsie, LOC Key Bank,
6.050% due 7/1/26
5,216,250
Series A:
15,000,000 A# Department of Health,
Rosewell Project, 5.500%
due 7/1/25
13,650,000 455,000 BBB- Manhattan Eye, Ear &
Throat Hospital, 11.500%
due 7/1/09
463,176
Mental Health
Services Facilities, Series B:
7,000,000 A# 5.625% due 2/15/21
6,457,500
5,000,000 AAA MBIA-Insured, 5.125%
due 8/15/21 4,537,500
15,000,000 AAA Montefiore Medical
Center, AMBAC-Insured,
5.250% due 2/1/15
14,100,000 3,000,000 AA St. Luke's
Home, Residential Health,
6.375% due
8/1/35 3,063,750
2,600,000 AAA St. Joseph's Hospital,
MBIA-Insured,
5.250% due
7/1/18 2,411,500
990,000 AAA United Health
Services Inc., FHA-Insured,
7.350% due
8/1/29 1,058,062
New York State Medical Care
Facilities Finance Agency
Revenue:
3,000,000 AAA Beth Israel Medical
Center, MBIA-Insured,
7.500% due
11/1/10 3,330,000
4,000,000 BBB Brookdale Hospital
Medical Center, 6.800%
due 8/15/12
4,150,000
2,500,000 BB Central Suffolk Hospital
Mortgage Project,
6.125% due
11/1/16 2,331,250
Hospital & Nursing Home, FHA-Insured:
Series A:
14,250,000 AAA 1995A, 6.200%
due 2/15/28 14,410,312
125,000 AA
6.100% due 2/15/02 129,375
11,805,000 AAA 6.200% due
2/15/21 12,026,344
4,100,000 AA 7.450%
due 8/15/31 4,448,500
Series B:
1,000,000 AAA
8.000% due 2/15/28 1,062,500
990,000 AA
7.000% due 8/15/32 1,066,725
1,965,000 AAA Series C,
6.400% due 8/15/14 2,058,338
6,800,000 AA Methodist Hospital,
FHA-Insured, 6.700% due 8/15/23 7,106,000
4,000,000 AA Mortgage Project,
FHA-Insured, 6.375% due 8/15/24 4,125,000
</TABLE>
See Notes to Financial
Statements.
14
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Schedules of Investments (continued)
March 31, 1997
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====================
NEW YORK
PORTFOLIO
<TABLE>
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Hospitals -- 24.6% (continued)
$4,700,000 BBB New York Downtown
Hospital, 6.800% due 2/15/20 $ 4,799,875
New York Hospital,
AMBAC/FHA-Insured:
8,500,000 AAA 6.800% due 8/15/24
9,201,250
7,600,000 AAA 6.500% due 8/15/29
8,065,500
2,500,000 AAA 6.900% due 8/15/34
2,721,875
Partially Pre-Refunded
(Call 2/15/00 @ 102):
1,215,000 BBB+ 7.750% due
2/15/20(e) 1,315,237
295,000 AAA MBIA-Insured,
7.750% due 2/15/20(e) 320,813
1,640,000 AAA St. Mary's Hospital
Project, AMBAC-Insured,
6.200% due 11/1/14
1,707,650
1,000,000 Aa2* Second Mortgage
Healthcare Project, 6.375%
due 11/15/19
1,035,000
5,000,000 BBB Secured Hospital Revenue
Bonds 1991, 7.400%
due 8/15/21
5,281,250
Series A:
5,075,000 BBB+ 8.875% due 8/15/07
5,250,290
1,185,000 BBB+ 7.700% due 2/15/18
1,235,434
Series B:
3,500,000 AA FHA-Insured, 6.100% due
2/15/15 3,543,750
1,860,000 AAA Long Term Healthcare,
CGIC-Insured,
6.450% due
11/1/14 1,941,375
2,500,000 AA Series C, FHA-Insured,
6.650% due 8/15/32 2,593,750
5,000,000 AA Series D, FHA-Insured,
6.450% due 2/15/32 5,100,000
Series F, Mental Health
Services Facilities:
4,720,000 BBB+ 6.500% due 8/15/12
4,873,400
4,615,000 BBB+ 6.500% due 2/15/19
4,730,375
2,825,000 NR Newark-Wayne Community Hospital Inc.,
Hospital
Revenue Refunding and Improvement, Series A,
7.600% due 9/1/15
2,722,594
720,000 A Valley Health Development
Corp., New York
Mortgage Revenue Bonds, Mortgage
Loan, FHA-Insured, 11.300% due
2/1/23 851,400
- ------------------------------------------------------------
- -----------------------------175,498,987
- ------------------------------------------------------------
- -----------------------------Housing: Multi-Family -- 7.2%
6,470,000 BBB Commonwealth of Puerto Rico, Urban
Renewal &
Housing Corp. Revenue Bonds,
7.875% due 10/1/04 7,003,775
10,200,000 AA Housing New York Corp. Revenue
Refunding,
5.500% due 11/1/20
9,600,750
New York City Housing Development
Corp.,
Multi-Family Housing:
1,591,508 NR Cadman Project, 6.500%
due 11/15/18 1,615,381
1,010,319 NR Heywood Towers Project,
6.500% due 10/15/17 1,025,473
1,282,710 NR Kelly Project, 6.500% due
2/15/18 1,301,951
</TABLE>
See Notes to Financial
Statements.
15
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Schedules of Investments (continued)
March 31, 1997
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====================
NEW YORK
PORTFOLIO
<TABLE>
<CAPTION>
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============================== <S> <C> <C>
<C>
Housing: Multi-Family -- 7.2% (continued)
$1,637,398 AAA Pass Through
Certificates, AMBAC-Insured,
6.500% due 12/20/01
$ 1,694,707
1,646,543 NR Riverside Project, 6.500% due
11/15/18 1,679,474
Series A, FHA-Insured:
4,000,000 AAA 6.600% due 4/1/30
4,080,000
5,000,000 AAA Multi-Unit Mortgage
Refunding, 7.350%
due 6/1/19
5,250,000
New York State Housing Finance Agency Revenue,
Multi-Family Housing:
Second Mortgage Project,
Multi-Family Housing,
SONYMA-Insured:
Series A:
500,000 Aa2* 7.000%
due 8/15/12(a) 528,125
500,000 Aa2* 7.050%
due 8/15/24(a) 521,875
6,870,000 Aa2* Series B,
6.250% due 8/15/29(a) 6,878,588
1,750,000 Aa2* Series C,
6.600% due 8/15/27 1,813,437
Series A:
2,000,000 Aa2* FHA-Insured, 6.200%
due 8/15/15(a) 2,032,500
3,450,000 AAA FSA-Insured, 6.125%
due 11/1/20 3,506,063
1,500,000 AAA Series C, FHA-Insured,
6.500% due 8/15/24 1,550,625
1,000,000 A* Rensselaer Housing Authority, Multi-
Family Mortgage
Revenue, Rensselaer Elderly
Apartments, Series A,
7.750% due 1/1/11
1,050,000
- ------------------------------------------------------------
- -----------------------------51,132,724
- ------------------------------------------------------------
- -----------------------------Housing: Single-Family -- 2.6%
1,785,000 NR Lincoln Towers Housing Corp., 11.250%
due 1/1/15 1,858,756
New York State Mortgage Agency Revenue:
2,625,000 Aa2* Series 37-A, 6.375% due 10/1/14
2,739,844
1,000,000 Aa2* Series 41-A, 6.450% due
10/1/14 1,033,750
4,000,000 Aa2* Series 42, FHA-Insured, 6.650%
due 4/1/26(a) 4,115,000
4,250,000 Aa2* Series 48, 6.100% due
4/1/25(a) 4,260,625
2,000,000 Aa2* Series 54, 6.100% due
10/1/15(a) 2,015,000
825,000 Aa2* Series SS, Homeowner Mortgage,
7.950% due 10/1/22(a) 874,500
320,000 Aa* 8th Series E, Pool-Insured,
8.100% due 10/1/17 331,011
1,345,000 Aa* 9th Series A, 7.300% due
4/1/17(a) 1,360,131
- ------------------------------------------------------------
- -----------------------------18,588,617
- ------------------------------------------------------------
- -----------------------------Industrial Development -- 7.4%
10,250,000 AAA Battery Park City Authority Revenue,
Series A,
AMBAC-Insured, 5.500% due
11/1/26 9,724,688
1,300,000 A1+ Grand Central, District Management
Association
Refunding-Business Import District Capital,
5.125% due 1/1/14
1,200,875
</TABLE>
See Notes to Financial Statements.
16
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Schedules of Investments (continued)
March 31, 1997
============================================================
====================
NEW YORK
PORTFOLIO
<TABLE>
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============================== <S> <C> <C>
<C>
Industrial Development -- 7.4% (continued)
$1,000,000 AA Hempstead Town IDA, Resource Recovery
Revenue Bonds,
Nassau District Energy
Corp., 7.750% due 9/15/15(a) $ 1,011,650
500,000 AA Monroe County IDA, Revenue
Public Improvement,
Canal Ponds Park, Series
A, 7.000% due 6/15/13 542,500
New York City IDA, Civil Facility Revenue, (The
Lighthouse Project):
LOC Barclay's Bank:
1,000,000 AA 6.375% due 7/1/10
1,033,750
2,250,000 AA 6.500% due 7/1/22
2,328,750
940,000 Aa-1* Prime
Laboratories Inc. IDR, LOC Algamene Bank
Nederland, NV,
7.700%, Mandatory tender 11/1/10 941,786
9,000,000 NR Visy Paper Inc. Project,
7.950% due 1/1/28(a) 9,562,500
1,815,000 BBB# YMCA Greater New York
Project, 5.800% due 8/1/16 1,733,325
3,000,000 Baa1 New York State Urban Development Corp.
Revenue
Refunding, State
Facilities, 5.700% due 4/1/20 2,887,500
7,000,000 AAA Onondaga County IDA Sewer Facilities
Revenue, (Bristol
Meyers Squibb Co.
Project), 5.750% due 3/1/24(a) 6,886,250
1,410,000 A Rensselaer County IDA, Albany
International Corp.,
7.550% due 6/1/07(a)
1,547,475
United Nations Development Corp. Revenue Bonds,
Senior Lien, Series A:
1,490,000 A+# 6.000% due 7/1/07
1,538,425
9,500,000 A+# 6.000% due 7/1/26
9,310,000
2,390,000 B* Warren & Washington Counties IDA,
Resource Recovery
Revenue Bonds, Series A,
7.900% due 12/15/07 2,443,775
- ------------------------------------------------------------
- -----------------------------52,693,249
- ------------------------------------------------------------
- -----------------------------Life Care Systems -- 2.7%
New York State Dormitory Authority,
Revenue Bonds:
8,025,000 A# Department of Health, Veterans
Home, 5.500%
due 7/1/21
7,322,813
FHA-Insured:
1,325,000 AAA Heritage House Nursing
Center, 7.000% due 8/1/31 1,429,344
2,450,000 AA- Iroquois Nursing Home,
7.050% due 2/1/31 2,633,750
3,350,000 AA Nursing Home, Wesley
Garden, 6.125% due 8/1/35 3,362,563
1,165,000 BBB New York State Medical Care Facilities,
Finance Agency
Revenue Bonds, Insured
Mortgage Nursing Program,
1984 Series A, FHA-
Insured, 9.500% due 1/15/24 1,179,271
2,160,000 A Oneida Health Care Corp. Mortgage
Revenue, Series A,
FHA-Insured, 7.200% due
8/1/31 2,251,800
1,250,000 AAA Syracuse GO, IDA, James Square
Association,
FHA-Insured, 7.000% due
8/1/25 1,318,750
- ------------------------------------------------------------
- -----------------------------19,498,291
- ------------------------------------------------------------
- -----------------------------</TABLE>
See Notes to Financial
Statements.
17
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Schedules of Investments (continued)
March 31, 1997
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====================
NEW YORK
PORTFOLIO
<TABLE>
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<C>
Miscellaneous -- 2.0%
$ 800,000 VMIG1* New York State LOC Assistance Corp.,
Series B,
3.350% due 4/1/23
(b) $ 800,000
New York State Municipal Bond
Bank Agency, Series A,
Special Revenue
Program:
1,000,000 BBB+ City of Buffalo, 6.875%
due 3/15/06 1,065,000
1,500,000 A+ City of Rochester, 6.750%
due 3/15/11 1,591,875
New York State Urban
Development Corp., Sub Lien:
10,000,000 A 5.500% due 7/1/22
9,300,000
1,990,000 AAA 5.500% due 7/1/26
1,860,650
- ------------------------------------------------------------
- -----------------------------14,617,525
- ------------------------------------------------------------
- -----------------------------Pollution Control Revenue --
4.6%
4,500,000 AAA Dutchess County Resource Recovery Agency
Revenue
Bonds, Solid Waste
Management, Series A, FGIC-
Insured, 7.500% due
1/1/09 4,848,750
New York State Energy,
Research & Development Authority:
2,660,000 AAA FSA-Insured, 8.375% due
12/1/28(a) 2,876,125
MBIA-Insured:
4,000,000 AAA 6.150% due 7/1/26(a)
4,050,000
1,100,000 AAA Series B, 7.375% due
10/1/14 1,194,875
1,000,000 A# Series C, 8.375% due
12/1/28(a) 1,072,500
New York State Environmental
Facilities Corp.:
4,440,000 Baa1* Huntington Project,
7.375% due 10/1/99 4,617,600
PCR, State Water
Revolving Fund, Series A:
8,250,000 A 7.250% due 6/15/10(d)
9,116,250
1,950,000 A 7.500% due 6/15/12
2,127,938
1,500,000 AAA Special Obligation Revenue,
Riverbank State Park,
AMBAC-Insured,
5.125% due 4/1/22 1,365,000
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 1,763,437
- ------------------------------------------------------------
- -----------------------------33,032,475
- ------------------------------------------------------------
- -----------------------------Pre-Refunded (e) -- 4.2%
495,000 AAA Babylon IDA, Resource Recovery
Revenue, Ogden
Martin System, Series B, (Call 7/1/98 @ 103),
8.500% due 1/1/19
534,600
35,000 NR Battery Park City
Authority, FHA-Insured, (Call 6/1/05
@ 100), 8.625% due
6/1/23 42,875
860,000 A- Commonwealth of Puerto Rico GO
Municipal Finance Agency,
Series A, (Call
7/1/98 @ 102), 8.250% due 7/1/08 914,825
</TABLE>
See Notes to Financial
Statements.
18
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====================
Schedules of Investments (continued)
March 31, 1997
============================================================
====================
NEW YORK
PORTFOLIO
<TABLE>
<CAPTION>
FACE
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============================== <S> <C> <C>
<C>
Pre-Refunded (e) -- 4.2% (continued)
New York State Dormitory Authority Revenue Bonds:
$ 800,000 AA- Ideal Senior Living
Center, FHA-Insured,
(Call 2/1/99 @ 102),
7.625% due 8/1/28 $ 859,000
5,000,000 Baa1* State of New York Issue,
Series 1991,
(Call 7/1/01 @ 102),
7.750% due 7/1/21(d) 5,643,750
800,000 AAA New York
State Local Government Assistance Corp.,
Series D, (Call 4/1/02 @
102), 7.000% due 4/1/18 889,000
New York State Medical Care
Facilities Finance Agency
Revenue:
620,000 AAA Call 2/15/00 @
102, 7.750% due 2/15/20 682,000
670,000 AAA MBIA-Insured,
(Call 2/15/00 @ 102), 7.750%
due 2/15/20
737,000
Hospital & Nursing
Home Mortgage, FHA-Insured:
6,430,000 AA Call 8/15/97 @ 102,
8.000% due 2/15/27 6,651,578
9,345,000 AAA Call 8/15/98 @ 102,
8.000% due 2/15/28 9,940,744
1,700,000 AAA St. Lukes Hospital,
Series B, (Call 2/15/00 @ 102),
7.450% due
2/15/29 1,857,250
500,000 AAA New York State Urban
Development Corp. Revenue,
Correctional Facilities, (Call 1/1/00 @ 100),
7.000% due 1/1/17
538,750
1,000,000 A1* Orangetown Housing Authority, Housing
Facility Revenue,
Senior Housing Center,
1990 Series, (Call 4/1/00 @ 102),
7.600% due 4/1/30
1,110,000
- ------------------------------------------------------------
- -----------------------------30,401,372
- ------------------------------------------------------------
- -----------------------------Public Facilities -- 2.5%
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
1,047,500
915,000 BBB New York State COP, (Hanson
Redevelopment Project),
8.375% due 5/1/08
1,047,675
New York State Urban Development Corp. Revenue,
Correctional Capital
Facilities:
5,000,000 AAA Series 6, AMBAC-Insured,
5.375% due 1/1/25 4,637,500
10,000,000 A# Series 7, 5.700% due
1/1/27 9,337,500
1,500,000 Baa1* Triborough Bridge & Tunnel Authority,
Convention Center
Project, Series E, 7.250%
due 1/1/10 1,668,750
- ------------------------------------------------------------
- -----------------------------17,738,925
- ------------------------------------------------------------
- -----------------------------Transportation -- 8.7%
1,500,000 AAA Albany County Airport Authority Revenue,
FSA-Insured,
5.500% due 12/15/19(a)
1,385,625
</TABLE>
See Notes to Financial
Statements.
19
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====================
Schedules of Investments (continued)
March 31, 1997
============================================================
====================
NEW YORK
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING
SECURITY VALUE
============================================================
============================== <S> <C> <C>
<C>
Transportation -- 8.7% (continued)
Metropolitan Transportation
Authority Transit Facilities
Revenue:
$3,555,000 A-# Commuter Facilities
Revenue, Series A,
6.500% due 7/1/24 $
3,612,769 Service Contract:
5,440,000 BBB Series N, 7.125% due
7/1/09 5,888,800
1,000,000 BBB Series O, 5.750% due
7/1/13 980,000
2,250,000 AAA Monroe County Airport Authority, Airport
Revenue,
Greater Rochester
International, MBIA-Insured,
7.250% due 1/1/19(a)
2,421,563
1,450,000 BB+ New York City IDA, Special Facilities
Revenue,
(1990 American Airlines Inc. Project), 8.000%
due 7/1/20(a)
1,533,375
4,230,000 AAA New York State Highway Authority,
Emergency Services,
Construction and Reconstruction, Series A,
FSA-Insured, 6.600% due
3/1/01 4,520,813
1,000,000 AAA Niagara Falls Bridge Authority, Toll
Revenue, Series B,
FGIC-Insured, 5.250% due
10/1/15 955,000
Port Authority of New York & New
Jersey:
8,000,000 BB+ Delta Airlines, Series 1R,
6.950% due 6/1/08 8,560,000
12,000,000 NR KIAC Project, 5th Installment,
Special Project,
6.750% due
10/1/19(a) 12,315,000
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue,
Refunding:
5,000,000 A 5.000% due 7/1/36
4,268,750
13,500,000 A Series Y, 5.500% due
7/1/36 12,571,875
Triborough Bridge & Tunnel
Authority:
2,500,000 AA# General Purpose, Series B,
5.200% due 1/1/27 2,253,125
500,000 Aa* Series L, 8.125% due
1/1/12(d) 522,135
- ------------------------------------------------------------
- -----------------------------61,788,830
- ------------------------------------------------------------
- -----------------------------Utilities -- 4.7%
3,270,000 AAA New York City Municipal Finance
Authority, Water &
Sewer System Revenue, Series A, FSA-Insured,
7.000% due 6/15/15
3,535,688
New York State Energy, Research & Development Authority,
Facilities Revenue Bonds:
Brooklyn Union Gas
Co. Project:
3,000,000 A Regular Linked SAVRS
and RIBS, 7.050%
due
7/15/26(a)(g) 3,191,250
1,500,000 A Regular RIBS, Series B,
6.952% due 7/1/26(a)(g) 1,758,750
</TABLE>
See Notes to Financial
Statements.
20
============================================================
====================
Schedules of Investments (continued)
March 31, 1997
============================================================
====================
NEW YORK
PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING
SECURITY VALUE
============================================================
============================== <S> <C> <C>
<C>
Utilities -- 4.7% (continued)
Consolidated Edison
Co. Project, Series A:
$4,500,000 AAA MBIA-Insured, 6.100% due 8/15/20
$ 4,584,375
2,250,000 A+ 7.125% due 3/15/22(a)
2,319,570
5,750,000 A+ 7.125% due 12/1/29(a)(d)
6,332,188
1,500,000 Baa2* Corning National Gas
Corp., Series A,
8.250% due
12/1/18(a) 1,616,250
Long Island Lighting
Co. Project:
Series A:
4,900,000 BB+ 7.150% due
12/1/20(a) 5,230,750
1,000,000 BB+ 7.150% due 2/1/22(a)
1,067,500
3,000,000 BB+ Series B, 7.150% due
2/1/22(a) 3,202,500
1,000,000 BB+ Series D, 6.900% due
8/1/22(a) 1,051,250
- ------------------------------------------------------------
- -----------------------------33,890,071
- ------------------------------------------------------------
- -----------------------------Water & Sewer -- 1.8%
1,000,000 AAA Buffalo Municipal Water Finance
Authority, Water
Systems Revenue, FGIC-
Insured, 6.100% due 7/1/26 1,018,750
2,150,000 AAA Monroe County Water Authority Revenue,
AMBAC-Insured, 7.000% due
8/1/19 2,356,938
10,000,000 A# New York City Municipal Water Finance
Authority,
Water & Sewer System Revenue, Series A,
5.500% due 6/15/24
9,287,500
- ------------------------------------------------------------
- -----------------------------12,663,188
- ------------------------------------------------------------
- -----------------------------TOTAL INVESTMENTS -- 100%
(Cost-- $691,691,150**)
$713,910,801
============================================================
============================== </TABLE>
(a) Income from this issue is considered a preference
item for the 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) Variable rate obligation payable at par on demand
on the date indicated.
(d) Security segregated by Custodian for open purchase
commitments.
(e) Bond is escrowed with U.S. government securities
and is considered by the
Manager to be triple-A rated even if issuer has not applied
for new
ratings.
(f) Bond is escrowed to maturity with U.S. government
securities and is
considered by the Manager to be triple-A rated even if
issuer has not applied for new ratings.
(g) Residual interest bond -- coupon varies inversely
with level of short-term
tax-exempt interest rates.
++ Security has not been rated by either Moody's Investors
Service or Standard
& Poor's Ratings Services. However, the Board of Trustees
has determined the security to be considered a first tier
quality issue due to enhancement features such as insurance
or irrevocable letters of credit.
+ Security has not been rated by either Moody's Investors
Service or Standard
& Poor's Ratings Services. However, the Board of Trustees
has determined
that the security presents minimal credit risk.
# Fitch Investor Services, Inc.
** Aggregate cost for Federal income tax purposes is
substantially the same.
See pages 22 and 23 for definitions of ratings and certain
security
descriptions.
See Notes to Financial Statements.
21
============================================================
====================
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 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 "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.
22
============================================================
====================
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.
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 -- AMBAC Indemnity Corporation BAN -- Bond
Anticipation Notes
BIG -- Bond Investors Guaranty
BOCES -- Board of Cooperative Education Services CGIC --
Capital Guaranty Insurance Company
COP -- Certificate of Participation
CSD -- Central School District
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
PART -- Partnership Structure
PCFA -- Pollution Control Financing Authority
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
SAVRS -- Select Auction Variable Rate Securities SONYMA --
State of New York Mortgage Association SWAP -- SWAP
Structure
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bond Structure
TRAN -- Tax and Revenue Anticipation Notes
UFSD -- Union Free School District
VRDD -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday Demand
23
============================================================
====================
Statements of Assets and Liabilities March 31,
1997
============================================================
====================
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
============================================================
================================ <S> <C>
<C>
ASSETS:
Investments, at value (Cost $928,800,890 and
$691,691,150, respectively) $ 928,800,890
$ 713,910,801
Cash 87,785
Interest receivable 7,932,000 11,749,922
Receivable for securities sold 1,910,840
4,973,015
Receivable for Fund shares sold
1,094,437
Other receivables 355,000
- ------------------------------------------------------------
- -------------------------------Total Assets
938,731,515 732,083,175
============================================================
================================ LIABILITIES:
Dividends payable 1,060,835
Management fees payable 407,227
356,768
Distribution fees payable 35,212
80,234
Payable for Fund shares purchased
357,337
Payable for securities purchased
5,402,158
Accrued expenses 113,496 89,101
- ------------------------------------------------------------
- -------------------------------Total Liabilities
1,616,770 6,285,598
- ------------------------------------------------------------
- -------------------------------Total Net Assets $
937,114,745 $ 725,797,577
============================================================
================================ NET ASSETS:
Par value of shares of beneficial interest $
937,374 $ 55,150
Capital paid in excess of par value
936,437,022 709,771,518
Undistributed net investment income --
235,328
Accumulated net realized loss from security
transactions (259,651) (6,484,070)
Net unrealized appreciation of investments
- -- 22,219,651
- ------------------------------------------------------------
- -------------------------------Total Net Assets $
937,114,745 $ 725,797,577
============================================================
================================ Shares Outstanding:
Class A 937,374,396 40,326,533
- ------------------------------------------------------------
- -------------------------------Class B --
14,057,541
- ------------------------------------------------------------
- -------------------------------Class C --
765,360
- ------------------------------------------------------------
- -------------------------------Net Asset Value:
Class A (and redemption price) $ 1.00
$ 13.16
- ------------------------------------------------------------
- -------------------------------Class B * --
$ 13.15
- ------------------------------------------------------------
- -------------------------------Class C ** --
$ 13.14
- ------------------------------------------------------------
- -------------------------------Class A Maximum Public
Offering Price Per Share
(net asset value plus 4.17% of net asset value per
share) -- $ 13.71
============================================================
================================ </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% CDSCif shares
are redeemed within the first year of purchase (See
Note 4).
See Notes to Financial Statements.
24
============================================================
====================
Statements of Operations For the Year
Ended March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
============================================================
============================ <S> <C>
<C>
INVESTMENT INCOME:
Interest $ 31,733,150 $ 46,660,328
- ------------------------------------------------------------
- ---------------------------EXPENSES:
Management fees (Note 4) 4,554,023 3,682,923
Distribution fees (Note 4) 910,804
2,073,869
Shareholder and system servicing fees
359,525 272,140
Shareholder communications 82,610
61,097
Registration fees 74,432 322,587
Custody 47,986 34,001
Audit and legal 30,295 53,193
Trustees' fees 6,366 10,002
Pricing service fees 34,913
Other 64,397 7,786
- ------------------------------------------------------------
- ---------------------------Total Expenses
6,130,438 6,552,511
- ------------------------------------------------------------
- ---------------------------Net Investment Income
25,602,712 40,107,817
- ------------------------------------------------------------
- ---------------------------REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS (NOTE 5):
Realized Gain (Loss) From Security Transactions
(excluding short-term securities*):
Proceeds from sales 36,740,622
406,551,453
Cost of securities sold 36,702,834
407,224,484
- ------------------------------------------------------------
- ---------------------------Net Realized Gain (Loss)
37,788 (673,031)
- ------------------------------------------------------------
- ---------------------------Change in Net Unrealized
Appreciation of Investments:
Beginning of year --
23,141,967
End of year -- 22,219,651
- ------------------------------------------------------------
- ---------------------------Decrease in Net Unrealized
Appreciation (922,316)
- ------------------------------------------------------------
- ---------------------------Net Gain (Loss) on Investments
37,788 (1,595,347)
- ------------------------------------------------------------
- ---------------------------Increase in Net Assets From
Operations $ 25,640,500 $ 38,512,470
============================================================
============================ </TABLE>
* Represents only gains from the sale of short-term
securities for the New York
Money Market Portfolio.
See Notes to Financial Statements.
25
============================================================
====================
Statements of Changes in Net Assets For the Years Ended
March 31,
============================================================
==================== <TABLE>
<CAPTION>
New York Money Market Portfolio 1997 1996
============================================================
=================== <S> <C>
<C>
OPERATIONS:
Net investment income $
25,602,712 $ 25,017,960
Net realized gain 37,788
2,354
- ------------------------------------------------------------
- ------------------Increase in Net Assets From Operations
25,640,500 25,020,314
- ------------------------------------------------------------
- -------------------DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (25,602,712) (25,017,960)
- ------------------------------------------------------------
- ------------------Decrease in Net Assets From
Distributions to Shareholders (25,602,712)
(25,017,960)
- ------------------------------------------------------------
- -------------------FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 3,558,756,790
3,174,176,362
Net asset value of shares issued
for reinvestment of dividends 25,115,287
24,164,797
Cost of shares reacquired
(3,529,287,358) (3,024,242,064) -------------------------
- -----------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 54,584,719
174,099,095
- ------------------------------------------------------------
- -------------------Increase in Net Assets
54,622,507 174,101,449
NET ASSETS:
Beginning of year 882,492,238 708,390,789
- ------------------------------------------------------------
- ------------------End of year $
937,114,745 $ 882,492,238
============================================================
=================== </TABLE>
See Notes to Financial Statements.
26
============================================================
====================
Statements of Changes in Net Assets (continued)
============================================================
==================== <TABLE>
<CAPTION>
For the Years Ended March 31,
New York Portfolio 1997 1996
============================================================
======================== <S> <C> <C>
OPERATIONS:
Net investment income $40,107,817 $11,477,881
Net realized gain (loss) (673,031) 1,044,195
Decrease in net unrealized appreciation (922,316)
(16,335,761)
- ------------------------------------------------------------
- -----------------------Increase (Decrease) in Net
Assets From Operations 38,512,470
(3,813,685)
- ------------------------------------------------------------
- -----------------------DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (40,014,974) (11,339,968)
- ------------------------------------------------------------
- -----------------------Decrease in Net Assets From
Distributions to Shareholders (40,014,974)
(11,339,968)
- ------------------------------------------------------------
- -----------------------FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 62,049,446
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 25,048,123
6,775,955
Cost of shares reacquired
(107,681,450) (31,148,509)
- ------------------------------------------------------------
- -----------------------Increase (Decrease) in Net
Assets From Fund Share Transactions
(20,583,881) 670,560,628
- ------------------------------------------------------------
- -----------------------Increase (Decrease) in Net Assets
(22,086,385) 655,406,975
NET ASSETS:
Beginning of year 747,883,962 92,476,987
- ------------------------------------------------------------
- -----------------------End of year*
$725,797,577 $747,883,962
============================================================
======================== * Includes undistributed net
investment income of: $235,328 $141,293
============================================================
======================== </TABLE>
See Notes to Financial Statements.
27
============================================================
====================
Notes to Financial Statements
============================================================
====================
1. SIGNIFICANT ACCOUNTING POLICIES
The New York Money Market and New York Portfolios
("Portfolios") are separate investment portfolios of the
Smith Barney Muni Funds ("Fund"). The Fund, a Massachusetts
business trust, is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, open-end
management investment company and consists of these
Portfolios and seven other separate investment portfolios:
Florida, Georgia, Ohio, Pennsylvania, Limited Term, National
and California Money Market Portfolios. The financial
statements and financial highlights for the other portfolios
are presented in separate annual reports.
The significant accounting policies consistently
followed by the Fund are: (a) security transactions are
accounted for on trade date; (b) securities are valued at
the mean between the quoted bid and 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, as applicable;
(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 an 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, 1997,
reclassifications were made to the New York Portfolio'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.
28
============================================================
====================
Notes to Financial Statements (continued)
============================================================
====================
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 of 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 year ended March
31, 1997, SB received sales charges of approximately
$348,000 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. Class C shares have a 1.00% CDSC, which applies if
redemption occurs within the first year of purchase. For the
year ended March 31, 1997, CDSCs paid to SB were:
<TABLE>
<CAPTION>
Class B Class C
============================================================
==================== <S>
<C> <C> CDSCs
$322,000 $4,000
============================================================
==================== </TABLE>
29
============================================================
====================
Notes to Financial Statements (continued)
============================================================
====================
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 year ended March 31, 1997, total Distribution Plan fees
incurred were:
<TABLE>
<CAPTION>
Portfolio Class A Class B
Class C
============================================================
==================== <S>
<C> <C> <C> New York Money
Market $910,804 -- -
- -
- ------------------------------------------------------------
- -------------------New York
815,597 $1,192,097 $66,175
============================================================
==================== </TABLE>
All officers and two Trustees of the Fund are employees
of SB.
5. INVESTMENTS
During the year ended march 31, 1997, the aggregate cost of
purchases and
proceeds from sales of investments (including maturities,
but excluding short-term securities) were as follows:
<TABLE>
<CAPTION>
New York Money New York Market Portfolio
Portfolio
============================================================
==================== <S> <C> <C>
Purchases -- $384,158,586
- ------------------------------------------------------------
- -------------------Sales --
406,551,453
============================================================
==================== </TABLE>
At March 31, 1997, the aggregate gross unrealized
appreciation and depreciation of investments for Federal
income tax purposes was substantially as follows:
<TABLE>
<CAPTION>
New York Money New York Market Portfolio
Portfolio
============================================================
==================== <S> <C> <C>
Gross unrealized appreciation --
$26,799,788
Gross unrealized depreciation --
(4,580,137)
- ------------------------------------------------------------
- -------------------Net unrealized appreciation
- -- $22,219,651
============================================================
==================== </TABLE>
30
============================================================
====================
Notes to Financial Statements (continued)
============================================================
====================
6. CAPITAL LOSS CARRYFORWARD
At March 31, 1997 the New York Money Market and New York
Portfolios had,
for Federal income tax purposes, $261,635 and $6,385,987,
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 probable 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:
<TABLE>
<CAPTION>
Portfolio 2000 2001 2002
2003 2005
============================================================
========================== <S> <C>
<C> <C> <C> <C>
New York Money Market $261,635 -- --
- -- --
- ------------------------------------------------------------
- -------------------------New York --
$713,974 $4,701,454 $365,887 $604,672
============================================================
========================== </TABLE>
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:
<TABLE>
<CAPTION>
Total Net
Shares Assets of Total Net
Issued by New York Assets of
Acquired Fund the Portfolio Municipals
the Portfolio
============================================================
==================== <S> <C>
<C> <C>
New York Municipals 48,095,606
$651,752,267 $117,671,692
============================================================
==================== </TABLE>
The total net assets of New York Municipals before
acquisition included
unrealized appreciation of $36,306,817 and a net realized
loss of $5,542,090. The total net assets of the Portfolio
immediately after the transfer were $769,423,959. The
transaction was structured for tax purposes to qualify as a
tax-free reorganization under the Internal Revenue Code of
1986, as amended.
8. SHARES OF BENEFICIAL INTEREST
At March 31, 1997, 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.
31
============================================================
====================
Notes to Financial Statements (continued)
============================================================
====================
At March 31, 1997, total paid-in capital amounted
to the following for each class and their respective
Portfolio:
<TABLE>
<CAPTION>
Portfolio Class A
Class B Class C
============================================================
==================== <S> <C>
<C> <C>
New York Money Market $937,374,396
- -- --
- ------------------------------------------------------------
- -------------------New York
506,575,357 $193,034,489 $10,216,822
============================================================
==================== </TABLE>
Transactions in shares of each class were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1997 March 31, 1996
New York ---------------------
- ----------- --------------------------------Money
Market Portfolio Shares
Amount Shares Amount
============================================================
================================================== <S>
<C> <C> <C> <C>
Class A
Shares sold 3,558,756,790 $
3,558,756,790 3,174,176,362 $ 3,174,176,362
Shares issued on reinvestment 25,115,287
25,115,287 24,164,797 24,164,797
Shares redeemed (3,529,287,358)
(3,529,287,358) (3,024,242,064) (3,024,242,064)
- ------------------------------------------------------------
- --------------------------------------------------
Net Increase 54,584,719 $
54,584,719 174,099,095 $ 174,099,095
============================================================
==================================================
New York Portfolio
============================================================
==================================================
Class A
Shares sold 2,751,378 $
36,566,344 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 1,438,119
19,033,592 401,580 5,319,636
Shares redeemed (6,161,975)
(81,524,659) (1,927,282) (25,676,286)
============================================================
================================================== Net
Increase (Decrease) (1,972,478) $
(25,924,723) 35,849,823 $ 485,860,195
============================================================
==================================================
Class B
Shares sold 1,729,769 $
22,891,545 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 428,975
5,674,888 91,512 1,216,365
Shares redeemed (1,843,688)
(24,383,430) (299,760) (4,018,685)
- ------------------------------------------------------------
- -------------------------------------------------Net
Increase 315,056 $ 4,183,003
13,445,549 $ 181,771,865
============================================================
================================================== Class C
Shares sold 195,814 $
2,591,557 253,093 $ 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 25,705 339,643
18,201 239,954
Shares redeemed (134,481)
(1,773,361) (109,624) (1,453,538)
============================================================
================================================== Net
Increase 87,038 $ 1,157,839 218,669 $
2,928,568
============================================================
================================================== </TABLE>
32
============================================================
====================
Financial Highlights
============================================================
====================
For a share of beneficial interest outstanding throughout
each year:
<TABLE>
<CAPTION>
Class A Shares ------------------------------
- --------------------------------------------
New York Money Market Portfolio 1997 1996
1995 1994 1993(1)
============================================================
======================================================== <S>
<C> <C> <C> <C>
<C>
Net Asset Value, Beginning of Year $1.00 $1.00
$1.00 $1.00 $1.00
- ------------------------------------------------------------
- -------------------------------------------------------Net
investment income(2) 0.028 0.038 0.025
0.018 0.010
Dividends from net investment
income (0.028) (0.038)
(0.025) (0.018) (0.010)
- ------------------------------------------------------------
- -------------------------------------------------------Net
Asset Value, End of Year $1.00 $1.00 $1.00
$1.00 $1.00
- ------------------------------------------------------------
- -------------------------------------------------------Total
Return 2.85% 3.17% 2.49% 1.77%
1.01%++
- ------------------------------------------------------------
- -------------------------------------------------------Net
Assets, End of Year (000s) $937,115
$882,492 $708,391 $82,459 $59,510
- ------------------------------------------------------------
- -------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 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 period fom September 17, 1992 (inception date)
to March 31, 1993.
(2) The manager has waived all or part of its fees for the
year ended March 31,
1994 and the period ended March 31, 1993. If
such fees were not waived, the
per share decrease on net investment income
would have been $0.001 and
$0.001, respectively, and the expense ratios would have been
0.67% and
0.69% (annualized), respectively.
++ Total return is not annualized, as the result may
not be representative of
the total return for the year.
+ Annualized.
33
============================================================
====================
Financial Highlights (continued)
============================================================
====================
For a share of each class of beneficial interest outstanding
throughout each
year:
<TABLE>
<CAPTION>
Class A Shares ---------------
- ---------------------------------------------------------
New York Portfolio 1997 1996
1995(1) 1994 1993
============================================================
==================================================== <S>
<C> <C> <C> <C>
<C>
Net Asset Value, Beginning of Year $13.19 $12.83
$12.83 $13.25 $12.33
- ------------------------------------------------------------
- ---------------------------------------------------Income
From Operations:
Net investment income 0.74 0.75
0.76 0.78 0.81
Net realized and
unrealized gain (loss) (0.03) 0.35
0.01* (0.41) 0.92
- ------------------------------------------------------------
- ---------------------------------------------------Total
Income From Operations 0.71 1.10 0.77
0.37 1.73
- ------------------------------------------------------------
- ---------------------------------------------------Less
Distributions From:
Net investment income (0.74) (0.74)
(0.77) (0.79) (0.81)
- ------------------------------------------------------------
- ---------------------------------------------------Total
Distributions (0.74) (0.74) (0.77)
(0.79) (0.81)
- ------------------------------------------------------------
- ---------------------------------------------------Net Asset
Value, End of Year $13.16 $13.19 $12.83
$12.83 $13.25
- ------------------------------------------------------------
- ---------------------------------------------------Total
Return 5.48% 8.71% 6.32%
2.66% 14.48%
- ------------------------------------------------------------
- ---------------------------------------------------Net
Assets, End of Year (000s) $530,827 $557,809
$82,768 $70,065 $61,532
- ------------------------------------------------------------
- ---------------------------------------------------Ratios to
Average Net Assets:
Expenses(2) 0.75% 0.72%
0.63% 0.55% 0.55%
Net investment income 5.58 5.84
6.00 5.79 6.32
- ------------------------------------------------------------
- ---------------------------------------------------Portfolio
Turnover Rate 53% 36% 30% 20%
22%
============================================================
====================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares -----------------------------------
- -----
New York Portfolio 1997 1996
1995(3)
============================================================
===========================
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $13.18
$12.84 $11.96
- ------------------------------------------------------------
- --------------------------Income From Operations:
Net investment income 0.67 0.67
0.31
Net realized and unrealized gain (loss) (0.03)
0.35 0.86*
- ------------------------------------------------------------
- --------------------------Total Income From Operations
0.64 1.02 1.17
- ------------------------------------------------------------
- --------------------------Less Distributions From:
Net investment income (0.67)
(0.68) (0.29)
- ------------------------------------------------------------
- --------------------------Total Distributions
(0.67) (0.68) (0.29)
- ------------------------------------------------------------
- --------------------------Net Asset Value, End of Year
$13.15 $13.18 $12.84
- ------------------------------------------------------------
- ---------------------------
Total Return 4.96%
8.05% 9.92%++ ------------------------------------
- --------------------------------------------------Net
Assets, End of Year (000s) $184,916
$181,144 $3,813 -----------------------------------
- ---------------------------------------------------Ratios to
Average Net Assets:
Expenses(2) 1.27%
1.25% 1.27%+ Net investment income
5.06 5.45 5.76+
- ------------------------------------------------------------
- --------------------------Portfolio Turnover Rate
53% 36% 30%
============================================================
=========================== </TABLE>
(1) On October 10, 1994, the former Class C shares were
exchanged into Class A
shares.
(2) As a result of voluntary expense limitations, the
expense ratio will not
exceed 0.80% and 1.30% for Class A shares and
Class B shares, respectively.
(3) For the period from November 11, 1994 (inception date)
to March 31, 1995.
* 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.
34
============================================================
====================
Financial Highlights (continued)
============================================================
====================
For a share of each class of beneficial interest outstanding
throughout each
year:
<TABLE>
<CAPTION>
Class C Shares ------------------------------
- ------------------------------------
New York Portfolio 1997 1996 1995(1)
1994 1993(2)
============================================================
===================================================== <S>
<C> <C> <C> <C>
<C>
Net Asset Value, Beginning of Year $13.17 $12.83
$12.82 $13.24 $12.84
- ------------------------------------------------------------
- ----------------------------------------------------Income
From Operations:
Net investment income 0.66 0.66 0.68
0.68 0.15
Net realized and unrealized gain (loss) (0.02) 0.36
0.01* (0.40) 0.37
- ------------------------------------------------------------
- -----------------------------------------------------
Total Income From Operations 0.64 1.02 0.69
0.28 0.52
- ------------------------------------------------------------
- -----------------------------------------------------
Less Distributions From:
Net investment income (0.67) (0.68)
(0.68) (0.70) (0.12)
- ------------------------------------------------------------
- -----------------------------------------------------
Total Distributions (0.67) (0.68) (0.68)
(0.70) (0.12)
- ------------------------------------------------------------
- ----------------------------------------------------Net
Asset Value, End of Year $13.14 $13.17 $12.83
$12.82 $13.24
- ------------------------------------------------------------
- ----------------------------------------------------
Total Return 4.91% 8.07% 5.66%
1.96% 4.04%++
- ------------------------------------------------------------
- ----------------------------------------------------Net
Assets, End of Year (000s) $10,055 $8,931
$5,896 $5,461 $1,368
- ------------------------------------------------------------
- ----------------------------------------------------Ratios
to Average Net Assets:
Expenses(3) 1.32% 1.28% 1.28%
1.23% 1.23%+
Net investment income 5.01 5.02 5.38
4.98 5.37+
- ------------------------------------------------------------
- ----------------------------------------------------
Portfolio Turnover Rate 53% 36% 30% 20%
22%
============================================================
=====================================================
</TABLE>
(1) On November 7, 1994, the former Class B shares were
renamed Class C shares.
(2) For the period from January 8, 1993 (inception date) to
March 31, 1993.
(3) As a result of voluntary expense limitations, the
expense ratio will not
exceed 1.35% for Class C shares. * Includes the net per
share effect of
shareholder sales and redemptions activity during the
period, most of which occurred at a net asset value less
than the net asset value at the beginning of the period.
++ Total return is not annualized, as the result may not
be representative of
the total return for the year.
+ Annualized.
35
============================================================
====================
Independent Auditors' Report
============================================================
====================
To the Shareholders and Board of Trustees
of the New York Money Market and New York Portfolios
of Smith Barney Muni Funds:
We have audited the accompanying statements of assets and
liabilities,
including the schedules of investments, of the New York
Money Market and New York Portfolios of Smith Barney Muni
Funds as of March 31, 1997, the related statements of
operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of
the years in the four-year period then ended and the period
from September 17, 1992 (commencement of operations) to
March 31, 1993 with respect to the New York Money Market
Portfolio and each of the years in the five-year period then
ended with respect to the New York Portfolio. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial
highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of
March 31, 1997, by correspondence with the custodian. As to
securities purchased or sold but not received or delivered,
we performed other appropriate auditing procedures. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of the New York Money Market and New York
Portfolios of Smith Barney Muni Funds as of March 31, 1997,
the results of their operations for the year then ended, the
changes in their net assets for each of the years in the two-
year period then ended and the financial highlights for each
of the years in the four-year period then ended and the
period from September 17, 1992 to March 31, 1993 with
respect to the New York Money Market Portfolio and for each
of the years in the five-year period then ended with respect
to the New York Portfolio, in conformity with generally
accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 14, 1997
36
SMITH BARNEY
MUNI FUNDS
SMITH BARNEY ------------
A Member of TravelersGroup [LOGO]
TRUSTEES
Jessica M. Bibliowicz INVESTMENT MANAGER
Joseph H. Fleiss
Donald R. Foley Smith Barney Mutual Funds
Paul Hardin Management Inc.
Francis P. Martin, M.D.
Heath B. McLendon, Chairman DISTRIBUTOR
Roderick C. Rasmussen
John P. Toolan Smith Barney Inc.
C. Richard Youngdahl, Emeritus
CUSTODIAN
PNC Bank, N.A.
OFFICERS
SHAREHOLDER
Heath B. McLendon SERVICING AGENT
Chief Executive Officer
First Data Investor Services Group, Inc. Jessica M.
Bibliowicz P.O. BOX 9134
President Boston, MA 02205-9134
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Joseph Benevento
Vice President This report is submitted for the
general information of the
Irving P. David shareholders of Smith Barney Muni
Controller Funds - New York Money Market and
New York Portfolios. It is not Thomas M.
Reynolds authorized for distribution to
Controller prospective investors unless
accompanied or preceded by a
Christina T. Sydor current Prospectus for the
Secretary Portfolios, which contains
information concerning the
Portfolios' investment policies and expenses as well as
other pertinent information.
SMITH BARNEY MUNI FUNDS
388 Greenwich Street
New York, New York 10013
FD2397 5/97
- ------------------------------------------------------------
- -------------------ANNUAL REPORT
- ------------------------------------------------------------
- -------------------1997
1997
1997 [GRAPHIC APPEARS HERE]
1997
1997
Smith Barney
Muni Funds
National
Portfolio
------------------------------------
March 31, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future. Every day.
- ------------------
National Portfolio
- ------------------
Dear Shareholder:
We are pleased to provide you with the annual report for the
Smith Barney Muni Funds-National Portfolio for the year
ended March 31, 1997. 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.
Portfolio Performance Update
For the year ended March 31, 1997, the Class A shares of the
National Portfolio generated a total return of 5.41%. In
comparison, the Portfolio's Lipper Analytical Services, Inc.
peer group average posted a total return of 4.81% for the
same period. (Lipper Analytical Services, Inc. is an
independent fund tracking organization.)
Smith Barney Muni Funds-National Portfolio
Average Annual Total Returns -- Without Sales Charges*
<TABLE>
<CAPTION>
Class A Shares Lipper Peer Group Average -----------
- --- -------------------------
<S> <C> <C>
One-Year 5.41% 4.81%
Five-Year 7.49 6.67
Ten-Year 7.96 6.68
</TABLE>
Over the twelve months covered by this report, the National
Portfolio
distributed dividends totaling $0.79 per Class A share;
based on its net asset value (NAV) of $13.60 as of March 31,
1997 for Class A shares, this equates to an annualized
distribution rate of 5.81%. For an individual in the federal
income tax bracket of 36%, the Portfolio's tax free yield of
5.81% is equivalent to a taxable yield of 9.06%. (According
to the Internal Revenue Service, approximately 10% of U.S.
taxpayers fall into the 36% federal income tax bracket.)
Market and Economic Overview
The U.S. bond market experienced considerable volatility
throughout the year ended March 31, 1997. In early 1996, a
significant bond market sell-off was precipitated by a pick-
up in inflationary fears that was caused by unexpected
strength in the U.S. economy and concerns that the Federal
Reserve Board ("Fed") would tighten rates in response. In
retrospect, those concerns were unfounded because Fed
monetary policy did not change throughout 1996. In fact, as
U.S. economic growth moderated and concerns about Fed
tightening eased, bond prices improved significantly.
- -------------
* 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.
1
After his now-infamous remarks regarding "irrational
exuberance" in the stock market in December, Fed Chairman
Alan Greenspan continued to warn investors about the
possible re-emergence of higher inflation in the U.S.
economy. In response to a steady stream of strong economic
reports, the Fed raised the federal funds rate by 25 basis
points, or 0.25% in late March of this year. (The federal
funds rate is the interest rate banks charge each other for
overnight loans and is a closely watched indicator of the
direction of interest rates.)
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
emphasize income rather than seeking total return through
capital gains. It is noteworthy that the Portfolio's
superior long-term total return performance has been
accomplished with minimal capital gains distributions. After-
tax total returns are what really counts for municipal bond
investors. (Of course, past performance is no guarantee of
future results.) In addition, as a general rule, we pay
closer 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 past year, the Portfolio retained its high-
quality orientation, broad sector diversification and good
call protection. As of March 31, 1997, the National
Portfolio's average weighted maturity was approximately 19
years, and approximately 97% of the Portfolio's holdings
were rated investment grade (BBB/Baa and higher) by either
Standard and Poor's Rating Service or Moody's Investors
Service, Inc., with approximately 41% of the Portfolio's
investments rated AAA. (Standard and Poor's Rating Service
and Moody's Investor Services, Inc. are two major credit
reporting and bond rating agencies.) The Portfolio's largest
holdings are concentrated in hospital bonds (14.9%), single-
family mortgage bonds (8.8%), escrowed to maturity bonds
(8.7%) and pollution control bonds (8.7%).
Municipal Bond Outlook
The U.S. economy appears to be strengthening. Although some
analysts estimate U.S. economic growth at a 4% annual rate,
we believe growth will most likely level off at around a
3.5% annual range. In our view, this higher domestic
economic growth will undoubtedly put pressure on interest
rates. In fact, we have already seen recent yields on 30
year U.S. treasury bonds climb above the 7.0% mark. We
expect that the benchmark 30 year bond is entering a
2
new trading range of 7.0% to 7.25% and that should continue
to exert some upward pressure on municipal market yields.
While a stronger U.S. economy could cause new wage pressures
to rise, it is unclear whether these trends will result in a
squeeze on corporate profits and cause prices to rise as
well.
In our opinion, global competition has kept wages and prices
down. In addition, we expect continued vigilance on the part
of the Fed to contain any possible signs of inflation and
additional Fed tightening of monetary policy cannot be
discounted.
However, we remain positive on the municipal bond market in
the months ahead. In fact, we view the recent rise in market
yields as an opportunity to extend the Portfolio's call
protection without sacrificing a lot of coupon income or
substantially increasing its downside risk. In our opinion,
supply and demand, ongoing Fed vigilance and attractive
after-tax returns continue to make a compelling case for
municipal bonds.
In closing, we would like to thank you for investing in
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 Vice President
April 11, 1997
3
<TABLE>
<CAPTION>
============================================================
==================== Historical Performance -- Class A
Shares
============================================================
====================
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends
Distributions Returns(1)
============================================================
==================== <S> <C> <C> <C> <C>
<C>
3/31/97 $13.67 $13.60 $0.79 $0.00 5.41%
- ------------------------------------------------------------
- -------------------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)
============================================================
==================== Total
$8.80 $0.26
============================================================
==================== </TABLE>
<TABLE>
<CAPTION>
============================================================
==================== Historical Performance -- Class B
Shares
============================================================
====================
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends
Distributions Returns(1)
============================================================
==================== <S> <C> <C> <C> <C>
<C>
3/31/97 $13.67 $13.61 $0.72 $0.00 4.95%
- ------------------------------------------------------------
- -------------------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
$1.78 $0.00
============================================================
==================== </TABLE>
<TABLE>
<CAPTION>
============================================================
==================== Historical Performance -- Class C
Shares
============================================================
====================
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends
Distributions Returns(1)
============================================================
==================== <S> <C> <C>
<C> <C> <C>
3/31/97 $13.65 $13.59 $0.71 $0.00
4.90%
- ------------------------------------------------------------
- -------------------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 $3.16 $0.06
============================================================
==================== </TABLE>
It is the Fund's policy to distribute dividends monthly and
capital gains, if any, annually.
4
<TABLE>
<CAPTION>
============================================================
==================== Average Annual Total Return
============================================================
====================
Without Sales Charge(1)
- -----------------------------------Class A Class B
Class C
============================================================
==================== <S> <C> <C>
<C>
Year Ended 3/31/97 5.41% 4.95% 4.90%
============================================================
==================== Five Years Ended 3/31/97 7.49
N/A N/A
- ------------------------------------------------------------
- -------------------Ten Years Ended 3/31/97 7.96
N/A N/A
- ------------------------------------------------------------
- -------------------Inception* through 3/31/97 7.92
9.79 5.96
============================================================
==================== <CAPTION>
With Sales Charge(2) ------------------------
- -----------Class A Class B Class C
============================================================
==================== <S> <C> <C>
<C>
Year Ended 3/31/97 1.19% 0.45% 3.90%
============================================================
==================== Five Years Ended 3/31/97 6.61
N/A N/A
- ------------------------------------------------------------
- -------------------Ten Years Ended 3/31/97 7.25
N/A N/A
- ------------------------------------------------------------
- -------------------Inception* through 3/31/97 7.50
8.69 5.96
============================================================
==================== </TABLE>
<TABLE>
<CAPTION>
============================================================
==================== Cumulative Total Return
============================================================
====================
Without Sales Charge(1)
============================================================
==================== <S> <C>
Class A (3/31/87 through 3/31/97)
109.75%
- ------------------------------------------------------------
- -------------------Class B (Inception* through 3/31/97)
25.10
- ------------------------------------------------------------
- -------------------Class C (Inception* through 3/31/97)
27.78
============================================================
==================== </TABLE>
(1) Assumes reinvestment of all dividends and capital gain
distributions at net asset value and does not reflect the
deduction of the applicable sales charge with respect to
Class A shares or the applicable contingent deferred sales
charges ("CDSC") with respect to Class B and Class C shares.
(2) Assumes reinvestment of all dividends and capital gain
distributions at net asset value. In addition, Class A
shares reflect the deduction of the maximum initial sales
charge of 4.00% and Class B shares reflect the deduction of
a 4.50% CDSC, which applies if shares are redeemed 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
============================================================
==================== Historical Performance (unaudited)
============================================================
====================
Growth of $10,000 Invested in Class A Shares of
the National Portfolio vs.
Lehman Long Bond Index+ -
- ------------------------------------------------------------
- ------------------
March 1987 -- March 1997
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE]
National Portfolio Lehman Long Bond Index ---------
- --------- ----------------------
<S> <C> <C>
3/87 $ 9,600 $ 10,000
3/88 9,481 10,154
3/89 10,484 11,224
3/90 11,452 12,470
3/91 12,464 13,649
3/92 13,822 15,202
3/93 15,709 17,428
3/94 16,166 17,627
3/95 17,172 19,154
3/96 18,689 20,914
3/97 19,700 22,232
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class
A shares on March
31, 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 (at net asset value) through March 31,
1997. 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 as 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
<TABLE>
<CAPTION>
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March 31, 1997
============================================================
===================================
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
===================================
<C> <C> <S> <C>
Education -- 5.4%
$5,000,000 AAA Chicago, IL Board of Education Lease
Certificates,
Series A, Refunding, MBIA-
Insured, 6.000% due 1/1/20 $ 5,087,500
3,310,000 AAA Cook & Dupage County, IL High School
District,
zero coupon due 12/1/12
1,315,725
1,000,000 Aaa* Joshua, TX Independent School District,
Series C,
PSFG, 5.450% due 2/15/16
967,500
2,000,000 Aa* Nebraska Higher Education Loan Program
Inc.,
Subseries A-5A, 6.200% due
6/1/13(a) 1,990,000
1,500,000 Baa3* New Hampshire Higher Education & Health,
Brewster
Academy, 6.750% due 6/1/25
1,500,000
1,500,000 BBB+ New York State Dormitory Authority
Revenue, State
University Educational
Facilities, Series B,
7.500% due 5/15/11
1,736,250
Noblesville, IN High School Building
Corp., AMBAC-Insured:
2,600,000 AAA Zero coupon due 2/15/17
786,500
4,040,000 AAA Zero coupon due 2/15/18
1,151,400
2,500,000 AAA Saddleback Valley University School
District,
Revenue, California Public
Financing Authority, Special
Tax Series A, FSA-Insured,
zero coupon due 9/1/20 606,250
Texas State Higher Education Coordinating Board,
College Student Loan Revenue:
2,545,000 A* 7.450% due 10/1/06(a)
2,669,069
360,000 A* 7.700% due 10/1/25(a)
374,400
1,000,000 AAA University of Pittsburgh Capital
Projects,
The Commonwealth System of Higher Education,
FGIC-Insured, 5.125% due
6/1/27 897,500
1,000,000 AAA Utah Student Loan Revenue, Series 1991F,
AMBAC-Insured,
7.450% due 11/1/08(a)
1,052,500
- ------------------------------------------------------------
- ----------------------------------20,134,594
- ------------------------------------------------------------
- ----------------------------------Escrowed to Maturity(b)
8.7%
835,000 AAA Boston, MA Water & Sewer Revenue, Series
A,
10.875% due 1/1/09
1,131,425
1,135,000 AAA Douglas County, NE Hospital Authority
No. 2,
Bergan Mercy, 9.500% due
7/1/10 1,447,125
1,695,000 AAA Fairmont, WV Virginia Water & Sewer
Revenue,
9.250% due 11/1/11
2,110,275
25,135,000 AAA Illinois Development Finance Authority,
Retirement Housing
Revenue, Regency Park, Series
B, (Escrowed to Maturity
with Refco Strips), zero
coupon due 7/15/25 3,613,156
5,685,000 AAA Indiana Bond Bank, AMBAC-Insured,
9.750% due 8/1/09(c) 7,305,225
5,000,000 AAA Labette County, KS Single-Family
Mortgage Revenue,
Series A, zero coupon due
12/1/14 1,781,250
1,225,000 AAA New Jersey Turnpike Authority, 10.375%
due 1/1/03 1,442,438
1,970,000 AAA Ohio State Water Development Authority
Revenue,
Safe Water, Series 2, 9.375%
due 12/1/10(c) 2,398,475
</TABLE>
See Notes to Financial Statements
7
<TABLE>
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(continued)
March 31, 1997
============================================================
===================================
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Escrowed to Maturity(b) -- 8.7% (continued)
$1,000,000 AAA Philadelphia Hospital & Higher Education
Facility Authority,
Presbyterian Medical Center,
6.650% due 12/1/19 $ 1,100,000
3,000,000 AAA Port Everglades, FL, 7.125% due 11/1/16
3,446,250
4,000,000 AAA Richmond County, GA Development
Authority,
Sub-Series C, zero coupon due
12/1/21 745,000
3,985,000 AAA Riverside County, CA Single-Family
Mortgage Revenue,
Series 89A, GNMA-
Collateralized, 7.800% due 5/1/21(a) 4,861,700
895,000 AAA Weber County, UT Hospital Revenue, St.
Benedict's
Hospital, 10.000% due 3/1/10
1,134,413
- ------------------------------------------------------------
- ----------------------------------32,516,732
- ------------------------------------------------------------
- ----------------------------------Finance -- 0.9%
3,000,000 A Pennsylvania Finance Authority, Beaver County
Municipal
Capital Improvements Program, Societe Generale
GIC-Insured, 6.600% due
11/1/09 3,172,500
- ------------------------------------------------------------
- ----------------------------------General Obligation -- 1.2%
2,000,000 AAA Berks County, PA GO, MVRICS, FGIC-
Insured,
8.790% due 11/10/20(d)
2,202,500
1,500,000 AAA Hawaii State GO, Unlimited, FGIC-
Insured,
5.250% due 3/1/17
1,400,625
740,000 BBB+ New York City GO, Series D, 7.500% due
2/1/16 812,150
- ------------------------------------------------------------
- ----------------------------------4,415,275
- ------------------------------------------------------------
- ----------------------------------Hospital -- 14.9%
500,000 AAA Allegheny County Hospital Development
Authority,
Children's Hospital of Pittsburgh, MBIA-Insured,
5.300% due 7/1/26
453,750
1,000,000 AAA Boston, MA Industrial Development
Financing Authority,
Alzheimer's Center Project,
FHA-Insured,
6.000% due 2/1/37
975,000
1,000,000 AAA Clarke County, GA Hospital Authority
Revenue COP,
(Athens Regional Medical
Center Project),
MBIA-Insured, 5.000% due
1/1/27 881,250
Colorado Health Facilities Authority
Hospital Revenue Bonds:
2,000,000 BBB Rocky Mountain Adventist
Health, Series 1993,
6.625% due 2/1/13
2,047,500
1,000,000 BBB Vail Valley Medical Center, 6.500%
due 1/15/13 1,012,500
3,500,000 A1* Elkhart County, IN Hospital Authority
Revenue,
Elkhart General Hospital
Insured, 7.000% due
7/1/123,692,500 Harris County, TX Health Facilities
Development Corp.:
2,000,000 A* Memorial Hospital Systems Project,
7.125% due 6/1/15 2,197,500
2,000,000 AA Sisters of Charity of the Incarnate
Word,
7.100% due 7/1/21
2,162,500
Illinois Health Facilities Authority
Hospital Revenue:
937,000 AAA Community Provider Pooled Loan
Program,
CGIC-Insured, 7.350% due
8/15/10 1,037,727
</TABLE>
See Notes to Financial Statements
8
<TABLE>
<CAPTION>
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(continued) March 31, 1997
============================================================
=================================== FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Hospital -- 14.9% (continued)
$3,500,000 A- Mercy Hospital and Medical Center,
7.000% due 1/1/07 $ 3,701,250
1,000,000 AAA Methodist Health System,
Series B, AMBAC-Insured,
RIBS, Variable Rate,
10.774% due 5/18/21(d) 1,140,000
4,000,000 AAA Rush-Presbyterian St. Luke's
Medical Center, INFLOS,
MBIA-Insured, Variable
Rate, 9.838% due 10/1/24(d) 4,545,000
1,000,000 AAA King County, WA Public Hospital
District, Hospital Facilities
Revenue, (Valley Medical Center), AMBAC-Insured,
5.250% due 9/1/15
932,500
900,000 BBB+ Klamath Falls, OR Inter-Community
Hospital Merle West,
7.100% due 9/1/24
948,375
5,000,000 BBB Louisiana Public Facilities Authority
Revenue, (General
Health Systems Project),
6.800% due 11/1/16 5,068,750
1,000,000 AAA Massachusetts State Health and Education
Facilities
Authority Revenue, St.
Elizabeth Hospital, LEVRRS,
FSA-Insured, 10.020% due
8/15/21(d) 1,122,500
5,000,000 AAA Metro Government, TN Health & Education,
AMBAC-Insured, 6.000% due
12/1/19 5,131,250
4,835,000 AA Missouri State Health & Educational
Facilities Authority,
BJC Health Systems, 6.750% due
5/15/13 5,397,069
450,000 BBB+ New York State Medical Care Facilities
Financing Agency,
Long Term Health Care, Medical Health Services,
Series 91B, 7.400% due 2/15/18
493,875
1,000,000 AAA Northeastern, PA Hospital & Education
Authority Revenue,
Wyoming Valley Health Care,
Series A, AMBAC-Insured,
5.250% due 1/1/26
902,500
1,000,000 Aaa* Reynoldsburg, OH Health Care Facilities
Revenue,
(Wesley Ridge Project), GNMA-Collateralized,
6.150% due 10/20/38
977,500
1,350,000 Aaa* Rhode Island State Health & Education
Building Corp.
Revenue, Lifespan Obligation Group, MBIA-Insured,
5.250% due 5/15/26
1,223,438
1,250,000 AAA Richland County, SC Hospital Revenue
Bonds, Community
Provider Pooled Loan, CGIC-
Insured, 7.125% due 7/1/17 1,387,500
1,000,000 A- South Fork, PA Municipal Authority Hospital
Revenue,
(Lee Hospital Project), Series
A, 5.500% due 7/1/23 891,250
2,375,000 AA- Vermont Educational & Health Building
Finance Agency,
H. Porter, FHA-Insured, 7.100%
due 2/1/31 2,508,595
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(c)
1,603,125
1,300,000 AAA Washington State Health, Sisters of
Providence,
FGIC-Insured, 6.375% due
10/1/09 1,400,750
</TABLE>
See Notes to Financial Statements
9
<TABLE>
<CAPTION>
============================================================
=================================== Schedule of Investments
(continued)
March 31, 1997
============================================================
===================================
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Hospital -- 14.9% (continued)
$2,000,000 AAA Wisconsin State Health & Educational
Facilities Authority
Revenue, Waukesha Memorial Hospital, Series A,
AMBAC-Insured, 5.250% due
8/15/19 $ 1,820,000 --------------
- ------------------------------------------------------------
- --------------------
55,655,454
- ------------------------------------------------------------
- ----------------------------------Housing: Multi-Family --
6.5%
300,000 A Atlanta, GA Urban Multi-Family Housing,
Cascade Pines,
6.250% due 9/1/10(a)
300,750
1,500,000 A+ Illinois Housing Development Authority
Refunding,
Multi-Family Housing, Series
91A, 8.125% due 7/1/10 1,584,375
1,500,000 AA- Indiana State HFA, Multi-Family Housing
Mortgage Revenue,
Hunters Run, FHA-Insured,
7.250% due 5/1/18(a) 1,586,250
5,000,000 Aa* Iowa Finance Authority, Prestwick
Apartments, FHA-Insured,
7.500% due 12/1/36(a)
5,831,250
1,000,000 A King County, WA Housing Authority Revenue,
Series A,
6.800% due 3/1/26
1,020,000
Massachusetts State HFA, Multi-Family
Residential Housing,
Series A, FHA-Insured:
1,995,000 A+ 8.800% due 8/1/21(a)
2,092,615
2,000,000 A+ 7.800% due 8/1/22(a)
2,102,500
1,955,000 AAA Mohave County, AZ Industrial Development
Agency,
Multi-Family Housing, Copper Ridge Apartments,
FHA-Insured, 7.375% due
4/1/32(a) 2,086,963
1,250,000 AAA Nevada Housing Division, Multi-Unit
Housing, Saratoga
Palms, FNMA-Collateralized,
6.350% due 10/1/28(a) 1,259,375
500,000 A1* Portland, OR Multi-Family Housing,
6.250% due 5/1/12(a) 505,625
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* Rogers County, OK Housing Finance
Authority,
Multi-Family Revenue, FNMA-
Collateralized, Series A,
FHA-Insured, 7.750% due 8/1/23
1,105,000
2,352,000 AAA Seattle Housing Authority, Low Income
Housing Revenue,
GNMA-Collateralized, 7.400%
due 11/20/36 2,575,440
1,000,000 AA Texas State Housing, 6.450% due 12/1/20(a)
1,022,500
- ------------------------------------------------------------
- ----------------------------------24,093,893
- ------------------------------------------------------------
- ----------------------------------Housing: Single-Family --
8.8%
170,000 AAA Adams County, CO Multi-County Single-
Family Mortgage
Revenue, Series 86B, GNMA-Collateralized, 9.250%
due 11/1/17(a) 173,274
295,000 AAA Alaska State Housing Finance Corp., Home
Mortgage,
Single-Family Revenue, GNMA/FNMA-Collateralized,
8.750% due 12/1/16
303,850
</TABLE>
See Notes to Financial Statements.
10
<TABLE>
<CAPTION>
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(continued) March 31, 1997
============================================================
=================================== FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Housing: Single-Family -- 8.8% (continued)
$ 650,000 AAA Arkansas Housing Development, Single-
Family Mortgage
Revenue, Series A, GNMA-
Collateralized,
7.400% due 9/1/23(a)
$ 678,438
610,000 Aaa* Aurora Kane & Dupage, IL Single-Family
Mortgage Revenue,
Series A, 7.950% due
10/1/25(a) 671,763
1,405,000 Aa2* Colorado HFA, Single-Family Housing
Revenue, Series B1,
7.900% due 12/1/25
1,561,306
1,060,000 Aa2* Colorado HFA, Single-Family Program
Refunding, Senior
Bonds, 1994 Series D-1, 8.000%
due 12/1/24 1,176,600
4,625,000 AAA Cowley & Shawnee Counties, KS Mortgage
Revenue,
Series B, AMBAC-Insured, GNMA-Collateralized,
zero coupon due 6/1/22(a)
664,844
770,000 AAA District of Columbia HFA, Collateralized
Revenue,
Single-Family, Series 90A,
GNMA, FHLMC &
FNMA-Collateralized, 8.100%
due 12/1/23(a) 810,425
710,000 AAA Fort Worth, TX Housing Finance Corp.,
Single-Family
Mortgage Revenue, Series A, GNMA-Collateralized,
zero coupon due 6/1/21
102,950
1,280,000 AA Idaho Housing Agency, Single-Family Mortgage,
Series C-2, 7.900% due
1/1/22(a) 1,337,600
1,065,000 Aa* Illinois Housing Development Authority,
Residential
Mortgage Revenue, Series 89A,
7.400% due 2/1/20(a) 1,091,625
740,000 A1* Labette County, KS Single-Family
Mortgage Revenue
Refunding, Series A, 8.400%
due 12/1/11 772,375
1,845,000 Aa* Maryland State Community Development
Administration,
Single-Family Mortgage Revenue, FHA-Insured,
7.450% due 4/1/32(a)
1,914,187
Missouri State Housing Development
Community
Mortgage Revenue:
645,000 AAA GNMA-Collateralized,
Series A, zero coupon due 7/1/23 95,944
1,000,000 AAA Series C, 7.450% due
9/1/27(a) 1,105,000
2,830,043 AAA Montgomery County, TX Housing Finance
Corp.,
Single-Family Mortgage Revenue, MBIA-Insured,
zero coupon due 9/1/15
374,981
Nebraska Investments Finance Authority:
700,000 AAA GNMA-Collateralized, RIBS,
Variable Rate,
8.696% due
9/15/23(a)(c)(d) 746,375
500,000 AAA Single-Family Mortgage
Revenue,GNMA Mortgage Backed
Securities Program, 1990
Series 3, RIBS, Variable Rate,
10.427% due 9/10/30(a)(d)
549,375
1,689,189 AA Nevada Housing Development Single-Family
Mortgage
Revenue, Series 1983 B, FHA-Insured, zero coupon
due 4/1/15
272,382
1,790,000 Aa* New Hampshire State HFA, Single-Family
Residential
Mortgage, 7.250% due 7/1/15(a)
1,857,125
</TABLE>
See Notes to Financial Statements.
11
<TABLE>
<CAPTION>
============================================================
=================================== Schedule of Investments
(continued)
March 31, 1997
============================================================
===================================
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Housing: Single-Family -- 8.8% (continued)
$ 490,000 Aa* Oregon State Housing & Community
Services Department,
Mortgage Revenue, Single-Family Mortgage Program,
Series D, 6.500% due 7/1/24(a)
$ 502,863
210,000 BBB- Panhandle, TX Regional Housing Finance
Corp., Single-
Family Mortgage Revenue,
10.375% due 3/1/09 216,038
1,000,000 AA+ Pennsylvania HFA, Single-Family Mortgage
Revenue,
Series 39B, 6.875% due
10/1/24(a) 1,048,750
725,000 AAA Prince Georges County, MD Housing
Authority, Single-
Family Mortage Revenue Refunding, Series A,
GNMA-Collateralized, 8.000%
due 1/1/17 763,062
3,625,000 AAA Reno County, KS Single-Family Mortgage
Revenue,
Series A, AMBAC-Insured, zero
coupon due 12/1/14 502,969
Rhode Island Housing & Mortgage Financing Corp.:
1,500,000 AA+ Home Ownership Opportunity
Bonds, Series 8,
INFLOS, Variable Rate,
10.276% due 4/1/24(a)(d) 1,612,500
1,410,000 AA+ Home Ownership, Series 88-ID, 7.875%
due 10/1/21(a) 1,468,162
2,350,000 AAA South Dakota Housing Development
Authority, Home
Ownership Mortgage Board,
Series C,
7.300% due 5/1/24(a)
2,432,250
655,555 A1* St. Bernard Parish, LA Home Mortgage
Authority,
Single-Family Mortgage Revenue
Refunding, Series A,
8.000% due 3/25/12
680,138
950,000 Aa* Tennessee Housing Development Authority,
Home
Ownership Bonds, Series H,
7.825% due 7/1/15(a) 969,000
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) 1,052,500
Utah HFA, Single-Family Mortgage
Revenue:
830,000 AA 7.300% due 7/1/16
868,388
555,000 AA FHA-Insured, 9.000% due
1/1/19(a)(c) 574,425
3,000,000 AA+ Virginia State Housing Development
Authority,
Commonwealth Mortgage, Series
A, 7.150% due 1/1/33 3,112,500
715,000 AA Wyoming Community Development Authority,
FHA-Insured, 8.1250% due
6/1/21(a) 748,069
- ------------------------------------------------------------
- ----------------------------------32,812,033
- ------------------------------------------------------------
- ----------------------------------Industrial Development --
5.9%
1,000,000 Baa3* Delaware County, PA Authority Revenue,
(Elwyn Inc.
Project), 8.350% due 6/1/15
1,118,750
2,500,000 BBB+ Greenville County, SC Industrial
Revenue, (Lockheed
Aeromod Center Inc. Project),
7.100% due 11/1/11(a) 2,665,625
850,000 AA Hempstead, NY IDA & IDR Bonds, (1990
Nassau District
Energy Corp. Project), LOC Toronto Dominion,
7.750% due 9/15/15(a)
859,902
2,650,000 A+ Iowa Finance Authority, (Governor Square
Project),
7.250% due 4/1/02
2,795,750
</TABLE>
See Notes to Financial Statements.
12
<TABLE>
<CAPTION>
============================================================
=================================== Schedule of Investments
(continued)
March 31, 1997
============================================================
===================================
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Industrial Development -- 5.9% (continued)
New York City IDA:
$2,000,000 NR Industrial Revenue, (Visy Paper
Inc. Project),
7.950% due 1/1/28(a)
$ 2,125,000
1,500,000 Baa2* Special Facilities Revenue,
(American Airlines Project),
7.750% due 7/1/19(a)
1,578,750
3,000,000 AA Oklahoma City Industrial & Culture
Facilities,
6.750% due 9/15/17(a)
3,078,750
3,440,000 BBB- Port Corpus Christi, TX Industrial
Development Corp.
Revenue, 10.250% due 6/1/17
3,572,337
1,000,000 A Rensselaer County, NY IDA, Albany
International Corp.,
7.550% due 6/1/07(a)
1,097,500
1,000,000 A3* Tucson Airport Authority Inc., Special
Facilities Revenue
Bonds, Lockheed Aeromod Center Inc., Series 1990,
8.700% due 9/1/19(a)
1,123,750
2,000,000 A West Chicago IDR, (Leggett & Platt Inc.
Project),
6.900% due 9/1/24(a)
2,067,500
- ------------------------------------------------------------
- ----------------------------------22,083,614
- ------------------------------------------------------------
- ----------------------------------Life Care -- 1.9%
2,000,000 Aa* Hamilton County, OH Mortgage Revenue,
Judson Care
Center, Series A, FHA-Insured,
6.500% due 8/1/26 2,040,000
2,500,000 BBB Illinois Development Finance Authority
Health Facilities,
Community Living, 7.125% due
3/1/10 2,565,625
1,000,000 Baa1* Indianapolis Industrial EDR, 7.625% due
10/1/22 1,058,750
1,400,000 AAA Massachusetts State Industrial Finance
Agency Revenue,
Briscoe House Assisted Living, FHA-Insured,
7.125% due 2/1/36(a)
1,461,250
- ------------------------------------------------------------
- ----------------------------------7,125,625
- ------------------------------------------------------------
- ----------------------------------Miscellaneous -- 4.0%
4,000,000 BBB- Clarksville, TN Natural Gas Acqusition
Corp., Series A,
7.500% due 11/1/04
4,140,000
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
2,175,000
1,500,000 A Indiana Bond Bank Guaranty, State Revolving
Fund,
Series B, 6.875% due 2/1/12
1,635,000
125,000 A* Maryland State Community Development
Administration,
Home & Energy Loan Revenue,
9.500% due 6/1/07 125,236
400,000 A* Oregon State Bond Bank, Economic
Development
Department, Series 1, 6.700%
due 1/1/15 429,000
1,330,000 NR Seward, AK (Sealife Center Project),
7.650% due 10/1/16 1,346,625
2,500,000 A- Summit County, CO Sports Facilities Refunding
Revenue,
(Keystone Resorts Management
Inc. Project), Ralston
Purina Company Guaranteed,
7.750% due 9/1/06 2,850,000
- ------------------------------------------------------------
- ----------------------------------14,855,861
- ------------------------------------------------------------
- ----------------------------------</TABLE>
See Notes to Financial Statements.
13
<TABLE>
<CAPTION>
============================================================
=================================== Schedule of Investments
(continued)
March 31, 1997
============================================================
===================================
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Pollution Control -- 8.7%
$1,500,000 BBB+ Brazos River Authority, TX Utility
Electric,
8.250% due 1/1/19(a)
$ 1,599,375
5,000,000 Aa3* Brazos River, TX Navigation District
PCR, (BASF Corp.
Project), 6.750% due 2/1/10
5,625,000
Lancaster, PA Solid Waste Resource
Recovery:
1,000,000 A* 7.875% due 12/15/09
1,037,500
1,500,000 A* Series A, 8.500% due 12/15/10(a)
1,576,875
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)(c)
2,160,000
1,500,000 AAA Monroe County, MI PCR, (Detroit Edison
Co. Project),
7.650% due 9/1/20(a)
1,644,375
2,000,000 AA Mount Vernon, IN PCR, Southern Indiana Gas,
7.250% due 3/1/14
2,165,000
935,000 NR New Jersey EDA Revenue, (Atlantic City
Sewer Project),
7.250% due 12/1/11(a)
1,015,644
1,500,000 AAA Ohio State Water Development Authority,
Pollution Control
Facilities Revenue, Cleveland
Electric, FGIC-Insured,
8.000% due 10/1/99(a)
1,606,875
1,850,000 A1* Richland, SC Solid Waste Facility,
(Union Camp Project),
7.125% due 9/1/21(a)
1,979,500
3,000,000 NR Rockdale County, GA Solid Waste Authority
Revenue,
7.500% due 1/1/26
3,116,250
1,945,000 BBB Saint Charles Parish, LA PCR, Union
Carbide,
7.350% due 11/1/22(a)
2,081,150
1,130,000 A- Southwestern Illinois Development Authority,
Solid Waste
Disposal Revenue, (Laclede Steel Co. Project),
8.500% due 8/1/20(a)
1,235,938
400,000 VMIG 1* St. Lucie County, FL Pollution
Control Revenue,
(Florida Power & Light Co.
Project),
4.000% due 3/1/27(e)
400,000
1,900,000 VMIG 1* Sweetwater County, WY Pollution Control
Revenue,
(Idaho Power Co. Project),
3.850% due 7/15/26(e) 1,900,000
3,200,000 BBB Sweetwater County, WY Solid Waste
Disposal Revenue,
(FMC Corp. Project), 7.000%
due 6/1/24(a) 3,372,000
- ------------------------------------------------------------
- ----------------------------------32,515,482
- ------------------------------------------------------------
- ----------------------------------Pre-Refunded(f) -- 8.7%
1,000,000 AAA Alton, IL Health Facility Revenue, FGIC-
Insured,
(Call 2/15/01 @ 102), 7.200%
due 2/15/21 1,101,250
1,500,000 AAA Boston, MA Boston City Hospital, FHA-
Insured,
(Call 8/15/00 @ 102), 7.625%
due 2/15/21 1,665,000
1,500,000 AAA Chattanooga-Hamilton County, TN Hospital
Authority
Revenue, FSA-Insured, (Call 2/25/00 @ 104),
10.367% due 5/25/21(d)
1,777,500
</TABLE>
See Notes to Financial Statements.
14
<TABLE>
<CAPTION>
============================================================
=================================== Schedule of Investments
(continued) March 31, 1997
============================================================
=================================== FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Pre-Refunded(f) -- 8.7% (continued)
$2,000,000 AAA Fairfax County, VA IDA, Series A, (Call
8/28/01 @ 104)
8.327% due 8/29/23(d)
$2,387,500
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
1,655,625
1,000,000 AAA Harris County, TX Toll Road, Senior Lien
Revenue,
(Call 8/1/98 @ 102), 8.125%
due 8/1/15 1,070,000
500,000 AAA Illinois Health Facility Authority
Revenue, United
Medical Center, (Call 7/1/03 @
100), 8.375% due 7/1/12
588,750
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
4,445,000
2,000,000 AAA Louisiana Public Facility Authority
Revenue, Tulane
University, Series A, (Call 5/15/98 @ 102),
8.200% due 5/15/18
2,122,500
1,000,000 AAA Michigan State Hospital Finance
Authority Revenue,
Sisters of Mercy, (Call
2/15/01 @ 102),
7.500% due 2/15/18
1,113,750
515,000 AAA New York City GO, Series D, (Call 2/1/02
@ 101.5),
7.500% due 2/1/16
579,375
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
1,105,000
2,000,000 AAA New York State Local Government
Assistance Corp.,
(Call 4/1/01 @ 102), 7.500%
due 4/1/20 2,232,500
1,170,000 AAA New York State Medical Care Facilities
Financing Agency
Long Term Health Care, Medical Health Services,
Series 91B, (Call 2/15/02 @
102), 7.400% due 2/15/18 1,314,786
North Carolina Eastern Municipal Power Agency, Power
System Revenue Refunding:
1,000,000 AAA Call 1/1/97 @ 100,
4.500% due 1/1/24 853,750
1,310,000 AAA Call 1/1/22 @ 100,
6.000% due 1/1/26 1,378,775
895,000 AAA Texas National Research Lab,
Superconducting Super
Collider, (Call 12/1/01 @
102), 7.100% due 12/1/21 994,567
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) 3,187,375
2,850,000 AAA Washington County, PA Hospital Authority
Revenue,
(Washington Hospital Project),
(Call 7/1/97 @ 101),
9.500% due 7/1/17(c)
2,915,977
- ------------------------------------------------------------
- ----------------------------------32,488,980
- ------------------------------------------------------------
- ----------------------------------</TABLE>
See Notes to Financial Statements.
15
<TABLE>
<CAPTION>
============================================================
=================================== Schedule of Investments
(continued)
March 31, 1997
============================================================
===================================
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Public Facilities -- 7.0%
$1,000,000 AAA Atlanta & Fulton County, GA Recreational
Authority
Revenue, MBIA-Insured, 5.375%
due 12/1/26 $ 926,250
2,500,000 A- Dekalb County, IN Redevelopment (Mini-Mill
Local Public
Improvement Project), 6.500%
due 1/15/14 2,590,625
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)
4,096,875
Indianapolis, IN Local Public
Improvement Bond Bank:
3,685,000 A+ Series 1992 D, 6.750% due 2/1/14
4,104,168
3,000,000 AA Series B, 6.000% due 1/1/13
3,131,250
3,600,000 AA- La Cross, WI Resource Recovery Revenue,
(Northern State Power
Project),
6.000% due 11/1/21(a)
3,618,000
1,095,000 BBB- Portland, TX Community Center Sales Tax
Gross
Revenue, 7.000% due 2/15/25
1,096,368
2,000,000 Baa1* Triborough Bridge & Tunnel Authority, NY
(Convention
Center Project), Series E,
7.250% due 1/1/10 2,225,000
3,960,000 A Tulsa, OK Public Facilities Authority, Lease
Payment
Revenue Refunding, Assembly
Center,
6.600% due 7/1/14
4,291,650
- ------------------------------------------------------------
- ----------------------------------26,080,186
- ------------------------------------------------------------
- ----------------------------------Tax Allocation -- 0.6%
1,000,000 AAA La Quinta, CA Redevelopment Agency, MBIA-
Insured,
7.300% due 9/1/12
1,180,000
1,000,000 Baa* Providence, RI Special Obligation, Tax
Increment,
Series D, 6.650% due 6/1/16
1,015,000
- ------------------------------------------------------------
- ----------------------------------2,195,000
- ------------------------------------------------------------
- ----------------------------------Transportation -- 7.9%
3,000,000 Baa2* Alliance Airport Authority Inc., TX
Special Facilities
Revenue, (American Airlines Inc. Project),
7.500% due 12/1/29 (a)
3,191,250
2,680,000 Baa* Arapahoe, CO Capital Improvement Highway
Revenue,
6.950% due 8/31/20
2,840,800
2,905,000 AAA Chicago, IL Midway Airport Revenue,
Series B,
MBIA-Insured, 5.625% due
1/1/29(a) 2,690,756
2,000,000 Baa2* Chicago, IL O'Hare International
Airport, Special Facility
Revenue, International Terminal, Series 1985A,
(American Airlines Inc.
Project), 7.875% due 11/1/25(a) 2,135,000
City and County of Denver, CO Airport
Systems Revenue:
3,500,000 BBB Series 1992B, 7.250% due 11/15/07(a)
3,745,000
1,000,000 BBB Series A, FGIC-Insured, 8.500%
due 11/15/23(a) 1,135,000
2,010,000 NR Connecticut Development Authority, Airport
Facilities
Revenue, 6.625% due 12/1/14(a)
2,025,075
</TABLE>
See Notes to Financial Statements.
16
<TABLE>
<CAPTION>
============================================================
=================================== Schedule of Investments
(continued) March 31, 1997
============================================================
=================================== FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Transportation -- 7.9% (continued)
New Hampshire State Turnpike Systems
Revenue
Refunding, FGIC-Insured:
$2,500,000 AAA 6.750% due 11/1/11
$ 2,762,500
1,000,000 AAA RIBS, Variable Rate, Series
C, 8.778% due 11/1/17(d) 1,193,750
1,000,000 A Puerto Rico Commonwealth Highway &
Transportation Authority, Highway Revenue,
Series Y, 5.000% due 7/1/36
853,750
Regional Transit Authority, Illinois:
2,000,000 AAA Series A, AMBAC-Insured,
6.400% due 6/1/12 2,137,500
1,045,000 AAA Series C, FGIC-Insured, 7.750%
due 6/1/20 1,304,944
3,240,000 AAA Rhode Island Port Authority & Economic
Development, Shepard Building, AMBAC-Insured,
6.750% due 6/1/25
3,483,000
- ------------------------------------------------------------
- ----------------------------------29,498,325
- ------------------------------------------------------------
- ----------------------------------Utilities -- 5.9%
3,000,000 AAA Brownsville, TX Utility System Revenue
Priority Refunding,
MBIA-Insured, 6.250% due
9/1/14 3,217,500
10,000,000 AAA Chelan County, WA Public Utility
District No. 1,
Capital Appreciation, Series A, MBIA-Insured,
zero coupon due 6/1/24
1,912,500
3,880,000 AAA Clark County, NV IDR, (Nevada Power
Company Project),
FGIC-Insured, 7.800% due
6/1/20(a) 4,292,250
1,500,000 AAA Georgia Municipal Electric Authority
Power Revenue,
Series EE, AMBAC-Insured,
7.250% due 1/1/24 1,794,375
2,500,000 A Municipal Electric Authority, Georgia Special
Obligation,
Fourth Crossover, Series X, (Project One),
6.500% due 1/1/12
2,693,750
1,000,000 A+ New York State Energy Research & Development,
(Con Edison Project A), 7.125%
due 12/1/29(a) 1,101,250
1,000,000 Baa1* North Carolina Eastern Municipal Power
Agency System
Revenue, Series B, 6.000% due
1/1/22 977,500
1,235,000 AAA Piedmont, SC Municipal Power Agency,
Electric Revenue
Refunding, FGIC-Insured,
6.750% due 1/1/20 1,392,463
4,250,000 Aaa* Washington State Public Power Supply
Revenue,
(Nuclear Project No. 2),
7.000% due 7/1/12 4,616,563
- ------------------------------------------------------------
- ----------------------------------21,998,151
- ------------------------------------------------------------
- ----------------------------------</TABLE>
See Notes to Financial Statements.
17
<TABLE>
<CAPTION>
============================================================
=================================== Schedule of Investments
(continued)
March 31, 1997
============================================================
===================================
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=================================== <C> <C> <S>
<C>
Water & Sewer -- 3.0%
$2,400,000 A Dauphin County, PA IDA, General Water Works
Corp.,
6.900% due 6/1/24(a)
$ 2,709,000
2,000,000 A Idaho State Water Resources Board, Water
Revenue,
Resource Development,
Borse Water Corp.,
7.250% due 12/1/21(a)
2,127,500
3,400,000 Aa1* Port of Umatilla, OR Water Project
Revenue,
Series 1994, LOC ABN AMRO
Bank,
6.650% due 8/1/22(a)
3,561,500
2,550,000 A- Trumbull County, OH Sewer Disposal Revenue,
(General Motors Corp.
Project), 6.750% due 7/1/14(a) 2,808,188
- ------------------------------------------------------------
- ----------------------------------11,206,188
- ------------------------------------------------------------
- ----------------------------------TOTAL INVESTMENTS -- 100%
(Cost-- $350,733,493**)
$372,847,893
============================================================
=================================== </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) Security segregated by Custodian for open purchase
commitment.
(d) Residual interest bonds-coupon varies inversely
with level of short-term
tax-exempt interest rates.
(e) Variable rate obligation payable at par on demand
at any time on no more
than seven days notice.
(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 19 and 20 for definitions of ratings and certain
security
descriptions.
See Notes to Financial Statements.
18
============================================================
==================== Bond Ratings
============================================================
====================
All ratings are by Standard & Poor's Ratings Service
("Standard & Poors"), 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.
19
============================================================
==================== 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
============================================================
====================
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 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 -- Financial Security Assurance
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
PSFG -- Permanent School Fund Guaranty
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
20
<TABLE>
<CAPTION>
============================================================
==================== Statement of Assets and Liabilities
March 31, 1997
============================================================
==================== <S>
<C>
ASSETS:
Investments, at value (Cost $350,733,493)
$ 372,847,893 Cash 87,638
Interest receivable
6,575,112 Receivable for securities sold
3,144,524 Receivable for Fund shares sold 25,518
- ------------------------------------------------------------
- -------------------Total Assets
382,680,685
- ------------------------------------------------------------
- -------------------LIABILITIES:
Payable for securities purchased
3,266,568 Payable for Fund shares purchased
164,760 Management fees payable
155,403 Distribution fees payable 22,213
Accrued expenses 85,222
- ------------------------------------------------------------
- -------------------Total Liabilities
3,694,166
- ------------------------------------------------------------
- -------------------Total Net Assets
$ 378,986,519
============================================================
==================== NET ASSETS:
Par value of shares of beneficial interest
$ 27,865
Capital paid in excess of par value
357,768,069 Undistributed net investment income
703,137 Accumulated net realized loss on security
transactions (1,626,952) Net unrealized
appreciation on investments
22,114,400
============================================================
==================== Total Net Assets
$ 378,986,519
============================================================
==================== Shares Outstanding:
Class A
25,835,550
- ------------------------------------------------------------
- ------------------
Class B
932,399
- ------------------------------------------------------------
- ------------------
Class C
1,096,879
- ------------------------------------------------------------
- ------------------
Net Asset Value:
Class A (and redemption price) $13.60
- ------------------------------------------------------------
- ------------------
Class B* $13.61
- ------------------------------------------------------------
- ------------------
Class C** $13.59
- ------------------------------------------------------------
- ------------------
Class A Maximium Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per
share) $14.17
============================================================
==================== </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.
21
<TABLE>
<CAPTION>
============================================================
==================== Statement of Operations
March 31, 1997
============================================================
==================== <S>
<C>
INVESTMENT INCOME:
Interest
$26,191,894
- ------------------------------------------------------------
- -------------------EXPENSES:
Management fees (Note 3)
1,780,788 Distribution fees (Note 3)
742,663 Registration fees
112,815
Shareholder and system servicing fees
105,241 Shareholder communications 70,080
Pricing service fees 27,601
Audit and legal 22,899
Custody 19,787
Trustees' fees 10,950
Other 19,280
- ------------------------------------------------------------
- -------------------Total Expenses
2,912,104
- ------------------------------------------------------------
- -------------------Net Investment Income
23,279,790 -------------------------------------------------
- ------------------------------REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales
153,098,015 Cost of securities sold
150,393,661
- ------------------------------------------------------------
- -------------------Net Realized Gain
2,704,354
- ------------------------------------------------------------
- -------------------Change in Net Unrealized Appreciation of
Investments:
Beginning of year
27,206,842 End of year
22,114,400
- ------------------------------------------------------------
- -------------------Decrease in Net Unrealized Appreciation
(5,092,442)
- ------------------------------------------------------------
- -------------------Net Loss on Investments
(2,388,088) ------------------------------------------------
- -------------------------------Increase in Net Assets From
Operations $20,891,702
============================================================
==================== </TABLE>
See Notes to Financial Statements.
22
<TABLE>
<CAPTION>
============================================================
==================== Statement of Changes in Net Assets
For the Years Ended March 31,
============================================================
==================== 1997 1996
============================================================
==================== <S> <C>
<C>
OPERATIONS:
Net investment income $ 23,279,790
$ 24,550,541 Net realized gain 2,704,354
1,579,865
Increase (decrease) in net unrealized
appreciation (5,092,442) 9,568,289
- ------------------------------------------------------------
- -------------------Increase in Net Assets From Operations
20,891,702 35,698,695
- ------------------------------------------------------------
- -------------------DISTRIBUTION TO
SHAREHOLDERS FROM (NOTE2):
Net investment income (22,691,231) (24,435,963)
- ------------------------------------------------------------
- -------------------Decrease in Net Assets From
Distributions to Shareholders (22,691,231)
(24,435,963)
- ------------------------------------------------------------
- -------------------FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 82,239,990
64,710,502
Net asset value of shares issued
for reinvestment of dividends 11,696,083
12,222,596
Cost of shares reacquired
(119,738,880) (108,474,584) -----------------------------
- --------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (25,802,807)
(31,541,486)
- ------------------------------------------------------------
- -------------------Decrease in Net Assets
(27,602,336) (20,278,754)
NET ASSETS:
Beginning of Year 406,588,855 426,867,609
- ------------------------------------------------------------
- -------------------End of Year*
$ 378,986,519 $ 406,588,855
============================================================
==================== * Includes undistributed net
investment income
of: $703,137 $114,578
============================================================
==================== </TABLE>
See Notes to Financial Statements.
23
============================================================
==================== Notes to Financial Statements
============================================================
====================
1. SIGNIFICANT ACCOUNTING POLICIES
The National Portfolio ("Portfolio") is a separate
investment portfolio of the Smith Barney Muni Funds
("Fund"). The Fund, a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as
amended, as a non-diversified, open-end management
investment company and consists of this Portfolio and eight
other separate investment portfolios: Florida, Georgia,
Limited Term, New York, Ohio, Pennsylvania, California Money
Market and New York Money Market Portfolios. The financial
statements and financial highlights for the other portfolios
are presented in separate annual reports.
The significant accounting policies consistently
followed by the Fund are: (a) 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 character of income and gains to be
distributed are determined in accordance with income tax
regulations which may differ from generally accepted
accounting principles; (i) 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 (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. 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.
24
============================================================
==================== Notes to Financial Statements
(continued)
============================================================
====================
Capital gains distributions, if any, are taxable to
shareholders, and are
declared and paid at least annually.
3. MANAGEMENT AGREEMENT AND 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 year ended March
31, 1997, SB received sales charges of approximately
$236,000 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 year
ended March 31, 1997, CDSCs paid to SB were approximately:
<TABLE>
<CAPTION>
Class A Class B Class C
============================================================
==================== <S> <C> <C>
<C>
CDSCs $1,000 $13,000 $6,000
============================================================
==================== </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 year ended March 31, 1997, total
Distribution Plan fees incurred were:
<TABLE>
<CAPTION>
Class A Class B Class C
============================================================
==================== <S> <C>
<C> <C>
Distribution Plan Fees $551,259 $80,225
$111,179
============================================================
==================== </TABLE>
All officers and two Trustees of the Fund are employees
of SB.
25
============================================================
==================== Notes to Financial Statements
(continued)
============================================================
====================
4. INVESTMENTS
During the year ended March 31, 1997, 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 $120,282,794
- ------------------------------------------------------------
- -------------------Sales 153,098,015
============================================================
==================== </TABLE>
At March 31, 1997, the aggregate gross unrealized
appreciation and depreciation of investments for Federal
income tax purposes was substantially as follows:
<TABLE>
============================================================
==================== <S> <C>
Gross unrealized appreciation $23,077,755
Gross unrealized depreciation (963,355)
- ------------------------------------------------------------
- -------------------Net unrealized appreciation
$22,114,400
============================================================
==================== </TABLE>
5. CAPITAL LOSS CARRYFORWARD
At March 31, 1997, the Portfolio had, for Federal income tax
purposes,
approximately $1,485,000 of loss carryforwards available to
offset future capital gains. To the extent that these
carryforward losses are used to offset capital gains, it is
probable that the gains so offset will not be distributed.
The amount and year of the expiration for each carryforward
loss is
indicated below:
<TABLE>
<CAPTION>
3/31/03 3/31/04
============================================================
=================== <S>
<C> <C> Carryforward Amounts
$1,445,000 $40,000
============================================================
=================== </TABLE>
6. SHARES OF BENEFICIAL INTEREST
At March 31, 1997, 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 March 31, 1997, total paid-in capital amounted to
the following for each class:
<TABLE>
<CAPTION>
Class A Class B Class C
============================================================
==================== <S> <C> <C> <C>
Total Paid-in Capital $330,061,821 $12,185,729
$15,548,384
============================================================
==================== </TABLE>
26
============================================================
==================== Notes to Financial Statements
(continued)
============================================================
====================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1997 March 31, 1996
-------------------- --------------------
Shares Amount Shares Amount
============================================================
==================== Class A
<S> <C> <C>
<C> <C>
Shares sold 5,705,109 $ 77,871,073 4,117,372
$ 56,693,521
Shares issued on
reinvestment 785,527 10,732,902
823,510 11,267,741
Shares redeemed (8,337,357) (113,957,473)
(7,388,331) (101,570,060)
- ------------------------------------------------------------
- -------------------Net Decrease (1,846,721)
$(25,353,498) (2,447,449) $ 33,608,798)
============================================================
==================== Class B
Shares sold 139,353 $ 1,871,437 410,533
$ 5,682,469
Shares issued on
reinvestment 29,337 427,323 24,745
339,516
Shares redeemed (84,709) (1,158,601)
(104,690) (1,438,128)
- ------------------------------------------------------------
- -------------------Net Increase 83,981 $ 1,140,159
330,588 $ 4,583,857
============================================================
==================== Class C
Shares sold 179,662 $ 2,497,480 170,117
$ 2,334,512
Shares issued on
reinvestment 42,703 535,858 45,027
615,339
Shares redeemed (338,272) (4,622,806)
(398,879) (5,466,396)
============================================================
==================== Net Decrease (115,907)
$ (1,589,468) (183,735) $ (2,516,545)
============================================================
==================== </TABLE>
27
============================================================
====================
Financial Highlights
============================================================
====================
For a share of each class of beneficial interest outstanding
throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1997 1996
1995(1) 1994 1993
============================================================
================================================== <S>
<C> <C> <C> <C>
<C> Net Asset Value,
Beginning of Year $13.67
$13.32 $13.35 $13.81 $12.95 -----
- ------------------------------------------------------------
- --------------------------------------------Income From
Operations:
Net investment income 0.81 0.81 0.82 0.85 0.88
Net realized and
unrealized gain (loss) (0.09) 0.35
(0.01) (0.39) 0.87
- ------------------------------------------------------------
- -------------------------------------------------Total
Income From Operations 0.72 1.16 0.81 0.46 1.75
- ------------------------------------------------------------
- -------------------------------------------------Less
Distributions From:
Net investment income (0.79) (0.81)
(0.84) (0.86) (0.89) Net realized gains
- -- -- -- (0.06)
- --
- ------------------------------------------------------------
- -------------------------------------------------Total
Distributions (0.79) (0.81)
(0.84) (0.92) (0.89) ---------------------
- ------------------------------------------------------------
- ----------------------------Net Asset Value, End of Year
$13.60 $13.67 $13.32 $13.35
$13.81 -----------------------------------------------------
- --------------------------------------------------------
Total Return 5.41% 8.83% 6.38% 3.17%
13.96%
- ------------------------------------------------------------
- -------------------------------------------------Net Assets,
End of Year (000s) $351,395 $378,421
$401,364 $412,681 $382,875 -------------------
- ------------------------------------------------------------
- ------------------------------Ratios to Average Net Assets:
Expenses 0.70% 0.70% 0.60% 0.52% 0.53%
Net investment income 5.92 5.88 6.30 6.05 6.58
- ------------------------------------------------------------
- -------------------------------------------------Portfolio
Turnover Rate 31% 27% 54% 42% 53%
============================================================
================================================== </TABLE>
(1) On October 10, 1994, the former Class C shares were
exchanged into Class A
shares.
28
============================================================
==================== Financial Highlights (continued)
============================================================
====================
For a share of each class of beneficial interest outstanding
throughout each year:
<TABLE>
<CAPTION>
Class B Shares 1997
1996 1995(1)
============================================================
==================== <S>
<C> <C> <C> Net Asset Value, Beginning of
Year $13.67 $13.33 $12.41 -----------
- ------------------------------------------------------------
- --------Income From Operations:
Net investment income 0.74 0.73 0.33
Net realized and unrealized gain (loss) (0.08)
0.35 0.91
- ------------------------------------------------------------
- -------------------Total Income From Operations 0.66 1.08
1.24
- ------------------------------------------------------------
- -------------------Less Distributions From:
Net investment income (0.72)
(0.74) (0.32) ------------------------------------------
- -------------------------------------Total Distributions
(0.72) (0.74) (0.32) -----------------------------
- --------------------------------------------------Net Asset
Value, End of Year $13.61 $13.67
$13.33 -----------------------------------------------------
- --------------------------Total Return 4.95% 8.26%
10.11%++
- ------------------------------------------------------------
- -------------------Net Assets, End of Year (000s)
$12,691 $11,605 $6,905 ----------------------------
- ---------------------------------------------------Ratios to
Average Net Assets:
Expenses 1.20% 1.19% 1.19%+
Net investment income 5.42 5.37 5.75+
- ------------------------------------------------------------
- -------------------Portfolio Turnover Rate 31% 27% 54%
============================================================
====================
</TABLE>
(1) 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.
29
============================================================
==================== Financial Highlights (continued)
============================================================
==================== For a share of each class of beneficial
interest outstanding throughout each year:
<TABLE>
<CAPTION>
Class C Shares
1997 1996 1995(1) 1994
1993(2)
============================================================
============================================================
============
<S>
<C> <C> <C> <C>
<C> Net Asset Value, Beginning of Year
$13.65 $13.32 $13.33 $13.80
$13.47 -----------------------------------------------------
- ------------------------------------------------------------
- -------------------
Income From Operations:
Net investment income 0.73 0.73 0.74 0.76 0.22
Net realized and unrealized gain (loss)
(0.08) 0.34 (0.01) (0.40) 0.31
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------
Total Income From Operations 0.65 1.07 0.73 0.36 0.53
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------
Less Distributions From:
Net investment income
(0.71) (0.74) (0.74) (0.77)
(0.20) Net realized gains --
(0.06)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------
Total Distributions
(0.71) (0.74) (0.74) (0.83)
(0.20) -----------------------------------------------------
- ------------------------------------------------------------
- -------------------
Net Asset Value, End of Year
$13.59 $13.65 $13.32 $13.33 13.80
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------
Total Return 4.90% 8.13% 5.80% 2.40%
3.98%++
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------
Net Assets, End of Year (000s)
$14,901 $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 5.35 5.31 5.69 5.29 5.68+
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------
Portfolio Turnover Rate 31% 27% 54% 42% 53%
============================================================
============================================================
============ </TABLE>
(1) On November 7, 1994, the former Class B shares were
renamed Class C shares.
(2) For the period from January 5, 1993 (inception date) to
March 31, 1993.
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
30
============================================================
==================== Independent Auditors' Report
============================================================
====================
To the Shareholders and Board of Trustees of
the National Portfolio of Smith Barney Muni Funds:
We have audited the accompanying statement of assets
and liabilities, including the schedule of investments, of
the National Portfolio of Smith Barney Muni Funds as of
March 31, 1997, the related statement of operations for the
year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended and the
financial highlights for each of the years in the five-year
period then ended. These financial statements are the
responsibility of the Funds management. Our responsibility
is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial
highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of
March 31, 1997, by correspondence with the custodian. As to
securities purchased and sold but not received or delivered,
we performed other appropriate auditing procedures. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the National Portfolio
of Smith Barney Muni Funds as of March 31, 1997, the results
of its operations for the year then ended, the changes in
its net assets for each of the years in the two-year period
then ended and the financial highlights for each the years
in the five-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 16, 1997
31
============================================================
==================== Tax Information (unaudited)
============================================================
====================
For Federal tax purposes the Fund hereby designates for the
fiscal year
ended March 31, 1997:
o 99.69% of the dividends paid by the Fund from the
net investment
income as tax-exempt for regular Federal income tax
purposes.
32
Smith Barney SMITH BARNEY
Muni Funds ------------
A Member of TravelersGroup[LOGO]
Trustees
Jessica M. Bibliowicz Investment Manager
Joseph H. Fleiss Smith Barney Mutual Funds
Donald R. Foley Management Inc.
Paul Hardin
Francis P. Martin, M.D. Distributor
Heath B. McLendon, Chairman Smith Barney Inc.
Roderick C. Rasmussen
John P. Toolan Custodian
PNC Bank, N.A.
C. Richard Youngdahl
Emeritus Shareholder
Servicing Agent Officers First
Data Investor Services Group, Inc.
Heath B. McLendon P.O. Box 9134
Chief Executive Officer Boston, MA 02205-9134
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
This report is submitted for the general Peter M.
Coffey information of the shareholders of
Vice President Smith Barney Muni Funds-National
Portfolio. It is not authorized for Thomas M.
Reynolds distribution to prospective investors
Controller unless accompanied or preceded by a
current Prospectus for the Portfolio, Christina T.
Sydor which contains information concerning
Secretary the Portfolio's investment policies and
expenses as well as other pertinent information.
Smith Barney Muni Funds 388 Greenwich Street
New York, New York 10013
FD2304 5/97
- ------------------------------------------------------------
- -------------------ANNUAL REPORT
- ------------------------------------------------------------
- --------------------
1997
1997
1997 [GRAPHIC]
1997
1997
Smith Barney
Muni Funds
Limited Term
Portfolio ---------------------------------------March 31,
1997
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
- ----------------------
Limited Term Portfolio ----------------------
Dear Shareholder:
We are pleased to provide the annual report for the Smith
Barney Muni Funds Limited Term Portfolio for the year ended
March 31, 1997. 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.
Performance Update
For the year ended March 31, 1997, the Class A shares of the
Limited Term Portfolio had a total return of 4.30% which
outperformed its Lipper Analytical Services, Inc. peer group
average total return of 4.24% for the same period. (Lipper
Analytical Services, Inc. is an independent fund tracking
organization.) Over the twelve months covered by the report,
the Portfolio distributed dividends totaling $0.35 per Class
A share; based on a its net asset value (NAV) of $6.54 as of
March 31, 1997, this equates to an annualized distribution
rate of 5.35% for Class A shares. For an individual in the
Federal income tax bracket of 36%, the Portfolio's tax free
yield of 5.35% is equivalent to a taxable yield of 8.36%.
(According to the Internal Revenue Service, approximately
10% of U.S. taxpayers fall into the 36% federal income tax
bracket.)
Market and Economic Overview
Over the past year, the domestic bond market experienced
significant volatility as investors vacillated between
expectations of slower growth and resurgent demand. This
investor uncertainty over the future direction of the U.S.
economy could be seen in the price swings of the benchmark
30-year U.S. Treasury bond. For example, during the spring
of 1996, yields on the 30-year U.S. Treasury bond fluctuated
in a relatively broad range of approximately 6.5% to over
7.2%.
The fixed income markets began to rally in the fourth
quarter of 1996, with strong performance gains by investment
grade bonds and U.S. Treasury bonds. An apparent slowdown in
U.S. economic growth at the onset of the fourth quarter,
combined with favorable inflation data, generally helped to
bolster the fixed income markets. The bond market rally was
also fueled by the Federal Reserve Board's ("Fed") decision
to remain on the sidelines and not raise interest rates.
1
However, since December 1996, Fed Chairman Alan Greenspan
has continued to warn investors about the possible re-
emergence of higher inflation in the U.S. economy.
Greenspan's comments caused many investors to believe that a
move to raise short-term interest rates by the Fed was
imminent. In late March of this year, a steady stream of
strong economic reports prompted the Fed to raise the
federal funds rate by 25 basis points, or 0.25%. (The
federal funds rate is the interest rate banks charge each
other for overnight loans and is a closely watched indicator
of the direction of interest rates.)
Municipal Bond Market Update
Despite the challenges faced by fixed income markets,
municipal bonds have continued to deliver competitive
performance with less overall volatility relative to U.S.
government bonds. In our opinion, the municipal bond market
continues to be driven primarily by many investors who may
be concerned with the recent historically high value of the
stock market. As the equity market has grown more turbulent,
many investors have gravitated toward bonds in an effort to
rebalance their portfolios. In our opinion, this increased
demand combined with light supply, has tended to support
municipal bond prices.
Fund's Investment Strategy
The Smith Barney Muni Funds - Limited Portfolio is an
intermediate-term municipal bond fund that seeks to provide
investors with as high a level of current income exempt from
federal 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 intermediate-term, high-quality portfolio
structure helps to reduce credit risk and NAV price
volatility, while still maintaining a competitive dividend
yield. During the twelve months covered by this report, the
high NAV of Class A shares of the Limited Term Portfolio was
$6.68 and the low was $6.51, and the monthly income dividend
remained at $0.029 per Class A share for the entire
reporting period.
As of March 31, 1997, the Portfolio's average weighted
maturity was 7.2 years, and approximately 94% of the
Portfolio's holdings were rated investment grade (BBB/Baa
and higher) by either Standard & Poor's Corporation or
Moody's Investors Service Inc. (Standard & Poor's
Corporation and Moody's Investors Service Inc. are two major
credit reporting and bond rating agencies.) The Portfolio's
largest holdings are concentrated in general obligation
bonds (13.4%), hospital bonds (12.0%), and education bonds
(11.8%).
2
Municipal Bond Market Outlook
In the months ahead, we believe that municipal bonds should
provide investors with competitive returns with
significantly less volatility than the U.S. Treasury bond
market. We expect to see continued Fed vigilance against any
possible inflationary pressures. In our view, although it is
likely that the Fed will move to raise short-term interest
rates again this year, yields on the 30 year U.S. Treasury
bond will probably moderate to a range of 6.75% to 7.0% as
opposed to the current range of 7.0% to 7.25%. In addition,
we are optimistic on positive developments in the political
arena including proposed adjustments to the Consumer Price
Index (CPI) and the rejection of federal tax reform by
voters in last November's election. We believe the proposed
CPI reduction could substantially reduce payments made to
costly entitlement programs such as Social Security and
Medicare. In our opinion, although the issue of tax reform
is far from over, it should not become a big issue in the
near future.
In closing, thank you for investing in the Smith Barney Muni
Fund - Limited Term Portfolio. We look forward to continuing
to help you achieve you financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Lawrence T. McDermott
Heath B. McLendon Lawrence T. McDermott
Chairman Vice President
April 11, 1997
3
============================================================
====================
Historical Performance -- Class A Shares
============================================================
====================
<TABLE>
<CAPTION>
Net Asset Value
- ----------------------
Beginning End Income Total Year
Ended of Year of Year Dividends
Returns(1)
============================================================
==================== <S> <C> <C>
<C> <C>
3/31/97 $6.61 $6.54 $0.35 4.30%
- ------------------------------------------------------------
- -------------------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
$3.25
============================================================
==================== </TABLE>
============================================================
====================
Historical Performance -- Class C Shares
============================================================
====================
<TABLE>
<CAPTION>
Net Asset Value
- ----------------------
Beginning End Income Total Year
Ended of Year of Year Dividends
Returns(1)
============================================================
==================== <S> <C> <C>
<C> <C>
3/31/97 $6.61 $6.54 $0.34 4.10%
- ------------------------------------------------------------
- -------------------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
$1.47
============================================================
==================== </TABLE>
It is the Fund's policy to distribute dividends monthly and
capital gains, if any, annually.
4
============================================================
====================
Average Annual Total Return
============================================================
====================
<TABLE>
<CAPTION>
Without Sales Charge(1) ----------------------
Class A Class C
============================================================
==================== <S> <C> <C>
Year Ended 3/31/97 4.30% 4.10%
- ------------------------------------------------------------
- -------------------Five Years Ended 3/31/97 6.01
N/A
- ------------------------------------------------------------
- -------------------Inception* through 3/31/97
6.75 5.08
============================================================
==================== </TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2) ----------------------Class A
Class C
============================================================
==================== <S> <C> <C>
Year Ended 3/31/97 2.29% 3.10%
- ------------------------------------------------------------
- -------------------Five Years Ended 3/31/97 5.58
N/A
- ------------------------------------------------------------
- -------------------Inception* through 3/31/97
6.49 5.08
============================================================
==================== </TABLE>
============================================================
====================
Cumulative Total Return
============================================================
====================
<TABLE>
<CAPTION>
Without Sales Charge(1)
============================================================
==================== <S> <C>
Class A (Inception* through 3/31/97)
72.50%
- ------------------------------------------------------------
- -------------------Class C (Inception* through 3/31/97)
23.35
- ------------------------------------------------------------
- -------------------</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
============================================================
====================
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 -- March 1997
[GRAPH]
<TABLE>
<CAPTION>
Lehman
Limited
Municipal Lehman
Term 5-Year
Long
Portfolio Bond Index Bond Index ---------
- ---------- ----------
<S> <C> <C>
<C>
11/28/88 $ 9,796 $10,000
$10,000
3/89 9,900
10,024 10,100
3/90 10,720
10,994 11,200
3/91 11,653
12,022 12,071
3/92 12,568
13,046 13,440
3/93 13,786
14,395 15,402
3/94 14,273
14,821 15,574
3/95 15,076
15,667 16,980
3/96 16,078
16,808 18,457
3/31/97 16,769
17,511 19,620
</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 March 31, 1997. 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
============================================================
====================
Schedule of Investments
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
============================== <S> <C> <C> <C>
Education -- 11.8%
$2,825,000 A* Arizona Education Loan Marketing Corp.,
Education Loan
Revenue Bonds, 7.000% due
3/1/02(a)(b) $ 3,008,625
2,430,000 A* Arkansas State Student Loan Authority
Revenue,
Sub-Series A-2, 6.125% due
12/1/00(a) 2,466,450
940,000 Aa* Brazos, TX Higher Education
Authority, Series C-1,
6.000% due 11/1/99(a)
957,625
2,940,000 AAA Chicago, IL Board of Education, Chicago
School Reform,
MBIA-Insured, 6.000% due 12/1/07
3,116,400
Colorado Student Obligation Board
Authority,
Student Loan Revenue:
270,000 A* Series A, 6.625% due
6/1/99 277,088
1,350,000 A* Series A-1, 6.600% due 9/1/98
1,375,313
1,150,000 AA Fairfield County, SC School District,
COP,
5.500% due 3/1/07 1,152,875
1,000,000 A+ Illinois Student Assistance Commission,
Student Loan
Revenue, Series H, 6.100% due
3/1/01(a) 1,027,500
350,000 Aa1* Iowa Student Loan Liquidity Corp.
Student Loan Revenue,
Series A, 6.000% due 3/1/98
353,836
1,000,000 Aa* Kentucky Higher Education Student Loan
Corp., Insured
Student Loan Revenue, Series 91B,
6.500% due 12/1/00(a)
1,045,000
210,000 AAA Louisiana Public Facilities
Authority Revenue,
Supplemental Student Loan C, AMBAC-
Insured, 8.125% due
12/1/99 224,963
1,250,000 A* Montana State Higher Education Student
Assistance Corp.,
Student Loan Revenue, Series 92B,
7.050% due 6/1/04(a) 1,315,625
North Texas Higher Education Authority
Inc.,
Student Loan Revenue:
1,475,000 AAA AMBAC-Insured, 7.000% due
7/1/01(a) 1,530,313
1,400,000 A* Series D, 6.300% due
4/1/09(a) 1,401,750
2,000,000 AAA Pennsylvania State Higher Education
Assistance Agency,
Student Loan Revenue Refunding,
Series A,
FGIC-Insured, 6.800% due 12/1/00
2,120,000
1,500,000 A* Rhode Island Student Loan Authority
Revenue Refunding,
Series 92B, 6.750% due 12/1/01(a)
1,590,000
1,000,000 AAA San Juan County, NM ISD #22, GO, MBIA-
Insured,
6.750% due 8/15/00 1,060,000
1,500,000 AAA Schuylkill, PA Redevelopment Authority
Revenue,
Commonwealth Lease Revenue Bonds,
Series A, FGIC-Insured, 6.850% due
6/1/03 1,631,250
2,540,000 A South Dakota Student Loan Assistance
Corp., Student Loan
Revenue, 7.350% due 8/1/98(a)
2,603,500
670,000 A* Texas State Higher Education
Coordinating Board, College
Student Loan Revenue, 6.800% due
4/1/98(a) 680,385
Utah State School District Co-Op Revenue
Financing Pool,
LOC Swiss Bank:
875,000 AAA 8.300% mandatory tender
2/15/98 901,810
</TABLE>
See Notes to Financial
Statements.
7
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
============================== <S> <C> <C>
<C>
Education -- 11.8% (continued)
$ 945,000 AA+ 8.300% mandatory tender
2/15/00 $ 1,025,325
2,220,000 AA+ 8.375% due 2/15/10
2,303,250
- ------------------------------------------------------------
- -----------------------------33,168,883
- ------------------------------------------------------------
- -----------------------------Escrowed to Maturity(c) -- 4.7%
120,000 A Austin, TX Water, Sewer & Electric
Refunding Revenue,
14.000% due 11/15/01
140,700
1,390,000 AAA Boston, MA Water & Sewer Community
Revenue,
10.650% due 1/1/99 1,471,663
115,000 AAA Enid, OK Hospital Authority
Revenue, St. Mary's Hospital
Crossover Refunding, 8.000% due
7/1/98 117,013
1,135,000 AAA Erie County, OH Hospital Improvement,
Sandusky Memorial
Hospital, 8.750% due 1/1/06(b)
1,333,625
1,555,000 AAA Galveston, TX Sewer System Revenue
Refunding, Series B,
7.800% due 5/1/99 1,613,313
1,050,000 AAA Illinois Educational Facilities
Authority Revenue, Chicago
Osteopathic Medical, Series A,
8.750% due 7/1/05 1,223,250
965,000 NR Kalamazoo, MI Hospital Finance
Authority,
6.750% due 4/1/03 1,018,075
1,300,000 NR New Jersey State Educational Facilities
Authority Revenue,
Fairleigh Dickinson University, Series C, 7.750%
due 7/1/01 1,389,375
1,870,000 AAA Owensboro, KY Electric, Light & Power,
10.500% due 1/1/04(b)
2,208,938
665,000 AAA San Francisco, CA Airport
Improvement Corp.,
Lease Revenue, United Airlines,
7.875% due 7/1/99 694,925
885,000 NR Sullivan County, TN Health &
Educational Facilities, Holston
Valley Community Hospital, 7.000%
due 9/1/99 934,781
880,000 NR Tom Green County, TX Hospital
Authority, 7.875% due 2/1/06 966,900
- ------------------------------------------------------------
- -----------------------------13,112,558
- ------------------------------------------------------------
- -----------------------------Finance -- 1.1%
1,000,000 A New York State Local Government
Assistance Corp.,
6.600% due 4/1/98 1,026,080
2,000,000 AAA Texas State Public Finance Authority
Building Revenue,
Series B, AMBAC-Insured, 6.200% due
2/1/05 2,150,000
- ------------------------------------------------------------
- -----------------------------3,176,080
- ------------------------------------------------------------
- -----------------------------General Obligation -- 13.4%
1,000,000 AAA Arizona COP Refunding GO, FSA-Insured,
6.500% due 3/1/08 1,072,500
Buffalo, NY GO Unlimited, AMBAC-Insured:
Series A:
500,000 AAA 5.200% due 2/1/10
480,000
2,540,000 AAA 5.250% due 2/1/11
2,435,225
1,600,000 AAA 5.375% due 2/1/12
1,542,000
265,000 AAA 5.375% due 2/1/13
253,738
695,000 AAA Series B, 5.250% due 2/1/11
666,331
</TABLE>
See Notes to Financial
Statements.
8
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
============================== <S> <C> <C> <C>
General Obligation -- 13.4% (continued)
California State GO:
$1,000,000 A+ 6.250% due 9/1/08 $ 1,088,750
1,000,000 AAA FGIC-Insured, 6.400% due 9/1/07
1,103,750
1,800,000 BBB Government of Guam GO, Series A, 5.750%
due 8/15/99 1,822,500
1,500,000 AA- Houston, TX GO, Series A, 6.000% due
3/1/06 1,597,500
500,000 AA+ Kings County, WA GO Unlimited Tax
Obligation,
9.000% due 12/1/98
538,750
2,500,000 AA Knoxville County, TN GO, 5.000% due
2/1/15 2,325,000
445,000 BBB- Lehigh County, PA IDA, Industrial &
Commercial
Development Revenue, (Strawbridge Project),
7.200% due 12/15/01
478,375
750,000 Baa1* Lowell, MA GO, 5.500% due 8/15/97
753,953
500,000 A3* Meridian, CO Metropolitan District,
GO, Refunding Bonds,
7.000% due 12/1/97
506,735
New Haven, CT GO, Series B:
625,000 BBB 5.700% due 12/1/97
630,600
2,000,000 BBB 9.000% due 12/1/01
2,310,000
New York City GO:
2,500,000 BBB+ Series A, 6.250% due 8/1/08
2,559,375
1,040,000 BBB+ Series D, 7.200% due 2/1/00
1,102,400
970,000 BBB+ Series F, 8.100% due 11/15/99
1,050,025
1,000,000 BBB+ Series H, 6.500% due 3/15/06
1,055,000
2,000,000 BBB+ Series H, 5.900% due 8/1/09
1,975,000
2,000,000 Aa2* New York City Municipal Assistance
Corp., Series E,
6.000% due 7/1/06
2,127,500
300,000 A-1+ Phoenix, AZ GO Unlimited Variable
Series 95-2,
3.700% due 6/1/20(d)
300,000
2,815,000 AAA Rhode Island State Conservation Capital
Development
Loan GO, Series A, 6.000% due
8/1/06 2,990,938
1,020,000 AAA Springfield, MA Municipal Purpose Loan,
GO,
AMBAC-Insured, 6.250% due 8/1/06
1,102,875
2,770,000 AA Texas State Veterans Housing Assistance
Fund IID GO,
5.650% due 12/1/14(a)
2,783,850
395,000 AA Texas State Veterans Housing
Assistance GO, FHA-Insured,
6.050% due 12/1/12(a)
396,975
810,000 AAA Yuma & La Paz County, AZ GO
Community College
District, (Arizona Western
College), AMBAC-Insured,
6.200% due 7/1/98
831,263
- ------------------------------------------------------------
- -----------------------------37,880,908
- ------------------------------------------------------------
- -----------------------------Hospitals -- 12.0%
595,000 A ABAG Finance Authority Nonprofit
Corps, CA Insured COP,
(Rehabilitation Mental Health
Services Inc. Project),
6.100% due 6/1/02
620,288
</TABLE>
See Notes to Financial
Statements.
9
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
============================== <S> <C> <C>
<C>
Hospitals -- 12.0% (continued)
$ 600,000 A- Bexar County, TX Health Facilities
Development Corp.,
Health Facilities Revenue
Refunding, Independence Hill
Project, LOC Banque Paribas, 7.500%
mandatory tender
12/1/98
$ 627,750
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 1,137,500
3,500,000 BBB Colorado Health Facilities Authority
Hospital Revenue Bonds,
Series 1993, Rocky Mountain
Adventist Health Guaranteed,
6.250% due 2/1/04 3,626,875
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
1,053,750
2,135,000 A2* Harris County, TX Health Facilities
Development Corp.,
Memorial Health System Guaranteed,
7.125% due 6/1/05 2,380,525
1,000,000 BBB Illinois Health Facilities Authority
Revenue Refunding,
Trinity Medical Center, 6.500% due
7/1/00 1,035,000
1,425,000 Ba3* Langhorne Manor Higher Education &
Health Authority,
Bucks County, Lower Bucks Hospital,
6.375% due 7/1/99 1,423,219
2,200,000 BBB Maplewood, MN Healthcare Facilities
Revenue,
(Health East Project), 5.950% due
11/15/06 2,178,000
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
447,011
New Jersey Healthcare Facilities
Financing Authority Revenue:
1,000,000 Baa1* Elizabeth General Medical
Center, Series C,
7.100% due 7/1/99 1,046,250
1,030,000 BBB+ Pascack Valley Hospital, Series 91,
6.500% due 7/1/01 1,077,638
St. Elizabeth Hospital Obligation
Group:
390,000 BBB 5.000% due 7/1/01
386,588
675,000 BBB 5.850% due 7/1/09
661,500
New York State Dormitory Authority
Revenue:
3,000,000 BBB+ Mental Health Services Facilities,
Series B,
5.750% due 8/15/12 2,902,500
750,000 AAA Montefiore Medical Center, FHA-
Insured,
5.250% due 2/1/10 726,563
320,000 A* Ouachita Parish, LA Hospital
Services District #1,
Hospital Revenue Bonds, Glenwood Regional Medical
Center, Series 1991, 7.250% due
7/1/00 342,800
</TABLE>
See Notes to Financial
Statements.
10
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
============================== <S> <C> <C> <C>
Hospitals -- 12.0% (continued)
$2,170,000 A+ Palm Beach County, FL Health Facilities
Authority Revenue,
Good Samaritan Health System
Guaranteed,
6.150% due 10/1/06 $
2,254,088
Philadelphia, PA Hospitals and
Higher Education Facilities
Authority Revenue:
390,000 A3* Albert Einstein Medical
Center, 6.500% due 10/1/97 392,305
1,000,000 BBB+ Graduate Health Systems,
6.500% due 7/1/97 1,003,740
245,000 Aa* St. Agnes Medical Center
Project, FHA-Insured,
6.750% due 8/15/01
252,044
1,750,000 A Riverside, CA Asset Leasing Corp.
Leasehold Revenue
Bonds, 1993 Series A, Riverside Hospital Project,
6.000% due 6/1/04
1,806,875
3,000,000 BBB++ Scranton-Lackawanna, PA Health &
Welfare Authority
Revenue, Allied Services
Rehabilitation Hospitals,
7.125% due 7/15/05
3,191,250
1,000,000 BBB++ Valley Health System, CA COP Refunding
Project,
6.250% due 5/15/99
1,007,500
- ------------------------------------------------------------
- -----------------------------33,877,809
- ------------------------------------------------------------
- -----------------------------Housing -- 8.3%
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
3,060,000
2,500,000 Aa2* California State Department of Veterans
Affairs, Home
Purchase Revenue, Series A,
7.500% due 8/1/98(a) 2,606,250
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 2,973,512
140,000 A* Cleveland County, OK Home Loan
Authority, Single-Family
Mortgage Revenue, 6.100% due
8/1/97 140,371
2,250,000 AAA Dekalb County, GA HFA, Multi-Family
Housing Revenue,
(Chimney Trace Project), FNMA-Collateralized,
5.625% due 5/1/25
2,300,625
835,000 AAA Fairfax County, VA Redevelopment &
Housing Authority,
Multi-Family Refunding,
Kingsley 91A, FHA-Insured, 6.500%
due 11/1/01
865,269
60,000 Aaa* Louisiana Housing Finance
Agency Mortgage Revenue,
GNMA-Collateralized, Single-
Family Mortgage Revenue,
7.600% due 11/1/97(a)
60,418
1,800,000 AA Louisiana Public Facilities Authority
Revenue, Multi-Family
Housing, Oakleigh Apartments,
Series A,
5.950% due 3/15/19
1,867,500
690,000 AA Maine State Housing Authority,
Series A-3, FHA-Insured,
6.900% due 11/15/98
708,113
</TABLE>
See Notes to Financial
Statements.
11
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
============================== <S> <C> <C>
<C>
Housing -- 8.3% (continued)
$ 732,220 AAA Monroe-West Monroe, LA Public Trust
Financing Authority,
FHLMC-Collateralized, 8.500% due
5/20/02 $ 757,848
500,000 AAA Nashville & Davidson County, TN
Metropolitan
Government IDB Revenue, (Club
Bellvue),
FNMA-Collateralized, 8.500%
mandatory tender 5/1/97 500,416
1,000,000 Aaa* Nevada Housing Single Family Mortgage,
Series E,
FHA-Insured 5.350% due 10/1/27(a)
981,250
490,000 A* Odessa, TX Housing Development
Corp. #2, Multi-Family
Revenue Refunding, Chaparral Village, Series A,
6.375% due 12/1/03
496,738
1,760,000 AAA Onterie Center Housing Finance Corp., IL
Mortgage
Revenue Refunding, (Onterie Center Project), Series A, MBIA-
Insured, 6.500% due 7/1/02 1,841,400
2,500,000 AA+ Rhode Island Housing & Mortgage Finance
Corp. Home
Ownership Opportunity, Series C,
5.650% due 10/1/20(a) 2,503,125
215,000 AAA St. Louis County, MO Single-Family
Mortgage Revenue,
MBIA-Insured, 6.125% due 4/1/03
216,881
1,000,000 AA+ Texas State Department of Housing &
Community Affairs,
GNMA/FNMA-Collateralized Home
Mortgage Revenue
Bonds, Series B-2, RIBS, Variable Rate, 9.898%
due 6/18/23(a)(d) 1,072,500
100,000 AA Texas State Housing Agency Mortgage
Revenue
Single-Family, 1987D, 7.750% due
7/1/99(a) 102,250
410,000 AA Wyoming Community Development
Authority, Single-Family
Mortgage, Series 1988C, 7.800% due
6/1/99(a) 418,713
- ------------------------------------------------------------
- -----------------------------23,473,179
- ------------------------------------------------------------
- -----------------------------Industrial Development -- 9.5%
1,500,000 A Bel Air, MD Revenue Refunding, (May
Department Stores
Co. Project), 6.375% due 10/1/99
1,561,875
1,000,000 A Belmont County, OH IDR Refunding, (May
Department
Stores Co. Project), Series 91,
6.500% due 1/1/00 1,046,250
2,000,000 AA+ Clarion County, PA IDA Energy
Development Revenue,
(Piney Creek Project), LOC Swiss
Bank, 7.250% mandatory
tender 12/1/00(a) 2,147,500
1,000,000 Baa* Delaware County, PA Development
Authority Revenue,
(Elwyn Inc. Project), 7.750% due
6/1/00 1,086,250
3,000,000 Ba1* Griffin-Spalding County, GA Development
Authority
Revenue Refunding, (Borden Inc.
Project,) Borden Inc.,
Guaranteed, 7.200% due 6/1/00
3,090,000
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
2,110,000
</TABLE>
See Notes to Financial
Statements.
12
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING
SECURITY VALUE
============================================================
============================== <S> <C> <C>
<C>
Industrial Development -- 9.5% (continued)
$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 $ 3,127,500
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) 3,535,000
1,835,000 Aa3* New Jersey EDA, Growth Bonds, LOC Banque
Nationale
de Paris, 6.200% due 12/1/02(a)
1,896,931
New York City IDA:
650,000 Aa1* IDR Oakdale Knitting Mills Inc.,
Composite Offering
XXX 1990, Series G, LOC
ABN AMRO Bank, NV, 7.700%
mandatory tender
11/1/00(a) 651,157
1,365,000 Aa1* Keystone Electric, LOC ABN AMRO
Bank NV,
7.500% mandatory tender
3/1/98(a) 1,380,015
455,000 Aa1* SuperFlex Ltd. Project,
Composite Offering XVIII 1989,
Series A, LOC ABN AMRO
Bank, NV,
7.750% optional tender
11/1/99(a) 455,742
1,170,000 AAA Pennsylvania State IDA Revenue, AMBAC-
Insured,
6.000% due 1/1/99 1,197,788
1,000,000 A Pinal County, AZ IDA, Solid Waste
Disposal Revenue,
5.000% due 2/1/06(a)
971,250
2,350,000 AAA Sioux City, IA IDR, (Terra Centre
Project),
6.800% due 5/1/07 2,467,500
- ------------------------------------------------------------
- -----------------------------26,724,758
- ------------------------------------------------------------
- -----------------------------Life Care -- 2.8%
1,355,000 BBB Illinois Development Finance Authority,
Health Facilities
Revenue, Community Living Options,
6.375% due 3/1/00 1,371,938
New York State Medical Care Facilities Finance Agency
Revenue, Mental Health Services
Facilities:
1,045,000 BBB+ Series B, 7.100% due 2/15/99
1,092,025
640,000 BBB+ Series D, 6.300% due
8/15/97 644,371
New York State Dormitory Authority
Revenue, Mental Health,
Series E, AMBAC-Insured:
3,000,000 AAA 5.300% due 2/15/09
2,951,250
700,000 AAA 5.300% due 8/15/09
688,625
1,000,000 AAA Rio Grande Valley, TX Health Facilities,
(Valley
Baptist Medical Center Project),
Short RITES,
MBIA-Insured, coupon varies weekly
till 8/1/02 then
converts to 6.250%, 8.110% due
8/1/06(e) 1,086,250
- ------------------------------------------------------------
- -----------------------------7,834,459
- ------------------------------------------------------------
- -----------------------------Miscellaneous -- 10.1%
2,595,000 BBB- Clarksville, TN Natural Gas Acquisition
Corporation, Gas
Revenue, Series A, 6.500% due
11/1/00 2,640,413
300,000 AAA Dallas-Fort Worth, TX Regional
Airport Revenue, Series A,
FGIC-Insured, 5.875% due 11/1/07(a)
304,626
</TABLE>
See Notes to Financial
Statements.
13
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
============================== <S> <C> <C>
<C>
Miscellaneous -- 10.1% (continued)
$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
1,705,313
2,750,000 A* Hoffman Estate, IL Tax Increment Junior
Lien, Hoffman
Estate Development, Series 91,
6.500% due 5/15/01 2,884,063
2,700,000 A- Illinois Development Finance Authority
Revenue, Debt
Restructure-East St. Louis, 6.875%
due 11/15/05 2,821,500
1,010,000 AAA Jacksonville, FL Excise Tax Revenue,
Series A,
FGIC-Insured, 5.500% due 10/1/05
1,049,138
575,000 Aa3* New Jersey EDA Revenue, LOC Banque
Nationale de Paris,
Series A, 6.250% due 12/1/01(a)
587,938
3,390,000 A2* New York State Job Development
Authority, Special Purpose,
Series A, 5.250% due 3/1/10
3,250,163
New York State Urban Development Corporation Revenue
Correctional Capital Facilities,
1,500,000 Baa1* Series 6, 5.500% due
1/1/01 1,520,625
2,950,000 Baa1* Series 6, 5.500% due
1/1/13 2,817,250
2,575,000 Baa1* Series 7, 5.375% due
1/1/08 2,507,406
1,240,000 AA- Ohio State Building Authority,
Correctional Facilities,
Series A, 5.250% due 10/1/09
1,227,600
1,200,000 AAA Pennsylvania Intergovernmental Co-Op
Authority, Special
Tax Revenue, FGIC-Insured, 6.000%
due 6/15/06 1,270,500
1,000,000 AA Tuscon, AZ COP, Asset Guaranty, 6.000%
due 7/1/04 1,040,000
- ------------------------------------------------------------
- -----------------------------28,323,410
- ------------------------------------------------------------
- -----------------------------Pollution Control -- 5.4%
1,200,000 AAA Burke County, GA Development Authority
PCR, Refunding,
Ogelthorpe Power Co., MBIA-Insured, 7.500% due
1/1/03 1,311,000
435,000 BB Camden County, NJ PCFA, Solid Waste
Resource Recovery
Revenue, Series D, 6.350% due
12/1/97 435,870
Detroit, MI Economic Development Corp., Facilities
Recovery Revenue, FSA-Insured:
3,000,000 AAA Series A, 7.000% due 5/1/01
3,180,000
1,000,000 AAA Series 91A, 6.600% due
5/1/02(a) 1,065,000
1,630,000 BBB Gilda County, AZ IDA, Revenue Pollution
Control,
8.900% due 7/1/06 1,694,548
1,075,000 BBB- Hudson County, NJ Improvement Authority,
5.750% due 1/1/98 1,076,043
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) 1,599,375
700,000 A-1+ Maricopa County, AZ Pollution
Control Corp. PCR, Arizona
Public Service Co., Series D,
3.500% due 5/1/29(e) 700,000
</TABLE>
See Notes to Financial
Statements.
14
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
============================== <S> <C> <C>
<C>
Pollution Control -- 5.4% (continued)
$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) 1,616,250
1,650,000 Baa* Onondaga County, NY Resource Recovery
Agency Project
Revenue Bonds, Series 1992,
6.625% due 5/1/00(a) 1,691,250
- ------------------------------------------------------------
- -----------------------------15,336,836
- ------------------------------------------------------------
- -----------------------------Pre-Refunded(f) -- 1.2%
1,525,000 AAA Alachua County, FL Health Facilities
Authority
Revenue, Santa Fe Healthcare Facilities Project,
(Call 11/15/00 @ 102), 6.875%
due 11/15/02 1,643,188
80,000 A* Austin,TX Water, Sewer &
Electric Refunding Revenue,
(Call 5/15/98 @ 100), 14.000%
due 11/15/01(c) 97,700
495,000 AAA Gila County, AZ IDA PCR, (Call
2/15/01 @ 101),
11.250% due 4/1/01
528,413
1,000,000 AAA Mississippi Hospital Equipment &
Facilities Authority
Revenue, (Mississippi Baptist
Medical Medical Center),
Series A, MBIA-Insured, (Call 5/1/00 @ 102),
7.300% due 5/1/01
1,092,500
- ------------------------------------------------------------
- -----------------------------3,361,801
- ------------------------------------------------------------
- -----------------------------Public Facilities -- 2.4%
40,000 A- Concord Santa Cruz Southgate,
CA COP, ABAG Finance Corp.,
7.100% due 6/1/99
40,058
4,000,000 Aa* Mt. Stearling, KY Lease Revenue,
Kentucky League of
Cities 1993A, Transamerica Life Guaranteed,
5.625% due 3/1/03
4,055,000
1,050,000 BBB Tampa, FL Capital Improvement Program
Revenue,
Series 88B, 7.400% due 10/1/97
1,061,172
1,655,000 AAA Washington State Public Power Supply
System,
Revenue Refunding, Series A,
Nuclear Project No. 3,
MBIA-Insured, 6.000% due
7/1/06 1,729,475
- ------------------------------------------------------------
- -----------------------------6,885,705
- ------------------------------------------------------------
- -----------------------------Solid Waste -- 1.1%
3,000,000 A Northeast Maryland Waste Disposal
Authority, Solid Waste
Revenue, Montgomery County,
6.200% due 7/1/10(a) 3,037,500
- ------------------------------------------------------------
- -----------------------------Transportation -- 7.6%
1,000,000 AAA Clark County, NV Airport Improvement
Revenue,
BIG-Insured, 7.900% due
7/1/00(a) 1,053,750
Denver, CO City & County Airport
Revenue:
1,590,000 BBB Series 1992B, 7.000% due
11/15/01(a) 1,697,325
1,000,000 BBB Series 1992B, 7.000% due
11/15/02(a) 1,075,000
1,000,000 BBB Series 1994A, 7.200% due
11/15/02(a) 1,085,000
1,510,000 AAA Series B, MBIA-Insured, 6.250% due
11/15/06(a) 1,604,375
2,445,000 AAA Hawaii Airport System Revenue, Second
Series of 91,
MBIA-Insured, 6.100% due
7/1/99(a) 2,518,350
</TABLE>
See Notes to Financial Statements.
15
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING
SECURITY VALUE
============================================================
============================== <S> <C> <C>
<C>
Transportation -- 7.6% (continued)
$1,250,000 A Indiana Transportation Finance
Authority, Airport
Facilities -- Lease Revenue, Series
A, United Air,
6.125% due 11/1/02
$ 1,318,750
1,000,000 AAA Massachusetts Port Authority Revenue,
Series A,
FGIC-Insured, 7.200% due 7/1/03(a)
1,083,750
3,750,000 Baa1* New York State Thruway Authority
Service Contract Revenue,
Local Highway & Bridge, Special Obligation Bonds,
5.625% due 4/1/07 3,707,813
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% due 12/1/02(a)
3,187,500
750,000 AA Port of Houston Authority, Harris
County, TX Port
Improvement Unlimited Tax
Obligation,
8.500% due 11/1/98(a)
798,750
2,095,000 AA- Simi Valley, CA Community Development
Agency COP,
Simi Valley Business Center, 6.050%
due 10/1/18 2,144,756
- ------------------------------------------------------------
- -----------------------------21,275,119
- ------------------------------------------------------------
- -----------------------------Utilities -- 7.1%
5,030,000 A* Austin, TX Water, Sewer & Electric
Refunding Revenue,
14.000% due 11/15/01
6,274,925
Chelan County, WA Public Utility
District #1:
1,500,000 A+ Chelan Hydro Consolidated System
Revenue Bonds,
7.000% mandatory tender
7/1/01(a) 1,608,750
22,485,000 AAA Columbia River Rock Capital
Appreciation, MBIA-Insured,
zero coupon due 6/1/13
8,825,347
600,000 A- Georgia Muni Gas Authority Revenue,
(Southern Storage
Gas Project), 6.300% due 7/1/09
628,500
770,000 Baa1* Philadelphia, PA Gas Works
Revenue Bonds, 13th Series,
7.400% due 6/15/00 817,163
1,000,000 AAA Piedmont Municipal Power Agency, South
Carolina Electric
Revenue, AMBAC-Insured, Series B,
5.250% due 1/1/09 973,750
1,000,000 BB Sam Rayburn, TX Municipal Power Supply
System Revenue
Refunding, Series A, 6.200% due
10/1/01 971,250
- ------------------------------------------------------------
- -----------------------------20,099,685
- ------------------------------------------------------------
- -----------------------------Water & Sewer -- 1.5%
1,500,000 NR New Jersey EDA Water Facilities Revenue,
Series 1991,
(New Jersey American Water Co. Inc.
Project), Private
Placement, 7.400% due 11/1/01(a)
1,593,750
250,000 AA Regional Waste Systems Inc., Maine
Solid Waste
Resource Recovery System, 7.550%
due 7/1/98(a)(b) 258,750
1,175,000 AAA South Essex, MA Sewer District, Series
A, MBIA-Insured,
6.000% due 6/15/05 1,248,438
</TABLE>
See Notes to Financial
Statements.
16
============================================================
====================
Schedule of Investments (continued)
March 31, 1997
============================================================
====================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
============================== <S> <C> <C> <C>
Water & Sewer -- 1.5% (continued)
$ 955,000 A Texas Water Resource Finance Authority
Revenue,
Series 89, 7.400% due 8/15/00 $
1,015,881
- ------------------------------------------------------------
- -----------------------------4,116,819
- ------------------------------------------------------------
- -----------------------------TOTAL INVESTMENTS -- 100%
(Cost-- $277,330,461**) $281,685,509
============================================================
============================== </TABLE>
(a) Income from these issues is considered a preference
item for purposes of calculating the alternative minimum
tax.
(b) Securities segregated by Custodian for open market
purchase commitment.
(c) Bonds are escrowed to maturity with U.S. Government
securities and are
considered by the manager to be triple-A rated even if
issuer has not
applied for new ratings.
(d) Residual interest bonds-coupon varies inversely with
level of short-term tax-exempt interest rates.
(e) Variable rate obligation payable at par on demand at
any time on no more than seven days notice.
(f) Bonds are escrowed with U.S. Government securities and
are considered by the manager to be triple-A rated even if
issuer has not applied for new ratings.
++ Fitch Investor Services, Inc.
** Aggregate cost for Federal income tax purposes is
substantially the same.
See pages 18 and 19 for definition of ratings and certain
security
descriptions.
See Notes to Financial Statements.
17
============================================================
====================
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 "B" 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.
18
============================================================
====================
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 -- Financial Security Assurance
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
19
============================================================
====================
Statement of Assets and Liabilities March 31, 1997
============================================================
==================== <TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost-- $277,330,461) $
281,685,509
Cash 36,519
Interest receivable 5,051,379
Receivable for securities sold 1,420,000
Receivable for Fund shares sold 190,819
- ------------------------------------------------------------
- ------------------Total Assets 288,384,226
- ------------------------------------------------------------
- ------------------LIABILITIES:
Payable for Fund shares purchased 176,978
Management fees payable 144,905
Distribution fees payable 16,630
Accrued expenses 26,070
- ------------------------------------------------------------
- ------------------Total Liabilities 364,583
- ------------------------------------------------------------
- ------------------Total Net Assets $ 288,019,643
============================================================
===================
NET ASSETS:
Par value of shares of beneficial interest $
44,016
Capital paid in excess of par value 289,079,344
Overdistributed net investment income (4,290)
Accumulated net realized loss from security
transactions (5,454,475)
Net unrealized appreciation of investments
4,355,048
- ------------------------------------------------------------
- ------------------Total Net Assets $ 288,019,643
============================================================
===================
Shares Outstanding:
Class A 39,683,946
- ------------------------------------------------------------
- ----------------
Class C 4,331,676
- ------------------------------------------------------------
- -----------------
Net Asset Value:
Class A (redemption price) $ 6.54
- ------------------------------------------------------------
- ----------------
Class C* $ 6.54
- ------------------------------------------------------------
- -----------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 2.04% of net asset value per
share) $ 6.67
============================================================
=================== </TABLE>
* 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.
20
<TABLE>
<CAPTION>
============================================================
====================
Statement of Operations For the Year
Ended March 31, 1997
============================================================
==================== <S>
<C>
INVESTMENT INCOME:
Interest $
17,675,637
- ------------------------------------------------------------
- ------------------EXPENSES:
Management fees (Note 3)
1,495,020 Distribution fees (Note 3)
506,163 Registration fees 86,820
Shareholder and system servicing fees 79,700
Shareholder communications 55,850
Pricing service fees 39,420
Audit and legal 16,088
Custody 15,622
Trustees' fees 10,001
Other 8,614
- ------------------------------------------------------------
- ------------------Total Expenses
2,313,298
- ------------------------------------------------------------
- ------------------Net Investment Income
15,362,339 -------------------------------------------------
- -----------------------------REALIZED AND UNREALIZED GAIN
(LOSS)
ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales
157,351,484 Cost of securities sold
156,710,364
- ------------------------------------------------------------
- -------------------Net Realized Gain
641,120
- ------------------------------------------------------------
- ------------------Change in Net Unrealized Appreciation of
Investments:
Beginning of year
7,741,212 End of year
4,355,048
- ------------------------------------------------------------
- ------------------Decrease in Net Unrealized Appreciation
(3,386,164)
- ------------------------------------------------------------
- ------------------Net Loss on Investments
(2,745,044) ------------------------------------------------
- -------------------------------Increase in Net Assets From
Operations $ 12,617,295
============================================================
=================== </TABLE>
See Notes to Financial Statements.
21
============================================================
====================
Statements of Changes in Net Assets For the
Years Ended March 31,
============================================================
====================
<TABLE>
<CAPTION>
1997 1996
============================================================
=========================== <S>
<C> <C>
OPERATIONS:
Net investment income $
15,362,339 $ 14,623,173 Net realized gain (loss)
641,120 (113,526)
Increase (decrease) in net unrealized appreciation
(3,386,164) 2,264,491
- ------------------------------------------------------------
- --------------------------Increase in Net Assets From
Operations 12,617,295 16,774,138
- ------------------------------------------------------------
- --------------------------DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (15,693,903) (14,441,996)
- ------------------------------------------------------------
- --------------------------Decrease in Net Assets From
Distributions to Shareholders (15,693,903)
(14,441,996)
- ------------------------------------------------------------
- --------------------------FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 37,182,237
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 8,825,123
7,807,761
Cost of shares reacquired (62,195,860)
(60,675,920)
- ------------------------------------------------------------
- --------------------------Increase (Decrease) in Net Assets
From
Fund Share Transactions (16,188,500) 33,511,950
- ------------------------------------------------------------
- --------------------------Increase (Decrease) in Net Assets
(19,265,108) 35,844,092
NET ASSETS:
Beginning of year 307,284,751 271,440,659
- ------------------------------------------------------------
- --------------------------End of year*
$ 288,019,643 $ 307,284,751
============================================================
=========================== * Includes undistributed
(overdistributed)
net investment income of:
$ (4,290) $ 183,209
============================================================
=========================== </TABLE>
See Notes to Financial Statements.
22
============================================================
====================
Notes to Financial Statements
============================================================
====================
1. SIGNIFICANT ACCOUNTING POLICIES
The Limited Term Portfolio ("Portfolio") is a separate
investment portfolio of the Smith Barney Muni Funds
("Fund"). The Fund, a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as
amended, as a non-diversified, open-end management
investment company and consists of this Portfolio and eight
other separate investment portfolios: Florida, Georgia, New
York, Ohio, Pennsylvania, National, California Money Market
and New York Money Market Portfolios. The financial
statements and financial highlights for the other portfolios
are presented in separate annual reports.
The significant accounting policies consistently
followed by the Fund are: (a) 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 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; (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, 1997, reclassifications
were made to the Portfolio's capital accounts to reflect
permanent book/tax differences and income gains available
for distributions under income tax regulations. Accordingly,
a portion of overdistributed net investment income amounting
to $144,065 was 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.
23
============================================================
====================
Notes to Financial Statements (continued)
============================================================
====================
2. Exempt-Interest Dividends and Other Distributions
The Portfolio intends to satisfy conditions that will
enable interest from municipal securities, which is exempt
from regular Federal income tax and from designated state
income taxes, to retain such tax-exempt status when
distributed to the shareholders of the Portfolio.
Capital gain distributions, if any, are taxable to
shareholders, and are
declared and paid at least annually.
3. MANAGEMENT AGREEMENT AND TRANSACTIONS WITH
AFFILIATED PERSONS
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a
subsidiary of Smith Barney Holdings Inc. ("SBH"), acts as
investment manager to the Fund. The Portfolio pays SBMFM a
management fee calculated at the annual rate of 0.50% of its
average daily net assets. This fee is calculated daily and
paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH,
acts as distributor of Fund shares. For the year ended March
31, 1997, SB received sales charges of approximately
$300,000 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 year ended March 31, 1997, CDSCs paid
to SB were approximately:
<TABLE>
<CAPTION>
Class A Class C
============================================================
==================== <S> <C> <C>
CDSCs $25,000 $10,000
============================================================
==================== </TABLE>
Pursuant to a Distribution Plan, the Portfolio pays a
service fee with respect to Class A and C shares calculated
at the annual rate of 0.15% of the average daily net assets
of each class. In addition, the Portfolio pays a
distribution fee with respect to Class C shares calculated
at the annual rate of 0.20% of the average daily net assets.
24
============================================================
====================
Notes to Financial Statements (continued)
============================================================
====================
For the year ended March 31, 1997, total Distribution Plan
fees incurred
were:
<TABLE>
<CAPTION>
Class A Class C
============================================================
==================== <S> <C>
<C>
Distribution Plan Fees $405,247
$100,916
============================================================
==================== </TABLE>
All officers and two Trustees of the Fund are employees
of SB.
4. INVESTMENTS
During the year ended March 31, 1997, 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 $136,483,793
- ------------------------------------------------------------
- -------------------Sales 157,351,484
============================================================
==================== </TABLE>
At March 31, 1997, the aggregate gross unrealized
appreciation and depreciation of investments for Federal
income tax purposes was substantially as follows:
<TABLE>
============================================================
==================== <S> <C>
Gross unrealized appreciation $
6,154,393
Gross unrealized depreciation
(1,799,345)
- ------------------------------------------------------------
- -------------------Net unrealized appreciation
$4,355,048
============================================================
==================== </TABLE>
5. CAPITAL LOSS CARRYFORWARD
At March 31, 1997, the Portfolio had, for Federal income tax
purposes,
approximately $5,452,000 of capital loss carryforwards
available to offset future capital gains. To the extent that
these carryforward losses are used to offset capital gains,
it is possible that the gains so offset will not be
distributed. The amount and expiration of the carryovers are
indicated below. Expiration occurs on March 31, of the year
indicated:
<TABLE>
<CAPTION>
2001 2002 2003 2004
============================================================
==================== <S> <C>
<C> <C> <C> Carryforward Amounts
$289,000 $577,000 $2,846,000 $1,740,000
============================================================
====================
</TABLE>
25
============================================================
====================
Notes to Financial Statements (continued)
============================================================
====================
6. SHARES OF BENEFICIAL INTEREST
At March 31, 1997, 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 March 31, 1997, total paid-in capital amounted
to the following for each class:
<TABLE>
<CAPTION>
Class A Class C
============================================================
==================== <S> <C>
<C>
Total Paid-in Capital $259,843,254
$29,280,106
============================================================
====================
</TABLE>
Transactions in shares of each class were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended March 31,
1997 March 31, 1996*
- --------------------------- -------------------------
Shares Amount Shares Amount
============================================================
===================================== <S> <C>
<C> <C> <C>
Class A
Shares sold 4,671,567 $ 30,834,509 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 1,188,611 7,824,406
1,037,716 6,883,693
Shares redeemed (8,251,679) (54,442,310)
(8,105,534) (53,911,260)
- ------------------------------------------------------------
- ------------------------------------Net Increase (Decrease)
(2,391,501) $(15,783,395) 4,632,065 $ 31,336,600
============================================================
===================================== Class C
Shares sold 962,621 $ 6,347,728
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 152,105
1,000,717 137,628 912,585
Shares redeemed (1,144,387) (7,542,039)
(1,018,889) (6,764,660)
- ------------------------------------------------------------
- ------------------------------------Net Increase (Decrease)
(29,661) $ (193,594) 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.
26
============================================================
====================
Notes to Financial Statements (continued)
============================================================
====================
7. TRANSFER OF NET ASSETS
On February 2, 1996, the Fund acquired the assets and
certain liabilities
of the Smith Barney Investment Trust--Smith Barney Limited
Maturity Municipals Fund ("Limited Maturity Fund") pursuant
to an Agreement and Plan of Reorganization dated December
14, 1995. Total shares issued by the Portfolio and the total
net assets of Limited Maturity Fund on the date of transfer
were as follows:
<TABLE>
<CAPTION>
Shares Total Net Total Net Issued by
Assets of Assets of
Acquired Fund the Portfolio Acquired
Fund the Portfolio
============================================================
==================== <S> <C> <C>
<C>
Limited Maturity Fund 7,475,811 $50,182,191
$260,062,548
============================================================
==================== </TABLE>
The total net assets of the Limited Maturity Fund before
acquisition
included unrealized appreciation of $772,816 and a net
realized loss of $851,038. Total net assets of the Portfolio
immediately after the transfer were $310,244,739. The
transaction was structured to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as
amended.
27
============================================================
====================
Financial Highlights
============================================================
====================
For a share of each class of beneficial interest outstanding
throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1997 1996 1995(1) 1994
1993
============================================================
============================================================
= <S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.61 $ 6.54 $
6.55 $ 6.68 $ 6.45
- ------------------------------------------------------------
- ------------------------------------------------------------
Income From Operations:
Net investment income 0.34 0.36 0.36
0.37 0.39
Net realized and unrealized gain (loss) (0.06)
0.07 -- (0.13) 0.23
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Income From Operations 0.28 0.43 0.36
0.24 0.62
- ------------------------------------------------------------
- ------------------------------------------------------------
Less Distributions From:
Net investment income (0.35) (0.36) (0.37)
(0.37) (0.39)
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Distributions (0.35) (0.36) (0.37) (0.37)
(0.39)
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Asset Value, End of Year $ 6.54 $ 6.61 $ 6.54
$ 6.55 $ 6.68
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Return 4.30% 6.65% 5.69%
3.65% 9.82%
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Assets, End of Year (000s) $259,695 $278,247
$244,818 $281,771 $242,491
- ------------------------------------------------------------
- ------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.75% 0.75% 0.61%
0.53% 0.55%
Net investment income 5.16 5.43 5.61
5.53 5.90
- ------------------------------------------------------------
- ------------------------------------------------------------
Portfolio Turnover Rate 46% 26% 22%
25% 25%
============================================================
============================================================
=
<CAPTION>
Class C Shares 1997 1996 1995(2) 1994
1993(3)
============================================================
============================================================
= <S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.61 $ 6.54 $
6.54 $ 6.68 $ 6.62
- ------------------------------------------------------------
- ------------------------------------------------------------
Income From Operations:
Net investment income 0.33 0.35 0.35
0.35 0.10
Net realized and unrealized gain (loss) (0.06)
0.06 -- (0.14) 0.05
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Income From Operations 0.27 0.41 0.35
0.21 0.15
- ------------------------------------------------------------
- ------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.34) (0.35)
(0.35) (0.09)
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Distributions (0.34) (0.34) (0.35) (0.35)
(0.09)
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Asset Value, End of Year $ 6.54 $ 6.61 $ 6.54
$ 6.54 $ 6.68
- ------------------------------------------------------------
- ------------------------------------------------------------
Total Return 4.10% 6.45% 5.51%
3.15% 2.28%++
- ------------------------------------------------------------
- ------------------------------------------------------------
Net Assets, End of Year (000s) $ 28,325 $ 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 4.94
5.22 5.34 5.10 5.35+ ----
- ------------------------------------------------------------
- --------------------------------------------------------
Portfolio Turnover Rate 46%
26% 22% 25% 25%
============================================================
============================================================
= </TABLE>
(1) On October 10, 1994, the former Class C shares were
exchanged into Class A
shares.
(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.
============================================================
====================
Tax Information (unaudited)
============================================================
====================
For Federal tax purposes the Fund hereby designates for the
fiscal year
ended March 31, 1997:
o 99.01% of the dividends paid by the Fund from
net investment income as
tax-exempt for regular Federal income tax
purposes.
28
============================================================
====================
Independent Auditors' Report
============================================================
====================
To the Shareholders and Board of Trustees of the
Limited Term Portfolio of Smith Barney Muni Funds:
We have audited the accompanying statement of assets
and liabilities, including the schedule of investments, of
the Limited Term Portfolio of Smith Barney Muni Funds as of
March 31, 1997, the related statement of operations for the
year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended and the
financial highlights for each of the years in the five-year
period then ended. These financial statements are the
responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial
highlights are free of material misstatement. An audit
includes examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of
March 31, 1997, by correspondence with the custodian. As to
securities sold but not delivered, we performed other
appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of the Limited Term
Portfolio of Smith Barney Muni Funds as of March 31, 1997,
the result of its operations for the year then ended, the
changes in its net assets for each of the years in the two-
year period then ended and the financial highlights for each
of the years in the five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 14, 1997
29
Smith Barney
Muni Funds SMITH BARNEY
------------ A Member of TravelersGroup [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
Emeritus Servicing Agent
First Data Investor Services Group, Inc. Officers
P.O. Box 9134
Heath B. McLendon Boston, MA 02205-9134
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer This report is submitted for the
general information of the Lawrence T.
McDermott shareholders of Smith Barney Muni
Vice President Funds-Limited Term Portfolio. It is
not authorized for distribution to Thomas M.
Reynolds prospective investors unless
Controller accompanied by a current Prospectus
for the Portfolio, which contains Christina T.
Sydor information concerning the
Secretary Portfolio's investment policies and
expenses as well as other pertinent information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
FD2305 5/97
Annual Report
1997
1997
1997
1997
1997
Smith Barney
Muni Funds
California Money
Market Portfolio
March 31, 1997
Smith Barney Mutual Funds
Investing for your future.
Every day.
Dear Shareholder:
We are pleased to provide the annual report for the Smith
Barney Muni Funds California
Money Market Portfolio ("Portfolio") for the year ended
March 31, 1997. 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.
Performance Update
As of March 31, 1997, the Portfolio's 7-day current yield
was 2.75%. The Portfolio's 7-day
effective yield which reflects compounding was 2.79%.
This means that investors in the
combined federal and state income tax bracket of 41.95%
would have to earn a 4.80% taxable
yield to match the tax-free income provided by the Fund.
(This combined federal and state
income tax bracket assumes a federal bracket of 36%
according to the Internal Revenue
Service. This bracket represents 10% of the U.S. federal
taxpayers.)
While the Portfolio seeks 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 Portfolio.
Market and Economic Overview
The U.S. economy continues to grow strongly with relatively
low inflation. Gross Domestic
Product (GDP), a key economic indicator that measures the
total output of U.S. goods and
services, grew at an annual rate of 3.8% for the fourth
quarter 1996 and 3.4% for all of
1996. In comparison, GDP grew at a meager 0.3% for the same
period in 1995 and at a rate of
1.3% for all of 1995. Moreover, recently released reports
suggest the U.S. economy has
continued to expand in early 1997. For example, some recent
government reports indicated
brisk U.S. employment growth for the first quarter of 1997,
and a decline in the unemployment
rate to roughly 5.30%, the lowest rate in years. In
addition, this job growth has been
accompanied by strong retail sales and upbeat consumer
confidence surveys. Given the current
favorable economic data, we anticipate first quarter 1997
GDP to grow at an annual rate of
4% to 4.25%.
However, despite this apparent economic expansion,
inflationary pressures have remained
relatively benign. In our opinion, declining health care
costs, deregulation in certain
industries, and increased global competition have helped to
keep inflation in check.
Nevertheless, Federal Reserve Board ("Fed") Chairman Alan
Greenspan has continued to voice
concerns about higher inflation that could result from an
overheated U.S. economy. In
response to this steady stream of positive economic reports,
the Fed raised the federal funds
rate by 25 basis points, or 0.25%, to 5.50% in March of this
year. (The federal funds rate
is the interest rate banks charge each other for overnight
loans and is a closely watched
indicator of the direction of interest rates.) This increase
in short-term interest rates is
the first Fed action since January 1996. Although this move
was widely expected by many
investors, it remains to be seen whether this is a one-time
action, or the first in a series
of preemptive moves by the Fed to ward off inflationary
pressures.
California Economic Highlights
The California economy continues to expand at a vigorous
pace and is currently at a six-year
economic high. In fact, California exceeds national averages
for job creation, personal
income growth, and higher labor productivity. The state's
recent expansion has been fueled
mostly by strong growth in the high technology, computer
software, and motion picture
industries. Moreover, the Golden State has successfully
diversified its growing job market
to become less reliant on the declining defense and
aerospace industries. This increased
economic growth has in turned increased tax revenues and has
helped to reduce the state's
budget deficit.
Yet, despite California's recent economic successes, a
number of challenges remain. For
example, although the state unemployment rate continues to
drop, the California jobless rate
still exceeds national levels. In addition, increased
spending pressures for services in
areas such as education, corrections, health, and other
entitlement programs has made it
somewhat more difficult for the state to accumulate
substantial reserves. At the present
time, we view California state general obligation credit as
stable to improving. In light of
its improving economic trends and more broadly diversified
economy, we remain guardedly
optimistic about California's future economic prospects.
Investment Strategy
The Portfolio seeks to provide investors with income exempt
from federal income tax by
investing in a portfolio of high quality, short-term
municipal obligations selected for
liquidity and stability of principal. During the reporting
period, we have slightly shortened
the Portfolio's average weighted maturity to approximately
40 to 45 days to reflect our more
neutral stance on the market. In addition, we positioned the
Portfolio to take into account
seasonal tax redemptions and possible further Fed
tightenings of monetary policy.
In closing, thank you for investing in the Smith Barney Muni
Funds California Money Market
Portfolio. We look forward to continuing to help you achieve
your financial goals.
Sincerely,
Heath B. McLendon
Chairman
Joseph Benevento
Vice President
April 21, 1997
Schedule of Investments March 31, 1997Schedule of
Investments (continued)March 31, 1997See
Notes to Financial Statements.
FACE
AMOUNT RATING SECURITY VALUE
$13,000,000 A-1+ ABAG Finance Authority for Nonprofit
Corporations Series 1996 3.30% (b)
$13,000,000
9,455,000 A-1+ Alameda Contra Costa California Schools
Financing Authority Project B
3.30% (b) 9,455,000
4,000,000 A-1+ Anaheim Housing Authority Multi-Family
Housing Revenue (Park Vista
Apartments-A) 3.35% (a)(b) 4,000,000
California Alternative Energy Source Finance
Authority, Cogeneration Revenue
Refunding Arroyo Energy:
17,230,000 A-1+ Series A 3.25% (a)(b) 17,230,000
7,400,000 A-1+ Series B 3.25% (a)(b) 7,400,000
California Alternative Energy:
4,800,000 VMIG 1* Hydroelectric Rock Creek Limited
Series 86 3.55% (a)(b) 4,800,000
8,900,000 A-1 Modesto Energy Project Series 85A 3.40%(b)
8,900,000
California School Cash Reserve Program Authority:
22,000,000 SP-1+ Pool Series A 4.75% due 7/2/97
22,054,628
14,000,000 SP-1+ Pool Series B 4.50% due 12/19/97
14,087,280
2,000,000 A+ Californa State GO 11.00% due 3/1/98
2,131,772
California State GO TECP Notes:
5,000,000 A-1 3.30% due 4/8/97 5,000,000
4,400,000 A-1 3.65% due 4/8/97 4,400,000
11,000,000 A-1 3.45% due 4/9/97 11,000,000
20,000,000 A-1 3.50% due 5/2/97 20,000,000
11,000,000 A-1 3.35% due 5/9/97 11,000,000
11,000,000 A-1 3.40% due 5/21/97 11,000,000
6,700,000 A-1 3.40% due 6/6/97 6,700,000
California Housing Finance Agency Revenue PART:
14,845,000 VMIG 1* Series PA-58 3.45% (b) 14,845,000
12,120,000 VMIG 1* Series PA-40A 3.60% (a)(b)
12,120,000
3,695,000 VMIG 1* Series PA-112-A MBIA-Insured 3.60%
(a)(b) 3,695,000
11,290,000 A-1+ Series PT-76 MBIA-Insured 3.45% (b)
11,290,000
14,500,000 A-1+ California Housing Finance Authority
Single-Family Mortgage Series B 3.70%
due 4/1/98 (a) 14,500,000
California Health Facility Financing Authority
Revenue:
Catholic Healthcare MBIA-Insured:
5,000,000 A-1+ Series 88B 3.45% (b) 5,000,000
7,000,000 A-1+ Series B 3.20% (b) 7,000,000
8,700,000 A-1+ Series D 3.20% (b) 8,700,000
3,750,000 A-1+ Childrens Hospital 1991 MBIA-Insured 3.20%
(b) 3,750,000
1,600,000 VMIG 1* Granada Hills Community Hospital
Series C 3.45% (b) 1,600,000
1,200,000 A-1+ St. Joseph Series A 3.50% (b) 1,200,000
4,200,000 A-1+ Sutter Children Series B AMBAC-Insured
3.20% (b) 4,200,000
1,000,000 A-1+ Sutter Health Series B 3.20% (b) 1,000,000
California Pollution Control Financial Authority:
(Pacific Gas & Electric Series-96D)TECP:
6,500,000 A-1+ 3.25% due 4/8/97 6,500,000
$10,000,000 A-1+ PCR 3.35% due 5/16/97
$10,000,000
11,000,000 A-1+ Series-88 3.40% due 4/14/97
11,000,000
California Pollution Control Financial Authority
PCR:
100,000 A-1 Burney Forest Project Series-88A 3.40%
(b) 100,000
Pacific Gas & Electric:
15,000,000 A-1+ Series A 3.35% (a)(b) 15,000,000
36,000,000 A-1+ Series B 3.35% (a)(b) 36,000,000
2,400,000 A-1+ Series C 3.55% (b) 2,400,000
4,300,000 A-1+ Series F 3.40% (b) 4,300,000
Resource Recovery:
4,250,000 VMIG 1* Sangier Project Series-90A 3.30%
(a)(b) 4,250,000
Wadham Energy Project:
6,605,000 A-2 Series A 3.45% (a)(b) 6,605,000
9,300,000 A-2 Series B 3.45% (a)(b) 9,300,000
7,000,000 A-1+ Sierra Pacific Project Series-93 3.35% (b)
7,000,000
Southdown Inc. Project:
4,900,000 A-1+ Series-83 3.25% (b) 4,900,000
1,100,000 A-1+ Series B 3.25% (b) 1,100,000
Southern California Edison Series-85D TECP:
4,100,000 A-1+ 3.00% due 4/21/97 4,100,000
6,150,000 A-1+ 3.40% due 5/20/97 6,150,000
California Pollution Control Finance Authority
Solid Waste Disposal Revenue:
Colmac Energy Project:
17,900,000 A-1+ Series-90A 3.30% (a)(b) 17,900,000
2,925,000 A-1+ Series-90C 3.30% (a)(b) 2,925,000
5,000,000 A-1+ Shell Martinez Refining Series B 3.30%
(a)(b) 5,000,000
8,675,000 A-1+ Sierra Pacific Project 3.45% (a)(b)
8,675,000
20,000,000 VMIG 1* California Public Capital
Improvement Financing Authority Series C
3.55% due 6/16/97 (c) 20,000,000
45,820,000 SP-1+ California State RAN Series A 4.50%
due 6/30/97 45,906,641
2,300,000 A-1+ California State RAN Series C-5 3.40% (b)
2,300,000
6,255,000 A-1+ California State Series 95 SGA 7 PART FSA-
Insured 3.40% (b) 6,255,000
6,235,000 A-1+ California State SG84 PART FSA-Insured 3.50%
(b) 6,235,000
20,000,000 SP-1+ California State RAN Series C-4
3.45% (b) 20,000,000
10,000,000 SP-1+ California Statewide Community
Development Authority Revenue Series A 4.75%
due 6/30/97 10,017,777
California Statewide Community Development
Corporation Revenue:
2,185,000 A-1+ Amern Zettler 3.40% (a)(b) 2,185,000
2,560,000 A-1+ Charles & Loralie Harris 3.40% (a)(b)
2,560,000
2,560,000 NR|P Pacific Bearing Company 3.55% (a)(b)
2,560,000
3,200,000 NR|P Supreme Truck 3.55% (a)(b)
3,200,000
California Statewide Community Development
Authority Revenue Partnership:
25,900,000 SP-1+ Kaiser Permanente 3.35% (b)
25,900,000
1,900,000 A-1+ Saint Joseph Health System Group 3.20%
(b) 1,900,000
California Statewide Community Development
Authority Apartment Development
Revenue:
$13,000,000 A-1+ Subseries A-4 3.30% (b)
$13,000,000
7,000,000 A-1+ Subseries A-7 3.35% (a)(b) 7,000,000
48,300,000 A-1+ California Statewide Community
Development Authority Memorial Health
Services 3.40% (b) 48,300,000
15,000,000 A-1+ California Statewide Community
Development Authority Multi-Family Revenue
(Canyon Creek Apartments) 3.30% (b) 15,000,000
10,000,000 A-1+ California State Economic Development
Finance Authority Revenue Buck Center
for Aging 3.40% (b) 10,000,000
California University Regents Series A TECP:
10,000,000 A-1+ 3.40% due 5/27/97 10,000,000
5,000,000 A-1+ 3.40% due 5/28/97 5,000,000
13,000,000 A-1+ 3.35% due 5/30/97 13,000,000
1,300,000 SP-1+ Chowchilla Union High School District
Transportation 4.25% due 6/30/97
1,301,544
17,200,000 A-1 Chula Vista IDR (San Diego Gas &
Electric Co.) 3.45% (a)(b) 17,200,000
2,180,000 SP-1+ Chula Vista Industrial Development
Authority Industrial Revenue
(Sutherland/Palumbo Project) 3.60% (a)(b) 2,180,000
Clipper California Tax-Exempt:
20,730,000 VMIG 1* Series 96-1 PART 3.46% (b)
20,730,000
6,890,000 VMIG 1* Series 96-6B PART 3.56% (a)(b)
6,890,000
9,900,000 VMIG 1* Series 96-7A GNMA PART 3.46% (a)(b)
9,900,000
14,260,000 A-1+ Series 96G IBM PART 3.55% (b)
14,260,000
2,100,000 A-1+ Concord Multi-Family Mortgage Revenue
(Crossroads Apartments) Series 88B
3.20% (b) 2,100,000
2,300,000 MIG 1* Contra Costa California Community
College District TRAN 4.50% due
6/30/97 2,303,821
4,500,000 A-1 Contra Costa County Multi-Family Housing
Revenue Refunding (Del Norte
Apartments) Series-94A 3.50% (a)(b) 4,500,000
13,700,000 SP-1+ Contra Costa County TRAN 4.50% due
7/3/97 13,724,194
11,300,000 A-1+ Contra Costa County Water District TECP
Series A 3.375% due 5/28/97
11,300,000
East Bay California Municipal Utility District
TECP:
3,000,000 A-1+ 3.40% due 5/27/97 3,000,000
31,650,000 A-1+ 3.40% due 5/28/97 31,650,000
6,600,000 A-1+ Eagle Tax-Exempt California Housing Finance
Authority PART 3.50% due 5/1/97
(c) 6,600,000
8,200,000 A-1+ Eagle Tax-Exempt California Department of
Water PART 3.46% (b) 8,200,000
2,000,000 A-1+ Fairfield IDA (R. Dakin & Company Project)
3.25% (b) 2,000,000
15,000,000 SP-1+ Fresno County TRAN 4.75% due
9/29/97 15,084,262
5,200,000 A-1 Fresno County Multi-Family Housing Revenue
(Heron Pointe Apartments Series
A) 3.25% (b) 5,200,000
$2,900,000 A-1 Hayward Housing Authority Multi-Family
Revenue Refunding Mortgage (Huntwood
Terrace Apartments) Series-93A 3.40% (b) $2,900,000
11,300,000 VMIG 1* Irvine Public Facility &
Infrastructure Authority Lease Revenue (City
Hall Series-85) 3.30% (b) 11,300,000
1,100,000 A-1+ Irvine Ranch Water District Series A 3.50%
(b) 1,100,000
3,250,000 A-1 Kings County Housing Multi-Family (Edgewater
Isle) 3.25% (b) 3,250,000
8,000,000 A-1+ Lodi IDA (Dart Container) 4.68% (b)
8,000,000
8,400,000 A-1+ Long Beach Health Facility Revenue (Memorial
Health Services) Series 1991
3.30% (b) 8,400,000
5,711,000 A-1 Los Angeles County Metropolitan
Transportation Authority 3.45% due 8/7/97
TECP 5,711,000
20,000,000 A-1+ Los Angeles County Metropolitan
Transportation Authority Sales Tax Revenue
SG-55 PART MBIA-Insured 3.45% (b) 20,000,000
8,750,000 A-1+ Los Angeles County Sanitation District
Finance Authority Revenue 93A PART
3.45% (b) 8,750,000
23,000,000 SP-1+ Los Angeles County TRAN Series A
4.50% due 6/30/97 23,048,847
13,100,000 A-1 Los Angeles County Housing Authority
Multi-Family Housing Revenue Diamond
Apartments Project Series A 3.35% (a)(b) 13,100,000
4,000,000 A-1+ Los Angeles County TRAN PART MBIA-Insured
3.50% (b) 4,000,000
4,200,000 A-1+ Los Angeles Department of Water & Power TECP
3.35% due 5/13/97 4,200,000
Los Angeles Department of Water & Power Electric
PART:
4,075,000 A-1+ SGA-4 FGIC-Insured 3.40% (b) 4,075,000
4,005,000 A-1+ SGA-6 MBIA-Insured 3.40% (b) 4,005,000
3,500,000 A-1+ Los Angeles Department of Water & Power
Electric Plant Revenue PA-141 MBIA-
Insured PART 3.45% (b) 3,500,000
8,765,000 A-1+ Los Angeles Department of Water & Power
Waterworks Revenue PART SG-20 FGIC-
Insured 3.45% (b) 8,765,000
10,000,000 A-1+ Los Angeles Harbor Department
Certificate Series B TECP 3.40% due 5/14/97
(a) 10,000,000
29,100,000 A-1+ Los Angeles Multi-Family Housing Revenue
Series-85K (b) 29,100,000
2,000,000 A-1+ Los Angeles Ontario Department Apartment
Revenue SG-61 PART FGIC-Insured
3.50% (a)(b) 2,000,000
9,000,000 SP-1+ Los Angeles USD TRAN 4.50% due 6/30/97
9,014,954
6,000,000 A-1+ Los Angeles Wastewater Revenue Notes TECP
3.40% due 5/27/97 6,000,000
2,500,000 AAA Los Angeles Wastewater System Revenue
(Pre-Refunded Escrowed with U.S. Government Securities to
11/1/97 Call @ 102) 8.125% due
11/1/17 2,615,731
$35,000,000 A-1 Los Angeles Wastewater TECP 3.35% due
5/29/97 $35,000,000
7,000,000 A-1+ Marysville Joint USD TRAN 4.25% due 10/31/97
7,018,872
14,620,000 A-1+ Metropolitian Water District Of Southern
California Waterworks Revenue PART
Series SGS-14
MBIA-Insured 3.40% (b) 14,620,000
2,500,000 SP-1+ Milpitas USD TRAN 4.50% due 7/1/97
2,504,081
14,000,000 A-1+ Modesto Irrigation District Finance
Authority PART Revenue MBIA-Insured SG-
66 3.45% (b) 14,000,000
10,000,000 A-1 Modesto Irrigation District 96 COP TECP
3.35% due 5/19/97 10,000,000
Modesto Multi-Family Housing Revenue:
5,075,000 A-1+ Live Oak Apartments Series-94 3.30% (a)(b)
5,075,000
5,800,000 VMIG 1* Shadowbrook Series A 3.35% (b)
5,800,000
4,000,000 SP-1+ Moorpark USD TRAN 4.50% due 7/1/97
4,006,530
6,080,000 SP-1+ Morgan Hill USD 4.50% due 6/30/97
6,087,201
18,500,000 SP-1+ Mountain Diablo USD TRAN 4.50% due
10/16/97 18,569,537
13,500,000 A-1+ Mountain View Multi-Family Housing
Revenue (Villa Mariposa Project) FGIC-
Insured 3.20% (b) 13,500,000
7,000,000 A-1+ MSR Public Power Agency San Juan Project
Series E MBIA-Insured 3.25% (b)
7,000,000
3,000,000 SP-1+ North Monterey County USD TRAN 4.50% due
6/30/97 3,003,553
700,000 A-1+ Oakland Revenue (Childrens Hospital Medical
Center) Series 1994B 3.25%(b)
700,000
8,500,000 SP-1+ Oakland TRAN 4.75% due 6/30/97
8,524,057
2,000,000 AAA Orange County Recovery COP Series A MBIA-
Insured 4.25% due 7/1/97 2,000,711
3,000,000 A-1+ Orange County Sanitation District Series 90-
92C
FGIC-Insured 3.45% (b) 3,000,000
Orange County Apartment Development Revenue:
2,700,000 A-1 The Lakes Project Series A 3.30%(b)
2,700,000
1,700,000 A-1+ Wood Canyon Villas 3.30%(a)(b) 1,700,000
5,800,000 VMIG 1* Pasadena COP (Rose Bowl Improvement
Project)
3.20% (b) 5,800,000
7,860,000 A-1+ Pleasanton Multi-Family Mortgage Revenue
(Valley Plaza) 3.20% (b) 7,860,000
3,000,000 SP-1+ Puerto Rico Commonwealth TRAN Series A
4.00% due 7/30/97 3,005,541
Puerto Rico GDB TECP:
4,700,000 A-1+ 3.45% due 5/12/97 4,700,000
20,000,000 A-1+ 3.40% due 5/22/97 20,000,000
5,000,000 SP-1+ Redlands USD TRAN 4.50% due 6/30/97
5,008,073
1,000,000 A-1+ Regents of University of California TECP
3.20% due 5/13/97 1,000,000
3,000,000 SP-1+ Rim World USD TRAN 4.50% due 6/30/97
3,004,844
3,740,000 A-1+ Riverside County Housing Authority Multi-
Family Mortgage Revenue (Woodcreek
Village) Series 85D 3.20% (b) 3,740,000
$7,840,000 A-1+ Sacramento City Financing Authority
Lease Revenue PART Series AMBAC-Insured
3.45% (b) $7,840,000
20,000,000 SP-1+ Sacramento County School District
TAN Series 96 4.00% due 12/10/97
20,070,896
9,400,000 A-1+ Sacramento Municipal Utility District
Electric Revenue PART Series SGA-5
FSA-Insured 3.40% (b) 9,400,000
Sacramento Municipal Utility District of
California:
3,160,000 A-1+ Series 1 3.30% due 4/14/97 3,160,000
10,279,000 A-1+ TECP 3.35% due 5/22/97 10,279,000
10,000,000 SP-1+ Sacramento TRAN 4.50% due 9/30/97
10,033,993
2,275,000 SP-1 Salinas Unified High School District TRAN
4.50%
due 10/2/97 2,280,734
4,108,000 A-1+ San Diego Housing Authority Multi-Family
Housing Revenue Refunding (Carmen
Del Mar Apartments-A) 3.30% (b) 4,108,000
4,400,000 A-1+ San Diego Multi-Family Housing Revenue Flores-
A-RMK 3.35% (b) 4,400,000
3,000,000 A-1+ San Diego Sewer Revenue PART SG-14 AMBAC-
Insured 3.45% (b) 3,000,000
3,000,000 NR|P San Dimas Redevelopment Agency (San
Dimas Community Center) 3.45% (b)
3,000,000
8,500,000 A-1 San Francisco (City & County of)
Redevelopment Agency Multi-Family Housing
(Fillmore Center) 92A-1 3.25% (b) 8,500,000
3,300,000 A-1+ San Jose Multi-Family Housing Revenue
(Fairway Glen) Series A 3.20% FGIC-
Insured (b) 3,300,000
3,000,000 VMIG 1* San Jose Multi-Family Housing Revenue
Bonds (Almaden Lake) 3.30%
(a)(b) 3,000,000
6,690,000 A-1+ San Jose Santa Clara Water Financing
Authority Sewer Revenue SG-49 PART
FGIC-Insured 3.45% (b) 6,690,000
10,720,000 SP-1+ Santa Clara County TRAN 4.50% due
8/1/97 10,750,516
3,000,000 A-1 Santa Clara County Financing Authority Lease
Revenue (VMC Facility
Replacement Project) Series B 3.35% (b) 3,000,000
8,315,000 A-1+ Santa Cruz County Public Financing Authority
Revenue PART SG-23 MBIA-
Insured 3.45% (b) 8,315,000
3,360,000 VMIG 1* Southern California Public Power
Transmission Project Revenue PART
MBIA-Insured 3.45% (b) 3,360,000
8,500,000 SP-1+ Sutter County Office of Education TRAN
4.50%
due 10/22/97 8,532,495
6,000,000 SP-1+ Ventura County Community College
District 4.25%
due 6/30/97 6,007,557
3,395,000 VMIG 1* West Covina Redevelopment Agency Lease
Revenue Refunding (The Lake
Public Parking Project) 3.20% (b) 3,395,000
$1,000,000 A-2 Windsor Multi-Family Housing Revenue
(Oakmont At Windsor) 3.70% (a)(b) $1,000,000
TOTAL INVESTMENTS 100%
(Cost $1,427,893,642**) $1,427,893,642
(a) Income from these issues 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) Variable rate obligation payable at par on demand on
the date indicated.
|P Security has not been rated by either Moody's Investors
Service or Standard & Poor's.
However, the Board of Directors has determined this security
to be considered a first tier
quality issue due to enhancement features; such as insurance
and/or irrevocable letters of
credit.
**Aggregate cost for Federal income tax purposes is
substantially the same.
See page 11 for definition of ratings and certain security
descriptions.
Bond Ratings
AAA Bonds rated "AAA" have the highest rating assigned
by Standard & Poor's. Capacity
to pay interest and repay principal is extremely strong.
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.
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.
VMIG 1 Moody's highest rating for issues having a
demand feature VRDO.
NR Indicates that the bond is not rated by Standard &
Poor's or Moody's. Security
Descriptions
ABAG Association of Bay Area
Governments
AIG American International Guaranty
AMBAC American Municipal Bond
Assurance Corporation
BAN Bond Anticipation Notes
BIG Bond Investors Guaranty
CGIC Capital Guaranty Insurance
Company
CHFCLI California Health Facility
Construction Loan Insurance
CONNIE LEE College Construction Loan
Insurance Association
COP Certificate of Participation
EDA Economic Development
Authority
ETM Escrowed To Maturity
FGIC Financial Guaranty Insurance
Company
FHA Federal Housing
Administration
FHLMC Federal Home Loan Mortgage
Corporation
FLAIRS Floating Adjustable Interest
Rate Securities
FNMA Federal National Mortgage
Association
FRTC Floating Rate Trust Certificates
FSA Federal Savings Association
GIC Guaranteed Investment Contract
GNMA Government National
Mortgage Association
GO General Obligation
HDC Housing Development
Corporation
HFA Housing Finance Authority
IDA Industrial Development
Authority
IDB Industrial Development Board
IDR Industrial Development
Revenue
INFLOS Inverse Floaters
LOC Letter of Credit
MBIA Municipal Bond Investors
Assurance Corporation
MUD Municipal Utilities District
MVRICS Municipal Variable Rate
Inverse Coupon Security
PART Partnership Structure
PCR Pollution Control Revenue
RAN Revenue Anticipation Notes
RAW Revenue Anticipation
Warrants
RIBS Residual Interest Bonds
RITES Residual Interest Tax-Exempt
Securities
SWAP Swap Structure
TAN Tax Anticipation Notes
TECP Tax Exempt Commercial Paper
TOB Tender Option Bond Structure
TRAN Tax and Revenue Anticipation
Notes
USD Unified School District
VA Veterans Administration
VRWE Variable Rate Wednesday
Demand
Statement of Assets and Liabilities March 31, 1997
ASSETS:
Investments, at amortized cost $1,427,893,642
Cash 83,155
Interest receivable 12,580,428
Total Assets 1,440,557,225
LIABILITIES:
Payable for securities purchased 30,602,735
Dividends payable 1,570,483
Management fees payable 603,901
Distribution fees payable 54,986
Accrued expenses 172,834
Total Liabilities 33,004,939
Total Net Assets $1,407,552,286
NET ASSETS:
Par value of shares of beneficial interest $1,407,832
Capital paid in excess of par value 1,406,331,019
Accumulated net realized loss from security transactions
(186,565)
Total Net Assets $1,407,552,286
Shares Outstanding:
Class A 1,400,427,070
Class Y 7,404,962
Net Asset Value, per class $1.00 See Notes to Financial
Statements.
Statement of OperationsFor the Year Ended March 31, 1997
INVESTMENT INCOME:
Interest $45,936,263
EXPENSES:
Management fees (Note 4) 6,706,574
Distribution fees (Note 4) 1,340,226
Shareholder and system servicing fees 373,665
Registration fees 241,985
Custody 138,773
Shareholder communications 133,225
Audit and legal 31,025
Trustees' fees 14,965
Other 9,855
Total Expenses 8,990,293
Net Investment Income 36,945,970
Net Realized Gain From Security Transactions 94,245
Increase in Net Assets From Operations $37,040,215
Statements of Changes in Net AssetsFor the Years Ended
March 31,
1997 1996
OPERATIONS:
Net investment income $36,945,970 $36,916,118
Net realized gain (loss) 94,245 (47,018)
Increase in Net Assets From Operations 37,040,215
36,869,100
DISTRIBUTION TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (36,945,970) (36,916,118)
Decrease in Net Assets From
Distributions to Shareholders (36,945,970)
(36,916,118)
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 5,459,002,289
5,101,071,082
Net asset value of shares issued for reinvestment
of dividends 36,681,668 35,790,180
Cost of shares reacquired (5,434,040,102)
(4,744,319,892)
Increase in Net Assets From
Fund Share Transactions 61,643,855 392,541,370
Increase in Net Assets 61,738,100 392,494,352
NET ASSETS:
Beginning of year 1,345,814,186 953,319,834
End of year $1,407,552,286 $1,345,814,186
Notes to Financial StatementsNotes to Financial Statements
(continued)
1. Significant Accounting Policies
The California Money Market 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 eight other separate
investment portfolios: Florida, Georgia, New York, National,
Ohio, Pennsylvania, Limited Term
and New York Money Market Portfolios. The financial
statements and financial highlights for
the other portfolios are presented in separate annual
reports.
The significant accounting policies consistently followed by
the Fund are: (a) security
transactions are accounted for on trade date; (b) the
Portfolio uses the amortized cost
method for valuing investments; accordingly, the cost of
securities plus accreted discount,
or minus amortized premium, approximates market value; (c)
gains or losses on the sale of
securities are calculated by using the specific
identification method; (d) interest income,
adjusted for amortization of premium and accretion of
original issue discount, is recorded
on the accrual basis; market discount is recognized upon the
disposition of the security; (e)
dividends and distributions to shareholders are recorded on
the ex-dividend date; (f) direct
expenses are charged to each portfolio and each class;
management fees and general fund
expenses are allocated on the basis of relative net assets;
(g) 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, 1997, reclassifications
were made to the Portfolio's 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
$93,181 was reclassified to paid-in
capital. Net investment income, net realized gains and net
assets were not affected by this
change; (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.
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 with respect to Class
A shares calculated at the annual rate of 0.10% of the
average daily net assets of that
class.
All officers and two Trustees of the Fund are employees of
SB.
5. Capital Loss Carryforwards
At March 31, 1997, the Portfolio had, for Federal income tax
purposes, $186,565 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:
1999 2000 2001 2002 2003 2004
Carryforward Amounts $54,568 $8,714 $82,684 $800
$1,435 $38,364
6. Shares of Beneficial Interest
At March 31, 1997, 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:
Year Ended
March 31, 1997* Year Ended
March 31, 1996
Class A
Shares sold 5,431,750,939 5,101,071,082
Shares issued on reinvestment 36,658,302 35,790,180
Shares redeemed (5,414,170,348) (4,744,319,892)
Net Increase 54,238,893 392,541,370
Class Y
Shares sold 27,251,350
Shares issued on reinvestment 23,366
Shares redeemed (19,869,754)
Net Increase 7,404,962
* For Class Y shares, transactions are for the period from
July 19, 1996 (inception date) to
March 31, 1997.
Financial HighlightsFor a share of each class of
beneficial interest outstanding throughout
each year:
Class A Shares
1997 1996 1995 1994 1993
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00
$1.00 $1.00
Net investment income (1) 0.028 0.032 0.026
0.018 0.021
Dividends from net investment income (0.028) (0.032)
(0.026) (0.018)
(0.021)
Net Asset Value, End of Year $1.00 $1.00 $1.00
$1.00 $1.00
Total Return 2.79% 3.22% 2.66% 1.84% 2.05%
Net Assets, End of Year (millions) $1,400 $1,346 $953
$190 $160
Ratios to Average Net Assets:
Expenses (1) 0.67% 0.64% 0.61% 0.64% 0.67%
Net investment income 2.75 3.15 3.02 1.82 2.05
Class Y Shares 1997(2)
Net Asset Value, Beginning of Year $1.00
Net investment income 0.020
Dividends from net investment income (0.020)
Net Asset Value, End of Year $1.00
Total Return|P 2.04%
Net Assets, End of Year (millions) $8
Ratios to Average Net Assets :
Expenses 0.56%
Net investment income 2.77
(1) The manager waived all or part of its fees for the
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
to Net Investment IncomeExpense Ratios
Without Fee Waivers
1996 1995 1996 1995
Class A
$0.000* $0.002 0.65% 0.63%
(2) For the period July 19, 1996 (inception date) to March
31, 1997.
* Amount represents less than $0.001 per share.
|P Total return is not annualized, as the result may not be
representative of the total
return for the year.
Annualized.
Independent Auditors' ReportIndependent Auditors' Report
(continued)
To the Shareholders and Board of Trustees
of the California Money Market Portfolio
of Smith Barney Muni Funds:
We have audited the accompanying statement of assets and
liabilities, including the schedule
of investments, of the California Money Market Portfolio of
Smith Barney Muni Funds as of
March 31, 1997, the related statement of operations for the
year then ended, the statements
of changes in net assets for each of the years in the two-
year period then ended and the
financial highlights for each of the years in the five-year
period then ended. These
financial statements and financial highlights are the
responsibility of the Funds'
management. Our responsibility is to express an opinion on
these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those
standards require that we plan and perform the audit to
obtain reasonable assurance about
whether the financial statements and financial highlights
are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures
in the financial statements. Our procedures included
confirmation of securities owned as of
March 31, 1997, by correspondence with the custodian. As to
securities purchased but not
received, we performed other appropriate auditing
procedures. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as
well as evaluating the overall financial statement
presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present
fairly, in all material respects, the financial position of
the California Money Market
Portfolio of Smith Barney Muni Funds as of March 31, 1997,
the results of operations for the
year then ended, the changes in its net assets for each of
the years in the two-year period
then ended and the financial highlights for each of the
years in the five-year period then
ended, in conformity with generally accepted accounting
principles.
New York, New York
May 9, 1997
Tax Information (unaudited)For Federal tax purposes the Fund
hereby designates for the fiscal
year ended March 31, 1997:
100.00% of the dividends paid by the Fund from net
investment income as tax-exempt for
regular Federal income tax purposes.
Smith Barney
Muni Funds
Smith Barney
A Member of Travelers Group
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
EMERITUS
OFFICERS
Heath B. McLendon
CHIEF EXECUTIVE OFFICER
Jessica M. Bibliowicz
PRESIDENT
Lewis E. Daidone
SENIOR VICE PRESIDENT
AND TREASURER
Joseph Benevento
VICE PRESIDENT
Irving P. David
CONTROLLER
Christina T. Sydor
SECRETARY
INVESTMENT MANAGER
Smith Barney Mutual Funds
Management Inc.
DISTRIBUTOR
Smith Barney, Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER
SERVICING AGENT
First Data Investors Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the
shareholders of
Smith Barney Muni Funds - California Money Market Portfolio.
It is not
authorized for distribution to prospective investors unless
accompanied or
preceded by a current Prospectus for the Portfolio, which
contains
information concerning the Portfolio's investment policies
and expenses as
well as other pertinent
information.
SMITH BARNEY MUNI FUNDS
388 Greenwich Street
New York, New York 10013
FD2309 5/97
- ------------------------------------------------------------
- --------------------
A N N U A L R E P O R T
============================================================
====================
1997
1997
1997
1997
1997
Smith Barney
Muni Funds
Georgia Portfolio
Ohio Portfolio
Pennsylvania Portfolio
- ------------------------------------------
March 31, 1997
[LOGO] SMITH BARNEY MUTUAL FUNDS
Investing for your future.
Every day.
<PAGE>
- ------------------------------------------
Georgia, Ohio and Pennsylvania Portfolios
- ------------------------------------------
Dear Shareholder:
We are pleased to provide the annual report for the Smith
Barney Muni Funds -
Georgia, Ohio and Pennsylvania Portfolios for the year ended
March 31, 1997. For
your convenience, we have summarized the period's prevailing
economic and market
conditions below and outlined the various investment
strategies employed by each
Portfolio during this time. A detailed summary of
performance and current
holdings for the various Portfolios can be found in the
appropriate sections
that follow.
Market and Economic Overview
The U.S. bond market experienced considerable volatility
throughout the year
ended March 31, 1997. In early 1996, a significant bond
market sell-off was
precipitated by a pick-up in inflationary fears that was
caused by unexpected
strength in the U.S. economy and concerns that the Federal
Reserve Board ("Fed")
would tighten rates in response. In retrospect, those
concerns were unfounded
because Fed monetary policy did not change throughout 1996.
In fact, as U.S.
economic growth moderated and concerns about Fed tightening
eased, bond prices
improved significantly.
After his now-infamous remarks regarding "irrational
exuberance" in the stock
market in December, Fed Chairman Alan Greenspan continued to
warn investors
about the possible re-emergence of higher inflation in the
U.S. economy. In
response to a steady stream of strong economic reports, the
Fed raised the
federal funds rate by 25 basis points, or 0.25% in late
March of this year. (The
federal funds rate is the interest rate banks charge each
other for overnight
loans and a closely watched indicator of the direction of
interest rates.)
Georgia Portfolio's Performance and Investment Strategy
For the year ended March 31, 1997, the Georgia Portfolio
generated a total
return of 5.95% for Class A shares which compares favorably
with its Lipper
Analytical Services, Inc. peer group average of 4.89%.
(Lipper Analytical
Services, Inc. is a major fund tracking organization.)
During the reporting period, we maintained the Georgia
Portfolio's high
credit-quality, good call protection and broad sector
diversification. In our
view, this is a prudent investment strategy and should
provide investors with a
competitive stream of tax-exempt income while at the same
time helping to
enhance the Portfolio's long-term total return performance
potential.
With respect to its credit quality, the Georgia Portfolio
had roughly 92% of its
assets invested in investment-grade securities. (An
investment-grade security is
a security with a rating of BBB/Baa or better from Standard
& Poor's Ratings
1
<PAGE>
Services or Moody's Investors Service, Inc., two major
credit and reporting
agencies.) In addition, approximately 45% of the Portfolio
had a triple-A
rating, the highest credit rating.
As of March 31, 1997, the Georgia Portfolio's average
weighted maturity was just
over 19.5 years. The Portfolio's emphasis has been in the
following diversified
market segments: multi-family housing bonds (19.3%),
escrowed-to-maturity bonds
(10.9%) and hospital bonds (10.2%) because in our opinion,
these issues
represent strong relative value.
Georgia Economic Highlights
As a result of Georgia's sound debt policies, conservative
fiscal practices,
strong economic growth in the past and development potential
in the future, the
state continues to enjoy a superior credit standing from the
major credit rating
agencies. In addition, Georgia's economy has become much
more diversified in
recent years and the state's economic growth was certainly
enhanced by the 1996
Summer Olympic games.
In our opinion, Georgia manages its financial affairs well,
and Atlanta remains
a key regional center primarily because of its major airport
and excellent trade
and service facilities. Manufacturing, especially in
nondurables, plays a major
role and trade is more significant in Georgia than in the
rest of the U.S.
Another indication of Georgia's recent economic success is a
growing state
population that has expanded at about twice the national
rate. We therefore
remain generally bullish on Georgia's future economic
prospects.
Ohio Portfolio's Performance and Investment Strategy
For the year ended March 31, 1997, the Ohio Portfolio's
Class A shares had a
total return of 6.06%, which exceeded its Lipper peer group
average of 5.05%.
With respect to the Ohio Portfolio's investment strategy, we
have maintained a
high-quality portfolio with more than 95% 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.)
As of March 31, 1997, the Ohio Portfolio's average weighted
maturity was
approximately 20 years. The Ohio Portfolio focused on
general obligation,
hospital, and housing bonds because we believed they offered
good value. In our
opinion, the Ohio Portfolio's high-quality orientation
should provide investors
with a competitive stream of income while helping to keep
its principal
relatively stable.
Ohio Economic Highlights
Ohio continues to maintain its high credit ratings of AA/Aa
from Standard &
Poor's Ratings Services and Moody's Investors Service, Inc.
However, the state
also continues to face challenges in transforming its
economy from a
heavy-industry emphasis to a more services-oriented one.
2
<PAGE>
On the positive side, Ohio has had success in diversifying
its industrial base
by adding business services, high technology firms, and
tourism to its
traditional mix. Moreover, we expect that Ohio will continue
to develop as a
center of financial services and distribution activity. In
addition, the steel
industry, a former economic keystone, has recently shown
signs of recovery.
Nevertheless, Ohio has struggled to attract and retain a
skilled and educated
labor supply as workers continue to migrate out of the
state. In our estimation,
this labor migration may limit future economic growth. While
we expect that Ohio
will continue to experience moderate growth in sales and
exports, job growth in
the state should remain relatively flat.
- ------------------------------------------------------------
- --------------------
Special Shareholder Notice
On September 4, 1996, the Board of Trustees of Smith Barney
Muni Funds approved
a proposed reorganization of the Ohio Portfolio into the
Fund's National
Portfolio. Under the terms of the proposed reorganization,
each Ohio Portfolio
shareholder would become a shareholder of the National
Portfolio, receiving
shares with a value equal to the value of the shareholder's
investment in the
Ohio Portfolio. Please note that no sales charge will be
imposed in this
proposed transaction. In addition, it is anticipated that no
gain or loss for
Federal income tax purposes would be recognized by
shareholders as a result of
this proposed reorganization.
In connection with the proposed reorganization of the Ohio
Portfolio, we will be
mailing proxy materials in anticipation of the shareholders
meeting tentatively
scheduled to take place August 8, 1997. We ask that you take
the time to read
the proxy materials carefully. In that regard, we also ask
that you complete,
sign and return the Proxy card that will accompany the
materials as soon as
possible after you receive it.
- ------------------------------------------------------------
- --------------------
Pennsylvania Portfolio's Performance
and Investment Strategy
For the year ended March 31, 1997, the Pennsylvania
Portfolio posted a total
return of 6.11% for Class A shares and outperformed its
Lipper peer group
average of 4.95%.
During the reporting period, the Pennsylvania Portfolio
maintained its broad
sector diversification, high-quality investment approach and
good call
protection. In addition, the Portfolio's average weighted
maturity was
approximately 21 years and the Portfolio's top three sectors
as of March 31,
1997 are hospital issues (24.1%), industrial revenue
development issues (11.6%),
and transportation issues (7.4%).
Looking ahead, we plan to continue to emphasize high-quality
issues that are
broadly diversified by sector in the Pennsylvania Portfolio
in order to provide
investors with an attractive level of income while helping
to enhance its
long-term total return potential.
3
<PAGE>
Pennsylvania Economic Highlights
We believe Pennsylvania's debt levels should not be
especially burdensome given
the state's fully adequate reserves. Moreover, although
Pennsylvania's economic
growth has been relatively slow, it has been steady. In
fact, the state has
recorded a budgetary general fund surplus since 1991-92 as
its economy has
become more diversified in recent years.
Pennsylvania's economy exhibits the characteristics of both
the Northeast region
and the Midwest region with the major cities of Philadelphia
and Pittsburgh
serving as anchors at each end of the state. While
manufacturing industries
continue to be a key contributor to state revenues, its
overall importance has
declined somewhat as diversification in the state's economy
has become more
widespread. In light of these positive economic trends, we
believe
Pennsylvania's future economic prospects should remain
bright.
National Outlook
The U.S. economy appears to be strengthening. Although some
analysts estimate
U.S. economic growth at a 4% annual rate, we believe growth
will most likely
level off at around a 3.5% annual range. In our view, this
higher domestic
economic growth will undoubtedly put some pressure on
interest rates. In fact,
we have already seen recent yields on 30-year U.S. treasury
bonds climb above
the 7% mark. We expect that the benchmark 30 year bond is
entering a new trading
range of 7% to 7.25% and that should continue to exert
upward pressure on
municipal market yields. While a stronger U.S. economy could
cause new wage
pressures to rise, it is unclear whether these trends will
result in a squeeze
on corporate profits and cause prices to rise as well.
Thank you for investing in the Smith Barney Muni Funds -
Georgia, Ohio and
Pennsylvania Portfolios. We look forward to helping you
achieve your financial
goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M.
Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
Georgia and
Pennsylvania Portfolios
/s/ Lawrence T. McDermott
Lawrence T. McDermott
Vice President
Ohio Portfolio
April 18, 1997
4
<PAGE>
- ------------------------------------------------------------
- --------------------
Georgia Portfolio
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
------------------
Beginning End of Income Capital
Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $12.50 $12.48 $0.67
$0.08 5.95%
- ------------------------------------------------------------
- --------------------
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 $ 1.99 $
0.13
============================================================
====================
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
------------------
Beginning End of Income Capital
Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $12.50 $12.47 $0.61
$0.08 5.33%
- ------------------------------------------------------------
- --------------------
3/31/96 12.11 12.50 0.65
0.05 9.08
- ------------------------------------------------------------
- --------------------
Inception*-3/31/95 12.27 12.11 0.49
0.00 2.88+
============================================================
====================
Total $ 1.75 $
0.13
============================================================
====================
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
------------------
Beginning End of Income Capital
Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $12.49 $12.46 $0.60
$0.08 5.28%
- ------------------------------------------------------------
- --------------------
3/31/96 12.09 12.49 0.64
0.05 9.12
- ------------------------------------------------------------
- --------------------
Inception*- 3/31/95 12.06 12.09 0.56
0.00 5.11+
============================================================
====================
Total $ 1.80 $
0.13
============================================================
====================
It is the Fund's policy to distribute dividends monthly and
capital gains, if
any, annually.
5
<PAGE>
- ------------------------------------------------------------
- --------------------
Georgia Portfolio
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
Without Sales
Charge(1)
------------------------
- ------------------
Class A Class B
Class C
============================================================
====================
Year Ended 3/31/97 5.95% 5.33%
5.28%
- ------------------------------------------------------------
- --------------------
Inception* through 3/31/97 7.32 6.17
6.57
============================================================
====================
With Sales
Charge(2)
------------------------
- ------------------
Class A Class B
Class C
============================================================
====================
Year Ended 3/31/97 1.72% 0.83%
4.28%
- ------------------------------------------------------------
- --------------------
Inception* through 3/31/97 5.86 5.19
6.57
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
Cumulative Total Return
- ------------------------------------------------------------
- --------------------
Without Sales
Charge(1)
============================================================
====================
Class A (Inception* through 3/31/97) 23.51%
- ------------------------------------------------------------
- --------------------
Class B (Inception* through 3/31/97) 18.20
- ------------------------------------------------------------
- --------------------
Class C (Inception* through 3/31/97) 20.75
============================================================
====================
(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 addi tion, Class A shares
reflect the deduction
of the maximum sales charge of 4.00% and Class B shares
reflect the de
duction 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.
6
<PAGE>
- ------------------------------------------------------------
- --------------------
Historical Performance (unaudited)
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A
Shares of
the Georgia Portfolio vs. Lehman Long Bond
Index+
- ------------------------------------------------------------
- --------------------
April 1994 -- March 1997
[LINE GRAPH]
+ Hypothetical illustration of $10,000 invested in Class A
shares at inception
on April 4, 1994, assuming deduction of the maximum 4.00%
sales charge at the
time of investment and reinvestment of dividends and
capital gains, if any,
at net asset value through March 31, 1997. 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.
7
<PAGE>
- ------------------------------------------------------------
- --------------------
Ohio Portfolio
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
------------------
Beginning End of Income Capital
Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $12.20 $12.23 $0.67
$0.02 6.06%
- ------------------------------------------------------------
- --------------------
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 $ 1.82
$0.02
============================================================
====================
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
------------------
Beginning End of Income Capital
Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $12.18 $12.20 $0.62
$0.02 5.52%
- ------------------------------------------------------------
- --------------------
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 $1.67
$0.02
============================================================
====================
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
------------------
Beginning End of Income Capital
Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $12.19 $12.21 $0.61
$0.02 5.48%
- ------------------------------------------------------------
- --------------------
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 $1.65
$0.02
============================================================
====================
It is the Fund's policy to distribute dividends monthly and
capital gains, if
any, annually.
8
<PAGE>
- ------------------------------------------------------------
- --------------------
Ohio Portfolio
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
Without Sales
Charge(1)
------------------------
- ------------------
Class A Class B
Class C
============================================================
====================
Year Ended 3/31/97 6.06% 5.52%
5.48%
- ------------------------------------------------------------
- --------------------
Inception* through 3/31/97 6.34 5.69
5.68
============================================================
====================
With Sales
Charge(2)
------------------------
- ------------------
Class A Class B
Class C
============================================================
====================
Year Ended 3/31/97 1.81% 1.02%
4.48%
- ------------------------------------------------------------
- --------------------
Inception* through 3/31/97 4.80 4.71
5.68
============================================================
====================
- ------------------------------------------------------------
- --------------------
Cumulative Total Return
- ------------------------------------------------------------
- --------------------
Without Sales
Charge(1)
============================================================
====================
Class A (Inception* through 3/31/97) 18.78%
- ------------------------------------------------------------
- --------------------
Class B (Inception* through 3/31/97) 16.75
- ------------------------------------------------------------
- --------------------
Class C (Inception* through 3/31/97) 16.72
============================================================
====================
(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 addi tion, Class A shares
reflect the deduction
of the maximum sales charge of 4.00% and Class B shares
reflect the de
duction 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.
9
<PAGE>
- ------------------------------------------------------------
- --------------------
Historical Performance (unaudited)
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A
Shares of
the Ohio Portfolio vs. Lehman Long Bond
Index+
- ------------------------------------------------------------
- --------------------
June 1994 -- March 1997
[LINE GRAPH]
+ Hypothetical illustration of $10,000 invested in Class A
shares at inception
on June 13, 1994, assuming deduction of the maximum
4.00% sales charge at
the time of investment and reinvestment of dividends and
capital gains, if
any, at net asset value through March 31, 1997. 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.
10
<PAGE>
- ------------------------------------------------------------
- --------------------
Pennsylvania Portfolio
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class A Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
------------------
Beginning End of Income Capital
Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $12.62 $12.66 $0.71
$0.00 6.11%
- ------------------------------------------------------------
- --------------------
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 $2.05
$0.05
============================================================
====================
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class B Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
------------------
Beginning End of Income Capital
Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $12.61 $12.64 $0.65
$0.00 5.56%
- ------------------------------------------------------------
- --------------------
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 4.48+
============================================================
====================
Total $1.79
$0.05
============================================================
====================
- ------------------------------------------------------------
- --------------------
Historical Performance -- Class C Shares
- ------------------------------------------------------------
- --------------------
Net Asset Value
------------------
Beginning End of Income Capital
Gain Total
Year Ended of Year Year Dividends
Distributions Returns(1)
============================================================
====================
3/31/97 $12.61 $12.64 $0.65
$0.00 5.51%
- ------------------------------------------------------------
- --------------------
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 $1.87
$0.05
============================================================
====================
It is the Fund's policy to distribute dividends monthly and
capital gains, if
any, annually.
11
<PAGE>
- ------------------------------------------------------------
- --------------------
Pennsylvania Portfolio
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
Average Annual Total Return
- ------------------------------------------------------------
- --------------------
Without Sales
Charge(1)
------------------------
- ------------------
Class A Class B
Class C
============================================================
====================
Year Ended 3/31/97 6.11% 5.56%
5.51%
- ------------------------------------------------------------
- --------------------
Inception* through 3/31/97 7.68 6.32
7.09
============================================================
====================
With Sales
Charge(2)
------------------------
- ------------------
Class A Class B
Class C
============================================================
====================
Year Ended 3/31/97 1.84% 1.06%
4.51%
- ------------------------------------------------------------
- --------------------
Inception* through 3/31/97 6.23 5.35
7.09
============================================================
====================
- ------------------------------------------------------------
- --------------------
Cumulative Total Return
- ------------------------------------------------------------
- --------------------
Without Sales
Charge(1)
============================================================
====================
Class A (Inception* through 3/31/97) 24.80%
- ------------------------------------------------------------
- --------------------
Class B (Inception* through 3/31/97) 18.68
- ------------------------------------------------------------
- --------------------
Class C (Inception* through 3/31/97) 22.72
============================================================
====================
(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
distribu tions, 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 de
duction 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 20, 1994
and April 5, 1994, respectively.
+ Total return is not annualized, as it may not be
representative of the total
return for the year.
12
<PAGE>
- ------------------------------------------------------------
- --------------------
Historical Performance (unaudited)
- ------------------------------------------------------------
- --------------------
Growth of $10,000 Invested in Class A
Shares of
the Pennsylvania Portfolio vs. Lehman Long Bond
Index+
- ------------------------------------------------------------
- --------------------
April 1994 -- March 1997
[LINE GRAPH]
+ Hypothetical illustration of $10,000 invested in Class A
shares at inception
on April 4, 1994, assuming deduction of the maximum
4.00% sales charge at
the time of investment and reinvestment of dividends and
capital gains, if
any, at net asset value through March 31, 1997. 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.
13
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
GEORGIA PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
======================================
<S> <C> <C>
<C>
Escrowed to Maturity (a) -- 10.9%
$ 280,000 AAA Cobb County Kennestone Hospital
Authority Revenue,
MBIA-Insured, 10.250% due 2/1/02
$ 309,400
1,875,000 Aaa* Colquitt County Development Authority
Revenue,
Sub-Series C, zero coupon due
12/1/21 349,219
485,000 AAA Puerto Rico Commonwealth Aqueduct &
Sewer
Authority Revenue, 10.250% due
7/1/09(b) 659,600
25,000 Aaa* Richmond County Development Authority,
Sub-Series C,
zero coupon due 12/1/21
4,656
185,000 Aaa* Richmond County Water and Sewer
Revenue,
9.875% due 4/1/02
209,744
1,500,000 Aaa* Savannah Economic Development
Authority,
zero coupon due 12/1/21
279,375
300,000 AAA Tri City Hospital Authority Hospital
Revenue,
FGIC-Insured, 10.250% due 7/1/06(b)
407,250
2,000,000 Aaa* Washington GA Wilkes Payroll
Development
Authority Revenue, zero coupon due
12/1/21 372,500
- ------------------------------------------------------------
- ---------------------------------------
2,591,744
- ------------------------------------------------------------
- ---------------------------------------
General Obligation -- 1.0%
220,000 Aaa* Georgia State GO, Series B, 6.800% due
3/1/11 249,700
- ------------------------------------------------------------
- ---------------------------------------
Hospitals -- 10.2%
1,000,000 AAA Dalton Development Authority Revenue,
Hamilton Health Care Systems,
MBIA-Insured, 5.250% due 8/15/26
916,250
500,000 A++ Fulco County Hospital Authority
Revenue Anticipation
Certificates, Georgia Baptist
Healthcare, Series A,
6.250% due 9/1/13
495,625
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
506,250
500,000 BBB+ Savannah Hospital Authority, Candler
Hospital,
7.000% due 1/1/11(b)
516,250
- ------------------------------------------------------------
- ---------------------------------------
2,434,375
- ------------------------------------------------------------
- ---------------------------------------
Housing: Multi-Family -- 19.3%
1,000,000 A Atlanta Urban Residential Finance
Authority,
Multi-Family Housing Revenue,
(Cascade Pines
Housing Project), 6.250% due
9/1/10(c) 1,002,500
250,000 A Cobb County Housing Authority
Refunding,
(Signature Place Project), Series A,
6.875% due 10/1/17
257,500
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
GEORGIA PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
======================================
<S> <C> <C>
<C>
Housing: Multi-Family -- 19.3% (continued)
De Kalb County Housing Authority,
Multi-Family Housing
Revenue, Series A:
$1,000,000 NR Friendly Hills Apartments, FHA-
Insured,
7.050% due 1/1/39(c)
$1,055,000
300,000 AAA Valley Brook Apartments Project,
Revenue Refunding,
MBIA-Insured, 7.750% due 1/1/26
318,375
1,000,000 A Fulton County Multi-Family Housing
Authority Revenue,
(Concorde Place Apartment Project),
6.300% due 7/1/16(c)
993,750
1,000,000 AAA Marietta Multi-Family Housing
Authority Revenue,
Country Oaks Apartments, GNMA-
Collateralized,
6.050% due 10/20/16(c)
987,500
- ------------------------------------------------------------
- ---------------------------------------
4,614,625
- ------------------------------------------------------------
- ---------------------------------------
Housing: Single-Family -- 8.3%
180,000 AAA Fulton County Housing Authority,
Single-Family Mortgage
Revenue, Series A, GNMA-
Collateralized,
6.600% due 3/1/28(c)
184,500
350,000 AA+ Georgia State Housing Finance
Authority, Single-Family
Mortgage Revenue, Series A, FHA-
Insured,
6.600% due 12/1/23(c)
356,125
345,000 AA+ Georgia State Residential Finance
Authority, Home
Ownership Mortgage, Series A, FHA-
Insured,
7.250% due 12/1/21(c)
366,131
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(c) 506,250
550,000 AAA Virgin Islands Housing Finance
Authority, Single-Family
Mortgage, Series A, GNMA-
Collateralized,
6.450% due 3/1/16(c)
557,562
- ------------------------------------------------------------
- ---------------------------------------
1,970,568
- ------------------------------------------------------------
- ---------------------------------------
Industrial Development -- 2.2%
500,000 A1* Savannah EDA, (Union Camp Corp.
Project), IDR,
6.150% due 3/1/17
517,500
- ------------------------------------------------------------
- ---------------------------------------
Miscellaneous -- 2.4%
500,000 BBB Puerto Rico Housing Bank and Finance
Agency, Kidder,
7.500% due 12/1/06(b)
566,250
- ------------------------------------------------------------
- ---------------------------------------
Pollution Control -- 8.5%
400,000 AAA Burke County Development Authority
PCR, (Oglethorpe
Power Corp. Vogtle Project), MBIA-
Insured,
7.500% due 1/1/03
437,000
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
GEORGIA PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
======================================
<S> <C> <C>
<C>
Pollution Control -- 8.5% (continued)
$ 500,000 A Monroe County Development Authority
PCR,
(Oglethorpe Power Corp. Scherer
Project),
Series A, 6.800% due 1/1/12
$ 556,875
1,000,000 NR Rockdale County Development Authority,
Solid Waste
Disposal Revenue, (Visy Paper
Project),
7.500% due 1/1/26
1,038,750
- ------------------------------------------------------------
- ---------------------------------------
2,032,625
- ------------------------------------------------------------
- ---------------------------------------
Public Facilities --- 5.7%
250,000 AAA Butts County COP, MBIA-Insured, 6.750%
due 12/1/14 270,625
1,100,000 AAA Cobb-Marietta Counties Coliseum and
Exhibit Hall Authority
Revenue, MBIA-Insured, 5.625% due
10/1/26 1,093,125
- ------------------------------------------------------------
- ---------------------------------------
1,363,750
- ------------------------------------------------------------
- ---------------------------------------
Short-Term (d) -- 11.3%
300,000 VMIG1* Barstow County Development Authority
PCR, (Georgia Power
Co. Bowen Project), 1st Series,
4.000% due 6/1/23 300,000
800,000 VMIG1* Burke County Development Authority
PCR, (Georgia Power
Co. Vogtle Project), 4th Series,
4.000% due 9/1/25 800,000
800,000 VMIG1* Georgia State Hospital Finance
Authority Revenue, (Pooled
Hospital Loan Program), 3.850% due
3/1/01 800,000
800,000 VMIG1* Putnam County Development Authority
PCR, (Georgia Power
Co. Project), 1st Series, 4.000% due
6/1/23 800,000
- ------------------------------------------------------------
- ---------------------------------------
2,700,000
- ------------------------------------------------------------
- ---------------------------------------
Transportation -- 4.7%
250,000 AAA Metro Atlanta Rapid Transit Authority
Revenue Refunding,
Series P, AMBAC-Insured, 6.250% due
7/1/20 265,313
1,000,000 A Puerto Rico Commonwealth Highway &
Transportation
Authority Revenue, Series Y, 5.000%
due 7/1/36 853,750
- ------------------------------------------------------------
- ---------------------------------------
1,119,063
- ------------------------------------------------------------
- ---------------------------------------
Utilities -- 9.4%
600,000 AAA Georgia Municipal Electric Authority
Power Revenue,
Series EE, AMBAC-Insured, 7.250% due
1/1/24(b) 717,750
500,000 A- Georgia Municipal Gas Authority
Revenue, (Southern
Storage Gas Project), 6.300% due
7/1/09 523,750
1,000,000 AA Hogansville Combined Public Utility
System,
Asset Guaranty Insured, 5.850% due
10/1/15 995,000
- ------------------------------------------------------------
- ---------------------------------------
2,236,500
- ------------------------------------------------------------
- ---------------------------------------
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
GEORGIA PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
======================================
<S> <C> <C>
<C>
Water & Sewer -- 6.1%
$ 625,000 AAA Douglasville-Douglas County Water &
Sewer Authority
Revenue, AMBAC-Insured, 5.625% due
6/1/15 $ 622,656
300,000 AAA Fulton County Water & Sewer Revenue,
FGIC-Insured,
6.375% due 1/1/14
325,125
500,000 AAA Milledgeville Water & Sewer Revenue,
FSA-Insured,
6.000% due 12/1/21
516,250
- ------------------------------------------------------------
- ---------------------------------------
1,464,031
- ------------------------------------------------------------
- ---------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $23,423,060**)
$23,860,731
============================================================
=======================================
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
OHIO PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
======================================
<S> <C> <C>
<C>
Education -- 5.8%
$ 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
10/1/22 100,000
100,000 AAA Strongville City Schools Improvement,
AMBAC-Insured,
6.000% due 12/1/14
103,375
- ------------------------------------------------------------
- ---------------------------------------
426,375
- ------------------------------------------------------------
- ---------------------------------------
General Obligation -- 22.4%
150,000 A1* Avon Lake City School District GO,
6.250% due 12/1/19 156,750
500,000 AAA Cleveland GO, AMBAC-Insured, 5.500%
due 9/1/16(b) 490,625
250,000 AA Columbiana County GO, Asset Guaranty
Insured,
6.600% due 12/1/17
261,563
105,000 AAA Columbus Sewer Improvement #28, 6.000%
due 5/1/12 109,200
325,000 AAA Lucas County GO, AMBAC-Insured, 5.400%
due 12/1/15 315,250
300,000 AAA Summit County Addiction & Mental
Health Facilities,
AMBAC-Insured, 6.400% due 12/1/14
319,875
- ------------------------------------------------------------
- ---------------------------------------
1,653,263
- ------------------------------------------------------------
- ---------------------------------------
Hospitals -- 19.1%
350,000 BBB- Green Springs Health Care Facilities
Revenue,
(St. Francis Health Care Center
Project),
Series A, 7.125% due 5/15/25
368,375
Miami County Hospital Facilities,
Refunding &
Improvement, Upper Valley Medical
Center:
500,000 BBB Series A, 6.375% due 5/15/26
491,875
550,000 BBB Series C, 6.250% due 5/15/13
545,875
- ------------------------------------------------------------
- ---------------------------------------
1,406,125
- ------------------------------------------------------------
- ---------------------------------------
Housing: Multi-Family -- 7.7%
250,000 Aaa* Cuyahoga County Multi-Family Housing
Revenue,
Dalebridge Apartments, GNMA-
Collateralized,
FHA Supported, 6.500% due
10/20/20(c) 254,063
300,000 Aaa* Kent Multi-Family Housing Revenue,
Silver Meadows,
GNMA-Collateralized, FHA Supported,
7.150% due 12/20/26(c)
316,875
- ------------------------------------------------------------
- ---------------------------------------
570,938
- ------------------------------------------------------------
- ---------------------------------------
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
OHIO PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
======================================
<S> <C> <C>
<C>
Housing: Single-Family -- 10.8%
Ohio Housing Finance Agency
Residential Mortgage,
GNMA-Collateralized:
$ 80,000 AAA Series A, Long Option Period,
6.000% due 2/1/16 $ 80,537
250,000 AAA Series A-1, 6.100% due 9/1/14
250,625
Series A-2:
225,000 AAA 6.125% due 9/1/24 (c)
219,656
240,000 AAA 6.625% due 3/1/26 (c)
245,400
- ------------------------------------------------------------
- ---------------------------------------
796,218
- ------------------------------------------------------------
- ---------------------------------------
Industrial Development -- 2.0%
150,000 Aa3* Toledo-Lucas County Port Authority
Revenue Refunding,
(Cargill Inc. Project), 5.900% due
12/1/15 149,625
- ------------------------------------------------------------
- ---------------------------------------
Miscellaneous -- 5.1%
200,000 AAA Ohio State Building Authority,
Juvenile Correction Facility,
Series A, AMBAC-Insured, 6.600% due
10/1/14 215,750
150,000 AAA Puerto Rico Public Buildings Authority
Revenue,
AMBAC-Insured, 6.250% due 7/1/15
161,813
- ------------------------------------------------------------
- ---------------------------------------
377,563
- ------------------------------------------------------------
- ---------------------------------------
Short-Term (d) -- 5.4%
400,000 A-1+ Paulding County Solid Waste Disposal
Revenue,
(Lafarge Corp. Project), 3.250% due
8/1/26 400,000
- ------------------------------------------------------------
- ---------------------------------------
Solid Waste -- 6.8%
500,000 NR Ohio State Solid Waste Revenue,
Republic Engineered
Steels Inc., 9.000% due 6/1/21(b)(c)
500,625
- ------------------------------------------------------------
- ---------------------------------------
Utilities -- 2.9%
195,000 AAA Cleveland Public Power System, First
Mortgage,
Series B, MBIA-Insured, 7.000% due
11/15/17 212,304
- ------------------------------------------------------------
- ---------------------------------------
Water & Sewer -- 12.0%
100,000 AAA Cleveland Water Works Revenue, First
Mortgage,
Series 92B, AMBAC-Insured, 6.250%
due 1/1/16 103,500
Ohio State Water Development
Authority:
400,000 A Broken Hill Project, 6.450% due
9/1/20(c) 409,500
150,000 AAA PCR, MBIA-Insured, 5.700% due
12/1/11 151,688
200,000 A- Trumbull County Sewer Disposal
Revenue,
(General Motors Corp. Project),
6.750% due 7/1/14(c) 220,250
- ------------------------------------------------------------
- ---------------------------------------
884,938
- ------------------------------------------------------------
- ---------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $7,168,565**)
$7,377,974
============================================================
=======================================
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
PENNSYLVANIA PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
=======================================
<S> <C> <C>
<C>
Education -- 2.9%
$1,000,000 AAA Abington School District, GO
Unlimited, FGIC-Insured
6.000% due 5/15/21
$1,018,750
- ------------------------------------------------------------
- ---------------------------------------
Escrowed to Maturity (a) -- 5.8%
340,000 AAA Blair County Hospital Authority
Revenue, Altoona
Hospital, 6.900% due 7/1/08
367,625
530,000 AAA Cambria County Hospital Development
Authority,
Conemaugh Valley Memorial Hospital,
7.625% due 9/1/11
614,800
435,000 AAA Lewisburg Area School District
Building,
AMBAC-Insured, 9.750% due 2/15/04(b)
523,631
325,000 AAA Southeastern Greene School District,
9.375% due 7/1/03
370,906
145,000 AAA York County GO, Refunding, AMBAC-
Insured,
8.875% due 6/1/06
170,919
- ------------------------------------------------------------
- ---------------------------------------
2,047,881
- ------------------------------------------------------------
- ---------------------------------------
Finance -- 1.5%
500,000 A Pennsylvania State Finance Authority
Revenue
Refunding, (Municipal Capital Input
Project),
Societe Generale, 6.600% due 11/1/09
528,750
- ------------------------------------------------------------
- ---------------------------------------
General Obligation -- 2.0%
1,255,000 AAA Hazleton Area School District GO,
Series B,
FGIC-Insured, zero coupon due 3/1/25
232,175
500,000 AAA Luzerne County, GO Unlimited, FGIC-
Insured,
5.625% due 12/15/21
486,875
- ------------------------------------------------------------
- ---------------------------------------
719,050
- ------------------------------------------------------------
- ---------------------------------------
Hospitals -- 24.1%
500,000 AAA Allegheny Hospital Development
Authority,
(General Hospital Project), Series
A, MBIA-Insured,
6.250% due 9/1/20
512,500
1,000,000 BBB Allentown Area Hospital Authority
Revenue,
Sacred Heart Hospital, 6.750% due
11/15/14 1,030,000
1,000,000 BBB+ Hazelton Health Services Authority
Revenue,
St. Joseph's Medical Center, 6.200%
due 7/1/26 948,750
1,000,000 BBB Horizon Hospital System Authority
Revenue,
Horizon Hospital Systems Inc.,
6.350% due 5/15/26 976,250
1,100,000 BBB- McKean County Hospital Authority
Revenue, (Bradford
Hospital Project), 6.100% due
10/1/20 1,062,875
1,000,000 AA Potter County Hospital Authority
Revenue,
Asset Guaranty Insured, 6.050% due
8/1/24 993,750
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
PENNSYLVANIA PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
======================================
<S> <C> <C>
<C>
Hospitals -- 24.1% (continued)
$ 500,000 BBB Puerto Rico Industrial, Tourist,
Educational,
Medical & Environmental Control
Facilities,
(Ryder Memorial Hospital Project),
Series A,
6.700% due 5/1/24
$ 506,250
Scranton-Lackawanna Health & Welfare
Authority Revenue:
500,000 NR Allied Services Rehabilitation
Hospitals,
Project-A, 7.600% due 7/15/20
528,750
500,000 AAA University of Scranton Project,
AMBAC-Insured, 6.800% due
11/1/14(b) 533,125
1,050,000 A- South Fork Municipal Authority
Hospital Revenue,
(Lee Hospital Project), Series A,
5.500% due 7/1/23 935,813
500,000 AAA Wayne County Hospital & Health
Facilities Authority,
County Guaranteed Hospital Revenue,
(Wayne Memorial Hospital Project),
MBIA-Insured,
6.250% due 7/1/14
515,000
- ------------------------------------------------------------
- ---------------------------------------
8,543,063
- ------------------------------------------------------------
- ---------------------------------------
Housing: Multi-Family -- 4.8%
1,500,000 BBB+++ Montgomery County Redevelopment
Authority,
Multi-Family Housing Revenue, (KBF
Associates L.P.
Project), Series A, 6.375% due
7/1/12 1,477,500
205,000 AAA Pittsburgh Urban Redevelopment
Authority, Mortgage
Revenue, Series B, 6.950% due
10/1/10(d) 207,050
- ------------------------------------------------------------
- ---------------------------------------
1,684,550
- ------------------------------------------------------------
- ---------------------------------------
Housing: Single-Family -- 6.3%
Allegheny County Residential Mortgage
Refunding,
Single-Family Housing, GNMA-
Collateralized:
975,000 Aaa* 6.875% due 5/1/26(d)
1,017,656
2,000,000 Aaa* Zero coupon due 5/1/27(d)
215,000
1,000,000 AAA Puerto Rico Single-Family Housing
Mortgage Revenue,
GNMA, FNMA & FHLMC-Collateralized,
6.250% due 4/1/29(d)
1,012,500
- ------------------------------------------------------------
- ---------------------------------------
2,245,156
- ------------------------------------------------------------
- ---------------------------------------
Industrial Development -- 11.6%
1,000,000 Baa3* Allegheny County IDA Revenue,
Refunding
Environmental Improvement, USX
Corp.,
6.700% due 12/1/20(b)
1,035,000
1,000,000 A- Bradford IDA Solid Waste,
International Paper Co.,
6.600% due 3/1/19(d)
1,040,000
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
PENNSYLVANIA PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
======================================
<S> <C> <C>
<C>
Industrial Development -- 11.6% (continued)
$1,000,000 A- Erie County IDA, Environmental
Improvement Revenue,
(International Paper Co. Project),
Series A, 7.625%
due 11/1/18(b)(c)
$1,115,000
1,000,000 AAA Philadelphia Authority for Industrial
Development
Lease Revenue, (City of Philadelphia
Project),
Series A, MBIA-Insured, 5.375% due
2/15/27 926,250
- ------------------------------------------------------------
- ---------------------------------------
4,116,250
- ------------------------------------------------------------
- ---------------------------------------
Life-Care -- 6.7%
Montgomery County IDA, Retirement
Community Revenue:
1,500,000 A- Series A, 5.875% due 11/15/22
1,432,500
1,000,000 A- Series B, 5.625% due 11/15/12
953,750
- ------------------------------------------------------------
- ---------------------------------------
2,386,250
- ------------------------------------------------------------
- ---------------------------------------
Miscellaneous -- 8.5%
1,000,000 AAA Delaware County Authority Revenue,
(Elwyn Inc. Project)
CONNIE LEE-Insured, 5.500% due
6/1/20 927,500
1,000,000 AA Northampton County IDA, (Moravian Hall
Square,
Project A), Asset Guaranty-Insured,
5.550% due 7/1/14 947,500
1,000,000 BBB Puerto Rico Housing Bank & Finance
Agency,
7.500% due 12/1/06
1,132,500
- ------------------------------------------------------------
- ---------------------------------------
3,007,500
- ------------------------------------------------------------
- ---------------------------------------
Pollution Control -- 4.3%
1,000,000 AAA Northampton County IDA, Metropolitan
Edison, Series A,
MBIA-Insured, 6.100% due 7/15/21
1,018,750
500,000 BBB- Pennsylvania Economic Development
Financing Authority,
Resource Recovery Revenue, (Culver
Project),
Series D, 7.150% due 12/1/18(c)
521,250
- ------------------------------------------------------------
- ---------------------------------------
1,540,000
- ------------------------------------------------------------
- ---------------------------------------
Pre-Refunded (e) -- 3.5%
960,000 AAA Philadelphia Hospital Revenue, (United
Hospital Inc.
Project), (Call 7/1/05 @ 100),
10.875% due 7/1/08(b) 1,227,600
- ------------------------------------------------------------
- ---------------------------------------
Short-Term (d) -- 2.8%
100,000 VMIG2* Chester County IDA Revenue, (General
Motors Corp. Project),
2.900% due 8/1//01
100,000
400,000 VMIG1* Pennsylvania State Higher Education
Health Services
Revenue, 3.450% due 11/15/35
400,000
500,000 VMIG1* Puerto Rico Commonwealth Development
Bank
Revenue, 3.100% due 12/1/15
500,000
- ------------------------------------------------------------
- ---------------------------------------
1,000,000
- ------------------------------------------------------------
- ---------------------------------------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
- ------------------------------------------------------------
- --------------------
Schedules of Investments (continued)
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
PENNSYLVANIA PORTFOLIO
FACE
AMOUNT RATING SECURITY
VALUE
============================================================
======================================
<S> <C> <C>
<C>
Solid Waste -- 3.6%
$ 250,000 A Lancaster County Solid Waste
Management Authority,
Resource Recovery Systems Revenue
Landfill,
7.875% due 12/15/09
$ 259,375
1,000,000 A New Morgan IDA Solid Waste Disposal,
Browning Ferris
Industries Inc., 6.500% due
4/1/19(c) 1,027,500
- ------------------------------------------------------------
- ---------------------------------------
1,286,875
- ------------------------------------------------------------
- ---------------------------------------
Transportation -- 7.4%
Puerto Rico Commonwealth Highway &
Transportation Authority:
1,000,000 A 5.500% due 7/1/15
968,750
500,000 A 5.000% due 7/1/36
426,875
1,200,000 Baa3* Puerto Rico Ports Authority Revenue,
American Airlines,
Series A, 6.250% due 6/1/26(c)
1,207,500
- ------------------------------------------------------------
- ---------------------------------------
2,603,125
- ------------------------------------------------------------
- ---------------------------------------
Utilities -- 1.2%
400,000 BBB Guam Power Authority Revenue, Series
A,
6.750% due 10/1/24
414,000
- ------------------------------------------------------------
- ---------------------------------------
Water & Sewer -- 3.0%
1,000,000 AAA Philadelphia Water & Wastewater
Revenue,
MBIA-Insured, 6.250% due 8/1/12
1,077,500
- ------------------------------------------------------------
- ---------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $34,906,899**)
$35,446,300
============================================================
=======================================
</TABLE>
(a) Bond is escrowed to maturity with U.S. government
securities and is
considered by the Manager to be triple-A rated even if
the issuer has not
applied for new ratings.
(b) Security segregated by Custodian for open purchase
commitment.
(c) Income from this issue is considered a preference item
for purposes of
calculating the alternative minimum tax.
(d) Variable rate obligation payable at par on demand at any
time on no more
than seven days notice.
(e) Bond is escrowed with U.S. government securities and is
considered by the
Manager to be triple-A rated even if the issuer has not
applied for new
ratings.
++ Fitch Investor Services, Inc.
** Aggregate cost for Federal income tax purposes is
substantially the same.
See pages 24 and 25 for definitions of ratings and
certain security
descriptions.
See Notes to Financial Statements.
23
<PAGE>
- ------------------------------------------------------------
- --------------------
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 minus (-) sign to show relative standings
within the major
rating categories.
AAA --Bonds rated "AAA" have the highest rating assigned by
Standard & Poor's.
Capacity to pay interest and repay principal is
extremely strong.
AA --Bonds rated "AA" have a very strong capacity to pay
interest and repay
principal and differ from the highest rated issue only
in a small degree.
A --Bonds rated "A" have a strong capacity to pay interest
and repay
principal although they are somewhat more susceptible
to the adverse
effects of changes in circumstances and economic
conditions than bonds in
higher rated categories.
BBB --Bonds rated "BBB" are regarded as having an adequate
capacity to pay
interest and repay principal. Whereas they normally
exhibit adequate
protection parameters, adverse economic conditions or
changing
circumstances are more likely to lead to a weakened
capacity to pay
interest and repay principal for bonds in this
category than in higher
rated categories.
BB --Bonds rated "BB" have less near-term vulnerability to
default than other
speculative issues. However, they face major ongoing
uncertainties of
exposure to adverse business, financial, or economic
conditions which
could lead to inadequate capacity to meet timely
interest and principal
payments.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to
each generic rating
from "Aa" to "Baa", where 1 is the highest and 3 the lowest
rating within its
generic category.
Aaa --Bonds that are rated "Aaa" are judged to be of the
best quality. They
carry the smallest degree of investment risk and are
generally referred to
as "gilt edge." Interest payments are protected by a
large or by an
exceptionally stable margin and principal is secure.
While the various
protective elements are likely to change, such changes
as can be
visualized are most unlikely to impair the
fundamentally strong position
of such issues.
Aa --Bonds that are rated "Aa" are judged to be of high
quality by all
standards. Together with the "Aaa" group they comprise
what are generally
known as high grade bonds. They are rated lower than
the best bonds
because margins of protection may not be as large as
in "Aaa" securities
or fluctuation of protective elements may be of
greater amplitude or there
may be other elements present which make the long-term
risks appear
somewhat larger than in "Aaa" securities.
A --Bonds that are rated "A" possess many favorable
investment attributes
and are to be considered as upper medium grade
obligations. Factors giving
security to principal and interest are considered
adequate but elements
may be present which suggest a susceptibility to
impairment some time in
the future.
Baa --Bonds that are rated "Baa" are considered as medium
grade obligations,
i.e., they are neither highly protected nor poorly
secured. Interest
payments and principal security appear adequate for
the present but
certain protective elements may be lacking or may be
characteristically
unreliable over any great length of time. Such bonds
lack outstanding
investment characteristics and in fact have
speculative characteristics as
well.
NR --Indicates that the bond is not rated by Standard &
Poor's or Moody's.
24
<PAGE>
- ------------------------------------------------------------
- --------------------
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.
VMIG 2 --Moody's second highest rating for issues having a
demand feature --
VRDO.
- ------------------------------------------------------------
- --------------------
Security Descriptions
- ------------------------------------------------------------
- --------------------
ABAG --Association of Bay Area Governments
AIG --American International Guaranty
AMBAC --AMBAC Indemnity 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 --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
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
Corporation
MVRICS --Municipal Variable Rate Inverse Coupon
Security
PCR --Pollution Control Revenue
RAN --Revenue Anticipation Notes
RIBS --Residual Interest Bonds
RITES --Residual Interest Tax-Exempt Securities
SYCC --Structured Yield Curve Certificate
TAN --Tax Anticipation Notes
TECP --Tax-Exempt Commercial Paper
TOB --Tender Option Bonds
TRAN --Tax and Revenue Anticipation Notes
VA --Veterans Administration
VRWE --Variable Rate Wednesday Demand
25
<PAGE>
- ------------------------------------------------------------
- --------------------
Statements of Assets and Liabilities
March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
============================================================
===================================
<S> <C>
<C> <C>
ASSETS:
Investments, at value (Cost -- $23,423,060,
$7,168,565 and $34,906,899, respectively) $
23,860,731 $ 7,377,974 $ 35,446,300
Cash
78,709 1,043 67,038
Receivable for securities sold
2,787,554 -- 2,456,790
Interest receivable
372,713 125,390 682,065
Receivable for Fund shares sold
32,227 -- 163,402
Receivable from manager (Note 4)
- -- 13,636 --
- ------------------------------------------------------------
- -----------------------------------
Total Assets
27,131,934 7,518,043 38,815,595
- ------------------------------------------------------------
- -----------------------------------
LIABILITIES:
Payable for securities purchased
2,013,757 -- 2,341,379
Payable for Fund shares purchased
4,250 9,152 --
Management fees payable
3,050 -- --
Distribution fees payable
2,811 1,184 4,958
Accrued expenses
38,201 22,997 27,455
- ------------------------------------------------------------
- -----------------------------------
Total Liabilities
2,062,069 33,333 2,373,792
- ------------------------------------------------------------
- -----------------------------------
Total Net Assets
$25,069,865 $7,484,710 $36,441,803
============================================================
===================================
NET ASSETS:
Par value of shares of beneficial interest $
2,010 $ 613 $ 2,881
Capital paid in excess of par value
24,633,622 7,235,510 35,911,513
Undistributed (overdistributed) net
investment income
(2,571) 17,697 (2,321)
Accumulated net realized gain (loss)
from security transactions
(867) 21,481 (9,671)
Net unrealized appreciation of investments
437,671 209,409 539,401
- ------------------------------------------------------------
- -----------------------------------
Total Net Assets
$25,069,865 $7,484,710 $36,441,803
============================================================
===================================
Shares Outstanding:
Class A
1,161,885 249,880 1,196,551
---------------------------------------------------------
- -----------------------------------
Class B
589,582 295,546 1,230,812
---------------------------------------------------------
- -----------------------------------
Class C
258,538 67,336 453,441
---------------------------------------------------------
- -----------------------------------
Net Asset Value:
Class A (and redemption price)
$12.48 $12.23 $12.66
---------------------------------------------------------
- -----------------------------------
Class B*
$12.47 $12.20 $12.64
---------------------------------------------------------
- -----------------------------------
Class C**
$12.46 $12.21 $12.64
---------------------------------------------------------
- -----------------------------------
Class A Maximum Public Offering Price Per Share
(Net asset value plus 4.17% of net asset value)
$13.00 $12.74 $13.19
============================================================
===================================
</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 Note
4).
See Notes to Financial Statements.
26
<PAGE>
- ------------------------------------------------------------
- --------------------
Statements of Operations For the Year
Ended March 31, 1997
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Georgia Ohio Pennsylvania
Portfolio Portfolio Portfolio
============================================================
===================================
<S> <C>
<C> <C>
INVESTMENT INCOME:
Interest $
1,263,158 $ 511,404 $ 2,051,666
- ------------------------------------------------------------
- -----------------------------------
EXPENSES:
Management fees (Note 4)
95,176 38,738 152,982
Distribution fees (Note 4)
80,162 37,294 153,996
Shareholder and system servicing fees
18,850 15,270 24,417
Audit and legal
16,000 13,600 16,159
Shareholder communications
10,700 7,900 12,000
Pricing service fees
5,300 4,300 6,000
Registration fees
5,000 5,400 7,202
Trustees' fees
3,500 3,600 3,221
Custody
2,200 1,100 4,800
Other
3,000 3,100 4,245
- ------------------------------------------------------------
- -----------------------------------
Total Expenses
239,888 130,302 385,022
Less: Management fee waiver and
expense reimbursement (Note 4)
88,259 52,374 152,982
- ------------------------------------------------------------
- -----------------------------------
Net Expenses
151,629 77,928 232,040
- ------------------------------------------------------------
- -----------------------------------
Net Investment Income
1,111,529 433,476 1,819,626
- ------------------------------------------------------------
- -----------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales
16,393,428 6,444,643 40,355,381
Cost of securities sold
16,265,849 6,423,141 40,348,421
- ------------------------------------------------------------
- -----------------------------------
Net Realized Gain
127,579 21,502 6,960
- ------------------------------------------------------------
- -----------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of year
588,454 157,371 450,439
End of year
437,671 209,409 539,401
- ------------------------------------------------------------
- -----------------------------------
Increase (Decrease) in Net
Unrealized Appreciation
(150,783) 52,038 88,962
- ------------------------------------------------------------
- -----------------------------------
Net Gain (Loss) on Investments
(23,204) 73,540 95,922
- ------------------------------------------------------------
- -----------------------------------
Increase in Net Assets From Operations $
1,088,325 $ 507,016 $ 1,915,548
============================================================
===================================
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
- ------------------------------------------------------------
- --------------------
Statements of Changes in Net Assets For the
Years Ended March 31,
- ------------------------------------------------------------
- --------------------
Georgia Portfolio 1997
1996
============================================================
===================
OPERATIONS:
Net investment income $
1,111,529 $ 777,391
Net realized gain
127,579 87,317
Increase (decrease) in net unrealized
appreciation
(150,783) 313,712
- ------------------------------------------------------------
- -------------------
Increase in Net Assets From Operations
1,088,325 1,178,420
- ------------------------------------------------------------
- -------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income
(1,099,230) (786,513)
Net realized gains
(122,390) (62,942)
- ------------------------------------------------------------
- -------------------
Decrease in Net Assets From
Distributions to Shareholders
(1,221,620) (849,455)
- ------------------------------------------------------------
- -------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares
9,113,953 9,072,752
Net asset value of shares issued
for reinvestment of dividends
778,557 553,165
Cost of shares reacquired
(2,808,135) (4,202,205)
- ------------------------------------------------------------
- -------------------
Increase in Net Assets From
Fund Share Transactions
7,084,375 5,423,712
- ------------------------------------------------------------
- -------------------
Increase in Net Assets
6,951,080 5,752,677
NET ASSETS:
Beginning of year
18,118,785 12,366,108
- ------------------------------------------------------------
- -------------------
End of year*
$25,069,865 $18,118,785
============================================================
===================
* Includes overdistributed net investment income of:
$(2,571) $(14,870)
============================================================
===================
See Notes to Financial Statements.
28
<PAGE>
- ------------------------------------------------------------
- --------------------
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------
- --------------------
For the
Years Ended March 31,
Ohio Portfolio
1997 1996
============================================================
====================
OPERATIONS:
Net investment income $
433,476 $ 397,606
Net realized gain
21,502 44,113
Increase (decrease) in net unrealized appreciation
52,038 (1,214)
- ------------------------------------------------------------
- --------------------
Increase in Net Assets From Operations
507,016 440,505
- ------------------------------------------------------------
- --------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income
(445,978) (379,858)
Net realized gains
(15,321) (42)
- ------------------------------------------------------------
- --------------------
Decrease in Net Assets From
Distributions to Shareholders
(461,299) (379,900)
- ------------------------------------------------------------
- --------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares
1,261,552 4,195,758
Net asset value of shares issued
for reinvestment of dividends
325,281 282,773
Cost of shares reacquired
(3,041,733) (1,033,839)
- ------------------------------------------------------------
- --------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions
(1,454,900) 3,444,692
- ------------------------------------------------------------
- --------------------
Increase (Decrease) in Net Assets
(1,409,183) 3,505,297
NET ASSETS:
Beginning of year
8,893,893 5,388,596
- ------------------------------------------------------------
- --------------------
End of year*
$7,484,710 $8,893,893
============================================================
====================
* Includes undistributed net investment income of:
$17,697 $30,199
============================================================
====================
See Notes to Financial Statements.
29
<PAGE>
- ------------------------------------------------------------
- --------------------
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------
- --------------------
For the
Years Ended March 31,
Pennsylvania Portfolio 1997
1996
============================================================
====================
OPERATIONS:
Net investment income $
1,819,626 $ 1,213,416
Net realized gain
6,960 190,854
Increase in net unrealized appreciation
88,962 24,753
- ------------------------------------------------------------
- -------------------
Increase in Net Assets From Operations
1,915,548 1,429,023
- ------------------------------------------------------------
- -------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income
(1,826,062) (1,250,241)
Net realized gains
- -- (96,147)
- ------------------------------------------------------------
- -------------------
Decrease in Net Assets From
Distributions to Shareholders
(1,826,062) (1,346,388)
- ------------------------------------------------------------
- -------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares
9,408,115 17,277,337
Net asset value of shares issued
for reinvestment of dividends
1,155,353 900,287
Cost of shares reacquired
(3,871,277) (4,761,052)
- ------------------------------------------------------------
- -------------------
Increase in Net Assets From
Fund Share Transactions
6,692,191 13,416,572
- ------------------------------------------------------------
- -------------------
Increase in Net Assets
6,781,677 13,499,207
NET ASSETS:
Beginning of year
29,660,126 16,160,919
- ------------------------------------------------------------
- -------------------
End of year*
$36,441,803 $29,660,126
============================================================
===================
* Includes overdistributed net investment
income of:
$(2,321) $(1,108)
============================================================
===================
See Notes to Financial Statements.
30
<PAGE>
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements
- ------------------------------------------------------------
- --------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Georgia, Ohio and Pennsylvania Portfolios
("Portfolios") are separate
investment portfolios of the Smith Barney Muni Funds
("Fund"). The Fund, a
Massachusetts business trust, is registered under the
Investment Company Act of
1940, as amended, as a non-diversified, open-end management
investment company
and consists of these Portfolios and six other separate
investment portfolios:
Florida, New York, National, Limited Term, California Money
Market and New York
Money Market portfolios. The financial statements and
financial highlights for
the other portfolios are presented in separate annual
reports.
The significant accounting policies consistently
followed by the Fund
are:(a) security transactions are accounted for on 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
an 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, 1997, reclassifications
were made to the
Portfolio's capital accounts to reflect permanent book/tax
differences and
income and gains available for distributions under income
tax regulations.
Accordingly, a portion of overdistributed net investment
income amounting to
$4,586 was reclassified to paid-in capital for the
Pennsylvania Portfolio. 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.
31
<PAGE>
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
2. PORTFOLIO CONCENTRATION
Since each Portfolio invests primarily in obligations
of issuers within
either Georgia, Ohio or Pennsylvania, each portfolio is
subject to possible
concentration risks associated with economic, political, or
legal developments
or industrial or regional matters specifically affecting the
respective state in
which it invests.
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 an
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 the Ohio
and Pennsylvania
Portfolios and waived a portion of its fee for the Georgia
Portfolio for the
year ended March 31, 1997. In addition, SBMFM has agreed to
reimburse the Ohio
Portfolio for certain expenses totaling $13,636 for the year
ended March 31,
1997.
Smith Barney Inc. ("SB"), another subsidiary of SBH,
acts as distributor of
Fund shares. For the year ended March 31, 1997, SB received
sales charges of
approximately $145,000 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 year ended March 31, 1997, CDSCs paid to SB
were approximately:
Portfolio Class B
Class C
============================================================
====================
Georgia $18,000
$1,000
- ------------------------------------------------------------
- --------------------
Ohio 30,000
1,000
- ------------------------------------------------------------
- --------------------
Pennsylvania 27,000
- --
- ------------------------------------------------------------
- --------------------
32
<PAGE>
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
Pursuant to a Distribution Plan, the Portfolios pay a
service fee with
respect to Class A, B and C shares calculated at the annual
rate of 0.15% of the
average daily net assets of each respective class. The
Portfolios also pay a
distribution fee with respect to Class B and C shares
calculated at the annual
rate of 0.50% and 0.55% of the average daily net assets of
each class,
respectively.
For the year ended March 31, 1997, total Distribution
Plan fees incurred
were:
Portfolio Class A
Class B Class C
============================================================
==================
Georgia $17,632
$42,074 $20,456
- ------------------------------------------------------------
- ------------------
Ohio 5,732
25,312 6,250
- ------------------------------------------------------------
- ------------------
Pennsylvania 20,872
96,814 36,310
============================================================
==================
All officers and two Trustees of the Fund are employees
of SB.
5. INVESTMENTS
During the year ended March 31, 1997, 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 $20,445,560
$4,674,909 $46,029,450
- ------------------------------------------------------------
- ------------------
Sales 16,393,428
6,444,643 40,355,381
============================================================
==================
At March 31, 1997, the aggregate gross unrealized
appreciation and
depreciation of investments for Federal income tax purposes
were substantially
as follows:
Georgia Ohio
Pennsylvania
Portfolio
Portfolio Portfolio
============================================================
==================
Gross unrealized appreciation $521,152
$214,748 $ 688,800
Gross unrealized depreciation (83,481)
(5,339) (149,399)
- ------------------------------------------------------------
- ------------------
Net unrealized appreciation $437,671
$209,409 $ 539,401
============================================================
==================
6. SHARES OF BENEFICIAL INTEREST
At March 31, 1997, 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.
33
<PAGE>
- ------------------------------------------------------------
- ------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- ------------------
At March 31, 1997, total paid-in capital amounted to
the following for each
class and their respective Portfolio:
Portfolio Class A Class
B Class C
============================================================
==================
Georgia $14,230,148 $
7,240,287 $3,165,197
- ------------------------------------------------------------
- ------------------
Ohio 2,894,080
3,545,246 796,797
- ------------------------------------------------------------
- ------------------
Pennsylvania 14,907,909
15,396,160 5,610,325
- ------------------------------------------------------------
- ------------------
Transactions in shares of each class were as follows:
Year Ended
Year Ended
March 31, 1997
March 31, 1996
--------------------- ----
- -----------------
Georgia Portfolio Shares Amount
Shares Amount
============================================================
==================
Class A
Shares sold 457,524 $ 5,795,183
329,410 $ 4,143,887
Shares issued on reinvestment 33,287 419,038
24,570 308,463
Shares redeemed (108,171) (1,364,400)
(278,738) (3,443,532)
- ------------------------------------------------------------
- ------------------
Net Increase 382,640 $ 4,849,821
75,242 $ 1,008,818
============================================================
==================
Class B
Shares sold 202,325 $ 2,540,756
252,969 $ 3,190,010
Shares issued on reinvestment 17,331 218,224
10,810 136,165
Shares redeemed (66,812) (843,932)
(37,761) (480,144)
- ------------------------------------------------------------
- ------------------
Net Increase 152,844 $ 1,915,048
226,018 $ 2,846,031
============================================================
==================
Class C
Shares sold 61,542 $ 778,014
139,440 $ 1,738,855
Shares issued on reinvestment 11,251 141,295
8,613 108,537
Shares redeemed (47,652) (599,803)
(21,760) (278,529)
- ------------------------------------------------------------
- ------------------
Net Increase 25,141 $ 319,506
126,293 $ 1,568,863
============================================================
==================
Ohio Portfolio
============================================================
==================
Class A
Shares sold 62,239 $ 752,159
100,478 $ 1,246,540
Shares issued on reinvestment 12,822 157,361
10,596 130,155
Shares redeemed (125,573) (1,554,127)
(41,822) (516,845)
- ------------------------------------------------------------
- ------------------
Net Increase (Decrease) (50,512) $ (644,607)
69,252 $ 859,850
============================================================
==================
Class B
Shares sold 32,302 $ 398,997
202,242 $ 2,495,050
Shares issued on reinvestment 11,136 136,537
9,992 122,694
Shares redeemed (103,577) (1,269,532)
(27,239) (331,647)
- ------------------------------------------------------------
- ------------------
Net Increase (Decrease) (60,139) $ (733,998)
184,995 $ 2,286,097
============================================================
==================
Class C
Shares sold 9,045 $ 110,396
37,400 $ 454,168
Shares issued on reinvestment 2,560 31,383
2,437 29,924
Shares redeemed (17,667) (218,074)
(15,046) (185,347)
- ------------------------------------------------------------
- ------------------
Net Increase (Decrease) (6,062) $ (76,295)
24,791 $ 298,745
============================================================
==================
34
<PAGE>
- ------------------------------------------------------------
- --------------------
Notes to Financial Statements (continued)
- ------------------------------------------------------------
- --------------------
Year Ended
Year Ended
March 31, 1997
March 31, 1996
--------------------- ----
- -----------------
Pennsylvania Portfolio Shares Amount
Shares Amount
============================================================
==================
Class A
Shares sold 307,459 $ 3,903,533
547,143 $ 7,020,582
Shares issued on reinvestment 42,485 539,870
34,618 441,224
Shares redeemed (91,821) (1,170,767)
(286,500) (3,684,082)
- ------------------------------------------------------------
- ------------------
Net Increase 258,123 $ 3,272,636
295,261 $ 3,777,724
============================================================
==================
Class B
Shares sold 328,162 $ 4,153,859
681,907 $ 8,724,282
Shares issued on reinvestment 35,686 452,643
24,518 312,971
Shares redeemed (174,300) (2,226,160)
(56,465) (718,691)
- ------------------------------------------------------------
- ------------------
Net Increase 189,548 $ 2,380,342
649,960 $ 8,318,562
============================================================
==================
Class C
Shares sold 106,472 $ 1,350,723
118,898 $ 1,532,473
Shares issued on reinvestment 12,840 162,840
11,472 146,092
Shares redeemed (37,197) (474,350)
(28,320) (358,279)
- ------------------------------------------------------------
- ------------------
Net Increase 82,115 $ 1,039,213
102,050 $ 1,320,286
============================================================
==================
7. CAPITAL LOSS CARRYFORWARD
At March 31, 1997, the Pennsylvania Portfolio had, for
Federal income tax
purposes, approximately $9,700 of loss carryforwards
available to offset
future capital gains through March 31, 2005. 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.
35
<PAGE>
- ------------------------------------------------------------
- ------------------
Financial Highlights
- ------------------------------------------------------------
- ------------------
For a share of each class of beneficial interest outstanding
throughout each
year:
<TABLE>
<CAPTION>
Class A Shares
Class B Shares
--------------------------
- ------ ------------------------------
Georgia Portfolio 1997 1996
1995(1) 1997 1996 1995(2)(3)
============================================================
=========================================
<S> <C> <C>
<C> <C> <C> <C>
Net Asset Value,
Beginning of Year $12.50 $12.10
$12.00 $12.50 $12.11 $12.27
- ------------------------------------------------------------
- -----------------------------------------
Income From Operations:
Net investment income (4) 0.69 0.70
0.62 0.62 0.64 0.49
Net realized and unrealized
gain (loss) 0.04 0.45
0.10* 0.04 0.45 (0.16)*
- ------------------------------------------------------------
- -----------------------------------------
Total Income From Operations 0.73 1.15
0.72 0.66 1.09 0.33
- ------------------------------------------------------------
- -----------------------------------------
Less Distributions From:
Net investment income (0.67) (0.70)
(0.62) (0.61) (0.65) (0.49)
Net realized gains (0.08) (0.05)
- -- (0.08) (0.05) --
- ------------------------------------------------------------
- -----------------------------------------
Total Distributions (0.75) (0.75)
(0.62) (0.69) (0.70) (0.49)
- ------------------------------------------------------------
- -----------------------------------------
Net Asset Value,
End of Year $12.48 $12.50
$12.10 $12.47 $12.50 $12.11
- ------------------------------------------------------------
- -----------------------------------------
Total Return 5.95% 9.67%
6.29%++ 5.33% 9.08% 2.88%++
- ------------------------------------------------------------
- -----------------------------------------
Net Assets,
End of Year (000s) $14,495 $9,744
$8,520 $7,354 $5,461 $2,551
- ------------------------------------------------------------
- -----------------------------------------
Ratios to Average Net Assets:
Expenses (4)# 0.48% 0.38%
0.28%+ 1.00% 0.92% 0.85%+
Net investment income 5.49 5.57
5.43+ 4.97 5.20 5.37+
- ------------------------------------------------------------
- -----------------------------------------
Portfolio Turnover Rate 81% 63%
34% 81% 63% 34%
============================================================
=========================================
</TABLE>
(1) For the period from April 4, 1994 (inception date) to
March 31, 1995.
(2) On November 7, 1994, the former Class E shares were
renamed Class B shares.
(3) For the period from June 15, 1994 (inception date) to
March 31, 1995.
(4) The manager has waived all or part of its fees for the
years ended March 31,
1997 and 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
expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without
Fee Waivers and/or
Per Share Decreases Expense
Reimbursements#
----------------------- ----------
- ----------------
1997 1996 1995 1997
1996 1995
----- ----- ----- ------
- ----- -----
Class A $0.04 $0.11 $0.12 0.90%
1.23% 1.20%+
Class B 0.05 0.10 0.11 1.42
1.77 1.82+
* Includes the net per share effect of shareholder sales
and redemptions
activity during the period, most of which occurred at a
net asset value less
than the net asset value at the beginning of the period.
# As a result of voluntary expense limitations, expense
ratios would not
exceed 0.80% and 1.30% for Class A and B shares,
respectively.
++ Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
36
<PAGE>
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of beneficial interest outstanding
throughout each
year:
Class
C Shares
--------------
- -------------------
Georgia Portfolio 1997
1996 1995(1)(2)
============================================================
===================
Net Asset Value, Beginning of Year $12.49
$12.09 $12.06
- ------------------------------------------------------------
- -------------------
Income From Operations:
Net investment income (3) 0.62
0.63 0.55
Net realized and unrealized gain 0.03
0.46 0.04*
- ------------------------------------------------------------
- -------------------
Total Income From Operations 0.65
1.09 0.59
- ------------------------------------------------------------
- -------------------
Less Distributions From:
Net investment income (0.60)
(0.64) (0.56)
Net realized gains (0.08)
(0.05) --
- ------------------------------------------------------------
- -------------------
Total Distributions (0.68)
(0.69) (0.56)
- ------------------------------------------------------------
- -------------------
Net Asset Value, End of Year $12.46
$12.49 $12.09
- ------------------------------------------------------------
- -------------------
Total Return 5.28%
9.12% 5.11%++
- ------------------------------------------------------------
- -------------------
Net Assets, End of Year (000s) $3,221
$2,914 $1,295
- ------------------------------------------------------------
- -------------------
Ratios to Average Net Assets:
Expenses (3)# 1.04%
0.97% 0.90%+
Net investment income 4.93
5.18 5.22+
- ------------------------------------------------------------
- -------------------
Portfolio Turnover Rate 81%
63% 34%
============================================================
===================
(1) On November 7, 1994, the former Class B shares were
renamed Class C shares.
(2) For the period from April 14, 1994 (inception date) to
March 31, 1995.
(3) The manager has waived all or part of its fees for the
years ended March 31,
1997 and 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
expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without
Fee Waivers and/or
Per Share Decreases Expense
Reimbursements#
----------------------- ----------
- ----------------
1997 1996 1995 1997
1996 1995
----- ----- ----- ------
- ----- -----
Class C $0.05 $0.10 $0.12 1.46%
1.82% 1.85%+
* Includes the net per share effect of shareholder sales
and redemptions
activity during the period, most of which occurred at a
net asset value less
than the net asset value at the beginning of the period.
# As a result of voluntary expense limitations, expense
ratios would not
exceed 1.35% for Class C shares.
++ Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
37
<PAGE>
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of beneficial interest outstanding
throughout each
year:
<TABLE>
<CAPTION>
Class A Shares
Class B Shares
--------------------------
- ------ ------------------------------
Ohio Portfolio 1997 1996
1995(1) 1997 1996 1995(2)(3)
============================================================
=========================================
<S> <C> <C>
<C> <C> <C> <C>
Net Asset Value,
Beginning of Year $12.20 $11.97
$12.00 $12.18 $11.96 $12.02
- ------------------------------------------------------------
- -----------------------------------------
Income From Operations:
Net investment income (4) 0.67 0.71
0.52 0.60 0.63 0.47
Net realized and unrealized
gain (loss) 0.05 0.19
(0.07)* 0.06 0.21 (0.10)*
- ------------------------------------------------------------
- -----------------------------------------
Total Income From Operations 0.72 0.90
0.45 0.66 0.84 0.37
- ------------------------------------------------------------
- -----------------------------------------
Less Distributions From:
Net investment income (0.67) (0.67)
(0.48) (0.62) (0.62) (0.43)
Net realized gains (0.02) (0.00)**
- -- (0.02) (0.00)** --
- ------------------------------------------------------------
- -----------------------------------------
Total Distributions (0.69) (0.67)
(0.48) (0.64) (0.62) (0.43)
- ------------------------------------------------------------
- -----------------------------------------
Net Asset Value,
End of Year $12.23 $12.20
$11.97 $12.20 $12.18 $11.96
- ------------------------------------------------------------
- -----------------------------------------
Total Return 6.06% 7.65%
4.04%++ 5.52% 7.10% 3.31%++
- ------------------------------------------------------------
- -----------------------------------------
Net Assets,
End of Year (000s) $3,056 $3,665
$2,766 $3,607 $4,334 $2,041
- ------------------------------------------------------------
- -----------------------------------------
Ratios to Average Net Assets:
Expenses (4)# 0.61% 0.30%
0.20%+ 1.13% 0.83% 0.72%+
Net investment income 5.33 5.86
5.75+ 4.81 5.44 5.10+
- ------------------------------------------------------------
- -----------------------------------------
Portfolio Turnover Rate 57% 42%
44% 57% 42% 44%
============================================================
=========================================
</TABLE>
(1) For the period from June 13, 1994 (inception date) to
March 31, 1995.
(2) On November 7, 1994, the former Class E shares were
renamed Class B 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 $13,636,
$59,614 and $41,401 for the years ended March 31, 1997
and 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 expense
ratios would have been as follows:
Expense Ratios
Net Investment Income
Without Fee Waivers
Per Share Decreases Expense
Reimbursements#
----------------------- ----------
- ----------------
1997 1996 1995 1997
1996 1995
----- ----- ----- ------
- ----- -----
Class A $0.09 $0.16 $0.21 1.22%
1.58% 1.91%+
Class B 0.08 0.11 0.25 1.74
2.14 2.43+
* Includes the net per share effect of shareholder sales
and redemptions
activity during the period, most of which occurred at a
net asset value less
than the net asset value at the beginning of the period.
** Amount represents less than $0.01 per share.
# As a result of voluntary expense limitations, expense
ratios would not
exceed 0.80% and 1.30% for Class A and B shares,
respectively.
++ Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
38
<PAGE>
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of beneficial interest outstanding
throughout each
year:
Class
C Shares
--------------
- -------------------
Ohio Portfolio 1997
1996 1995(1)(2)
============================================================
===================
Net Asset Value, Beginning of Year $12.19
$11.96 $12.02
- ------------------------------------------------------------
- -------------------
Income From Operations:
Net investment income (3) 0.59
0.63 0.46
Net realized and unrealized gain (loss) 0.06
0.21 (0.09)*
- ------------------------------------------------------------
- -------------------
Total Income From Operations 0.65
0.84 0.37
- ------------------------------------------------------------
- -------------------
Less Distributions From:
Net investment income (0.61)
(0.61) (0.43)
Net realized gains (0.02)
(0.00)** --
- ------------------------------------------------------------
- -------------------
Total Distributions (0.63)
(0.61) (0.43)
- ------------------------------------------------------------
- -------------------
Net Asset Value, End of Year $12.21
$12.19 $11.96
- ------------------------------------------------------------
- -------------------
Total Return 5.48%
7.14% 3.28%++
- ------------------------------------------------------------
- -------------------
Net Assets, End of Year (000s) $822
$895 $582
- ------------------------------------------------------------
- -------------------
Ratios to Average Net Assets:
Expenses (3)# 1.17%
0.89% 0.77%+
Net investment income 4.77
5.37 5.09+
- ------------------------------------------------------------
- -------------------
Portfolio Turnover Rate 57%
42% 44%
============================================================
===================
(1) On November 7, 1994, the former Class B shares were
renamed Class C shares.
(2) For the period from June 14, 1994 (inception date) to
March 31, 1995.
(3) The manager has waived all of its fees and reimbursed
expenses of $13,636,
$59,614 and $41,401 for the years ended March 31, 1997
and 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 expense
ratios would have been as follows:
Expense Ratios
Net Investment Income
Without Fee Waivers
Per Share Decreases Expense
Reimbursements#
----------------------- ----------
- ----------------
1997 1996 1995 1997
1996 1995
----- ----- ----- ------
- ----- -----
Class C $0.08 $0.16 $0.25 1.78%
2.20% 2.48%+
* Includes the net per share effect of shareholder sales
and redemptions
activity during the period, most of which occurred at a
net asset value less
than the net asset value at the beginning of the period.
** Amount represents less than $0.01 per share.
# As a result of voluntary expense limitations, expense
ratios would not
exceed 1.35% for Class C shares.
++ Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
39
<PAGE>
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of beneficial interest outstanding
throughout each
year:
<TABLE>
<CAPTION>
Class A Shares
Class B Shares
--------------------------
- ------ ------------------------------
Pennsylvania Portfolio 1997 1996(1)
1995(2)(3) 1997 1996(1) 1995(4)(5)
============================================================
=========================================
<S> <C> <C>
<C> <C> <C> <C>
Net Asset Value,
Beginning of Year $12.62 $12.40
$12.00 $12.61 $12.39 $12.35
- ------------------------------------------------------------
- -----------------------------------------
Income From Operations:
Net investment income (6) 0.71 0.70
0.67 0.65 0.64 0.51
Net realized and
unrealized gain 0.04 0.29
0.35* 0.03 0.29 0.01*
- ------------------------------------------------------------
- -----------------------------------------
Total Income From Operations 0.75 0.99
1.02 0.68 0.93 0.52
- ------------------------------------------------------------
- -----------------------------------------
Less Distributions From:
Net investment income (0.71) (0.72)
(0.62) (0.65) (0.66) (0.48)
Net realized gains -- (0.05)
- -- -- (0.05) --
- ------------------------------------------------------------
- -----------------------------------------
Total Distributions (0.71) (0.77)
(0.62) (0.65) (0.71) (0.48)
- ------------------------------------------------------------
- -----------------------------------------
Net Asset Value,
End of Year $12.66 $12.62
$12.40 $12.64 $12.61 $12.39
- ------------------------------------------------------------
- -----------------------------------------
Total Return 6.11% 8.08%
8.82%++ 5.56% 7.61% 4.48%++
- ------------------------------------------------------------
- -----------------------------------------
Net Assets,
End of Year (000s) $15,152 $11,847
$7,974 $15,559 $13,131 $4,850
- ------------------------------------------------------------
- -----------------------------------------
Ratios to Average Net Assets:
Expenses (6)# 0.37% 0.38%
0.29%+ 0.88% 0.88% 0.82%+
Net investment income 5.66 5.57
5.76+ 5.15 5.07 5.31+
- ------------------------------------------------------------
- -----------------------------------------
Portfolio Turnover Rate 122% 88%
38% 122% 88% 38%
============================================================
=========================================
</TABLE>
(1) Per share amounts have been calculated using the monthly
average shares
method rather than the undistributed net investment
income method, because
it more accurately reflects the per share data for the
period.
(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) On November 7, 1994, the former Class E shares were
renamed Class B shares.
(5) For the period from June 20, 1994 (inception date) to
March 31, 1995.
(6) The manager has waived all of its fees for the years
ended March 31, 1997
and 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
expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without
Fee Waivers and/or
Per Share Decreases Expense
Reimbursements#
----------------------- ----------
- ----------------
1997 1996 1995 1997
1996 1995
----- ----- ----- ------
- ----- -----
Class A $0.06 $0.07 $0.09 0.82%
0.93% 1.03%+
Class B 0.06 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.
40
<PAGE>
- ------------------------------------------------------------
- --------------------
Financial Highlights (continued)
- ------------------------------------------------------------
- --------------------
For a share of each class of beneficial interest outstanding
throughout each
year:
Class
C Shares
---------------
- ------------------
Pennsylvania Portfolio 1997
1996(1) 1995(2)(3)
============================================================
==================
Net Asset Value, Beginning of Year $12.61
$12.39 $12.00
- ------------------------------------------------------------
- -----------------
Income From Operations:
Net investment income (4) 0.64
0.64 0.59
Net realized and unrealized gain 0.04
0.29 0.36*
- ------------------------------------------------------------
- -----------------
Total Income From Operations 0.68
0.93 0.95
- ------------------------------------------------------------
- -----------------
Less Distributions From:
Net investment income (0.65)
(0.66) (0.56)
Net realized gains --
(0.05) --
- ------------------------------------------------------------
- -----------------
Total Distributions (0.65)
(0.71) (0.56)
- ------------------------------------------------------------
- -----------------
Net Asset Value, End of Year $12.64
$12.61 $12.39
- ------------------------------------------------------------
- -----------------
Total Return 5.51%
7.56% 8.14%++
- ------------------------------------------------------------
- -----------------
Net Assets, End of Year (000s) $5,731
$4,682 $3,337
- ------------------------------------------------------------
- -----------------
Ratios to Average Net Assets:
Expenses (4)# 0.94%
0.94% 0.86%+
Net investment income 5.09
5.00 5.04+
- ------------------------------------------------------------
- -----------------
Portfolio Turnover Rate 122%
88% 38%
============================================================
====================
(1) Per share amounts have been calculated using the monthly
average shares
method rather than the undistributed net investment
income method, because
it more accurately reflects the per share data for the
period.
(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 years
ended March 31, 1997
and 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
expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without
Fee Waivers and/or
Per Share Decreases Expense
Reimbursements#
----------------------- ----------
- ----------------
1997 1996 1995 1997
1996 1995
----- ----- ----- ------
- ----- -----
Class C $0.06 $0.07 $0.09 1.39%
1.49% 1.56%+
* Includes the net per share effect of shareholder sales
and redemptions
activity during the period, most of which occurred at a
net asset value less
than the net asset value at the beginning of the period.
# As a result of voluntary expense limitations, expense
ratios would not
exceed 1.35% for Class C shares.
++ Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
41
<PAGE>
- ------------------------------------------------------------
- --------------------
Independent Auditors' Report
- ------------------------------------------------------------
- --------------------
To the Shareholders and Board of Trustees
of the Georgia, Ohio and Pennsylvania Portfolios
of Smith Barney Muni Funds:
We have audited the accompanying statements of assets
and liabilities,
including the schedules of investments, of the Georgia, Ohio
and Pennsylvania
Portfolios of Smith Barney Muni Funds as of March 31, 1997,
the related
statements of operations for the year then ended, the
statements of changes in
net assets for each of the years in the two-year period then
ended and the
financial highlights for each of the years in the two-year
period then ended and
for the period from April 4, 1994 (commencement of
operations) to March 31, 1995
with respect to the Georgia and Pennsylvania Portfolios, and
for the period from
June 13, 1994 (commencement of operations) to March 31, 1995
with respect to the
Ohio Portfolio. These financial statements and financial
highlights are the
responsibility of the Funds' management. Our responsibility
is to express an
opinion on these financial statements and financial
highlights based on our
audits.
We conducted our audits in accordance with generally
accepted auditing
standards. Those standards require that we plan and perform
the audit to obtain
reason able assurance about whether the financial statements
and financial
highlights are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements. Our procedures included confirmation of
securities owned as of March
31, 1997, by correspondence with the custodian. As to
securities purchased or
sold but not received or delivered, we performed other
appropriate auditing
procedures. An audit also includes assessing the accounting
principles used and
significant estimates made by management, as well as
evaluating the overall
financial statement presentation. We believe that our audits
provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly,
in all material respects, the financial position of the
Georgia, Ohio and
Pennsylvania Port folios of Smith Barney Muni Funds as of
March 31, 1997, the
results of their operations for the year then ended, the
changes in their net
assets for each of the years in the two-year period then
ended and the financial
highlights for each of the years in the two-year period then
ended and for the
period from April 4, 1994 to March 31, 1995 with respect to
the Georgia and
Pennsylvania Portfolios, and for the period from June 13,
1994 to March 31, 1995
with respect to the Ohio Portfolio, in conformity with
generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 14, 1997
42
<PAGE>
- ------------------------------------------------------------
- --------------------
Tax Information (unaudited)
- ------------------------------------------------------------
- --------------------
For Federal tax purposes the Fund hereby designates for
the fiscal year
ended March 31, 1997:
o Long-term capital gain distributions paid:
Georgia Portfolio $122,390
Ohio Portfolio 15,321
o Percentage of dividends paid by the Fund from net
investment income
as tax-exempt for regular Federal income tax
purposes:
Georgia Portfolio 99.40%
Ohio Portfolio 100.00
Pennsylvania Portfolio 99.31
43
<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, Emeritus
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Larry T. McDermott
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
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: Georgia, Ohio and
Pennsylvania Portfolios. It is not
authorized for distribution to prospective
investors unless accompanied or preceded
by a current Prospectus for the Fund,
which contains information concerning
the Fund's investment policies and
expenses as well as other pertinent
information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
FD0798 5/97
