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[GRAPHIC]
Smith Barney Muni Funds
Limited Term
Portfolio
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SEMI-ANNUAL REPORT
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September 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
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Smith Barney
Muni Funds
[PHOTO] [PHOTO]
HEATH B. LAWRENCE T.
MCLENDON MCDERMOTT
Chairman Vice President
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Muni
Funds-Limited Term Portfolio ("Fund") for the period ended September 30, 1998.
In this report, we summarize the period's prevailing economic and market
conditions and outline our portfolio strategy. A detailed summary of the Fund's
performance can be found in the appropriate sections that follow. We hope you
find this report to be useful and informative.
Performance Update
For the six months ended September 30, 1998, Class A and L shares of the Fund
had a total return of 4.47% and 4.39%, respectively. In comparison, the Lipper
Analytical Services, Inc. peer group average returned 3.92% for the same period.
(Lipper is an independent fund-tracking organization.)
We are proud to report that the Fund has received a five star rating overall
from Morningstar, Inc.(*) as of September 30, 1998. Over the six months covered
by the report, the Fund distributed income dividends totaling $0.17 per Class A
share; based on its net asset value ("NAV") of $6.89 as of September 30, 1998,
this equates to an annualized distribution rate of 4.88% for Class A shares. For
an individual in the federal income tax bracket of 36%, the Fund's tax-free
yield of 4.88% is equivalent to a taxable yield of 7.63%.
A Style Pure Fund
The Smith Barney Muni Funds - Limited Term Portfolio is a Style Pure Fund. Style
Pure Series mutual funds are Smith Barney Mutual Funds that are the basic
building blocks of asset allocation. Other than maintaining minimal
- -------------
(*) Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through September 30, 1998. The ratings are subject to change
every month. Past performance is not a guarantee of future results.
Morningstar ratings are calculated from the Fund's 3- and 5-year returns
(with fee adjustments) in excess of 90-day T-bill returns. The 1-year
rating is calculated using the same methodology, but is not a component of
the overall rating. The Fund received 5 stars for the 1- and 5-year
periods. It was rated among 1,581 and 943 intermediate municipal bond funds
for the 3- and 5-year periods, respectively. Ten percent of the funds in a
rating category receive 5 stars. Different classes share a common portfolio
of securities.
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Smith Barney Muni Funds 1
<PAGE>
cash or under extraordinary market conditions, each Style Pure Series Fund is
totally invested 100% of the time within its designated asset classes and its
investment style.
Market and Economic Overview
The municipal bond market has continued to benefit from the U.S. economy's
persistent strength. We expect this year's municipal bond issuance to be heavy
and come close to the record set in 1993, a year when approximately $290 billion
in new debt was issued. Attractive low rates combined with the ongoing
infrastructural needs of many municipalities are, in our view, some of the
reasons why so many municipal bonds have been issued lately.
Attractive low interest rates have been an incentive for state and local
governments to refinance older, high interest rate debt. In addition, when
interest rates are low, it is easier to get voter approval to fund ongoing
infrastructure construction such as school and healthcare facilities.
The globalization of the U.S. economy has made it more vulnerable to foreign
difficulties. In our opinion, the dominant theme in the financial markets
continues to be what impact, if any, will Asia's and Russia's problems have on
the U.S. economy and future corporate earnings. During the reporting period,
strong demand for U.S. Treasuries was fueled by a classic flight to safety
amidst rising investor uncertainty. While municipal bond prices have been mostly
flat, the prices of U.S. Treasuries have gone higher and their yields have
declined to historic levels. Tax-exempt bonds have participated in this rally,
albeit at a somewhat subdued pace.
With stock market volatility on the rise and anxiety about the global economy
increasing, the Federal Reserve Board ("Fed") changed its monetary policy from
one of vigilance against inflation to one of combating deflation. (Deflation is
when prices actually fall. Deflation should not be confused with disinflation.
Disinflation is the slowing down of the rate at which prices increase.) The
Federal Open-Market Committee, the committee that sets interest rate and credit
policies for the Federal Reserve System, lowered the federal-funds rate 25 basis
points on September 29, 1998. (A basis point is a means of expressing yield as a
percentage. Each basis point is 1/100 of 1%. The federal-funds rate is an
overnight bank lending rate that is a benchmark for other short-term interest
rates.) After the close of the reporting period, the Fed took an unexpected
action of cutting short-term interest rates again by another 25 basis points on
October 15, 1998. The second Fed rate cut came as a surprise to many investment
professionals.
We think that the tax-exempt market, which has been lagging versus the U.S.
Treasury market in 1998, should experience stable to lower interest rates as
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2 1998 Semi-Annual Report to Shareholders
<PAGE>
municipal bond volume slows in the coming year. Moreover, we believe the
after-tax attractiveness of municipal bonds should become more apparent to
individual investors in the days ahead.
Investment Strategy
The Smith Barney Muni Funds - Limited Term Portfolio is an intermediate-term
municipal bond fund that seeks to provide investors with as high a level of
current income exempt from federal taxes as is consistent with a prudent
investment approach.
The Fund invests primarily in high-grade municipal securities with maturities of
less than ten years. Because we are positive on further rate cuts, we have
maintained a 9 1/2 year to 10-year average weighted maturity. One of our goals
in the Fund is to deliver the performance of a longer-maturity fund with less
market volatility. We believe the combination of intermediate-term securities
and the Fund's high-grade credit quality orientation should help to reduce
credit risk and NAV price volatility, while still maintaining a competitive
dividend yield for our shareholders.
As of September 30, 1998, the Fund's average weighted maturity was 9.9 years.
The Fund's largest holdings were concentrated in general obligation bonds
(16.7%), hospital bonds (16.3%) and transportation bonds (11.7%).
Approximately 93% of the Fund's holdings were rated investment grade (BBB/Baa
and higher) by either Standard & Poor's Corporation or Moody's Investors Service
Inc. at the end of September. (Standard & Poor's Corporation and Moody's
Investors Service Inc. are two major credit reporting and bond-rating agencies.)
Because of new construction initiatives in the U.S., we remain bullish on select
transportation issues. In addition, other areas of the market we particularly
like for the next six months are healthcare and utilities issues that fall in
the five- to twelve-year maturity range. The electric utilities sector
especially looks favorable to us because of the deregulation of the
industry, which has created overlooked opportunities in this sector.
Municipal Bond Market Outlook
Going forward, we are optimistic about the attractiveness of the tax-exempt bond
market. We expect that the Fed will lower interest rates at least one more time
in 1998, and if the U.S. economy remains sluggish, we believe that the Fed will
lower rates again in the first half of 1999. We expect a moderately expanding
U.S. economy while the Fed continues to monitor the U.S. economy closely for
signs of either inflationary or deflationary pressures. While the ultimate
effect of the worsening Asian and Russian crisis remains unknown, municipal
bonds are yielding almost as much as U.S. Treasuries,
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Smith Barney Muni Funds 3
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giving investors tax-exempt income with a competitive yield. At current levels,
we believe that tax-exempt securities represent good relative values.
On a more somber note, we report with much sadness the passing of Emeritus
Trustee C. Richard Youngdahl. Dick made many valuable contributions to the Board
and the Fund during his tenure and he will be missed.
In closing, thank you for investing in the Smith Barney Muni Fund - Limited Term
Portfolio. We look forward to continuing to help you pursue your financial
goals.
Sincerely,
/s/ Heath B. McLendon /s/ Lawrence T. McDermott
Heath B. McLendon Lawrence T. McDermott
Chairman Vice President
October 26, 1998
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4 1998 Semi-Annual Report to Shareholders
<PAGE>
===============================================================================
Historical Performance -- Class A Shares
===============================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns/(1)/
=================================================================================
<S> <C> <C> <C> <C>
9/30/98 $6.76 $6.89 $0.17 4.47%+
- ---------------------------------------------------------------------------------
3/31/98 6.54 6.76 0.34 8.66
- ---------------------------------------------------------------------------------
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
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3/31/92 6.38 6.45 0.42 7.99
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3/31/91 6.28 6.38 0.40 8.23
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3/31/90 6.20 6.28 0.46 9.07
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Inception/*/ - 3/31/89 6.25 6.20 0.13 1.09+
=================================================================================
Total $3.76
=================================================================================
</TABLE>
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Historical Performance -- Class L Shares/(2)/
===============================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns(1)
===============================================================================
<S> <C> <C> <C> <C>
9/30/98 $6.76 $6.90 $0.15 4.39%+
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3/31/98 6.54 6.76 0.32 8.36
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3/31/97 6.61 6.54 0.34 4.10
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3/31/96 6.54 6.61 0.34 6.45
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3/31/95 6.54 6.54 0.35 5.51
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3/31/94 6.68 6.54 0.35 3.15
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Inception/*/ - 3/31/93 6.62 6.68 0.09 2.28+
===============================================================================
Total $1.94
===============================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
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Smith Barney Muni Funds 5
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===============================================================================
Average Annual Total Return
===============================================================================
<TABLE>
<CAPTION>
Without Sales Charge/(1)/
--------------------------
Class A Class L/(2)/
=================================================================================
<S> <C> <C>
Six Months Ended 9/30/98+ 4.47% 4.39%
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Year Ended 9/30/98 7.89 7.78
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Five Years Ended 9/30/98 5.58 5.32
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Inception/*/ through 9/30/98 7.06 5.98
=================================================================================
<CAPTION>
With Sales Charge/(3)/
--------------------------
Class A Class L/(2)/
=================================================================================
<S> <C> <C>
Six Months Ended 9/30/98+ 2.35% 2.32%
- ---------------------------------------------------------------------------------
Year Ended 9/30/98 5.68 5.67
- ---------------------------------------------------------------------------------
Five Years Ended 9/30/98 5.15 5.11
- ---------------------------------------------------------------------------------
Inception/*/ through 9/30/98 6.84 5.78
=================================================================================
</TABLE>
<TABLE>
<CAPTION>
=================================================================================
Cumulative Total Return
=================================================================================
Without Sales Charge/(1)/
=================================================================================
<S> <C>
Class A (Inception/*/ through 9/30/98) 95.77%
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Class L(2) (Inception/*/ through 9/30/98) 39.53
=================================================================================
</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 and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 2.00% and Class L 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 L 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.
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6 1998 Semi-Annual Report to Shareholders
<PAGE>
===============================================================================
Historical Performance (unaudited)
===============================================================================
Growth of $10,000 Invested in Class A Shares of
the Limited Term Portfolio vs.
Lehman Brothers Municipal 5-Year Bond Index,
Lehman Brothers Municipal Long Bond Index,
Lehman Brothers Municipal Bond Index
and Lehman Brothers Municipal 10-Year Bond Index+
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November 1988 -- September 1998
<TABLE>
<CAPTION>
Limited Term Lehman Brothers Lehman Brothers Lehman Brothers Lehman Brothers
Portofolio Municipal Municipal Municipal Municipal
5 Year Long Bond Index* 10-Year
Bond Index* Bond Index* Bond Index*
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11/28/88 $ 9,796 $10,000 $10,000 $10,000 $10,000
3/89 9,900 10,024 10,100 10,254 10,173
3/90 10,720 10,994 11,200 11,336 11,189
3/91 11,653 12,022 12,071 12,381 12,272
3/92 12,568 13,046 13,440 13,618 13,415
3/93 13,786 14,395 15,402 15,322 15,189
3/94 14,273 14,821 15,574 15,678 15,617
3/95 15,076 15,667 16,980 16,844 16,790
3/96 16,078 16,808 18,457 18,256 18,280
3/97 16,769 17,511 19,620 19,250 19,234
3/98 18,222 18,848 22,087 21,312 21,232
9/30/98 19,028 19,577 23,274 22,301 22,289
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on November 28, 1988, assuming deduction of the maximum 2.00% sales charge at
the time of investment and reinvestment of dividends (after deduction of
applicable sales charge through November 6, 1994, afterwards at net asset
value) and capital gains, if any, at net asset value through September 30,
1998. 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.
* It is the opinion of management that the Lehman Brothers Municipal Bond Index
and the Lehman Brothers Municipal 10-Year Bond Index are more appropriate
broad-based benchmarks for the market in which the Limited Term Portfolio
invests rather than the Lehman Brothers Municipal Long Bond Index and the
Lehman Brothers Municipal 5-Year Index. In future reporting, the Lehman
Brothers Municipal Bond Index and the Lehman Brothers Municipal 10-Year Bond
Index will be used as a basis of comparison of total return performance
rather than the Lehman Brothers Municipal Long Bond Index and the Lehman
Brothers Municipal 5-Year Index. The Lehman Brothers Municipal Long Bond
Index (consisting of maturities of at least 22 years), the Lehman Brothers
Municipal 5-Year Bond Index (consisting of maturities of 4-6 years) and the
Lehman Brothers Municipal 10-Year Bond Index (consisting of maturities of 10
years) is each a sub-index of the Lehman Brothers Municipal Bond Index, a
broad-based, total return index comprised of investment grade, fixed rate
municipal bonds selected from issues larger than $50 million issued since
January 1991. Each index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund.
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Smith Barney Muni Funds 7
<PAGE>
================================================================================
Schedule of Investments (unaudited) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<C> <S> <C>
Education -- 9.4%
$ 2,825,000 Aa2* Arizona Education Loan Marketing Corp., Education
Loan Revenue Bonds, 7.000% due 3/1/02(a)(b) $ 3,051,000
1,850,000 A* Arkansas State Student Loan Authority Revenue,
Sub-Series A-2, (Partially Pre-Refunded -- Escrowed
with U.S. government securities to 12/1/97,
Call @ 100), 6.125% due 12/1/00(a) 1,900,875
940,000 Aa* Brazos, TX Higher Education Authority, Series C-1,
6.000% due 11/1/99(a) 959,110
1,150,000 AA Fairfield County, SC School District, COP,
5.500% due 3/1/07 1,237,687
1,000,000 A+ Illinois Student Assistance Commission, Student Loan
Revenue, Series H, 6.100% due 3/1/01(a) 1,036,250
2,000,000 AAA Jefferson Parish, LA School Board, Sales and Use Tax
Revenue, FSA-Insured, zero coupon to yield
5.000% due 9/1/09 1,247,500
4,575,000 AAA Keller, TX ISD, Capital Appreciation, PSFG, zero coupon
to yield 4.930% due 8/15/12 2,430,469
1,000,000 Aaa* Kentucky Higher Education Student Loan Corp.,
Insured Student Loan Revenue, Series 91B,
6.500% due 12/1/00(a) 1,052,500
205,000 AAA Louisiana Public Facilities Authority Revenue,
Supplemental Student Loan, Series C,
AMBAC-Insured, 8.125% due 12/1/99 213,200
2,175,000 AAA Massachusetts State Health & Educational Facilities
Authority Revenue, Northeastern University,
Series G, MBIA-Insured, 5.000% due 10/1/18 2,207,625
1,110,000 A* Montana State Higher Education Student Assistance
Corp., Student Loan Revenue, Series 92B,
7.050% due 6/1/04(a) 1,183,538
2,500,000 AAA New York State Dormitory Authority Revenues, City
University System, FGIC-Insured, 5.000% due 7/1/18 2,528,125
North Texas Higher Education Authority Inc.,
Student Loan Revenue:
1,475,000 AAA AMBAC-Insured, 7.000% due 4/1/01(a) 1,561,656
2,400,000 A* Series D, 6.300% due 4/1/09(a) 2,508,000
2,000,000 AAA Pennsylvania State Higher Education Assistance Agency,
Student Loan Revenue Refunding, Series A,
FGIC-Insured, 6.800% due 12/1/00 2,117,500
1,500,000 A* Rhode Island Student Loan Authority Revenue Refunding,
Series 92B, 6.750% due 12/1/01(a) 1,601,250
1,500,000 AAA Schuylkill, PA Redevelopment Authority Revenue,
Commonwealth Lease Revenue Bonds, Series A,
FGIC-Insured, 6.850% due 6/1/03 1,640,625
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28,476,910
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</TABLE>
See Notes to Financial Statements.
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8 1998 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1998
=================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<C> <S> <C>
Escrowed to Maturity(c) -- 3.4%
$ 720,000 AAA Boston, MA Water & Sewer Community Revenue,
10.650% due 1/1/99 $ 727,358
505,000 Baa3* Delaware County, PA Development Authority Revenue,
(Elwyn Inc. Project), 7.750% due 6/1/00 537,825
1,040,000 AAA Erie County, OH Hospital Improvement, Sandusky
Memorial Hospital, 8.750% due 1/1/06(b) 1,228,500
1,050,000 AAA Illinois Educational Facilities Authority Revenue, Chicago
Osteopathic Medical, Series A, 8.750% due 7/1/05 1,254,750
830,000 AAA Kalamazoo, MI Hospital Finance Authority,
6.750% due 4/1/03 884,988
375,000 NR Lehigh County, PA IDA, Industrial & Commercial
Development Revenue, (Strawbridge Project),
7.200% due 12/15/01 395,625
1,135,000 Baa1* New Haven, CT GO, Series B, 9.000% due 12/1/01 1,310,925
320,000 A Ouachita Parish, LA Hospital Services District #1,
Hospital Revenue Bonds, Glenwood Regional Medical
Center, Series 1991, 7.250% due 7/1/00 338,800
1,595,000 AAA Owensboro, KY Electric, Light & Power,
10.500% due 1/1/04(b) 1,896,056
160,000 Aa* Philadelphia, PA Hospitals and Higher Education Facilities
Authority Revenue, (St. Agnes Medical Center Project),
FHA-Insured, 6.750% due 8/15/01 166,800
240,000 AAA San Francisco, CA Airport Improvement Corp.,
Lease Revenue, United Airlines, 7.875% due 7/1/99 244,507
460,000 NR Sullivan County, TN Health & Educational Facilities,
Holston Valley Community Hospital, 7.000% due 9/1/99 470,304
810,000 NR Tom Green County, TX Hospital Authority,
7.875% due 2/1/06 921,375
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10,377,813
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General Obligation -- 16.7%
1,000,000 AAA Arizona COP Refunding GO, FSA-Insured,
6.500% due 3/1/08 1,095,000
Baltimore, MD GO, Capital Appreciation, Consumer
Public Improvement, Series C, FGIC-Insured:
4,020,000 AAA Zero coupon to yield 4.700% due 10/15/07 2,788,875
4,000,000 AAA Zero coupon to yield 4.750% due 10/15/08 2,635,000
4,600,000 AAA Zero coupon to yield 4.800% due 10/15/09 2,875,000
3,000,000 AAA Zero coupon to yield 4.950% due 10/15/11 1,680,000
2,000,000 AAA Chicago, IL Board of Education GO, Chicago School
Reform, AMBAC-Insured, 5.800% due 12/1/13 2,232,500
795,000 BBB Government of Guam GO, Series A, 5.750% due 8/15/99 807,362
Harris County, TX Refunding Toll Road Authority GO
Unlimited, MBIA-Insured:
1,000,000 AAA Zero coupon to yield 5.150% due 8/15/11 563,750
See Notes to Financial Statements.
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</TABLE>
Smith Barney Muni Funds 9
<PAGE>
================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<S> <C> <C>
General Obligation -- 16.7% (continued)
$ 1,000,000 AAA Zero coupon to yield 5.200% due 8/15/12 $ 531,250
1,250,000 AAA Zero coupon to yield 5.250% due 8/15/13 629,688
1,450,000 BBB- Jefferson County, AZ PCR, (Entergy Arizona Inc. Project),
5.600% due 10/1/17 1,482,625
500,000 AA+ Kings County, WA GO Unlimited Tax Obligation,
9.000% due 12/1/98 504,340
6,705,000 AA- Massachusetts State GO, Series C, zero coupon to yield
5.020% due 8/1/18 2,631,713
865,000 BBB+ New Haven, CT GO, Series B, 9.000% due 12/1/01 979,612
2,500,000 A+ New Jersey State GO, COP Equipment, Series A,
6.400% due 4/1/05 2,712,500
New York City GO:
2,500,000 A- Series A, 6.250% due 8/1/08 2,843,750
130,000 A- Series D, 7.200% due 2/1/00 135,850
6,640,000 A- Series F, zero coupon to yield 5.050% due 8/1/08 4,332,600
2,000,000 A- Series H, 5.900% due 8/1/09 2,220,000
New York, NY GO, Capital Appreciation:
2,500,000 AAA Series F, FGIC-Insured, zero coupon to yield
5.050% due 8/1/08 1,656,250
Series G, MBIA-Insured, zero coupon to yield:
4,000,000 AAA 4.650% due 8/1/07 2,785,000
4,190,000 AAA 4.750% due 8/1/08 2,775,875
New York State, GO, Series F:
1,450,000 A 5.000% due 9/15/16 1,466,312
1,120,000 A 5.000% due 9/15/17 1,132,600
13,410,000 AAA Puerto Rico Commonwealth GO, Capital Appreciation,
Public Improvement, zero coupon to yield
4.950% due 7/1/15 6,185,362
1,500,000 AA+ Shelby County, TN GO, zero coupon to yield
5.350% due 8/1/14 725,625
255,000 AA Texas State Veterans Housing Assistance Fund GO,
FHA-Insured, 6.050% due 12/1/12(a) 262,331
- -------------------------------------------------------------------------------------------------
50,670,770
- -------------------------------------------------------------------------------------------------
Hospitals -- 16.3%
425,000 A+ ABAG Finance Authority Nonprofit Corps, CA Insured COP,
(Rehabilitation Mental Health Services Inc. Project),
6.100% due 6/1/02 457,406
600,000 A Bexar County, TX Health Facilities Development Corp.,
Health Facilities Revenue Refunding,
(Independence Hill Project), LOC Banque Paribas,
7.500% mandatory tender 12/1/98 603,612
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 1,202,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<S> <C> <C>
Hospitals -- 16.3% (continued)
$ 3,500,000 BBB Colorado Health Facilities Authority Hospital Revenue
Bonds, Series 1993, Rocky Mountain Adventist Health
Guaranteed, 6.250% due 2/1/04 $3,718,750
2,135,000 NR Harris County, TX Health Facilities Development Corp.,
Memorial Health System Guaranteed,
7.125% due 6/1/05 2,407,212
1,000,000 BBB Illinois Health Facilities Authority Revenue Refunding,
Trinity Medical Center, 6.500% due 7/1/00 1,036,250
1,000,000 AA Kansas State Development Finance Authority
Revenue, Catholic Health Initiatives, Series J,
5.000% due 12/1/18 1,002,500
500,000 Ba3* Langhorne Manor Higher Education & Health Authority,
Bucks County, PA Lower Bucks Hospital,
6.375% due 7/1/99 503,290
2,200,000 BBB Maplewood, MN Healthcare Facilities Revenue,
(Health East Project), 5.950% due 11/15/06 2,326,500
3,000,000 AAA Miami-Dade County, FL Public Facilities Revenue,
Jackson Memorial Hospital, FSA-Insured,
5.000% due 6/1/18 3,030,000
New Jersey Healthcare Facilities Financing
Authority Revenue:
3,250,000 AAA Cathedral Health Services, MBIA/FHA-Insured,
5.200% due 8/1/15 3,384,062
1,000,000 Baa1* Elizabeth General Medical Center, Series C,
7.100% due 7/1/99 1,023,150
1,030,000 BBB+ Pascack Valley Hospital, Series 91,
6.500% due 7/1/01 1,089,225
New York State Dormitory Authority Revenue:
1,000,000 BBB+ Bronx Lebanon Hospital, 5.200% due 2/15/16 1,012,500
Mental Health Services Facilities, Series B:
3,000,000 A- 5.750% due 8/15/12 3,277,500
3,000,000 A- 5.000% due 2/15/18 2,988,750
3,000,000 AAA New York & Presbyterian, AMBAC/FHA-Insured,
5.000% due 2/1/19 3,018,750
1,570,000 BBB+ North General Hospital, 5.200% due 2/15/16 1,589,625
1,150,000 AAA St. Barnabas Hospital, AMBAC/FHA-Insured,
5.350% due 8/1/17 1,188,812
2,500,000 AAA State University Educational Facilities, Series A,
MBIA-Insured, 5.000% due 5/15/18 2,525,000
2,170,000 A+ Palm Beach County, FL Health Facilities Authority
Revenue, Good Samaritan Health System Guaranteed,
6.150% due 10/1/06 2,465,662
1,750,000 A Riverside, CA Asset Leasing Corp. Leasehold Revenue
Bonds, 1993 Series A, Riverside Hospital Project,
6.000% due 6/1/04 1,900,937
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<S> <C> <C>
Hospitals -- 16.3% (continued)
$ 4,690,000 AA Royal Oak, MI Hospital Financing Authority Revenue,
William Beaumont Hospital, Series K, zero coupon
to yield 5.150% due 11/15/08 $ 3,025,050
Scranton-Lackawanna, PA Health & Welfare
Authority Revenue:
3,000,000 BBB-++ Allied Services Rehabilitation Hospitals,
7.125% due 7/15/05 3,303,750
1,000,000 BBB-++ Moses Taylor Hospital Project,
6.050% due 7/1/10 1,073,750
357,000 BBB-++ Valley Health System, CA COP Refunding Project,
6.250% due 5/15/99 360,017
- -------------------------------------------------------------------------------------------------
49,514,560
- -------------------------------------------------------------------------------------------------
Housing -- 4.8%
2,500,000 BBB California Statewide Community Development Authority
Revenue, Irvine Apartment Communities, Series A-4,
5.250% due 5/15/25 2,568,750
2,250,000 AAA Dekalb County, GA HFA, Multi-Family Housing Revenue,
(Chimney Trace Project), FNMA-Collateralized,
5.625% mandatory tender 5/1/05 2,413,125
615,000 AAA Fairfax County, VA Redevelopment & Housing Authority,
Multi-Family Refunding, Kingsley 91A, FHA-Insured,
6.500% due 11/1/01 647,287
1,000,000 AAA Harrisonburg, VA Redevelopment & Housing Authority,
Multi-Family Housing Revenue, (Greens of Salem Run
Project), FSA-Insured, 6.000% due 4/1/12(a) 1,090,000
1,800,000 AA- Louisiana Public Facilities Authority Revenue,
Multi-Family Housing, Oakleigh Apartments, Series A,
5.950% mandatory tender 3/15/05 1,903,500
1,200,000 NR Maricopa County, AZ IDA, Multi-Family Housing
Revenue, Stanford Court Apartments, Series B,
5.750% due 7/1/08 1,213,500
384,686 AAA Monroe-West Monroe, LA Public Trust Financing
Authority, FHLMC-Collateralized, 8.500% due 5/20/02 403,921
820,000 Aaa* Nevada Housing Single-Family Mortgage, Series E,
FHA-Insured 5.350% due 10/1/27(a) 855,875
410,000 Ba2* Odessa, TX Housing Development Corp. #2, Multi-Family
Revenue Refunding, Chaparral Village, Series A,
6.375% due 12/1/03 429,475
1,340,000 AAA Onterie Center Housing Finance Corp., IL Mortgage
Revenue Refunding, (Onterie Center Project),
Series A, MBIA-Insured, 6.500% due 7/1/02 1,430,450
130,000 AAA St. Louis County, MO Single-Family Mortgage Revenue,
MBIA-Insured, 6.125% due 4/1/03 136,013
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<C> <S> <C>
Housing -- 4.8% (continued)
$ 1,000,000 AAA Texas State Department of Housing & Community Affairs,
GNMA/FNMA/FHLMC-Collateralized Home Mortgage
Revenue Bonds, Series B-2, RIBS Variable Rate,
10.000% due 6/18/23(a)(d) $ 1,107,500
70,000 AA Texas State Housing Agency Mortgage Revenue
Single-Family, 1987D, GNMA-Collateralized
7.750% due 7/1/99(a) 70,934
410,000 AA Wyoming Community Development Authority,
Single-Family Mortgage, Series 1988C,
7.800% due 6/1/99(a) 414,731
- -------------------------------------------------------------------------------------------------
14,685,061
- -------------------------------------------------------------------------------------------------
Industrial Development -- 9.0%
1,500,000 A Bel Air, MD Revenue Refunding, (May Department
Stores Co. Project), 6.375% due 10/1/99 1,542,135
1,000,000 A Belmont County, OH IDR Refunding, (May Department
Stores Co. Project), Series 91, 6.500% due 1/1/00 1,036,250
2,000,000 AAA Clarion County, PA IDA Energy Development Revenue,
(Piney Creek Project), LOC Swiss Bank,
7.250% mandatory tender 12/1/00(a) 2,135,000
5,000,000 BBB- Greenville, SC Connector 2000 Association Inc.,
SC Toll Road Revenue, Capital Appreciation,
Series B, zero coupon to yield 5.700% due 1/1/15 2,012,500
3,000,000 Ba1* Griffin-Spalding County, GA Development Authority
Revenue Refunding, (Borden Inc. Project,) Borden Inc.
Guaranteed, 7.200% due 6/1/00 3,131,250
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 2,068,880
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 3,105,000
3,500,000 BBB+ Metropolitan Government Nashville & Davidson County,
TN IDB Revenue Refunding & Improvement, Osco
Treatment Inc. Guaranteed, 6.000% due 5/1/03(a) 3,692,500
1,000,000 NR Minneapolis, MN Commercial Development Revenue,
(Holiday Inn Metrodome Project), 6.000% due 12/1/01 1,010,000
2,280,000 AAA Nassau County, NY IDA, Civic Facility Revenue, Capital
Appreciation, Hofstra University Project, zero coupon
to yield 5.130% due 7/1/16 969,000
1,625,000 Aa3* New Jersey EDA, Growth Bonds, LOC Banque Nationale
de Paris, 6.200% due 12/1/02(a) 1,734,688
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<C> <S> <C>
Industrial Development -- 9.0% (continued)
New York City IDA:
$ 565,000 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) $ 567,232
435,000 Aa1* SuperFlex, Ltd. Project, Composite Offering XVIII 1989,
Series A, LOC ABN AMRO Bank, NV, 7.750%
optional tender 11/1/99(a) 436,405
1,195,000 NR Community Hospital, Brooklyn, 6.875% due 11/1/10 1,209,938
2,350,000 AAA Sioux City, IA IDR, (Terra Centre Project), LOC Rabobank
Nederland, 6.800% due 5/1/07 2,540,938
- -------------------------------------------------------------------------------------------------
27,191,716
- -------------------------------------------------------------------------------------------------
Life Care -- 1.2%
1,355,000 BBB Illinois Development Finance Authority, Health
Facilities Revenue, Community Living Options,
6.375% due 3/1/00 1,385,488
1,045,000 A- New York State Medical Care Facilities Finance Agency
Revenue, Mental Health Services Facilities, Series B,
7.100% due 2/15/99 1,058,784
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%, 7.920% due 8/1/06(d) 1,136,250
- -------------------------------------------------------------------------------------------------
3,580,522
- -------------------------------------------------------------------------------------------------
Miscellaneous -- 8.2%
2,595,000 BBB- Clarksville, TN Natural Gas Acquisition Corp.,
Gas Revenue, Series A, 6.500% due 11/1/00 2,689,069
2,750,000 A2* Hoffman Estate, IL Tax Increment Junior Lien, Hoffman
Estate Development, Series 91, 6.500% due 5/15/01 2,921,875
2,700,000 A Illinois Development Finance Authority Revenue, Debt
Restructure -- East St. Louis, 6.8750% due 11/15/05 3,037,500
3,000,000 AAA Jefferson, LA Sales Tax District, Special Sales Tax
Revenue, FSA-Insured, 5.000% due 12/1/18 3,026,250
470,000 Aa3* New Jersey EDA Revenue, LOC Banque Nationale de
Paris, Series A, 6.250% due 12/1/01(a) 481,407
1,500,000 A New York State Job Development Authority, Special
Purpose, Series A, 5.250% due 3/1/10 1,575,000
New York State Urban Development Corporation Revenue,
Correctional Capital Facilities:
3,000,000 BBB+ Series A, 5.000% due 1/1/18 2,988,750
2,950,000 BBB+ Series 6, 5.500% due 1/1/13 3,237,625
3,900,000 BBB- Spokane, WA Downtown Foundation Parking Revenue,
(River Park Square Project), 5.000% due 8/1/08 3,943,875
1,000,000 AA Tuscon, AZ COP, Asset Guaranty, 6.000% due 7/1/04 1,096,250
- -------------------------------------------------------------------------------------------------
24,997,601
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<C> <S> <C>
Pollution Control -- 3.7%
$ 1,035,000 AAA Burke County, GA Development Authority PCR,
Refunding, Ogelthorpe Power Co., MBIA-Insured,
7.500% due 1/1/03 $ 1,119,094
Detroit, MI Economic Development Corp., Facilities
Recovery Revenue, FSA-Insured:
2,540,000 AAA Series A, 7.000% due 5/1/01(a) 2,679,700
1,000,000 AAA Series 91A, 6.600% due 5/1/02(a) 1,082,500
1,500,000 BBB+ Illinois Development Financing Authority, Solid Waste
Disposal Revenue Bonds, (Waste Management Inc.
Project), Series 1990, 7.125% due 1/1/01(a) 1,590,000
1,000,000 A-1+ Maricopa County, AZ Pollution Control Revenue, Public
Service Co., Series A, 3.900% due 5/1/29(e) 1,000,000
1,000,000 Baa2* Massachusetts State IDB Finance Agency, PCR, (Eastern
Edison Co. Project), 5.875% due 8/1/08 1,051,250
1,500,000 AAA Montgomery, AL IDB, PCR, (General Electric Co. Project),
7.000% mandatory tender, 9/15/00(a) 1,595,625
950,000 Baa1* Onondaga County, NY Resource Recovery Agency
Project Revenue Bonds, Series 1992,
6.625% due 5/1/00(a) 982,063
- -------------------------------------------------------------------------------------------------
11,100,232
- -------------------------------------------------------------------------------------------------
Pre-Refunded -- 0.3%
Austin, TX Water, Sewer & Electric Refunding Revenue:
105,000 A* Call 5/15/99 @ 100, 14.000% due 11/15/01(c) 111,956
60,000 A* Various Call Dates @ 100, 14.000% due 11/15/01(c) 67,875
495,000 AAA Gila County, AZ IDA PCR, (Call 2/15/01 @ 101),
11.250% due 4/1/01(c) 574,819
235,000 AAA Massachusetts State Port Authority Revenue,
FGIC-Insured, Series A, (Pre-Refunded -- Escrowed
with State and Local government securities,
Call 7/1/00 @ 102), 7.200% due 7/1/03(a) 252,919
- -------------------------------------------------------------------------------------------------
1,007,569
- -------------------------------------------------------------------------------------------------
Public Facilities -- 1.4%
40,000 A- Concord Santa Cruz Southgate, CA COP, ABAG Finance
Corp., 7.100% due 6/1/99 40,199
4,000,000 Aa* Mt. Sterling, KY Lease Revenue, Kentucky League of
Cities 1993A, Transamerica Life Guaranteed,
5.625% due 3/1/03(b) 4,260,000
- -------------------------------------------------------------------------------------------------
4,300,199
- -------------------------------------------------------------------------------------------------
Solid Waste -- 1.1%
3,000,000 A2* Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue, Montgomery County,
6.200% due 7/1/10(a) 3,270,000
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<C> <S> <C>
Transportation -- 11.7%
Denver, CO City & County Airport Revenue:
$ 1,590,000 Baa1* Series 1992B, 7.000% due 11/15/01(a) $ 1,717,200
1,000,000 Baa1* Series 1992B, 7.000% due 11/15/02(a) 1,101,250
1,000,000 Baa1* Series 1994A, 7.200% due 11/15/02(a) 1,108,750
1,510,000 AAA Series B, MBIA-Insured, 6.250% due 11/15/06(a) 1,727,062
E-470 Public Highway Authority, CO Senior Revenue
Bonds, MBIA-Insured:
5,000,000 AAA Zero coupon to yield 5.430% due 9/1/16 2,112,500
5,000,000 AAA Zero coupon to yield 5.450% due 9/1/17 2,000,000
2,445,000 AAA Hawaii Airport System Revenue, Second Series of 91,
MBIA-Insured, 6.100% due 7/1/99(a) 2,488,643
1,250,000 A Indiana Transportation Finance Authority, Airport
Facilities Lease Revenue, Series A, United Air,
6.125% due 11/1/02 1,356,250
Massachusetts State Port Authority Revenue:
765,000 AAA FGIC-Insured, Series A, 7.200% due 7/1/03(a) 820,463
1,000,000 AA- FGIC-Insured, Series B, 5.000% due 7/1/18(a) 997,500
3,000,000 AA- Series D, 5.000% due 7/1/18 3,026,250
9,000,000 Aaa* Massachusetts State Turnpike Authority,
Metropolitan Highway System Revenue, Series C,
MBIA-Insured, zero coupon to yield 5.400% due 1/1/16 4,016,250
3,000,000 Aa1* Ocean Highway and Port Authority, Nassau County, FL
Adjustable Demand Revenue Bonds, Series 1990,
LOC ABN AMRO Bank, NV, 6.250% mandatory
tender 12/1/02(a) 3,273,750
2,500,000 AAA Phoenix, AZ Civic Improvement Corp., Airport Revenue,
Series A, FSA-Insured, 5.000% due 7/1/18 2,534,375
750,000 AA Port of Houston Authority, Harris County, TX
Port Improvement Unlimited Tax Obligation,
8.500% due 11/1/98(a) 752,738
2,235,000 AAA Puerto Rico Commonwealth Highway & Transportation
Revenue, Series A, AMBAC-Insured, zero coupon to
yield 5.050% due 7/1/17 930,319
4,000,000 A Rhode Island State Turnpike & Bridge Authority Revenue,
5.350% due 12/1/17 4,080,000
1,340,000 AAA Triborough Bridge & Tunnel Authority, NY Special
Obligation, Series A, FGIC-Insured, 5.000% due 1/1/16 1,358,425
- -------------------------------------------------------------------------------------------------
35,401,725
- -------------------------------------------------------------------------------------------------
Utilities -- 9.5%
4,585,000 A* Austin, TX Water, Sewer & Electric Refunding Revenue,
14.000% due 11/15/01 5,427,494
Chelan County, WA Public Utility District #1:
1,500,000 AA Chelan Hydro Consolidated System Revenue Bonds,
7.000% mandatory tender 7/1/01(a) 1,618,125
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================
<C> <S> <C>
Utilities -- 9.5% (continued)
$22,485,000 AAA Columbia River Rock Capital Appreciation, MBIA-
Insured, zero coupon to yield 6.999% due 6/1/13 $11,270,606
600,000 A- Georgia Muni Gas Authority Revenue, (Southern Storage
Gas Project), 6.300% due 7/1/09 664,500
Long Island Power Authority, NY Electric System
Revenue, Capital Appreciation, Series A, FSA-Insured:
3,715,000 AAA Zero coupon to yield 5.280% due 12/1/17 1,458,138
3,660,000 AAA Zero coupon to yield 5.280% due 12/1/18 1,367,925
Philadelphia, PA Gas Works Revenue Bonds:
770,000 Baa1* 13th Series, 7.400% due 6/15/00 813,312
2,500,000 AAA Series B, FSA-Insured, 5.000% due 7/1/18 2,528,125
1,000,000 BB Sam Rayburn, TX Municipal Power Supply System
Revenue Refunding, Series A, 6.200% due 10/1/01 1,022,500
2,520,000 AAA Union County, NJ Utilities Authority, Series A,
AMBAC-Insured, 5.000% due 6/1/14(a) 2,564,100
- -------------------------------------------------------------------------------------------------
28,734,825
- -------------------------------------------------------------------------------------------------
Water & Sewer -- 3.3%
3,500,000 AAA Detroit, MI Water Supply System, FGIC-Insured,
6.500% due 7/1/15 4,274,375
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) 1,599,375
2,500,000 AA Somerset Raritan Valley, NJ Sewer, Series G,
6.750% due 7/1/10 2,675,000
860,000 A Texas Water Resource Finance Authority Revenue,
Series 89, 7.400% due 8/15/00 884,888
Washington Township, NJ Municipal Utilities Authority
Revenue, Capital Appreciation, Series A, FGIC-Insured:
350,000 Aaa* Zero coupon to yield 4.400% due 12/15/08 226,187
360,000 Aaa* Zero coupon to yield 4.500% due 12/15/10 211,050
540,000 Aaa* Zero coupon to yield 4.600% due 12/15/13 274,050
- -------------------------------------------------------------------------------------------------
10,144,925
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $287,227,542**) $303,454,428
=================================================================================================
</TABLE>
(a) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Security segregated by Custodian for open market purchase commitment.
(c) Bonds escrowed to maturity by U.S. government securities and Pre-Refunded
bonds escrowed with U.S. government securities are considered by the manager
to be triple-A rated even if issuer has not applied 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.
** 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 17
<PAGE>
================================================================================
Bond Ratings (unaudited)
================================================================================
All ratings are by Standard & Poor's Ratings Services ("Standard & Poor's"),
except that those which are identified by an asterisk (*) are rated by Moody's
Investors Service Inc. ("Moody's") and those which are identified by a double
dagger (++) are rated by Fitch Investors Services, Inc. ("Fitch"). The
definitions of the applicable rating symbols are set forth below:
Standard & Poor's -- Ratings from "AA" to "BB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for bonds in this category than in
higher rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments.
Moody's - Numerical modifiers 1, 2 and 3 may be applied to each generic rating
from "Aa" to "Ba", where 1 is the highest and 3 the lowest ranking within its
generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large 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 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 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.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and therefore
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Bond Ratings (unaudited)(continued)
================================================================================
Fitch -- Ratings may be modified by the addition of a plus (+) or minus (-)
sign to show relative standings within the major rating categories.
A -- Bonds rated "A" are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and/or dividends
and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances
than securities with higher ratings.
BBB -- Bonds rated "BBB" are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest or
dividends and repay principal is considered to be adequate. Adverse
changes in economic conditions and circumstances, however, are more
likely to have adverse impact on these securities and, therefore,
impair timely payment. The likelihood that the ratings of these bonds
will fall below investment grade is higher than for securities with
higher ratings.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's or
Fitch.
================================================================================
Short-Team Security Ratings (unaudited)
================================================================================
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
MIG1 -- Moody's highest rating for short-term municipal obligations.
P-1 -- Moody'shighest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
================================================================================
Security Descriptions (unaudited)
================================================================================
ABAG -- Association of Bay Area
Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity 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
PSFG -- Permanent School Fund Guaranty
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt
Securities
VA -- Veterans Administration
VRDD -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday Demand
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<PAGE>
================================================================================
Statement of Assets and Liabilities (unaudited) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (Cost -- $287,227,542) $ 303,454,428
Cash 34,890
Interest receivable 4,135,236
Receivable for securities sold 2,725,622
Receivable for Fund shares sold 1,282,815
- --------------------------------------------------------------------------------------
Total Assets 311,632,991
- --------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 705,251
Management fees payable 144,802
Distribution fees payable 15,188
Accrued expenses 70,918
- --------------------------------------------------------------------------------------
Total Liabilities 936,159
- --------------------------------------------------------------------------------------
Total Net Assets $ 310,696,832
======================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 45,085
Capital paid in excess of par value 296,921,149
Undistributed net investment income 420,598
Accumulated net realized loss from security transactions (2,916,886)
Net unrealized appreciation of investments 16,226,886
- --------------------------------------------------------------------------------------
Total Net Assets $ 310,696,832
======================================================================================
Shares Outstanding:
Class A 40,101,242
-----------------------------------------------------------------------------------
Class L 4,983,720
-----------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 6.89
-----------------------------------------------------------------------------------
Class L (*) $ 6.90
-----------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 2.04% of net asset value per share) $ 7.03
-----------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $ 6.97
======================================================================================
</TABLE>
(*) Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within one year from initial purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statement of Operations (unaudited)
================================================================================
For the Six Months Ended September 30, 1998
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $ 8,234,185
- --------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 724,332
Distribution fees (Note 3) 249,317
Shareholder and system servicing fees 36,890
Registration fees 25,069
Shareholder communications 17,222
Pricing service fees 10,027
Audit and legal 8,023
Custody fees 7,243
Trustees' fees 3,008
Other 5,515
- --------------------------------------------------------------------------------------
Total Expenses 1,086,646
- --------------------------------------------------------------------------------------
Net Investment Income 7,147,539
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 84,054,247
Cost of securities sold 83,340,305
- --------------------------------------------------------------------------------------
Net Realized Gain 713,942
- --------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 11,466,415
End of period 16,226,886
- --------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 4,760,471
- --------------------------------------------------------------------------------------
Net Gain on Investments 5,474,413
- --------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 12,621,952
======================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
================================================================================
Statements of Changes in Net Assets
================================================================================
For the Six Months Ended September 30, 1998 (unaudited)
and the Year Ended March 31, 1998
<TABLE>
<CAPTION>
September 30 March 31
=========================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 7,147,539 $ 14,476,709
Net realized gain 713,942 1,823,647
Increase in net unrealized appreciation 4,760,471 7,111,367
- -----------------------------------------------------------------------------------------
Increase in Net Assets from Operations 12,621,952 23,411,723
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (7,107,318) (14,092,042)
- -----------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (7,107,318) (14,092,042)
- -----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 40,538,589 43,773,091
Net asset value of shares issued
for reinvestment of dividends 4,089,132 7,991,624
Cost of shares reacquired (27,660,301) (60,889,261)
- -----------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions 16,967,420 (9,124,546)
- -----------------------------------------------------------------------------------------
Increase in Net Assets 22,482,054 195,135
NET ASSETS:
Beginning of period 288,214,778 288,019,643
- -----------------------------------------------------------------------------------------
End of period/*/ $ 310,696,832 $ 288,214,778
=========================================================================================
/*/ Includes undistributed net investment income of: $ 420,598 $ 380,377
=========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Limited Term Portfolio ("Portfolio") is a separate investment portfolio of
the Smith Barney Muni Funds ("Fund"). The Fund, a Massachusetts business trust,
is registered under the Investment Company Act of 1940, as amended, as an open-
end management investment company and consists of this Portfolio and seven other
separate investment portfolios: Florida, Georgia, New York, 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 semi-annual reports .
The significant accounting policies consistently followed by the Fund are:(a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between the quoted bid and ask prices provided by an independent
pricing service that are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; (c) securities for
which market quotations are not available will be valued in good faith at fair
market value by or under the direction of the Board of Trustees; (d) securities
maturing within 60 days are valued at cost plus accreted discount or minus
amortized premium, which approximates value; (e) gains or losses on the sale of
securities are calculated by using the specific identification method; (f)
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; (g) dividends and distributions to
shareholders are recorded on the ex-dividend date; (h) 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 by class; (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; (j) 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; and
(k) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment,financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 23
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)(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
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment manager to the Fund. The Portfolio pays MMC a
management fee calculated at an annual rate of 0.50% of its average daily net
assets. This fee is calculated daily and paid monthly.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB"), was the Fund's distributor. SSB (as well
as certain other broker-dealers) continues to sell Fund shares to the public as
members of the selling group.
On June 12, 1998, the Fund's Class C shares were renamed Class L shares.
Effective June 15, 1998, Class L shares are being sold at net asset value plus a
maximum initial sales charge of 1.00%. Class L shares also have a 1.00%
contingent deferred sales charge ("CDSC"), which applies if redemption occurs
within the first year of purchase.
There is also a CDSC of 1.00% on Class A shares, which applies if redemption
occurs within the first year of purchase. This CDSC only applies to those
purchases of Class A shares, which, when combined with current holdings of Class
A shares, equal or exceed $500,000 in the aggregate. These purchases do not
incur an initial sales charge.
For the six months ended September 30, 1998, SSB received sales charges of
approximately $294,000 and $26,000 on sales of the Portfolios' Class A and Class
L shares, respectively. In addition, for the six months ended September 30,
1998, CDSCs paid to SSB were approximately:
Class A Class L
================================================================================
CDSCs $7,000 $4,000
================================================================================
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)(continued)
================================================================================
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A and L shares calculated at an 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 L shares calculated at an annual rate of 0.20% of the
average daily net assets.
For the six months ended September 30, 1998, total Distribution Plan fees
incurred were:
Class A Class L
================================================================================
Distribution Plan Fees $193,287 $56,030
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
4. Investments
During the six months ended September 30, 1998, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
================================================================================
Purchases $90,043,580
- --------------------------------------------------------------------------------
Sales 84,054,247
================================================================================
At September 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 16,304,929
Gross unrealized depreciation (78,043)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 16,226,886
================================================================================
5. Capital Loss Carryforward
At March 31, 1998, the Portfolio had, for Federal income tax purposes,
approximately $3,628,000 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 carryforwards are indicated below.
Expiration occurs on March 31, of the year indicated:
2003 2004
================================================================================
Carryforward Amounts $1,888,000 $1,740,000
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 25
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)(continued)
================================================================================
6. Shares of Beneficial Interest
At September 30, 1998, the Fund had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Portfolio has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest in the Portfolio and has the same rights, except that each
class bears certain expenses specifically related to the distribution of its
shares. Effective June 12, 1998, the Fund adopted the renaming of existing Class
C shares as Class L shares.
At September 30, 1998, total paid-in capital amounted to the following for each
class:
Class A Class L
================================================================================
Total Paid-in Capital $263,274,744 $ 33,691,490
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
------------------------- ----------------------------
Shares Amount Shares Amount
================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 5,171,925 $ 35,202,722 5,614,217 $ 37,885,348
Shares issued on reinvestment 532,992 3,616,483 1,047,721 7,028,557
Shares redeemed (3,605,902) (24,431,570) (8,343,657) (55,870,050)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) 2,099,015 $ 14,387,635 (1,681,719) $(10,956,145)
================================================================================================
Class L(*)
Shares sold 785,609 5,335,867 875,665 $ 5,887,743
Shares issued on reinvestment 69,639 472,649 143,726 963,067
Shares redeemed (475,876) (3,228,731) (746,719) (5,019,211)
- ------------------------------------------------------------------------------------------------
Net Increase 379,372 $ 2,579,785 272,672 $ 1,831,599
================================================================================================
(*) On June 12, 1998, Class C shares were renamed as Class L shares.
</TABLE>
- --------------------------------------------------------------------------------
26 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class A Shares 1998(1) 1998 1997 1996 1995(2) 1994
================================================================================================================
Net Asset Value,
Beginning of Period $6.76 $6.54 $6.61 $6.54 $6.55 $6.68
- ----------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.17 0.34 0.34 0.36 0.36 0.37
Net realized and
unrealized gain (loss) 0.13 0.22 (0.06) 0.07 -- (0.13)
- ----------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.30 0.56 0.28 0.43 0.36 0.24
- ----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.17) (0.34) (0.35) (0.36) (0.37) (0.37)
- ----------------------------------------------------------------------------------------------------------------
Total Distributions (0.17) (0.34) (0.35) (0.36) (0.37) (0.37)
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $6.89 $6.76 $6.54 $6.61 $6.54 $6.55
- ----------------------------------------------------------------------------------------------------------------
Total Return 4.47%++ 8.66% 4.30% 6.65% 5.69% 3.65%
- ----------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $276 $257 $260 $278 $245 $282
- ----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.73%+ 0.74% 0.75% 0.75% 0.61% 0.53%
Net investment income 4.96+ 5.14 5.16 5.43 5.61 5.53
- ----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 29% 58% 46% 26% 22% 25%
================================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 27
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares(1) 1998(2) 1998 1997 1996 1995(3) 1994
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 6.76 $ 6.54 $ 6.61 $ 6.54 $ 6.54 $ 6.68
- ---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.16 0.33 0.33 0.35 0.35 0.35
Net realized and
unrealized gain (loss) 0.13 0.21 (0.06) 0.06 -- (0.14)
- ---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.29 0.54 0.27 0.41 0.35 0.21
- ---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.15) (0.32) (0.34) (0.34) (0.35) (0.35)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.15) (0.32) (0.34) (0.34) (0.35) (0.35)
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 6.90 $ 6.76 $ 6.54 $ 6.61 $ 6.54 $ 6.54
- ---------------------------------------------------------------------------------------------------------------
Total Return 4.39%++ 8.36% 4.10% 6.45% 5.51% 3.15%
- ---------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $ 34,364 $ 31,133 $ 28,325 $ 28,824 $ 26,622 $ 26,869
- ---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.94%++ 0.99% 0.97% 0.96% 0.89% 0.88%
Net investment income 4.74+ 4.89 4.94 5.22 5.34 5.10
- ---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 29% 58% 46% 26% 22% 25%
===============================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended September 30, 1998 (unaudited).
(3) On November 7, 1994, the former Class B shares were renamed Class C shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized
- --------------------------------------------------------------------------------
28 1998 Semi-Annual Report to Shareholders
<PAGE>
SalomonSmithBarney
----------------------------
A member of citigroup [LOGO]
Trustees
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Lawrence T. McDermott
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Mutual Management Corp.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds -- Limited Term Portfolio. It is not authorized for
distribution to prospective investors unless accompanied by a current Prospectus
for the Portfolio, which contains information concerning the Portfolio's
investment policies and expenses as well as other pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Muni Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD0804 11/98
<PAGE>
[GRAPHIC]
Smith Barney Muni Funds
National
Portfolio
[GRAPHIC]
-------------------
SEMI-ANNUAL REPORT
-------------------
September 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Smith Barney Muni Funds
National Portfolio
================================================================================
The Smith Barney Muni Funds-- National Portfolio seeks to pay its shareholders
as high a level of monthly income exempt from Federal income taxes as is
consistent with prudent investing.
Smith Barney Muni Funds -- National Portfolio
Average Annual Total Returns
September 30, 1998
<TABLE>
<CAPTION>
Without Sales Charges(1)
---------------------------------------------
Class A Class B Class L(2)
================================================================================
<S> <C> <C> <C>
Six-Month+ 4.90% 4.59% 4.51%
- --------------------------------------------------------------------------------
One-Year 9.12 8.51 8.45
- --------------------------------------------------------------------------------
Five-Year 6.53 N/A 5.88
- --------------------------------------------------------------------------------
Ten-Year 8.82 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 8.29 9.99 7.05
================================================================================
<CAPTION>
With Sales Charges(3)
---------------------------------------------
Class A Class B Class L(2)
================================================================================
<S> <C> <C> <C>
Six-Month+ 0.71% 0.09% 2.48%
- --------------------------------------------------------------------------------
One-Year 4.76 4.01 6.38
- --------------------------------------------------------------------------------
Five-Year 5.66 N/A 5.67
- --------------------------------------------------------------------------------
Ten-Year 8.38 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 7.93 9.60 6.86
================================================================================
</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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.00% and 1.00%,
respectively. Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed within one year from 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 L shares also reflect the deduction
of a 1.00% CDSC, which applies if shares are redeemed also within the first
year of purchase. All figures represent past performance and are not a
guarantee of future results. Investment returns and principal value will
fluctuate, and redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B and L shares are August 20, 1986, November
7, 1994 and January 5, 1993, respectively.
================================================================================
FUND HIGHLIGHT
================================================================================
We have continued to maintain a fairly long average life because we believe that
the risk of higher inflation is minimal. As of September 30, 1998, the
call-adjusted average life of the Portfolio was 12.8 years. In addition, we have
placed a greater emphasis on call protection which we believe will provide our
shareholders with more consistent long-term income during the current
low-interest rate environment.
================================================================================
NASDAQ SYMBOL
================================================================================
Class A SBBNX
================================================================================
WHAT'S INSIDE
================================================================================
Shareholder Letter.............................................................1
Historical Performance.........................................................4
Smith Barney Muni Funds -- National Portfolio
at a Glance....................................................................6
Schedule of Investments........................................................7
Statement of Assets and Liabilities...........................................19
Statement of Operations.......................................................20
Statements of Changes in Net Assets...........................................21
Notes to Financial Statements.................................................22
Financial Highlights..........................................................25
<PAGE>
================================================================================
SHAREHOLDER LETTER
================================================================================
[PHOTO] [PHOTO]
HEATH B. PETER M.
MCLENDON COFFEY
Chairman Vice President
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Muni Funds
- - National Portfolio ("Portfolio") for the period ended September 30, 1998. 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.
A Style Pure Fund
The Smith Barney Muni Funds - National Portfolio is a Style Pure Fund. Style
Pure Series mutual funds are Smith Barney Mutual Funds that are the basic
building blocks of asset allocation. Other than maintaining minimal cash or
under extraordinary market conditions, each Style Pure Series Fund is totally
invested 100% of the time within its designated asset classes and its designated
investment style.
Portfolio Performance Update
For the six months ended September 30, 1998, the Class A shares of the National
Portfolio generated a total return of 4.90%, significantly outperforming the
average total return of 4.28% for general municipal bond funds for the same
period, according to Lipper Analytical Services, Inc., an independent
fund-tracking organization. Performance information on other share classes of
the Portfolio appears on page 4.
Smith Barney Muni Funds - National Portfolio
Average Annual Total Returns - Without Sales Charges+
Your Portfolio continues to be a consistent performer among its Lipper peers.
The Portfolio has ranked in the first quartile of general municipal bond funds
in the Lipper Survey for the 1-, 5- and 10-year periods ended September 30,
1998.++
<TABLE>
<CAPTION>
Lipper Peer
Class A Shares Group Average
-------------- -------------
<S> <C> <C>
One-Year 9.12% 8.20%
Five-Year 6.53 5.66
Ten-Year 8.82 7.97
</TABLE>
Based on its net asset value ("NAV") of $14.45 as of September 30, 1998 and the
current monthly income distribution per share of $0.064 for Class A shares, this
equates to an annualized distribution rate of 5.31%. For an individual in the
federal income tax bracket of 36%, the Portfolio's tax free yield of 5.31% is
equivalent to a taxable yield of 8.30%. (According to the Internal Revenue
Service, the 36% tax bracket constitutes nearly 10% of all U.S. taxpayers.)
- ----------
+ 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.
++ Lipper rankings show a fund's 1-, 5- and 10-year annualized returns (at
NAV) as of a particular reporting period. Lipper also compares a fund's
returns to the average of its peer group. The rankings are subject to
change every month. Past performance is not a guarantee of future results.
For the 1-, 5- and 10-year periods, ended September 30, 1998, there were
237, 134 and 73 funds, respectively, in the Lipper peer group category.
Different classes share a common portfolio of securities.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 1
<PAGE>
We are proud to report that your Portfolio was awarded a five-star rating
overall for Class A and a four-star rating for Class B and Class L from
Morningstar, Inc.* as of September 30, 1998.
Market and Economic Overview
Bond market performance was shaped primarily by surging demand for U.S. Treasury
securities and a massive issuance of municipal bonds in the past six months.
During the reporting period, municipal bond prices remained relatively flat with
coupon interest providing most of the returns for municipal bonds.
Troubled financial markets abroad and a strengthening U.S. dollar further
exacerbated an already dramatic flight of capital from foreign countries into
U.S. markets. The U.S. Treasury bond, considered to be the global benchmark for
credit quality, was the chief beneficiary of these capital inflows. The large
flows of money into U.S. Treasury securities drove their prices upward and their
yields lower. On September 30, 1998, the yield of the bellwether 30-year U.S.
Treasury bond fell to 4.95%, the lowest level for long-term government debt
since 1967. Since the close of the reporting period, long-term U.S. Treasury
yields fell even further before drifting upward in recent days.
Up until July, many bond investors had been focused on any signs of the
reappearance of inflation. However, developments in the Pacific Rim, such as
Japan's failure to shore up its ailing banking system and Russia's unexpected
devalution of its currency, altered that view considerably. Moreover, a number
of speculators who found themselves caught in highly unusual market conditions
added to the growing uncertainty in U.S. capital markets.
In response to global tumult, the Federal Reserve Board ("Fed") signaled a shift
in policy from vigilance against inflation toward concerns of global deflation
by cutting short-term interest rates 0.25% at its September 1998 meeting. The
rate cut was the first action by the Fed since March 1997.
After the close of the reporting period, the Fed took an extraordinary and
unexpected action of cutting short-term interest rates again by another 0.25% on
October 15, 1998. This latest action brings the federal-funds rate to 5.0% and
the largely symbolic discount rate to 4.75%. (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. The discount rate is the interest
rate the Federal Reserve charges its member banks for loans.)
Foreign investors, who do not benefit from the tax-exempt status of municipal
bonds, have been large buyers of U.S. Treasury securities. As a result, yields
for U.S. Treasury securities have declined further than those of municipal
bonds. Municipal bond yields are currently yielding as much as 100% of
equivalent maturity U.S. Treasury bonds. Municipal bonds are considered by many
investors to be a good value when they yield about 85% of U.S. Treasury bonds.
At their present levels, we believe that tax-exempt bonds can now provide a
competitive income stream for risk-averse investors of almost any income tax
bracket.
In contrast to the diminishing U.S. Treasury security supply, municipal bond
issuance continued at record levels. New issue volume reached its peak in 1993
when $293 billion in new municipal bonds were sold. So far this year, municipal
bond volume is on pace to exceed $300 billion. This disparity in supply and
- ----------
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through September 30, 1998. The ratings are subject to change
every month. Past performance is not a guarantee of future results.
Morningstar, Inc. ratings are calculated from the Portfolio's 3- and 5-year
returns (with fee adjustments) in excess of 90-day T-bill returns. For
Class A shares, the Portfolio received 5 stars for the overall, 4 stars for
the 3-year period, 5 stars for the 5-year period and 5 stars for the ten
year period. For Class B shares, the Portfolio received 4 stars for the
overall and 4 stars for the 3-year period. For Class L shares, the
Portfolio received 4 stars for the overall, 3-year and 5-year periods. It
was rated among 1,581 municipal bond funds for the 3-year period, 943
municipal bond funds for the 5-year period and 359 municipal bond funds for
the ten-year period. The top 10% of the funds in a rating category receive
5 stars, 22.5% receive 4 stars, 35% receive 3 stars, 22.5% receive 2 stars
and 10% receive 1 star. Different classes share a common portfolio of
securities.
- --------------------------------------------------------------------------------
2 1998 Semi-Annual Report to Shareholders
<PAGE>
demand between U.S. Treasury bonds and municipal bonds is a primary reason for
municipal bond underperformance relative to U.S. Treasurys.
Investment Strategy
As previously noted, the 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.
We have continued to maintain a fairly long average life because we believe that
the risk of higher inflation is minimal. As of September 30, 1998, the
call-adjusted average life of the Portfolio was 12.8 years. In addition, we have
placed a greater emphasis on call protection which we believe will provide our
shareholders with more consistent long-term income under the current
low-interest rate environment.
We have also remained committed to higher credit quality. As of September 30,
1998, 94.6% of the Portfolio was rated investment grade or better with roughly
51.2% rated AAA or Aaa, the highest ratings.
During the past six months, we have maintained broad diversification over a
range of different kinds of bonds. In particular, we have emphasized housing and
hospital bonds because we believe that these bonds offer slightly higher yields
than similarly-rated bonds of other categories. As of September 30, 1998, the
Portfolio's assets were concentrated in hospital bonds (15.8%), housing bonds
(14.2%) and education bonds (9.8%).
Municipal Bond Market Outlook
As noted above, we believe that municipal bonds represent excellent values under
the current market conditions. With the stock market's recent volatility, many
investors may be looking to reallocate their existing portfolios. In our
opinion, this may be a timely opportunity for many of these investors to
consider further diversifying their portfolios with municipal bonds.
We believe that economic conditions should remain supportive for the municipal
bond market over the near term. The U.S. economy remains sound despite the
widely reported economic distress of many other countries. Although U.S.
economic growth will likely slow over the coming months, we expect the economy
to expand modestly. Moreover, the Fed should continue to gradually lower
short-term interest rates and that in turn should help correct some of the
imbalances that exist in the overall bond market today.
On a more somber note, we report with much sadness the passing of Emeritus
Director C. Richard Youngdahl. Dick made many valuable contributions to the
Board and the Fund during his tenure and he will be missed.
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 pursue your
financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
October 16, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 3
<PAGE>
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
9/30/98 $14.16 $14.45 $0.39 $0.00 4.90%+
- ------------------------------------------------------------------------------------------------------------------------------
3/31/98 13.60 14.16 0.80 0.16 11.47
- ------------------------------------------------------------------------------------------------------------------------------
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
==============================================================================================================================
Total $9.05 $0.22
==============================================================================================================================
<CAPTION>
================================================================================
Historical Performance -- Class B Shares
================================================================================
Net Asset Value
---------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
9/30/98 $14.16 $14.44 $0.36 $0.00 4.59%+
- ------------------------------------------------------------------------------------------------------------------------------
3/31/98 13.61 14.16 0.73 0.16 10.80
- ------------------------------------------------------------------------------------------------------------------------------
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 $2.87 $0.16
==============================================================================================================================
<CAPTION>
================================================================================
Historical Performance -- Class L Shares
================================================================================
Net Asset Value
---------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
9/30/98 $14.16 $14.45 $0.34 $0.00 4.51%+
- ------------------------------------------------------------------------------------------------------------------------------
3/31/98 13.59 14.16 0.70 0.16 10.71
- ------------------------------------------------------------------------------------------------------------------------------
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 $4.20 $0.22
==============================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
4 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
--------------------------------------------------------------------
Class A Class B Class L
===================================================================================================================
<S> <C> <C> <C>
Six Months Ended 9/30/98+ 4.90% 4.59% 4.51%
- -------------------------------------------------------------------------------------------------------------------
Year Ended 9/30/98 9.12 8.51 8.45
- -------------------------------------------------------------------------------------------------------------------
Five Years Ended 9/30/98 6.53 N/A 5.88
- -------------------------------------------------------------------------------------------------------------------
Ten Years Ended 9/30/98 8.82 N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Inception* through 9/30/98 8.29 9.99 7.05
===================================================================================================================
<CAPTION>
With Sales Charge(2)
--------------------------------------------------------------------
Class A Class B Class L
===================================================================================================================
<S> <C> <C> <C>
Six Months Ended 9/30/98+ 0.71% 0.09% 2.48%
- -------------------------------------------------------------------------------------------------------------------
Year Ended 9/30/98 4.76 4.01 6.38
- -------------------------------------------------------------------------------------------------------------------
Five Years Ended 9/30/98 5.66 N/A 5.67
- -------------------------------------------------------------------------------------------------------------------
Ten Years Ended 9/30/98 8.38 N/A N/A
- -------------------------------------------------------------------------------------------------------------------
Inception* through 9/30/98 7.93 9.60 6.86
===================================================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (9/30/88 through 9/30/98) 132.91%
- --------------------------------------------------------------------------------
Class B (Inception* through 9/30/98) 44.97
- --------------------------------------------------------------------------------
Class L (Inception* through 9/30/98) 47.84
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions at net
asset value and does not reflect the deduction of the applicable sales
charges with respect to Class A and L shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions at net
asset value. In addition, Class A and L shares reflect the deduction of the
maximum initial sales charge of 4.00% and 1.00%, respectively. Class B
shares reflect the deduction of a 4.50% CDSC, which applies if shares are
redeemed within one year from 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 L shares also 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 L 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 5
<PAGE>
================================================================================
Smith Barney Muni Funds -- National Portfolio at a Glance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of the National Portfolio vs.
Lehman Brothers Municipal Long Bond Index and
Lehman Brothers Municipal Bond Index+
- --------------------------------------------------------------------------------
September 1988--September 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Lehman Brothers Municipal Lehman Brothers
National Long Bond Index++ Municipal Bond Index++
-------- ----------------- ----------------------
<S> <C> <C> <C>
9/88 $ 9,602 $10,000 $10,000
3/89 $10,006 $10,397 $10,254
3/90 $10,931 $11,551 $11,336
3/91 $11,897 $12,643 $12,381
3/92 $13,193 $14,082 $13,618
3/93 $14,994 $16,144 $15,322
3/94 $15,430 $16,328 $15,678
3/95 $16,390 $17,743 $16,844
3/96 $17,838 $19,373 $18,256
3/97 $18,803 $20,594 $19,250
3/98 $20,960 $23,184 $21,312
9/98 $21,987 $24,429 $22,301
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares on
September 30, 1988, assuming deduction of the maximum 4.00% sales charge at
the time of investment and reinvestment of dividends (after deduction of
applicable sales charges through November 6, 1994, and thereafter at net
asset value) and capital gains (at net asset value) through September 30,
1998. 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.
++ It is the opinion of management that the Lehman Brothers Municipal Bond
Index is a more appropriate broad-based benchmark for the market in which
the National Portfolio invests, rather than the Lehman Brothers Municipal
Long Bond Index. In future reporting, the Lehman Brothers Municipal Bond
Index will be used as a basis of comparison of total return performance
rather than the Lehman Brothers Municipal Long Bond Index. The Lehman
Brothers Municipal Long Bond Index (consisting of maturities of at least 22
years) is a sub-index of the Lehman Brothers Municipal Bond Index, a
broad-based, total return index comprised of investment grade, fixed rate
municipal bonds selected from issues larger than $50 million issued January
1991. Each index is unmanaged and is not subject to the same management and
trading expenses as a mutual fund.
Industry Diversification*
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Education 9.8%
Escrowed to Maturity 4.7%
General Obligation 5.3%
Hospital 15.8%
Housing 14.2%
Pollution Control 6.2%
Public Facilities 5.8%
Transportation 9.5%
Utility 6.9%
Water & Sewer 5.3%
Other 16.5%
</TABLE>
* As a percentage of total investments.
Summary of Investments by Combined Ratings
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard Percentage
Moody's & Poor's of Total Investments
- --------------------------------------------------------------------------------
<S> <C> <C>
Aaa AAA 51.2%
Aa AA 17.6
A A 15.8
Baa BBB 10.0
Ba BB 0.1
VMIG 1/P-1 A-1 4.1
NR NR 1.2
-----
100.0%
=====
</TABLE>
- --------------------------------------------------------------------------------
6 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Education -- 9.8%
$ 5,000,000 AAA Chicago, IL Board of Education Lease Certificates, Series A,
Refunding, MBIA-Insured, 6.000% due 1/1/20 $ 5,800,000
Dexter, MI Community Schools, FGIC-Insured:
2,500,000 AAA 5.000% due 5/1/23 2,587,500
1,000,000 AAA 5.100% due 5/1/28 1,047,500
Indiana State Educational Facilities Authority Revenue, MBIA-Insured:
2,000,000 Aaa* Rose-Hulman Institute of Technology, 5.000% due 6/1/17 2,035,000
1,500,000 AAA Saint Mary's College Project, 5.125% due 4/1/18 1,522,500
3,000,000 AAA Lake Superior, State University Michigan Revenue,
MBIA-Insured, 5.125% due 11/15/19 3,078,750
Massachusetts State Industrial Finance Agency Revenue:
6,000,000 AAA Tufts University, Series H, MBIA-Insured, 4.750% due 2/15/28 5,850,000
1,595,000 AAA University Commons Nursing, Series A, FHA-Insured,
6.550% due 8/1/18 1,802,350
5,000,000 AAA Metro Government, TN Health & Education, Meharry Medical College,
AMBAC-Insured, 6.000% due 12/1/19 5,781,250
2,355,000 AAA Mission, TX ISD, PSFG, 5.000% due 2/15/15 2,399,156
2,000,000 Aa* Nebraska Higher Education Loan Program Inc., Sub-Series A-5A,
6.200%, due 6/1/13(a) 2,157,500
1,500,000 Baa3* New Hampshire Higher Education & Health, Brewster Academy,
6.750% due 6/1/25 1,636,875
1,500,000 A- New York State Dormitory Authority Revenue, State University
Educational Facilities, Series B, 7.500% due 5/15/11 1,867,500
1,000,000 AAA St. John's, MI Public Schools, FGIC-Insured, 5.000% due 5/1/21 1,036,250
Texas State Higher Education Coordinating Board,
College Student Loan Revenue:
1,880,000 A* 7.450% due 10/1/06(a) 2,004,550
265,000 A* 7.700% due 10/1/25(a) 281,231
1,000,000 AAA Utah Student Loan Revenue, Series 1991F,
AMBAC-Insured, 7.450% due 11/1/08(a) 1,066,250
1,000,000 A+ Wayne Township, IN Marion County School Building Corp.,
5.500% due 1/15/22 1,046,250
- ------------------------------------------------------------------------------------------------------------------------------------
43,000,412
- ------------------------------------------------------------------------------------------------------------------------------------
Escrowed To Maturity(b) -- 4.7%
835,000 AAA Boston, MA Water & Sewer Revenue, Series A, 10.875% due 1/1/09 1,151,256
1,050,000 AAA Douglas County, NE Hospital Authority No. 2,
Bergan Mercy, 9.500% due 7/1/10 1,370,250
1,640,000 AAA Fairmont, WV Water & Sewer Revenue, AMBAC-Insured,
9.250% due 11/1/11 2,158,650
5,000,000 AAA Indiana Bond Bank, AMBAC-Insured, 9.750% due 8/1/09(c) 6,700,000
1,865,000 AAA Ohio State Water Development Authority Revenue, Safe Water,
Series 2, 9.375% due 12/1/10(c) 2,387,200
1,000,000 AAA Philadelphia Hospital & Higher Education Facility Authority,
Presbyterian Medical Center, 6.650% due 12/1/19 1,217,500
3,000,000 AAA Port Everglades Authority, Florida Port, 7.125% due 11/1/16 3,720,000
3,000,000 AAA Richmond County, GA Development Authority, Sub-Series C,
zero coupon bond to yield 7.120% due 12/1/21 892,500
855,000 AAA Weber County, UT Hospital Revenue, St. Benedict's Hospital,
10.000% due 3/1/10 1,133,944
- ------------------------------------------------------------------------------------------------------------------------------------
20,731,300
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 7
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
General Obligation -- 5.3%
$ 2,855,000 AAA Bastrop, TX GO, ISD, PSFG, zero coupon bond to yield
5.629% due 2/15/19 $ 1,059,919
2,000,000 AAA Berks County, PA GO, MVRICS, FGIC-Insured, 8.330% due 11/10/20(d) 2,437,500
5,000,000 AAA Center Unified School District, CA GO, Series C, MBIA-Insured,
zero coupon bond to yield 5.838% due 9/1/20 1,718,750
1,590,000 AAA College Station, TX GO, ISD, PSFG, 4.500% due 8/15/19 1,498,575
5,000,000 AAA District of Columbia, Series A, MBIA-Insured, 5.000% due 6/1/18 5,006,250
2,000,000 AAA Hawaii State GO, Series C, MBIA-Insured, 4.750% due 4/1/18 1,982,500
1,975,000 AAA Keller, TX GO, ISD, PSFG, 4.750% due 8/15/21 1,930,562
1,075,000 Aaa* Lago Vista, TX GO, ISD, PSFG, zero coupon bond to yield
5.689% due 8/15/22 334,594
2,500,000 AA- Massachusetts State GO, Series C, 5.250% due 8/1/16 2,606,250
1,875,000 AAA McKeesport, PA GO, Area School District, MBIA-Insured, zero coupon
bond to yield 5.662% due 10/1/23 550,781
160,000 A- New York City, NY GO, Series D, 7.500% due 2/1/16 178,600
1,000,000 AAA Providence, RI GO, Series A, FSA-Insured, 5.700% due 7/15/19 1,077,500
1,790,000 A Puerto Rico Commonwealth, Public Improvement, 4.500% due 7/1/23 1,680,363
300,000 AAA Summit County, OH Addiction & Mental Health Facilities, GO,
AMBAC-Insured, 6.400% due 12/1/14 338,250
1,000,000 AA Texas State GO, Veterans Housing Assistance, 6.450% due 12/1/20(a) 1,083,750
- ------------------------------------------------------------------------------------------------------------------------------------
23,484,144
- ------------------------------------------------------------------------------------------------------------------------------------
Hospital -- 15.8%
1,000,000 AAA Boston, MA Industrial Development Financing Authority,
Alzheimer's Center Project, FHA-Insured, 6.000% due 2/1/37 1,080,000
1,000,000 BBB Colorado Health Facilities Authority Hospital Revenue Bonds,
Vail Valley Medical Center, 6.500% due 1/15/13 1,101,250
3,500,000 A1* Elkhart County, IN Hospital Authority Revenue, Elkhart General
Hospital Insured, 7.000% due 7/1/12 3,863,125
350,000 BB- Green Springs, OH Health Care Facilities Revenue, (St. Francis Health
Care Center Project), Series A, 7.125% due 5/15/25 376,250
2,000,000 NR Harris County, TX Health Facilities Development Corp., (Memorial
Hospital Systems Project), (Partially Pre-Refunded -- Escrowed with
U.S. government securities to 6/1/02 Call @ 102), 7.125% due 6/1/15 2,240,000
2,200,000 A Harrison County, TX Health Facilities Development Corp. Revenue,
(Marshall Regional Medical Center Project), 5.500% due 1/1/18 2,296,250
Illinois Health Facilities Authority Revenue:
1,000,000 A- Centegra Health System, 5.250% due 9/1/18 1,007,500
937,000 AAA Community Provider Pooled Loan Program, FSA-Insured,
7.350% due 8/15/10 1,037,727
3,500,000 A- Mercy Hospital and Medical Center, 7.000% due 1/1/07 3,801,875
1,000,000 AAA Methodist Health System, Series B, AMBAC-Insured,
RIBS Variable Rate, 9.872% due 5/1/21(d) 1,177,500
4,000,000 AAA Rush-Presbyterian St. Luke's Medical Center, INFLOS, MBIA-Insured,
Variable Rate, 9.818% due 10/1/24(d) 4,770,000
900,000 BBB+ Klamath Falls, OR Inter-Community Hospital Merle West,
7.100% due 9/1/24 1,001,250
5,000,000 BBB Louisiana Public Facilities Authority Revenue, (General Health
Systems Project), 6.800% due 11/1/16 5,631,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Hospital -- 15.8% (continued)
Massachusetts State Health and Education Facilities Authority Revenue:
$ 2,000,000 AAA Hallmark Health System, Series A, FSA-Insured, 5.000% due 7/1/17 $ 2,015,000
1,000,000 AAA St. Elizabeth Hospital, LEVRRS, FSA-Insured, 9.680% due 8/15/21(d) 1,188,750
500,000 BBB Miami County, OH Hospital Facilities Refunding & Improvement,
Upper Valley Medical Center, Series A, 6.375% due 5/15/26 545,000
4,835,000 AA Missouri State Health & Educational Facilities Authority,
BJC Health Systems, 6.750% due 5/15/13 5,880,569
5,745,000 AAA New York State Dormitory Authority Revenue, Mental Health Services
Facilities, Series D, MBIA-Insured, 4.750% due 2/15/25 5,579,831
450,000 A- New York State Medical Care Facilities Financing Agency,
Long Term Health Care, Medical Health Services, Series 91B,
7.400% due 2/15/18 501,750
North Carolina Medical Care Community Hospital Revenue:
5,000,000 AA- Pitt County Memorial Hospital, Series A, 4.750% due 12/1/28 4,768,750
2,000,000 AAA Rex Healthcare, AMBAC-Insured, 5.000% due 6/1/17 2,020,000
2,000,000 AAA Pennsylvania State Higher Educational Facilities Authority,
Health Services Revenue, Allegheny Delaware Valley,
Series A, MBIA-Insured, 5.600% due 11/15/09 2,062,500
1,500,000 Aaa* Randolph County, WV Community Health System Revenue,
Davis Health System, Series A, FSA-Insured, 5.200% due 11/1/21 1,526,250
5,000,000 AAA Shelby County, TN Health Educational & Housing Facility Board, Hospital
Revenue, Methodist Healthcare, MBIA-Insured, 5.000% due 4/1/18 5,025,000
3,000,000 AAA University of Illinois, Health Services Facilities, Series A,
AMBAC-Insured, 5.875% due 10/1/26 3,273,750
2,375,000 AA- Vermont Educational & Health Building Finance Agency, H. Porter,
FHA-Insured, 7.100% due 2/1/31 2,547,188
1,500,000 A Washington Health Care Facilities Authority Refunding 1990, Our Lady of
Lourdes Health Center, Pasco, LOC AIB Group, 7.875% due 12/1/09(c) 1,610,625
1,300,000 AAA Washington State Health, Sisters of Providence, FGIC-Insured,
6.375% due 10/1/09 1,532,375
- ------------------------------------------------------------------------------------------------------------------------------------
69,461,315
- ------------------------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 7.5%
1,000,000 AAA Boston, MA Industrial Development Financing Authority Revenue,
North End Community, Series A, FHA-Insured, 6.450% due 8/1/37 1,130,000
250,000 Aaa* Cuyahoga County, OH Multi-Family Housing, Dalebridge Apartments,
GNMA-Collateralized, FHA-Insured, 6.500% due 10/20/20(a) 270,625
1,500,000 A+ Illinois Housing Development Authority Refunding, Multi-Family Housing,
Series 91A, 8.125% due 7/1/10 1,595,625
1,500,000 AA- Indiana State HFA, Multi-Family Housing Mortgage Revenue,
Hunters Run, FHA-Insured, 7.250% due 5/1/18(a) 1,623,750
4,290,000 Aa2* Indianapolis, IN EDA, Multi-Family Housing Mortgage Revenue,
(Castle Dore Apartments Project), FHA-Insured, 6.100% due 12/1/37(a) 4,617,112
5,000,000 Aa2* Iowa Finance Authority, Prestwick Apartments, FHA-Insured,
7.500% due 12/1/36(a)(c) 6,487,500
300,000 Aaa* Kent, OH Multi-Family Housing, GNMA-Collateralized, FHA-Insured,
7.150% due 12/20/26(a) 339,750
1,000,000 A King County, WA Housing Authority Revenue, Series A, 6.800% due 3/1/26 1,075,000
3,480,000 AAA Maricopa County, AZ IDA, Multi-Family Housing Revenue, (National Health
Facilities II Project), FSA-Insured, 5.500% due 1/1/24 3,688,800
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 7.5% (continued)
$ 2,000,000 A+ Massachusetts State HFA, Multi-Family Residential Housing, Series A,
FHA-Insured, 7.800% due 8/1/22(a) $ 2,075,980
1,945,000 AAA Mohave County, AZ Industrial Development Agency, Multi-Family Housing,
Copper Ridge Apartments, FHA-Insured, 7.375% due 4/1/32(a) 2,115,187
1,250,000 AAA Nevada Housing Division, Multi-Unit Housing, Saratoga Palms,
FNMA-Collateralized, 6.350% due 10/1/28(a) 1,350,000
500,000 A1* Portland, OR Multi-Family Housing, 6.250%, due 5/1/12(a) 531,250
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) 1,053,750
1,000,000 AAA Rogers County, OK HFA, Multi-Family Revenue, FNMA-Collateralized,
Series A, FHA-Insured, 7.750% due 8/1/23 1,091,250
2,347,000 AAA Seattle Housing Authority, WA Low Income Housing Revenue,
GNMA-Collateralized, 7.400% due 11/20/36 2,760,659
1,000,000 AAA Texas State Department of Housing & Community Affairs, Multi-Family
Revenue, (Volente Project), FNMA-Collateralized, 5.550% due 1/1/18(a) 1,028,750
- ------------------------------------------------------------------------------------------------------------------------------------
32,834,988
- ------------------------------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 6.7%
575,000 AAA Arkansas Housing Development, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 7.400% due 9/1/23(a) 608,781
515,000 Aaa* Aurora Kane & Dupage, IL Single-Family Mortgage
Revenue, Series A, GNMA/FHLMC-Collateralized, 7.950% due 10/1/25(a) 602,550
680,000 Aa2* Colorado HFA, Single-Family Program Refunding, Sr. Bonds,
1994 Series D-1, 8.000% due 12/1/24 748,000
3,755,000 AAA Cowley & Shawnee Counties, KS Mortgage Revenue, Series
B, AMBAC-Insured, GNMA-Collateralized, zero coupon bond to yield 7.868%
due 6/1/22(a) 605,494
770,000 AAA District of Columbia HFA, Collateralized Revenue, Single-Family,
Series 90A, GNMA/FHLMC/FNMA-Collateralized, 8.100% due 12/1/23(a) 813,312
525,000 AAA Fort Worth, TX Housing Finance Corp., Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, zero coupon bond to yield
7.997% due 6/1/21 85,312
880,000 AA Idaho Housing Agency, Single-Family Mortgage, Series C-2,
FHA-Insured, 7.900% due 1/1/22(a) 916,300
755,000 Aa1* Illinois Housing Development Authority, Residential Mortgage Revenue,
Series 89A, 7.400% due 2/1/20(a) 778,020
495,000 Aa2* Labette County, KS Single-Family Mortgage Revenue Refunding,
Series A, 8.400% due 12/1/11 533,981
1,840,000 Aa2* Maryland State Community Development Administration, Single-Family
Mortgage Revenue, FHA-Insured, 7.450% due 4/1/32(a) 1,936,600
Missouri State Housing Development Community Mortgage Revenue:
595,000 AAA GNMA-Collateralized, Series A, zero coupon bond to yield
7.337% due 7/1/23 98,919
930,000 AAA GNMA/FNMA-Collateralized, Series C, 7.450% due 9/1/27(a) 1,074,150
1,665,044 AAA Montgomery County, TX Housing Finance Corp.,
Single-Family Mortgage Revenue, MBIA-Insured, zero coupon bond to yield
10.983% due 9/1/15 260,163
Nebraska Investments Finance Authority:
400,000 AAA GNMA-Collateralized, RIBS Variable Rate, 10.065% due 10/17/23(a)(d) 442,000
300,000 AAA Single-Family Mortgage Revenue, GNMA-Collateralized, 1990 Series 3,
RIBS Variable Rate, 11.429% due 9/10/30(a)(d) 336,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Housing: Single-Family -- 6.7% (continued)
$ 909,563 AA Nevada Housing Development Single-Family Mortgage Revenue,
Series 1983 B, FHA-Insured, zero coupon bond to yield
10.245% due 4/1/15 $ 171,680
1,535,000 A+ New Hampshire State HFA, Single-Family Residential Mortgage,
7.250% due 7/1/15(a) 1,634,775
New Mexico Mortgage Finance Authority, FNMA/GNMA/FHLMC-Collateralized:
1,000,000 AAA Single Family Mortgage, Series B-3, 5.400% due 7/1/18 1,027,500
1,000,000 AAA Single Family Mortgage Program, Series D-3, 5.250% due 7/1/17 1,018,750
Ohio Housing Finance Agency Residential Mortgage, GNMA-Collateralized:
250,000 AAA Series A-1, 6.100% due 9/1/14 266,250
Series A-2:
185,000 AAA 6.125% due 9/1/24(a) 194,019
230,000 AAA 6.625% due 3/1/26(a) 247,825
475,000 Aa2* Oregon State Housing & Community Services Department,
Mortgage Revenue, Single-Family Mortgage Program,
Series D, 6.500% due 7/1/24(a) 509,437
150,000 BBB- Panhandle, TX Regional Housing Finance Corp., Single-Family
Mortgage Revenue, 10.375% due 3/1/09 152,438
1,000,000 AA+ Pennsylvania State HFA, Single-Family Mortgage Revenue, Series 39B,
6.875% due 10/1/24(a) 1,090,000
1,425,000 AAA Pima County, AZ Single-Family Mortgage Revenue, Series A,
GNMA/FNMA/FHLMC-Collateralized, step bond to yield
6.250% due 11/1/29(a) 1,537,219
570,000 AAA Prince Georges County, MD Housing Authority, Single-Family Mortgage
Revenue Refunding, Series A, GNMA-Collateralized, 8.000% due 1/1/17 642,675
1,950,000 AAA Reno County, KS Single-Family Mortgage Revenue, Series A,
AMBAC-Insured, zero coupon bond to yield 11.039% due 12/1/14 321,750
Rhode Island Housing & Mortgage Financing Corp.:
1,500,000 AA+ Home Ownership Opportunity Bonds, Series 8,
INFLOS Variable Rate, 10.967% due 4/1/24(a)(d) 1,663,125
960,000 AA+ Home Ownership, Series 88-ID, 7.875% due 10/1/21(a) 994,013
1,000,000 Aaa* South Carolina State Housing Finance & Development Authority,
Single Family Mortgage, 5.500% due 7/1/25 1,087,500
1,900,000 AAA South Dakota Housing Development Authority, Home Ownership
Mortgage Board, Series C, 7.300% due 5/1/24(a) 1,999,750
480,440 A1* St. Bernard Parish, LA Home Mortgage Authority, Single-Family Mortgage
Revenue Refunding, Series A, 8.000% due 3/25/12 526,083
650,000 AA Tennessee Housing Development Authority, Home Ownership Bonds,
Series H, FHA-Insured, 7.825% due 7/1/15(a) 667,875
325,000 AAA Travis County, TX Housing Finance Corp., Single-Family Mortgage Revenue,
Series B, GNMA/FNMA-Collateralized, 7.100% due 10/1/27(a) 355,469
Utah HFA, Single-Family Mortgage Revenue, FHA-Insured:
515,000 AAA 7.300% due 7/1/16 543,969
165,000 AAA 9.000% due 1/1/19(a) 172,219
2,375,000 AA+ Virginia State Housing Development Authority, Commonwealth
Mortgage Series A, 7.150% due 1/1/33 2,532,344
435,000 AA Wyoming Community Development Authority, FHA-Insured
8.125% due 6/1/21(a) 455,663
- ------------------------------------------------------------------------------------------------------------------------------------
29,652,660
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Industrial Development -- 2.6%
$ 200,000 VMIG 1* Burke County, GA Development Authority, PCR, Georgia Power Company,
Series 3, 4.150% due 9/1/25(e) $ 200,000
300,000 A-1+ Dade County, FL IDA, Exempt Facilities Revenue,
Florida Power & Light Co., 4.100% due 6/1/21(e) 300,000
600,000 A-1+ Guadalupe, TX PCR, Blanco River Authority, Central Power & Light Co.,
4.000% due 11/1/15(e) 600,000
2,650,000 A+ Iowa Finance Authority, (Governor Square Project), 7.250% due 4/1/02 2,741,266
1,500,000 Baa1* New York City, NY IDA, Special Facilities Revenue, (American Airlines
Project), 7.750% due 7/1/19(a) 1,541,550
1,640,000 AA Oklahoma City, OK Industrial & Culture Facilities, 6.750% due 9/15/17(a) 1,674,178
1,000,000 A+ Rensselaer County, NY IDA, Albany International Corp.,
7.550% due 6/1/07(a) 1,198,750
1,000,000 A3* Tucson, AZ Airport Authority Inc., Special Facilities Revenue Bonds,
Lockheed Aeromod Center Inc., Series 1990, 8.700% due 9/1/19(a) 1,106,250
2,000,000 A+ West Chicago, IL IDR, (Leggett & Platt Inc. Project), 6.900% due 9/1/24(a) 2,247,500
- ------------------------------------------------------------------------------------------------------------------------------------
11,609,494
- ------------------------------------------------------------------------------------------------------------------------------------
Life Care -- 2.8%
3,225,000 Aa* Hamilton County, OH Mortgage Revenue, Judson Care
Center, Series A, FHA-Insured, 6.500% due 8/1/26 3,543,469
2,500,000 BBB Illinois Development Finance Authority Health Facilities,
Community Living, 7.125% due 3/1/10 2,690,625
1,000,000 Baa1* Indianapolis, IN Industrial EDR, 7.625% due 10/1/22 1,121,250
Massachusetts State Industrial Finance Agency Revenue:
1,400,000 AAA Briscoe House Assisted Living, FHA-Insured, 7.125% due 2/1/36(a) 1,638,000
1,940,000 AAA Chelsea Jewish, Series A, FHA-Insured, 6.500% due 8/1/37 2,201,900
1,000,000 Aaa* Reynoldsburg, OH Health Care Facilities Revenue, (Wesley Ridge Project),
GNMA-Collateralized, 6.150% due 10/20/38 1,081,250
- ------------------------------------------------------------------------------------------------------------------------------------
12,276,494
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 7.0%
Bernalillo County, NM Gross Receipts, Tax Revenue:
1,250,000 AA 5.125% due 4/1/16 1,315,625
1,050,000 AA 5.125% due 4/1/17 1,103,812
Dauphin County, PA General Authority:
4,000,000 NR Hyatt Regency, 6.200% due 1/1/29 3,995,000
1,000,000 NR Riverfront Office, 6.000% due 1/1/25 1,007,500
2,000,000 Baa2* Galveston, TX Special Contract Revenue, (Farmland
Industries Inc. Project), 5.500% due 5/1/15 2,050,000
3,000,000 AAA Georgia Local Government COP, Series A, MBIA-Insured,
4.750% due 6/1/28 2,951,250
2,000,000 A Illinois Development Finance Authority Revenue Refunding,
City of East St. Louis, 7.250% due 11/15/09 2,270,000
1,500,000 AAA Indiana Bond Bank Guaranty State Revolving Fund,
Series B, 6.875% due 2/1/12 1,751,250
3,000,000 AAA Maine Municipal Bond Bank, Series C, FSA-Insured,
5.350% due 11/1/18 3,112,500
1,600,000 VMIG 1* New York State, Job Development Authority, Special
Purpose, Series A-1 through A-25, 4.100% due 3/1/07(a)(e) 1,600,000
200,000 AAA Ohio State Building Authority, Juvenile Correction
Facility, Series A, AMBAC-Insured, 6.600% due 10/1/14 228,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Miscellaneous -- 7.0% (continued)
$ 400,000 A2* Oregon State Bond Bank, Economic Development Department,
Series 1, 6.700% due 1/1/15 $ 444,000
1,330,000 NR Seward, AK (Sealife Center Project), 7.650% due 10/1/16 1,436,400
2,500,000 A- Summit County, CO Sports Facilities Refunding Revenue, (Keystone
Resorts Management Inc. Project), Ralston Purina Co.
Guaranteed, 7.750% due 9/1/06 3,003,125
5,000,000 AAA Washington D.C. Convention Center Authority, Dedicated Tax Revenue,
AMBAC-Insured, 4.750% due 10/1/28 4,775,000
- ------------------------------------------------------------------------------------------------------------------------------------
31,043,462
- ------------------------------------------------------------------------------------------------------------------------------------
Pollution Control -- 6.2%
5,000,000 Aa3* Brazos River, TX Navigation District PCR, (BASF Corp. Project),
6.750% due 2/1/10(c) 6,056,250
3,600,000 AA- La Crosse, WI Resource Recovery Revenue, (Northern States
Power Co. Project), 6.000% due 11/1/21(a) 4,126,500
2,000,000 AAA Matagorda County, TX Navigational District No. 2, PCR, Houston
Power & Light, Series D, FGIC-Insured, 7.600% due 10/1/19(a)(c) 2,116,440
1,500,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project),
7.650% due 9/1/20(a) 1,629,375
895,000 NR New Jersey EDA Revenue, (Atlantic City Sewer Project),
7.250% due 12/1/11(a) 985,619
1,850,000 A2* Richland, SC Solid Waste Facility, (Union Camp Project),
7.125% due 9/1/21(a) 2,016,500
3,000,000 NR Rockdale County, GA Solid Waste Authority Revenue,
7.500% due 1/1/26(a) 3,247,500
1,945,000 BBB Saint Charles Parish, LA PCR, Union Carbide, 7.350% due 11/1/22(a) 2,158,950
1,130,000 A Southwestern Illinois Development Authority, Solid Waste Disposal Revenue,
(Laclede Steel Co. Project), 8.500% due 8/1/20(a) 1,243,000
3,200,000 Baa2* Sweetwater County, WY Solid Waste Disposal Revenue,
(FMC Corp. Project), 7.000% due 6/1/24(a) 3,592,000
- ------------------------------------------------------------------------------------------------------------------------------------
27,172,134
- ------------------------------------------------------------------------------------------------------------------------------------
Pre-Refunded(f) -- 2.2%
1,500,000 AAA Chattanooga-Hamilton County, TN Hospital Authority Revenue,
FSA-Insured, (Call 2/25/00 @ 104), 9.956% due 5/25/21(d) 1,786,875
1,000,000 AAA Delaware County, PA Authority Revenue, (Elwyn Inc. Project),
(Call 6/1/00 @ 102), 8.350% due 6/1/15 1,092,500
85,000 AAA Denver, CO City & County Airport Revenue, Series A,
8.500% due 11/15/23(a) 94,669
2,000,000 AAA Fairfax County, VA IDA, Series A, (Call 8/28/01 @ 104),
9.747% due 8/29/23(d) 2,425,000
500,000 AAA Illinois Health Facility Authority Revenue, United Medical Center,
(Call 7/1/03 @ 100), 8.375% due 7/1/12 595,625
North Carolina Eastern Municipal Power Agency, Power System
Revenue Refunding, (Call 1/1/22 @ 100):
1,000,000 AAA 4.500% due 1/1/24 980,000
1,310,000 AAA 6.000% due 1/1/26 1,562,175
1,095,000 AAA Portland, TX Community Center Sales Tax Gross Revenue,
7.000% due 2/15/25 1,294,838
- ------------------------------------------------------------------------------------------------------------------------------------
9,831,682
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Public Facilities -- 5.8%
$ 7,990,000 AAA Anaheim, CA Public Financing Authority, FSA-Insured,
zero coupon bond to yield 6.093% due 9/1/21 $ 2,616,725
5,000,000 AAA Chicago, IL Lakefront Millennium Parking Facilities,
MBIA-Insured, 5.000% due 1/1/18 5,025,000
2,500,000 A- Dekalb County, IN Redevelopment, (Mini-Mill Local Public
Improvement Project), 6.500% due 1/15/14 2,793,750
Indianapolis, IN Local Public Improvement Bond Bank:
3,685,000 AA Series 1992 D, 6.750% due 2/1/14 4,514,125
3,000,000 AA Series B, 6.000% due 1/10/13 3,468,750
2,000,000 BBB+ Triborough Bridge & Tunnel Authority, NY (Convention Center Project),
Series E, 7.250% due 1/1/10 2,422,500
3,960,000 A Tulsa, OK Public Facilities Authority, Lease Payment Revenue Refunding,
Assembly Center, 6.600% due 7/1/14 4,855,950
- ------------------------------------------------------------------------------------------------------------------------------------
25,696,800
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Allocation -- 1.9%
2,000,000 AAA Detroit, MI Downtown Development Authority, Tax Increment Revenue,
(Area 1 Project), Series A, MBIA-Insured, 4.750% due 7/1/25 1,932,500
2,000,000 AAA Illinois State Sales Tax Revenue, Series P, 6.500% due 6/15/13 2,427,500
3,000,000 AAA Jefferson, LA Sales Tax Distribution, Special Sales Tax Revenue,
FSA-Insured, zero coupon bond to yield 5.050% due 12/1/12 1,571,250
1,000,000 AAA La Quinta, CA Redevelopment Agency, MBIA-Insured, 7.300% due 9/1/12 1,307,500
1,000,000 BBB- Providence, RI Special Obligation, Tax Increment, Series D,
6.650% due 6/1/16 1,106,250
- ------------------------------------------------------------------------------------------------------------------------------------
8,345,000
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation -- 9.5%
3,000,000 Baa1* Alliance Airport Authority Inc., TX Special Facilities Revenue,
(American Airlines Inc. Project), 7.500% due 12/1/29(a) 3,236,250
2,000,000 Baa1* Chicago, IL O'Hare International Airport, Special Facility Revenue,
International Terminal, Series 1985A, (American Airlines Inc. Project),
7.875% due 11/1/25(a)(c) 2,167,500
5,000,000 AAA Clark County, NV Passenger Facility Charge Revenue, Las Vegas
McCarran International Airport, MBIA-Insured, 5.000% due 7/1/18 5,043,750
2,010,000 NR Connecticut Development Authority, Airport Facilities Revenue,
6.625% due 12/1/14(a) 2,195,925
4,000,000 AAA Delaware Valley, PA Regional Finance Authority, Local
Government Revenue, Series A, AMBAC-Insured, 5.500% due 8/1/28 4,415,000
Denver, CO City & County Airport Revenue:
915,000 Baa1* Series A, 8.500% due 11/15/23(a) 1,008,787
3,130,000 Baa1* Series B, 7.250% due 11/15/07(a) 3,493,862
2,470,000 Aaa* Massachusetts State Turnpike Authority, Highway Systems Revenue,
MBIA-Insured, Series C, zero coupon bond to yield 5.545% due 1/1/21 845,975
New Hampshire State Turnpike Systems Revenue Refunding, FGIC-Insured:
2,500,000 AAA 6.750% due 11/1/11 2,962,500
1,000,000 AAA RIBS, Series C, 9.632% due 11/1/17(d) 1,386,250
1,500,000 AAA Phoenix, AZ Civic Improvement Corp., Airport Revenue, Series A,
FSA-Insured, 5.000% due 7/1/18 1,520,625
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Transportation -- 9.5% (continued)
Puerto Rico Commonwealth Highway & Transportation Authority:
Highway Revenue, Series Y:
$ 3,000,000 A 5.000% due 7/1/36 $ 3,060,000
1,000,000 A 5.500% due 7/1/36 1,091,250
1,000,000 A Transportation Revenue, Series A, 4.750% due 7/1/38 986,250
Regional Transit Authority, IL:
2,000,000 AAA Series A, AMBAC-Insured, 6.400% due 6/1/12 2,387,500
1,045,000 AAA Series C, FGIC-Insured, 7.750% due 6/1/20 1,409,444
2,250,000 AAA Rhode Island State Economic Development Corp., Airport Revenue,
Series B, FSA-Insured, 5.000% due 7/1/18 2,261,250
2,500,000 A-1+ Valdez, AK Marine Terminal Revenue, (Exxon Pipeline Co. Project),
Series C , 3.900% due 12/1/33(e) 2,500,000
- ------------------------------------------------------------------------------------------------------------------------------------
41,972,118
- ------------------------------------------------------------------------------------------------------------------------------------
Utility -- 6.9%
3,000,000 AAA Brownsville, TX Utility System Revenue Priority Refunding,
MBIA-Insured, 6.250% due 9/1/14 3,615,000
3,000,000 AAA Clark County, NV IDR, (Nevada Power Co. Project),
FGIC-Insured, 7.800% due 6/1/20(a) 3,221,250
4,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp., Series A,
7.500% Due 11/1/04 4,220,000
195,000 AAA Cleveland Public Power System, MBIA-Insured, Series B,
7.000% due 11/15/17 216,206
Georgia Municipal Electric Authority Power Revenue:
1,500,000 AAA Series EE, AMBAC-Insured, 7.250% due 1/1/24 2,047,500
2,500,000 A Series X, 6.500% due 1/1/12 2,971,875
1,250,000 AAA Hawaii State Department Budget & Finance, Hawaiian Electric Co. Inc.,
Series A, MBIA-Insured, 5.650% due 10/1/27(a) 1,360,937
2,000,000 AAA Maine Financial Authority Revenue, Electric Rate
Stabilization, Series A, FSA-Insured, 5.000% due 7/1/18 2,017,500
2,500,000 NR Michigan State Strategic Fund, Resource Recovery, Limited Obligation
Revenue, Central Wayne Energy Recovery, Series A,
7.000% due 7/1/27(a) 2,550,000
1,000,000 A+ New York State Energy Research & Development,
(Con Edison Project A), 7.125% due 12/1/29(a) 1,155,000
1,775,000 Baa1* North Carolina Eastern Municipal Power Agency System Revenue,
Series B, 6.000% due 1/1/22 1,983,562
1,235,000 AAA Piedmont, SC Municipal Power Agency, Electric Revenue Refunding,
FGIC-Insured, 6.750% due 1/1/20 1,554,556
3,500,000 Aa1* Washington State Public Power Supply System Revenue,
(Nuclear Project No. 3), Series A, 5.125% due 7/1/18 3,526,250
- ------------------------------------------------------------------------------------------------------------------------------------
30,439,636
- ------------------------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 5.3%
2,000,000 AAA Cleveland, OH Water Works Revenue, Series 1, FSA-Insured,
5.000% due 1/1/17 2,027,500
2,400,000 A Dauphin County, PA IDA, General Water Works Corp.,
6.900% due 6/1/24(a) 3,042,000
10,000,000 AAA Houston, TX Water & Sewer System Revenue, Series A,
FSA-Insured, zero coupon bond to yield 5.500% due 12/1/23 2,925,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) September 30, 1998
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C>
Water & Sewer -- 5.3% (continued)
$ 2,000,000 A Idaho State Water Resources Board, Water Revenue, Resource
Development, Borse Water Corp., 7.250% due 12/1/21(a) $ 2,192,500
2,000,000 AAA Jefferson County, AL Sewer Revenue, Series D, FGIC-Insured,
5.750% due 2/1/27 2,162,500
Massachusetts State Water Resource Authority, Series B, FSA-Insured:
1,000,000 AAA 5.500% due 8/1/15 1,108,750
1,000,000 AAA 5.500% due 8/1/16 1,106,250
500,000 NR Ohio State Solid Waste Revenue, Republic Engineered Steels Inc.,
9.000% due 6/1/21(a) 560,000
400,000 A Ohio Water Development Authority, (Broken Hill Project),
6.450% due 9/1/20(a) 441,500
3,400,000 Aa1* Port of Umatilla, OR Water Project Revenue, Series 1994,
LOC ABN AMRO Bank, 6.650% due 8/1/22(a) 3,718,750
1,000,000 AAA Portland, OR Sewer System Revenue, Series A, MBIA-Insured,
4.500% due 6/1/17 966,250
2,750,000 A Trumbull County, OH Sewer Disposal Revenue, (General
Motors Corp. Project), 6.750% due 7/1/14(a) 3,317,188
- ------------------------------------------------------------------------------------------------------------------------------------
23,568,188
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $400,527,202**) $ 441,119,827
====================================================================================================================================
</TABLE>
(a) Income from this issue 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 issuer has not
applied for new ratings.
(c) Security segregated by Custodian for open purchase commitment.
(d) Residual interest bond-coupon varies inversely with the 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.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 17 and 18 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Bond Ratings (unaudited)
================================================================================
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard & Poor's -- 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 to a debt obligation. 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 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 for bonds in
higher rated categories.
BB and B -- Bonds rated BB and B are regarded, on balance, as
predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance
with the terms of the obligation. BB indicates the lowest
degree of speculation and B the highest degree of
speculation. While such bonds will likely have some quality
and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.
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 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 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 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 rated "Baa" are considered to be 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 either Standard &
Poor's or Moody's.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 17
<PAGE>
================================================================================
Short-Term Securities Ratings (unaudited)
================================================================================
SP-1 -- Standard & Poor's highest rating indicating very strong or
strong capacity to pay principal and interest; those issues
determined to possess overwhelming safety characteristics
are denoted with a plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree
of safety regarding timely payment is either overwhelming or
very strong; those issues determined to possess overwhelming
safety characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature --
VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO
prior to the advent of the VMIG 1 rating.
================================================================================
Security Descriptions (unaudited)
================================================================================
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
SYCC -- Structured Yield Curve Certificate
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statement of Assets and Liabilities (unaudited) September 30, 1998
================================================================================
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $400,527,202) $ 441,119,827
Cash 1,231,214
Interest receivable 7,011,098
Receivable for securities sold 6,348,897
Receivable for Fund shares sold 1,960,824
Other assets 15,024
- ----------------------------------------------------------------------------------------
Total Assets 457,686,884
- ----------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 6,986,877
Management fees payable 172,207
Distribution fees payable 20,931
Accrued expenses 56,692
- ----------------------------------------------------------------------------------------
Total Liabilities 7,236,707
- ----------------------------------------------------------------------------------------
Total Net Assets $ 450,450,177
========================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 31,181
Capital paid in excess of par value 404,618,962
Overdistributed net investment income (243,165)
Accumulated net realized gain on security transactions 5,450,574
Net unrealized appreciation on investments 40,592,625
- ----------------------------------------------------------------------------------------
Total Net Assets $ 450,450,177
========================================================================================
Shares Outstanding:
---------------------------------------------------------------------------------
Class A 27,895,770
---------------------------------------------------------------------------------
Class B 2,055,455
---------------------------------------------------------------------------------
Class L 1,229,516
---------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $14.45
---------------------------------------------------------------------------------
Class B* $14.44
---------------------------------------------------------------------------------
Class L** $14.45
---------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $15.05
---------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $14.60
========================================================================================
</TABLE>
* Redemption price is NAV of Class B reduced by a 4.50% CDSC if shares are
redeemed within one year from purchase (See Note 3).
** Redemption price is NAV of Class L reduced by a 1.00% CDSC if shares are
redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<PAGE>
================================================================================
Statement of Operations (unaudited) For the Six Months Ended September 30, 1998
================================================================================
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 12,541,277
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 951,640
Distribution fees (Note 3) 421,083
Shareholder and system servicing fees 54,027
Registration fees 25,069
Shareholder communications 20,807
Pricing service fees 14,038
Custody 10,574
Audit and legal 9,026
Trustees' fees 3,008
Other 5,014
- --------------------------------------------------------------------------------
Total Expenses 1,514,286
- --------------------------------------------------------------------------------
Net Investment Income 11,026,991
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 136,760,348
Cost of securities sold 135,594,928
- --------------------------------------------------------------------------------
Net Realized Gain 1,165,420
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 32,584,043
End of period 40,592,625
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 8,008,582
- --------------------------------------------------------------------------------
Net Gain on Investments 9,174,002
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 20,200,993
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statement of Changes in Net Assets
================================================================================
For the Six Months Ended September 30, 1998 (unaudited)
and the Year Ended March 31, 1998
<TABLE>
<CAPTION>
September 30 March 31
=====================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 11,026,991 $ 21,651,710
Net realized gain 1,165,420 10,254,014
Increase in net unrealized appreciation 8,008,582 9,944,057
- -----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 20,200,993 41,849,781
- -----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (11,572,589) (22,052,414)
Net realized gain -- (4,341,908)
- -----------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (11,572,589) (26,394,322)
- -----------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 54,632,786 67,394,715
Net asset value of shares issued in connection with
the transfer of the Smith Barney Muni Funds --
Ohio Portfolio's net assets (Note 5) -- 7,122,331
Net asset value of shares issued for
reinvestment of dividends 5,957,542 14,164,394
Cost of shares reacquired (25,920,232) (75,971,741)
- -----------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 34,670,096 12,709,699
- -----------------------------------------------------------------------------------------------------
Increase in Net Assets 43,298,500 28,165,158
NET ASSETS:
Beginning of period 407,151,677 378,986,519
- -----------------------------------------------------------------------------------------------------
End of period* $ 450,450,177 $ 407,151,677
=====================================================================================================
* Includes undistributed (overdistributed) net investment income of: $(243,165) $302,433
=====================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)
================================================================================
1. Significant Accounting Policies
The National Portfolio ("Portfolio") is a separate investment portfolio of the
Smith Barney Muni Funds ("Fund"). The Fund, a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company and consists of this Portfolio and seven other
separate investment portfolios: Florida, Georgia, Limited Term, New York,
Pennsylvania, California Money Market and New York Money Market Portfolios. The
financial statements and financial highlights for the other portfolios are
presented in separate semi-annual reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on 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 for which market
quotations are not available will be valued in good faith at fair value by or
under the direction of the Board of Trustees; (d) securities maturing within 60
days are valued at cost plus accreted discount or minus amortized premium, if
any, which approximates value; (e) gains or losses on the sale of securities are
calculated by using the specific identification method; (f) 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; (g) dividends and distributions to shareholders are
recorded on the ex-dividend date; (h) 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 by class; (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; (j)
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 (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. Exempt-Interest Dividends and Other Distributions
The 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 gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Management Agreement and Other Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment manager to the Fund. The Portfolio pays MMC 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.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date, Salomon Smith Barney Inc ("SSB"), another subsidary of SSBH, was the
Fund's distributor. SSB (as well as certain other broker-dealers) continues to
sell Fund shares to the public as a member of the selling group.
On June 12, 1998, the Fund's existing Class C shares were renamed Class L
shares. Effective June 15, 1998, Class L shares are being sold at net asset
value plus a maximum initial sales charge of 1.00%. Class L shares
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
also have a 1.00% contingent deferred sales charge ("CDSC"), which applies if
redemption occurs within the first year of purchase.
There is also a CDSC of 4.50% on Class B shares, which applies if redemption
occurs within one year from purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred. For
the six months ended September 30, 1998, SSB received sales charges of $336,000
and $18,000 on sales of the Fund's Class A and L shares, respectively. In
addition, CDSCs paid to SSB were approximately $13,000 for Class B shares.
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A, B and L 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 L shares calculated at the annual
rates of 0.50% and 0.55% of the average daily net assets of each class,
respectively. For the six months ended September 30, 1998, total Distribution
Plan fees incurred were:
<TABLE>
<CAPTION>
Class A Class B Class L
================================================================================
<S> <C> <C> <C>
Distribution Plan Fees $287,256 $77,649 $56,178
================================================================================
</TABLE>
All officers and one Trustee of the Fund are employees of SSB.
4. Investments
During the six months ended September 30, 1998, 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 $152,995,920
- --------------------------------------------------------------------------------
Sales 136,760,348
================================================================================
</TABLE>
At September 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
================================================================================
<S> <C>
Gross unrealized appreciation $40,713,193
Gross unrealized depreciation (120,568)
- --------------------------------------------------------------------------------
Net unrealized appreciation $40,592,625
================================================================================
</TABLE>
5. Transfer of Net Assets
On December 5, 1997, the National Portfolio acquired the assets and certain
liabilities of the Smith Barney Muni Funds -- Ohio Portfolio ("Ohio Portfolio")
pursuant to a plan of reorganization approved by Ohio Portfolio shareholders on
November 21, 1997. Total shares issued by the National Portfolio and the total
net assets of the Ohio Portfolio and the National Portfolio on the date of the
transfer were as follows:
<TABLE>
<CAPTION>
Shares Total Total
Issued Net Assets Net Assets
by the of the of the
National Ohio National
Acquired Portfolio Portfolio Portfolio Portfolio
================================================================================
<S> <C> <C> <C>
Ohio Portfolio 503,302 $7,122,331 $387,765,783
================================================================================
</TABLE>
The total net assets of the Ohio Portfolio before acquisition included
unrealized appreciation of $525,586. Total net assets of the National Portfolio
immediately after the transfer were $394,888,114. The transaction was structured
to qualify as a tax-free reorganization under the Internal Revenue Code of 1986,
as amended.
6. Shares of Beneficial Interest
At September 30, 1998, the Fund had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Portfolio has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest in the Portfolio and has the same rights, except that each
class bears certain expenses specifically related to the distribution of its
shares. Effective June 12, 1998, the Fund adopted the renaming of existing Class
C shares as Class L shares.
At September 30, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class L
================================================================================
<S> <C> <C> <C>
Total Paid-in Capital $359,292,322 $27,952,847 $17,404,974
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 23
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
-------------------------- --------------------------
Shares Amount Shares Amount
=====================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 2,954,655 $ 41,997,959 4,278,086 $ 60,139,642
Net asset value of shares issued in
connection with the transfer of the
Smith Barney Muni Funds --
Ohio Portfolio's net assets (Note 5) -- -- 216,152 3,061,450
Shares issued on reinvestment 378,410 5,377,550 919,860 12,952,448
Shares redeemed (1,620,943) (23,027,302) (5,066,000) (70,997,885)
- -----------------------------------------------------------------------------------------------------
Net Increase 1,712,122 $ 24,348,207 348,098 $ 5,155,655
=====================================================================================================
Class B
Shares sold 709,451 $ 10,099,210 435,980 $ 6,185,158
Net asset value of shares issued in
connection with the transfer of the
Smith Barney Muni Funds --
Ohio Portfolio's net assets (Note 5) -- -- 226,974 3,210,679
Shares issued on reinvestment 23,366 331,978 43,558 613,782
Shares redeemed (112,124) (1,585,684) (204,149) (2,891,933)
- -----------------------------------------------------------------------------------------------------
Net Increase 620,693 $ 8,845,504 502,363 $ 7,117,686
=====================================================================================================
Class L+
Shares sold 177,413 $ 2,535,617 75,660 $ 1,069,915
Net asset value of shares issued in
connection with the transfer of the
Smith Barney Muni Funds --
Ohio Portfolio's net assets (Note 5) -- -- 60,176 850,202
Shares issued on reinvestment 17,445 248,014 42,562 598,164
Shares redeemed (91,932) (1,307,246) (148,687) (2,081,923)
- -----------------------------------------------------------------------------------------------------
Net Increase 102,926 $ 1,476,385 29,711 $ 436,358
=====================================================================================================
</TABLE>
+ On June 12, 1998 Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares 1998(1) 1998 1997 1996 1995(2) 1994
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $14.16 $13.60 $13.67 $13.32 $13.35 $13.81
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.37 0.79 0.81 0.81 0.82 0.85
Net realized and unrealized gain (loss) 0.31 0.73 (0.09) 0.35 (0.01) (0.39)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.68 1.52 0.72 1.16 0.81 0.46
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.39) (0.80) (0.79) (0.81) (0.84) (0.86)
Net realized gains -- (0.16) -- -- -- (0.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.39) (0.96) (0.79) (0.81) (0.84) (0.92)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.45 $14.16 $13.60 $13.67 $13.32 $13.35
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 4.90%++ 11.47% 5.41% 8.83% 6.38% 3.17%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $403 $371 $351 $378 $401 $413
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.67%+ 0.66% 0.70% 0.70% 0.60% 0.52%
Net investment income 5.25+ 5.61 5.92 5.88 6.30 6.05
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 87% 31% 27% 54% 42%
====================================================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 25
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares 1998(1) 1998 1997 1996 1995(2)
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $14.16 $13.61 $13.67 $13.33 $12.41
- -----------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.34 0.70 0.74 0.73 0.33
Net realized and unrealized gain (loss) 0.30 0.74 (0.08) 0.35 0.91
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.64 1.44 0.66 1.08 1.24
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36) (0.73) (0.72) (0.74) (0.32)
Net realized gains -- (0.16) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.89) (0.72) (0.74) (0.32)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.44 $14.16 $13.61 $13.67 $13.33
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 4.59%++ 10.80% 4.95% 8.26% 10.11%++
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $29,603 $20,313 $12,691 $11,605 $6,905
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.16%+ 1.29% 1.20% 1.19% 1.19%+
Net investment income 4.76+ 4.95 5.42 5.37 5.75+
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 87% 31% 27% 54%
====================================================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) For the period from November 7, 1994 (inception date) to March 31, 1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
26 1998 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares(1) 1998(2) 1998 1997 1996 1995(3) 1994
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $14.16 $13.59 $13.65 $13.32 $13.33 $13.80
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.33 0.69 0.73 0.73 0.74 0.76
Net realized and unrealized gain (loss) 0.30 0.74 (0.08) 0.34 (0.01) (0.40)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.63 1.43 0.65 1.07 0.73 0.36
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.70) (0.71) (0.74) (0.74) (0.77)
Net realized gains -- (0.16) -- -- -- (0.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.86) (0.71) (0.74) (0.74) (0.83)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.45 $14.16 $13.59 $13.65 $13.32 $13.33
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 4.51%++ 10.71% 4.90% 8.13% 5.80% 2.40%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $17,767 $15,926 $14,901 $16,563 $18,599 $18,185
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.24%+ 1.35% 1.27% 1.27% 1.23% 1.22%
Net investment income 4.68+ 4.91 5.35 5.31 5.69 5.29
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 87% 31% 27% 54% 42%
====================================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended September 30, 1998 (unaudited).
(3) On November 7, 1994, the former Class B shares were renamed Class C shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 27
<PAGE>
[This page intentionally left blank]
<PAGE>
Smith Barney
Muni Funds
Trustees Investment Manager
Donald R. Foley Mutual Management Corp.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen Distributor
John P. Toolan CFBDS, Inc.
Joseph H. Fleiss, Emeritus
Custodian
PNC Bank, N.A.
Officers
Heath B. McLendon
President and Chief Executive Officer Shareholder Servicing Agent
First Data Investor Services Group, Inc.
Lewis E. Daidone P.O. Box 9134
Senior Vice President and Treasurer Boston, MA 02205-9134
Peter M. Coffey
Vice President This report is submitted for general
information of the shareholders of Smith
Thomas M. Reynolds Barney Muni Funds - National Portfolio.
Controller It is not authorized for distribution to
prospective investors unless accompanied
Christina T. Sydor or preceded by a current Prospectus for
Secretary the Portfolio, which contains
information concerning the Portfolio's
investment policies and expenses as well
as other pertinent information.
SALOMON SMITH BARNEY
--------------------
A member of citigroup[LOGO]
Salomon Smith Barney is a service mark
of Salomon Smith Barney Inc.
Smith Barney Muni Funds
Smith Barney Mutual Funds
388 Greenwich Street
MF-2
New York, New York 10013
www.smithbarney.com
FD0806 11/98
[PHOTO OMITTED]
Smith Barney Muni Funds
Florida
Portfolio
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------
September 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Smith Barney
Muni Funds
[PHOTO OMITTED]
HEATH B.
MCLENDON
Chairman
[PHOTO OMITTED]
PETER M.
COFFEY
Vice President
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Muni Funds
- - Florida Portfolio ("Portfolio") for the period ended September 30, 1998. For
your convenience, we have summarized the period's prevailing economic and market
conditions below and outlined the various investment strategies employed by the
Fund during the period under review. A detailed summary of performance and
current holdings for the Fund can be found in the appropriate sections that
follow.
Fund's Performance and Investment Strategy
For the six months ended September 30, 1998, the Florida Portfolio generated a
total return of 4.61% for Class A shares which compares favorably with its
Lipper Analytical Services, Inc. peer group average of 4.30% (Lipper is a major
fund-tracking organization.) For performance information on the Portfolio's
other share classes, please see pages 5 and 6.
We are pleased to report that your Portfolio has been given a four-star rating
overall for its Class A, Class B and Class L shares from Morningstar, Inc.* as
of September 30, 1998.
Given present market conditions, we have continued to emphasize credit quality
and call protection in the Portfolio. As of the close of the reporting period,
93.2% of the Portfolio's bond holdings was rated investment grade or better and
the Portfolio's average stated call protection was 8.9 years. The Portfolio's
holdings were concentrated among the following industries: housing bonds
(17.8%), transportation bonds (15.3%), hospital bonds (9.7%) and utility bonds
(8.7%).
- ----------
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through September 30, 1998. The ratings are subject to change every
month. Past performance is not a guarantee of future results. Morningstar
ratings are calculated from the Fund's 3- and 5-year returns (with fee
adjustments) in excess of 90-day T-bill returns. For Class A shares, the Fund
received 4 stars for the overall, 4 stars for the 3-year period and 4 stars for
the 5-year period. For Class B shares, the Fund received 4 stars for the overall
and 4 stars for the 3-year period. For Class L shares, the Fund received 4 stars
for the overall, 3-year and 5-year periods. It was rated among 1,581 municipal
bond funds for the 3-year period and 943 municipal bond funds for the 5-year
period. The top 10% of the funds in a category receive 5 stars, 22.5% receive 4
stars, 35% receive 3 stars 22.5% receive 2 stars and 10% receive 1 star. The
Classes share a common portfolio of securities.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 1
<PAGE>
Market and Economic Overview
Bond market performance was shaped primarily by surging demand for U.S. Treasury
securities and a massive issuance of municipal bonds in the past six months.
During the reporting period, municipal bond prices remained relatively flat with
coupon interest providing most of the returns for municipal bonds.
Troubled financial markets abroad and a strengthening U.S. dollar further
exacerbated an already dramatic flight of capital from foreign countries into
U.S. markets. The U.S. Treasury bond, considered to be the global benchmark for
credit quality, was the chief beneficiary of these capital inflows. The large
flows of money into U.S. Treasury securities drove their prices upward and their
yields lower. On September 30, 1998, the yield of the bellwether 30-year U.S.
Treasury bond fell to 4.95%, the lowest level for long-term government debt
since 1967. Since the close of the reporting period, long-term U.S. Treasury
yields fell even further before drifting upward in recent days.
Until July, many bond investors had been primarily concerned about whether there
were any signs of the reappearance of inflation. However, developments in the
Pacific Rim, such as Japan's failure to shore up its ailing banking system and
Russia's unexpected devaluation of its currency, altered that focus
considerably. Moreover, a number of speculators who found themselves caught in
highly unusual market conditions added to the growing uncertainty in U.S.
capital markets.
In response to foreign economic conditions, the Federal Reserve Board ("Fed")
signaled a shift in policy from vigilance against inflation toward concerns of
global deflation by cutting short-term interest rates by 0.25% at its September
1998 meeting. The rate cut was the first action by the Fed since March 1997.
After the close of the reporting period, the Fed took an extraordinary and
unexpected action of cutting short-term interest rates again by another 0.25% on
October 15, 1998. This latest action brings the federal funds rate to 5.0% and
the largely symbolic discount rate to 4.75%. (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. The discount rate is the interest
rate the Federal Reserve charges its member banks for loans.)
Foreign investors, who do not benefit from the tax-exempt status of municipal
bonds, have been large buyers of U.S. Treasury securities. As a result, yields
for U.S. Treasury securities have declined further than those of municipal
bonds. Some municipal bonds are currently yielding as much as 100% of equivalent
maturity U.S. Treasury bonds. Municipal bonds are considered by many investors
to be a good value when they yield at least 85% of U.S.
- --------------------------------------------------------------------------------
1998 Semi-Annual Report to Shareholders
<PAGE>
Treasury bonds. At their present levels, we believe that tax-exempt bonds can
provide a competitive income stream for investors of almost any income tax
bracket.
In contrast to the diminishing U.S. Treasury security supply, municipal bond
issuance continued at record levels. New issue volume reached its peak in 1993
when $293 billion in new municipal bonds were sold. So far this year, municipal
bond volume is on pace to exceed $300 billion. This disparity in supply and
demand between U.S. Treasury bonds and municipal bonds is a primary reason for
municipal bond underperformance relative to U.S. Treasurys.
Florida Economic Highlights
Florida continues to experience rapid economic and population growth as it
proceeds with its transformation to an even more diversified economy. The
Sunshine State has made significant progress in transforming its economy from a
seasonal base of agriculture and tourism to more of a service and trade economy.
Moreover, financial service companies such as banks and insurance companies have
played an increasingly important role in the greater diversification of
Florida's economy. This rapid growth has added to the growing need for
additional infrastructure and educational facilities. The State has been
successful in maintaining moderate debt levels despite the increase in demand
for municipal spending. However, Florida's overdependence on sales tax revenues
could make it more vulnerable in the event of an economic downturn.
Municipal Bond Market Outlook
In view of the above, we believe that municipal bonds represent excellent values
under the current market conditions. With the stock market's recent volatility,
many investors may be looking to reallocate a portion of their existing
portfolios away from equities. In our opinion, this may be a timely opportunity
for many of these investors to do so with investments in municipal bonds.
We believe that economic conditions should remain supportive for the municipal
bond market over the near term. The U.S. economy remains sound despite the
widely reported economic distress of many other countries. Although U.S.
economic growth will likely slow over the coming months, we expect the economy
to expand modestly. Moreover, the Fed should continue to gradually lower
short-term interest rates and that in turn should help correct some of the
imbalances that exist in the overall bond market today.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 3
<PAGE>
On a more somber note, we report with much sadness the passing of Emeritus
Trustee C. Richard Youngdahl. Dick made many valuable contributions to the Board
and the Fund during his tenure and he will be missed.
Thank you for investing in the Smith Barney Muni Funds - Florida Portfolio. We
look forward to helping you pursue your investment goals in the years ahead.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
October 16, 1998
- --------------------------------------------------------------------------------
4 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
=========================================================================================================
<S> <C> <C> <C> <C> <C>
9/30/98 $13.74 $14.01 $0.35 $0.00 4.61%+
- ---------------------------------------------------------------------------------------------------------
3/31/98 13.16 13.74 0.73 0.13 11.15
- ---------------------------------------------------------------------------------------------------------
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 $5.58 $0.19
=========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
=========================================================================================================
<S> <C> <C> <C> <C> <C>
9/30/98 $13.73 $14.00 $0.32 $0.00 4.33%+
- ---------------------------------------------------------------------------------------------------------
3/31/98 13.14 13.73 0.65 0.13 10.59
- ---------------------------------------------------------------------------------------------------------
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 $2.63 $0.18
=========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares(2)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
=========================================================================================================
<S> <C> <C> <C> <C> <C>
9/30/98 $13.74 $14.01 $0.31 $0.00 4.29%+
- ---------------------------------------------------------------------------------------------------------
3/31/98 13.14 13.74 0.63 0.13 10.51
- ---------------------------------------------------------------------------------------------------------
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 $3.82 $0.18
=========================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 5
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
----------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months Ended 9/30/98+ 4.61% 4.33% 4.29%
- --------------------------------------------------------------------------------
Year Ended 9/30/98 8.74 8.22 8.20
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 6.45 N/A 5.82
- --------------------------------------------------------------------------------
Inception* through 9/30/98 8.26 10.05 6.97
================================================================================
With Sales Charges(3)
----------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months Ended 9/30/98+ 0.44% (0.17)% 2.24%
- --------------------------------------------------------------------------------
Year Ended 9/30/98 4.39 3.72 6.10
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 5.59 N/A 5.61
- --------------------------------------------------------------------------------
Inception* through 9/30/98 7.68 9.66 6.78
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (Inception* through 9/30/98) 81.40%
- --------------------------------------------------------------------------------
Class B (Inception* through 9/30/98) 44.93
- --------------------------------------------------------------------------------
Class L (Inception* through 9/30/98)(2) 47.15
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 4.50% CDSC,
which applies if shares are redeemed within one year from 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 L 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 L 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.
- --------------------------------------------------------------------------------
6 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the Florida Portfolio vs.
Lehman Brothers Municipal Long Bond Index and
Lehman Brothers Municipal Bond Index+
- --------------------------------------------------------------------------------
April 1991 -- September 1998
[The following table was depicted as a line chart in the printed material.]
Florida Lehman Long Bond Index* Lehman Bond Index*
------- ---------------------- -----------------
4/2/91 9600 10000 10000
3/92 10410 11139 10999
3/93 11859 12768 12376
3/94 12158 12915 12663
3/95 12963 14081 13605
3/96 14084 15153 14746
3/97 14850 16108 15548
3/98 16507 18134 17214
9/30/98 17268 19107 18013
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on April 2, 1991, assuming deduction of the maximum 4.00% sales
charge at the time of investment and reinvestment of dividends (after
deduction of applicable sales charges through November 6, 1994, and
thereafter at net asset value) and capital gains, if any, at net asset
value through September 30, 1998. 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.
* It is the opinion of management that the Lehman Brothers Municipal Bond
Index is a more appropriate broad-based benchmark for the market in which
the Florida Portfolio invests rather than the Lehman Brothers Municipal
Long Bond Index. In future reporting, the Lehman Brothers Municipal Bond
Index will be used as a basis of comparison of total return performance
rather than the Lehman Brothers Municipal Long Bond Index. The Lehman
Brothers Municipal Long Bond Index (consisting of maturities of at least
22 years) is a sub-index of the Lehman Brothers Municipal Bond Index, a
broad-based, total return index comprised of investment grade, fixed rate
municipal bonds selected from issues larger than $50 million issued since
January 1991. Each index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Education -- 2.6%
$2,000,000 AAA Polk County School Board, COP, FSA-Insured,
4.750% due 1/1/18 $ 1,960,000
Volusia County Educational Facilities Authority Revenue,
Embry-Riddle Aeronautical University:
500,000 AAA CONNIE LEE-Insured, 6.500% due 10/15/15 554,375
2,875,000 Baa2* Series A, 6.125% due 10/15/16 3,144,531
- ---------------------------------------------------------------------------------------------------------
5,658,906
- ---------------------------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 5.2%
445,000 AAA Altamonte Springs Health Facilities Authority Hospital
Revenue, Adventist Health System,
13.000% due 10/1/01 513,975
860,000 AAA Bradford County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project),
6.050% due 11/15/16 972,875
265,000 AAA Cape Coral Health Facilities Authority Hospital Revenue,
(Cape Coral Medical Center Project),
8.125% due 11/1/08 310,381
3,000,000 AAA Escambia County HFA, Multi-Family Housing Revenue,
Genesis Healthcare, Principal Custodial Receipts,
Series A, FGIC-Insured, zero coupon due 10/15/18 1,117,500
2,015,000 AAA Gainesville Utility System Revenue,
8.125% due 10/1/14 (b) 2,657,281
200,000 AAA Lee County Justice Center Complex Inc., Improvement
Revenue, Series A, MBIA-Insured,
11.125% due 1/1/11 286,500
525,000 AAA Orange County Health Facility Authority Revenue,
Southern Adventist Hospital, 8.750% due 10/1/09 656,906
1,025,000 AAA Palm Beach County Health Facilities Authority Revenue,
(John F. Kennedy Memorial Hospital Inc. Project),
Series C, 9.500% due 8/1/13 1,383,750
690,000 AAA Palm Beach County Solid Waste Authority Revenue,
MBIA-Insured, 10.000% due 12/1/04 838,350
2,000,000 AAA Port Everglades Authority Port Improvement,
7.125% due 11/1/16 (b) 2,480,000
- ---------------------------------------------------------------------------------------------------------
11,217,518
- ---------------------------------------------------------------------------------------------------------
Finance -- 1.0%
485,000 AA+ Florida State Board of Education Capital Outlay,
Unrefunded Balance, Series A, 7.250% due 6/1/23 (b) 520,163
500,000 AAA Gulf Breeze Local Government Revenue, FGIC-Insured,
7.750% due 12/1/15 532,500
1,000,000 AA St. Lucie County Special Assessment, South Hutchinson
Island, Asset Guaranty, 6.200% due 11/1/25 1,152,500
- ---------------------------------------------------------------------------------------------------------
2,205,163
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
General Obligation -- 1.0%
$ 500,000 NR Brevard County Tourist Development Tax Revenue,
4th Century Marlins Spring, 6.875% due 3/1/13 $ 536,875
1,000,000 AA+ Florida State Broward County, 10.000% due 7/1/14 (b) 1,571,250
- ---------------------------------------------------------------------------------------------------------
2,108,125
- ---------------------------------------------------------------------------------------------------------
Hospital -- 9.7%
Escambia County Health Facilities Authority Revenue:
2,500,000 BBB+ Azalea Trace Inc. Project, 6.100% due 1/1/19 2,643,750
375,000 NR Unrefunded Balance, Baptist Hospital,
6.750% due 10/1/14 421,875
1,000,000 A Halifax Hospital Medical Center, Florida Health Care
Facilities Revenue, Halifax Management System,
Series A, ACA-Insured, 5.200% due 4/1/18 1,020,000
Jacksonville Health Facilities Authority,
Hospital Revenue:
National Benevolent Association, IDR, Cypress Hill
Village Program:
750,000 Baa1* 6.400% due 12/1/16 817,500
1,000,000 Baa1* Series A, 6.250% due 12/1/26 1,095,000
2,000,000 AA+ St. Lukes Hospital Association Project,
7.125% due 11/15/20 2,212,500
310,000 AAA St. Vincent's Medical Center, 9.125% due 1/1/03 349,138
310,000 AAA University Medical Center Inc. Project,
CONNIE LEE-Insured, 6.600% due 2/1/21 339,450
Lee County Hospital Board of Directors, Hospital Revenue,
MBIA-Insured, Regular Linked SAVRS & RIBS:
1,000,000 AAA 9.468% due 3/26/20 (c) 1,177,500
1,000,000 AAA 6.350% due 3/26/20 (c) 1,178,750
Orange County Health Facilities Authority,
Hospital Revenue Bonds:
Adventist Health Systems, FSA-Insured:
1,500,000 AAA FLAIRS, 6.700% due 11/15/07 (c) 1,638,750
1,000,000 AAA Sunbelt Inc. Project, Series B,
6.750% due 11/15/21 1,097,500
1,000,000 AAA Regular Linked SAVRS & RIBS, MBIA-Insured,
8.796% due 10/29/21 (c) 1,198,750
710,000 BB+ Pinellas County Health Facilities Authority, Sun Coast
Health System Revenue, Sun Coast Hospital
Guaranteed, Series A, 8.500% due 3/1/20 750,825
5,000,000 AAA Tampa Revenue Health Systems, Catholic Health,
Series A-1, 4.875% due 11/15/18 4,975,000
- ---------------------------------------------------------------------------------------------------------
20,916,288
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 9.7%
$ 380,000 AAA Clearwater Multi-Family Housing Revenue,
(Drew Gardens Project), Series A, FHA-Insured,
6.500% due 10/1/25 $ 403,275
Dade County HFA, Multi-Family Mortgage Revenue,
Series A:
1,085,000 AAA Antigue Club Apartments, Series A-1,
AMBAC-Insured, 6.750% due 8/1/14 (d) 1,185,362
1,000,000 A-+ Golden Lakes Apartments Project,
6.050% due 11/1/39 (d) 1,038,750
1,500,000 AAA Mariner Club Apartments, Series K-1,
6.375% due 9/1/36 (d) 1,638,750
3,000,000 A Sr. Lien, Series I-1, 6.625% due 7/1/28 (b)(d) 3,285,000
3,000,000 AAA Stoddert Arms Apartments, Series O,
AMBAC-Insured, 6.300% due 9/1/36 (d) 3,240,000
1,000,000 AAA Turtle Creek Apartments, Series C-1,
AMBAC-Insured, 6.200% due 5/1/36 (d) 1,081,250
1,000,000 BBB+ The Vinyards Project, Series H, 6.500% due 11/1/25 1,068,750
2,355,000 AAA Dade County IDR, Susanna Wesley Health Center,
Series A, FHA-Insured, 6.625% due 7/1/30 (b) 2,599,331
Florida Housing Finance Agency:
1,000,000 AAA Crossings Indian Run Apartments, Series V,
AMBAC-Insured, 6.200% due 12/1/36 (d) 1,073,750
2,000,000 AAA Glen Oaks Apartment Projects, FNMA-Collateralized,
5.900% due 2/1/30 (d) 2,120,000
1,000,000 AAA Oceanside Housing Development Corp., Multi-Family
Mortgage Revenue, FHA-Insured, 6.875% due 2/1/20 1,058,750
1,095,000 AAA Southwest Housing Development Corp., Multi-Family
Housing Mortgage Revenue Refunding,
FHA-Insured, 6.875% due 2/1/20 1,153,856
- ---------------------------------------------------------------------------------------------------------
20,946,824
- ---------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 8.1%
Brevard County HFA, Single-Family Mortgage Revenue:
620,000 Aaa* GNMA-Collateralized, 6.600% due 9/1/16 (d) 667,275
900,000 Aaa* GNMA/FNMA-Collateralized, 6.400% due 9/1/23 (d) 968,625
Broward County HFA, Single-Family Mortgage Revenue:
520,000 Aa3* Capital Appreciation, zero coupon due 4/1/14 109,200
GNMA/FNMA-Collateralized:
610,000 Aaa* 6.650% due 8/1/21 (d) 662,612
895,000 Aaa* Series A, 6.200% due 4/1/30 (d) 959,887
Dade County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized:
1,500,000 AAA 6.700% due 4/1/28 (b)(d) 1,627,500
340,000 Aaa* Series B, 7.250% due 9/1/23 (d) 359,975
35,000 Aaa* Series E, 7.000% due 3/1/24 37,056
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Housing: Single-Family -- 8.1% (continued)
Duval County HFA, Single-Family Mortgage Revenue,
GNMA-Collateralized:
$ 95,000 AAA 8.000% due 6/1/00 (d) $ 97,494
700,000 Aaa* 6.700% due 10/1/26 (d) 761,250
Escambia County HFA, Single-Family Mortgage Revenue:
180,000 Aaa* Series A, GNMA-Collateralized, 7.800% due 4/1/22 (d) 189,675
1,400,000 Aaa* Multi-County Program, Series A,
GNMA/FNMA-Collateralized, 6.100% due 4/1/30 1,501,500
Florida Housing Finance Agency:
435,000 AA Homeowner Mortgage, Series 2, 6.350% due 7/1/28 (d) 471,975
110,000 Aaa* Home Ownership Revenue, Series G-1,
GNMA-Collateralized, 7.800% due 9/1/10 (d) 115,912
1,180,000 AAA Single-Family Mortgage, Series B,
GNMA/FNMA-Collateralized, 6.650% due 7/1/26 (d) 1,259,650
1,000,000 AAA Hialeah Housing Authority Revenue, Affordable
Housing Program, GNMA-Collateralized,
5.300% due 12/20/18 1,035,000
380,000 Aa1* Hillsborough County HFA, Single-Family Mortgage
Revenue, Series A, GNMA-Collateralized,
7.700% due 4/1/23 (d) 401,850
685,000 AAA Leon County HFA, Single-Family Mortgage Revenue,
Multi-County Program, Series B,
GNMA/FHLMC-Collateralized, 7.300% due 1/1/28 (d) 805,731
1,000,000 AAA Miami-Dade County Housing Finance Authority,
Single Family Revenue Mortgage, Series A-2,
GNMA/FNMA/FHLMC-Collateralized,
5.200% due 6/1/16 1,016,250
Orange County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA Mortgage Backed Securities Program:
755,000 AAA 6.750% due 10/1/18 (d) 821,062
1,180,000 AAA Series A, 6.300% due 4/1/28 (d) 1,274,400
405,000 Aa1* Palm Beach HFA, Single-Family Mortgage Power
Revenue Bonds, Series A, GNMA-Collateralized,
7.875% due 4/1/23 (d) 413,606
1,310,000 Aaa* Pinnellas County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 6.550% due 8/1/27 (d) 1,403,337
430,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 6.500% due 3/1/25 (d) 461,713
- ---------------------------------------------------------------------------------------------------------
17,422,535
- ---------------------------------------------------------------------------------------------------------
Industrial Development -- 4.3%
600,000 VMIG 1* Dade County IDA, Florida Power & Lighting Company,
4.100% due 6/1/21 (e) 600,000
1,975,000 NR Homestead IDR, Community Rehabilitation Providers
Program, Series A, 7.950% due 11/1/18 2,137,938
1,500,000 BBB- Martin County IDA, Indiantown, (Cogeneration Project),
7.875% due 12/15/25 (d) 1,760,625
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Industrial Development -- 4.3% (continued)
$ 500,000 NR Northern Palm Beach County Water Control District, Unit
Development No. 31, Program 1, 6.750% due 11/1/07 $ 536,875
Osceola County IDA Revenue, (Community Provider
Pooled Loan Program), Series A, FSA-Insured:
400,000 AAA 7.500% due 7/1/02 430,500
799,000 AAA 7.750% due 7/1/10 863,919
1,000,000 AAA St. Johns County IDA, IDR, Series A, 5.500% due 3/1/17 1,066,250
Tampa Sports Authority Revenue, (Tampa Bay Arena
Project), MBIA-Insured:
500,000 AAA 6.050% due 10/1/20 586,875
1,000,000 AAA 6.100% due 10/1/26 1,198,750
- ---------------------------------------------------------------------------------------------------------
9,181,732
- ---------------------------------------------------------------------------------------------------------
Miscellaneous -- 16.4%
1,000,000 AAA Dade County Aviation Facilities Revenue, Series B,
MBIA-Insured, 6.600% due 10/1/22 (d) 1,107,500
3,700,000 NR Dade County IDR, (Miami Cerebral Palsy Services
Project), 8.000% due 6/1/22 4,019,125
5,000,000 AAA Dade County Special Obligation, Series B,
AMBAC-Insured, Capital Appreciation,
zero coupon due 10/1/16 2,075,000
750,000 AAA Florida State Department of Corrections, COP,
Okeechobee Correctional, AMBAC-Insured,
6.250% due 3/1/15 843,750
2,700,000 AAA Gulf Breeze Capital Funding, Series B, MBIA-Insured,
4.500% due 10/1/27 2,517,750
500,000 BBB- Hillsborough County Aviation Authority, Special Purpose,
(Delta Airlines Project), 6.800% due 1/1/24 545,625
1,500,000 AAA Miami-Dade County Professional Sports Franchise
Facilities, MBIA-Insured, 4.750% due 10/1/30 1,455,000
1,000,000 AAA Miami Springs Utility System Revenue, Refunding &
Improvement, MBIA-Insured, 5.000% due 9/1/16 1,017,500
1,200,000 AAA North Springs Improvement District, MBIA-Insured,
7.000% due 10/1/09 1,500,000
2,800,000 AA- Orlando Capital Improvement, Special Revenue,
Series A, 4.750% due 10/1/22 2,705,500
2,500,000 AAA Port Palm Beach District Revenue, Series A,
MBIA-Insured, Capital Appreciation,
zero coupon due 9/1/21 706,250
5,000,000 AAA Port St. Lucie Special Assessment Revenue,
Utility Service Area No. 3 & 4-A, MBIA-Insured,
5.000% due 10/1/18 5,068,750
6,000,000 A Puerto Rico Commonwealth Refunding
Public Improvement, 4.500% due 7/1/23 5,632,500
1,200,000 BBB Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,435,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Miscellaneous -- 16.4% (continued)
$ 500,000 NR Tampa Revenue (Florida Aquarium Inc. Project),
7.750% due 5/1/27 $ 574,375
1,000,000 AAA Village Community Development District No. 2,
Florida Special Assessment Revenue,
MBIA-Insured, 5.200% due 5/1/19 1,030,000
2,000,000 AAA Village Community Development District No. 3,
Florida Special Assessment Revenue,
MBIA-Insured, 5.000% due 5/1/19 2,015,000
1,000,000 BBB- Virgin Islands Public Finance Authority Revenue,
Sr. Lien, Series A, 5.500% due 10/1/18 1,025,000
- ---------------------------------------------------------------------------------------------------------
35,274,125
- ---------------------------------------------------------------------------------------------------------
Nursing Home -- 2.7%
1,000,000 Aa3* Broward County Health Facilities Authority
Revenue Refunding, Broward County
Nursing Home, LOC 91, Allied Irish Banks Ltd.,
7.500% due 8/15/20 1,097,500
3,500,000 A- Palm Beach County Health Facilities Authority Revenue,
Retirement Community, 5.625% due 11/15/20 3,688,125
1,000,000 AA Volusia County Health Facilities Authority Revenue,
(John Knox Projects), Series A, Asset Guaranteed,
6.000% due 6/1/17 1,107,500
- ---------------------------------------------------------------------------------------------------------
5,893,125
- ---------------------------------------------------------------------------------------------------------
Pollution Control -- 8.5%
2,300,000 A- Broward County Resource Recovery Revenue,
Broward Waste Energy, 7.950% due 12/1/08 (b) 2,463,875
2,000,000 A+ Citrus County PCR, Florida Power Corp., (Crystal River
Project), Series A, 6.625% due 1/1/27 (b) 2,177,500
Escambia County PCR, (Champion
International Corp. Project):
500,000 Baa1* 6.950% due 11/1/07 555,625
3,500,000 Baa1* 6.900% due 8/1/22 (d) 3,920,000
2,500,000 A+ Jacksonville Sewer & Solid Waste Disposal
Facilities Revenue, (Anheuser-Busch Project),
5.875% due 2/1/36 (d) 2,665,625
705,000 AAA Lee County Solid Waste Revenue, MBIA-Insured,
7.000% due 10/1/11 (d) 782,550
1,500,000 AAA Miami-Dade County Solid Waste System Revenue,
AMBAC-Insured, 4.750% due 10/1/18 1,470,000
1,000,000 Aa3* Pinellas County PCR, Florida Power Corp.,
(Anclot & Bartlow Plants Project),
7.200% due 12/1/14 1,093,750
1,390,000 Baa2* Putnam County Development Authority PCR,
Georgia Pacific Corp. 1984, 7.000% due 12/1/05 1,548,113
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Pollution Control -- 8.5% (continued)
$1,500,000 AA- St. Lucie County Solid Waste Disposal Revenue,
(Florida Power & Light Co. Project),
7.150% due 2/1/23 (d) $ 1,618,125
- ---------------------------------------------------------------------------------------------------------
18,295,163
- ---------------------------------------------------------------------------------------------------------
Pre-Refunded(f) -- 3.6%
Alachua County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project),
(Call 11/15/00 @ 102):
150,000 AAA 6.875% due 11/15/02 158,250
1,000,000 AAA 7.600% due 11/15/13 1,098,750
1,500,000 Aaa* Bay County Hospital Revenue, (Bay Medical Center Project),
(Call 10/1/04 @ 102), 8.000% due 10/1/12 (b) 1,854,375
1,375,000 NR Escambia County Health Facilities Authority,
Baptist Hospital, (Call 10/1/03 @ 102),
6.750% due 10/1/14 1,570,938
1,000,000 AAA Miami Sports & Exhibition Authority Special Obligation
Refunding, FGIC-Insured, (Call 4/1/00 @ 102),
7.200% due 10/1/20 1,071,250
835,000 AAA Pinellas County Health Facilities Authority, Sun Coast
Health System Revenue, Series A, Sun Coast Hospital
Guaranteed, (Call 3/1/00 @ 102),
8.500% due 3/1/20 907,019
1,000,000 AAA South Broward, Hospital District Revenue Bonds,
Series 1991C, RIBS, AMBAC-Insured,
(Call 5/1/01 @ 104), 9.277% due 5/13/21 (c) 1,182,500
- ---------------------------------------------------------------------------------------------------------
7,843,082
- ---------------------------------------------------------------------------------------------------------
Public Facilities -- 1.1%
1,000,000 BBB Miami Beach Redevelopment Agency Tax
Increment Revenue, City Center-Historic
Convention, Series B, 6.350% due 12/1/22 1,100,000
1,185,000 A Puerto Rico Public Buildings Authority Revenue,
Series L, 5.500% due 7/1/21 1,302,019
- ---------------------------------------------------------------------------------------------------------
2,402,019
- ---------------------------------------------------------------------------------------------------------
Transportation -- 15.3%
2,000,000 AAA Florida State Turnpike Authority Revenue,
Department of Transportation, Series A,
FGIC-Insured, 4.500% due 7/1/27 1,865,000
2,030,000 AAA Greater Orlando Aviation Authority, Florida Airport
Facilities, FGIC-Insured, 5.250% due 10/1/12 2,205,088
Guam Airport Authority Revenue:
750,000 BBB Series A, 6.500% due 10/1/23 816,563
1,000,000 BBB Series B, 6.600% due 10/1/10 (d) 1,105,000
1,000,000 AAA Hillsborough County Aviation Authority Revenue,
Tampa International Airport, Series A,
FGIC-Insured, 6.000% due 10/1/23 1,106,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Transportation -- 15.3% (continued)
$ 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) $ 1,636,875
5,000,000 AAA Orlando & Orange County Expressway Authority,
Florida Expressway Revenue, Jr. Lien,
FGIC-Insured, 5.000% due 7/1/16 5,087,500
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue:
6,000,000 A Series A, 4.750% due 7/1/38 5,917,500
2,000,000 A Series Y, 5.000% due 7/1/36 2,040,000
Sanford Airport Authority IDR,
(Central Florida Terminals Inc. Project):
Series A:
1,000,000 NR 7.500% due 5/1/15 (d) 1,095,000
2,000,000 NR 7.750% due 5/1/21 (d) 2,207,500
645,000 NR Series C, 7.500% due 5/1/21 (d) 706,275
Santa Rosa Bay Bridge Authority Revenue:
3,500,000 BBB- 6.250% due 7/1/28 3,898,125
5,000,000 BBB+ Capital Appreciation, zero coupon due 7/1/17 1,950,000
1,355,000 AAA Volusia County Airport System Revenue,
Daytona Beach Regional Airport, MBIA-Insured,
7.000% due 10/1/21 (d) 1,460,013
- ---------------------------------------------------------------------------------------------------------
33,096,689
- ---------------------------------------------------------------------------------------------------------
Utilities -- 8.7%
1,800,000 AAA Englewood Water District Utility System Revenue,
FSA-Insured, 5.000% due 10/1/18 1,824,750
3,905,000 Aaa* Escambia County Utilities Authority Sanitation System
Revenue Refunding & Improvement, FSA-Insured,
4.500% due 1/1/22 3,685,344
3,000,000 AAA Escambia County Utility System Authority
Revenue Bonds, Series B, FGIC-Insured,
6.250% due 1/1/15 3,562,500
1,350,000 BBB Guam Power Authority Revenue, Series A,
6.750% due 10/1/24 1,506,938
930,000 BBB+ Hillsborough County Utilities Revenue, Refunding &
Improvement, 7.000% due 8/1/14 1,013,700
1,000,000 AAA Jupiter Island Utility System, South Martin Regional
Utility, MBIA-Insured, 5.000% due 10/1/18 1,015,000
1,000,000 AAA Lakeland Electric & Water Revenue, Jr. Sub. Lien,
FGIC-Insured, 6.000% due 10/1/14 1,161,250
1,000,000 Aaa* Martin County Utility System Revenue, FGIC-Insured,
5.000% due 10/1/18 1,015,000
1,000,000 AAA Puerto Rico Electric Power Authority
Revenue Refunding, Series EE, MBIA-Insured,
4.500% due 7/1/18 965,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Utilities -- 8.7% (continued)
$3,000,000 AAA Sunrise Utility System Revenue Refunding,
AMBAC-Insured, 5.200% due 10/1/22 $ 3,101,250
- ---------------------------------------------------------------------------------------------------------
18,850,732
- ---------------------------------------------------------------------------------------------------------
Water & Sewer -- 2.1%
1,085,000 AAA Hernando County Water & Sewer Revenue Refunding,
FGIC-Insured, 5.000% due 6/1/19 1,098,562
640,000 AAA Miramar Wastewater Improvement Authority,
FGIC-Insured, 6.750% due 10/1/16 735,200
2,250,000 AAA Seminole County Water & Sewer Refunding &
Improvement, MBIA-Insured, 6.000% due 10/1/12 2,629,687
- ---------------------------------------------------------------------------------------------------------
4,463,449
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $197,841,777**) $ 215,775,475
=========================================================================================================
</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) Security is 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 this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(e) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(f) 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.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 17 and 18 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Rating Service ("Standard & Poor's") except
that those which are identified by an asterisk (*) are rated by Moody's
Investors Service Inc. ("Moody's") or those which are identified by a single
dagger (+) are rated by Fitch Investors Services, Inc. ("Fitch"). 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 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 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 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 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 17
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited) (continued)
- --------------------------------------------------------------------------------
Fitch -- Ratings may be modified by the addition of a plus (+) sign or minus (-)
sign to show relative standings within the major ratings categories.
AA -- Bonds rated "AA" are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and/or
dividends and repay principal is very strong.
BBB -- Bonds rated "BBB" are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest
or dividends and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances, however,
are more likely to have adverse impact on these securities and,
therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for
securities with higher ratings.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's
or Fitch.
- --------------------------------------------------------------------------------
Short-Term Security Ratings (unaudited)
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong;
those issues determined to possess overwhelming safety
characteristics are denoted with a (+) 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 (unaudited)
- --------------------------------------------------------------------------------
ACA -- American Capital Assurance
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity 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
FLAIRS -- Floating Adjustable Interest Rate Securities
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
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) September 30, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $197,841,777) $ 215,775,475
Cash 76,394
Interest receivable 3,855,272
Receivable for securities sold 685,689
Receivable for Fund shares sold 435,130
- --------------------------------------------------------------------------------
Total Assets 220,827,960
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 2,710,372
Management fees payable 88,939
Distribution fees payable 21,250
Payable for Fund shares purchased 18,921
Accrued expenses 48,474
- --------------------------------------------------------------------------------
Total Liabilities 2,887,956
- --------------------------------------------------------------------------------
Total Net Assets $ 217,940,004
================================================================================
NET ASSETS:
Par value of capital shares $ 15,557
Capital paid in excess of par value 198,759,229
Overdistributed net investment income (70,000)
Accumulated net realized gain from security transactions 1,301,520
Net unrealized appreciation of investments 17,933,698
- --------------------------------------------------------------------------------
Total Net Assets $ 217,940,004
================================================================================
Shares Outstanding:
Class A 10,389,064
-----------------------------------------------------------------------------
Class B 4,417,465
-----------------------------------------------------------------------------
Class L 750,035
-----------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 14.01
-----------------------------------------------------------------------------
Class B * $ 14.00
-----------------------------------------------------------------------------
Class L ** $ 14.01
-----------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset
value per share) $ 14.59
-----------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset
value per share) $ 14.15
================================================================================
* 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 L shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998
INVESTMENT INCOME:
Interest $ 6,224,402
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 539,017
Distribution fees (Note 4) 337,719
Shareholder and system servicing fees 31,554
Registration fees 22,562
Shareholder communications 11,683
Audit and legal 11,533
Pricing service fees 9,274
Custody 5,415
Trustees' fees 2,106
Other 3,210
- --------------------------------------------------------------------------------
Total Expenses 974,073
- --------------------------------------------------------------------------------
Net Investment Income 5,250,329
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 60,121,094
Cost of securities sold 59,919,843
- --------------------------------------------------------------------------------
Net Realized Gain 201,251
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 13,875,164
End of period 17,933,698
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 4,058,534
- --------------------------------------------------------------------------------
Net Gain on Investments 4,259,785
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 9,510,114
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998 (unaudited)
and the Year Ended March 31, 1998
<TABLE>
<CAPTION>
September 30 March 31
=====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,250,329 $ 10,136,491
Net realized gain 201,251 3,275,071
Increase in net unrealized appreciation 4,058,534 6,856,322
- -------------------------------------------------------------------------------------
Increase in Net Assets From Operations 9,510,114 20,267,884
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (5,312,763) (10,138,329)
Net realized gains -- (1,909,781)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (5,312,763) (12,048,110)
- -------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 22,538,026 43,905,998
Net asset value of shares issued for reinvestment
of dividends 2,195,690 5,171,877
Cost of shares reacquired (21,876,766) (32,126,326)
- -------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 2,856,950 16,951,549
- -------------------------------------------------------------------------------------
Increase in Net Assets 7,054,301 25,171,323
NET ASSETS:
Beginning of period 210,885,703 185,714,380
- -------------------------------------------------------------------------------------
End of period* $ 217,940,004 $ 210,885,703
=====================================================================================
* Includes overdistributed net investment income of: $ (70,000) $ (7,566)
=====================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
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 an open-end
management investment company. The Fund consists of this Portfolio and seven
other separate investment portfolios: Georgia, Limited Term, National, New York,
Pennsylvania, New York Money Market and California Money Market Portfolios. The
financial statements and financial highlights for the other portfolios are
presented in separate semi-annual reports.
The significant accounting policies consistently followed by the Portfolio 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 for which market quotation are not available in good faith at fair
market value by or under the direction of the Board of Trustees; (d) securities
maturing within 60 days are valued at cost plus accreted discount or minus
amortized premium, which approximates value; (e) gains or losses on the sale of
securities are calculated by using the specific identification method; (f)
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; (g) direct expenses are charged to each
class; management fees and general fund expenses are allocated on the basis of
relative net assets; (h) dividends and distributions to shareholders are
recorded on the ex-dividend date; (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; (j) 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, 1998, 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 adjustment; and (k) estimates and assumptions are required to
be made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (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
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment manager to the Fund. The Portfolio pays MMC a
management fee calculated at an annual rate of 0.50% of its average daily net
assets. This fee is calculated daily and paid monthly.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date, Salomon Smith Barney Inc. ("SSB") was the Fund's distributor. SSB (as well
as certain other broker-dealers) continues to sell Fund shares to the public as
members of the selling group.
On June 12, 1998, the Fund's Class C shares were renamed Class L shares.
Effective June 15, 1998, Class L shares are being sold at net asset value plus
an initial sales charge of 1.00%. Class L shares also have a 1.00% contingent
deferred sales charge ("CDSC"), which applies if redemption occurs within the
first year of purchase.
There is a CDSC of 4.50% on Class B shares, which applies if redemption occurs
within one year from purchase. This CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. In
addition, Class A shares also 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
For the six months ended September 30, 1998, SSB received sales charges of
approximately $201,000 and $9,000 on sales of the Portfolios' Class A and Class
L shares, respectively. In addition, for the six months ended September 30,
1998, CDSCs paid to SSB were approximately:
Class A Class B Class L
================================================================================
CDSCs $22,000 $27,000 $ 2,000
================================================================================
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A, B and L shares calculated at an annual rate of 0.15% of average
daily net assets for each respective class. The Portfolio pays a distribution
fee with respect to Class B and L shares calculated at the annual rates of 0.50%
and 0.55% of the average daily net assets of those classes, respectively. For
the six months ended September 30, 1998, total Distribution Plan fees incurred
were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $109,613 $194,881 $33,225
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
5. Investments
During the six months ended September 30, 1998, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $63,064,756
- --------------------------------------------------------------------------------
Sales 60,121,094
================================================================================
At September 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 17,940,931
Gross unrealized depreciation (7,233)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 17,933,698
================================================================================
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
6. Shares of Beneficial Interest
At September 30, 1998, 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 related to the distribution of its shares.
At September 30, 1998, total paid-in capital amounted to the following for each
class:
Class A Class B Class L
================================================================================
Total Paid-in Capital $130,536,005 $58,089,893 $10,148,888
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
--------------------- ----------------------
Shares Amount Shares Amount
=========================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 1,125,920 $ 15,524,477 2,168,321 $ 29,686,100
Shares issued on reinvestment 106,100 1,464,640 245,679 3,350,010
Shares redeemed (1,223,224) (16,896,312) (1,707,187) (23,309,310)
- ---------------------------------------------------------------------------------------------------------
Net Increase 8,796 $ 92,805 706,813 $ 9,726,800
=========================================================================================================
Class B
Shares sold 368,180 $ 5,080,415 865,155 $ 11,835,656
Shares issued on reinvestment 45,052 621,477 116,324 1,583,889
Shares redeemed (319,602) (4,406,342) (557,498) (7,617,726)
- ---------------------------------------------------------------------------------------------------------
Net Increase 93,630 $ 1,295,550 423,981 $ 5,801,819
=========================================================================================================
Class L
Shares sold 139,710 $ 1,933,134 173,864 $ 2,384,242
Shares issued on reinvestment 7,941 109,573 17,468 237,978
Shares redeemed (41,555) (574,112) (88,301) (1,199,290)
- ---------------------------------------------------------------------------------------------------------
Net Increase 106,096 $ 1,468,595 103,031 $ 1,422,930
=========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 25
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares 1998(1) 1998 1997 1996(2) 1995(3) 1994
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.74 $ 13.16 $ 13.24 $ 12.89 $ 12.82 $ 13.21
- -----------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.35 0.72 0.73 0.74 0.75 0.77
Net realized and unrealized
gain (loss) 0.27 0.72 (0.03) 0.35 0.08# (0.39)
- -----------------------------------------------------------------------------------------------------------
Total Income From Operations 0.62 1.44 0.70 1.09 0.83 0.38
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.35) (0.73) (0.73) (0.74) (0.76) (0.77)
Net realized gains -- (0.13) (0.05) -- -- --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.35) (0.86) (0.78) (0.74) (0.76) (0.77)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 14.01 $ 13.74 $ 13.16 $ 13.24 $ 12.89 $ 12.82
- -----------------------------------------------------------------------------------------------------------
Total Return 4.61%++ 11.15% 5.44% 8.65% 6.77% 2.75%
- -----------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $ 146 $ 143 $ 127 $ 117 $ 108 $ 105
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 0.74%+ 0.76% 0.85% 0.70% 0.61% 0.54%
Net investment income 5.04+ 5.28 5.56 5.62 5.97 5.71
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 28% 59% 62% 47% 43% 20%
===========================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) 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.
(3) On October 10, 1994 the former Class C shares were exchanged into Class A
Shares.
(4) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.85%.
# Includes the per share effect of shareholder sale and redemption 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.
- --------------------------------------------------------------------------------
26 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares 1998(1) 1998 1997 1996(2) 1995(3)
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.73 $ 13.14 $ 13.23 $ 12.89 $ 11.91
- ---------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.31 0.65 0.65 0.68 0.30
Net realized and unrealized gain (loss) 0.28 0.72 (0.01) 0.35 0.97#
- ---------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.59 1.37 0.64 1.03 1.27
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.65) (0.68) (0.69) (0.29)
Net realized gains -- (0.13) (0.05) -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.32) (0.78) (0.73) (0.69) (0.29)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 14.00 $ 13.73 $ 13.14 $ 13.23 $ 12.89
- ---------------------------------------------------------------------------------------------------------------------
Total Return 4.33%++ 10.59% 4.91% 8.09% 10.77%++
- ---------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $ 62 $ 59 $ 51 $ 46 $ 2
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 1.25%+ 1.28% 1.35% 1.20% 1.20%+
Net investment income 4.53+ 4.76 4.93 5.00 5.57+
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 28% 59% 62% 47% 43%
=====================================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) 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.
(3) For the period from November 16, 1994 (inception date) to March 31, 1995.
(4) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.35%.
# Includes the per share effect of shareholder sale and redemption 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares(1) 1998(2) 1998 1997 1996(3) 1995(4) 1994
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.74 $ 13.14 $ 13.22 $ 12.89 $ 12.81 $ 13.20
- ---------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.31 0.64 0.65 0.66 0.67 0.68
Net realized and
unrealized gain (loss) 0.27 0.72 (0.01) 0.35 0.08# (0.39)
- ---------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.58 1.36 0.64 1.01 0.75 0.29
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.63) (0.67) (0.68) (0.67) (0.68)
Net realized gains -- (0.13) (0.05) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.76) (0.72) (0.68) (0.67) (0.68)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 14.01 $ 13.74 $ 13.14 $ 13.22 $ 12.89 $ 12.81
- ---------------------------------------------------------------------------------------------------------------------
Total Return 4.29%++ 10.51% 4.94% 7.96% 6.12% 2.05%
- ---------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $ 11 $ 9 $ 7 $ 3 $ 3 $ 2
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (5) 1.32%+ 1.33% 1.40% 1.28% 1.25% 1.24%
Net investment income 4.46+ 4.71 4.84 5.04 5.40 4.95
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 28% 59% 62% 47% 43% 20%
=====================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended September 30, 1998 (unaudited).
(3) 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.
(4) On November 7, 1994 the former Class B shares were renamed Class C Shares.
(5) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.40%.
# Includes the per share effect of shareholder sale and redemption 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.
- --------------------------------------------------------------------------------
28 1998 Semi-Annual Report to Shareholders
<PAGE>
SALOMON SMITH BARNEY
A member of citigroup[LOGO]
Trustees
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Mutual Management Corp.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Transfer 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 the Fund, which contains information concerning the
Fund's investment policies, fees and expenses as well as other pertinent
information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Muni Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD0787 11/98
[GRAPHIC OMITTED]
Smith Barney Muni Funds
Georgia Portfolio
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------
September 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Smith Barney
Muni Funds
[PHOTO OMITTED]
HEATH B.
MCLENDON
Chairman
[PHOTO OMITTED]
PETER M.
COFFEY
Vice President
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Muni Funds
- - Georgia and Pennsylvania Portfolios ("Portfolio") for the period ended
September 30, 1998. For your convenience, we have summarized the period's
prevailing economic and market conditions below and outlined the investment
strategies employed by each Portfolio during the period. A detailed summary of
performance and current holdings for both Portfolios can be found in the
appropriate sections that follow.
Market and Economic Overview
Bond market performance was shaped primarily by surging demand for U.S. Treasury
securities and a massive issuance of municipal bonds in the past six months.
During the reporting period, municipal bond prices remained relatively flat with
coupon interest providing most of the returns for municipal bonds.
Troubled financial markets abroad and a strengthening U.S. dollar further
exacerbated an already dramatic flight of capital from foreign countries into
U.S. markets. The U.S. Treasury bond, considered to be the global benchmark for
credit quality, was the chief beneficiary of these capital inflows. The large
flows of money into U.S. Treasury securities drove their prices upward and their
yields lower. On September 30, 1998, the yield of the bellwether 30-year U.S.
Treasury bond fell to 4.95%, the lowest level for long-term government debt
since 1967. Since the close of the reporting period, long-term U.S. Treasury
yields fell even further before drifting upward in recent days.
Up until July, many bond investors had been focused on any signs of the
reappearance of inflation. However, developments in the Pacific Rim, such as
Japan's failure to shore up its ailing banking system and Russia's unexpected
devaluation of its currency, altered that view considerably. Moreover, a number
of speculators who found themselves caught in highly unusual market conditions
added to the growing uncertainty in U.S. capital markets.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 1
<PAGE>
In response to the global tumult, the Federal Reserve Board ("Fed") signaled a
shift in policy from vigilance against inflation toward concerns of global
deflation by cutting short-term interest rates 0.25% at its September 1998
meeting. The rate cut was the first action by the Fed since March 1997.
After the close of the reporting period, the Fed took an extraordinary and
unexpected action of cutting short-term interest rates again by another 0.25% on
October 15, 1998. This latest action brings the federal-funds rate to 5.00% and
the largely symbolic discount rate to 4.75%. (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. The discount rate is the interest
rate the Federal Reserve charges its member banks for loans.)
Foreign investors, who do not benefit from the tax-exempt status of municipal
bonds, have been large buyers of U.S. Treasury securities. As a result, yields
for U.S. Treasury securities have declined further than those of municipal
bonds. Municipal bond yields are currently yielding as much as 100% of
equivalent maturity U.S. Treasury bonds. Municipal bonds are considered by many
investors to be a good value when they yield about 85% of U.S. Treasury bonds.
At their present levels, we believe that tax-exempt bonds can now provide a
competitive income stream for risk-averse investors of almost any income tax
bracket.
In contrast to the diminishing U.S. Treasury security supply, municipal bond
issuance continued at record levels. New issue volume reached its peak in 1993
when $293 billion in new municipal bonds were sold. So far this year, municipal
bond volume is on pace to exceed $300 billion. This disparity in supply and
demand between U.S. Treasury bonds and municipal bonds is a primary reason for
municipal bond underperformance relative to U.S. Treasurys.
Georgia Portfolio's Performance and Investment Strategy
For the six months ended September 30, 1998, the Georgia Portfolio generated a
total return of 5.21% for Class A shares and significantly outperformed its
Lipper Analytical Services, Inc. peer group average of 4.52%. (Lipper is a major
fund tracking organization.)
In view of current market conditions, we have maintained a fairly long average
life of our holdings and continued to place emphasis on call protection and
credit quality. As of September 30, 1998, the call-adjusted average life was
14.6 years and 95.2% of the Portfolio was rated investment grade. In addition,
approximately 53.0% of the Portfolio had a triple-A rating, the highest credit
rating. The Portfolio's largest holdings are concentrated in housing bonds
(21.0%), water and sewer bonds (15.6%) and utility bonds (11.4%).
- --------------------------------------------------------------------------------
2 1998 Semi-Annual Report to Shareholders
<PAGE>
We are pleased to report that your Portfolio has been given a four-star rating
overall for Class A and B and Class L from Morningstar, Inc.* as of September
30, 1998.
Georgia Economic Highlights
Our outlook for Georgia's economy remains very bright. The Peach State continues
to earn high marks from major credit rating agencies due in large part to its
prudent debt management and conservative fiscal policies. Moreover, a booming
economy in Georgia has led to increased tax revenues and solid gains in
employment. Compared to its previous fiscal year, personal income tax revenues
grew by 14.8% and corporate income taxes rose substantially. Like many other
states, job growth in Georgia has been concentrated mainly in the service
industries.
By many accounts, Georgia has been highly successful in attracting new
entrepreneurship. According to Georgia Secretary of State Lewis Massey,
corporate activity had increased by more than 10% by the end of 1997. In
addition, the State has also demonstrated that it can compete aggressively in
world export markets. Despite economic woes in many parts of the world,
Georgia's exports grew by more than 3% overall in the first half of 1998 over
the same period in 1997. Exports to major U.S. trading partners such as Canada
and Mexico grew respectably while market share in strategic European Union
nations such as France and Spain increased substantially. In our view, Georgia
is well positioned to take advantage of current economic globalization trends.
Pennsylvania Portfolio's Performance and Investment Strategy
For the six months ended September 30, 1998, the Pennsylvania Portfolio posted a
total return of 4.83% for Class A shares and significantly outperformed its
Lipper peer group average of 3.91%.
We have continued to lengthen the Portfolio's maturity structure and have
extended the call-adjusted average life of the Portfolio from 12.8 years on
March 31, 1998 to 13.2 years. Average stated call protection was also extended
from 9.3 years to 9.8 years. The emphasis on longer maturities and call
protection is designed to help preserve a competitive stream of income over the
long term in a low-interest rate environment.
- ----------
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through September 30, 1998. The ratings are subject to change
every month. Past performance is not a guarantee of future results.
Morningstar, Inc. ratings are calculated from the Portfolio's 3- and
5-year returns (with fee adjustments) in excess of 90-day T-bill returns.
For Class A shares, the Portfolio received 4 stars for the overall, 4
stars for the 3-year period. For Class B shares, the Portfolio received 4
stars for the overall and 4 stars for the 3-year period. For Class L
shares, the Portfolio received 4 stars for the overall and 3-year periods.
It was rated among 1,581 municipal bond funds for the 3-year period, 943
municipal bond funds for the 5-year period. The top 10% of the funds in a
rating category receive 5 stars, 22.5% receive 4 stars, 35% receive 3
stars, 22.5% receive 2 stars and 10% receive 1 star. Different classes
share a common portfolio of securities.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 3
<PAGE>
As of September 30, 1998, 94.1% of the Portfolio was rated investment grade. In
addition, approximately 42.0% of the Portfolio had a triple-A rating, the
highest credit rating. The Portfolio's largest holdings are concentrated in
hospital bonds (26.3%), transportation bonds (16.2%) and industrial development
(8.8%).
We are pleased to report that the Portfolio has been given a four-star rating
overall for Class A and B and Class L from Morningstar, Inc.** as of September
30, 1998.
Pennsylvania Economic Highlights
Pennsylvania continues to make great strides in reforming its economy and
rehabilitating its image as a former rustbelt state. Only three years ago,
annual job growth in the Commonwealth was ranked 45th in the nation. Today,
annual job growth stands at 17th thanks in large part to the development of high
technology and advanced manufacturing businesses. In recognition of these
positive changes, the July 27, 1998 edition of Business Week cited Pennsylvania
as one of its Top Ten in its economic development report card.
A vibrant economy, fiscal restraint and effective debt management has enabled
the Commonwealth to accumulate reserves even while lowering taxes for
individuals and businesses. In our opinion, Pennsylvania is well-positioned for
continued economic growth for the foreseeable future.
National Outlook
As noted earlier, we believe that municipal bonds represent excellent values
under the current market conditions. With the stock market's recent volatility,
many investors may be looking to reallocate their existing portfolios. In our
opinion, this may be a timely opportunity for many of these investors to
consider further diversifying their portfolios with municipal bonds.
We believe that economic conditions should remain supportive for the municipal
bond market over the near term. The U.S. economy remains sound despite the
widely reported economic distress of many other countries. Although U.S.
economic growth will likely slow over the coming months, we expect the economy
to expand modestly. Moreover, the Fed should continue to gradually lower
short-term interest rates and that in turn should help correct some of the
imbalances that exist in the overall bond market today.
- ----------
** Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through September 30, 1998. The ratings are subject to change
every month. Past performance is not a guarantee of future results.
Morningstar ratings are calculated from the Portfolio's 3- and 5-year
returns (with fee adjustments) in excess of 90-day T-bill returns. For
Class A shares, the Portfolio received 4 stars for the overall and 4 stars
for the 3-year period. For Class B shares, the Portfolio received 4 stars
for the overall and 4 stars for the 3-year period. For Class L shares, the
Portfolio received 4 stars for the overall and 3-year periods. It was
rated among 1,581 municipal bond funds for the 3-year period and 943
municipal bond funds for the 5-year period. The top 10% of the funds in a
rating category receive 5 stars, 22.5% receive 4 stars, 35% receive 3
stars, 22.5% receive 2 stars and 10% receive 1 star. Different classes
share a common portfolio of securities.
- --------------------------------------------------------------------------------
4 1998 Semi-Annual Report to Shareholders
<PAGE>
On a more somber note, we report with much sadness the passing of Emeritus
Trustee C. Richard Youngdahl. Dick made many valuable contributions to the Board
and the Portfolios during his tenure and he will be missed.
In closing, thank you for investing in the Smith Barney Muni Funds - Georgia and
Pennsylvania Portfolios. We look forward to helping you pursue your financial
goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
October 16, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 5
<PAGE>
- --------------------------------------------------------------------------------
Georgia Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/98 $13.43 $13.79 $0.33 $0.00 5.21%+
- --------------------------------------------------------------------------------
3/31/98 12.48 13.43 0.67 0.08 13.85
- --------------------------------------------------------------------------------
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 $2.99 $0.21
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/98 $13.43 $13.78 $0.29 $0.00 4.87%+
- --------------------------------------------------------------------------------
3/31/98 12.47 13.43 0.60 0.08 13.39
- --------------------------------------------------------------------------------
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 $2.64 $0.21
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares(2)
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/98 $13.41 $13.77 $0.29 $0.00 4.91%+
- --------------------------------------------------------------------------------
3/31/98 12.46 13.41 0.59 0.08 13.23
- --------------------------------------------------------------------------------
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 $2.68 $0.21
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
6 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Georgia Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months Ended 9/30/98+ 5.21% 4.87% 4.91%
- --------------------------------------------------------------------------------
Year Ended 9/30/98 9.70 9.07 9.07
- --------------------------------------------------------------------------------
Inception* through 9/30/98 9.11 8.25 8.41
================================================================================
With Sales Charge(3)
-------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months Ended 9/30/98+ 1.00% 0.37% 2.82%
- --------------------------------------------------------------------------------
Year Ended 9/30/98 1.54 4.57 7.01
- --------------------------------------------------------------------------------
Inception* through 9/30/98 8.12 8.07 8.17
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 9/30/98) 47.95%
- --------------------------------------------------------------------------------
Class B (Inception* through 9/30/98) 40.54
- --------------------------------------------------------------------------------
Class L (Inception* through 9/30/98)(2) 43.44
================================================================================
(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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum sales charge of 4.00% and 1.00%, respectively;
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 L shares also 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 L 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 7
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Georgia Portfolio
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the
Georgia Portfolio vs. Lehman Brothers Municipal Long Bond Index,
Lehman Brothers Municipal Bond Index
and Lehman Brothers Georgia Municipal Bond Index+
- --------------------------------------------------------------------------------
April 1994 -- September 1998
[The following table was depicted as a line graph in the printed material.]
Municiple Georgia Municiple
Georgia Long Bond Municiple Bond
Portfolio Index Bond Index Index
--------- ----- ---------- -----
4/4/94 9600 10000 10000 10000
3/95 10193 10903 10744 10795
3/96 11179 11733 11645 11675
3/96 11844 12424 12278 12289
3/98 13485 13986 13594 13573
9/30/98 14188 14737 14225 14215
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on April 4, 1994, assuming deduction of the maximum 4.00% sales
charge at the time of investment and reinvestment of dividends and capital
gains, if any, at net asset value through September 30, 1998. 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.
* It is the opinion of management that the Lehman Brothers Municipal Bond
Index is a more appropriate broad-based benchmark for the market in which
the Georgia Portfolio invests rather than the Lehman Brothers Municipal
Long Bond Index. In future reporting, the Lehman Brothers Municipal Bond
Index and the Lehman Brothers Georgia Municipal Bond Index will be used as
a basis of comparison of total return performance rather than the Lehman
Brothers Municipal Long Bond Index. The Lehman Brothers Municipal Long
Bond Index (consisting of maturities of at least 22 years) and the Lehman
Brothers Georgia Municipal Bond Index (consisting of Georgia municipal
bonds) are each a sub-index of the Lehman Brothers Municipal Bond Index, a
broad-based, total return index comprised of investment grade, fixed rate
municipal bonds selected from issues larger than $50 million issued since
January 1991. Each index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund.
- --------------------------------------------------------------------------------
8 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/98 $13.54 $13.84 $0.35 $0.00 4.83%+
- --------------------------------------------------------------------------------
3/31/98 12.66 13.54 0.69 0.11 13.52
- --------------------------------------------------------------------------------
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 $3.09 $0.16
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/98 $13.52 $13.82 $0.31 $0.00 4.57%+
- --------------------------------------------------------------------------------
3/31/98 12.64 13.52 0.62 0.11 12.97
- --------------------------------------------------------------------------------
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 $2.72 $0.16
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares(2)
- --------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Period Ended of Period Period Dividends Distributions Returns(1)
================================================================================
9/30/98 $13.51 $13.81 $0.31 $0.00 4.55%+
- --------------------------------------------------------------------------------
3/31/98 12.64 13.51 0.62 0.11 12.84
- --------------------------------------------------------------------------------
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 $2.80 $0.16
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
- --------------------------------------------------------------------------------
Pennsylvania Portfolio
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months Ended 9/30/98+ 4.83% 4.57% 4.55%
- --------------------------------------------------------------------------------
Year Ended 9/30/98 5.86 5.53 5.42
- --------------------------------------------------------------------------------
Inception* through 9/30/98 9.20 8.21 8.59
================================================================================
With Sales Charge(3)
-------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months Ended 9/30/98+ 0.67% 0.07% 2.47%
- --------------------------------------------------------------------------------
Year Ended 9/30/98 1.59 1.03 3.34
- --------------------------------------------------------------------------------
Inception* through 9/30/98 8.22 8.03 8.35
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 9/30/98) 48.52%
- --------------------------------------------------------------------------------
Class B (Inception* through 9/30/98) 40.19
- --------------------------------------------------------------------------------
Class L (Inception* through 9/30/98)(2) 44.76
================================================================================
(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 and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum sales charge of 4.00% and 1.00%, respectively;
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 L shares also 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 L 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.
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the
Pennsylvania Portfolio vs. Lehman Brothers Municipal Long Bond Index,
Lehman Brothers Municipal Bond Index
and Lehman Brothers Pennsylvania Municipal Bond Index+
- --------------------------------------------------------------------------------
April 1994 -- September 1998
[The following table was depicted as a line graph in the printed material.]
Municiple Pennsylvania Municiple
Pennsylvania Long Bond Municiple Bond Bond
Portfolio Index Index Index
--------- ----- ----- -----
4/4/94 9600 10000 10000 10000
3/95 10447 10903 10744 10765
3/96 11290 11733 11645 11638
3/97 11980 12424 12278 12282
3/98 13601 13986 13594 13529
9/30/98 14258 14737 14225 14123
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on April 4, 1994, assuming deduction of the maximum 4.00% sales
charge at the time of investment and reinvestment of dividends and capital
gains, if any, at net asset value through September 30, 1998. 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.
* It is the opinion of management that the Lehman Brothers Municipal Bond
Index is a more appropriate broad-based benchmark for the market in which
the Pennsylvania Portfolio invests rather than the Lehman Brothers
Municipal Long Bond Index. In future reporting, the Lehman Brothers
Municipal Bond Index and the Lehman Brothers Pennsylvania Municipal Bond
Index will be used as a basis of comparison of total return performance
rather than the Lehman Brothers Municipal Long Bond Index. The Lehman
Brothers Municipal Long Bond Index (consisting of maturities of at least
22 years) and the Lehman Brothers Pennsylvania Municipal Bond Index
(consisting of Pennsylvania municipal bonds) are each a sub-index of the
Lehman Brothers Municipal Bond Index, a broad-based, total return index
comprised of investment grade, fixed rate municipal bonds selected from
issues larger than $50 million issued since January 1991. Each index is
unmanaged and is not subject to the same management and trading expenses
of a mutual fund.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) September 30, 1998
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Education -- 7.0%
$1,000,000 AAA Bibb County Development Authority Revenue, (Wesleyan
College Project), AMBAC-Insured, 5.000% due 10/1/18 $ 1,011,250
1,000,000 AA Fulton County School District, 5.375% due 1/1/18 1,087,500
1,000,000 Aa1* Private Colleges & Universities Authority Revenue, (Emory
University Project), Series A, 5.000% due 11/1/15 1,018,750
- ---------------------------------------------------------------------------------------------------------
3,117,500
- ---------------------------------------------------------------------------------------------------------
Escrowed to Maturity (a) -- 9.1%
Cobb County Kennestone Hospital Authority Revenue,
MBIA-Insured:
205,000 AAA 10.250% due 2/1/02 225,756
660,000 AAA Series 86A, 7.750% due 2/1/07 767,250
1,875,000 Aaa* Colquitt County Development Authority Revenue,
Sub-Series C, zero coupon due 12/1/21 557,813
290,000 AAA Fulton County Water & Sewer Revenue, FGIC-Insured,
6.375% due 1/1/14 342,562
485,000 AAA Puerto Rico Commonwealth Aqueduct & Sewer
Authority Revenue, 10.250% due 7/1/09(b) 671,725
165,000 Aaa* Richmond County Water and Sewer Revenue,
9.875% due 4/1/02 185,831
1,000,000 Aaa* Savannah EDA, zero coupon due 12/1/21 300,000
320,000 AAA Tri City Hospital Authority Revenue, South Fulton
Hospital, FGIC-Insured, 10.250% due 7/1/06(b) 419,200
2,000,000 Aaa* Washington Wilkes Payroll Development Authority
Revenue, zero coupon due 12/1/21 592,500
- ---------------------------------------------------------------------------------------------------------
4,062,637
- ---------------------------------------------------------------------------------------------------------
General Obligation -- 11.0%
2,000,000 AAA Georgia Local Government, Public Improvement Grant,
Series A, MBIA-Insured, 4.750% due 6/1/28 1,967,500
2,000,000 A Puerto Rico Commonwealth, Public Improvement,
4.500% due 7/1/23 1,877,500
1,000,000 BBB- Virgin Islands Public Financing Authority Revenue,
Sr. Lien, Series A, 5.500% due 10/1/18 1,025,000
- ---------------------------------------------------------------------------------------------------------
4,870,000
- ---------------------------------------------------------------------------------------------------------
Hospitals -- 6.5%
1,000,000 AAA Fulco Hospital Authority Revenue, Catholic Health East,
Series A, 4.875% due 11/15/15 1,006,250
500,000 BBB Puerto Rico Industrial Tourist Educational, Medical &
Enviromental Control Facility Finance Authority,
(Ryder Memorial Hospital Project), Series A,
6.700% due 5/1/24 546,875
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Hospitals -- 6.5% (continued)
Savannah Hospital Authority Revenue:
$ 500,000 Ba1* Refunding & Improvement, Candler Hospital,
7.000% due 1/1/11(b) $ 569,375
725,000 Aaa* St. Josephs/Candler Health Systems, Series A,
5.250% due 7/1/14 757,625
- ---------------------------------------------------------------------------------------------------------
2,880,125
- ---------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 15.0%
500,000 AAA Acworth Housing Authority Revenue, (Wingate Falls
Apartments Project), 6.125% due 3/1/17(c) 537,500
Atlanta Urban Residential Finance Authority,
Multi-Family Housing Revenue:
1,180,000 A Cascade Pines Housing Project,
6.250% due 9/1/10(b)(c) 1,267,025
1,000,000 AAA New Community, GNMA Collateralized,
Series A-1, 5.450% due 11/20/17(c) 1,023,750
240,000 A Cobb County Housing Authority Refunding, (Signature
Place Project), Series A, 6.875% due 10/1/17 256,500
De Kalb County Housing Authority,
Multi-Family Housing Revenue, Series A:
1,000,000 Aa2* Friendly Hills Apartments, FHA-Insured,
7.050% due 1/1/39(c) 1,136,250
300,000 AAA Valley Brook Apartments Project, Revenue
Refunding, MBIA-Insured, 7.750% due 1/1/26 318,000
1,000,000 A Fulton County Multi-Family Housing Authority Revenue,
(Concorde Place Apartment Project),
6.300% due 7/1/16(c) 1,070,000
1,000,000 AAA Lawrenceville Housing Authority, Multi-Family Revenue,
(Knollwood Park Apartments Project),
6.250% due 12/1/29(c) 1,083,750
- ---------------------------------------------------------------------------------------------------------
6,692,775
- ---------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 6.0%
155,000 AAA Fulton County Housing Authority, Single-Family Mortgage
Revenue, Series A, GNMA-Collateralized,
6.600% due 3/1/28(c) 167,206
Georgia State HFA, Single-Family Mortgage Revenue:
350,000 AAA Series A, FHA-Insured, 6.600% due 12/1/23(c) 375,375
1,000,000 AAA Series A-1, 5.300% due 6/1/17 1,022,500
305,000 AA+ Georgia State Residential Finance Authority, Home
Ownership Mortgage, Series A, FHA-Insured,
7.250% due 12/1/21(c) 329,019
495,000 AAA Puerto Rico Housing Bank and Finance Agency,
Single-Family Mortgage, Affordable Housing Mortgage,
Portfolio I, GNMA/FNMA Collateralized,
6.250% due 4/1/29(c) 532,744
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Housing: Single-Family -- 6.0% (continued)
$ 235,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 6.450% due 3/1/16(c) $ 252,038
- ---------------------------------------------------------------------------------------------------------
2,678,882
- ---------------------------------------------------------------------------------------------------------
Industrial Development -- 1.3%
500,000 A1* Savannah EDA, PCR, (Union Camp Corp. Project),
6.150% due 3/1/17 572,500
- ---------------------------------------------------------------------------------------------------------
Miscellaneous -- 1.4%
500,000 BBB Puerto Rico Housing Bank and Finance Agency,
7.500% due 12/1/06(b) 598,125
- ---------------------------------------------------------------------------------------------------------
Pollution Control -- 4.6%
345,000 AAA Burke County Development Authority PCR, (Oglethorpe
Power Co. Vogtle Project), MBIA-Insured,
7.500% due 1/1/03 373,031
500,000 A Monroe County Development Authority PCR,
(Oglethorpe Power Co. Scherer Project), Series A,
6.800% due 1/1/12 595,000
1,000,000 NR Rockdale County Development Authority, Solid Waste
Disposal Revenue, (Visy Paper Project),
7.500% due 1/1/26 1,082,500
- ---------------------------------------------------------------------------------------------------------
2,050,531
- ---------------------------------------------------------------------------------------------------------
Public Facilities -- 3.5%
250,000 AAA Butts County COP, MBIA-Insured, 6.750% due 12/1/14 285,625
1,100,000 AAA Cobb-Marietta Counties Coliseum and Exhibit Hall Authority
Revenue, MBIA-Insured, 5.625% due 10/1/26 1,273,250
- ---------------------------------------------------------------------------------------------------------
1,558,875
- ---------------------------------------------------------------------------------------------------------
Short-Term(d) -- 1.1%
300,000 VMIG1* Burke County Development Authority PCR, Power Co.
Vogtle, 3rd Series, 4.150% due 9/1/25 300,000
200,000 VMIG1* Georgia State Hospital Financing Authority Revenue,
Pooled Hospital Loan Program, 4.150% due 3/1/01 200,000
- ---------------------------------------------------------------------------------------------------------
500,000
- ---------------------------------------------------------------------------------------------------------
Transportation -- 6.5%
1,000,000 AAA Georgia State Tollway Authority Revenue Refunding,
(Georgia 400 Project), 5.000% due 7/1/10 1,075,000
250,000 AAA Metro Atlanta Rapid Transit Authority Revenue Refunding,
Series P, AMBAC-Insured, 6.250% due 7/1/20 301,875
1,500,000 A Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series Y, 5.000% due 7/1/36 1,530,000
- ---------------------------------------------------------------------------------------------------------
2,906,875
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Utilities -- 11.4%
Georgia Municipal Electric Authority Revenue:
$ 600,000 AAA Series EE, AMBAC-Insured, 7.250% due 1/1/24(b) $ 819,000
1,000,000 AAA Series Z, MBIA-Insured, 5.500% due 1/1/20 1,090,000
Georgia Municipal Gas Authority Revenue:
500,000 Aaa* Buford Project, FSA-Insured, 5.000% due 11/1/13 515,000
500,000 A- Southern Storage Gas Project, 6.300% due 7/1/09 553,750
1,000,000 AA Hogansville Combined Public UtiIity System,
Asset Guaranty, 5.850% due 10/1/15 1,125,000
1,000,000 AAA Puerto Rico Electric Power Authority Revenue Refunding,
Series EE, MBIA-Insured, 4.500% due 7/1/18 965,000
- ---------------------------------------------------------------------------------------------------------
5,067,750
- ---------------------------------------------------------------------------------------------------------
Water & Sewer -- 15.6%
500,000 A+ Cartersville Development Authority Revenue Refunding,
Sewer Facilities, Anheuser Busch, 6.125% due 5/1/27(c) 550,625
1,000,000 AA Clayton County Water Authority Revenue,
5.100% due 5/1/16 1,048,750
625,000 AAA Douglasville-Douglas County Water & Sewer Authority
Revenue, AMBAC-Insured, 5.625% due 6/1/15 702,344
1,000,000 Baa2* Effingham County Development Authority, Solid Waste
Disposal Revenue, (Fort James Project),
5.625% due 7/1/18(c) 1,010,000
Fulton County Water & Sewer Revenue, FGIC-Insured:
10,000 AAA 6.375% due 1/1/14 11,850
1,000,000 AAA 5.000% due 1/1/18 1,010,000
1,000,000 AAA 4.750% due 1/1/28 980,000
500,000 AAA Milledgeville Water & Sewer Revenue, FSA-Insured,
6.000% due 12/1/21 589,375
1,000,000 AA Peachtree City Water & Sewer Authority, Sewer System
Revenue, Series A, 5.375% due 3/1/22 1,055,000
- ---------------------------------------------------------------------------------------------------------
6,957,944
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $41,282,965**) $44,514,519
=========================================================================================================
</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.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 20 and 21 for definitions of ratings and certain security.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Education -- 6.0%
$ 500,000 AAA Butler Area School District, GO, Series B, FGIC-Insured,
4.750% due 10/1/22 $ 490,000
700,000 BBB- Chester County Health & Education Facilities Authority
College Revenue, Immaculata College,
5.600% due 10/15/18 720,125
1,000,000 Aaa* Delaware County Authority University Revenue,
Villanova University, Series A, 5.000% due 12/1/98 1,013,750
1,000,000 AAA Erie School District, Capital Appreciation, Refunding,
zero coupon to yield 5.000% due 9/1/14 475,000
1,050,000 AAA McKeesport Area School District, Series B, FGIC-Insured,
zero coupon to yield 6.100% due 10/1/20 360,937
- ---------------------------------------------------------------------------------------------------------
3,059,812
- ---------------------------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 3.1%
500,000 AAA Cambria County Hospital Development Authority,
Conemaugh Valley Memorial Hospital,
7.625% due 9/1/11 604,375
435,000 AAA Lewisburg Area School District Building, AMBAC-Insured,
9.750% due 2/15/04(b) 525,806
250,000 AAA Southeastern Greene School District, 9.375% due 7/1/03 285,313
150,000 AAA York County GO, Refunding, AMBAC-Insured,
8.875% due 6/1/06 181,313
- ---------------------------------------------------------------------------------------------------------
1,596,807
- ---------------------------------------------------------------------------------------------------------
General Obligation -- 3.3%
1,000,000 A Puerto Rico Commonwealth GO, Public Improvement,
4.500% due 7/1/23 938,750
2,000,000 AAA Westmoreland County GO, FGIC-Insured,
zero coupon to yield 5.970% due 12/1/18 752,500
- ---------------------------------------------------------------------------------------------------------
1,691,250
- ---------------------------------------------------------------------------------------------------------
Hospital -- 26.3%
Allegheny County Hospital Development Authority
Revenue:
1,000,000 AAA Catholic Health East, Series A, 4.875% due 11/15/18 982,500
500,000 AAA General Hospital Project, Series A, MBIA-Insured,
6.250% due 9/1/20 534,375
1,000,000 BBB Allentown Area Hospital Authority Revenue, Sacred
Heart Hospital, 6.750% due 11/15/14 1,093,750
1,000,000 AA- Berks County Municipal Authority Health Care,
(Pooled Fing Project), 5.000% due 3/1/28 980,000
1,000,000 BBB+ Hazelton Health Services Authority Revenue,
St. Joseph's Medical Center, 6.200% due 7/1/26 1,091,250
1,000,000 BBB Horizon Hospital System Authority Revenue, Horizon
Hospital Systems Inc., 6.350% due 5/15/26 1,088,750
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Hospital -- 26.3% (continued)
$1,000,000 NR Philadelphia Authority for Industrial Development,
Health Care Facility Revenue, Baptist Home of
Philadelphia, Series A, 5.600% due 11/15/28 $ 986,250
1,600,000 AAA Philadelphia Hospital & Higher Education Facilities
Authority, Hospital Revenue, FHA-Insured,
Series A, 5.300% due 1/1/18 1,648,000
1,000,000 AA Potter County Hospital Authority Revenue, Asset
Guaranteed, 6.050% due 8/1/24 1,083,750
500,000 BBB Puerto Rico Industrial, Tourist, Educational, Medical
& Environmental Control Facilities, (Ryder Memorial
Hospital Project), Series A, 6.700% due 5/1/24 546,875
Scranton-Lackawanna Health & Welfare Authority Revenue:
500,000 BBB-++ Allied Services Rehabilitation Hospitals, (Project-A),
7.600% due 7/15/20 556,250
750,000 BBB- Moses Taylor Hospital Project, 6.250% due 7/1/20 806,250
500,000 AAA Sharon Regional Health System Authority Revenue,
5.000% due 12/1/18 505,000
St. Mary Hospital Authority, Bucks County, Catholic
Health Initiatives, Series A:
500,000 AA 5.375% due 12/1/13 524,375
1,000,000 AA 5.000% due 12/1/18 992,500
- ---------------------------------------------------------------------------------------------------------
13,419,875
- ---------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.5%
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 1,563,750
205,000 AAA Pittsburgh Urban Redevelopment Authority, Mortgage
Revenue, FNMA/GNMA-Collateralized, Series B,
6.950% due 10/1/10(c) 218,069
- ---------------------------------------------------------------------------------------------------------
1,781,819
- ---------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 4.6%
Allegheny County, Residential Mortgage Refunding,
Single-Family Housing, GNMA-Collateralized:
970,000 Aaa* 6.875% due 5/1/26(b)(c) 1,062,150
1,675,000 Aaa* Zero coupon to yield 7.500% due 5/1/27(c) 205,187
990,000 AAA Puerto Rico Single-Family Housing Mortgage Revenue,
GNMA/FNMA/ FHLMC-Collateralized,
6.250% due 4/1/29(c) 1,065,488
- ---------------------------------------------------------------------------------------------------------
2,332,825
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 17
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Industrial Development -- 8.8%
$1,000,000 BBB- Allegheny County IDA Refunding Environmental
Improvement, USX Corp., 6.700% due 12/1/20(b) $ 1,108,750
1,000,000 A3* Bradford County IDA Solid Waste, International Paper Co.,
6.600% due 3/1/19(c) 1,126,250
1,000,000 A- Delaware County IDA Revenue, Resource
Recovery Facility, Series A, 6.200% due 7/1/19 1,105,000
1,000,000 A3* Erie County IDA Environmental Improvement Revenue,
(International Paper Co. Project), Series A,
7.625% due 11/1/18(b)(c) 1,177,500
- ---------------------------------------------------------------------------------------------------------
4,517,500
- ---------------------------------------------------------------------------------------------------------
Life-Care -- 5.2%
Montgomery County IDA, Retirement Community Revenue:
1,500,000 A- Series A, 5.875% due 11/15/22 1,588,125
1,000,000 A- Series B, 5.625% due 11/15/12 1,053,750
- ---------------------------------------------------------------------------------------------------------
2,641,875
- ---------------------------------------------------------------------------------------------------------
Miscellaneous -- 8.4%
Dauphin County General Authority:
1,000,000 NR Hotel & Conference Center, Hyatt Regency,
6.200% due 1/1/29 998,750
1,000,000 NR Office & Package, Riverfront Office, 6.000% due 1/1/25 1,007,500
1,000,000 BBB Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,196,250
1,000,000 AAA York County Solid Waste & Refuse Authority, Waste
System Revenue, FGIC-Insured, 5.500% due 12/1/14 1,101,250
- ---------------------------------------------------------------------------------------------------------
4,303,750
- ---------------------------------------------------------------------------------------------------------
Pollution Control -- 3.2%
1,000,000 AAA Northhampton County IDA, Metropolitan Edison, Series A,
MBIA-Insured, 6.100% due 7/15/21 1,097,500
500,000 BBB- Pennsylvania Economic Development Financing Authority,
Resource Recovery Revenue, (Colver Project), Series D,
7.150% due 12/1/18(c) 558,125
- ---------------------------------------------------------------------------------------------------------
1,655,625
- ---------------------------------------------------------------------------------------------------------
Pre-Refunded(d) -- 2.2%
870,000 Aaa* Philadelphia Hospital Revenue, (United Hospital Inc. Project),
(Call 7/1/05 @ 100), 10.875% due 7/1/08(b) 1,121,212
- ---------------------------------------------------------------------------------------------------------
Solid Waste -- 2.2%
1,000,000 A- New Morgan IDA Solid Waste Disposal, Browning Ferris
Industries Inc., 6.500% due 4/1/19(c) 1,095,000
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Transportation -- 16.2%
$1,200,000 AAA Allegheny County Airport Revenue, Pittsburgh International
Airport, Series B, MBIA-Insured, 5.000% due 1/1/17 $ 1,215,000
1,250,000 AAA Delaware Valley Regional Financing Authority, Local
Government Revenue, AMBAC-Insured, Series A,
5.500% due 8/1/28 1,379,688
Pennsylvania State Turnpike Common Oil Franchise,
Tax Revenue Subsidiary, Series B:
1,000,000 AAA 5.000% due 12/1/18 1,012,500
500,000 AAA 4.750% due 12/1/27 490,000
1,000,000 AAA Philadelphia Authority For Industrial Development,
Airport Revenue, (Philadelphia Airport System Project),
Series A, 5.000% due 7/1/15 1,010,000
1,825,000 A Puerto Rico Commonwealth Highway & Transportation
Authority, 5.000% due 7/1/36 1,861,500
1,200,000 BBB- Puerto Rico Ports Authority Revenue, American Airlines,
Series A, 6.250% due 6/1/26(c) 1,321,500
- ---------------------------------------------------------------------------------------------------------
8,290,188
- ---------------------------------------------------------------------------------------------------------
Utilities -- 4.7%
400,000 BBB Guam Power Authority Revenue, Series A,
6.750% due 10/1/24 446,500
Puerto Rico Electric Power Authority, Power Revenue:
1,000,000 AAA Series EE, MBIA-Insured, 4.500% due 7/1/18 965,000
1,000,000 AAA Series GG, FSA-Insured, 4.750% due 7/1/21 985,000
- ---------------------------------------------------------------------------------------------------------
2,396,500
- ---------------------------------------------------------------------------------------------------------
Water and Sewer -- 2.3%
1,000,000 AAA Philadelphia Water & Wastewater Revenue, MBIA-Insured,
6.250% due 8/1/12 1,183,750
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $47,567,717**) $51,087,788
=========================================================================================================
</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) Pre-refunded bond 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.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 20 and 21 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except those that are identified by an asterisk (*) are rated by Moody's
Investors Service, Inc. ("Moody's") or those that are identified by a double
dagger (++) are rated by Fitch IBCA, Inc. ("Fitch"). 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" and "B" are regarded, on balance, as predominantly
and B speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "B" the highest
degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating
from "Aa" to "Ba", where 1 is the highest and 3 the lowest rating within its
generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa -- Bonds rated "Baa" are considered to be medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
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.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes in this class.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited) (continued)
- --------------------------------------------------------------------------------
Fitch -- Ratings may be modified by the addition of a plus (+) sign or
minus (-) sign to show relative standings within the major rating
categories.
BBB -- Bonds rated "BBB" by Fitch currently have a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
impair this capacity. This is the lowest investment grade category
assigned by Fitch.
NR -- Indicates that the bond is not rated by Standard & Poor's,
Moody's or Fitch.
- --------------------------------------------------------------------------------
Short-Term Security Ratings (unaudited)
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong;
those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
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 (unaudited)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (unaudited) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Georgia Pennsylvania
Portfolio Portfolio
=========================================================================================
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $41,282,965
and $47,567,717, respectively) $44,514,519 $51,087,788
Cash 2,848 --
Interest receivable 665,422 817,520
Receivable for Fund shares sold 26,000 170,117
Receivable for securities sold 5,000 --
- -----------------------------------------------------------------------------------------
Total Assets 45,213,789 52,075,425
- -----------------------------------------------------------------------------------------
LIABILITIES:
Management fees payable 104,052 26,531
Distribution fees payable 5,223 6,236
Payable to bank -- 388,788
Accrued expenses 24,000 31,805
- -----------------------------------------------------------------------------------------
Total Liabilities 133,275 453,360
- -----------------------------------------------------------------------------------------
Total Net Assets $45,080,514 $51,622,065
=========================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 3,271 $ 3,734
Capital paid in excess of par value 41,593,543 47,412,330
Undistributed (overdistributed) net
investment income (34,038) 111,832
Accumulated net realized gain
on security transactions 286,184 574,098
Net unrealized appreciation of investments 3,231,554 3,520,071
- -----------------------------------------------------------------------------------------
Total Net Assets $45,080,514 $51,622,065
=========================================================================================
Shares Outstanding:
Class A 1,945,668 1,457,851
-------------------------------------------------------------------------------------
Class B 906,397 1,596,147
-------------------------------------------------------------------------------------
Class L 419,297 679,890
-------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 13.79 $ 13.84
-------------------------------------------------------------------------------------
Class B * $ 13.78 $ 13.82
-------------------------------------------------------------------------------------
Class L ** $ 13.77 $ 13.81
-------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value) $ 14.36 $ 14.42
-------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value) $ 13.91 $ 13.95
=========================================================================================
</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 L 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.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998
Georgia Pennsylvania
Portfolio Portfolio
===========================================================================
INVESTMENT INCOME:
Interest $ 1,058,274 $ 1,307,446
- ---------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 88,862 106,260
Distribution fees (Note 4) 72,554 110,407
Shareholder and system servicing fees 7,583 10,000
Audit and legal 4,739 5,000
Shareholder communications 3,655 2,000
Registration fees 2,292 5,000
Pricing service fees 1,375 3,000
Trustees' fees 911 1,000
Custody 855 800
Other 1,734 1,338
- ---------------------------------------------------------------------------
Total Expenses 184,560 244,805
Less: Management fee waiver (Note 4) (23,319) (79,729)
- ---------------------------------------------------------------------------
Net Expenses 161,241 165,076
- ---------------------------------------------------------------------------
Net Investment Income 897,033 1,142,370
- ---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 13,120,860 12,500,020
Cost of securities sold 12,897,139 12,419,471
- ---------------------------------------------------------------------------
Net Realized Gain 223,721 80,549
- ---------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of period 2,327,721 2,526,007
End of period 3,231,554 3,520,071
- ---------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 903,833 994,064
- ---------------------------------------------------------------------------
Net Gain on Investments 1,127,554 1,074,613
- ---------------------------------------------------------------------------
Increase in Net Assets From Operations $ 2,024,587 $ 2,216,983
===========================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 23
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998 (unaudited)
and the Year Ended March 31, 1998
<TABLE>
<CAPTION>
Georgia Portfolio September 30 March 31
===================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 897,033 $ 1,427,411
Net realized gain 223,721 239,588
Increase in net unrealized appreciation 903,833 1,890,050
- -----------------------------------------------------------------------------------
Increase in Net Assets From Operations 2,024,587 3,557,049
- -----------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (928,932) (1,426,979)
Net realized gains -- (176,258)
- -----------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (928,932) (1,603,237)
- -----------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 9,163,494 10,292,258
Net asset value of shares issued
for reinvestment of dividends 612,152 1,042,371
Cost of shares reacquired (1,645,386) (2,503,707)
- -----------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 8,130,260 8,830,922
- -----------------------------------------------------------------------------------
Increase in Net Assets 9,225,915 10,784,734
NET ASSETS:
Beginning of period 35,854,599 25,069,865
- -----------------------------------------------------------------------------------
End of period* $ 45,080,514 $ 35,854,599
===================================================================================
* Includes overdistributed net investment income of: $ (34,038) $ (2,139)
===================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998 (unaudited)
and the Year Ended March 31, 1998
<TABLE>
<CAPTION>
Pennsylvania Portfolio September 30 March 31
===================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,142,370 $ 2,045,063
Net realized gain 80,549 825,414
Increase in net unrealized appreciation 994,064 1,986,606
- -----------------------------------------------------------------------------------
Increase in Net Assets From Operations 2,216,983 4,857,083
- -----------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (1,127,248) (1,946,032)
Net realized gains -- (322,194)
- -----------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,127,248) (2,268,226)
- -----------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 12,697,471 8,372,759
Net asset value of shares issued
for reinvestment of dividends 754,615 1,490,181
Cost of shares reacquired (5,872,070) (5,941,286)
- -----------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 7,580,016 3,921,654
- -----------------------------------------------------------------------------------
Increase in Net Assets 8,669,751 6,510,511
NET ASSETS:
Beginning of period 42,952,314 36,441,803
- -----------------------------------------------------------------------------------
End of period* $ 51,622,065 $ 42,952,314
===================================================================================
* Includes undistributed net investment income of: $ 111,832 $ 96,710
===================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Georgia 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 an 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 semi-annual reports.
The significant accounting policies consistently followed by the Portfolios 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 securi
ties and various relationships between securities; (c) securities for which
market quotations are not available will be valued in good faith at fair value
by or under the direction of the Board of Trustees; (d) securities maturing
within 60 days are valued at cost plus accreted discount or minus amortized
premium, which approximates value; (e) gains or losses on the sale of securities
are calculated by using the specific identification method; (f) 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; (g) dividends and distributions to shareholders are
recorded on the ex-dividend date; (h) 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; (i) 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; (j) 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; and (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
- --------------------------------------------------------------------------------
26 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
2. Portfolio Concentration
Since the Georgia and Pennsylvania Portfolios invest primarily in obligations of
issuers within Georgia and Pennsylvania, respectively, 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
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment manager to the Portfolios. The Portfolios pay
MMC 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. MMC
waived a portion of its management fees for the Portfolios for the six months
ended September 30, 1998.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB"), was the Fund's distributor. SSB (as well
as certain other broker-dealers) continues to sell Fund shares to the public as
a member of the selling group.
On June 12, 1998, the Fund's existing Class C shares were renamed Class L
shares. Effective June 15, 1998, Class L shares are being sold at net asset
value plus a maximum initial sales charge of 1.00%. Class L shares also have a
1.00% contingent deferred sales charge ("CDSC"), which applies if redemption
occurs within the first year of purchase.
There is also a CDSC of 4.50% on Class B shares, which applies if redemption
occurs less than one year from initial purchase. This CDSC declines by 0.50% the
first year after purchase and by 1.00% per year until no CDSC is incurred. In
certain cases, 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 27
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
For the six months ended September 30, 1998, CDSC's paid to SSB and sales
charges received by SSB were approximately:
CDSC's Sales Charges
--------------------- --------------------
Portfolio Class A Class B Class A Class L
================================================================================
Georgia -- $ 6,000 $77,000 $7,000
- --------------------------------------------------------------------------------
Pennsylvania $6,000 12,000 74,000 6,000
================================================================================
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to Class A, B and L shares calculated at an 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 L shares calculated at an annual
rate of 0.50% and 0.55% of the average daily net assets of each class,
respectively.
For the six months ended September 30, 1998, total Distribution Plan fees
incurred were:
Portfolio Class A Class B Class L
================================================================================
Georgia $17,121 $37,679 $17,754
- --------------------------------------------------------------------------------
Pennsylvania 13,563 67,015 29,829
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
5. Investments
During the six months ended September 30, 1998, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Georgia Pennsylvania
Portfolio Portfolio
================================================================================
Purchases $19,125,223 $19,603,144
- --------------------------------------------------------------------------------
Sales 13,120,860 12,500,020
================================================================================
At September 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Georgia Pennsylvania
Portfolio Portfolio
================================================================================
Gross unrealized appreciation $3,231,554 $3,520,071
Gross unrealized depreciation -- --
- --------------------------------------------------------------------------------
Net unrealized appreciation $3,231,554 $3,520,071
================================================================================
- --------------------------------------------------------------------------------
28 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
6. Shares of Beneficial Interest
At September 30, 1998, 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. Effective June 12, 1998, the Fund adopted the
renaming of existing Class C shares as Class L shares.
At September 30, 1998, total paid-in capital amounted to the following for each
class and their respective Portfolio:
Portfolio Class A Class B Class L
================================================================================
Georgia $24,805,074 $11,467,953 $5,323,787
- --------------------------------------------------------------------------------
Pennsylvania 18,444,938 20,308,198 8,662,928
================================================================================
Transactions in shares of each class were as follows:
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
---------------------- -----------------------
Georgia Portfolio Shares Amount Shares Amount
===============================================================================
Class A
Shares sold 480,297 $ 6,507,896 428,273 $ 5,703,527
Shares issued on reinvestment 27,419 370,556 44,976 594,980
Shares redeemed (88,401) (1,197,593) (108,781) (1,404,440)
- --------------------------------------------------------------------------------
Net Increase 419,315 $ 5,680,859 364,468 $ 4,894,067
================================================================================
Class B
Shares sold 121,062 $ 1,628,951 244,140 $ 3,233,404
Shares issued on reinvestment 11,512 155,453 22,249 294,164
Shares redeemed (24,015) (324,406) (58,133) (759,900)
- --------------------------------------------------------------------------------
Net Increase 108,559 $ 1,459,998 208,256 $ 2,767,668
================================================================================
Class L*
Shares sold 76,117 $ 1,026,647 101,894 $ 1,355,327
Shares issued on reinvestment 6,382 86,143 11,606 153,227
Shares redeemed (9,209) (123,387) (26,031) (339,367)
- --------------------------------------------------------------------------------
Net Increase 73,290 $ 989,403 87,469 $ 1,169,187
================================================================================
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
--------------------- -----------------------
Pennsylvania Portfolio Shares Amount Shares Amount
================================================================================
Class A
Shares sold 539,397 $ 7,372,412 192,029 $ 2,564,480
Shares issued on reinvestment 27,106 369,239 52,700 701,357
Shares redeemed (286,632) (3,945,378) (263,300) (3,525,081)
- --------------------------------------------------------------------------------
Net Increase (Decrease) 279,871 $ 3,796,273 (18,571) $ (259,244)
================================================================================
Class B
Shares sold 237,173 $ 3,220,014 265,068 $ 3,525,937
Shares issued on reinvestment 19,796 268,981 42,873 570,003
Shares redeemed (85,996) (1,168,196) (113,579) (1,504,701)
- --------------------------------------------------------------------------------
Net Increase 170,973 $ 2,320,799 194,362 $ 2,591,239
================================================================================
Class L*
Shares sold 155,149 $ 2,105,046 171,289 $ 2,282,342
Shares issued on reinvestment 8,567 116,395 16,451 218,821
Shares redeemed (55,815) (758,497) (69,192) (911,504)
- --------------------------------------------------------------------------------
Net Increase 107,901 $ 1,462,944 118,548 $ 1,589,659
================================================================================
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
30 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------------
Georgia Portfolio 1998(1) 1998 1997 1996 1995(2)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.43 $ 12.48 $ 12.50 $ 12.10 $ 12.00
- ----------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.32 0.67 0.69 0.70 0.62
Net realized and unrealized gain 0.37 1.03 0.04 0.45 0.10*
- ----------------------------------------------------------------------------------------------------------
Total Income From Operations 0.69 1.70 0.73 1.15 0.72
- ----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.33) (0.67) (0.67) (0.70) (0.62)
Net realized gains -- (0.08) (0.08) (0.05) --
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.75) (0.75) (0.75) (0.62)
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.79 $ 13.43 $ 12.48 $ 12.50 $ 12.10
- ----------------------------------------------------------------------------------------------------------
Total Return 5.21%++ 13.85% 5.95% 9.67% 6.29%++
- ----------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 26,820 $ 20,502 $ 14,495 $ 9,744 $ 8,520
- ----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3)(4) 0.59%+ 0.50% 0.48% 0.38% 0.28%+
Net investment income 4.76+ 5.10 5.49 5.57 5.43+
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 36% 81% 63% 34%
==========================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) For the period from April 4, 1994 (inception date) to March 31, 1995.
(3) The Manager has waived all or part of its fees for the six months ended
September 30, 1998 and the years ended March 31, 1998, 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(4)
---------------------------------- ------------------------------------
1998(1) 1998 1997 1996 1995 1998(1) 1998 1997 1996 1995
------ ----- ----- ----- ----- ------ ----- ----- ----- ------
Class A $0.01 $0.04 $0.04 $0.11 $0.12 0.71%+ 0.83% 0.90% 1.23% 1.20%+
(4) As a result of voluntary expense limitations, expense ratios will not
exceed 0.80% for Class A shares.
* Includes the per share effect of shareholder sale and redemption 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 31
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
---------------------------------------------------------------------
Georgia Portfolio 1998(1) 1998 1997 1996 1995(2)(3)
================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.43 $ 12.47 $ 12.50 $ 12.11 $ 12.27
- ----------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(4) 0.29 0.61 0.62 0.64 0.49
Net realized and unrealized gain (loss) 0.35 1.03 0.04 0.45 (0.16)*
- ----------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.64 1.64 0.66 1.09 0.33
- ----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.29) (0.60) (0.61) (0.65) (0.49)
Net realized gains -- (0.08) (0.08) (0.05) --
- ----------------------------------------------------------------------------------------------------------------
Total Distributions (0.29) (0.68) (0.69) (0.70) (0.49)
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.78 $ 13.43 $ 12.47 $ 12.50 $ 12.11
- ----------------------------------------------------------------------------------------------------------------
Total Return 4.87%++ 13.39% 5.33% 9.08% 2.88%++
- ----------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 12,488 $ 10,712 $ 7,354 $ 5,461 $ 2,551
- ----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4)(5) 1.11%+ 1.02% 1.00% 0.92% 0.85%+
Net investment income 4.24+ 4.58 4.97 5.20 5.37+
- ----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 36% 81% 63% 34%
================================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) For the period from June 15, 1994 (inception date) to March 31, 1995.
(3) On November 7, 1994, the former Class E shares were renamed Class B
shares.
(4) The Manager has waived all or part of its fees the six months ended
September 30, 1998 and the years ended March 31, 1998, 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(5)
---------------------------------- -----------------------------------
1998(1) 1998 1997 1996 1995 1998(1) 1998 1997 1996 1995
------ ----- ----- ----- ----- ------ ----- ----- ----- ------
Class B $0.01 $0.04 $0.05 $0.10 $0.11 1.23%+ 1.35% 1.42% 1.77% 1.82%+
(5) As a result of voluntary expense limitations, expense ratios will not
exceed 1.30% for Class B shares.
* Includes the per share effect of shareholder sale and redemption 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.
- --------------------------------------------------------------------------------
32 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares(1)
------------------------------------------------------------------
Georgia Portfolio 1998(2) 1998 1997 1996 1995(3)(4)
========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.41 $ 12.46 $ 12.49 $ 12.09 $ 12.06
- --------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(5) 0.28 0.60 0.62 0.63 0.55
Net realized and unrealized gain 0.37 1.02 0.03 0.46 0.04*
- --------------------------------------------------------------------------------------------------------
Total Income From Operations 0.65 1.62 0.65 1.09 0.59
- --------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.29) (0.59) (0.60) (0.64) (0.56)
Net realized gains -- (0.08) (0.08) (0.05) --
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.29) (0.67) (0.68) (0.69) (0.56)
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.77 $ 13.41 $ 12.46 $ 12.49 $ 12.09
- --------------------------------------------------------------------------------------------------------
Total Return 4.91%++ 13.23% 5.28% 9.12% 5.11%++
- --------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 5,773 $ 4,641 $ 3,221 $ 2,914 $ 1,295
- --------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5)(6) 1.15%+ 1.06% 1.04% 0.97% 0.90%+
Net investment income 4.20+ 4.54 4.93 5.18 5.22+
- --------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 36% 81% 63% 34%
========================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended September 30, 1998 (unaudited).
(3) For the period from April 14, 1994 (inception date) to March 31, 1995.
(4) On November 7, 1994, the former Class B shares were renamed Class C
shares.
(5) The Manager has waived all or part of its fees for the six months ended
September 30, 1998 and the years ended March 31, 1998, 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(6)
---------------------------------- ----------------------------------
1998(1) 1998 1997 1996 1995 1998(1) 1998 1997 1996 1995
------ ----- ----- ----- ----- ------ ----- ----- ----- ------
Class L $0.01 $0.04 $0.05 $0.10 $0.12 1.27%+ 1.39% 1.46% 1.82% 1.85%+
(6) As a result of voluntary expense limitations, expense ratios will not
exceed 1.35% for Class L shares.
* Includes the per share effect of shareholder sale and redemption 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 33
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------------------
Pennsylvania Portfolio 1998(1) 1998 1997 1996(2) 1995(3)(4)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.54 $ 12.66 $ 12.62 $ 12.40 $ 12.00
- ---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(5) 0.34 0.73 0.71 0.70 0.67
Net realized and unrealized gain 0.31 0.95 0.04 0.29 0.35*
- ---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.65 1.68 0.75 0.99 1.02
- ---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.35) (0.69) (0.71) (0.72) (0.62)
Net realized gains -- (0.11) -- (0.05) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.35) (0.80) (0.71) (0.77) (0.62)
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.84 $ 13.54 $ 12.66 $ 12.62 $ 12.40
- ---------------------------------------------------------------------------------------------------------------
Total Return 4.83%++ 13.52% 6.11% 8.08% 8.82%++
- ---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 20,180 $ 15,955 $ 15,152 $ 11,847 $ 7,974
- ---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5)(6) 0.37%+ 0.37% 0.37% 0.38% 0.29%+
Net investment income 5.16+ 5.46 5.66 5.57 5.76+
- ---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 81% 122% 88% 38%
===============================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) 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.
(3) For the period from April 4, 1994 (inception date) to March 31, 1995.
(4) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(5) The Manager has waived all or part of its fees for the six months ended
September 30, 1998 and the years ended March 31, 1998, 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(6)
---------------------------------- ----------------------------------
1998(1) 1998 1997 1996 1995 1998(1) 1998 1997 1996 1995
------ ----- ----- ----- ----- ------ ----- ----- ----- ------
Class A $0.01 $0.05 $0.06 $0.07 $0.09 0.48%+ 0.79% 0.82% 0.93% 1.03%+
(6) As a result of voluntary expense limitations, expense ratios will not
exceed 0.80% for Class A shares.
* Includes the per share effect of shareholder sale and redemption 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.
- --------------------------------------------------------------------------------
34 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares
-------------------------------------------------------------------------
Pennsylvania Portfolio 1998(1) 1998 1997 1996(2) 1995(3)(4)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.52 $ 12.64 $ 12.61 $ 12.39 $ 12.35
- ---------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(5) 0.31 0.65 0.65 0.64 0.51
Net realized and unrealized gain 0.30 0.96 0.03 0.29 0.01*
- ---------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.61 1.61 0.68 0.93 0.52
- ---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.62) (0.65) (0.66) (0.48)
Net realized gains -- (0.11) -- (0.05) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.73) (0.65) (0.71) (0.48)
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.82 $ 13.52 $ 12.64 $ 12.61 $ 12.39
- ---------------------------------------------------------------------------------------------------------------
Total Return 4.57%++ 12.97% 5.56% 7.61% 4.48%++
- ---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 22,053 $ 19,268 $ 15,559 $ 13,131 $ 4,850
- ---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(5)(6) 0.89%+ 0.89% 0.88% 0.88% 0.82%+
Net investment income 4.65+ 4.94 5.15 5.07 5.31+
- ---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 81% 122% 88% 38%
===============================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) 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.
(3) For the period from June 20, 1994 (inception date) to March 31, 1995.
(4) On November 7, 1994, the former Class E shares were renamed Class B
shares.
(5) The Manager has waived all or part of its fees for the six months ended
September 30, 1998 and the years ended March 31, 1998, 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(6)
---------------------------------- ----------------------------------
1998(1) 1998 1997 1996 1995 1998(1) 1998 1997 1996 1995
------ ----- ----- ----- ----- ------ ----- ----- ----- ------
Class B $0.01 $0.05 $0.06 $0.07 $0.08 1.00%+ 1.31% 1.33% 1.44% 1.58%+
(6) As a result of voluntary expense limitations, expense ratios will not
exceed 1.30% for Class B shares.
* Includes the per share effect of shareholder sale and redemption 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 35
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares(1)
--------------------------------------------------------------------
Pennsylvania Portfolio 1998(2) 1998 1997 1996(3) 1995(4)(5)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.51 $ 12.64 $ 12.61 $ 12.39 $ 12.00
- ----------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(6) 0.31 0.64 0.64 0.64 0.59
Net realized and unrealized gain 0.30 0.96 0.04 0.29 0.36*
- ----------------------------------------------------------------------------------------------------------
Total Income From Operations 0.61 1.60 0.68 0.93 0.95
- ----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.62) (0.65) (0.66) (0.56)
Net realized gains -- (0.11) -- (0.05) --
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.73) (0.65) (0.71) (0.56)
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.81 $ 13.51 $ 12.64 $ 12.61 $ 12.39
- ----------------------------------------------------------------------------------------------------------
Total Return 4.55%++ 12.84% 5.51% 7.56% 8.14%++
- ----------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 9,389 $ 7,729 $ 5,731 $ 4,682 $ 3,337
- ----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(6)(7) 0.94%+ 0.94% 0.94% 0.94% 0.86%+
Net investment income 4.59+ 4.89 5.09 5.00 5.04+
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 81% 122% 88% 38%
==========================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended September 30, 1998 (unaudited).
(3) 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.
(4) For the period from April 5, 1994 (inception date) to March 31, 1995.
(5) On November 7, 1994, the former Class B shares were renamed Class C
shares.
(6) The Manager has waived all or part of its fees for the six months ended
September 30, 1998 and the years ended March 31, 1998, 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(7)
---------------------------------- -----------------------------------
1998(1) 1998 1997 1996 1995 1998(1) 1998 1997 1996 1995
------ ----- ----- ----- ----- ------ ----- ----- ----- ------
Class L $0.01 $0.05 $0.06 $0.07 $0.09 1.06%+ 1.36% 1.39% 1.49% 1.56%+
(7) As a result of voluntary expense limitations, expense ratios will not
exceed 1.35% for Class L shares.
* Includes the per share effect of shareholder sale and redemption activity
during the period, most of which occurred at a net asset value less than
the net asset value at the beginning of the period.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
36 1998 Semi-Annual Report to Shareholders
<PAGE>
SALOMON SMITH BARNEY
A member of citigroup[LOGO]
Trustees
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Mutual Management Corp.
Distributor
CFBDS, 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 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, fees and expenses as well as other
pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Muni Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD01563 11/98
<PAGE>
[GRAPHIC]
Smith Barney Muni Funds
New York Money
Market Portfolio
New York Portfolio
- ------------------
SEMI-ANNUAL REPORT
- ------------------
September 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Smith Barney
Muni Funds
[PHOTO] [PHOTO]
HEATH B. JOSEPH
MCLENDON BENEVENTO
Chairman Vice President
[PHOTO]
PETER M.
COFFEY
Vice President
DEAR SHAREHOLDER:
We are pleased to provide you with the semi-annual report for the Smith Barney
Muni Funds - New York Money Market Portfolio and New York Portfolio
("Portfolios") for the period ended September 30, 1998. For your convenience, we
have summarized the period's prevailing economic and market conditions below and
outlined each Portfolio's investment strategy. A detailed summary of performance
can be found in the appropriate sections that follow.
NEW YORK MONEY MARKET PORTFOLIO
The New York Money Market Portfolio seeks to provide investors with income
exempt from federal income tax (other than the alternative minimum tax) and New
York State and City personal income taxes by investing in a portfolio of high
quality, short-term New York municipal obligations selected for liquidity and
stability of principal.
As of September 30, 1998, the Portfolio's 7-day current yield was 3.12%. The
Portfolio's 7-day effective yield, which reflects compounding, was 3.17%.
The Portfolio invests only in short-term securities that carry minimal credit
risk. All of the Portfolio's holdings are rated within the top two short-term
credit rating categories or are of comparable quality. During the reporting
period, the Portfolio's average weighted maturity was approximately 51 days.
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
neither insures nor guarantees an investment in the New York Money Market
Portfolio.
NEW YORK PORTFOLIO'S PERFORMANCE AND INVESTMENT STRATEGY
The New York Portfolio seeks to pay its shareholders as high a level of monthly
income exempt from Federal income taxes and from New York State and City
personal income taxes as is consistent with prudent investing.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 1
<PAGE>
For the six months ended September 30, 1998, the Class A shares of the New York
Portfolio generated a total return of 4.78% and outperformed its New York
municipal bond fund peer group average total return of 4.49% for the same time
period, according to Lipper Analytical Services, Inc. (Lipper is an independent
fund-tracking organization.)
Based on its net asset value ("NAV") of $14.21 as of September 30, 1998 and the
current monthly income dividend of $0.058 for Class A, this equates to an
annualized distribution rate of 4.90%. For a New York resident in the combined
federal and state income tax bracket of 43.22%, the New York Portfolio's
tax-free yield of 4.90% is equivalent to a taxable yield of 8.63%. (This figure
assumes a federal income tax bracket of 36.0%, which represents 10.0% of all
U.S. federal taxpayers according to the Internal Revenue Service.) For
performance information on the Portfolio's other share classes, please see pages
6 and 7.
We are pleased to report that the Fund has been given a four-star rating overall
for its Class A and Class B shares from Morningstar, Inc.* as of September 30,
1998.
Given the present market conditions, we have continued to emphasize credit
quality and call protection in the Portfolio. As of the close of the reporting
period 91% of the Portfolio's bond holdings were rated "A" or better and average
stated call protection was 8.8 years. The Portfolio's holdings were concentrated
among the following industries: hospital bonds (14.7%), education bonds (11.9%),
transportation bonds (11.4%), pre-refunded bonds (11.0%) and housing bonds
(10.2%).
MARKET AND ECONOMIC OVERVIEW
Bond market performance was shaped primarily by surging demand for U.S. Treasury
securities and a massive issuance of municipal bonds in the past six months.
During the reporting period, municipal bond prices remained relatively flat with
coupon interest providing most of the returns for municipal bonds.
- ----------
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through September 30, 1998. The ratings are subject to change
every month. Past performance is not a guarantee of future results.
Morningstar, Inc. ratings are calculated from the Portfolio's 3- and 5-year
returns (with fee adjustments) in excess of 90-day T-bill returns. For Class A
shares, the Portfolio received 4 stars for the overall, 4 stars for the 3-year
period, 4 stars for the 5-year period and 4 stars for the ten year period. For
Class B shares, the Portfolio received 4 stars for the overall and 4 stars for
the 3-year period. For Class L shares, the Portfolio received 3 stars overall,
4 stars for the 3-year period and 3 stars for the 5-year period. It was rated
among 1,581 municipal bond funds for the 3-year period, 943 municipal bond
funds for the 5-year period and 359 municipal bond funds for the ten-year
period. The top 10% of the funds in a rating category receive 5 stars, 22.5%
receive 4 stars, 35% receive 3 stars 22.5% receive 2 stars and 10% receive 1
star.
- --------------------------------------------------------------------------------
2 1998 Semi-Annual Report to Shareholders
<PAGE>
Troubled financial markets abroad and a strengthening U.S. dollar further
exacerbated an already dramatic flight of capital from foreign countries into
U.S. markets. The U.S. Treasury bond, considered to be the global benchmark for
credit quality, was the chief beneficiary of these capital inflows. The large
flows of money into U.S. Treasury securities drove their prices upward and their
yields lower. On September 30, 1998, the yield of the bellwether 30-year U.S.
Treasury bond fell to 4.95%, the lowest level for long-term government debt
since 1967. Since the close of the reporting period, long-term U.S. Treasury
yields fell even further before drifting upward in recent days.
Up until July, many bond investors had been focused on any signs of the
reappearance of inflation. However, developments in the Pacific Rim, such as
Japan's failure to shore up its ailing banking system and Russia's unexpected
devaluation of its currency, altered that view considerably. Moreover, a number
of speculators who found themselves caught in highly unusual market conditions
added to the growing uncertainty in U.S. capital markets.
In response to global tumult, the Federal Reserve Board ("Fed") signaled a shift
in policy from vigilance against inflation toward concerns of global deflation
by cutting short-term interest rates 0.25% at its September 1998 meeting. The
rate cut was the first action by the Fed since March 1997.
After the close of the reporting period, the Fed took an extraordinary and
unexpected action of cutting short-term interest rates again by another 0.25% on
October 15, 1998. This latest action brings the federal-funds rate to 5.0% and
the largely symbolic discount rate to 4.75%. (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. The discount rate is the interest
rate the Federal Reserve charges its member banks for loans.)
Foreign investors, who do not benefit from the tax-exempt status of municipal
bonds, have been large buyers of U.S. Treasury securities. As a result, yields
for U.S. Treasury securities have declined further than those of municipal
bonds. Municipal bond yields are currently yielding as much as 100% of
equivalent maturity U.S. Treasury bonds. Municipal bonds are considered by many
investors to be a good value when they yield about 85% of U.S. Treasury bonds.
At their present levels, we believe that tax-exempt bonds can now provide a
competitive income stream for risk-averse investors of almost any income tax
bracket.
In contrast to the diminishing U.S. Treasury security supply, municipal bond
issuance continued at record levels. New issue volume reached its peak in 1993
when $293 billion in new municipal bonds were sold. So far this year, municipal
bond volume is on pace to exceed $300 billion. This disparity in supply and
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 3
<PAGE>
demand between U.S. Treasury bonds and municipal bonds is a primary reason for
municipal bond underperformance relative to U.S. Treasurys.
NEW YORK ECONOMIC HIGHLIGHTS
Economic recovery continued in New York State, driven mostly by a booming
downstate economy. Employment in New York City grew at its fastest pace in
decades accompanied by real gains in wages. The service sector, especially
financial services and tourism industries, continues to fuel the economic
expansion in New York. In addition, the tremendous success of Wall Street in
recent years has helped revive a previously floundering real estate market and
has also led to higher spending in the adjacent suburbs. As a result of the
increased economic activity, New York City generated a record budget surplus of
$2.1 billion in fiscal year 1998.
Nonetheless, the Empire State may soon be feeling the effects of the spreading
global deflationary pressures. A number of prominent Wall Street firms have
already reported diminished earnings and downsizing as a direct result of the
recent market turmoil. Although we expect New York City to experience declining
revenues, it should not result in budget shortfalls as in previous market
downturns because New York City officials have already begun to lower its
financial forecasts. Because Wall Street is such a significant contributor to
New York City's financial health, as well as New York State, its near-term
prospects will be closely tied to the resolution of current market unrest.
However, we continue to be optimistic about New York's long-term financial
future.
OUTLOOK
We believe that municipal bonds represent excellent values under the current
market conditions. With the stock market's recent volatility, many investors may
be looking to reallocate their existing portfolios. In our opinion, this may be
a timely opportunity for many of these investors to consider further
diversifying their portfolios with municipal bonds.
We anticipate that economic conditions should remain supportive for the
municipal bond market over the near term. The U.S. economy remains sound despite
the widely reported economic distress of many other countries. Although U.S.
economic growth will likely slow over the coming months, we expect the economy
to expand modestly. Moreover, the Fed should continue to gradually lower
short-term interest rates and that in turn should help correct some of the
imbalances that exist in the overall bond market today.
On a more somber note, we report with much sadness the passing of Emeritus
Trustee C. Richard Youngdahl. Dick made many valuable contributions to the Board
and the Fund during his tenure and he will be missed.
- --------------------------------------------------------------------------------
4 1998 Semi-Annual Report to Shareholders
<PAGE>
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 continuing to
help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Joseph Benevento
Heath B. McLendon Joseph Benevento
Chairman Vice President
New York Money Market Portfolio
/s/ Peter M. Coffey
Peter M. Coffey
Vice President
New York Portfolio
October 16, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 5
<PAGE>
- --------------------------------------------------------------------------------
New York Portfolio
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
================================================================================
9/30/98 $13.91 $14.21 $0.35 $0.00 4.78%+
- --------------------------------------------------------------------------------
3/31/98 13.16 13.91 0.73 0.05 11.83
- --------------------------------------------------------------------------------
3/31/97 13.19 13.16 0.74 0.00 5.48
- --------------------------------------------------------------------------------
3/31/96 12.83 13.19 0.74 0.00 8.71
- --------------------------------------------------------------------------------
3/31/95 12.83 12.83 0.77 0.00 6.32
- --------------------------------------------------------------------------------
3/31/94 13.25 12.83 0.79 0.00 2.66
- --------------------------------------------------------------------------------
3/31/93 12.33 13.25 0.81 0.00 14.48
- --------------------------------------------------------------------------------
3/31/92 11.80 12.33 0.81 0.00 11.98
- --------------------------------------------------------------------------------
3/31/91 11.67 11.80 0.85 0.00 8.74
- --------------------------------------------------------------------------------
3/31/90 11.48 11.67 0.87 0.00 9.28
- --------------------------------------------------------------------------------
3/31/89 11.25 11.48 0.86 0.00 10.03
================================================================================
Total $8.32 $0.05
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
========================================================================================
<S> <C> <C> <C> <C> <C>
9/30/98 $13.89 $14.20 $0.32 $0.00 4.57%+
- ----------------------------------------------------------------------------------------
3/31/98 13.15 13.89 0.66 0.05 11.19
- ----------------------------------------------------------------------------------------
3/31/97 13.18 13.15 0.67 0.00 4.96
- ----------------------------------------------------------------------------------------
3/31/96 12.84 13.18 0.68 0.00 8.05
- ----------------------------------------------------------------------------------------
Inception* - 3/31/95 11.96 12.84 0.29 0.00 9.92+
========================================================================================
Total $2.62 $0.05
========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
6 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
New York Portfolio
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares(2)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
========================================================================================
<S> <C> <C> <C> <C> <C>
9/30/98 $13.88 $14.18 $0.31 $0.00 4.45%+
- ----------------------------------------------------------------------------------------
3/31/98 13.14 13.88 0.65 0.05 11.13
- ----------------------------------------------------------------------------------------
3/31/97 13.17 13.14 0.67 0.00 4.91
- ----------------------------------------------------------------------------------------
3/31/96 12.83 13.17 0.68 0.00 8.07
- ----------------------------------------------------------------------------------------
3/31/95 12.82 12.83 0.68 0.00 5.66
- ----------------------------------------------------------------------------------------
3/31/94 13.24 12.82 0.70 0.00 1.96
- ----------------------------------------------------------------------------------------
Inception* - 3/31/93 12.84 13.24 0.12 0.00 4.04+
========================================================================================
Total $3.81 $0.05
========================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months Ended 9/30/98+ 4.78% 4.57% 4.45%
- --------------------------------------------------------------------------------
Year Ended 9/30/98 9.26 8.69 8.60
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 6.51 N/A 5.86
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/98 8.72 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 9/30/98 7.78 9.99 7.02
================================================================================
With Sales Charges(3)
--------------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months Ended 9/30/98+ 0.58% 0.07% 2.41%
- --------------------------------------------------------------------------------
Year Ended 9/30/98 4.91 4.19 6.50
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 5.65 N/A 5.65
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/98 8.28 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 9/30/98 7.41 9.60 6.83
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 7
<PAGE>
- --------------------------------------------------------------------------------
New York Portfolio
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (9/30/88 through 9/30/98) 130.76%
- --------------------------------------------------------------------------------
Class B (Inception* through 9/30/98) 44.95
- --------------------------------------------------------------------------------
Class L (Inception* through 9/30/98)(2) 47.49
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed within one year from 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 L shares also 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 L 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.
- --------------------------------------------------------------------------------
8 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the New York Portfolio vs.
Lehman Brothers Municipal Long Bond Index
and Lehman Brothers Municipal Bond Index+
- --------------------------------------------------------------------------------
September 1988 -- September 1998
[LINE GRAPH]
<TABLE>
<CAPTION>
New York Lehman Brothers Lehman Brothers
Portfolio Municipal Long Bond Index Municipal Bond Index
<S> <C> <C> <C>
9/88 9,600 10,000 10,000
3/89 9,903 10,397 10,254
3/90 10,791 11,551 11,336
3/91 11,700 12,643 12,381
3/92 13,065 14,082 13,618
3/93 14,919 16,144 15,322
3/94 15,280 16,328 15,678
3/95 16,222 17,743 16,844
3/96 17,636 19,373 18,256
3/97 18,602 20,594 19,250
3/98 20,802 23,184 21,312
9/98 21,796 24,429 22,301
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares on
September 30, 1988, assuming deduction of the maximum 4.00% sales charge
at the time of investment and reinvestment of dividends (after deduction
of applicable sales charges through November 6, 1994 and thereafter at net
asset value) and capital gains, if any, at net asset value through
September 30, 1998. 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.
* It is the opinion of management that the Lehman Brothers Municipal Bond
Index is a more appropriate broad-based benchmark for the market in which
the New York Portfolio invests, rather than the Lehman Brothers Municipal
Long Bond Index. In future reporting, the Lehman Brothers Municipal Bond
Index will be used as a basis of comparison of total return performance
rather than the Lehman Brothers Municipal Long Bond Index. The Lehman
Brothers Municipal Long Bond Index (consisting of maturities of at least
22 years) is a sub-index of the Lehman Brothers Municipal Bond Index, a
broad-based, total return index comprised of investment grade, fixed rate
municipal bonds selected from issues larger than $50 million issued since
January 1991. Each index is unmanaged and is not subject to any management
and trading expenses of a mutual fund.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Albany IDA IDR, 540 Broadway Project:
$ 1,255,000 A-1 Series B-2 4.200% due 12/1/98(a)(c) $ 1,255,000
1,250,000 A-1 Series B-3 4.250% due 12/1/98(a)(c) 1,250,000
3,600,000 NR++ Chautauqua County IDA (Red Wing Co. Inc.
Project) 3.900%(b) 3,600,000
4,950,000 A-1 Columbia County IDA (Rural Manufacturing
Project) Series A 3.700%(a)(b) 4,950,000
5,000,000 MIG 1* Deer Park UFSD TAN 1998 4.000% due 6/25/99 5,014,138
5,000,000 A-1+ Dutchess County IDA (Marist College) 1998
Series A 3.850%(b) 5,000,000
8,600,000 MIG 1* East Meadow UFSD TAN 4.000% due 6/28/99 8,624,558
10,000,000 NR+ Eastern Suffolk BOCES RAN 4.000% due
6/23/99 10,016,045
Erie County IDA:
Colad Group:
2,160,000 A-1 Series A 3.700%(a)(b) 2,160,000
2,229,000 A-1 Series B 3.700%(a)(b) 2,229,000
3,660,000 P-1* Rosina Food Products, Inc. 3.700%(a)(b) 3,660,000
2,240,000 A-1 Fulton County IDR (Fiber Conversion Inc.
Project) 3.700%(a)(b) 2,240,000
1,630,000 A-1 Hudson County (Emsig Manufacturing Corp.)
Series 98 3.800%(a)(b) 1,630,000
Jefferson County IDA IDR:
1,160,000 A-1 The Climax Manufacturing Co. Project
3.700%(a)(b) 1,160,000
2,300,000 A-1 Fisher Gauge 3.700%(a)(b) 2,300,000
1,170,000 A-1 Lewis County IDA IDR (The Climax
Manufacturing Co. Project) 3.700%(a)(b) 1,170,000
Long Island Power Authority:
32,900,000 A-1+ Series 1 1998 3.350%(b) 32,900,000
15,100,000 A-1+ Series 2 3.500%(b) 15,100,000
12,000,000 A-1+ Series 3 TECP 3.400% due 10/20/98 12,000,000
13,000,000 A-1+ Series 3 TECP 3.700% due 11/20/98 13,000,000
4,300,000 A-1+ Series 3 TECP 3.500% due 12/7/98 4,300,000
1,400,000 A-1+ Series 5 4.000%(b) 1,400,000
10,000,000 VMIG 1* Series 1998-10 FSA-Insured PART 4.170%(b) 10,000,000
8,500,000 NR+ Madison County BOCES RAN 4.000% due 6/25/99 8,527,266
Monroe County IDA IDR:
4,565,000 A-1 Granite Building 3.600%(b) 4,565,000
6,200,000 A-1 Jada Precision Plastic 3.700%(a)(b) 6,200,000
Municipal Assistance Corp.:
10,800,000 A-1+ Series F AMBAC-Insured 3.900%(b) 10,800,000
5,000,000 A-1+ Series L 5.000% due 7/1/99 5,047,936
Nassau County:
34,655,000 SP-1 BAN Series C 4.250% due 5/18/99 34,787,662
13,419,000 NR+ Hempstead BAN Series D 4.000% due 10/15/98 13,419,991
6,350,000 A-1+ Hempstead IDA IDR Nassau Energy 3.350%(b) 6,350,000
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
$17,000,000 NR+ Hempstead UFSD TAN Series 99 4.000%
due 6/30/99 $17,036,586
New York City GO:
1,400,000 A-1+ Series 92D FGIC-Insured 3.250%(b) 1,400,000
4,200,000 A-1+ Series 92D FGIC-Insured 3.450%(b) 4,200,000
4,500,000 A-1+ Series 92D FGIC-Insured 3.500%(b) 4,500,000
16,100,000 A-1+ Series 94 B-8 3.350%(b) 16,100,000
1,600,000 A-1+ Series 94E 4.100%(b) 1,600,000
2,200,000 A-1+ Series 95 F-2 3.300%(b) 2,200,000
8,400,000 A-1+ Series 95 F-6 3.300%(b) 8,400,000
7,050,000 A-1+ Series A-4 3.800%(b) 7,050,000
3,525,000 A-1+ Series B FGIC-Insured 4.250%(b) 3,525,000
6,400,000 A-1+ Series B-6 MBIA-Insured 3.950%(b) 6,400,000
4,000,000 A-1+ Series F-3 3.300%(b) 4,000,000
1,100,000 A-1+ Sub-Series 94 B-5 MBIA-Insured 3.950%(b) 1,100,000
2,200,000 A-1+ Sub-Series 94 B-10 3.250%(b) 2,200,000
16,100,000 A-1+ Sub-Series 95 F-4 3.300%(b) 16,100,000
1,300,000 A-1+ Sub-Series 96 J-3 TECP 3.550% due 12/10/98 1,300,000
4,300,000 A-1+ Sub-Series A-7 4.100%(b) 4,300,000
4,150,000 A-1+ Sub-Series B-2 4.250%(b) 4,150,000
5,000,000 A-1 Sub-Series E AMBAC-Insured PART
3.800% due 10/2/98(c) 5,000,000
2,500,000 A-1+ Sub-Series E-2 4.100%(b) 2,500,000
New York City HDC Multi-Family Housing:
400 West 59th Street:
8,300,000 A-1+ Series A-1 3.350%(a)(b) 8,300,000
6,700,000 A-1+ Series A-2 3.350%(a)(b) 6,700,000
13,570,000 A-1+ Columbus Apartments Series A 3.350%(b) 13,570,000
10,400,000 A-1 York Avenue Project 3.900%(a)(b) 10,400,000
New York City Health & Hospital Revenue:
4,500,000 A-1+ Series A 3.350%(b) 4,500,000
2,500,000 A-1+ Series C 3.350%(b) 2,500,000
New York City IDA:
19,000,000 A-1 Air Express International Corp.
Project 3.700%(a)(b) 19,000,000
3,126,000 VMIG 1* Berkeley Carroll School Project 3.700%(b) 3,126,000
10,000,000 A-1+ Children's Oncology Society 3.250%(b) 10,000,000
2,050,000 A-1 Columbia Grammar School Project 3.550%(b) 2,050,000
3,900,000 A-1+ Guggenheim Foundation 4.100%(b) 3,900,000
12,000,000 A-1+ USA Waste Services 3.850%(a)(b) 12,000,000
7,820,000 A-1+ New York City Metro Transportation
Authority
PART AMBAC-Insured 4.140%(b) 7,820,000
New York City Municipal Water & Finance
Authority:
9,015,000 A-1 PART FGIC-Insured 3.800% due 11/4/98(c) 9,015,000
12,805,000 VMIG 1* Series 2 PART 3.810%(b) 12,805,000
20,000,000 A-1+ Series 4 TECP 3.600% due 11/5/98 20,000,000
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
$18,700,000 A-1+ Series 5 TECP 3.600% due 10/20/98 $18,700,000
8,400,000 A-1+ Series 5A TECP 3.600% due 10/13/98 8,400,000
4,685,000 A-1+ Series 94B PART MBIA-Insured 3.600%(b) 4,685,000
2,600,000 A-1+ Series A FGIC-Insured 4.150%(b) 2,600,000
3,640,000 AAA Series A FGIC-Insured (Pre-Refunded--
Escrowed with U.S. government
securities to 6/15/99 Call @ 101.50
6.750% due 6/15/14) 3,762,888
9,700,000 A-1+ Series G FGIC-Insured 4.000%(b) 9,700,000
New York City Transitional Finance Authority:
20,000,000 A-1+ Series 98B PART 4.140%(b) 20,000,000
6,500,000 VMIG 1* Series C 3.950%(b) 6,500,000
New York State Dormitory Authority:
8,625,000 A-1+ Colgate University PART FGIC-Insured
3.600%(b) 8,625,000
Memorial Sloan Kettering TECP:
1,000,000 A-1 Series 89B 3.350% due 12/9/98 1,000,000
11,525,000 A-1 Series 89C 3.350% due 12/9/98 11,525,000
7,235,000 A-1+ Mental Health Services PART FSA-Insured
4.140%(b) 7,235,000
2,000,000 A-1+ PART FGIC-Insured 3.650%(b) 2,000,000
6,245,000 A-1+ United Health Services PART AMBAC-Insured
3.900% due 10/1/98(c) 6,245,000
New York State Energy Research & Development
Authority Gas Facilities:
Brooklyn Union Gas MBIA-Insured:
4,400,000 A-1+ 3.300%(b) 4,400,000
14,320,000 A-1+ 3.400%(b) 14,320,000
Long Island Lighting Co.:
14,000,000 VMIG 1* Series A 3.350%(a)(b) 14,000,000
10,500,000 VMIG 1* Series A 3.450%(a)(b) 10,500,000
Niagara Mohawk:
1,100,000 A-1+ PCR 4.150%(a)(b) 1,100,000
5,900,000 P-1* Series 87A 4.100%(b) 5,900,000
3,300,000 A-1+ Series A 4.100%(b) 3,300,000
1,800,000 A-1+ Series B PCR 4.150%(a)(b) 1,800,000
Rochester Gas & Electric:
14,700,000 A-1+ Series 97A MBIA-Insured 3.350%(a)(b) 14,700,000
18,000,000 A-1+ Series B MBIA-Insured 3.350%(b) 18,000,000
New York State Environmental Quality
Series TECP:
22,100,000 A-1+ General Electric 3.750% due 10/6/98(a) 22,100,000
10,000,000 A-1+ Series 98A 3.550% due 10/7/98 10,000,000
10,000,000 A-1+ Series 98A 3.550% due 10/8/98 10,000,000
21,000,000 VMIG 1* New York State GO PART AMBAC-Insured
4.000%(b) 21,000,000
New York State Housing Finance Authority:
24,500,000 A-1 250 West 50th Street 3.450%(a)(b) 24,500,000
6,600,000 A-1+ Normandie Court Project Series 91A
3.300%(b) 6,600,000
20,000,000 VMIG 1* Saxony Housing Series 97A 3.350%(a)(b) 20,000,000
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
New York State Job Development Authority:
$ 2,900,000 VMIG 1* Series A-1 to A-21 4.100%(b) $ 2,900,000
1,900,000 VMIG 1* Series A-1 to A-25 4.100%(a)(b) 1,900,000
2,000,000 VMIG 1* Series B 4.100%(a)(b) 2,000,000
New York State Local Government
Assistance Corp.:
3,000,000 A-1+ PART AMBAC-Insured 3.850%(b) 3,000,000
5,880,000 A-1+ Series 93A 3.250%(b) 5,880,000
28,685,000 A-1+ Series 95B 3.350%(b) 28,685,000
16,020,000 A-1+ Series 95C 3.250%(b) 16,020,000
19,500,000 A-1+ Series 95C 3.350%(b) 19,500,000
14,100,000 A-1+ Series 95E 3.250%(b) 14,100,000
New York State Medical Care Facility
Finance Agency:
7,700,000 VMIG 1* Lenox Hill Hospital 3.300%(b) 7,700,000
12,125,000 VMIG 1* St. Lukes PART FHA-Insured 4.100%(b) 12,125,000
New York State Mortgage Agency Revenue PART:
4,560,000 VMIG 1* Series 11 4.150%(a)(b) 4,560,000
13,100,000 VMIG 1* Series 38 4.150%(a)(b) 13,100,000
5,285,000 VMIG 1* Series KK 3.400% due 4/8/99(a)(c) 5,285,000
23,600,000 A-1 New York State Power Authority General
TECP Series 2 3.400% due 12/1/98 23,600,000
23,095,000 A-1+ New York State Thruway PART Series
1997 3.600%(b) 23,095,000
14,595,000 A-1 New York State UDC 93A PART FSA-Insured
3.900% due 10/14/98(c) 14,595,000
8,000,000 A-1+ Niagara County IDA (American Re-Fuel Co.)
3.500%(a)(b) 8,000,000
3,760,000 NR+ North Tonawanda BAN 4.000% due 6/24/99 3,768,710
Onadaga County IDA:
Southern Container:
4,500,000 NR++ Series A 3.600%(a)(b) 4,500,000
1,725,000 NR++ Series B 3.950%(a)(b) 1,725,000
3,125,000 A-1 Syracuse Research Corp. 3.900%(b) 3,125,000
3,000,000 A-1 Oneida County IDR (Harden Furniture)
3.700%(a)(b) 3,000,000
10,000,000 NR+ Oyster Bay BAN 4.000% due 2/25/99 10,020,233
10,000,000 MIG 1 Patchogue-Medford UFSD TAN 4.000%
due 6/29/99 10,028,783
7,745,000 A-1+ Port Authority NY/NJ PART 3.700%
due 6/10/99(c) 7,745,000
4,100,000 A-1+ Puerto Rico GDB MBIA-Insured 3.125%(b) 4,100,000
6,000,000 NR+ Puerto Rico Industrial Medical PCR
(Abbott Laboratory) Series 1983 3.550%
due 3/1/99(c) 6,000,000
18,330,000 A-1 Puerto Rico Public Finance Corp.
PART AMBAC-Insured 4.070%(b) 18,330,000
1,100,000 NR++ Rensselaer County IDA IDR (Millers
Supermarket Inc. Project) 3.750% due
3/1/99(a)(c) 1,100,000
13,000,000 NR+ Rochester BAN Series 1998 I 4.000% due
3/9/99 13,023,510
6,215,000 NR++ Rochester Series A AMBAC-Insured 4.625%
due 8/15/99 6,267,653
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
$ 1,000,000 A-1 Rotterdam IDA IDR Rotterdam Park
3.600%(b) $ 1,000,000
Schenectady County IDA IDR:
6,325,000 A-1 Feuz Holding Co. Series 98A 3.700%(a)(b) 6,325,000
1,800,000 A-1 Scotia Industrial Park Project Series
94A 3.700%(b) 1,800,000
7,000,000 A-1 Seneca County IDA (Chiropractic College)
3.550%(b) 7,000,000
Suffolk County:
3,000,000 MIG 1* Brentwood UFSD TAN 4.000% due 6/30/99 3,008,091
12,000,000 MIG 1* Half Hollow Hills CSD TAN 4.000% due
6/25/99 12,034,687
5,600,000 A-1+ Suffolk County IDR (JBC Reality/Wilbar
International) 3.700%(b) 5,600,000
20,000,000 SP-1+ Suffolk County TAN 1998 Series 2 4.000%
due 9/9/99 20,118,091
Syracuse:
20,000,000 SP-1 BAN Series B 4.000% due 12/18/98 20,007,371
11,304,000 SP-1 BAN Series C 4.250% due 12/18/98 11,312,082
3,600,000 A-1+ University of Syracuse 4.100%(b) 3,600,000
Triborough Bridge & Tunnel Authority:
3,000,000 Aa3* Series A 4.250% due 1/1/99 3,005,520
8,525,000 AAA Series P (Pre-Refunded--Escrowed with
U.S. government securities to 1/1/99
Call @ 101.50 6.500% due 1/1/15) 8,714,432
2,650,000 A-1+ United Nations Development Corp.
PART 4.170%(b) 2,650,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $1,211,556,233**) $1,211,556,233
================================================================================
(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.
++ 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.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 25 through 27 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Education -- 11.9%
New York State Dormitory Authority Revenue Bonds:
City University Systems:
$ 7,750,000 BBB+ Series 2, 5.000% due 7/1/28 $ 7,653,125
Series A:
5,825,000 BBB+ 5.625% due 7/1/16 6,422,063
5,000,000 AAA FGIC-Insured, 5.000% due 7/1/16 5,081,250
7,000,000 BBB+ Series B, 6.000% due 7/1/14 8,058,750
2,500,000 BBB+ Series C, 7.500% due 7/1/10(a) 3,103,125
2,000,000 AAA Columbia University, 5.000% due 7/1/18 2,030,000
Cornell University, Series A:
2,000,000 AA 7.375% due 7/1/20 2,162,500
1,000,000 AA 7.375% due 7/1/30 1,081,250
200,000 Baa1* Department of Health, State of New
York Issue, 7.250% due 7/1/02 215,000
2,700,000 AA Manhattan College, Asset Guaranty,
6.500% due 7/1/19 2,963,250
New York Medical College:
1,050,000 AAA 7.250% due 10/1/03 1,066,265
220,000 AA Asset Guaranty, 6.700% due 7/1/01 236,775
2,000,000 AAA Rockefeller University, 4.750% due
7/1/37 1,957,500
3,400,000 AAA St. Johns University, MBIA-Insured,
5.250% due 7/1/18 3,548,750
3,575,000 Aaa* State University Athletic Facility,
MBIA-Insured, 4.500% due 7/1/21 3,387,313
State University Educational Facility:
Series A:
12,110,000 A- 5.875% due 5/15/17 13,623,750
6,450,000 AAA MBIA-Insured, 4.750% due 5/15/25 6,296,813
Series B:
1,000,000 A- 7.500% due 5/15/11 1,245,000
7,000,000 A- 5.000% due 5/15/18 7,008,750
5,000,000 AAA FGIC-Insured, 5.250% due 5/15/19 5,387,500
7,370,000 A+ University of Rochester, Series A,
6.500% due 7/1/19 8,245,187
285,000 BBB+ Upstate Community College, Series B,
7.100% due 7/1/01 309,225
- --------------------------------------------------------------------------------
91,083,141
- --------------------------------------------------------------------------------
Escrowed to Maturity(b) -- 0.9%
1,495,000 AAA Commonwealth of Puerto Rico, Aquaduct
& Sewer Authority Revenue Bonds,
10.250% due 7/1/09 2,070,575
3,150,000 AAA New York City GO, AMBAC-Insured, Series I,
7.250% due 8/15/14 3,284,537
1,470,000 AAA New York State Power Authority Revenue
& General Purpose, 9.500% due 1/1/01 1,550,850
- --------------------------------------------------------------------------------
6,905,962
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Finance -- 8.1%
New York City Transitional Finance
Authority Revenue, Future Tax:
Series B:
$10,000,000 AA 4.750% due 11/15/23 $ 9,725,000
10,000,000 AA 4.500% due 11/15/27 9,325,000
11,000,000 AA Series C, 4.750% due 5/1/23 10,697,500
New York State Local Government
Assistance Corp.:
Series B, MBIA-Insured:
8,000,000 AAA 5.000% due 4/1/18 8,080,000
10,000,000 AAA 4.875% due 4/1/20 9,925,000
5,000,000 AAA 5.000% due 4/1/21 5,018,750
6,450,000 A+ Series C, 5.500% due 4/1/17 7,119,187
New York State Municipal Bond Bank Agency,
Special Revenue Program:
1,000,000 BBB+ City of Buffalo, 6.875% due 3/15/06 1,087,500
1,500,000 AAA City of Rochester, 6.750% due 3/15/11 1,651,875
- --------------------------------------------------------------------------------
62,629,812
- --------------------------------------------------------------------------------
General Obligation -- 6.8%
Green Island GO:
100,000 Baa* 9.375% due 11/1/01 113,875
125,000 Baa* 9.375% due 11/1/02 146,875
New York City Refunding Bonds, GO:
275,000 A- Series A, 7.750% due 8/15/16 305,938
Series C:
5,000,000 A- 6.660% due 8/1/09 5,312,500
5,875,000 A- 5.000% due 8/15/14 5,948,437
6,000,000 A- Series F, 5.000% due 8/1/23 5,947,500
Series H:
220,000 A- 7.000% due 2/1/21 241,725
10,000,000 A- 6.125% due 8/1/25 11,000,000
115,000 AAA Series I, 7.250% due 8/15/14 120,032
6,625,000 A- Series J, 5.000% due 8/1/23 6,567,031
New York State GO:
1,000,000 A 12.000% due 11/15/03(a) 1,371,250
2,750,000 A 9.875% due 11/15/05(a) 3,736,562
1,500,000 Aaa* North Hempstead GO, Series B,
FGIC-Insured, 4.750% due 3/1/18 1,490,625
3,210,000 Aa2* Orange County GO, 5.000% due 7/15/21 3,242,100
7,400,000 A Puerto Rico Commonwealth, Public
Improvement, Refunding Bonds,
4.500% due 7/1/23 6,946,750
- --------------------------------------------------------------------------------
52,491,200
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Government Facilities -- 3.6%
New York State Urban Development Corp.
Revenue:
Correctional Facilities Service
Contract:
$ 5,000,000 AAA FSA-Insured, 5.000% due 1/1/20 $ 5,031,250
15,700,000 BBB+ Series A, 5.000% due 1/1/19 15,621,500
3,700,000 BBB+ Sports Facilities Assistance Program,
Series A, 5.000% due 4/1/18 3,686,125
3,000,000 BBB+ State Facilities, 5.700% due 4/1/20 3,337,500
- --------------------------------------------------------------------------------
27,676,375
- --------------------------------------------------------------------------------
Hospitals -- 14.7%
680,000 B1* Monroe County IDA Revenue, Civic
Facilities, Genesee Hospital, Series A,
6.500% due 11/1/99 690,418
New York State Dormitory Authority
Revenue:
5,350,000 Aa3* Lutheran Center at Poughkeepsie, LOC
Key Bank, 6.050% due 7/1/26 5,804,750
5,000,000 AAA Memorial Sloan Kettering Cancer Center,
Series C, MBIA-Insured, 5.500% due
7/1/23 5,543,750
Mental Health Services Facilities:
Series B:
2,500,000 A- 5.000% due 2/15/18 2,490,625
7,000,000 A- 5.625% due 2/15/21 7,402,500
11,505,000 AAA Series D, MBIA-Insured, 5.000% due
8/15/17 11,605,669
17,000,000 AAA New York & Presbyterian Hospital,
FHA-Insured, 4.750% due 8/1/16 16,787,500
16,615,000 BBB+ New York State Department of Health,
5.000% due 7/1/18 16,698,075
3,000,000 AA St. Luke's Home, Residential Health,
FHA-Insured, 6.375% due 8/1/35 3,300,000
2,450,000 AAA St. Vincent's Hospital & Medical
Center, FHA-Insured, 7.400%
due 8/1/30 2,691,937
New York State Medical Care Facilities Finance
Agency Revenue:
2,080,000 A- 8.875% due 8/15/07 2,128,942
550,000 A- 7.700% due 2/15/18 562,661
Hospital & Nursing Home Insured Mortgage,
FHA-Insured:
Series A:
70,000 AA 6.100% due 2/15/02 74,425
4,855,000 AA 6.200% due 2/15/21 5,267,675
4,065,000 AA 7.450% due 8/15/31 4,491,825
990,000 AA Series B, 7.000% due 8/15/32 1,119,938
2,385,000 AA Series C, 6.650% due 8/15/32 2,614,556
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 17
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Hospitals -- 14.7% (continued)
Series A:
$ 2,500,000 BB Central Suffolk Hospital
Mortgage Project, 6.125%
due 11/1/16 $ 2,543,750
1,000,000 Aa2* Health Center Projects,
Secured Mortgage Program,
6.375% due 11/15/19 1,112,500
6,800,000 AA Methodist Hospital, FHA-Insured,
6.700% due 8/15/23 7,420,500
4,000,000 AA Mortgage Project, FHA-Insured,
6.375% due 8/15/24 4,580,000
Series B:
1,860,000 AAA Long Term Healthcare, FSA-Insured,
6.450% due 11/1/14 2,039,025
3,500,000 AA Mortgage Project, FHA-Insured,
6.100% due 2/15/15 3,810,625
Series F, Mental Health Services
Facilities Improvement:
710,000 A- 6.500% due 8/15/12 783,663
730,000 A- 6.500% due 2/15/19 791,138
705,000 A Valley Health Development Corp., Mortgage
Revenue Bonds, Mortgage Loan, FHA-Insured,
11.300% due 2/1/23 841,594
- --------------------------------------------------------------------------------
113,198,041
- --------------------------------------------------------------------------------
Housing: Multi-Family -- 5.5%
6,470,000 BBB Commonwealth of Puerto Rico, Urban
Renewal & Housing Corp. Revenue Bonds,
7.875% due 10/1/04 6,829,926
New York City Housing Development Corp.:
1,543,393 NR Cadman Project, 6.500% due 11/15/18 1,621,829
979,447 NR Heywood Towers Project, 6.500% due
10/15/17 1,028,429
1,245,421 NR Kelly Project, 6.500% due 2/15/18 1,308,340
1,189,693 AAA Pass Through Certificates, AMBAC-Insured,
6.500% due 12/20/01 1,250,665
1,596,765 NR Riverside Project, 6.500% due 11/15/18 1,680,068
Series A, FHA-Insured:
4,000,000 AAA 6.600% due 4/1/30 4,265,000
5,000,000 AAA Multi-Unit Mortgage Refunding, 7.350%
due 6/1/19 5,300,000
New York State Housing Finance Agency
Revenue, FHA-Insured:
2,000,000 Aa1* Secured Mortgage, Series A, 6.200%
due 8/15/15(c) 2,165,000
1,500,000 AAA Series C, 6.500% due 8/15/24 1,605,000
3,430,000 AAA Housing Project Mortgage, Series A,
FSA-Insured, 6.125% due 11/1/20 3,704,400
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Housing: Multi-Family -- 5.5% (continued)
Secured Mortgage Project, SONYMA-Insured:
Series A:
$ 500,000 Aa1* 7.000% due 8/15/12(c) $ 541,250
500,000 Aa1* 7.050% due 8/15/24(c) 537,500
6,870,000 Aa1* Series B, 6.250% due 8/15/29(c) 7,385,250
1,750,000 Aa1* Series C, 6.600% due 8/15/27 1,896,562
990,000 A1* Rensselaer Housing Authority, Multi-Family
Mortgage Revenue, Rensselaer Elderly
Apartments, Series A, 7.750% due 1/1/11 1,067,962
- --------------------------------------------------------------------------------
42,187,181
- --------------------------------------------------------------------------------
Housing: Single-Family -- 4.7%
New York State Mortgage Agency Revenue:
1,000,000 Aaa* Series 41-A, 6.450% due 10/1/14 1,086,250
Homeowner Mortgage:
2,625,000 Aa2* Series 37-A, 6.375% due 10/1/14 2,848,125
4,000,000 Aa2* Series 42, FHA-Insured, 6.650%
due 4/1/26(c) 4,320,000
9,790,000 Aa2* Series 46, 6.650% due 10/1/25(c) 10,622,150
4,400,000 Aa2* Series 65, 5.850% due 10/1/28(c) 4,609,000
5,000,000 Aa2* Series 67, 5.800% due 10/1/28(c) 5,218,750
6,500,000 Aa2* Series 71, 5.350% due 10/1/18 6,613,750
460,000 Aa2* Series SS, FHA-Insured, 7.950%
due 10/1/22(c) 487,025
- --------------------------------------------------------------------------------
35,805,050
- --------------------------------------------------------------------------------
Industrial Development -- 8.6%
3,470,000 Aaa* Allegany County IDA, Civic Facilities
Revenue, (Alfred University Civic
Facilities), MBIA-Insured, 5.000%
due 8/1/18 3,496,025
2,250,000 A3* Essex County IDA Revenue, Solid Waste,
(International Paper Co. Project),
Series A, 6.150% due 4/1/21(c) 2,458,125
500,000 A+ Monroe County IDA, Public Improvement,
Canal Ponds Park, Series A, 7.000%
due 6/15/13 556,250
Nassau County IDA, Civic Facilities Revenue,
(Hofstra University Project):
8,000,000 AAA 4.750% due 7/1/28 7,820,000
1,000,000 AAA Capital Appreciation, zero coupon
due 7/1/18 382,500
New York City IDA:
5,000,000 BBB- Brooklyn Navy Yard Cogen Partners,
5.750% due 10/1/36(c) 5,181,250
Civic Facilities Revenue:
1,000,000 BBB College of Aeronautics Project,
5.450% due 5/1/18 1,027,500
The Lighthouse Project:
1,000,000 AA 6.375% due 7/1/10 1,075,000
2,250,000 AA 6.500% due 7/1/22 2,418,750
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Industrial Development -- 8.6% (continued)
$ 925,000 Aa1* Prime Laboratories Inc., Series C,
7.700% Mandatory Tender 11/1/00 $ 928,654
1,450,000 Baa1* Special Facilities Revenue, (1990
American Airlines Inc. Project),
8.000% due 7/1/20(c) 1,490,759
8,000,000 AAA Onondaga County IDA Sewer Facilities
Revenue, (Bristol-Myers Squibb Co.
Project), 5.750% due 3/1/24(c) 9,060,000
1,600,000 AA Oswego County IDA, (Seneca Hill Project),
Series A, FHA-Insured, 5.650% due 8/1/37 1,680,000
Port Authority of New York & New Jersey:
8,000,000 BBB- Delta Airlines Inc. Project, Series 1R,
6.950% due 6/1/08 8,800,000
12,000,000 NR Special Project, 5th Installment,
6.750% due 10/1/19(c) 13,515,000
1,410,000 A+ Rensselear County IDA, Albany
International Corp., 7.550% due
6/1/07(a)(c) 1,690,237
1,000,000 AAA St. Lawrence County IDA, Civic
Facilities Revenue, (St. Lawrence
University Project), Series A,
MBIA-Insured, 5.375% due 7/1/18 1,052,500
1,250,000 AAA Syracuse GO, IDA, James Square Association,
FHA-Insured, 7.000% due 8/1/25(a) 1,351,563
2,230,000 B2* Warren & Washington Counties IDA, Resource
Recovery Revenue Bonds, Series A,
7.900% due 12/15/07 2,313,134
- --------------------------------------------------------------------------------
66,297,247
- --------------------------------------------------------------------------------
Life Care Systems -- 4.2%
7,450,000 AAA Castle Residential Health Care
Facility Mortgage Revenue,
FHA-Insured, 5.750% due 8/1/37 7,850,438
New York State Dormitory Authority
Revenue Bonds:
1,100,000 Aa3* Chapel Oaks Inc, 5.375% due 7/1/17 1,131,625
FHA-Insured:
1,230,000 AAA Crouse Community Center, 7.500%
due 8/1/29 1,305,337
Genessee Valley:
1,000,000 AA Series A, 6.900% due 2/1/32 1,088,750
685,000 AA Series B, 6.850% due 8/1/16 746,650
3,815,000 AA Hebrew Nursing Home, 6.125% due 2/1/37 4,139,275
1,305,000 AAA Heritage House Nursing Center, 7.000%
due 8/1/31 1,417,556
2,450,000 AA- Iroquois Nursing Home, 7.050% due
2/1/31 2,636,813
2,150,000 AAA Jewish Geriatric Center, 7.150% due
8/1/14 2,480,563
1,500,000 AAA Menorah Campus, Nursing Home,
6.100% due 2/1/37 1,657,500
1,600,000 AA Niagara Frontier Home, Mortgage Revenue,
6.200% due 2/1/15 1,768,000
3,350,000 AA Wesley Garden Nursing Home, 6.125%
due 8/1/35 3,638,938
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Life Care Systems -- 4.2% (continued)
$ 2,160,000 A Oneida Health Care Corp. Mortgage
Revenue, Series A, FHA-Insured,
7.200% due 8/1/31 $ 2,311,200
- --------------------------------------------------------------------------------
32,172,645
- --------------------------------------------------------------------------------
Pollution Control Revenue -- 2.3%
4,500,000 AAA Dutchess County Resource Recovery
Agency Revenue Bonds, Solid Waste
Management, Series A, FGIC-Insured,
7.500% due 1/1/09 4,781,250
New York State Energy, Research &
Development Authority:
MBIA-Insured, Central Hudson Gas &
Electric:
1,100,000 AAA Series B, 7.375% due 10/1/14(a) 1,171,720
1,000,000 A Series C, 8.375% due 12/1/28(c) 1,026,900
2,660,000 AAA Rochester Gas & Electric, FSA-Insured,
8.375% due 12/1/28(c) 2,733,549
New York State Environmental Facilities
Corp.:
1,595,000 Baa1* Huntington Project, 7.375% due 10/1/99 1,641,351
PCR, State Water Revolving Fund,
Series A:
805,000 Aaa* 7.250% due 6/15/10 892,544
1,950,000 Aa2* 7.500% due 6/15/12 2,110,875
1,000,000 AAA North Country Development Authority,
Solid Waste Management System Revenue
Refunding, FSA-Insured, 6.000% due
5/15/15 1,167,500
1,710,000 Aa3* Puerto Rico Industrial, Medical &
Environmental Pollution Control
Facilities Finance Authority Revenue,
Series A, American Airlines Inc.,
6.450% due 12/1/25 1,895,963
- --------------------------------------------------------------------------------
17,421,652
- --------------------------------------------------------------------------------
Pre-Refunded(d) -- 11.0%
35,000 AAA Battery Park City Authority Housing
Revenue, FHA-Insured, (Call
6/1/05 @ 100), 8.625% due 6/1/23 44,494
1,000,000 AAA Buffalo Municipal Water Finance
Authority, Water Systems Revenue,
FGIC-Insured, (Call 7/1/06 @ 102),
6.100% due 7/1/26 1,153,750
2,150,000 AAA Monroe County Water Authority
Revenue, AMBAC-Insured, (Call
8/1/04 @ 101), 7.000% due 8/1/19 2,518,188
New York City GO:
55,000 AAA Series A, (Call 8/15/01 @ 101.5),
7.750% due 8/15/16 61,737
4,000,000 AAA Series B1, MBIA-Insured, (Call
8/15/04 @ 101), 6.950% due 8/15/12 4,675,000
2,155,000 AAA Series H, (Call 2/1/02 @ 101.5),
7.000% due 2/1/21 2,397,437
3,270,000 AAA New York City Municipal Water
Finance Authority, Water
& Sewer System Revenue, Series A,
FSA-Insured, (Call 6/15/01 @ 101),
7.000% due 6/15/15 3,539,775
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Pre-Refunded(d) -- 11.0% (continued)
New York State Dormitory Authority
Revenue:
$ 5,000,000 Baa1* Department of Education, State of
New York Issue, (Call 7/1/01 @ 102),
7.750% due 7/1/21(a) $ 5,606,250
990,000 AAA United Health Services Inc.,
FHA-Insured Mortgage, (Call 2/1/00 @
102), 7.350% due 8/1/29(d) 1,056,825
New York State Medical Care Facilities
Finance Agency Revenue:
1,320,000 AAA Call 2/15/00 @ 102, 7.750% due 2/15/20 1,417,350
Hospital & Nursing Home, FHA-Insured:
6,950,000 AA Series A, (Call 2/15/04 @ 102),
6.200% due 2/15/21 7,844,812
115,000 AA Series C, (Call 8/15/02 @ 102),
6.650% due 8/15/32 128,656
MBIA-Insured:
830,000 AAA Call 2/15/00 @ 102, 7.750% due
2/15/20 891,212
135,000 AAA Partially Pre-Refunded, (Call
2/15/00 @ 102), 7.750% due
2/15/20 144,281
Mental Health Improvement, Series F,
(Call 8/15/02 @ 102):
4,010,000 A- 6.500% due 8/15/12 4,466,137
3,885,000 A- 6.500% due 2/15/19 4,326,919
515,000 A- Partially Pre-Refunded, (Call 2/15/00
@ 102), 7.750% due 2/15/20 550,406
Series A:
3,000,000 AAA Beth Israel Medical Center,
MBIA-Insured, (Call 11/1/00
@ 102), 7.500% due 11/1/10 3,288,750
4,000,000 AAA Brookdale Hospital Medical Center,
(Call 2/15/05 @ 102), 6.800%
due 8/15/12 4,710,000
4,700,000 AAA New York Downtown Hospital,
(Call 2/15/05 @ 102), 6.800% due
2/15/20 5,534,250
New York Hospital, Series A,
FHA-Insured, (Call 2/15/05 @ 102):
8,500,000 AAA 6.800% due 8/15/24(a) 10,008,750
7,600,000 AAA 6.500% due 8/15/29 8,825,500
2,500,000 AAA 6.900% due 8/15/34(a) 2,959,375
5,000,000 AAA Secured Hospital Revenue Bonds 1991,
(Call 8/15/01 @ 102), 7.400%
due 8/15/21 5,587,500
1,700,000 AAA St. Luke's Hospital, Series B,
FHA-Insured, (Call 2/15/00 @ 102),
7.450% due 2/15/29 1,819,000
1,000,000 A1* Orangetown Housing Authority, Housing
Facility Revenue, Orangetown Senior
Housing Center, (Call 10/1/00 @ 102),
7.600% due 4/1/30 1,093,750
- --------------------------------------------------------------------------------
84,650,104
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Public Facilities -- 0.5%
$ 1,000,000 A Albany Parking Authority Revenue
Refunding, (Green & Hudson Street
Garage Project), Series A, 7.150%
due 9/15/16 $ 1,072,500
915,000 BBB+ New York State COP, (Hanson Redevelopment
Project), 8.375% due 5/1/08 1,133,456
1,500,000 BBB+ Triborough Bridge & Tunnel Authority,
(Convention Center Project), Series E,
7.250% due 1/1/10(a) 1,816,875
- --------------------------------------------------------------------------------
4,022,831
- --------------------------------------------------------------------------------
Short-Term -- 0.7%
700,000 VMIG 1* New York City GO, Series A-7, 4.100%
due 8/1/21 700,000
3,000,000 VMIG 1* New York City Municipal Water Finance
Authority, Water & Sewer System
Revenue, Series G, 3.600% due 6/15/24 3,000,000
400,000 VMIG 1* New York State Job Development Authority,
Series A-1 thru A-25, 4.100% due
3/1/07 400,000
1,000,000 VMIG 1* Syracuse IDA, Civic Facilities Revenue,
(Syracuse University Project), 4.100%
due 3/1/23 1,000,000
- --------------------------------------------------------------------------------
5,100,000
- --------------------------------------------------------------------------------
Transportation -- 11.4%
Metropolitan Transportation Authority:
6,945,000 AAA Commuter Facility Revenue, Series B,
4.750% due 7/1/26 6,788,737
5,000,000 AAA Series A, FGIC-Insured, 4.750% due 4/1/28 4,881,250
Transit Facilities Revenue:
Series A, MBIA-Insured:
5,000,000 AAA 4.750% due 7/1/21 4,900,000
10,000,000 AAA 5.625% due 7/1/25 10,712,500
5,000,000 BBB+ Series N, 7.125% due 7/1/09 5,618,750
2,250,000 AAA Monroe County Airport Authority,
Airport Revenue, Greater Rochester
International, MBIA-Insured,
7.250% due 1/1/19(c) 2,379,375
4,230,000 AAA New York State Highway Authority,
Emergency Services, Construction &
Reconstruction, Series A, FSA-Insured,
6.600% due 3/1/01 4,520,812
New York State Thruway Authority,
Local Highway & Bridge Authority
FGIC-Insured:
5,000,000 AAA Series B, 5.250% due 4/1/14 5,262,500
3,000,000 AAA Series C, 5.250% due 4/1/15 3,142,500
1,000,000 AAA Niagara Falls Bridge Authority, Toll
Revenue, Series B, FGIC-Insured,
5.250% due 10/1/15 1,082,500
2,840,000 AAA Niagara Frontier Authority Airport
Revenue, Buffalo Niagara International
Airport, FGIC-Insured, 5.000% due 4/1/13 2,893,250
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 23
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) September 30, 1998
- --------------------------------------------------------------------------------
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
================================================================================
Transportation -- 11.4% (continued)
Puerto Rico Commonwealth Highway
& Transportation Authority Revenue
Refunding:
$ 7,000,000 A Series A, 4.750% due 7/1/38 $ 6,903,750
Series Y:
10,000,000 A 5.000% due 7/1/36 10,200,000
17,000,000 A 5.500% due 7/1/36 18,551,250
- --------------------------------------------------------------------------------
87,837,174
- --------------------------------------------------------------------------------
Utilities -- 3.1%
4,000,000 AAA Long Island Power Authority, Series A,
FSA-Insured, 5.000% due 12/1/15 4,080,000
New York State Energy, Research &
Development Authority, Facilities
Revenue Bonds:
3,000,000 A1* Brooklyn Union Gas Co. Project,
Regular RIBS, Series B, 9.939%
due 7/1/26(c)(e) 4,001,250
5,750,000 A+ Consolidated Edison Co. Inc. Project,
Series A, 7.125% due 12/1/29(a)(c) 6,641,250
1,500,000 Baa2* Corning National Gas Corp., Series A,
8.250% due 12/1/18(c) 1,554,630
Long Island Lighting Co. Project:
4,000,000 A- Series A, 7.150% due 12/1/20(c) 4,400,000
3,000,000 A- Series B, 7.150% due 2/1/22(c) 3,300,000
- --------------------------------------------------------------------------------
23,977,130
- --------------------------------------------------------------------------------
Water & Sewer -- 2.0%
8,000,000 A1* New York City Municipal Water Finance
Authority, Water & Sewer System
Revenue, Series D, 4.750% due 6/15/25 7,750,000
New York State Environmental Facilities Corp.,
Clean Water & Drinking Revolving Funds:
6,520,000 Aa2* Series C, 5.000% due 6/15/16 6,625,950
1,000,000 Aa2* Series F, 5.250% due 6/15/14 1,050,000
- --------------------------------------------------------------------------------
15,425,950
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $710,384,041**) $768,881,495
================================================================================
(a) Security segregated by Custodian for open purchase agreements.
(b) Bond is escrowed to maturity by U.S. government securities and is
considered by the Manager to be triple-A rated even if isssuer has not
applied for new ratings.
(c) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(d) Bond is escrowed by U.S. government securities and is considered by the
Manager to be triple-A rated even if isssuer has not applied for new
ratings.
(e) Residual interest bond -- coupon varies inversely with level of short-term
tax-exempt interest rates.
** Aggregate cost for Federal income tax purposes is substanially the same.
See pages 25 through 27 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Ratings Services ("Standard & Poor's"),
except those which are 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 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 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 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 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.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
NR -- Indicates the bond is not rated by Standard & Poor's or Moody's.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 25
<PAGE>
- --------------------------------------------------------------------------------
Short-Term Security Ratings (unaudited)
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
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 (unaudited)
- --------------------------------------------------------------------------------
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
GDB -- Government Development Bank
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
- --------------------------------------------------------------------------------
26 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Security Descriptions (unaudited) (continued)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (unaudited) September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
========================================================================================================
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $1,211,556,233 and
$710,384,041, respectively) $ 1,211,556,233 $ 768,881,495
Interest receivable 8,222,267 11,959,017
Receivable for securities sold -- 4,156,417
Receivable for Fund shares sold -- 901,608
Other assets 104,410 863
- --------------------------------------------------------------------------------------------------------
Total Assets 1,219,882,910 785,899,400
========================================================================================================
LIABILITIES:
Payable for securities purchased 16,100,000 9,842,714
Dividends payable 1,668,182 --
Management fees payable 471,491 322,881
Distribution fees payable 39,120 72,770
Deferred compensation 8,560 --
Payable to bank -- 35,369
Accrued expenses 88,300 117,581
- --------------------------------------------------------------------------------------------------------
Total Liabilities 18,375,653 10,391,315
- --------------------------------------------------------------------------------------------------------
Total Net Assets $ 1,201,507,257 $ 775,508,085
========================================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 1,201,691 $ 54,599
Capital paid in excess of par value 1,200,489,578 702,697,739
Overdistributed net investment income -- (166,735)
Accumulated net realized gain (loss)
from security transactions (184,012) 14,425,028
Net unrealized appreciation of investments -- 58,497,454
- --------------------------------------------------------------------------------------------------------
Total Net Assets $ 1,201,507,257 $ 775,508,085
========================================================================================================
Shares Outstanding:
Class A 1,201,691,269 39,964,218
------------------------------------------------------------------------------------------------------
Class B -- 13,704,616
------------------------------------------------------------------------------------------------------
Class L -- 930,548
------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 1.00 $ 14.21
------------------------------------------------------------------------------------------------------
Class B * -- $ 14.20
------------------------------------------------------------------------------------------------------
Class L ** -- $ 14.18
------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) -- $ 14.80
------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) -- $ 14.32
========================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if
shares are redeemed within one year from purchase (See Note 4).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
28 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
========================================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 20,266,760 $ 21,693,503
- --------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 2,827,496 1,896,141
Distribution fees (Note 4) 565,031 1,084,200
Shareholder and system servicing fees 186,969 146,772
Registration fees 42,563 7,521
Shareholder communications 21,177 25,119
Audit and legal 14,706 9,928
Trustees' fees 7,825 3,008
Custody -- 18,049
Pricing service fees -- 12,634
Other 21,174 4,363
- --------------------------------------------------------------------------------------------------------
Total Expenses 3,686,941 3,207,735
- --------------------------------------------------------------------------------------------------------
Net Investment Income 16,579,819 18,485,768
- --------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities*):
Proceeds from sales 27,938,248 233,611,672
Cost of securities sold 27,917,855 229,541,425
- --------------------------------------------------------------------------------------------------------
Net Realized Gain 20,393 4,070,247
- --------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period -- 46,069,781
End of period -- 58,497,454
- --------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation -- 12,427,673
- --------------------------------------------------------------------------------------------------------
Net Gain on Investments 20,393 16,497,920
- --------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 16,600,212 $ 34,983,688
========================================================================================================
</TABLE>
* Represents net realized gains only from the sale of short-term securities
for the New York Money Market Portfolio.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 29
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998 (unaudited)
and the Year Ended March 31, 1998
New York Money Market Portfolio September 30 March 31
================================================================================
OPERATIONS:
Net investment income $ 16,579,819 $ 30,888,796
Net realized gain 20,393 55,246
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 16,600,212 30,944,042
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (16,579,819) (30,888,796)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (16,579,819) (30,888,796)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 2,255,857,890 4,017,556,068
Net asset value of shares issued
for reinvestment of dividends 15,941,632 29,748,114
Cost of shares reacquired (2,231,313,070) (3,823,473,761)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 40,486,452 223,830,421
- --------------------------------------------------------------------------------
Increase in Net Assets 40,506,845 223,885,667
NET ASSETS:
Beginning of period 1,161,000,412 937,114,745
- --------------------------------------------------------------------------------
End of period $ 1,201,507,257 $ 1,161,000,412
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
30 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1998 (unaudited)
and the Year Ended March 31, 1998
New York Portfolio September 30 March 31
================================================================================
OPERATIONS:
Net investment income $ 18,485,768 $ 38,359,402
Net realized gain 4,070,247 19,378,043
Increase in net unrealized appreciation 12,427,673 23,850,130
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 34,983,688 81,587,575
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (18,647,629) (38,599,604)
Net realized gains -- (2,539,192)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (18,647,629) (41,138,796)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 42,963,992 73,045,552
Net asset value of shares issued
for reinvestment of dividends 11,155,128 25,013,632
Cost of shares reacquired (54,200,074) (105,052,560)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (80,954) (6,993,376)
- --------------------------------------------------------------------------------
Increase in Net Assets 16,255,105 33,455,403
NET ASSETS:
Beginning of period 759,252,980 725,797,577
- --------------------------------------------------------------------------------
End of period* $ 775,508,085 $ 759,252,980
================================================================================
* Includes overdistributed net investment
income of: $ (166,735) $ (4,874)
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The New York Money Market and New York Portfolios ("Portfolios") are separate
investment portfolios of the Smith Barney Muni Funds ("Fund"). The Fund, a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company and consists of
these Portfolios and six other separate investment portfolios: Florida, Georgia,
Pennsylvania, Limited Term, National and California Money Market Portfolios. The
financial statements and financial highlights for the other portfolios are
presented in separate semi-annual reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between the quoted bid and ask prices provided by an independent
pricing service that are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; (c) securities maturing
within 60 days are valued at cost plus accreted discount or minus amortized
premium, which approximates value; (d) securities for which market quotations
are not available will be valued in good faith at fair value by or under the
directions of the Board of Trustees; (e) gains or losses on the sale of
securities are calculated by using the specific identification method; (f)
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; (g) dividends and distributions to
shareholders are recorded on the ex-dividend date; (h) 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; (i) 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 them from substantially
all Federal income and excise taxes; (j) 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; and (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. 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.
- --------------------------------------------------------------------------------
32 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment manager to the Fund. The New York Money Market
Portfolio pays MMC 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. The New York
Portfolio pays MMC 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.
On October 8, 1998 CFBDS, Inc. became the Fund's distributor. Prior to that date
Salomon Smith Barney Inc. ("SSB"), was the Fund's distributor. SSB (as well as
certain other broker-dealers) continues to sell Fund shares to the public as
members of the selling group.
On June 12, 1998, the Fund's Class C shares were renamed Class L shares.
Effective June 15, 1998, Class L shares of the New York Portfolio are being sold
at net asset value plus a maximum initial sales charge of 1.00%. Class L shares
also have a 1.00% contingent deferred sales charge ("CDSC"), which applies if
redemption occurs within the first year of purchase.
There is also a CDSC of 4.50% on Class B shares of the New York Portfolio, which
applies if redemption occurs within one year from purchase. This CDSC declines
by 0.50% the first year after purchase and thereafter by 1.00% per year until no
CDSC is incurred. In addition, Class A shares of the New York Portfolio also
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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 33
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
For the six months ended September 30, 1998, SSB received sales charges of
approximately $268,000 and $17,000 on sales of the New York Portfolio's Class A
and Class L shares, respectively. In addition, for the six months ended
September 30, 1998, CDSCs paid to SSB were approximately:
Class A Class B
================================================================================
New York Portfolio $3,000 $82,000
================================================================================
Pursuant to a Distribution Plan, the New York Money Market Portfolio pays a
distribution fee calculated at the annual rate of 0.10% of the average daily net
assets of its Class A shares. The New York Portfolio pays a service fee with
respect to Class A, B and L 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 L shares
calculated at the annual rates of 0.50% and 0.55% of the average daily net
assets of each class, respectively.
For the six months ended September 30, 1998, total Distribution Plan fees
incurred were:
Portfolio Class A Class B Class L
================================================================================
New York Money Market $565,031 -- --
- --------------------------------------------------------------------------------
New York 415,093 $629,031 $40,076
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
5. INVESTMENTS
During the six months ended September 30, 1998, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
New York Money New York
Market Portfolio Portfolio
================================================================================
Purchases -- $221,646,548
- --------------------------------------------------------------------------------
Sales -- 233,611,672
================================================================================
- --------------------------------------------------------------------------------
34 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
At September 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
New York Money New York
Market Portfolio Portfolio
================================================================================
Gross unrealized appreciation -- $58,497,454
Gross unrealized depreciation -- --
- --------------------------------------------------------------------------------
Net unrealized appreciation -- $58,497,454
================================================================================
6. CAPITAL LOSS CARRYFORWARD
At March 31, 1998, the New York Money Market Portfolio had, for Federal income
tax purposes, $206,000 of loss carryforwards expiring March 31, 2000 which are
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.
7. SHARES OF BENEFICIAL INTEREST
At September 30, 1998, 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. Effective June 12, 1998, the Fund adopted the
renaming of existing Class C shares as Class L shares.
At September 30, 1998, total paid-in capital amounted to the following for each
class and their respective Portfolio:
Portfolio Class A Class B Class L
================================================================================
New York Money Market $1,201,691,269 -- --
- --------------------------------------------------------------------------------
New York 502,097,448 $188,119,063 $12,535,827
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 35
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1998 March 31, 1998
New York -------------------------------- --------------------------------
Money Market Portfolio Shares Amount Shares Amount
=========================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 2,255,857,890 $ 2,255,857,890 4,017,556,068 $ 4,017,556,068
Shares issued on reinvestment 15,941,632 15,941,632 29,748,114 29,748,114
Shares redeemed (2,231,313,070) (2,231,313,070) (3,823,473,761) (3,823,473,761)
- ---------------------------------------------------------------------------------------------------------
Net Increase 40,486,452 $ 40,486,452 223,830,421 $ 223,830,421
=========================================================================================================
New York Portfolio
=========================================================================================================
Class A
Shares sold 2,249,076 $ 31,407,312 3,850,913 $ 53,040,777
Shares issued on reinvestment 600,225 8,373,599 1,362,472 18,669,863
Shares redeemed (2,724,839) (37,934,121) (5,700,162) (78,035,339)
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 124,462 $ 1,846,790 (486,777) $ (6,324,699)
=========================================================================================================
Class B
Shares sold 598,592 $ 8,350,971 1,316,193 $ 18,054,603
Shares issued on reinvestment 186,619 2,601,604 436,910 5,982,453
Shares redeemed (1,090,341) (15,198,881) (1,800,898) (24,706,176)
- ---------------------------------------------------------------------------------------------------------
Net Decrease (305,130) $ (4,246,306) (47,795) $ (669,120)
=========================================================================================================
Class L*
Shares sold 229,784 $ 3,205,709 143,210 $ 1,950,172
Shares issued on reinvestment 12,908 179,925 26,418 361,316
Shares redeemed (76,776) (1,067,072) (170,356) (2,311,045)
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 165,916 $ 2,318,562 (728) $ 443
=========================================================================================================
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
36 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year ended March
31, except where noted:
<TABLE>
<CAPTION>
New York Money Market Portfolio
----------------------------------------------------------
Class A Shares 1998(1) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------
Net investment income(2) 0.015 0.030 0.028 0.038 0.025 0.018
Dividends from
net investment income (0.015) (0.030) (0.028) (0.038) (0.025) (0.018)
- --------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------
Total Return 1.48%++ 3.04% 2.85% 3.17% 2.49% 1.77%
- --------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $1,202 $1,161 $937 $882 $708 $82
- --------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(2) 0.66%+ 0.65% 0.67% 0.67% 0.68% 0.60%
Net investment income 2.93+ 2.99 2.80 3.11 2.94 1.73
============================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) The manager has waived all or part of its fees for the year ended March
31, 1994. If such fees were not waived, the per share decrease on net
investment income would have been $0.001 and the expense ratio would have
been 0.67%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 37
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year ended March
31, except where noted:
<TABLE>
<CAPTION>
New York Portfolio
---------------------------------------------------------------------
Class A Shares 1998(1) 1998 1997 1996 1995(2) 1994
====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $13.91 $13.16 $13.19 $12.83 $12.83 $13.25
- ----------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.35 0.72 0.74 0.75 0.76 0.78
Net realized and
unrealized gain (loss) 0.30 0.81 (0.03) 0.35 0.01* (0.41)
- ----------------------------------------------------------------------------------------------------
Total Income
From Operations 0.65 1.53 0.71 1.10 0.77 0.37
- ----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.35) (0.73) (0.74) (0.74) (0.77) (0.79)
Net realized gains -- (0.05) -- -- -- --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.35) (0.78) (0.74) (0.74) (0.77) (0.79)
- ----------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $14.21 $13.91 $13.16 $13.19 $12.83 $12.83
- ----------------------------------------------------------------------------------------------------
Total Return 4.78%++ 11.83% 5.48% 8.71% 6.32% 2.66%
- ----------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $568 $554 $531 $558 $83 $70
- ----------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(3) 0.70%+ 0.71% 0.75% 0.72% 0.63% 0.55%
Net investment income 5.02+ 5.28 5.58 5.84 6.00 5.79
- ----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 29% 71% 53% 36% 30% 20%
====================================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(3) As a result of voluntary expense limitations, the expense ratio will not
exceed 0.85% for Class A shares.
* Includes the per share effect of shareholder sale and redemption activity
during the year, most of which occurred at a net asset value less than the
net asset value at the beginning of the year.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
38 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year ended March
31, except where noted:
<TABLE>
<CAPTION>
New York Portfolio
---------------------------------------------------------
Class B Shares 1998(1) 1998 1997 1996 1995(2)
==========================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $13.89 $13.15 $13.18 $12.84 $11.96
- ------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.31 0.65 0.67 0.67 0.31
Net realized and
unrealized gain (loss) 0.32 0.80 (0.03) 0.35 0.86*
- ------------------------------------------------------------------------------------------
Total Income From Operations 0.63 1.45 0.64 1.02 1.17
- ------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.66) (0.67) (0.68) (0.29)
Net realized gains -- (0.05) -- -- --
- ------------------------------------------------------------------------------------------
Total Distributions (0.32) (0.71) (0.67) (0.68) (0.29)
- ------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $14.20 $13.89 $13.15 $13.18 $12.84
- ------------------------------------------------------------------------------------------
Total Return 4.57%++ 11.19% 4.96% 8.05% 9.92%++
- ------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $195 $195 $185 $181 $4
- ------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.23%+ 1.23% 1.27% 1.25% 1.27%+
Net investment income 4.50+ 4.76 5.06 5.45 5.76+
- ------------------------------------------------------------------------------------------
Portfolio Turnover Rate 29% 71% 53% 36% 30%
==========================================================================================
</TABLE>
(1) For the six months ended September 30, 1998 (unaudited).
(2) For the period from November 11, 1994 (inception date) to March 31, 1995.
(3) As a result of voluntary expense limitations, the expense ratio will not
exceed 1.35% for Class B shares.
* Includes the per share effect of shareholder sale and redemption activity
during the year, most of which occurred at a net asset value less than the
net asset value at the beginning of the year.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds 39
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year ended March
31, except where noted:
<TABLE>
<CAPTION>
New York Portfolio
------------------------------------------------------------
Class L Shares(1) 1998(2) 1998 1997 1996 1995(3) 1994
================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $13.88 $13.14 $13.17 $12.83 $12.82 $13.24
- ------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.31 0.64 0.66 0.66 0.68 0.68
Net realized and
unrealized gain (loss) 0.30 0.80 (0.02) 0.36 0.01* (0.40)
- ------------------------------------------------------------------------------------------------
Total Income From Operations 0.61 1.44 0.64 1.02 0.69 0.28
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.65) (0.67) (0.68) (0.68) (0.70)
Net realized gains -- (0.05) -- -- -- --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.70) (0.67) (0.68) (0.68) (0.70)
- ------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $14.18 $13.88 $13.14 $13.17 $12.83 $12.82
- ------------------------------------------------------------------------------------------------
Total Return 4.45%++ 11.13% 4.91% 8.07% 5.66% 1.96%
- ------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $13,197 $10,611 $10,055 $8,931 $5,896 $5,461
- ------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(4) 1.27%+ 1.28% 1.32% 1.28% 1.28% 1.23%
Net investment income 4.45+ 4.71 5.01 5.02 5.38 4.98
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 29% 71% 53% 36% 30% 20%
================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended September 30, 1998 (unaudited).
(3) On November 7, 1994, the former Class B shares were renamed Class C
shares.
(4) As a result of voluntary expense limitations, the expense ratio will not
exceed 1.40% for Class C shares.
* Includes the per share effect of shareholder sale and redemption activity
during the year, most of which occurred at a net asset value less than the
net asset value at the beginning of the year.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
40 1998 Semi-Annual Report to Shareholders
<PAGE>
Salomon Smith Barney
---------------------------
A member of citigroup[LOGO]
TRUSTEES
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
OFFICERS
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Joseph Benevento
Vice President
Irving P. David
Controller -- New York
Money Market Portfolio
Thomas M. Reynolds
Controller -- New York Portfolio
Christina T. Sydor
Secretary
INVESTMENT MANAGER
Mutual Management Corp.
DISTRIBUTOR
CFBDS, Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds--New York Money Market and New York Portfolios. It is
not authorized for distribution to prospective investors unless accompanied or
preceded by a current Prospectus for the Portfolios, which contains information
concerning the Portfolios' investment policies and expenses as well as other
pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Muni Funds
388 Greenwich Street, MF2
New York, New York 10013
www.smithbarney.com
FD0807 11/98
