<PAGE>
[GRAPHIC]
Smith Barney Muni Funds
New York Money Market Portfolio
New York Portfolio
ANNUAL REPORT
March 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
<PAGE>
New York [PHOTO] [PHOTO]
Money Market
Portfolio HEATH B. JOSEPH
New York MCLENDON BENEVENTO
Portfolio
Chairman Vice President
Dear Shareholder:
We are pleased to provide you with the annual report
for the Smith Barney Muni Funds--New York Money Market
Portfolio and New York Portfolio for the year ended [PHOTO]
March 31, 1998. For your convenience, we have summarized
the period's prevailing economic and market conditions PETER M.
below and outlined each Portfolio's investment strategy. COFFEY
A detailed summary of performance can be found in the
appropriate sections that follow. Vice President
New York Portfolio's Performance and Investment Strategy
The New York Portfolio seeks to pay its shareholders as high a level of monthly
income exempt from Federal income taxes and from New York State and City
personal income taxes as is consistent with prudent investing.
For the year ended March 31, 1998, the Class A shares of the New York Portfolio
generated a total return of 11.83% and outperformed its New York municipal bond
fund peer group average total return of 10.49% for the same time period,
according to Lipper Analytical Services, Inc. (Lipper is an independent
fund-tracking organization.)
Based on the net asset value ("NAV") of $13.91 as of March 31, 1998 for Class A
shares and the current monthly income dividend rate of $0.06 per Class A Share,
the New York Portfolio's annualized distribution rate is 5.18%. For a New York
resident in the combined federal and state income tax bracket of 40.62%, the New
York Portfolio's tax-free yield of 5.18% is equivalent to a taxable yield of
8.72%. (This figure assumes a Federal income tax bracket of 36%, which
represents 10% of all U.S. Federal taxpayers according to the Internal Revenue
Service.)
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Smith Barney Muni Funds -- NY Money Market and NY Portfolios 1
<PAGE>
We are pleased to report that the New York Portfolio has been given a four-star
rating overall for Class A shares and Class B shares from Morningstar, Inc.* as
of March 31, 1998.
In response to the overall decline in interest rates, we have gradually pared
away bonds that were vulnerable to early calls and replaced them with newer
issues with better call protection. We extended the weighted average life of the
New York Portfolio from 7.81 years on March 31, 1997 to 8.67 years on March 31,
1998 to help provide a more competitive stream of income over the long term.
(The weighted average life differs from the weighted average maturity in that it
is based on the length of time before the first optional call date rather than
simply the final maturity of the bond. A longer weighted average life increases
exposure to current interest rates, which reduces the risk that the bond will be
called and the proceeds reinvested at a lower interest rate than the current
investment.)
Given current market conditions, we have also upgraded the overall credit
quality of the New York Portfolio. Because many investors have been seeking the
higher yields found in lower-rated issues, the yield gap between high- and
lower-quality bonds has narrowed during the past fiscal year. We believe that
the lower-quality, higher-yielding bonds do not currently offer sufficient
reward to justify the added risk. Therefore, we have placed an even greater
emphasis on high-quality securities. As of March 31, 1998, 96.9% of the
Portfolio was rated investment grade or better with roughly 33% rated AAA, the
highest rating. (Investment-grade bonds are those rated in one of the highest
four rating categories by any nationally recognized statistical rating
organization, or determined by the manager to be of equivalent quality.)
During the past year, we have also maintained a broad diversification over a
range of different kinds of bonds. As of March 31, 1998, the Portfolio's assets
were concentrated in hospital bonds (15.8%), transportation bonds (13.6%) and
education bonds (11.2%).
Market and Economic Overview
During the past year, domestic bond market performance was driven primarily by a
healthy economy with low inflation and the uncertainties that continue to cloud
many of the world's major stock markets. Despite robust consumer demand and
labor shortages in many areas, consumer prices remained fairly stable while
wholesale prices for many commodities, particularly oil, actually fell. The
Gross
- ----------
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through 3/31/98. 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, the 3-year period and the 5-year period. For Class B
shares, the Fund received 4 stars for the overall, and the 3-year periods.
It was rated among 1,525 municipal bond funds for the 3-year period and 782
municipal bond funds for the 5-year period. Ten percent of the funds in a
rating category receive five stars.
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2 1998 Annual Report to Shareholders
<PAGE>
Domestic Product, which measures the total output of goods and services
produced, grew at an annual rate of nearly 4% in 1997 and continued at about the
same rate in the first quarter of 1998.
In late October 1997, the U.S. stock market experienced its first major shock
during its record-setting seven-year rise when the Dow Jones Industrial Average
(a price-weighted average of 30 actively traded blue chip stocks) fell more than
554 points, the largest single-day point drop in stock market history. The stock
market plunge was triggered by concerns that Asia's spreading economic and
financial crisis might eventually impact domestic markets. Despite the ease in
which U.S. and European stock markets recovered from the downturn, many
investors began to shift their attention towards "safe haven" investments such
as U.S. Treasury securities. This renewed demand helped push the yield on the
bellwether 30-year U.S. Treasury bond, which moves in the opposite direction of
its price, to a record low of 5.73% on January 5, 1998.
Just fifteen months ago, Federal Reserve Board Chairman Alan Greenspan warned
against what he viewed as "irrational exuberance" in financial markets. Since
that time, the economy has continued to expand, the stock market has soared to
even greater heights and in May 1997, unemployment reached its lowest level in
more than 20 years. Yet, inflation has remained subdued. In a widely expected
action, Federal Reserve policymakers emerged from their meeting on March 31,
1998 with no decision and let stand the 5.5% federal-funds rate, which has
remained unchanged since March 1997. (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.)
Interest rates, as represented by the 30-year U.S. Treasury bond yield, have
dropped nearly 1.16% in the past year. Similarly, municipal bond yields have
also declined, although not as sharply. According to the Bond Buyer 25-Year
Revenue Index, municipal bond yields have fallen from approximately 6.09% on
March 31, 1997 to 5.42% on March 31, 1998. One result of these historically low
interest rates has been a record volume of municipal bond issuance.
In the first quarter of 1998 alone, more than $68 billion of bonds were sold,
representing an increase of roughly 70% from the same period last year. Many
municipalities took advantage of the low interest rates by refinancing older,
higher-coupon bonds. Moreover, the strength of the economy has filled government
coffers and increased their debt capacity while the economic expansion has
accelerated demand for more infrastructure improvements, many of which have been
on hold in an era of fiscal conservatism.
In our view, this surge in municipal bond supply has created a number of
investment opportunities. The massive issuance volume that we have witnessed
recently has helped keep municipal bond yields from falling as much as their
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 3
<PAGE>
taxable counterparts. In addition, the oversupply has resulted in a steeper
yield curve than U.S. Treasury securities and consequently created many
attractive investment opportunities, especially in the longer-term issues. (The
yield curve shows the difference between short- and long-term yields.)
New York Economic Highlights
New York has finally begun to reap the benefits of the nation's ongoing economic
expansion. In 1997, new job creation increased by roughly 1.2%. However, the
Empire State still substantially lags the rest of the U.S. in job growth. Like
many other regions, New York's economy continues to evolve from one dominated by
manufacturing to a more services-oriented economy. In particular, the Empire
State has benefited immensely from Wall Street's spectacular success in recent
years. Strong stock market volume, high levels of merger and acquisition
activity and a large volume of corporate underwriting has led to equally
outstanding profit growth for many financial services firms. Wall Street's
success has enabled New York City officials to project budget surpluses for the
first time in years.
However, New York State still faces a number of challenges. So far, economic
recovery has been limited almost entirely to the downstate region. In 1997,
upstate New York posted a job growth rate of less than half that of the state as
a whole and continues to struggle amid manufacturing layoffs and military base
closures. This regional disparity and somewhat sluggish recovery coupled with
its notoriously contentious budget processes has kept the State lingering near
the bottom tier of state credit ratings. Although we are encouraged by recent
developments, we remain somewhat cautious about New York's economic future.
Outlook
We remain bullish on the prospects for the municipal bond market in the coming
months. We believe our positive outlook is supported by the following four
factors:
o The full impact of the Asian crisis on the U.S. economy has yet to be
realized. Economic strength continued into the first quarter of this year,
but we attribute much of that to temporary factors such as unusually warm
weather. As Asian companies attempt to recover, domestic companies will
face fierce competition and that will tend to hold prices down and help to
contain any emerging inflationary pressures.
o The rate of inflation remains historically low. Salomon Smith Barney
research forecasts a Consumer Price Index ("CPI") increase of approximately
a 1.3% annual rate for 1998, well below the roughly 5.5% annual average
since 1970.
o The reduction of the Federal budget, which should also reduce the need for
issuing Treasury securities.
o A significant possibility that the Asian economic and financial recovery
will take longer than many investment professionals currently anticipate,
therefore extending the disinflationary influence on the U.S. economy.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
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 March 31, 1998, the New York Money Market Portfolio's 7-day current yield
was 2.92%. The Portfolio's 7-day effective yield--which reflects
compounding--was 2.97%.
The New York Money Market Portfolio invests only in short-term securities that
carry minimal credit risk. All of the Portfolio's investments 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 45 days.
While the New York Money Market 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.
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
April 21, 1998
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Smith Barney Muni Funds -- NY Money Market and NY Portfolios 5
<PAGE>
================================================================================
New York Portfolio
================================================================================
================================================================================
Historical Performance -- Class A Shares
================================================================================
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
<S> <C> <C> <C> <C> <C>
3/31/98 $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 $7.97 $0.05
================================================================================
<CAPTION>
================================================================================
Historical Performance -- Class B Shares
================================================================================
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
<S> <C> <C> <C> <C> <C>
3/31/98 $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 $2.30 $0.05
================================================================================
<CAPTION>
================================================================================
Historical Performance -- Class C Shares
================================================================================
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
<S> <C> <C> <C> <C> <C>
3/31/98 $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 $3.50 $0.05
================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
================================================================================
New York Portfolio
================================================================================
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
----------------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Year Ended 3/31/98 11.83% 11.19% 11.13%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 6.96 N/A 6.30
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/98 8.90 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/98 7.69 10.09 6.82
================================================================================
<CAPTION>
With Sales Charge(2)
-----------------------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Year Ended 3/31/98 7.34% 6.69% 10.13%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 6.09 N/A 6.30
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/98 8.45 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 3/31/98 7.30 9.62 6.82
================================================================================
<CAPTION>
================================================================================
Cumulative Total Return
================================================================================
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (3/31/88 through 3/31/98) 134.54%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/98) 38.61
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/98) 41.20
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from purchase. This CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. Class
C shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are January 16, 1987, November
11, 1994 and January 8, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 7
<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+
- --------------------------------------------------------------------------------
March 1988 -- March 1998
[THE FOLLOWING DATA APPEARED IN A LINE CHART IN THE PRINTED MATTER]
<TABLE>
<CAPTION>
Lehman Brothers Lehman Brothers
New York Municipal Long Municipal Bond
Portfolio Bond Index* Index*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
3/88 9,698 10,000 10,000
3/89 10,639 11,054 10,721
3/90 11,593 12,281 11,851
3/91 12,569 13,442 12,944
3/92 14,035 14,972 14,238
3/93 16,027 17,164 16,020
3/94 16,415 17,360 16,391
3/95 17,428 18,864 17,610
3/96 18,946 20,598 19,087
3/97 19,985 21,896 20,125
3/89 22,348 24,649 22,282
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares on March
31, 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 March 31, 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
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 incurred mutual funds.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments March 31, 1998
===========================================================================================================
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING DESCRIPTION VALUE
===========================================================================================================
<S> <C> <C> <C>
Albany IDA IDR, 540 Broadway Project:
$ 1,255,000 NR++ Series B-2 4.200% due 12/1/98(a)(c) $ 1,255,000
1,250,000 NR++ Series B-3 4.200% due 12/1/98(a)(c) 1,250,000
5,000,000 SP-1+ Buffalo RANS 4.400% due 8/5/98 5,009,767
3,600,000 NR++ Chautauqua County IDA Red Wing Project 3.450%(b) 3,600,000
5,000,000 NR++ Columbia County IDR Rural Manufacturing Project
3.600%(a)(b) 5,000,000
7,000,000 NR+ East Islip UFSD TAN 4.250% due 6/26/98 7,005,236
10,500,000 NR+ East Meadow UFSD TAN 4.250% due 6/29/98 10,510,106
10,000,000 NR+ Eastern Suffolk County BOCES RAN 4.500% due 6/24/98 10,011,144
Erie County IDA:
Colad Group:
2,160,000 A-1 Series A 3.600%(a)(b) 2,160,000
2,229,000 A-1 Series B 3.600%(a)(b) 2,229,000
8,500,000 MIG 1* Erie County Series A 4.500% due 6/25/98 8,513,338
3,995,000 VMIG 1* Rosina Food Products 3.400%(a)(b) 3,995,000
2,560,000 A-1 Fulton County IDR (Fiber Conversion Inc.) 3.950%(a)(b) 2,560,000
1,050,000 A-1 Glens Falls IDA Broad Street Center Project 3.650%(b) 1,050,000
13,419,000 NR+ Hempstead BAN Series D 4.000% due 10/15/98 13,432,944
3,350,000 A-1+ Hempstead IDA Trigen-Nassau Energy Corp. 3.550%(b) 3,350,000
Jefferson County IDA IDR:
1,585,000 A-1 The Climax Manufacturing Co. Project 3.600%(a)(b) 1,585,000
2,300,000 A-1 Fisher Gauge 3.600%(a)(b) 2,300,000
2,150,000 NR+ Lancaster Village BAN 4.250% due 6/25/98 2,151,828
3,100,000 A-1 Lewis County IDA IDR (The Climax Manufacturing Co.
Project) 3.600%(a)(b) 3,100,000
8,000,000 NR+ Longwood CSD TAN 4.250% due 6/30/98 8,006,467
2,500,000 NR+ Monroe County BOCES RANS Series 1997
4.250% due 6/19/98 2,501,456
4,565,000 P-1* Monroe County IDA (Granite Building) 3.500%(b) 4,565,000
6,200,000 A-1 Monroe County IDA JADA Precision Plastic 97
3.600%(a)(b) 6,200,000
5,000,000 A-1+ Municipal Assistance Corp. Series F Bond
AMBAC-Insured TECP Series G 3.400% due 4/6/98 5,000,000
9,000,000 NR+ Nassau County BOCES RAN Lot 1 4.250% due 6/30/98 9,005,336
3,600,000 A-1+ Nassau County IDA Cold Spring Harbor 3.800%(b) 3,600,000
13,750,000 SP-1+ Nassau County RAN Series B 4.500% due 4/10/98 13,752,139
New York City GO:
4,500,000 A-1+ Sub-Series 92D FGIC-Insured 3.500%(b) 4,500,000
4,200,000 A-1+ Sub-Series 92D FGIC-Insured 3.550%(b) 4,200,000
5,000,000 A-1+ Sub-Series 92D FGIC-Insured 3.550%(b) 5,000,000
12,300,000 A-1+ Sub-Series 94B-8 3.450%(b) 12,300,000
6,500,000 A-1+ Sub-Series 94B-10 3.450%(b) 6,500,000
2,200,000 A-1+ Sub-Series 95 F2 3.550%(b) 2,200,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 9
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING DESCRIPTION VALUE
===========================================================================================================
<S> <C> <C> <C>
$ 29,500,000 A-1+ New York City HDC MFH Carnegie Park Series A 3.500%(b) $29,500,000
New York City HDC Mortgage Revenue MFH:
400 West 59th Street:
7,000,000 A-1 Series A-1 3.550%(a)(b) 7,000,000
12,700,000 A-1 Series A-2 3.650%(a)(b) 12,700,000
10,200,000 A-1+ Columbus Apartments 3.500%(b) 10,200,000
2,250,000 A-1+ Parkgate Tower 1 3.600%(b) 2,250,000
10,400,000 A-1 York Avenue Project 3.600%(a)(b) 10,400,000
43,000,000 A-1+ New York City Health & Hospital Series A 3.500%(b) 43,000,000
New York City IDA:
19,000,000 A-1 Air Express International Corporation Project
3.750%(a)(b) 19,000,000
2,326,000 VMIG 1* Civic Facilities Revenue Berkeley Carroll
School Project 3.500%(b) 2,326,000
2,500,000 A-1 Civic Facilities Revenue Children Oncology
Society 3.500%(b) 2,500,000
2,150,000 A-1 Civic Facilities Revenue Columbia
Grammar School Project 3.500%(b) 2,150,000
3,050,000 VMIG 1* Series 87-A 3.500%(a)(b) 3,050,000
900,000 VMIG 1* Series 89-0 3.500%(a)(b) 900,000
1,620,000 VMIG 1* Series 89-G 3.500%(a)(b) 1,620,000
12,000,000 A-1+ Solid Waste Facility USA Waste Services 3.550%(a)(b) 12,000,000
New York City Municipal Water Finance Authority:
5,100,000 A-1+ Tax-Exempt Eagle Trust Series B 3.770%
PART MBIA-Insured(b) 5,100,000
10,000,000 A-1+ TECP Series 5A 3.450% due 5/7/98 10,000,000
10,000,000 A-1+ TECP Series 5B 3.400% due 5/7/98 10,000,000
30,000,000 SP-1+ New York City RAN Series A 4.500% due 6/30/98 30,067,736
23,735,000 VMIG 1* New York City Transitional Financial Authority PART
3.750%(b) 23,735,000
9,175,000 A-1+ New York City Trust Cultural Resource Revenue
Carnegie Hall Series A 3.500%(b) 9,175,000
New York State Dormitory Authority Revenue:
2,000,000 A-1+ City University Revenue FGIC-Insured 3.750%(b) 2,000,000
8,625,000 A-1+ Colgate University PART FGIC-Insured 3.700%(b) 8,625,000
Memorial Sloan Kettering TECP:
9,600,000 A-1 Series 89 A 3.250% due 5/1/98 9,600,000
10,560,000 A-1 Series 89 A 3.150% due 4/1/98 10,560,000
1,500,000 A-1 Series 89 B 3.150% due 4/2/98 1,500,000
11,400,000 A-1 Series 89 B 3.350% due 4/2/98 11,400,000
2,900,000 A-1 Series 89 B 3.250% due 5/1/98 2,900,000
3,500,000 A-1 Series 89 C 3.150% due 4/1/98 3,500,000
6,600,000 A-1 Series 89 C 3.250% due 5/11/98 6,600,000
1,000,000 A-1 Series 89 D 3.150% due 4/2/98 1,000,000
10,000,000 A-1+ Series 96 3.500% due 4/7/98 10,000,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING DESCRIPTION VALUE
===========================================================================================================
<S> <C> <C> <C>
$ 1,500,000 A-1+ Series 96 3.250% due 5/1/98 $ 1,500,000
10,300,000 A-1+ Series 96 3.450% due 5/15/98 10,300,000
7,235,000 A-1+ Mental Health Facilities FSA-Insured PART 3.770%(b) 7,235,000
6,250,000 A-1+ United Health Services AMBAC-Insured PART
3.90% due 10/1/98(c) 6,250,000
New York State Energy Research &
Development Authority Electric Facilities:
8,300,000 VMIG 1* LILCO Series A 3.550%(a)(b) 8,300,000
10,500,000 VMIG 1* LILCO Series A 3.700%(a)(b) 10,500,000
Niagara Mohawk:
3,400,000 P-1* Series 86A 3.800%(a)(b) 3,400,000
14,200,000 A-1+ Tax-Exempt Eagle Trust
PART FGIC-Insured 3.400%(b) 14,200,000
9,500,000 A-1+ Tax-Exempt Eagle Trust
PART FGIC-Insured 3.770%(b) 9,500,000
New York State Energy Research &
Development Authority Gas Facilities:
Brooklyn Union Gas MBIA-Insured:
14,300,000 A-1+ Project A 3.600%(b) 14,300,000
1,300,000 A-1+ Project B 3.600%(b) 1,300,000
11,250,000 P-1* Central Hudson Gas & Electric 3.850%(b) 11,250,000
11,900,000 A-1+ Rochester Gas & Electric Series 97A
MBIA-Insured 3.400%(b) 11,900,000
18,000,000 A-1+ Rochester Gas & Electric B
MBIA-Insured 3.600%(b) 18,000,000
New York State Environmental Facilities Corp. PCR:
20,000,000 A-1+ Tax-Exempt Eagle Trust PART FSA-Insured 3.770%(b) 20,000,000
16,300,000 A-1+ Tax-Exempt Eagle Trust PART Series D 3.750%
due 7/1/98(c) 16,300,000
1,100,000 A-1+ New York State Environmental Quality
Series 97A TECP 3.450% due 4/9/98 1,100,000
New York State Housing Finance Authority:
24,500,000 VMIG 1* 250 West 50th Street 3.600%(a)(b) 24,500,000
15,000,000 A-1+ Liberty View Apartment Series 97 A 3.500%(a)(b) 15,000,000
9,900,000 VMIG 1* Normandy Court Project 1 3.500%(b) 9,900,000
20,000,000 VMIG 1* Saxony Housing Series 97A 3.650%(a)(b) 20,000,000
New York State Local Government Assistance Corp.:
3,000,000 A-1+ PART AMBAC-Insured 3.900%(b) 3,000,000
7,400,000 A-1+ Series 93 A 3.450%(b) 7,400,000
3,300,000 A-1+ Series 94 B 3.400%(b) 3,300,000
29,000,000 A-1+ Series 95 B 3.450%(b) 29,000,000
19,700,000 A-1+ Series 95 C 3.450%(b) 19,700,000
4,200,000 A-1+ Series 95 C 3.500%(b) 4,200,000
6,600,000 A-1+ Series 95 E 3.500%(b) 6,600,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 11
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING DESCRIPTION VALUE
===========================================================================================================
<S> <C> <C> <C>
New York State Medical Care Facility Finance Agency:
$ 7,700,000 VMIG 1* Lenox Hill Hospital 3.600%(b) $ 7,700,000
12,125,000 VMIG 1* St. Luke's PART FHA-Insured 3.770%(b) 12,125,000
2,000,000 A-1+ Tax-Exempt Eagle Trust New York Hospital 3.770%
PART AMBAC-Insured(b) 2,000,000
New York State Mortgage Revenue Agency:
6,480,000 VMIG 1* PART Series HHZ 3.800%(a)(b) 6,480,000
13,500,000 VMIG 1* PART Series 38 3.800%(a)(b) 13,500,000
7,530,000 VMIG 1* PART Series KK 3.900%(a)(c) 7,530,000
32,000,000 A-1+ New York State Power Authority TECP Series 2
3.200% due 4/9/98 32,000,000
22,275,000 A-1+ New York State Thruway PART Series 97 3.700%(b) 22,275,000
14,595,000 A-1 New York State UDC 93A Refunding FSA-Insured
PART 3.900% due 10/14/98(c) 14,595,000
12,342,000 VMIG 1* New York State UDC Correctional Facilities
Series 3 PART 3.800%(b) 12,342,000
2,140,000 NR+ Niagara County GO BAN 4.250% due 7/17/98 2,142,107
8,000,000 A-1+ Niagara County IDA American Re-Fuel Co.
Series D 3.700%(a)(b) 8,000,000
3,500,000 P-1* Niagara County IDA IDR (General Abrasive Tribacher)
3.750%(a)(b) 3,500,000
15,000,000 NR+ Onondaga County BAN Series 97 4.125% due 6/19/98 15,010,162
Onondaga County IDA:
3,125,000 A-1 Civic Facilitiy B 3.550%(a)(b) 3,125,000
4,500,000 A-1 Southern Container Series A 3.550%(a)(b) 4,500,000
1,725,000 A-1 Southern Container Series B 3.550%(a)(b) 1,725,000
10,000,000 NR+ Oyster Bay NY BAN 4.000% due 2/25/99 10,045,420
4,400,000 NR+ Plainedge UFSD 4.250% due 6/30/98 4,402,896
5,990,000 A-1+ Port Authority NY NJ, JFK International Airport PART
MBIA-Insured 4.200%(b) 5,990,000
1,000,000 VMIG 1* Puerto Rico Commonwealth GDB MBIA-Insured
3.700%(b) 1,000,000
6,000,000 NR+ Puerto Rico Industrial Medical PCR (Abbott
Laboratory) Series 1983 3.550% due 3/1/99(c) 6,000,000
7,158,000 NR+ Rensselaer County BAN Series B 4.250% due 6/25/98 7,164,084
1,100,000 NR++ Rensselaer County IDA IDR (Millers Supermarket Inc. 1,100,000
Project) 3.750% due 3/1/99(a)(c)
13,000,000 NR++ Rochester BANS Series 1998 I 4.000% due 3/9/99 13,050,567
5,690,000 NR++ Rochester GO Series 94 A PART AMBAC-Insured
3.800%(b) 5,690,000
1,000,000 P-1* Rotterdam IDA IDR Rotterdam Park 3.500%(b) 1,000,000
1,900,000 P-1* Schenectady County IDA IDR Refunding (Scotia
Industrial Park Project) Series 94A 3.500%(b) 1,900,000
7,000,000 A-1 Seneca County IDA Chiropractic College 3.500%(b) 7,000,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING DESCRIPTION VALUE
===========================================================================================================
<S> <C> <C> <C>
$25,000,000 SP-1+ Suffolk County NY TRANS Series RA 1
4.250% due 8/13/98 $ 25,058,434
5,000,000 NR+ Sullivan County GO BAN 4.500% due 7/17/98 5,007,036
Syracuse New York BANS:
20,000,000 SP-1+ Series B 4.000% due 12/18/98 20,024,666
11,304,000 SP-1+ Series C 4.250% due 12/18/98 11,331,045
Triborough Bridge & Tunnel Authority:
3,000,000 NR+ Series A 4.250% due 1/1/99 3,016,500
40,100,000 VMIG 1* Special Obligations 3.450%(b) 40,100,000
8,525,000 AAA Pre-Refunded -- Escrowed with U.S. government
securities to 1/1/99 Call @ 101.50
6.500% due 1/1/15 8,836,878
2,650,000 A-1+ United Nations Development Corp. PART 3.850%(b) 2,650,000
4,924,000 NR+ Wilson CSD BAN 4.250% due 4/16/98 4,924,784
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $1,153,534,076**) $1,153,534,076
===========================================================================================================
</TABLE>
(a) Income from this issue is considered a preference item for the purposes of
calculating the alternative minimum tax.
(b) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(c) Variable rate obligation payable at par on demand on the date indicated.
++ 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 24 through 26 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 13
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Education -- 11.2%
$ 2,500,000 AAA New York State Dormitory Authority Revenue Bonds:
Center Development of Disabilities, Series A,
AMBAC-Insured, 5.000% due 7/1/17 $ 2,450,000
City University Systems:
Series A:
5,625,000 BBB+ 5.625% due 7/1/16 5,941,405
5,000,000 AAA FGIC-Insured, 5.000% due 7/1/16 4,887,500
7,000,000 BBB+ Series B, 6.000% due 7/1/14 7,708,750
2,500,000 BBB+ Series C, 7.500% due 7/1/10(a) 3,087,500
Cornell University, Series A:
2,000,000 AA 7.375% due 7/1/20 2,177,500
1,000,000 AA 7.375% due 7/1/30 1,088,750
200,000 Baa1* Department of Health, State of New York Issue,
7.250% due 7/1/02 215,750
2,700,000 AA Manhattan College, Asset Guaranty,
6.500% due 7/1/19 2,892,375
New York Medical College:
1,100,000 AAA 7.250% due 10/1/03 1,123,375
220,000 AA Asset Guaranty, 6.700% due 7/1/01 237,875
2,000,000 AAA Rockefeller University, 4.750% due 7/1/37 1,847,500
State University Educational Facility:
4,000,000 A- 5.375% due 7/1/21 4,020,000
20,000,000 A- 5.125% due 5/15/21 19,525,000
12,110,000 A- Series A, 5.875% due 5/15/17 13,472,374
Series B:
1,000,000 A- 7.500% due 5/15/11 1,252,500
5,000,000 AAA FGIC-Insured, 5.250% due 5/15/19 5,156,250
7,370,000 A+ University of Rochester, Series A, 6.500% due 7/1/19 8,180,700
285,000 BBB+ Upstate Community College, Series B,
7.100% due 7/1/01 309,225
- -----------------------------------------------------------------------------------------------------------
85,574,329
- -----------------------------------------------------------------------------------------------------------
Escrowed to Maturity (b) -- 0.9%
1,495,000 AAA Commonwealth of Puerto Rico, Aqueduct & Sewer
Authority Revenue Bonds, 10.250% due 7/1/09 2,068,706
3,150,000 AAA New York City GO, AMBAC-Insured, Series I,
7.250% due 8/15/14 3,319,313
1,470,000 AAA New York State Power Authority Revenue &
General Purpose, 9.500% due 1/1/01 1,560,038
- -----------------------------------------------------------------------------------------------------------
6,948,057
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Finance -- 8.1%
New York City Transitional Finance Authority
Revenue, Future Tax:
$ 5,400,000 AA Series A, 5.125% due 8/15/21 $ 5,305,500
Series B:
10,000,000 AA 4.750% due 11/15/23 9,275,000
15,000,000 AA 4.500% due 11/15/27 13,237,500
New York State Local Government Assistance Corp.:
Series B, MBIA-Insured:
8,000,000 AAA 5.000% due 4/1/18 7,840,000
5,000,000 AAA 4.875% due 4/1/20 4,793,750
12,000,000 AAA 5.000% due 4/1/21 11,760,000
6,450,000 A+ Series C, 5.500% due 4/1/17 6,828,938
New York State Municipal Bond Bank Agency,
Special Revenue Program:
1,000,000 BBB+ City of Buffalo, 6.875% due 3/15/06 1,086,250
1,500,000 A+ City of Rochester, 6.750% due 3/15/11 1,623,750
- -----------------------------------------------------------------------------------------------------------
61,750,688
- -----------------------------------------------------------------------------------------------------------
General Obligation -- 6.7%
1,000,000 A Commonwealth of Puerto Rico GO,
8.000% due 7/1/08 1,029,260
Green Island GO:
100,000 Baa* 9.375% due 11/1/01 114,375
125,000 Baa* 9.375% due 11/1/02 146,719
New York City Refunding Bonds, GO:
1,145,000 AAA Series B1, MBIA-Insured, 6.950% due 8/15/12 1,321,044
5,000,000 A3* Series C, 6.660% due 8/1/09 5,262,500
5,000,000 A3* Series D, 5.250% due 8/1/21 4,968,750
6,000,000 A3* Series F, 5.000% due 8/1/23 5,737,500
5,000,000 A3* Series G, 5.125% due 8/1/25 4,812,500
Series H:
660,000 A3* 7.000% due 2/1/21 724,350
10,000,000 A3* 6.125% due 8/1/25 10,812,500
540,000 A3* Series I, 7.250% due 8/15/14 569,025
New York State GO:
1,000,000 A 12.000% due 11/15/03(a) 1,380,000
2,750,000 A 9.875% due 11/15/05(a) 3,705,625
3,195,000 Aa2* Orange County GO, 5.125% due 9/1/23 3,202,987
6,000,000 A Puerto Rico Commonwealth, Public Improvement,
Refunding Bonds, 4.500% due 7/1/23 5,407,500
1,500,000 AAA Yonkers GO, Series B, FGIC-Insured,
5.000% due 9/1/17 1,473,750
- -----------------------------------------------------------------------------------------------------------
50,668,385
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 15
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Government Facilities -- 2.4%
New York State Urban Development Corp. Revenue:
Correctional Facilities Service Contract, Series A:
$ 10,700,000 BBB+ 5.000% due 1/1/19 $10,231,874
5,000,000 BBB+ 5.000% due 1/1/28 4,750,000
3,000,000 BBB+ State Facilities, 5.700% due 4/1/20 3,187,500
- -----------------------------------------------------------------------------------------------------------
18,169,374
- -----------------------------------------------------------------------------------------------------------
Hospitals -- 15.8%
680,000 B1* Monroe County IDA Revenue, Civic Facilities,
Genesee Hospital, Series A, 6.500% due 11/1/99 693,600
2,000,000 AAA New York State Dormitory Authority Revenue:
Long Island Medical Center, Series A, FHA-Insured,
7.750% due 8/15/27 2,045,000
5,350,000 Aa3* Lutheran Center at Poughkeepsie, LOC Key Bank,
6.050% due 7/1/26 5,664,313
5,000,000 AAA Memorial Sloan Kettering Cancer Center,
Series C, MBIA-Insured, 5.500% due 7/1/23 5,293,750
Mental Health Services Facilities, Series B:
2,500,000 A- 5.000% due 2/15/18 2,396,875
7,000,000 A- 5.625% due 2/15/21 7,262,500
8,500,000 AAA Millard Fillmore Hospital, AMBAC/FHA-Insured,
5.375% due 2/1/32 8,542,500
21,000,000 AAA New York & Presbyterian Hospital, FHA-Insured,
4.750% due 8/1/16 19,950,000
5,850,000 AAA St. Joseph's Hospital, MBIA-Insured,
5.250% due 7/1/18 5,842,688
3,000,000 AA St. Luke's Home, Residential Health,
FHA-Insured, 6.375% due 8/1/35 3,262,500
2,450,000 AAA St. Vincent's Hospital & Medical Center, FHA-Insured,
7.400% due 8/1/30 2,682,750
New York State Medical Care Facilities Finance
Agency Revenue:
2,080,000 A- 8.875% due 8/15/07 2,129,400
550,000 A- 7.700% due 2/15/18 568,255
Hospital & Nursing Home Insured Mortgage,
FHA-Insured:
Series A:
90,000 AA 6.100% due 2/15/02 95,063
11,805,000 AAA 6.200% due 2/15/21 12,675,618
4,090,000 AA 7.450% due 8/15/31 4,534,788
990,000 AA Series B, 7.000% due 8/15/32 1,093,950
Series A:
2,500,000 BB Central Suffolk Hospital Mortgage Project,
6.125% due 11/1/16 2,543,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Hospitals -- 15.8% (continued)
$ 1,000,000 Aa2* Health Center Projects, Secured Mortgage
Program, 6.375% due 11/15/19 $ 1,098,750
6,800,000 AA Methodist Hospital, FHA-Insured,
6.700% due 8/15/23 7,352,500
4,000,000 AA Mortgage Project, FHA-Insured,
6.375% due 8/15/24 4,350,000
Series B:
1,860,000 AAA Long Term Healthcare, FSA-Insured,
6.450% due 11/1/14 2,027,400
3,500,000 AA Mortgage Project, FHA-Insured,
6.100% due 2/15/15 3,766,875
Series F, Mental Health Services Facilities
Improvement:
4,720,000 A- 6.500% due 8/15/12 5,127,100
4,615,000 A- 6.500% due 2/15/19 4,909,205
2,755,000 NR Newark-Wayne Community Hospital Inc., Hospital Revenue
Refunding & Improvement, Series A, 7.600% due 9/1/15 2,892,750
500,000 Baa1* Port Jervis, NY Industrial Development Authority,
Franciscan Health Partnership, 5.200% due 11/1/8 506,875
710,000 A Valley Health Development Corp., Mortgage Revenue Bonds,
Mortgage Loan, FHA-Insured, 11.300% due 2/1/23 851,113
- -----------------------------------------------------------------------------------------------------------
120,159,868
- -----------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 6.5%
6,470,000 Baa* Commonwealth of Puerto Rico, Urban Renewal &
Housing Corp. Revenue Bonds, 7.875% due 10/1/04 6,930,987
1,750,000 NR Lincoln Towers Housing Corp., Mortgage Revenue,
11.250% due 1/1/15 1,814,295
New York City Housing Development Corp.,
Multi-Family Housing:
1,560,015 NR Cadman Project, 6.500% due 11/15/18 1,638,062
990,157 NR Heywood Towers Project, 6.500% due 10/15/17 1,039,694
1,258,358 NR Kelly Project, 6.500% due 2/15/18 1,326,347
1,344,757 AAA Pass Through Certificates, AMBAC-Insured,
6.500% due 12/20/01 1,413,676
1,613,960 NR Riverside Project, 6.500% due 11/15/18 1,696,902
Series A, FHA-Insured:
4,000,000 AAA 6.600% due 4/1/30 4,235,000
5,000,000 AAA Multi-Unit Mortgage Refunding,
7.350% due 6/1/19 5,306,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 17
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 6.5% (continued)
New York State Housing Finance Agency Revenue,
Multi-Family Housing:
FHA-Insured:
$ 2,000,000 Aa2* Secured Mortgage, Series A,
6.200% due 8/15/15(c) $ 2,132,500
1,500,000 AAA Series C, 6.500% due 8/15/24 1,597,500
3,450,000 AAA Housing Project Mortgage, Series A, FSA-Insured,
6.125% due 11/1/20 3,657,000
Secured Mortgage Project, SONYMA-Insured:
Series A:
500,000 Aa2* 7.000% due 8/15/12(c) 539,375
500,000 Aa2* 7.050% due 8/15/24(c) 535,625
6,870,000 Aa2* Series B, 6.250% due 8/15/29(c) 7,256,438
1,750,000 Aa2* Series C, 6.600% due 8/15/27 1,881,250
5,200,000 Aa2* New York State Mortgage Agency Revenue,
Homeowner Mortgage, Series 69,
5.500% due 10/1/28(c) 5,219,500
1,000,000 A1* Rensselaer Housing Authority, Multi-Family
Mortgage Revenue, Rensselaer Elderly Apartments,
Series A, 7.750% due 1/1/11 1,076,250
- -----------------------------------------------------------------------------------------------------------
49,296,651
- -----------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 4.0%
New York State Mortgage Agency Revenue:
1,345,000 Aaa* 9th Series A, Pool-Insured, 7.300% due 4/1/17(c) 1,353,568
1,000,000 Aaa* Series 41-A, 6.450% due 10/1/14 1,078,750
Homeowner Mortgage:
2,625,000 Aa2* Series 37-A, 6.375% due 10/1/14 2,828,437
4,000,000 Aa2* Series 42, FHA-Insured, 6.650% due 4/1/26(c) 4,300,000
9,880,000 Aa2* Series 46, 6.650% due 10/1/25(c) 10,658,050
4,400,000 Aa2* Series 65, 5.850% due 10/1/28(c) 4,521,000
5,000,000 Aa2* Series 67, 5.800% due 10/1/28(c) 5,118,750
785,000 Aa2* Series SS, FHA-Insured, 7.950% due 10/1/22(c) 834,063
- -----------------------------------------------------------------------------------------------------------
30,692,618
- -----------------------------------------------------------------------------------------------------------
Industrial Development -- 6.8%
2,250,000 A- Essex County IDA Revenue, Solid Waste,
(International Paper Co. Project), Series A,
6.150% due 4/1/21(c) 2,430,000
500,000 AA- Monroe County IDA, Public Improvement,
Canal Ponds Park, Series A, 7.000% due 6/15/13 555,000
New York City IDA:
5,000,000 BBB- Brooklyn Navy Yard Cogen Partners,
5.750% due 10/1/36(c) 5,106,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Industrial Development -- 6.8% (continued)
Civic Facility Revenue, (The Lighthouse Project):
$ 1,000,000 AA 6.375% due 7/1/10 $ 1,067,500
2,250,000 AA 6.500% due 7/1/22 2,404,688
925,000 Aa1* Prime Laboratories Inc., Series C, 7.700%
Mandatory Tender 11/1/10 928,145
1,450,000 Baa2* Special Facilities Revenue, (1990 American
Airlines Inc. Project), 8.000% due 7/1/20(c) 1,512,336
8,000,000 AAA Onondaga County IDA Sewer Facilities Revenue, (Bristol-
Meyers Squibb Co. Project), 5.750% due 3/1/24(c) 8,780,000
1,600,000 AA Oswego County IDA, (Seneca Hill Project), Series A,
FHA-Insured, 5.650% due 8/1/37 1,638,000
Port Authority of New York & New Jersey:
8,000,000 BBB- Delta Airlines Inc. Project, Series 1R, 6.950% due 6/1/08 8,780,000
12,000,000 NR Special Project, 5th Installment, 6.750% due 10/1/19(c) 13,380,000
1,410,000 A Rensselear County IDA, Albany International Corp.,
7.550% due 6/1/07(a)(c) 1,670,850
1,250,000 AAA Syracuse GO, IDA, James Square Association,
FHA-Insured, 7.000% due 8/1/25(a) 1,345,313
2,230,000 B2* Warren & Washington Counties IDA, Resource Recovery
Revenue Bonds, Series A, 7.900% due 12/15/07 2,321,987
- -----------------------------------------------------------------------------------------------------------
51,920,069
- -----------------------------------------------------------------------------------------------------------
Life Care Systems -- 5.4%
7,450,000 AAA Castle Residential Health Care Facility Mortgage Revenue,
FHA-Insured, 5.750% due 8/1/37 7,682,813
New York State Dormitory Authority Revenue Bonds:
Chapel Oaks Inc.:
1,100,000 Aa3* 5.375% due 7/1/17 1,098,625
1,000,000 Aa3* 5.450% due 7/1/26 1,005,000
1,230,000 AAA Crouse Community Center, FHA-Insured,
7.500% due 8/1/29 1,320,713
7,000,000 BBB+ Department of Health, Veterans Home,
5.500% due 7/1/21 7,078,750
FHA-Insured:
1,000,000 AAA Eger Health Care, Nursing Home, 5.100% due 2/1/28 970,000
Genessee Valley:
1,000,000 AA Series A, 6.900% due 2/1/32 1,076,250
685,000 AA Series B, 6.850% due 8/1/16 750,075
3,815,000 AA Hebrew Nursing Home, 6.125% due 2/1/37 4,058,205
1,310,000 AAA Heritage House Nursing Center, 7.000% due 8/1/31 1,431,175
2,450,000 AA- Iroquois Nursing Home, 7.050% due 2/1/31 2,655,188
2,190,000 AAA Jewish Geriatric Center, 7.150% due 8/1/14 2,510,287
1,500,000 AAA Menorah Campus, Nursing Home,
6.100% due 2/1/37 1,584,375
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 19
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Life Care Systems -- 5.4% (continued)
$ 1,600,000 AA Niagara Frontier Home, Mortgage Revenue,
6.200% due 2/1/15 $ 1,750,000
3,350,000 AA Wesley Garden Nursing Home, 6.125% due 8/1/35 3,576,125
2,160,000 A Oneida Health Care Corp. Mortgage Revenue, Series A,
FHA-Insured, 7.200% due 8/1/31 2,308,500
- -----------------------------------------------------------------------------------------------------------
40,856,081
- -----------------------------------------------------------------------------------------------------------
Pollution Control Revenue -- 2.5%
4,500,000 AAA Dutchess County Resource Recovery Agency Revenue
Bonds, Solid Waste Management, Series A,
FGIC-Insured, 7.500% due 1/1/09 4,826,250
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) 1,183,875
1,000,000 A Series C, 8.375% due 12/1/28(c) 1,047,320
2,660,000 AAA Rochester Gas & Electric, FSA-Insured,
8.375% due 12/1/28(c) 2,793,612
New York State Environmental Facilities Corp.:
3,085,000 Baa1* Huntington Project, 7.375% due 10/1/99 3,204,543
PCR, State Water Revolving Fund, Series A:
1,950,000 Aa2* 7.500% due 6/15/12 2,127,938
805,000 Aaa* 7.250% due 6/15/10 894,556
1,000,000 AAA North Country Development Authority, Solid Waste
Management System Revenue Refunding, FSA-Insured,
6.000% due 5/15/15 1,125,000
1,710,000 Baa1* Puerto Rico Industrial, Medical & Environmental
Pollution Control Facilities Finance Authority Revenue,
Series A, American Airlines Inc., 6.450% due 12/1/25 1,866,038
- -----------------------------------------------------------------------------------------------------------
19,069,132
- -----------------------------------------------------------------------------------------------------------
Pre-Refunded (d) -- 9.3%
35,000 AAA Battery Park City Authority Housing Revenue, FHA-Insured,
(Call 6/1/05 @ 100), 8.625% due 6/1/23 44,100
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 1,133,750
500,000 AAA Municipal Assistance Corp., New York City, Series 67,
(Call 7/1/99 @ 102), 7.625% due 7/1/08 532,500
New York City GO:
2,855,000 AAA Series B1, MBIA-Insured, (Call 8/15/04 @ 101),
6.950% due 8/15/12 3,301,094
1,715,000 AAA Series H, (Call 2/1/02 @ 101.5), 7.000% due 2/1/21 1,905,794
1,310,000 AAA Series I, (Call 8/15/99 @ 101.5), 7.250% due 8/15/14 1,388,600
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Pre-Refunded (d) -- 9.3% (continued)
$ 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 $ 3,543,863
New York State Dormitory Authority Revenue:
5,000,000 AAA Department of Education, State of New York Issue,
(Call 7/1/01 @ 102), 7.750% due 7/1/21(a) 5,631,250
800,000 AAA Ideal Senior Living Center, FHA-Insured,
(Call 2/1/99 @ 102), 7.625% due 8/1/28 840,824
990,000 AAA United Health Services Inc., FHA-Insured Mortgage,
(Call 2/1/00 @ 102), 7.350% due 8/1/29(d) 1,066,725
New York State Medical Care Facilities
Finance Agency Revenue:
1,320,000 AAA Call 2/15/00 @ 102, 7.750% due 2/15/20 1,433,850
2,500,000 AAA Hospital & Nursing Home, Series C,
(Call 8/15/02 @ 102), 6.650% due 8/15/32 2,693,750
MBIA-Insured:
830,000 AAA Call 2/15/00 @ 102, 7.750% due 2/15/20 901,588
135,000 AAA Partially Pre-Refunded, (Call 2/15/00 @ 102),
7.750% due 2/15/20 145,631
515,000 AAA Partially Pre-Refunded, (Call 2/15/00 @ 102),
7.750% due 2/15/20 556,200
Series A:
3,000,000 AAA Beth Israel Medical Center, MBIA-Insured,
(Call 11/1/00 @ 102), 7.500% due 11/1/10 3,303,750
4,000,000 AAA Brookdale Hospital Medical Center,
(Call 2/15/05 @ 102), 6.800% due 8/15/12 4,635,000
4,700,000 AAA New York Downtown Hospital,
(Call 2/15/05 @ 102), 6.800% due 2/15/20 5,446,125
New York Hospital, Series A, FHA-Insured:
8,500,000 AAA Call 2/15/05 @ 102, 6.800% due 8/15/24(a) 9,881,250
7,600,000 AAA Call 2/15/05 @ 102, 6.500% due 8/15/29 8,702,000
2,500,000 AAA Call 2/15/05 @ 102, 6.900% due 8/15/34(a) 2,918,750
5,000,000 AAA Secured Hospital Revenue Bonds 1991,
(Call 8/15/01 @ 102), 7.400% due 8/15/21 5,593,750
1,700,000 AAA St. Luke's Hospital, Series B, FHA-Insured,
(Call 2/15/00 @ 102), 7.450% due 2/15/29 1,838,125
2,150,000 AAA Monroe County Water Authority Revenue,
AMBAC-Insured, (Call 8/1/04 @ 101),
7.000% due 8/1/19 2,491,312
1,000,000 AAA Orangetown Housing Authority, Housing Facility Revenue,
Orangetown Senior Housing Center, (Call 10/1/00 @ 102),
7.600% due 4/1/30 1,100,000
- -----------------------------------------------------------------------------------------------------------
71,029,581
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 21
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
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 $ 1,070,000
915,000 BBB+ New York State COP, (Hanson Redevelopment Project),
8.375% due 5/1/08 1,104,863
1,500,000 BBB+ Triborough Bridge & Tunnel Authority, (Convention
Center Project), Series E, 7.250% due 1/1/10(a) 1,792,500
- -----------------------------------------------------------------------------------------------------------
3,967,363
- -----------------------------------------------------------------------------------------------------------
Transportation -- 13.6%
2,500,000 AAA Albany County Airport Authority Revenue, FSA-Insured,
5.500% due 12/15/19(c) 2,553,125
Metropolitan Transportation Authority:
5,000,000 AAA Commuter Facility Revenue, Series E, AMBAC-Insured,
5.000% due 7/1/21 4,843,750
Transit Facilities Revenue:
Series A, MBIA-Insured:
5,000,000 AAA 4.750% due 7/1/21 4,693,750
10,000,000 AAA 5.625% due 7/1/25 10,462,500
5,600,000 AAA Series B-2, MBIA-Insured, 5.000% due 7/1/20 5,432,000
5,000,000 BBB+ Service Contract, Series N, 7.125% due 7/1/09 5,512,500
2,250,000 AAA Monroe County Airport Authority, Airport Revenue,
Greater Rochester International, MBIA-Insured,
7.250% due 1/1/19(c) 2,399,063
4,230,000 AAA New York State Highway Authority, Emergency Services,
Construction and Reconstruction, Series A,
FSA-Insured, 6.600% due 3/1/01 4,531,387
New York State Thruway Authority, Local Highway &
Bridge Authority:
5,000,000 AAA Series B, FGIC-Insured, 5.250% due 4/1/14 5,068,750
3,500,000 BBB+ Service Contract Revenue, 5.000% due 4/1/17 3,364,375
1,000,000 AAA Niagara Falls Bridge Authority, Toll Revenue, Series B,
FGIC-Insured, 5.250% due 10/1/15 1,040,000
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue Refunding:
7,500,000 A Series A, 4.750% due 7/1/38 6,918,750
Series Y:
10,000,000 A 5.000% due 7/1/36 9,650,000
17,000,000 A 5.500% due 7/1/36 17,743,750
20,000,000 Aa3* Triborough Bridge & Tunnel Authority, General Purpose,
Series B, 5.200% due 1/1/27 19,850,000
- -----------------------------------------------------------------------------------------------------------
104,063,700
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Schedules of Investments (continued) March 31, 1998
===========================================================================================================
NEW YORK PORTFOLIO
FACE
AMOUNT RATING SECURITY VALUE
===========================================================================================================
<S> <C> <C> <C>
Utilities -- 2.8%
New York State Energy, Research & Development
Authority, Facilities Revenue Bonds:
Brooklyn Union Gas Co. Project:
$ 3,000,000 A1* Regular linked SAVRS and RIBS,
6.952% due 7/1/26(c) $ 3,360,000
1,500,000 A1* Regular RIBS, Series B,
9.939% due 7/1/26(c)(e) 1,921,874
5,750,000 A1* Consolidated Edison Co. Inc. Project, Series A,
7.125% due 12/1/29(a)(c) 6,648,438
1,500,000 Baa2* Corning National Gas Corp., Series A,
8.250% due 12/1/18(c) 1,582,935
Long Island Lighting Co. Project:
4,000,000 BB+ Series A, 7.150% due 12/1/20(c) 4,380,000
3,000,000 BB+ Series B, 7.150% due 2/1/22(c) 3,285,000
- -----------------------------------------------------------------------------------------------------------
21,178,247
- -----------------------------------------------------------------------------------------------------------
Water & Sewer -- 3.5%
1,000,000 AA Monroe County Water Authority Revenue Refunding,
5.000% due 8/1/19 983,750
New York City Municipal Water Finance Authority,
Water & Sewer System Revenue:
10,000,000 A2* Series A, 5.125% due 6/15/21 9,762,500
2,500,000 AAA Series C, FGIC-Insured, 5.000% due 6/15/21 2,434,374
8,000,000 A2* Series D, 4.750% due 6/15/25 7,380,000
6,520,000 Aa2* New York State Environmental Facilities Corp.,
Clean Water & Drinking Revolving Funds,
Series C, 5.000% due 6/15/16 6,381,450
- -----------------------------------------------------------------------------------------------------------
26,942,074
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $716,216,436**) $762,286,217
===========================================================================================================
</TABLE>
(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 24 through 26 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 23
<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 that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba -- Bonds that are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B -- Bonds that are rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
NR -- Indicates the bond is not rated by Standard & Poor's, Moody's or Fitch.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<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 1 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.
MIG1 -- 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
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 25
<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
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================
Statements of Assets and Liabilities March 31, 1998
==================================================================================================
New York Money New York
Market Portfolio Portfolio
==================================================================================================
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $1,153,534,076 and
$716,216,436, respectively) $ 1,153,534,076 $ 762,286,217
Cash 18,541 49,941
Interest receivable 9,421,559 11,100,201
Receivable for securities sold -- 4,547,425
Receivable for Fund shares sold -- 409,603
Other assets -- 864
- --------------------------------------------------------------------------------------------------
Total Assets 1,162,974,176 778,394,251
- --------------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 1,430,578 --
Management fees payable 469,395 340,036
Distribution fees payable 41,912 76,653
Deferred compensation 8,560 10,831
Payable for Fund shares purchased -- 120,534
Payable for securities purchased -- 18,498,892
Accrued expenses 23,319 94,325
- --------------------------------------------------------------------------------------------------
Total Liabilities 1,973,764 19,141,271
- --------------------------------------------------------------------------------------------------
Total Net Assets $ 1,161,000,412 $ 759,252,980
==================================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 1,161,205 $ 54,614
Capital paid in excess of par value 1,160,043,612 702,778,678
Overdistributed net investment income -- (4,874)
Accumulated net realized gain (loss)
from security transactions (204,405) 10,354,781
Net unrealized appreciation of investments -- 46,069,781
- --------------------------------------------------------------------------------------------------
Total Net Assets $ 1,161,000,412 $ 759,252,980
==================================================================================================
Shares Outstanding:
Class A 1,161,204,817 39,839,756
- --------------------------------------------------------------------------------------------------
Class B -- 14,009,746
- --------------------------------------------------------------------------------------------------
Class C -- 764,632
- --------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $1.00 $13.91
- --------------------------------------------------------------------------------------------------
Class B* -- $13.89
- --------------------------------------------------------------------------------------------------
Class C** -- $13.88
- --------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) -- $14.49
==================================================================================================
</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 C shares reduced by a 1.00% CDSCif shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 27
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================
Statements of Operations For the Year Ended March 31, 1998
=====================================================================================
New York Money New York
Market Portfolio Portfolio
=====================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest $37,571,313 $ 44,696,981
- -------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 5,154,859 3,734,185
Distribution fees (Note 4) 1,030,972 2,139,690
Shareholder and system servicing fees 163,519 289,215
Shareholder communications 123,990 48,949
Registration fees 92,196 19,989
Custody 32,861 32,501
Audit and legal 29,000 25,000
Trustees' fees 15,500 5,749
Pricing service fees -- 28,800
Other 39,620 13,501
- -------------------------------------------------------------------------------------
Total Expenses 6,682,517 6,337,579
- -------------------------------------------------------------------------------------
Net Investment Income 30,888,796 38,359,402
- -------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities*):
Proceeds from sales 94,419,877 526,168,354
Cost of securities sold 94,364,631 506,790,311
- -------------------------------------------------------------------------------------
Net Realized Gain 55,246 19,378,043
- -------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year -- 22,219,651
End of year -- 46,069,781
- -------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation -- 23,850,130
- -------------------------------------------------------------------------------------
Net Gain on Investments 55,246 43,228,173
- -------------------------------------------------------------------------------------
Increase in Net Assets From Operations $30,944,042 $ 81,587,575
=====================================================================================
</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.
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Statements of Changes in Net Assets For the Years Ended March 31,
================================================================================
New York Money Market Portfolio 1998 1997
================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 30,888,796 $ 25,602,712
Net realized gain 55,246 37,788
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 30,944,042 25,640,500
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (30,888,796) (25,602,712)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (30,888,796) (25,602,712)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 4,017,556,068 3,558,756,790
Net asset value of shares issued
for reinvestment of dividends 29,748,114 25,115,287
Cost of shares reacquired (3,823,473,761) (3,529,287,358)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 223,830,421 54,584,719
- --------------------------------------------------------------------------------
Increase in Net Assets 223,885,667 54,622,507
NET ASSETS:
Beginning of year 937,114,745 882,492,238
- --------------------------------------------------------------------------------
End of year $ 1,161,000,412 $ 937,114,745
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 29
<PAGE>
<TABLE>
<CAPTION>
======================================================================================
Statements of Changes in Net Assets (continued)
======================================================================================
For the Years Ended March 31,
-------------------------------
New York Portfolio 1998 1997
======================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 38,359,402 $ 40,107,817
Net realized gain (loss) 19,378,043 (673,031)
Increase (decrease) in net unrealized appreciation 23,850,130 (922,316)
- -------------------------------------------------------------------------------------
Increase in Net Assets From Operations 81,587,575 38,512,470
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (38,599,604) (40,014,974)
Net realized gains (2,539,192) --
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (41,138,796) (40,014,974)
- -------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 73,045,552 62,049,446
Net asset value of shares issued
for reinvestment of dividends 25,013,632 25,048,123
Cost of shares reacquired (105,052,560) (107,681,450)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (6,993,376) (20,583,881)
- -------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 33,455,403 (22,086,385)
NET ASSETS:
Beginning of year 725,797,577 747,883,962
- -------------------------------------------------------------------------------------
End of year* $ 759,252,980 $ 725,797,577
======================================================================================
* Includes undistributed (overdistributed)
net investment income of: $ (4,874) $ 235,328
======================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
30 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
The New York Money Market and New York Portfolios ("Portfolios") are separate
investment portfolios of the Smith Barney Muni Funds ("Fund"). The Fund, a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as amended, as 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 annual reports.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) securities are
valued at the mean between the quoted bid and ask prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (d) gains or losses on the
sale of securities are calculated by using the specific identification method;
(e) interest income, adjusted for amortization of premium and accretion of
original issue discount, is recorded on an accrual basis; market discount is
recognized upon the disposition of the security; (f) dividends and distributions
to shareholders are recorded on the ex-dividend date; (g) direct expenses are
charged to each portfolio and each class; management fees and general fund
expenses are allocated on the basis of relative net assets; (h) the Portfolios
intend to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to relieve them from substantially
all Federal income and excise taxes; (i) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles; and (j) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. Portfolio Concentration
Since each Portfolio invests primarily in obligations of issuers within 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 31
<PAGE>
================================================================================
Notes to Financial Statements (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"), formerly known as Smith Barney Mutual Funds
Management Inc., 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.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of
Fund shares. For the year ended March 31, 1998, SB received sales charges of
approximately $489,000 on sales of the New York Portfolio's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B shares
of the New York Portfolio, which applies if redemption occurs less than one year
from initial purchase. This CDSC declines by 0.50% the first year after purchase
and thereafter by 1.00% per year until no CDSC is incurred. Class C shares have
a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. For the year ended March 31, 1998, CDSCs paid to SB were
approximately:
<TABLE>
<CAPTION>
Class B Class C
================================================================================
<S> <C> <C>
CDSCs $203,000 $2,000
================================================================================
</TABLE>
Pursuant to a Distribution Plan, the New York Money Market Portfolio pays a
distribution fee calculated at the annual rate of 0.10% of the average daily net
assets of its Class A shares. The New York Portfolio pays a service fee with
respect to Class A, B and C shares calculated at the annual rate of 0.15% of the
- --------------------------------------------------------------------------------
32 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
average daily net assets of each respective class. In addition, the New York
Portfolio pays a distribution fee with respect to Class B and C shares
calculated at the annual rates of 0.50% and 0.55% of the average daily net
assets of each class, respectively.
For the year ended March 31, 1998, total Distribution Plan fees incurred were:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
New York Money Market $1,030,972 -- --
- -------------------------------------------------------------------------------
New York 815,993 $1,250,544 $73,153
===============================================================================
</TABLE>
All officers and one Trustee of the Fund are employees of SB.
5. Investments
During the year ended March 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
================================================================================
<S> <C> <C>
Purchases -- $532,398,354
- --------------------------------------------------------------------------------
Sales -- 526,168,354
================================================================================
</TABLE>
At March 31, 1998, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
==============================================================================
<S> <C> <C>
Gross unrealized appreciation -- $47,911,562
Gross unrealized depreciation -- (1,841,781)
- ------------------------------------------------------------------------------
Net unrealized appreciation -- $46,069,781
==============================================================================
</TABLE>
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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 33
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
7. Shares of Beneficial Interest
At March 31, 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.
At March 31, 1998, total paid-in capital amounted to the following for each
class and their respective Portfolio:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class C
================================================================================
<S> <C> <C> <C>
New York Money Market $1,161,204,817 -- --
- --------------------------------------------------------------------------------
New York 500,250,658 $192,365,369 $10,217,265
================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1998 March 31, 1997
New York ------------------------------- ---------------------------------
Money Market Portfolio Shares Amount Shares Amount
===========================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 4,017,556,068 $ 4,017,556,068 3,558,756,790 $3,558,756,790
Shares issued on reinvestment 29,748,114 29,748,114 25,115,287 25,115,287
Shares redeemed (3,823,473,761) (3,823,473,761) (3,529,287,358) (3,529,287,358)
- -----------------------------------------------------------------------------------------------------------
Net Increase 223,830,421 $ 223,830,421 54,584,719 $ 54,584,719
===========================================================================================================
<CAPTION>
New York Portfolio
===========================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 3,850,913 $ 53,040,777 2,751,378 $ 36,566,344
Shares issued on reinvestment 1,362,472 18,669,863 1,438,119 19,033,592
Shares redeemed (5,700,162) (78,035,339) (6,161,975) (81,524,659)
- -----------------------------------------------------------------------------------------------------------
Net Decrease (486,777) $ (6,324,699) (1,972,478) $(25,924,723)
===========================================================================================================
Class B
Shares sold 1,316,193 $ 18,054,603 1,729,769 $ 22,891,545
Shares issued on reinvestment 436,910 5,982,453 428,975 5,674,888
Shares redeemed (1,800,898) (24,706,176) (1,843,688) (24,383,430)
- -----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (47,795) $ (669,120) 315,056 $ 4,183,003
===========================================================================================================
Class C
Shares sold 143,210 $ 1,950,172 195,814 $ 2,591,557
Shares issued on reinvestment 26,418 361,316 25,705 339,643
Shares redeemed (170,356) (2,311,045) (134,481) (1,773,361)
- -----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (728) $ 443 87,038 $ 1,157,839
===========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
34 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of beneficial interest outstanding throughout each year:
<TABLE>
<CAPTION>
New York Money Market Portfolio
------------------------------------------------------------
Class A Shares 1998 1997 1996 1995 1994
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------
Net investment income(1) 0.030 0.028 0.038 0.025 0.018
Dividends from net investment income (0.030) (0.028) (0.038) (0.025) (0.018)
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------------
Total Return 3.04% 2.85% 3.17% 2.49% 1.77%
- -----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $1,161 $937 $882 $708 $82
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(1) 0.65% 0.67% 0.67% 0.68% 0.60%
Net investment income 2.99% 2.80 3.11 2.94 1.73
=================================================================================================================
</TABLE>
(1) 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%.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 35
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
New York Portfolio
------------------------------------------------------
Class A Shares 1998 1997 1996 1995(1) 1994
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.16 $13.19 $12.83 $12.83 $13.25
- ----------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.72 0.74 0.75 0.76 0.78
Net realized and unrealized gain (loss) 0.81 (0.03) 0.35 0.01* (0.41)
- ----------------------------------------------------------------------------------------------------
Total Income From Operations 1.53 0.71 1.10 0.77 0.37
- ----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.73) (0.74) (0.74) (0.77) (0.79)
Net realized gains (0.05) -- -- -- --
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.78) (0.74) (0.74) (0.77) (0.79)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.91 $13.16 $13.19 $12.83 $12.83
- ----------------------------------------------------------------------------------------------------
Total Return 11.83% 5.48% 8.71% 6.32% 2.66%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $554 $531 $558 $83 $70
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.71% 0.75% 0.72% 0.63% 0.55%
Net investment income 5.28 5.58 5.84 6.00 5.79
- ----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 71% 53% 36% 30% 20%
====================================================================================================
</TABLE>
(1) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(2) As a result of voluntary expense limitations, the expense ratio will not
exceed 0.85% 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.
- --------------------------------------------------------------------------------
36 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
New York Portfolio
--------------------------------------------------------
Class B Shares 1998 1997 1996 1995(1)
===========================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.15 $13.18 $12.84 $11.96
- -----------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.65 0.67 0.67 0.31
Net realized and unrealized gain (loss) 0.80 (0.03) 0.35 0.86*
- -----------------------------------------------------------------------------------------------------------
Total Income From Operations 1.45 0.64 1.02 1.17
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.66) (0.67) (0.68) (0.29)
Net realized gains (0.05) -- -- --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.71) (0.67) (0.68) (0.29)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.89 $13.15 $13.18 $12.84
- -----------------------------------------------------------------------------------------------------------
Total Return 11.19% 4.96% 8.05% 9.92%++
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $194,641 $184,916 $181,144 $3,813
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.23% 1.27% 1.25% 1.27%+
Net investment income 4.76 5.06 5.45 5.76+
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 71% 53% 36% 30%
===========================================================================================================
</TABLE>
(1) For the period from November 11, 1994 (inception date) to March 31, 1995.
(2) As a result of voluntary expense limitations, the expense ratio will not
exceed 1.35% 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 -- NY Money Market and NY Portfolios 37
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
New York Portfolio
------------------------------------------------------------------
Class C Shares 1998 1997 1996 1995(1) 1994
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.14 $13.17 $12.83 $12.82 $13.24
- ---------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.64 0.66 0.66 0.68 0.68
Net realized and unrealized gain (loss) 0.80 (0.02) 0.36 0.01* (0.40)
- ---------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.44 0.64 1.02 0.69 0.28
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.65) (0.67) (0.68) (0.68) (0.70)
Net realized gains (0.05) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.70) (0.67) (0.68) (0.68) (0.70)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.88 $13.14 $13.17 $12.83 $12.82
- ---------------------------------------------------------------------------------------------------------------------
Total Return 11.13% 4.91% 8.07% 5.66% 1.96%
- ---------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $10,611 $10,055 $8,931 $5,896 $5,461
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.28% 1.32% 1.28% 1.28% 1.23%
Net investment income 4.71 5.01 5.02 5.38 4.98
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 71% 53% 36% 30% 20%
=====================================================================================================================
</TABLE>
(1) On November 7, 1994, the former Class B shares were renamed Class C shares.
(2) 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.
- --------------------------------------------------------------------------------
38 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
To the Shareholders and Board of Trustees
of the New York Money Market and New York Portfolios
of Smith Barney Muni Funds:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the New York Money Market and New York
Portfolios of Smith Barney Muni Funds as of March 31, 1998, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian. As to securities purchased or
sold but not yet received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
New York Money Market and New York Portfolios of Smith Barney Muni Funds as of
March 31, 1998, the results of their operations for the year then ended, the
changes in their net assets for each of the years in the two-year period then
ended and the financial highlights for each of the years in the five-year period
then ended, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 15, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- NY Money Market and NY Portfolios 39
<PAGE>
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 1998:
o Percentages of dividends paid by the Fund from net investment income
as tax-exempt for regular Federal income tax purposes:
New York Money Market Portfolio 100.00%
New York Portfolio 99.95%
o The Taxpayer Relief Act of 1997 enacted differing rates of tax on
various long-term capital gain transactions. As a result, the New York
Portfolio designates:
o Total long-term capital gain distributions paid of $1,951,159.
$34,340 are considered "28 percent rate gains".
$1,916,819 are considered "20 percent rate gains".
- --------------------------------------------------------------------------------
40 1998 Annual Report to Shareholders
<PAGE>
Smith Barney
Muni Funds
TRUSTEES
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
C. Richard Youngdahl, 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
SMITHBARNEY
-----------
A Member of TravelersGroup[LOGO]
INVESTMENT MANAGER
Mutual Management Corp.
DISTRIBUTOR
Smith Barney Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general
information of the shareholders of Smith
Barney Muni Funds--New York Money Market
and New York Portfolios. It is not
authorized for distribution to prospective
investors unless accompanied or preceded
by a current Prospectus for the Portfolios,
which contains information concerning the
Portfolios' investment policies and
expenses as well as other pertinent
information.
SMITH BARNEY
MUNI FUNDS
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD2397 5/98
<PAGE>
================================================================================
[GRAPHIC]
[GRAPHIC]
Smith Barney Muni Funds
National
Portfolio
ANNUAL REPORT
March 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
================================================================================
<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
March 31, 1998
Without Sales Charges*
-------------------------------------
Class A Class B Class C
================================================================================
One-Year 11.47% 10.80% 10.71%
- --------------------------------------------------------------------------------
Five-Year 7.02 N/A 6.35
- --------------------------------------------------------------------------------
Ten-Year 8.96 N/A N/A
- --------------------------------------------------------------------------------
Since Inception+ 8.22 10.09 6.85
================================================================================
Without Sales Charges**
-------------------------------------
Class A Class B Class C
================================================================================
One-Year 6.98% 6.30% 9.71%
- --------------------------------------------------------------------------------
Five-Year 6.14 N/A 6.35
- --------------------------------------------------------------------------------
Ten-Year 8.52 N/A N/A
- --------------------------------------------------------------------------------
Since Inception+ 7.84 9.62 6.85
================================================================================
* Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
** Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00%; and Class B shares reflect
the deduction of a 4.50% CDSC, which applies if shares are redeemed within
one year from purchase. Thereafter, the CDSC declines by 1.00% per year
until no CDSC is incurred. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
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.
+ Inception dates for Class A, B and C shares are August 20, 1996, November
7, 1994 and January 5, 1993, respectively.
================================================================================
FUND HIGHLIGHT
================================================================================
Given current market conditions, we have upgraded the overall credit quality of
the Portfolio. Because many investors have been seeking the higher yields found
in lower-rated issues, the yield gap between high- and lower-quality bonds has
narrowed during the past fiscal year. We believe that the lower-quality,
higher-yielding bonds do not currently offer sufficient reward to justify the
added risk.
================================================================================
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
Independent Auditors' Report ........................................... 28
Tax Information ........................................................ 29
<PAGE>
================================================================================
Shareholder Letter
================================================================================
[PHOTO] [PHOTO]
Heath B. McLendon Peter M. Coffey
Chairman Vice President
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Muni Funds --
National Portfolio ("Portfolio") for the year ended March 31, 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.
Performance Update
For the year ended March 31, 1998, the Class A shares of the Portfolio generated
a total return of 11.47% without sales charges, significantly outperforming the
average total return of 10.61% 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 pages four and five.
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 March 31, 1998.++
Lipper Peer
Class A Shares Group Average
-------------- -------------
One-Year Return 11.47% 10.61%
Five-Year Return 7.02 6.18
Ten-Year Return 8.96 8.05
Based on its net asset value of $14.16 as of March 31, 1998 for Class A shares
and the current income distribution of $0.067 per Class A share, this equates to
an annualized distribution rate of 5.68%. For an individual in the Federal
income tax bracket of 36%, the Portfolio's tax free yield of 5.68% is equivalent
to a taxable yield of 8.88%. (According to the Internal Revenue Service, the 36%
tax bracket constitutes nearly 10% of all U.S. taxpayers.)
We are very proud to report that your Portfolio was awarded a five-star rating
overall for Class A shares and a four-star rating for Class B and Class C shares
from Morningstar, Inc.* as of March 31, 1998.
Market and Economic Overview
During the past year, domestic bond market performance was driven primarily by a
healthy economy with low
- ----------
+ 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 one, five and ten 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 March 31, 1998, there were 237,
120 and 71 funds, respectively, in the Lipper peer group category.
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through March 31, 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 C shares, the Portfolio
received 4 stars for the overall, 3-year and 5-year periods. It was rated
among 1,525 municipal bond funds for the 3-year period and 782 municipal
bond Portfolios for the 5-year period. The top ten percent of the funds in
a rating category receive five stars.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 1
<PAGE>
inflation and the uncertainties that continue to cloud many of the world's major
stock markets. Despite robust consumer demand and labor shortages in many areas,
consumer prices remained fairly stable while wholesale prices for many
commodities, particularly oil, actually fell. The Gross Domestic Product, which
measures the total output of goods and services produced, grew at an annual rate
of nearly 4% in 1997 and continued at about the same rate in the first quarter
of 1998.
In late October 1997, the U.S. stock market experienced its first major shock
during its record-setting seven-year rise when the Dow Jones Industrial Average
(a price-weighted average of 30 actively traded blue chip stocks) fell more than
554 points, the largest single-day point drop in stock market history. The stock
market plunge was triggered by concerns that Asia's spreading economic and
financial crisis might eventually impact domestic markets. Despite the ease in
which U.S. and European stock markets recovered from the downturn, many
investors began to shift their attention toward "safe haven" investments such as
U.S. Treasury securites. This renewed demand helped push the yield on the
bellwether 30-year U.S. Treasury bond, which moves in the opposite direction of
its price, to a record low of 5.73% on January 5, 1998.
Just fifteen months ago, Federal Reserve Board Chairman Alan Greenspan warned
against what he viewed as "irrational exuberance" in financial markets. Since
that time, the economy has continued to expand, the stock market has soared to
even greater heights and in May 1997, unemployment reached its lowest level in
more than 20 years. Yet, inflation has remained subdued. In a widely expected
action, Federal Reserve policymakers emerged from their meeting on March 31,
1998 with no decision and let stand the 5.5% federal-funds rate, which has
remained unchanged since March 1997. (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.)
Interest rates, as represented by the 30-year U.S. Treasury bond yields, have
dropped nearly 1.16% in the past year. Similarly, municipal bond yields have
also declined, although not as sharply. According to the Bond Buyer 25-Year
Revenue Index, municipal bond yields have fallen from approximately 6.09% on
March 31, 1997 to 5.42% on March 31, 1998. One result of these historically low
interest rates has been a record volume of municipal bond issuance.
In the first quarter of 1998 alone, more than $68 billion of bonds were sold, an
increase of roughly 70% from the same period last year. Many municipalities took
advantage of the low interest rates by refinancing older, higher-coupon bonds.
Moreover, the strength of the economy has filled government coffers and
increased their debt capacity while the economic expansion has accelerated
demand for more infrastructure improvements, many of which have been on hold in
an era of fiscal conservatism.
In our view, this surge in muncipal bond supply has been positive for investors.
The massive issuance volume that we have witnessed recently has helped keep
municipal bond yields from falling as much as their taxable counterparts. In
addition, the oversupply has resulted in a steeper yield curve than U.S.
Treasury securities and consequently created many attractive investment
opportunities, especially in the longer-term issues. (The yield curve shows the
difference between short- and long-term yields.)
Investment Strategy
The Smith Barney Muni Funds - National Portfolio seeks to provide investors with
as high a level of current income exempt from federal income taxes as is
consistent with a prudent investment approach. The Portfolio has a bias towards
good quality, higher-coupon bonds.
In response to the overall decline in interest rates, we have gradually pared
away bonds that were vulnerable to early calls and replaced them with newer
issues with better call protection. We extended the weighted average life of the
Portfolio from 9.77 years on March 31, 1997 to 10.18 years on March 31, 1998 to
help provide a more competitive stream of income
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
over the long term. (The weighted average life differs from the average weighted
maturity in that it shows the length of time before the first optional call date
rather than simply the maturity life of the bond. A longer weighted average life
helps to reduce reinvestment risk, which is the risk that the reinvested portion
will earn less interest than the original investment.)
Given current market conditions, we have also upgraded the overall credit
quality of the Portfolio. Because many investors have been seeking the higher
yields found in lower-rated issues, the yield gap between high- and
lower-quality bonds has narrowed during the past fiscal year. We believe that
the lower-quality, higher-yielding bonds do not currently offer sufficient
reward to justify the added risk. Therefore, we have placed an even greater
emphasis on high-quality securities. As of March 31, 1998, 96.5% of the
Portfolio was rated investment grade or better with roughly 45.2% rated AAA, the
highest rating. (Investment-grade bonds are those rated in one of the four
highest ratings categories by any nationally recognized statistical rating
organization, or determined by the manager to be of equivalent quality.)
During the past year, we have also maintained a 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 March 31, 1998, the
Portfolio's assets were concentrated in hospital bonds (14.8%), multi-family
housing bonds (10.0%) and education bonds (8.5%).
Municipal Bond Market Outlook
We remain bullish on the prospects for the municipal bond market in the coming
months. We believe our positive outlook is supported by the following four
factors:
o The full impact of the Asian crisis on the U.S. economy has yet to be
realized.
Economic strength continued into the first quarter of this year, but we
attribute much of that to temporary factors such as unusually warm weather.
As Asian companies attempt to recover, domestic companies will face fierce
competition and that will tend to hold prices down and help to contain any
emerging inflationary pressures.
o The rate of inflation remains historically low. Salomon Smith Barney
research forecasts a Consumer Price Index increase of approximately a 1.3%
annual rate for 1998, well below the roughly 5.5% annual average since
1970.
o The reduction of the federal budget, which should also reduce the need for
issuing Treasury securities.
o A significant possibility that the Asian economic and financial recovery
will take longer than many investment professionals currently anticipate,
therefore extending the disinflationary influence on the U.S. economy.
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
April 21, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 3
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Historical Performance -- Class A Shares
====================================================================================================================================
Net Asset Value
---------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/98 $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 $8.66 $0.22
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Historical Performance -- Class B Shares
====================================================================================================================================
Net Asset Value
---------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/98 $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 $2.51 $0.16
====================================================================================================================================
<CAPTION>
====================================================================================================================================
Historical Performance -- Class C Shares
====================================================================================================================================
Net Asset Value
---------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/98 $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 $3.86 $0.22
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Average Annual Total Return
====================================================================================================================================
Without Sales Charge(1)
------------------------------------------------
Class A Class B Class C
====================================================================================================================================
<S> <C> <C> <C>
Year Ended 3/31/98 11.47% 10.80% 10.71%
- ------------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 3/31/98 7.02 N/A 6.35
- ------------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 3/31/98 8.96 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 3/31/98 8.22 10.09 6.85
====================================================================================================================================
<CAPTION>
Without Sales Charge(2)
------------------------------------------------
Class A Class B Class C
====================================================================================================================================
<S> <C> <C> <C>
Year Ended 3/31/98 6.98% 6.30% 9.71%
- ------------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 3/31/98 6.14 N/A 6.35
- ------------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 3/31/98 8.52 N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 3/31/98 7.84 9.62 6.85
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
Cumulative Total Return
====================================================================================================================================
Without Sales Charge(1)
====================================================================================================================================
<S> <C>
Class A (3/31/88 through 3/31/98) 150.33%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 3/31/98) 38.61
- ------------------------------------------------------------------------------------------------------------------------------------
Class C (Inception* through 3/31/98) 41.47
====================================================================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions at net
asset value and does not reflect the deduction of the applicable sales
charges with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and Class C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions at net
asset value. In addition, Class A shares reflect the deduction of the
maximum initial sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from purchase. This CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. Class
C shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are August 20, 1986, November
7, 1994 and January 5, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 5
<PAGE>
================================================================================
Smith Barney Muni Funds -- National Portfolio at a Glance
================================================================================
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+
- --------------------------------------------------------------------------------
March 1988--March 1998
[GRAPH APPEARS HERE]
March 1988 - March 1998
Lehman Brothers
National Municipal Lehman Brothers
Portfolio Long Bond Index++ Municipal Bond Index++
--------- ----------------- ----------------------
3/88 $9,602 $10,000 $10,000
3/89 $10,618 $11,054 $10,721
3/90 $11,598 $12,281 $11,851
3/91 $12,624 $13,442 $12,944
3/92 $13,999 $14,972 $14,238
3/93 $15,910 $17,164 $16,020
3/94 $16,373 $17,360 $16,391
3/95 $17,391 $18,864 $17,610
3/96 $18,928 $20,598 $19,087
3/97 $19,952 $21,896 $20,125
3/98 $22,240 $24,649 $22,282
+ Hypothetical illustration of $10,000 invested in Class A shares on March
31, 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 March 31, 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*
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
Education 8.5%
Escrowed to Maturity 5.0%
General Obligation 5.6%
Hospital 14.8%
Housing 17.6%
Pollution Control 8.0%
Public Facilities 6.5%
Transportation 7.1%
Utility 7.8%
Water & Sewer 4.0%
Other 15.1%
Summary of Investments by Combined Ratings
- --------------------------------------------------------------------------------
Standard Percentage
Moody's & Poor's of Total Investments
- --------------------------------------------------------------------------------
Aaa AAA 45.2%
Aa AA 24.1
A A 16.1
Baa BBB 11.1
Ba BB 0.1
VMIG 1/P-1 A-1 0.8
NR NR 2.6
-----
100.0%
=====
* As a percentage of total investments.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Education -- 8.5%
$ 5,000,000 AAA Chicago, IL Board of Education Lease Certificates, Series A,
Refunding, MBIA-Insured, 6.000% due 1/1/20 $ 5,600,000
3,000,000 AAA Lake Superior, State University Michigan Revenue,
MBIA-Insured, 5.125% due 11/15/19 2,996,250
1,000,000 AAA Lawrence Township, Independent School Building Corp.,
FSA-Insured, 5.000% due 1/5/20 975,000
6,000,000 AAA Massachusetts State Industrial Finance Agency Revenue,
Tufts University, Series H, MBIA-Insured, 4.750% due 2/15/28 5,565,000
5,000,000 AAA Metro Government, TN Health & Education, Meharry Medical College,
AMBAC-Insured, 6.000% due 12/1/19 5,662,500
2,000,000 Aa* Nebraska Higher Education Loan Program Inc., Sub-Series A-5A,
6.200% due 6/1/13(a) 2,137,500
New Hampshire Higher Education & Health:
1,500,000 Baa3* Brewster Academy, 6.750%, due 6/1/25 1,621,875
1,000,000 A Franklin Pierce College, 5.250% due 10/1/18 986,250
2,000,000 AAA Saint Anselm College, MBIA-Insured, 5.000% due 7/1/23 1,922,500
1,500,000 A- New York State Dormitory Authority Revenue, State University
Educational Facilities, Series B, 7.500% due 5/15/11 1,878,750
1,435,000 AA Richland County, SC Educational Facilities Revenue,
(Benedict College Project), 5.125% due 1/1/18 1,399,125
Texas State Higher Education Coordinating Board,
College Student Loan Revenue:
2,060,000 A* 7.450% due 10/1/06(a) 2,204,200
290,000 A* 7.700% due 10/1/25(a) 308,488
1,000,000 AAA Utah Student Loan Revenue, Series 1991F,
AMBAC-Insured, 7.450% due 11/1/08(a) 1,073,750
1,000,000 A+ Wayne Township, IN Marion County School Building Corp.,
5.500% due 1/15/22 1,012,500
- ------------------------------------------------------------------------------------------------------------------------------------
35,343,688
- ------------------------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity(b) -- 5.0%
835,000 AAA Boston, MA Water & Sewer Revenue, Series A, 10.875% due 1/1/09 1,151,256
1,095,000 AAA Douglas County, NE Hospital Authority No. 2, Bergan Mercy,
9.500% due 7/1/10 1,415,288
1,640,000 AAA Fairmont, WV Virginia Water & Sewer Revenue, AMBAC-Insured,
9.250% due 11/1/11 2,134,050
5,000,000 AAA Indiana Bond Bank, AMBAC-Insured, 9.750% due 8/1/09(c) 6,650,000
1,865,000 AAA Ohio State Water Development Authority Revenue, Safe Water,
Series 2, 9.375% due 12/1/10(c) 2,361,556
1,000,000 AAA Philadelphia Hospital & Higher Education Facility Authority,
Presbyterian Medical Center, 6.650% due 12/1/19 1,188,750
3,000,000 AAA Port Everglades Authority, Florida Port, 7.125% due 11/1/16 3,645,000
3,000,000 AAA Richmond County, GA Development Authority, Sub-Series C,
zero coupon bond to yield 7.120% due 12/1/21 855,000
855,000 AAA Weber County, UT Hospital Revenue, St. Benedict's Hospital,
10.000% due 3/1/10 1,124,325
- ------------------------------------------------------------------------------------------------------------------------------------
20,525,225
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 7
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (continued) March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Finance -- 2.1%
$10,000,000 AA New York City, NY Transitional Finance Authority Revenue,
Series B, 4.500% due 11/15/27 $ 8,825,000
- ------------------------------------------------------------------------------------------------------------------------------------
General Obligation -- 5.6%
2,855,000 AAA Bastrop, TX GO, ISD, PSFG, zero coupon bond to yield
5.629% due 2/15/19 952,856
2,000,000 AAA Berks County, PA GO, MVRICS, FGIC-Insured,
8.670% due 11/10/20(d) 2,420,000
2,000,000 AAA Butler, PA GO, Area School District, Series B, FGIC-Insured,
4.750% due 10/1/22 1,870,000
2,620,000 AAA California State GO, Series BH, FSA-Insured, 5.400% due 12/1/15(a) 2,639,650
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 1,562,500
1,590,000 AAA College Station, TX GO, ISD, PSFG, 4.500% due 8/15/19 1,440,938
1,975,000 AAA Keller, TX GO, ISD, PSFG, 4.750% due 8/15/21 1,844,156
1,075,000 Aaa* Lago Vista, TX GO, ISD, PSFG, zero coupon bond to yield
5.689% due 8/15/22 294,281
200,000 AAA Lakeview, OH Local School District, GO, AMBAC-Insured,
6.900% due 12/1/14 230,250
1,875,000 AAA McKeesport, PA GO, Area School District, MBIA-Insured,
zero coupon bond to yield 5.662% due 10/1/23 499,218
160,000 A3* New York City, NY GO, Series D, 7.500% due 2/1/16 178,400
2,000,000 AAA North Andover, MA GO, FGIC-Insured, 4.750% due 1/15/18 1,910,000
1,000,000 AAA Providence, RI GO, Series A, FSA-Insured, 5.700% due 7/15/19 1,047,500
300,000 AAA Summit County, OH Addiction & Mental Health Facilities, GO,
AMBAC-Insured, 6.400% due 12/1/14 333,750
1,000,000 AA Texas State GO, Veterans Housing Assistance, 6.450% due 12/1/20(a) 1,075,000
5,000,000 AA Wisconsin State GO, Series A, 4.800% due 5/1/16 4,818,750
- ------------------------------------------------------------------------------------------------------------------------------------
23,117,249
- ------------------------------------------------------------------------------------------------------------------------------------
Hospital -- 14.8%
1,000,000 AAA Boston, MA Industrial Development Financing Authority,
Alzheimer's Center Project, FHA-Insured, 6.000% due 2/1/37 1,052,500
1,000,000 BBB Colorado Health Facilities Authority Hospital Revenue Bonds,
Vail Valley Medical Center, 6.500% due 1/15/13 1,090,000
2,000,000 AAA DCH Health Care Authority, AL Health Care Facilities Revenue,
MBIA-Insured, 5.000% due 6/1/17 1,937,500
3,500,000 A1* Elkhart County, IN Hospital Authority Revenue, Elkhart General
Hospital Insured, 7.000% due 7/1/12 3,854,375
800,000 VMIG 1* Georgia State Hospital Financing Authority Revenue,
LOC First Union National Bank, 3.700% due 3/1/01(e) 800,000
350,000 BB- Green Springs, OH Health Care Facilities Revenue, (St. Francis Health
Care Center Project), Series A, 7.125% due 5/15/25 383,688
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 2,237,500
2,200,000 A Harrison County, TX Health Facilities Development Corp. Revenue,
(Marshall Regional Medical Center Project), 5.500% due 1/1/18 2,211,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (continued) March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Hospital -- 14.8% (continued)
$ 700,000 BBB+ Hawaii State Department Budget & Finance, (Wilcox Memorial
Hospital Projects), 5.350% due 7/1/18 $ 690,375
Illinois Health Facilities Authority Hospital Revenue:
937,000 AAA Community Provider Pooled Loan Program, FSA-Insured,
7.350% due 8/15/10 1,037,728
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, 9.892% 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) 4,755,000
5,000,000 AAA Iowa Finance Authority Hospital Facility Revenue, Iowa Health System,
Series A, MBIA-Insured, 5.125% due 7/1/20 4,881,250
900,000 BBB+ Klamath Falls, OR Inter-Community Hospital Merle West,
7.100% due 9/1/24 993,375
5,000,000 BBB Louisiana Public Facilities Authority Revenue,
(General Health Systems Project), 6.800% due 11/1/16 5,550,000
2,000,000 AAA Maine Health & Higher Educational Facilities Authority Revenue,
Series B, MBIA-Insured, 5.000% due 7/1/18 1,950,000
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 1,942,500
1,000,000 AAA St. Elizabeth Hospital, LEVRRS, FSA-Insured, 9.720% due 8/15/21(d) 1,177,500
500,000 BBB Miami County, OH Hospital Facilities Refunding & Improvement, Upper
Valley Medical Center, Series A, 6.375% due 5/15/26 536,875
2,000,000 AAA Michigan State Hospital Financing Authority Revenue, Oakwood
Obligation Group, Series A, FSA-Insured, 5.000% due 8/15/31 1,907,500
4,835,000 AA Missouri State Health & Educational Facilities Authority,
BJC Health Systems, 6.750% due 5/15/13 5,832,219
450,000 A- New York State Medical Care Facilities Financing Agency,
Long Term Health Care, Medical Health Services, Series 91B,
7.400% due 2/15/18 500,063
2,000,000 AAA North Carolina Medical Care Community Hospital Revenue,
5.000% due 6/1/17 1,955,000
3,000,000 AAA University of Illinois, Health Services Facilities, Series A,
AMBAC-Insured, 5.875% due 10/1/26 3,187,500
2,375,000 AA- Vermont Educational & Health Building Finance Agency, H. Porter,
FHA-Insured, 7.100% due 2/1/31 2,553,125
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) 1,614,375
1,300,000 AAA Washington State Health, Sisters of Providence, FGIC-Insured,
6.375% due 10/1/09 1,480,375
- ------------------------------------------------------------------------------------------------------------------------------------
61,090,698
- ------------------------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 10.0%
1,000,000 AAA Boston, MA Industrial Development Financing Authority Revenue,
North End Community, Series A, FHA-Insured,
6.450% due 8/1/37 1,106,250
250,000 Aaa* Cuyahoga County, OH Multi-Family Housing, Dalebridge Apartments,
GNMA-Collateralized, FHA-Insured, 6.500% due 10/20/20(a) 266,563
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 9
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (continued) March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Housing: Multi-Family -- 10.0% (continued)
$ 1,500,000 A+ Illinois Housing Development Authority Refunding,
Multi-Family Housing, Series 91A, 8.125% due 7/1/10 $ 1,597,500
1,500,000 AA- Indiana State HFA, Multi-Family Housing Mortgage Revenue,
Hunters Run, FHA-Insured, 7.250% due 5/1/18(a) 1,618,125
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) 4,488,413
5,000,000 Aa2* Iowa Finance Authority, Prestwick Apartments, FHA-Insured,
7.500% due 12/1/36(a)(c) 6,331,250
300,000 Aaa* Kent, OH Multi-Family Housing, GNMA-Collateralized, FHA-Insured,
7.150% due 12/20/26(a) 335,250
1,000,000 A King County, WA Housing Authority Revenue, Series A,
6.800% due 3/1/26 1,066,250
Maricopa County, AZ IDA, Multi-Family Housing Revenue,
(National Health Facilities II Project), FSA-Insured:
2,770,000 AAA 5.500% due 1/1/18 2,891,188
3,480,000 AAA 5.500% due 1/1/24 3,649,650
Massachusetts State HFA, Multi-Family Residential Housing,
Series A, FHA-Insured:
1,995,000 A+ 8.800% due 8/1/21(a) 2,014,950
2,000,000 A+ 7.800% due 8/1/22(a) 2,092,500
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) 2,112,756
Nevada Housing Division, Multi-Unit Housing:
5,000,000 AAA Austin Crest Project, FNMA-Collateralized, 5.800% due 4/1/31(a) 5,056,250
1,250,000 AAA Saratoga Palms, FNMA-Collateralized, 6.350% due 10/1/28(a) 1,326,563
500,000 A1* Portland, OR Multi-Family Housing, 6.250%, due 5/1/12(a) 525,000
1,000,000 BBB+ Roanoke, VA Redevelopment and Housing Authority,
Multi-Family Housing Revenue Refunding,
United Dominion-Laurel Ridge, 6.625% due 5/1/23(a) 1,048,750
1,000,000 AAA Rogers County, OK HFA, Multi-Family Revenue, FNMA-Collateralized,
Series A, FHA-Insured, 7.750% due 8/1/23 1,100,000
2,347,000 AAA Seattle Housing Authority, WA Low Income Housing Revenue,
GNMA-Collateralized, 7.400% due 11/20/36 2,660,911
- ------------------------------------------------------------------------------------------------------------------------------------
41,288,119
- ------------------------------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 7.6%
60,000 AAA Alaska State Housing Finance Corp., Home Mortgage, Single-Family
Revenue, GNMA/FHLMC-Collateralized, 8.750% due 12/1/16 61,327
585,000 AAA Arkansas Housing Development, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 7.400% due 9/1/23(a) 619,369
560,000 Aaa* Aurora Kane & Dupage, IL Single-Family Mortgage Revenue, Series A,
GNMA/FHLMC-Collateralized, 7.950% due 10/1/25(a) 642,600
1,245,000 Aa2* Colorado HFA, Single-Family Housing Revenue, Series B1,
7.900% due 12/1/25(a) 1,386,619
865,000 Aa2* Colorado HFA, Single-Family Program Refunding, Senior Bonds,
1994 Series D-1, 8.000% due 12/1/24 967,719
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (continued) March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Housing: Single-Family -- 7.6% (continued)
$ 4,145,000 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) $ 642,475
770,000 AAA District of Columbia HFA, Collateralized Revenue, Single-Family,
Series 90A, GNMA/FHLMC/FNMA-Collateralized,
8.100% due 12/1/23(a) 815,237
565,000 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 88,281
1,030,000 AA Idaho Housing Agency, Single-Family Mortgage, Series C-2,
FHA-Insured, 7.900% due 1/1/22(a) 1,077,637
790,000 Aa2* Illinois Housing Development Authority, Residential Mortgage
Revenue, Series 89A, 7.400% due 2/1/20(a) 816,662
595,000 Aa2* Labette County, KS Single-Family Mortgage Revenue Refunding,
Series A, 8.400% due 12/1/11 639,625
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:
630,000 AAA GNMA-Collateralized, Series A, zero coupon bond to yield
7.337% due 7/1/23 100,800
930,000 AAA GNMA/FNMA-Collateralized, Series C, 7.450% due 9/1/27(a) 1,066,012
2,130,043 AAA Montgomery County, TX Housing Finance Corp.,
Single-Family Mortgage Revenue, MBIA-Insured,
zero coupon bond to yield 10.983% due 9/1/15 314,181
Nebraska Investments Finance Authority:
400,000 AAA GNMA-Collateralized, RIBS Variable Rate, 9.943% due 10/17/23(a)(d) 440,000
300,000 AAA Single-Family Mortgage Revenue, GNMA Mortgage Backed
Securities Program, 1990 Series 3, RIBS Variable Rate,
11.302% due 9/10/30(a)(d) 339,750
1,689,189 AA Nevada Housing Development Single-Family Mortgage Revenue,
Series 1983 B, FHA-Insured, zero coupon bond to yield
10.245% due 4/1/15 301,942
1,685,000 Aa* New Hampshire State HFA, Single-Family Residential
Mortgage, 7.250% due 7/1/15(a) 1,790,312
Ohio Housing Finance Agency Residential Mortgage, GNMA-Collateralized:
250,000 AAA Series A-1, 6.100% due 9/1/14 262,188
Series A-2:
200,000 AAA 6.125% due 9/1/24(a) 206,750
230,000 AAA 6.625% due 3/1/26(a) 246,100
485,000 Aa2* Oregon State Housing & Community Services Department,
Mortgage Revenue, Single-Family Mortgage Program,
Series D, 6.500% due 7/1/24(a) 515,919
185,000 BBB- Panhandle, TX Regional Housing Finance Corp., Single-Family
Mortgage Revenue, 10.375% due 3/1/09 189,650
1,000,000 AA+ Pennsylvania State HFA, Single-Family Mortgage Revenue, Series 39B,
6.875% due 10/1/24(a) 1,085,000
1,750,000 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) 1,857,187
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 11
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (continued) March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Housing: Single-Family -- 7.6% (continued)
$ 680,000 AAA Prince Georges County, MD Housing Authority, Single-Family
Mortgage Revenue Refunding, Series A, GNMA-Collateralized,
8.000% due 1/1/17 $ 755,650
2,875,000 AAA Reno County, KS Single-Family Mortgage Revenue, Series A,
AMBAC-Insured, zero coupon bond to yield 11.039% due 12/1/14 449,218
Rhode Island Housing & Mortgage Financing Corp.:
1,500,000 AA+ Home Ownership Opportunity Bonds, Series 8,
INFLOS Variable Rate, 10.418% due 4/1/24(a)(d) 1,657,500
1,390,000 AA+ Home Ownership, Series 88-ID, 7.875% due 10/1/21(a) 1,447,338
1,995,000 AAA South Dakota Housing Development Authority, Home Ownership
Mortgage Board, Series C, 7.300% due 5/1/24(a) 2,099,738
566,448 A1* St. Bernard Parish, LA Home Mortgage Authority, Single-Family
Mortgage Revenue Refunding, Series A, 8.000% due 3/25/12 613,888
750,000 AA Tennessee Housing Development Authority, Home Ownership
Bonds, Series H, FHA-Insured, 7.825% due 7/1/15(a) 773,940
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) 355,063
Utah HFA, Single-Family Mortgage Revenue, FHA-Insured:
675,000 AAA 7.300% due 7/1/16 712,969
315,000 AAA 9.000% due 1/1/19(a) 322,481
3,000,000 AA+ Virginia State Housing Development Authority, Commonwealth
Mortgage Series A, 7.150% due 1/1/33 3,180,000
605,000 AA Wyoming Community Development Authority, FHA-Insured,
8.125% due 6/1/21(a) 636,006
- ------------------------------------------------------------------------------------------------------------------------------------
31,413,733
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Development -- 2.8%
1,000,000 VMIG 1* Chula Vista, CA IDR, Series A, 3.650% due 7/1/21(e) 1,000,000
2,650,000 A+ Iowa Finance Authority, (Governor Square Project),
7.250% due 4/1/02 2,771,052
1,500,000 BBB+ New York City, NY IDA, Special Facilities Revenue,
(American Airlines Project), 7.750% due 7/1/19(a) 1,562,565
1,640,000 AA Oklahoma City, OK Industrial & Culture Facilities,
6.750% due 9/15/17(a) 1,685,100
1,000,000 A Rensselaer County, NY IDA Albany International Corp.,
7.550% due 6/1/07(a) 1,185,000
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) 1,118,750
2,000,000 A West Chicago, IL IDR, (Leggett & Platt Inc. Project),
6.900% due 9/1/24(a) 2,225,000
- ------------------------------------------------------------------------------------------------------------------------------------
11,547,467
- ------------------------------------------------------------------------------------------------------------------------------------
Life Care -- 2.9%
3,225,000 Aa* Hamilton County, OH Mortgage Revenue, Judson Care Center,
Series A, FHA-Insured, 6.500% due 8/1/26 3,491,062
2,500,000 BBB Illinois Development Finance Authority Health Facilities,
Community Living, 7.125% due 3/1/10 2,681,250
1,000,000 BBB+ Indianapolis, IN Industrial EDR, 7.625% due 10/1/22 1,120,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (continued) March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Life Care-- 2.9% (continued)
Massachusetts State Industrial Finance Agency Revenue:
$ 1,400,000 AAA Briscoe House Assisted Living, FHA-Insured, 7.125% due 2/1/36(a) $ 1,613,500
1,940,000 AAA Chelsea Jewish, Series A, FHA-Insured, 6.500% due 8/1/37 2,165,525
1,000,000 Aaa* Reynoldsburg, OH Health Care Facilities Revenue, (Wesley Ridge Project),
GNMA-Collateralized, 6.150% due 10/20/38 1,057,500
- ------------------------------------------------------------------------------------------------------------------------------------
12,128,837
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 3.4%
1,885,000 AA Bernalillo County, NM Gross Receipts Tax Revenue, 5.200% due 4/1/21 1,903,850
2,000,000 Baa2* Galveston, TX Special Contract Revenue, (Farmland Industries Inc. Project),
5.500% due 5/1/15 2,000,000
2,000,000 A Illinois Development Finance Authority Revenue Refunding,
City of East St. Louis, 7.250% due 11/15/09 2,237,500
1,500,000 AAA Indiana Bond Bank Guaranty State Revolving Fund, Series B,
6.875% due 2/1/12 1,719,375
200,000 AAA Ohio State Building Authority, Juvenile Correction Facility, Series A,
AMBAC-Insured, 6.600% due 10/1/14 224,750
400,000 A2* Oregon State Bond Bank, Economic Development Department,
Series 1, 6.700% due 1/1/15 439,000
1,000,000 AAA San Francisco, CA City & County Redevelopment Agency, Hotel Tax Revenue,
FSA-Insured, 5.000% due 7/1/18 981,250
1,330,000 NR Seward, AK (Sealife Center Project), 7.650% due 10/1/16 1,428,088
2,500,000 A- Summit County, CO Sports Facilities Refunding Revenue,
(Keystone Resorts Management Inc. Project), Ralston
Purina Company Guaranteed, 7.750% due 9/1/06 2,968,750
- ------------------------------------------------------------------------------------------------------------------------------------
13,902,563
- ------------------------------------------------------------------------------------------------------------------------------------
Pollution Control -- 8.0%
1,500,000 BBB+ Brazos River Authority, TX Utility Electric, 8.250% due 1/1/19(a) 1,570,605
5,000,000 Aa3* Brazos River, TX Navigation District PCR, (BASF Corp. Project),
6.750% due 2/1/10(c) 5,975,000
1,000,000 VMIG 1* Harris County, TX Industrial Development Corp.,
Solid Waste Disposal Revenue, (Exxon Project),
3.650% due 4/1/33(a)(e) 1,000,000
3,600,000 AA- La Crosse, WI Resource Recovery Revenue,
(Northern States Power Co. Project), 6.000% due 11/1/21(a) 4,009,500
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) 2,140,000
1,500,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project),
7.650% due 9/1/20(a) 1,640,625
2,000,000 AA Mount Vernon, IN PCR, Southern Indiana Gas, 7.250% due 3/1/14 2,165,000
895,000 NR New Jersey EDA Revenue, (Atlantic City Sewer Project),
7.250% due 12/1/11(a) 985,618
1,500,000 AAA Ohio State Water Development Authority, Pollution Control
Facilities Revenue, Cleveland Electric, FGIC-Insured,
8.000% due 10/1/23(a) 1,588,125
1,850,000 A1* Richland, SC Solid Waste Facility, (Union Camp Project),
7.125% due 9/1/21(a) 2,018,813
3,000,000 NR Rockdale County, GA Solid Waste Authority Revenue,
7.500% due 1/1/26(a) 3,281,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 13
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (continued) March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Pollution Control -- 8.0% (continued)
$ 1,945,000 BBB Saint Charles Parish, LA PCR, Union Carbide,
7.350% due 11/1/22(a) $ 2,156,519
1,130,000 A Southwestern Illinois Development Authority, Solid Waste Disposal
Revenue, (Laclede Steel Co. Project), 8.500% due 8/1/20(a) 1,254,300
3,200,000 BBB Sweetwater County, WY Solid Waste Disposal Revenue,
(FMC Corp. Project), 7.000% due 6/1/24(a) 3,536,000
- ------------------------------------------------------------------------------------------------------------------------------------
33,321,355
- ------------------------------------------------------------------------------------------------------------------------------------
Pre-Refunded(f) -- 2.4%
1,500,000 AAA Chattanooga-Hamilton County, TN Hospital Authority Revenue, FSA-Insured,
RIBS Variable Rate, (Call 2/25/00 @ 104), 9.976% due 5/25/21(d) 1,792,500
1,000,000 AAA Delaware County, PA Authority Revenue, (Elwyn Inc. Project),
(Call 6/1/00 @ 102), 8.350% due 6/1/15 1,105,000
Denver, CO City & County Airport Revenue:
85,000 AAA Series A, 8.500% due 11/15/23(a) 95,519
370,000 AAA Series B, 7.250% due 11/15/07(a) 421,338
2,000,000 AAA Fairfax County, VA IDA, Series A, (Call 8/28/01 @ 104), Regular RITES,
9.627% due 8/29/23(d) 2,415,000
500,000 AAA Illinois Health Facility Authority Revenue, United Medical Center,
(Call 7/1/03 @ 100), 8.375% due 7/1/12 595,000
North Carolina Eastern Municipal Power Agency, Power System
Revenue Refunding:
1,000,000 AAA Call 1/1/22 @ 100, 4.500% due 1/1/24 933,750
1,310,000 AAA Call 1/1/22 @ 100, 6.000% due 1/1/26 1,495,038
1,095,000 AAA Portland, TX Community Center Sales Tax Gross Revenue,
7.000% due 2/15/25 1,278,412
- ------------------------------------------------------------------------------------------------------------------------------------
10,131,557
- ------------------------------------------------------------------------------------------------------------------------------------
Public Facilities -- 6.5%
7,990,000 AAA Anaheim, CA Public Financing Authority, FSA-Insured,
zero coupon bond to yield 6.093% due 9/1/21 2,367,037
2,500,000 A- Dekalb County, IN Redevelopment (Mini-Mill Local Public
Improvement Project), 6.500% due 1/15/14 2,746,875
3,750,000 AA- George L. Smith II Georgia, World Congress Center Authority
Revenue Bonds, (Domed Stadium Project), Series 1990, LOC
Industrial Bank of Japan, 7.875% due 7/1/20(a) 4,110,938
Indianapolis, IN Local Public Improvement Bond Bank:
3,685,000 AA Series 1992 D, 6.750% due 2/1/14 4,339,087
3,000,000 AA Series B, 6.000% due 1/10/13 3,341,250
3,000,000 AA- Ohio State Building Authority, State Facilities, (Administration Building
Fund Projects), Series A, 4.750% due 10/1/17 2,857,500
2,000,000 BBB+ Triborough Bridge & Tunnel Authority, NY (Convention Center Project),
Series E, 7.250% due 1/1/10 2,390,000
3,960,000 A Tulsa, OK Public Facilities Authority, Lease Payment Revenue
Refunding, Assembly Center, 6.600% due 7/1/14 4,672,800
- ------------------------------------------------------------------------------------------------------------------------------------
26,825,487
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Allocation -- 1.5%
2,000,000 AAA Illinois State Sales Tax Revenue, Series P, 6.500% due 6/15/13 2,335,000
1,000,000 AAA La Quinta, CA Redevelopment Agency, MBIA-Insured,
7.300% due 9/1/12 1,257,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (continued) March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Tax Allocation -- 1.5% (continued)
$ 5,000,000 AAA Metropolitan Pier & Exposition Authority, IL Dedicated State Tax Revenue,
Series A, MBIA-Insured, zero coupon bond to yield 6.077% due 6/15/22 $ 1,406,250
1,000,000 BBB- Providence, RI Special Obligation, Tax Increment, Series D,
6.650% due 6/1/16 1,085,000
- ------------------------------------------------------------------------------------------------------------------------------------
6,083,750
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation -- 7.1%
3,000,000 Baa2* Alliance Airport Authority Inc., TX Special Facilities Revenue,
(American Airlines Inc. Project), 7.500% due 12/1/29(a) 3,258,750
2,000,000 Baa2* Chicago, IL O'Hare International Airport, Special Facility Revenue,
International Terminal, Series 1985A, (American Airlines Inc. Project),
7.875% due 11/1/25(a)(c) 2,182,500
2,010,000 NR Connecticut Development Authority, Airport Facilities Revenue,
6.625% due 12/1/14(a) 2,188,387 Denver, CO City & County Airport Revenue:
915,000 Baa1* Series A, 8.500% due 11/15/23(a) 1,021,369
3,130,000 Baa1* Series B, 7.250% due 11/15/07(a) 3,446,913
3,000,000 AAA Massachusetts State Port Authority Revenue, (Bosfuel Project),
MBIA-Insured, 5.750% due 7/1/39(a) 3,108,750
2,470,000 Aaa* Massachusetts State Turnpike Authority, Highway Systems Revenue,
MBIA-Insured, Series C, zero coupon bond to
yield 5.545% due 1/1/21 768,787
New Hampshire State Turnpike Systems Revenue Refunding,
FGIC-Insured:
2,500,000 AAA 6.750% due 11/1/11 2,900,000
1,000,000 AAA RIBS, Series C, 9.789% due 11/1/17(d) 1,317,500
1,000,000 AAA Port Arthur, TX Navigation District, AMBAC-Insured, 4.875% due 3/1/17 968,750
600,000 A-1+ Port Authority of New York & New Jersey, Special Obligation Revenue,
Series 2, 3.600% due 5/1/19(e) 600,000
Puerto Rico Commonwealth Highway & Transportation Authority,
Highway Revenue, Series Y:
3,000,000 A 5.000% due 7/1/36 2,895,000
1,000,000 A 5.500% due 7/1/36 1,043,750
Regional Transit Authority, IL:
2,000,000 AAA Series A, AMBAC-Insured, 6.400% due 6/1/12 2,317,500
1,045,000 AAA Series C, FGIC-Insured, 7.750% due 6/1/20 1,413,363
- ------------------------------------------------------------------------------------------------------------------------------------
29,431,319
- ------------------------------------------------------------------------------------------------------------------------------------
Utility -- 7.8%
3,000,000 AAA Brownsville, TX Utility System Revenue Priority Refunding,
MBIA-Insured, 6.250% due 9/1/14 3,483,750
3,000,000 AAA Clark County, NV IDR, (Nevada Power Co. Project),
FGIC-Insured, 7.800% due 6/1/20(a) 3,247,500
4,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp., Series A,
7.500% Due 11/1/04 4,230,000
195,000 AAA Cleveland Public Power System, MBIA-Insured,
Series B, 7.000% due 11/15/17 215,962
Georgia Municipal Electric Authority Power Revenue:
1,500,000 AAA Series EE, AMBAC-Insured, 7.250% due 1/1/24 1,953,750
2,500,000 A Series X, 6.500% due 1/1/12 2,900,000
1,250,000 AAA Hawaii State Department Budget & Finance, Hawaiian Electric Co. Inc.,
Series A, MBIA-Insured, 5.650% due 10/1/27(a) 1,306,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 15
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Schedule of Investments (continued) March 31, 1998
====================================================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================================================
<S> <C> <C> <C> <C>
Utility -- 7.8% (continued)
$ 1,000,000 A+ New York State Energy Research & Development,
(Con Edison Project A), 7.125% due 12/1/29(a) $ 1,156,250
North Carolina Eastern Municipal Power Agency System Revenue:
2,000,000 AAA Series A, MBIA-Insured, 5.000% due 1/1/20 1,942,500
1,740,000 Baa1* Series B, 6.000% due 1/1/22 1,850,925
Piedmont, SC Municipal Power Agency, Electric Revenue Refunding:
1,235,000 AAA FGIC-Insured, 6.750% due 1/1/20 1,495,894
5,400,000 AAA Series A, MBIA-Insured, 4.750% due 1/1/25 4,995,000
3,500,000 Aa1* Washington State Public Power Supply System Revenue,
(Nuclear Project No. 3), Series A, 5.125% due 7/1/18 3,403,750
- ------------------------------------------------------------------------------------------------------------------------------------
32,181,531
- ------------------------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 4.0%
2,400,000 A Dauphin County, PA IDA, General Water Works Corp.,
6.900% due 6/1/24(a) 2,919,000
2,000,000 A Idaho State Water Resources Board, Water Revenue, Resource
Development, Borse Water Corp., 7.250% due 12/1/21(a) 2,195,000
2,000,000 AAA Jefferson County, AL Sewer Revenue, Series D, FGIC-Insured,
5.750% due 2/1/27 2,112,500
500,000 NR Ohio State Solid Waste Revenue, Republic Engineered Steels Inc.,
9.000% due 6/1/21(a) 541,250
400,000 A Ohio Water Development Authority, (Broken Hill Project),
6.450% due 9/1/20(a) 435,000
3,400,000 Aa1* Port of Umatilla, OR Water Project Revenue, Series 1994,
LOC ABN AMRO Bank, 6.650% due 8/1/22(a) 3,689,000
1,500,000 AA- San Diego County, CA Water Authority, Water Revenue, Series A,
4.750% due 5/1/18 1,423,125
2,750,000 A Trumbull County, OH Sewer Disposal Revenue, (General
Motors Corp. Project), 6.750% due 7/1/14(a) 3,217,500
- ------------------------------------------------------------------------------------------------------------------------------------
16,532,375
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $381,105,910**) $413,689,953
====================================================================================================================================
</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 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 "BBB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differs from the highest rated issue only in a small
degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than in higher
rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating
from "Aa" to "Baa," where 1 is the highest and 3 the lowest ranking within its
generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
NR -- Indicates that the bond is not rated by either Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 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 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities March 31, 1998
====================================================================================================================================
<S> <C>
ASSETS:
Investments, at value (Cost -- $381,105,910) $413,689,953
Cash 61,839
Interest receivable 6,432,157
Receivable for securities sold 17,929,840
Receivable for Fund shares sold 741,841
Other assets 15,024
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 438,870,654
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 31,290,746
Management fees payable 169,555
Payable for Fund shares redeemed 164,221
Distribution fees payable 19,293
Accrued expenses 75,162
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 31,718,977
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $407,151,677
====================================================================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 28,745
Capital paid in excess of par value 369,951,302
Undistributed net investment income 302,433
Accumulated net realized gain on security transactions 4,285,154
Net unrealized appreciation on investments 32,584,043
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $407,151,677
====================================================================================================================================
Shares Outstanding:
Class A 26,183,648
-------------------------------------------------------------------------------------------------------------------------------
Class B 1,434,762
-------------------------------------------------------------------------------------------------------------------------------
Class C 1,126,590
-------------------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $14.16
-------------------------------------------------------------------------------------------------------------------------------
Class B* $14.16
-------------------------------------------------------------------------------------------------------------------------------
Class C** $14.16
-------------------------------------------------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) $14.75
====================================================================================================================================
</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 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 19
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statement of Operations For the Year Ended March 31, 1998
====================================================================================================================================
<S> <C>
INVESTMENT INCOME:
Interest $ 24,423,502
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 1,754,116
Distribution fees (Note 3) 744,757
Shareholder and system servicing fees 100,646
Registration fees 51,779
Shareholder communications 39,000
Pricing service fees 27,999
Custody 19,490
Audit and legal 17,002
Trustees' fees 7,001
Other 10,002
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 2,771,792
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 21,651,710
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 340,974,877
Cost of securities sold 330,720,863
- ------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain 10,254,014
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation (Note 5) 9,944,057
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain on Investments 20,198,071
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 41,849,781
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Statements of Changes in Net Assets For the Years Ended March 31,
====================================================================================================================================
1998 1997
====================================================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 21,651,710 $ 23,279,790
Net realized gain 10,254,014 2,704,354
Increase (decrease) in net unrealized appreciation 9,944,057 (5,092,442)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 41,849,781 20,891,702
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (22,052,414) (22,691,231)
Net realized gain (4,341,908) --
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (26,394,322) (22,691,231)
- ------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 67,394,715 82,239,990
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 14,164,394 11,696,083
Cost of shares reacquired (75,971,741) (119,738,880)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions 12,709,699 (25,802,807)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 28,165,158 (27,602,336)
NET ASSETS:
Beginning of year 378,986,519 406,588,855
- ------------------------------------------------------------------------------------------------------------------------------------
End of year* $407,151,677 $378,986,519
====================================================================================================================================
* Includes undistributed net investment income of: $302,433 $703,137
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 21
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
The National Portfolio ("Portfolio") is a separate investment portfolio of the
Smith Barney Muni Funds ("Fund"). The Fund, a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as 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 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 maturing within 60 days
are valued at cost plus accreted discount or minus amortized premium, if any,
which approximates value; (d) gains or losses on the sale of securities are
calculated by using the specific identification method; (e) interest income,
adjusted for amortization of premium and accretion of original issue discount,
is recorded on an accrual basis; market discount is recognized upon the
disposition of the security; (f) dividends and distributions to shareholders are
recorded on the ex-dividend date; (g) direct expenses are charged to each
Portfolio and each class; management fees and general fund expenses are
allocated on the basis of relative net assets by class; (h) the character of
income and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles; (i)
the Portfolio intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; and (j) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. Exempt-Interest Dividends and Other Distributions
The Portfolio intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Portfolio.
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"), formerly known as Smith Barney Mutual Funds
Management Inc., 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.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of
Fund shares. For the year ended March 31, 1998, SB received sales charges of
approximately $345,000 on purchases of the Portfolio's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B shares,
which applies if redemption occurs within one year from initial purchase. This
CDSC declines by 0.50% the first year after purchase and thereafter by 1.00% per
year until no CDSC is incurred. Class C shares have a 1.00% CDSC, which applies
if redemption occurs within the first year of purchase.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
For the year ended March 31, 1998, CDSCs paid to SB were approximately:
<TABLE>
<CAPTION>
Class B Class C
================================================================================
<S> <C> <C>
CDSCs $23,000 $1,000
================================================================================
</TABLE>
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A, B and C shares calculated at the annual rate of 0.15% of the average
daily net assets of each respective class. In addition, the Portfolio pays a
distribution fee with respect to Class B and C shares calculated at the annual
rates of 0.50% and 0.55% of the average daily net assets of each class,
respectively. For the year ended March 31, 1998, total Distribution Plan fees
incurred were:
<TABLE>
<CAPTION>
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Distribution Plan Fees $538,970 $99,361 $106,426
================================================================================
</TABLE>
All officers and one Trustee of the Fund are employees of SB.
4. Investments
During the year ended March 31, 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 $359,483,313
- --------------------------------------------------------------------------------
Sales 340,974,877
================================================================================
</TABLE>
At March 31, 1998, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
<TABLE>
<CAPTION>
===============================================================================
<S> <C>
Gross unrealized appreciation $33,194,456
Gross unrealized depreciation (610,413)
- -------------------------------------------------------------------------------
Net unrealized appreciation $32,584,043
===============================================================================
</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 March 31, 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.
At March 31, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Total Paid-in Capital $334,944,115 $19,107,343 $15,928,589
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 23
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1998 March 31, 1997
----------------------------------- -----------------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 4,278,086 $ 60,139,642 5,705,109 $ 77,871,073
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 919,860 12,952,448 785,527 10,732,902
Shares redeemed (5,066,000) (70,997,885) (8,337,357) (113,957,473)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 348,098 $ 5,155,655 (1,846,721) $ (25,353,498)
====================================================================================================================================
Class B
Shares sold 435,980 $ 6,185,158 139,353 $ 1,871,437
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 43,558 613,782 29,337 427,323
Shares redeemed (204,149) (2,891,933) (84,709) (1,158,601)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase 502,363 $ 7,117,686 83,981 $ 1,140,159
====================================================================================================================================
Class C
Shares sold 75,660 $ 1,069,915 179,662 $ 2,497,480
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 42,562 598,164 42,703 535,858
Shares redeemed (148,687) (2,081,923) (338,272) (4,622,806)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 29,711 $ 436,358 (115,907) $ (1,589,468)
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1998 1997 1996 1995(1) 1994
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.60 $13.67 $13.32 $13.35 $13.81
- ------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.79 0.81 0.81 0.82 0.85
Net realized and unrealized gain (loss) 0.73 (0.09) 0.35 (0.01) (0.39)
- ------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.52 0.72 1.16 0.81 0.46
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.80) (0.79) (0.81) (0.84) (0.86)
Net realized gains (0.16) -- -- -- (0.06)
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.96) (0.79) (0.81) (0.84) (0.92)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.16 $13.60 $13.67 $13.32 $13.35
- ------------------------------------------------------------------------------------------------------------
Total Return 11.47% 5.41% 8.83% 6.38% 3.17%
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $371 $351 $378 $401 $413
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.66% 0.70% 0.70% 0.60% 0.52%
Net investment income 5.61 5.92 5.88 6.30 6.05
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 87% 31% 27% 54% 42%
============================================================================================================
</TABLE>
(1) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 25
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class B Shares 1998 1997 1996 1995(1)
======================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.61 $13.67 $13.33 $12.41
- ------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.70 0.74 0.73 0.33
Net realized and unrealized gain (loss) 0.74 (0.08) 0.35 0.91
- ------------------------------------------------------------------------------------------------------
Total Income From Operations 1.44 0.66 1.08 1.24
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.73) (0.72) (0.74) (0.32)
Net realized gains (0.16) -- -- --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.89) (0.72) (0.74) (0.32)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.16 $13.61 $13.67 $13.33
- ------------------------------------------------------------------------------------------------------
Total Return 10.80% 4.95% 8.26% 10.11%++
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $20,313 $12,691 $11,605 $6,905
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.29% 1.20% 1.19% 1.19%+
Net investment income 4.95 5.42 5.37 5.75+
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 87% 31% 27% 54%
======================================================================================================
</TABLE>
(1) For the period from November 7, 1994 (inception date) to March 31, 1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class C Shares 1998 1997 1996 1995(1) 1994
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.59 $13.65 $13.32 $13.33 $13.80
- ----------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.69 0.73 0.73 0.74 0.76
Net realized and unrealized gain (loss) 0.74 (0.08) 0.34 (0.01) (0.40)
- ----------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.43 0.65 1.07 0.73 0.36
- ----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.70) (0.71) (0.74) (0.74) (0.77)
Net realized gains (0.16) -- -- -- (0.06)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.86) (0.71) (0.74) (0.74) (0.83)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $14.16 $13.59 $13.65 $13.32 $13.33
- ----------------------------------------------------------------------------------------------------------------------
Total Return 10.71% 4.90% 8.13% 5.80% 2.40%
- ----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $15,926 $14,901 $16,563 $18,599 $18,185
- ----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.35% 1.27% 1.27% 1.23% 1.22%
Net investment income 4.91 5.35 5.31 5.69 5.29
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 87% 31% 27% 54% 42%
======================================================================================================================
</TABLE>
(1) On November 7, 1994, the former Class B shares were renamed Class C shares.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 27
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
To the Shareholders and Board of Trustees of
the National Portfolio of Smith Barney Muni Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the National Portfolio of Smith Barney Muni
Funds as of March 31, 1998, the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended and financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian. As to securities purchased or
sold but not yet received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
National Portfolio of Smith Barney Muni Funds as of March 31, 1998, the results
of its operations for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended and financial highlights for
each the years in the five-year period then ended, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick
New York,New York
May 15, 1998
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 1998:
o 100% of the dividends paid by the Fund from the net investment income
as tax-exempt for regular Federal income tax purposes.
o The Taxpayer Relief Act of 1997 enacted differing rates of tax on
various long-term capital gain transactions. As a result, the Fund
designates:
o Total long-term capital gain distributions paid of $4,341,908 are
considered "20 percent rate gains".
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- National Portfolio 29
<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
Smith Barney Inc.
Joseph H. Fleiss, Emeritus
C. Richard Youngdahl, Emeritus
Custodian
Officers PNC Bank, N.A.
Heath B. McLendon
President and Chief Executive Officer Shareholder Servicing Agent
Lewis E. Daidone First Data Investor Services Group, Inc.
Senior Vice President and Treasurer P.O. Box 9134
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.
SMITH BARNEY
------------
A Member oF TravelersGroup[LOGO]
Smith Barney
Muni Funds
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD2304 5/98
<PAGE>
================================================================================
[PHOTO]
Smith Barney Muni Funds
Limited Term
Portfolio
ANNUAL REPORT
March 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
================================================================================
<PAGE>
Limited Term
Portfolio
[PHOTO] [PHOTO]
Heath B. McLendon Lawrence T. McDermott
Chairman Vice President
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Muni Funds --
Limited Term Portfolio ("Portfolio") for the year ended March 31, 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.
Performance Update
For the year ended March 31, 1998, Class A and Class C shares of the Portfolio
had a total return of 8.66% and 8.36%, respectively. In comparison, the
Portfolio's Lipper Analytical Services, Inc. peer group average had a total
return of 8.22% for the same period. (Lipper is an independent fund-tracking
organization.)
Over the twelve months covered by the report, the Portfolio distributed income
dividends totaling $0.34 per Class A share. Based on its net asset value ("NAV")
of $6.76 at March 31, 1998 and a current monthly income dividend of $0.028, this
equates to an annualized distribution rate of 4.97% for Class A shares. For an
individual in the Federal tax bracket of 36%, the Portfolio's tax-free yield of
4.97% is equivalent to a taxable yield of 7.77%.
We are also pleased to report that your Portfolio has received a five-star
rating overall for its Class A and Class C shares from Morningstar, Inc.* as of
March 31, 1998.
- ----------
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through 3/31/98. 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
and 5 stars for the 5-year period. For Class C shares, the Portfolio
received 5 stars for the overall, 3-year and 5-year periods. It was rated
among 1,525 municipal bond funds for the 3-year period and 782 municipal
bond funds for the 5-year period. Ten percent of the funds in a rating
category receive five stars.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 1
<PAGE>
Market and Economic Overview
Interest rates continued to decline overall during the course of the reporting
period. However, the bond markets did experience volatility as investors
responded to a conflicting combination of low inflation and falling
unemployment. The Federal Reserve Board ("Fed") last raised the federal-funds
rate by 0.25% in March 1997, but has since chosen to remain on the sidelines.
(The federal-funds rate is the interest rate banks charge each other for
overnight loans and is a closely watched indicator of the direction of interest
rates.) However, the persistent strength of the U.S. economy heightened fears
among many investors that the Fed would raise short-term interest rates.
Since the end of October, one of the dominant themes in the financial markets
has been the Asian financial crisis and the extent of its impact on the U.S.
economy. We expect at least a modest dampening effect on economic growth in the
first part of the year with inflation continuing to trend lower in spite of wage
pressures resulting from an extremely tight labor market. Yet the ultimate
effect of the Asian crisis is still unknown. In comparison to the international
bond markets and in light of recent events in Asia, we think that many domestic
bonds represent good value based on current market conditions.
Investment Strategy
The Portfolio is an intermediate-term municipal bond fund that seeks to provide
investors with as high a level of current income exempt from federal taxes as is
consistent with a prudent investment approach. The Portfolio invests primarily
in high-grade municipal securities with maturities of less than ten years. As of
March 31, 1998, the Portfolio's average weighted maturity was 9.5 years. We
believe the combination of intermediate-term securities and the Portfolio's
high-quality orientation should help to reduce credit risk and NAV price
volatility, while still maintaining a competitive dividend yield for
shareholders. Moreover, the Portfolio's manager is supported by an experienced
credit analysis team that utilizes extensive research to identify what they
believe to be undervalued issues with less risk potential.
Approximately 94% of the Portfolio's holdings were rated investment grade
(BBB/Baa and higher) by either Standard & Poor's Ratings Services or Moody's
Investors Service Inc. (Standard & Poor's Ratings Services and Moody's Investors
Service Inc. are two major credit reporting and bond-rating agencies.) The
Portfolio's largest holdings were concentrated in hospital bonds (16.3%),
education bonds (12.6%), transportation bonds (11.5%), general obligation
(11.1%) and housing bonds (10.3%).
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
Municipal Bond Market Outlook
Municipal bond issuance in 1997 was the second largest issuance ever and the
market's ability to absorb these securities is an indication of the healthy
appetite for tax-free investments. Insurance companies were among the largest
buyers, but we believe that more and more individual investors are beginning to
recognize the attractive investment opportunities in municipal bonds. Moreover,
the heavy supply of bond issues usually depresses prices, which enables us to
inexpensively purchase longer-term bonds and enhance the call protection and the
relative performance of the funds we manage. In addition, municipalities have
benefited from the strong economy and low inflation.
Going forward, we remain positive on the prospects for the municipal bond
market. We expect a moderately expanding U.S. economy with the Fed maintaining
its vigilance against higher inflationary pressures. However, as previously
noted, we think that inflation should remain subdued despite rising wage
pressures from a tight U.S. labor market. Therefore, our outlook for municipal
bonds over the next six months remains bright.
In closing, thank you for investing in the Smith Barney Muni Funds -- 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
April 28, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 3
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Historical Performance -- Class A Shares
================================================================================
Net Asset Value
---------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
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
- --------------------------------------------------------------------------------
3/31/92 6.38 6.45 0.42 7.99
- --------------------------------------------------------------------------------
3/31/91 6.28 6.38 0.40 8.23
- --------------------------------------------------------------------------------
3/31/90 6.20 6.28 0.46 9.07
- --------------------------------------------------------------------------------
Inception* - 3/31/89 6.25 6.20 0.13 1.09+
================================================================================
Total $3.59
================================================================================
<CAPTION>
================================================================================
Historical Performance -- Class C Shares
================================================================================
Net Asset Value
---------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
<S> <C> <C> <C> <C>
3/31/98 $6.54 $6.76 $0.32 8.36%
- --------------------------------------------------------------------------------
3/31/97 6.61 6.54 0.34 4.10
- --------------------------------------------------------------------------------
3/31/96 6.54 6.61 0.34 6.45
- --------------------------------------------------------------------------------
3/31/95 6.54 6.54 0.35 5.51
- --------------------------------------------------------------------------------
3/31/94 6.68 6.54 0.35 3.15
- --------------------------------------------------------------------------------
Inception* - 3/31/93 6.62 6.68 0.09 2.28+
================================================================================
Total $1.79
================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
================================================================================
Without Sales Charge(1)
------------------------
Class A Class C
================================================================================
<S> <C> <C>
Year Ended 3/31/98 8.66% 8.36%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 5.78 5.50
- --------------------------------------------------------------------------------
Inception* through 3/31/98 6.95 5.70
================================================================================
<CAPTION>
With Sales Charge(2)
------------------------
Class A Class C
================================================================================
<S> <C> <C>
Year Ended 3/31/98 6.54% 7.36%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 5.34 5.50
- --------------------------------------------------------------------------------
Inception* through 3/31/98 6.72 5.70
================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Cumulative Total Return
================================================================================
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 3/31/98) 87.38%
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/98) 33.66
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 2.00% and Class C shares reflect the
deduction of a 1.00% CDSC, which applies if shares are redeemed within one
year from initial purchases.
* Inception dates for Class A and C shares are November 28, 1988 and January
5, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 5
<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+
- --------------------------------------------------------------------------------
November 1988 -- March 1998
[THE FOLLING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Lehman Brothers Lehman Brothers Lehman Brothers Lehman Brothers
Municipal Municipal Municipal Municipal
Limited Term Portfolio 5-Year Bond Index* Long Bond Index* Bond Index* 10-Year 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
3/31/98 $18,222 $18,848 $22,087 $21,312 $21,232
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on November 28, 1988, assuming deduction of the maximum 2.00%
sales charge at the time of investment and reinvestment of dividends (after
deduction of applicable sales charge through November 6, 1994, afterwards
at net asset value) and capital gains, if any, at net asset value through
March 31, 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 benchmark for the market in which the Limited Term
Portfolio invests 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 Muncipal 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) are 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.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Education -- 12.6%
$ 2,825,000 Aa2* Arizona Education Loan Marketing Corp.,
Education Loan Revenue Bonds, 7.000%
due 3/1/02(a)(b) $3,054,531
2,010,000 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) 2,075,325
940,000 Aa* Brazos, TX Higher Education Authority, Series C-1,
6.000% due 11/1/99(a) 964,675
1,350,000 A* Colorado Student Obligation Board Authority, Student
Loan Revenue, Series A-1, 6.600% due 9/1/98 1,361,407
1,150,000 AA Fairfield County, SC School District, COP,
5.500% due 3/1/07 1,213,250
1,000,000 A+ Illinois Student Assistance Commission, Student
Loan Revenue, Series H, 6.100% due 3/1/01(a) 1,041,250
2,000,000 AAA Jefferson Parish, LA School Board, Sales
and Use Tax Revenue, FSA-Insured, zero coupon
to yield 4.956% due 9/1/09 1,150,000
4,575,000 AAA Keller, TX ISD, Capital Appreciation, PSFG, zero coupon
to yield 4.902% due 8/15/12 2,236,031
1,000,000 Aaa* Kentucky Higher Education Student Loan Corp., Insured
Student Loan Revenue, Series 91B,
6.500% due 12/1/00(a) 1,055,000
205,000 AAA Louisiana Public Facilities Authority Revenue,
Supplemental Student Loan, AMBAC-Insured,
8.125% due 12/1/99 215,762
4,655,000 AAA McKeesport, PA Area School District, MBIA-Insured,
zero coupon to yield 5.578% due 10/1/17 1,710,712
1,155,000 A* Montana State Higher Education Student Assistance Corp.,
Student Loan Revenue, Series 92B, 7.050%
due 6/1/04(a) 1,232,962
2,500,000 AAA New York State Dormitory Authority Revenues,
City University System, FGIC-Insured,
5.000% due 7/1/18 2,434,375
North Texas Higher Education Authority Inc.,
Student Loan Revenue:
1,475,000 AAA AMBAC-Insured, 7.000% due 4/1/01(a) 1,548,750
2,400,000 A* Series D, 6.300% due 4/1/09(a) 2,505,000
2,000,000 AAA Pennsylvania State Higher Education Assistance Agency,
Student Loan Revenue Refunding, Series A,
FGIC-Insured, 6.800% due 12/1/00 2,132,500
1,500,000 A* Rhode Island Student Loan Authority Revenue
Refunding, Series 92B, 6.750% due 12/1/01(a) 1,612,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 7
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Education -- 12.6% (continued)
$ 1,500,000 AAA Schuylkill, PA Redevelopment Authority Revenue,
Commonwealth Lease Revenue Bonds, Series A,
FGIC-Insured, 6.850% due 6/1/03 $ 1,638,750
2,540,000 A South Dakota Student Loan Assistance Corp.,
Student Loan Revenue, 7.350% due 8/1/98(a) 2,568,372
630,000 A* Texas State Higher Education Coordinating Board,
College Student Loan Revenue, 6.800% due 4/1/98(a) 630,000
Utah State School District Co-Op Revenue Financing Pool,
LOC Swiss Bank:
945,000 AA+ 8.300% mandatory tender 2/15/00 1,012,331
2,195,000 AA+ 8.375% due 2/15/10 2,227,135
1,000,000 AAA Yuma County, AZ Elementary School District No. 001,
(Project of 1996), Series C, AMBAC-Insured,
5.000% due 7/1/14 1,006,250
- ------------------------------------------------------------------------------------------------------------
36,626,868
- ------------------------------------------------------------------------------------------------------------
Escrowed to Maturity(c) -- 4.4%
720,000 AAA Boston, MA Water & Sewer Community Revenue,
10.650% due 1/1/99 742,018
740,000 Baa3* Delaware County, PA Development Authority Revenue,
(Elwyn Inc. Project), 7.750% due 6/1/00 795,500
60,000 AAA Enid, OK Hospital Authority Revenue, St. Mary's Hospital
Crossover Refunding, 8.000% due 7/1/98 60,283
1,040,000 AAA Erie County, OH Hospital Improvement, Sandusky
Memorial Hospital, 8.750% due 1/1/06(b) 1,224,600
1,050,000 AAA Illinois Educational Facilities Authority Revenue, Chicago
Osteopathic Medical, Series A, 8.750% due 7/1/05 1,252,125
830,000 AAA Kalamazoo, MI Hospital Finance Authority,
6.750% due 4/1/03 882,912
375,000 NR Lehigh County, PA IDA, Industrial & Commercial
Development Revenue, (Strawbridge Project),
7.200% due 12/15/01 408,750
1,135,000 Baa1* New Haven, CT GO, Series B, 9.000% due 12/1/01 1,319,437
New York, NY GO:
910,000 Aaa* Series D, 7.200% due 2/1/00 961,188
765,000 Aaa* Series F, 8.100% due 11/15/99 815,681
320,000 A Ouachita Parish, LA Hospital Services District #1,
Hospital Revenue Bonds, Glenwood Regional
Medical Center, Series 1991, 7.250% due 7/1/00 341,200
1,595,000 AAA Owensboro, KY Electric, Light & Power,
10.500% due 1/1/04(b) 1,902,038
195,000 Aa* Philadelphia, PA Hospitals and Higher Education
Facilities Authority Revenue, (St. Agnes Medical Center
Project), FHA-Insured, 6.750% due 8/15/01 203,288
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Escrowed to Maturity(c) -- 4.4% (continued)
$ 455,000 AAA San Francisco, CA Airport Improvement Corp., Lease
Revenue, United Airlines, 7.875% due 7/1/99 $ 468,081
610,000 NR Sullivan County, TN Health & Educational Facilities,
Holston Valley Community Hospital, 7.000% due 9/1/99 629,062
810,000 NR Tom Green County, TX Hospital Authority,
7.875% due 2/1/06 916,313
- ------------------------------------------------------------------------------------------------------------
12,922,476
- ------------------------------------------------------------------------------------------------------------
Finance -- 0.3%
1,000,000 A+ New York State Local Government Assistance Corp.,
6.600% due 4/1/98 1,000,000
- ------------------------------------------------------------------------------------------------------------
General Obligation -- 11.1%
1,000,000 AAA Arizona COP Refunding GO, FSA-Insured,
6.500% due 3/1/08 1,092,500
2,000,000 AAA Chicago, IL Board of Education GO, Chicago School
Reform, AMBAC-Insured, 5.800% due 12/1/13 2,162,500
1,570,000 BBB Government of Guam GO, Series A, 5.750% due 8/15/99 1,603,363
Harris County, TX Refunding Toll Road Authority
GO Unlimited, MBIA-Insured:
1,000,000 AAA Zero coupon to yield 5.188% due 8/15/11 521,250
1,000,000 AAA Zero coupon to yield 5.240% due 8/15/12 488,750
1,250,000 AAA Zero coupon to yield 5.293% due 8/15/13 573,438
1,450,000 BBB- Jefferson County, AR PCR, (Entergy Arizona Inc. Project),
5.600% due 10/1/17 1,460,875
500,000 AA+ Kings County, WA GO Unlimited Tax Obligation,
9.000% due 12/1/98 517,170
865,000 Baa1* New Haven, CT GO, Series B, 9.000% due 12/1/01 955,825
New York City GO:
2,500,000 A3* Series A, 6.250% due 8/1/08 2,759,375
2,250,000 A3* Series B, 5.250% due 8/1/17 2,233,125
130,000 A3* Series D, 7.200% due 2/1/00 137,150
205,000 A3* Series F, 8.100% due 11/15/99 218,838
6,640,000 A3* Series F, zero coupon to yield 5.014% due 8/1/08 4,042,100
2,000,000 A3* Series H, 5.900% due 8/1/09 2,172,500
Puerto Rico Commonwealth GO, Capital Appreciation,
Public Improvement:
13,410,000 A Zero coupon to yield 4.932% due 7/1/15 5,648,963
3,800,000 A Zero coupon to yield 4.940% due 7/1/17 1,434,500
Shelby County, TN GO:
1,500,000 AA+ Zero coupon to yield 5.336% due 8/1/14 667,500
1,500,000 AA+ Zero coupon to yield 5.437% due 8/1/16 596,250
Texas State Veterans Housing Assistance:
2,660,000 AA Fund II-D GO, 5.650% due 12/1/14(a) 2,753,100
285,000 AA GO, FHA-Insured, 6.050% due 12/1/12(a) 291,769
- ------------------------------------------------------------------------------------------------------------
32,330,841
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 9
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Hospitals -- 16.3%
$ 515,000 A+ ABAG Finance Authority Nonprofit Corps, CA Insured COP,
(Rehabilitation Mental Health Services Inc. Project),
6.100% due 6/1/02 $ 549,762
600,000 A Bexar County, TX Health Facilities Development Corp.,
Health Facilities Revenue Refunding,
(Independence Hill Project), LOC Banque Paribas,
7.500% mandatory tender 12/1/98 614,268
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 1,192,500
3,500,000 BBB Colorado Health Facilities Authority Hospital Revenue
Bonds, Series 1993, Rocky Mountain Adventist Health
Guaranteed, 6.250% due 2/1/04 3,714,375
3,000,000 AAA District of Columbia Hospital Revenue, Medlantic
Healthcare Group, Series A, MBIA-Insured,
5.375% due 8/15/15 3,052,500
2,135,000 NR Harris County, TX Health Facilities Development Corp.,
Memorial Health System Guaranteed,
7.125% due 6/1/05 2,401,875
1,000,000 BBB Illinois Health Facilities Authority Revenue Refunding,
Trinity Medical Center, 6.500% due 7/1/00 1,041,250
975,000 Ba3* Langhorne Manor Higher Education & Health Authority,
Bucks County, PA Lower Bucks Hospital,
6.375% due 7/1/99 984,750
1,000,000 Aaa* Lehigh County, PA General Purpose Authority Revenues,
Lehigh Valley Health Network, MBIA-Insured,
5.000% due 7/1/18 972,500
2,200,000 BBB Maplewood, MN Healthcare Facilities Revenue,
(Health East Project), 5.950% due 11/15/06 2,321,000
515,000 Ba1* Massachusetts Health & Education Facilities Authority
Revenue, Series A, Massachusetts Eye & Ear Infirmary,
7.000% due 7/1/98 517,271
3,550,000 AAA Montana State Health Facilities Authority Revenue,
Sisters of Charity, Leavenworth, MBIA-Insured,
5.125% due 12/1/18 3,514,500
New Jersey Healthcare Facilities Financing
Authority Revenue:
3,250,000 AAA Cathedral Health Services, MBIA/FHA-Insured,
5.200% due 8/1/15 3,229,687
1,000,000 Baa1* Elizabeth General Medical Center, Series C,
7.100% due 7/1/99 1,035,000
1,030,000 BBB+ Pascack Valley Hospital, Series 91,
6.500% due 7/1/01 1,091,800
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Hospitals -- 16.3% (continued)
New York State Dormitory Authority Revenue:
$ 1,000,000 BBB+ Bronx Lebanon Hospital, 5.200% due 2/15/16 $ 982,500
3,000,000 A- Mental Health Services Facilities, Series B,
5.750% due 8/15/12 3,157,500
1,570,000 BBB+ North General Hospital, 5.200% due 2/15/16 1,542,525
1,150,000 AAA St. Barnabas Hospital, AMBAC/FHA-Insured,
5.350% due 8/1/17 1,168,687
2,000,000 AAA Norfolk, VA IDA Revenue, Bon Secours Health,
MBIA-Insured, 5.250% due 8/15/17 2,025,000
2,170,000 A+ Palm Beach County, FL Health Facilities Authority
Revenue, Good Samaritan Health System Guaranteed,
6.150% due 10/1/06 2,416,838
1,750,000 A Riverside, CA Asset Leasing Corp. Leasehold Revenue
Bonds, 1993 Series A, Riverside Hospital Project,
6.000% due 6/1/04 1,874,688
4,690,000 AA Royal Oak, MI Hospital Financing Authority Revenue,
William Beaumont Hospital, Series K,
zero coupon to yield 5.110% due 11/15/08 2,825,725
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 1,056,250
687,000 BBB-++ Valley Health System, CA COP Refunding Project,
6.250% due 5/15/99 695,588
- ------------------------------------------------------------------------------------------------------------
47,282,089
- ------------------------------------------------------------------------------------------------------------
Housing -- 10.3%
3,000,000 A Aurora, IL Multi-Family Revenue Refunding Housing,
(Fox Village Unit 18D Project), LOC Banque Paribas,
7.750% due 9/1/98 3,041,940
1,500,000 AAA California Housing Finance Agency Revenue, Home
Mortgage, Series I, MBIA-Insured, 5.650% due 8/1/17(a) 1,548,750
2,885,000 A+ City of Burnsville, MN Multi-Family Housing Revenue
Refunding Bonds, (The Atrium Project), Policy of
Indemnity Commercial Union Insurance Co. PLC
Reinsured by Trygg-Hansa Insurance. Co. of Sweden,
7.200% mandatory tender 5/1/02 2,946,393
2,250,000 AAA Dekalb County, GA HFA, Multi-Family Housing Revenue,
(Chimney Trace Project), FNMA-Collateralized,
5.625% mandatory tender 5/1/05 2,390,625
690,000 AAA Fairfax County, VA Redevelopment & Housing Authority,
Multi-Family Refunding, Kingsley 91A, FHA-Insured,
6.500% due 11/1/01 725,362
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 11
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Housing -- 10.3% (continued)
$ 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) $ 1,063,750
1,800,000 AA- Louisiana Public Facilities Authority Revenue,
Multi-Family Housing, Oakleigh Apartments,
Series A, 5.950% mandatory tender 3/15/05 1,901,250
513,572 AAA Monroe-West Monroe, LA Public Trust Financing
Authority, FHLMC-Collateralized, 8.500% due 5/20/02 538,609
975,000 Aaa* Nevada Housing Single-Family Mortgage, Series E,
FHA-Insured, 5.350% due 10/1/27(a) 999,375
2,500,000 A+ New York City Housing Authority, Multi-Family Revenue
Refunding, Series A, 5.650% due 7/1/10 2,615,625
2,500,000 AA North Carolina Housing Finance Agency, Single
Family, Series VV, 5.250% due 3/1/17 2,478,125
440,000 Ba2* Odessa, TX Housing Development Corp. #2,
Multi-Family Revenue Refunding, Chaparral Village,
Series A, 6.375% due 12/1/03 458,150
1,485,000 AAA Onterie Center Housing Finance Corp., IL Mortgage
Revenue Refunding, (Onterie Center Project), Series A,
MBIA-Insured, 6.500% due 7/1/02 1,581,525
2,500,000 AA+ Rhode Island Housing & Mortgage Finance Corp. Home
Ownership Opportunity, Series C, 5.650% due 10/1/20(a) 2,615,625
130,000 AAA St. Louis County, MO Single-Family Mortgage Revenue,
MBIA-Insured, 6.125% due 4/1/03 135,038
1,000,000 AAA Texas State Department of Housing & Community Affairs,
GNMA/FNMA-Collateralized Home Mortgage Revenue
Bonds, Series B-2, RIBS Variable Rate,
10.000% due 6/18/23(a)(d) 1,091,250
85,000 AA Texas State Housing Agency Mortgage Revenue
Single-Family, 1987D, 7.750% due 7/1/99(a) 86,700
3,245,000 AA+ Virginia State Housing Development Authority,
Multi-Family Housing, Series E, 5.600% due 11/1/17(a) 3,322,069
410,000 AA Wyoming Community Development Authority,
Single-Family Mortgage, Series 1988C,
7.800% due 6/1/99(a) 417,175
- ------------------------------------------------------------------------------------------------------------
29,957,336
- ------------------------------------------------------------------------------------------------------------
Industrial Development -- 9.3%
1,500,000 A Bel Air, MD Revenue Refunding, (May Department
Stores Co. Project), 6.375% due 10/1/99 1,556,250
1,000,000 A Belmont County, OH IDR Refunding, (May
Department Stores Co. Project), Series 91,
6.500% due 1/1/00 1,043,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Industrial Development -- 9.3% (continued)
$ 2,000,000 AA+ Clarion County, PA IDA Energy Development Revenue,
(Piney Creek Project), LOC Swiss Bank, 7.250%
mandatory tender 12/1/00(a) $ 2,152,500
2,000,000 AA Fairfax County, VA IDA Revenue, Health Care, INOVA
Health, Series A, 5.000% due 8/15/18 1,972,500
5,000,000 BBB- Greenville, SC Connector 2000 Association Inc.,
SC Toll Road Revenue, Capital Appreciation,
Series B, zero coupon to yield 5.687% due 1/1/15 1,943,750
3,000,000 Ba1* Griffin-Spalding County, GA Development Authority
Revenue Refunding, (Borden Inc. Project), Borden Inc.
Guaranteed, 7.200% due 6/1/00 3,150,000
2,000,000 A+ Iowa Finance Authority, (Governors Square Project),
Policy of Indemnity Commercial Union
Assurance Co. PLC, Reinsured by Trygg-Hansa
Insurance Co. of Sweden, 7.250% mandatory
tender 4/1/02 2,091,360
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 3,123,750
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) 3,661,875
1,000,000 NR Minneapolis, MN Commercial Development Revenue,
(Holiday Inn Metrodome Project), 6.000% due 12/1/01 1,008,750
1,625,000 Aa3* New Jersey EDA, Growth Bonds, LOC Banque
Nationale de Paris, 6.200% due 12/1/02(a) 1,726,563
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) 566,921
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) 436,496
2,350,000 AAA Sioux City, IA IDR, (Terra Centre Project),
6.800% due 5/1/07 2,532,125
- ------------------------------------------------------------------------------------------------------------
26,966,590
- ------------------------------------------------------------------------------------------------------------
Life Care -- 1.2%
1,355,000 BBB Illinois Development Finance Authority, Health
Facilities Revenue, Community Living Options,
6.375% due 3/1/00 1,392,262
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 1,073,330
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 13
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Life Care -- 1.2% (continued)
$ 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) $ 1,111,250
- ------------------------------------------------------------------------------------------------------------
3,576,842
- ------------------------------------------------------------------------------------------------------------
Miscellaneous -- 5.3%
2,595,000 BBB- Clarksville, TN Natural Gas Acquisition Corp.,
Gas Revenue, Series A, 6.500% due 11/1/00 2,682,581
300,000 AAA Dallas-Fort Worth, TX Regional Airport Revenue, Series A,
FGIC-Insured, 5.875% optional tender 5/1/98(a) 300,519
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, 6.875% due 11/15/05 2,993,625
470,000 Aa3* New Jersey EDA Revenue, LOC Banque Nationale de Paris,
Series A, 6.250% due 12/1/01(a) 486,586
1,500,000 A New York State Job Development Authority,
Special Purpose, Series A, 5.250% due 3/1/10 1,545,000
2,950,000 BBB+ New York State Urban Development Corporation Revenue,
Correctional Capital Facilities, Series 6,
5.500% due 1/1/13 3,115,938
1,100,000 AAA Southeast Wisconsin Professional Baseball
District League COP, MBIA-Insured, zero coupon
to yield 5.673% due 12/15/16 422,125
1,000,000 AA Tuscon, AZ COP, Asset Guaranty, 6.000% due 7/1/04 1,080,000
- ------------------------------------------------------------------------------------------------------------
15,548,249
- ------------------------------------------------------------------------------------------------------------
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:
3,000,000 AAA Series A, 7.000% due 5/1/01 3,210,000
1,000,000 AAA Series 91A, 6.600% due 5/1/02(a) 1,085,000
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) 1,599,375
1,000,000 Baa2* Massachusetts State IDB Finance Agency, PCR,
(Eastern Edison Co. Project), 5.875% due 8/1/08 1,023,750
1,500,000 AAA Montgomery, AL IDB, PCR, (General Electric Co.
Project), 7.000% mandatory tender 9/15/00(a) 1,614,375
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Pollution Control -- 3.7% (continued)
$ 1,050,000 A-++ Onondaga County, NY Resource Recovery Agency
Project Revenue Bonds, Series 1992,
6.625% due 5/1/00(a) $ 1,089,375
- ------------------------------------------------------------------------------------------------------------
10,740,969
- ------------------------------------------------------------------------------------------------------------
Pre-Refunded(c) -- 0.4%
Austin, TX Water, Sewer & Electric Refunding Revenue:
120,000 A* (Call 5/15/99 @ 100), 14.000% due 11/15/01 128,400
80,000 A* (Various call dates @ 100), 14.000% due 11/15/01 91,400
495,000 AAA Gila County, AZ IDA PCR, (Call 2/15/01 @ 101),
11.250% due 4/1/01 584,719
235,000 AA- Massachusetts State Port Authority Revenue,
FGIC-Insured, Series A, (Pre-Refunded Escrowed
to Maturity with state and local government
securities, Call 7/1/00 @ 102), 7.200% due 7/1/03(a) 254,387
- ------------------------------------------------------------------------------------------------------------
1,058,906
- ------------------------------------------------------------------------------------------------------------
Public Facilities -- 1.5%
40,000 A- Concord Santa Cruz Southgate, CA COP, ABAG
Finance Corp., 7.100% due 6/1/99 40,111
4,000,000 Aa* Mt. Sterling, KY Lease Revenue, Kentucky League
of Cities 1993A, Transamerica Life Guaranteed,
5.625% due 3/1/03(b) 4,210,000
- ------------------------------------------------------------------------------------------------------------
4,250,111
- ------------------------------------------------------------------------------------------------------------
Solid Waste -- 1.1%
3,000,000 A* Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue, Montgomery County,
6.200% due 7/1/10(a) 3,176,250
- ------------------------------------------------------------------------------------------------------------
Transportation -- 11.5%
1,000,000 AAA Clark County, NV Airport Improvement Revenue,
BIG-Insured, 7.900% due 7/1/00(a) 1,029,050
Denver, CO City & County Airport Revenue:
1,590,000 Baa1* Series 1992B, 7.000% due 11/15/01(a) 1,707,262
1,000,000 Baa1* Series 1992B, 7.000% due 11/15/02(a) 1,088,750
1,000,000 Baa1* Series 1994A, 7.200% due 11/15/02(a) 1,096,250
1,510,000 AAA Series B, MBIA-Insured, 6.250% due 11/15/06(a) 1,679,875
E-470 Public Highway Authority, CO Senior
Revenue Bonds, MBIA-Insured:
5,000,000 AAA Zero coupon to yield 5.408% due 9/1/16 1,931,250
5,000,000 AAA Zero coupon to yield 5.429% due 9/1/17 1,825,000
2,445,000 AAA Hawaii Airport System Revenue, Second Series of 91,
MBIA-Insured, 6.100% due 7/1/99(a) 2,512,237
1,250,000 A Indiana Transportation Finance Authority, Airport
Facilities Lease Revenue, Series A, United Air,
6.125% due 11/1/02 1,342,187
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 15
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Transportation -- 11.5% (continued)
Massachusetts State Port Authority Revenue,
FGIC-Insured:
$ 765,000 AA- Series A, 7.200% due 7/1/03(a) $ 826,200
1,000,000 AA- Series B, 5.000% due 7/1/18(a) 957,500
Massachusetts State Turnpike Authority, MBIA-Insured:
9,000,000 Aaa* Metropolitan Highway System Revenue, Series C,
zero coupon to yield 5.394% due 1/1/16 3,656,250
3,000,000 BBB+ Metropolitan Transportation Authority, New York
Transit Facilities Revenue Service Contract,
Series 8, 5.250% due 7/1/17 2,981,250
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) 3,247,500
400,000 A-1+ Port Authority of New York and New Jersey, Special
Obligation Revenue, Versatile Structure Obligation,
Series 2, 3.600% due 5/1/19(e) 400,000
750,000 AA Port of Houston Authority, Harris County, TX Port
Improvement Unlimited Tax Obligation,
8.500% due 11/1/98(a) 770,348
4,190,000 A Rhode Island State Turnpike & Bridge Authority Revenue,
5.350% due 12/1/17 4,205,713
1,985,000 AA- Simi Valley, CA Community Development Agency COP,
Simi Valley Business Center, 6.050% mandatory
tender 10/1/99 2,039,588
- ------------------------------------------------------------------------------------------------------------
33,296,210
- ------------------------------------------------------------------------------------------------------------
Utilities -- 8.2%
5,030,000 A* Austin, TX Water, Sewer & Electric Refunding Revenue,
14.000% due 11/15/01(b) 6,023,425
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) 1,621,875
22,485,000 AAA Columbia River Rock Capital Appreciation,
MBIA-Insured, zero coupon to yield
5.736% due 6/1/13 10,567,950
600,000 A- Georgia Muni Gas Authority Revenue, (Southern
Storage Gas Project), 6.300% due 7/1/09 655,500
3,095,000 Aaa* Lacey, NJ Municipal Utilities Authority, NJ Water Revenue,
MBIA-Insured, 5.100% due 12/1/16 3,122,081
770,000 Baa1* Philadelphia, PA Gas Works Revenue Bonds, 13th Series,
7.400% due 6/15/00 819,088
1,000,000 BB Sam Rayburn, TX Municipal Power Supply System
Revenue Refunding, Series A, 6.200% due 10/1/01 1,022,500
- ------------------------------------------------------------------------------------------------------------
23,832,419
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) March 31, 1998
============================================================================================================
FACE
AMOUNT RATINGS SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Water & Sewer -- 2.8%
$ 3,500,000 AAA Detroit, MI Water Supply System, FGIC-Insured,
6.500% due 7/1/15 $ 4,116,875
1,075,000 BBB+ Galveston, TX Sewer System Revenue Refunding,
(Partially Pre-Refunded--Escrowed with U.S.
government securities to 5/1/98, Call @ 100),
Series B, 7.800% due 5/1/99 1,101,692
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) 1,608,750
250,000 AA Regional Waste Systems Inc., Maine Solid Waste
Resource Recovery System, 7.550% due 7/1/98(a)(b) 252,250
940,000 A Texas Water Resource Finance Authority Revenue,
Series 89, 7.400% due 8/15/00 966,724
- ------------------------------------------------------------------------------------------------------------
8,046,291
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $279,146,032**) $290,612,447
============================================================================================================
</TABLE>
(a) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Security is segregated by Custodian for open market purchase commitments.
(c) Bonds escrowed with U.S. government securities and bonds escrowed to
maturity with U.S. government securities are considered by the manager to
be triple-A rated even if issuer has not applied for new ratings.
(d) Residual interest bond -- 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 -- Limited Term Portfolio 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 that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Ba -- Bonds which are rated "Ba" are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate, and therefore not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
- --------------------------------------------------------------------------------
18 1998 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 which are 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 which are 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 plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature --
VRDO.
MIG 1 -- Moody's highest rating for short-term municipal obligations.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
================================================================================
Security Descriptions (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 -- Limited Term Portfolio 19
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Statement of Assets and Liabilities March 31, 1998
================================================================================
<S> <C>
ASSETS:
Investments, at value (Cost -- $279,146,032) $ 290,612,447
Cash 81,210
Interest receivable 4,412,071
Receivable for Fund shares sold 1,857,259
Receivable for securities sold 462,475
- -------------------------------------------------------------------------------
Total Assets 297,425,462
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 8,811,074
Payable for Fund shares purchased 178,382
Management fees payable 146,623
Distribution fees payable 14,791
Accrued expenses 59,814
- -------------------------------------------------------------------------------
Total Liabilities 9,210,684
- -------------------------------------------------------------------------------
Total Net Assets $ 288,214,778
===============================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 42,607
Capital paid in excess of par value 279,956,207
Undistributed net investment income 380,377
Accumulated net realized loss from security transactions (3,630,828)
Net unrealized appreciation of investments 11,466,415
- -------------------------------------------------------------------------------
Total Net Assets $ 288,214,778
===============================================================================
Shares Outstanding:
Class A 38,002,227
----------------------------------------------------------------------------
Class C 4,604,348
----------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $6.76
----------------------------------------------------------------------------
Class C* $6.76
----------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 2.04% of net asset value per share) $6.90
===============================================================================
</TABLE>
* Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Statement of Operations For the Year Ended March 31, 1998
================================================================================
<S> <C>
INVESTMENT INCOME:
Interest $ 16,637,065
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 1,416,637
Distribution fees (Note 3) 484,751
Shareholder and system servicing fees 72,148
Registration fees 70,002
Shareholder communications 41,799
Pricing service fees 30,999
Audit and legal 15,651
Custody 14,166
Trustees' fees 7,001
Other 7,202
- --------------------------------------------------------------------------------
Total Expenses 2,160,356
- --------------------------------------------------------------------------------
Net Investment Income 14,476,709
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 162,951,332
Cost of securities sold 161,127,685
- --------------------------------------------------------------------------------
Net Realized Gain 1,823,647
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 4,355,048
End of year 11,466,415
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 7,111,367
- --------------------------------------------------------------------------------
Net Gain on Investments 8,935,014
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 23,411,723
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 21
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================
Statements of Changes in Net Assets For the Years Ended March 31,
=====================================================================================
1998 1997
=====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,476,709 $ 15,362,339
Net realized gain 1,823,647 641,120
Increase (decrease) in net unrealized appreciation 7,111,367 (3,386,164)
- -------------------------------------------------------------------------------------
Increase in Net Assets From Operations 23,411,723 12,617,295
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (14,092,042) (15,693,903)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (14,092,042) (15,693,903)
- -------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 43,773,091 37,182,237
Net asset value of shares issued
for reinvestment of dividends 7,991,624 8,825,123
Cost of shares reacquired (60,889,261) (62,195,860)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (9,124,546) (16,188,500)
- -------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 195,135 (19,265,108)
NET ASSETS:
Beginning of year 288,019,643 307,284,751
- -------------------------------------------------------------------------------------
End of year* $ 288,214,778 $ 288,019,643
=====================================================================================
* Includes undistributed (overdistributed)
net investment income of: $ 380,377 $ (4,290)
=====================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
The Limited Term Portfolio ("Portfolio") is a separate investment portfolio of
the Smith Barney Muni Funds ("Fund"). The Fund, a Massachusetts business trust,
is registered under the Investment Company Act of 1940, as amended, as 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 annual reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between the quoted bid and ask prices provided by an independent
pricing service that are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; (c) securities maturing
within 60 days are valued at cost plus accreted discount or minus amortized
premium, which approximates value; (d) gains or losses on the sale of securities
are calculated by using the specific identification method; (e) interest income,
adjusted for amortization of premium and accretion of original issue discount,
is recorded on an accrual basis; market discount is recognized upon the
disposition of the security; (f) dividends and distributions to shareholders are
recorded on the ex-dividend date; (g) direct expenses are charged to each
Portfolio and each class; management fees and general fund expenses are
allocated on the basis of relative net assets by class; (h) the Portfolio
intends to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to relieve it from substantially all
Federal income and excise taxes; (i) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles; and (j) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 23
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
2. Exempt-Interest Dividends and Other Distributions
The Portfolio intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Portfolio.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Management Agreement and Transactions with Affiliated Persons
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual Funds
Management Inc., 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.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of
Fund shares. For the year ended March 31, 1998, SB received sales charges of
approximately $315,000 on purchases of the Portfolio's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 1.00% on Class C shares
of the Portfolio if redemption occurs less than one year from initial purchase.
In addition, Class A shares have a 1.00% CDSC, which applies if redemption
occurs within the first year of purchase. This CDSC only applies to those
purchases of Class A shares, which, when combined with current holdings of Class
A shares equal or exceed $500,000 in the aggregate. These purchases do not incur
an initial sales charge. For the year ended March 31, 1998, CDSCs paid to SB
were approximately:
<TABLE>
<CAPTION>
Class A Class C
================================================================================
<S> <C> <C>
CDSCs $18,000 $3,000
================================================================================
</TABLE>
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A and C 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 C shares calculated at an annual rate of 0.20% of the
average daily net assets.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
For the year ended March 31, 1998, total Distribution Plan fees incurred were:
<TABLE>
<CAPTION>
Class A Class C
================================================================================
<S> <C> <C>
Distribution Plan Fees $380,172 $104,579
================================================================================
</TABLE>
All officers and one Trustee of the Fund are employees of SB.
4. Investments
During the year ended March 31, 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 $163,609,449
- --------------------------------------------------------------------------------
Sales 162,951,332
================================================================================
</TABLE>
At March 31, 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 $12,148,012
Gross unrealized depreciation (681,597)
- --------------------------------------------------------------------------------
Net unrealized appreciation $11,466,415
================================================================================
</TABLE>
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:
<TABLE>
<CAPTION>
2003 2004
================================================================================
<S> <C> <C>
Carryforward Amounts $1,888,000 $1,740,000
================================================================================
</TABLE>
6. Shares of Beneficial Interest
At March 31, 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 25
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
At March 31, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class C
================================================================================
<S> <C> <C>
Total Paid-in Capital $248,887,109 $31,111,705
================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1998 March 31, 1997
-------------------- ------------------------
Shares Amount Shares Amount
===================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 5,614,217 $ 37,885,348 4,671,567 $ 30,834,509
Shares issued on reinvestment 1,047,721 7,028,557 1,188,611 7,824,406
Shares redeemed (8,343,657) (55,870,050) (8,251,679) (54,442,310)
- ---------------------------------------------------------------------------------------------------
Net Decrease (1,681,719) $(10,956,145) (2,391,501) $(15,783,395)
===================================================================================================
Class C
Shares sold 875,665 $ 5,887,743 962,621 $ 6,347,728
Shares issued on reinvestment 143,726 963,067 152,105 1,000,717
Shares redeemed (746,719) (5,019,211) (1,144,387) (7,542,039)
- ---------------------------------------------------------------------------------------------------
Net Increase (Decrease) 272,672 $ 1,831,599 (29,661) $ (193,594)
===================================================================================================
Class Y
Shares sold -- -- -- $ --
Shares issued on reinvestment -- -- -- --
Shares redeemed -- -- (32,264) (211,511)
- ---------------------------------------------------------------------------------------------------
Net Decrease -- -- (32,264) $ (211,511)
===================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1998 1997 1996 1995(1) 1994
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $6.54 $6.61 $6.54 $6.55 $6.68
- --------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.34 0.34 0.36 0.36 0.37
Net realized and unrealized gain (loss) 0.22 (0.06) 0.07 -- (0.13)
- --------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.56 0.28 0.43 0.36 0.24
- --------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.35) (0.36) (0.37) (0.37)
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.35) (0.36) (0.37) (0.37)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $6.76 $6.54 $6.61 $6.54 $6.55
- --------------------------------------------------------------------------------------------------------------------------
Total Return 8.66% 4.30% 6.65% 5.69% 3.65%
- --------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $257,082 $259,695 $278,247 $244,818 $281,771
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.74% 0.75% 0.75% 0.61% 0.53%
Net investment income 5.14 5.16 5.43 5.61 5.53
- --------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 58% 46% 26% 22% 25%
==========================================================================================================================
<CAPTION>
Class C Shares 1998 1997 1996 1995(2) 1994
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $6.54 $6.61 $6.54 $6.54 $6.68
- --------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.33 0.33 0.35 0.35 0.35
Net realized and unrealized gain (loss) 0.21 (0.06) 0.06 -- (0.14)
- --------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.54 0.27 0.41 0.35 0.21
- --------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.34) (0.34) (0.35) (0.35)
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.32) (0.34) (0.34) (0.35) (0.35)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $6.76 $6.54 $6.61 $6.54 $6.54
- --------------------------------------------------------------------------------------------------------------------------
Total Return 8.36% 4.10% 6.45% 5.51% 3.15%
- --------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $31,133 $28,325 $28,824 $26,622 $26,869
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.99% 0.97% 0.96% 0.89% 0.88%
Net investment income 4.89 4.94 5.22 5.34 5.10
- --------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 58% 46% 26% 22% 25%
==========================================================================================================================
</TABLE>
(1) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 27
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
To the Shareholders and Board of Trustees of the
Limited Term Portfolio of Smith Barney Muni Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Limited Term Portfolio of Smith Barney Muni
Funds as of March 31, 1998, the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended and financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian. As to securities purchased or
sold but not yet received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Limited Term Portfolio of Smith Barney Muni Funds as of March 31, 1998, the
result of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended and financial highlights
for each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
May 15, 1998
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 1998:
-- 100% of the dividends paid by the Fund from net investment income as
tax exempt for regular Federal income tax purposes.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Limited Term Portfolio 29
<PAGE>
Smith Barney SMITH BARNEY
Muni Funds ------------
A Member of TravelersGroup[LOGO]
Trustees Investment Manager
Mutual Management Corp.
Donald R. Foley
Paul Hardin Distributor
Heath B. McLendon, Chairman Smith Barney Inc.
Roderick C. Rasmussen
John P. Toolan Custodian
PNC Bank, N.A.
Joseph H. Fleiss, Emeritus
C. Richard Youngdahl, Emeritus Shareholder
Servicing Agent
Officers First Data Investor Services Group, Inc.
P.O. Box 9134
Heath B. McLendon Boston, MA 02205-9134
President and
Chief Executive Officer This report is submitted for the general
information of the shareholders of Smith
Lewis E. Daidone Barney Muni Funds - Limited Term
Senior Vice President Portfolio. It is not authorized for
and Treasurer distribution to prospective investors
unless accompanied by a current
Lawrence T. McDermott Prospectus for the Portfolio, which
Vice President contains information concerning the
Portfolio's investment policies and
Thomas M. Reynolds expenses as well as other pertinent
Controller information.
Christina T. Sydor Smith Barney Muni Funds
Secretary 388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD2305 5/98
[back cover]
Smith Barney [Logo: Smith Barney
MuniFunds A Member of TravelersGroup(umbrella logo)]
Trustees
Donald R. Foley
Paul Hardin
Heath B. McLendon Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
C. Richard Youngdahl, Emeritus
Officers
Heath B. McLendon
President and Chief Executive
Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Joseph Benevento
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Manager
Mutual Management Corp.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investors Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general
information of the shareholders of Smith
Barney Muni Funds - California Money
Market Portfolio. It is not authorized
for distribution to prospective
investors unless accompanied or preceded
by a current Prospectus for the
Portfolio, which contains information
concerning the Portfolio's investment
policies and expenses as well as other
pertinent information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD2309 5/98
<PAGE>
[front cover]
[3-dimensional graphic of Smith Barney logo]
Smith Barney Muni Funds
California
Money Market
Portfolio
- -----------------------------------------------
ANNUAL REPORT
- -----------------------------------------------
March 31, 1998
[logo: Smith Barney] Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
<PAGE>
California
Money Market
Portfolio
[Photo]
HEATH B. MCLENDON
Chairman
[Photo]
JOSEPH BENEVENTO
Vice President
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney Muni
Funds-- California Money Market Portfolio ("Portfolio") for the year ended March
31, 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.
Performance Update
As of March 31, 1998, the Portfolio's 7-day current yield was 2.86%. The
Portfolio's 7-day effective yield--which reflects compounding--was 2.90%. This
means that investors in the combined federal and state income tax bracket of
41.95% would have to earn a 5.0% taxable yield to match the tax-free income
provided by the Portfolio. (This assumes an investor is in the 36% federal tax
bracket.)
Please note that 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 and
that the U.S. government neither insures nor guarantees an investment in the
Portfolio.
Market Overview and Outlook
The U.S. economic expansion is now seven years old and continues to show few
signs of faltering. Gross Domestic Product, a key economic indicator that
measures the total output of goods and services in the U.S., expanded by 3.8%
in 1997 and outpaced the 2.8% annual growth rate in 1996. As a result of the
expanding U.S. economy, more than 3 million Americans joined the nation's
payrolls in 1997, bringing the March unemployment rate to 4.6%, a 24-year low.
Low inflation and increased productivity have been key components to the
continued success of this economic expansion. In the coming months we believe
that the risks for the U.S. economy can be characterized as a balance between
two strong, yet opposing forces: the inflationary pressures of continued strong
demand and tight labor markets in the U.S. versus the possible slowdown that
the ongoing financial turmoil in Asia could have on the U.S. economy. The
impact of unfolding events in Asia will likely be lower exports to those
economies and, as a result
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 1
<PAGE>
of the stronger U.S. dollar, lower priced imports. Both of these factors should
help to reduce inflationary pressures.
At the most recent Federal Open Market Committee ("FOMC") meeting, monetary
policy was left unchanged. (The FOMC is a key committee that sets interest
rates and credit policies for the Federal Reserve System.) Near term, we think
that the Federal Reserve Board ("Fed") will keep monetary policy on hold
pending further details on domestic demand. The last rate increase by the Fed
took place in March 1997 when the federal-funds rate was increased 25 basis
points. (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. One basis point is .01%, or one one-hundredth of a percent.)
California Economic Highlights
California's economy continues its solid economic growth, outperforming the
nation as a whole in 1997. The Golden State now has a trillion-dollar economy.
The economy created more than 400,000 new jobs during 1997 bringing the
unemployment rate to a seven-year low. California stands as the nation's
leading export state. Approximately 15% of its gross state product is exported
to other countries. However, on the negative side, slightly more than half of
the states' exports are sold to Asia. Given the financial turmoil in Asia, we
expect to see a dampening effect on California's growth in 1998. Yet, overall,
our outlook for California is positive, reflecting its diverse economy and
improving financial position.
Investment Strategy
The Fund seeks to provide investors with income exempt from federal income
taxes and California personal taxes by investing in a portfolio of
high-quality, short-term, municipal obligations selected for liquidity and
stability of principal. At the present time, we have shortened our target
average maturity to a 40-45 day range. This shortening of the Fund's average
maturity should position the Fund for seasonal redemptions relating to
individual and corporate tax payments. However, we will continue to monitor
economic data closely and assess its impact on inflation and how that relates
to the tax-exempt money markets.
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
In closing, thank you for investing in the Smith Barney Muni Funds--California
Money Market Portfolio. We look forward to continuing to help you pursue your
financial goals.
Sincerely,
<TABLE>
<S> <C>
/s/ Heath B. McLendon /s/ Joseph Benevento
- --------------------- --------------------
Heath B. McLendon Joseph Benevento
Chairman Vice President
</TABLE>
April 20, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 3
<PAGE>
Schedule of Investments March 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 13,000,000 A-1+ ABAG Finance Authority for Nonprofit Corporations
Series 1996 3.60% (b) $13,000,000
Alameda Contra Costa California Schools Financing
Authority Project:
10,455,000 A-1+ Series B 3.45% (b) 10,455,000
20,000,000 A-1+ Series C 3.40% (b) 20,000,000
8,410,000 A-1+ Series E 3.40% (b) 8,410,000
5,000,000 A-1+ Series F 3.45% (b) 5,000,000
Alameda County:
10,000,000 SP-1+ 1997 TRAN 4.50% due 7/22/98 10,017,692
18,300,000 SP-1+ Board of Education 1997 TRAN 4.25% due 7/1/98 18,320,185
4,000,000 A-1+ Anaheim Housing Authority Multi-Family Housing
Revenue (Park Vista Apartments-A) 3.70% (a)(b) 4,000,000
California Alternative Energy:
4,700,000 VMIG 1* Hydroelectric Rock Creek Limited
Series 86 3.20% (a)(b) 4,700,000
Source Finance Authority, Cogeneration Revenue
Refunding Arroyo Energy:
25,330,000 A-1+ Series A 3.30% (a)(b) 25,330,000
7,400,000 A-1+ Series B 3.35% (a)(b) 7,400,000
5,500,000 SP-1+ California Community College Finance Authority TRAN
Series 97 FSA-Insured 4.50% due 6/30/98 5,509,134
California Health Facility Financing Authority Revenue:
3,750,000 A-1+ Childrens Hospital 1991 MBIA-Insured 3.30% (b) 3,750,000
9,900,000 A-1+ Memorial Health Services 3.35% (b) 9,900,000
California Housing Finance Agency Revenue:
3,000,000 A-1+ Multi-Family Housing Series 97C 3.55% (a)(b) 3,000,000
12,120,000 VMIG 1* Series 94 PART FHA-Insured 3.67% (a)(b) 12,120,000
9,120,000 A-1+ Series 96 PART MBIA-Insured 3.62% (a)(b) 9,120,000
3,500,000 VMIG 1* Series 95 PART MBIA-Insured 3.67% (a)(b) 3,500,000
7,500,000 A-1+ Series 98A 3.60% due 4/1/99 (a)(c) 7,500,000
California Pollution Control Financial Authority:
8,600,000 A-1 ARCO Environmental Improvement Revenue 3.60% (a)(b) 8,600,000
Colmac Energy Project:
17,900,000 A-1+ Series 90A 3.30% (a)(b) 17,900,000
1,760,000 A-1+ Series 90C 3.30% (a)(b) 1,760,000
Pacific Gas & Electric:
17,000,000 A-1+ Series 88F TECP 3.45% due 6/11/98 17,000,000
5,400,000 A-1+ Series 96A 3.40% (a)(b) 5,400,000
24,000,000 A-1+ Series 96B 3.50% (a)(b) 24,000,000
13,000,000 A-1+ Series 96C 3.70% (b) 13,000,000
6,200,000 A-1 Series 96G 3.75% (b) 6,200,000
2,000,000 A-1+ Series 97B 3.75% (a)(b) 2,000,000
18,900,000 A-1+ Series C 3.75% (a)(b) 18,900,000
4,250,000 VMIG 1* Sangier Project Series 90A 3.30% (a)(b) 4,250,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
Schedule of Investments (continued) March 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shell Martinez Refining:
$ 14,000,000 A-1+ Series 94A 3.70% (a)(b) $14,000,000
5,000,000 A-1+ Series 94B 3.40% (a)(b) 5,000,000
4,300,000 A-1+ Series 96A 3.80% (a)(b) 4,300,000
Sierra Pacific Project Solid Waste Disposal Revenue:
7,000,000 P-1* Series 93 3.55% (b) 7,000,000
8,675,000 P-1* Series 93 3.65% (a)(b) 8,675,000
Southdown Inc. Project:
5,695,000 A-1+ Series 83 3.35% (b) 5,695,000
2,800,000 A-1+ Series B 3.35% (b) 2,800,000
8,750,000 A-1 Southern California Edison Series 85D TECP
3.25% due 5/11/98 8,750,000
20,000,000 VMIG 1* California Public Capital Improvement Financing
Authority Series C 3.60% due 6/15/98 (c) 20,000,000
14,005,000 P-1* California Regents Revenue PART MBIA-Insured
3.85% due 6/30/98 (c) 14,005,000
44,000,000 SP-1+ California School Cash Reserve Program Authority Pool
Series A 4.75% due 7/2/98 44,100,433
California State GO TECP Notes:
11,000,000 A-1 3.50% due 4/2/98 11,000,000
10,000,000 A-1 3.45% due 4/7/98 10,000,000
22,000,000 A-1 3.05% due 4/9/98 22,000,000
11,000,000 A-1 3.10% due 4/13/98 11,000,000
7,900,000 A-1 2.90% due 4/14/98 7,900,000
4,600,000 A-1 3.35% due 4/15/98 4,600,000
20,900,000 A-1 3.40% due 4/17/98 20,900,000
9,900,000 A-1 3.00% due 4/20/98 9,900,000
10,000,000 A-1 3.30% due 4/20/98 10,000,000
20,000,000 A-1 3.40% due 4/27/98 20,000,000
20,000,000 A-1 3.55% due 5/1/98 20,000,000
California State Public Works Board Lease Revenue
University of California PART:
14,115,000 VMIG 1* AMBAC-Insured 3.70% (b) 14,115,000
18,960,000 A-1 MBIA-Insured 3.70% (b) 18,960,000
33,900,000 SP-1+ California State RAN 1997 4.50% due 6/30/98 33,971,477
6,255,000 A-1+ California State Series 95 PART FSA-Insured 3.70% (b) 6,255,000
3,200,000 A-1+ California State Veterans GO PART FSA-Insured
3.67% (b) 3,200,000
California Statewide Community Development Authority:
Apartment Development Revenue:
13,000,000 A-1+ Subseries A-4 3.30% (b) 13,000,000
22,925,000 A-1+ Subseries A-5 3.30% (b) 22,925,000
8,800,000 A-1+ Subseries A-6 3.30% (b) 8,800,000
7,000,000 A-1+ Subseries A-7 3.40% (a)(b) 7,000,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 5
<PAGE>
Schedule of Investments (continued) March 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporation Revenue:
$ 2,110,000 A-1+ American Zettler 3.55% (a)(b) $ 2,110,000
2,440,000 A-1+ Charles & Loralie Harris 3.55% (a)(b) 2,440,000
3,945,000 A-1+ Chino Basin 3.55% (a)(b) 3,945,000
2,500,000 VMIG 1* Karcher Project 3.55% (a)(b) 2,500,000
3,000,000 NR[dbldag] Supreme Truck 3.70% (a)(b) 3,000,000
49,800,000 VMIG 1* Memorial Health Services 3.35% (b) 49,800,000
15,000,000 A-1+ Multi-Family Revenue (Canyon Creek Apartments)
3.50%(b) 15,000,000
2,250,000 A-1+ Central Coast Water Authority Revenue
PART AMBAC-Insured 3.62% (b) 2,250,000
Chula Vista IDR (San Diego Gas & Electric Co.):
6,200,000 A-1 Series 92 A 3.70% (b) 6,200,000
26,500,000 A-1 Series 92 B 3.50% (a)(b) 26,500,000
5,000,000 A-1 TECP Series C 3.55 due 4/6/98 5,000,000
Clipper California PART:
20,730,000 VMIG 1* Tax-Exempt MBIA-Insured 3.67% (b) 20,730,000
6,890,000 VMIG 1* Trust Class A Series 96-6B MBIA-Insured 3.77% (a)(b) 6,890,000
9,900,000 VMIG 1* Trust GNMA Series 96-7A 3.67% (a)(b) 9,900,000
5,000,000 SP-1+ Conejo Valley USD 97 TRANS 4.25% due 7/2/98 5,005,332
28,000,000 SP-1+ Contra Costa County Board of Education
4.25% due 7/1/98 28,032,815
Contra Costa County Water District TECP:
10,000,000 A-1+ 3.40% due 4/1/98 10,000,000
3,000,000 A-1+ 3.125% due 4/27/98 3,000,000
2,100,000 AAA Corona Community District Refund Split Tax
MBIA-Insured 4.25% due 9/1/98 2,106,426
2,600,000 A-1+ Corona Multi-Family Housing
County Hills Project 3.55% (b) 2,600,000
3,000,000 A-1+ East Bay Municipal Utility District TECP
3.25% due 5/7/98 3,000,000
10,000,000 VMIG 1* Emeryville California Revenue Development Agency
Multi-Family Housing Emerybay Apartments
Series A 3.65% (a)(b) 10,000,000
2,000,000 A-1+ Fairfield IDA (R. Dakin & Company Project) 3.15% (b) 2,000,000
8,750,000 SP-1+ Fremont California TRAN 4.25% due 6/30/98 8,757,193
11,200,000 VMIG 1* Imperial County CA COP Project 3.35% (b) 11,200,000
19,300,000 VMIG 1* Irvine Public Facility & Infrastructure Authority Lease
Revenue (Capital Improvement Series 85) 3.40% (b) 19,300,000
Irvine Ranch Water District:
2,100,000 A-1+ Series 91 3.80% (b) 2,100,000
1,900,000 A-1+ Series 95 3.80% (b) 1,900,000
3,000,000 SP-1+ Kern County TRAN 4.75% due 10/1/98 3,016,582
8,000,000 A-1+ Lodi IDA (Dart Container) 3.40% (b) 8,000,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
Schedule of Investments (continued) March 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5,000,000 VMIG 1* Long Beach Harbor Revenue
Series 98A PART FGIC-Insured 3.55% (b) $ 5,000,000
8,400,000 A-1+ Long Beach Health Facility Revenue (Memorial Health
Services) Series 1991 3.35% (b) 8,400,000
Los Angeles California Wastewater Revenue TECP:
10,000,000 A-1+ 3.40% due 5/1/98 10,000,000
6,000,000 A-1+ 3.30% due 5/13/98 6,000,000
10,000,000 A-1+ 3.50% due 6/10/98 10,000,000
1,060,000 SP-1+ Los Angeles City TRAN 4.50% due 6/30/98 1,061,833
10,000,000 SP-1+ Los Angeles Community College TRAN
4.50% due 6/30/98 10,014,533
Los Angeles County California:
Capital Assistance Program Lease Corp. TECP:
6,500,000 A-1+ 3.30% due 5/13/98 6,500,000
4,000,000 A-1+ 3.55% due 6/10/98 4,000,000
19,000,000 SP-1+ Los Angeles County TRAN 4.50% due 6/30/98 19,034,077
4,000,000 A-1+ Los Angeles County Transportation Series 96
PART MBIA-Insured 3.70% (b) 4,000,000
Los Angeles County Housing Authority
Multi-Family Housing:
13,000,000 A-1 Diamond Apartments Project
Series A 3.50% (a)(b) 13,000,000
20,700,000 A-1+ Park Sierra Project 78 3.65% (a)(b) 20,700,000
Metropolitan Transportation Authority:
9,425,000 A-1+ MBIA-Insured PART 3.85% due 6/4/98 (c) 9,425,000
5,030,000 AAA Sales Tax Revenue AMBAC-Insured
8.00% due 7/1/98 5,085,613
9,000,000 A-1 TECP 3.10% due 4/3/98 9,000,000
Metropolitan Water District of Southern California
Waterworks Revenue:
14,620,000 A-1+ PART MBIA-Insured 3.65% (b) 14,620,000
27,500,000 A-1+ Series 97B 3.35% (b) 27,500,000
10,000,000 A-1+ Series 97C 3.35% (b) 10,000,000
8,750,000 A-1+ Sanitation District Finance Authority Revenue
PART 3.70% 8,750,000
2,000,000 A-1+ Los Angeles Department of Airports Revenue
PART FGIC-Insured 3.67% (a)(b) 2,000,000
Los Angeles Department of Water & Power:
8,765,000 A-1+ Electric Plant Revenue FGIC-Insured PART 3.70% (b) 8,765,000
9,000,000 A-1+ TECP 3.10% due 4/3/98 9,000,000
17,700,000 A-1+ TECP 3.10% due 9/9/98 17,700,000
16,980,000 VMIG 1* Los Angeles USD FGIC-Insured PART 3.60% (b) 16,980,000
10,000,000 SP-1+ Los Angeles USD TRAN Series 97-98 4.50% due 7/1/98 10,016,804
14,000,000 A-1+ Modesto Irrigation District Finance Authority:
PART MBIA-Insured 3.62% (b) 14,000,000
5,700,000 VMIG 1* Modesto Multi-Family Housing Revenue
Shadowbrook Series A 3.60% (b) 5,700,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 7
<PAGE>
Schedule of Investments (continued) March 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 4,250,000 SP-1+ Moorpark California USD TRAN 4.25% due 6/30/98 $ 4,254,434
3,000,000 SP-1+ Moreland Elementary School District TRAN
4.25% due 6/30/98 3,003,063
2,500,000 MIG 1* Moreno Valley USD TRAN 4.50% due 6/30/98 2,503,549
13,500,000 A-1+ Mountain View Multi-Family Housing Revenue
(Villa Mariposa Project) FGIC-Insured 3.30% (b) 13,500,000
1,300,000 A-1+ Oakland Revenue (Childrens Hospital Medical Center)
Series 1994B 3.30% (b) 1,300,000
1,500,000 SP-1+ Oakland California TRAN 4.50% due 6/30/98 1,502,704
1,100,000 A-1+ Ontario California Multi-Family Revenue
Series B 3.65% (b) 1,100,000
Orange County Apartment Development Revenue:
4,100,000 VMIG 1* Harbor Pointe Series D 3.40% (b) 4,100,000
2,700,000 A-1+ The Lakes Project Series A 3.65% (b) 2,700,000
8,000,000 VMIG 1* Lantern Pines Series D 3.45% (b) 8,000,000
1,700,000 A-1+ Wood Canyon Villas 3.45% (a)(b) 1,700,000
10,000,000 A-1+ Orange County California Sanitation District Partnership
AMBAC-Insured 3.30% (b) 10,000,000
18,470,000 VMIG 1* Palo Alto California USD PART 3.70% (b) 18,470,000
15,120,000 VMIG 1* Pasadena California PART COP Rose Bowl Improvement
Project 3.45% (b) 15,120,000
2,000,000 SP-1+ Petaluma City California UHSD TRAN 4.25% due 6/30/98 2,002,136
1,600,000 SP-1+ Petaluma City CSD TRAN 4.25% due 6/30/98 1,601,669
10,000,000 SP-1+ Puerto Rico Commonwealth Series A 4.50% due 7/30/98 10,024,151
Puerto Rico GDB:
8,600,000 A-1+ MBIA-Insured 3.38% (b) 8,600,000
14,991,000 A-1+ TECP 3.60% due 4/7/98 14,991,000
3,400,000 A-1+ TECP 3.00% due 4/17/98 3,400,000
9,696,000 A-1+ TECP 3.65% due 5/7/98 9,696,000
27,630,000 NR+ Puerto Rico Independent Medical Abbot Labs
3.55% due 3/1/99 (c) 27,630,000
4,285,000 VMIG 1* Puerto Rico Infrastructure PART
AMBAC-Insured 3.63% (b) 4,285,000
9,690,000 AAA Rancho Cucamonga California (Pre-Refunded --
Escrowed with U.S. government securities to 5/1/98
Call @102) 7.70% due 5/1/16 (d) 9,720,773
4,100,000 VMIG 1* Rancho Mirage Redevelopment Agency 3.70% (a)(b) 4,100,000
Regents of University of California Series A TECP:
11,000,000 A-1+ 3.40% due 4/9/98 11,000,000
13,000,000 A-1+ 3.25% due 5/15/98 13,000,000
9,500,000 VMIG 1* Riverside County Housing Authority Multi-Family
Housing Revenue Amanda Park Apartments
3.40% (a)(b) 9,500,000
5,000,000 SP-1+ Riverside County TRAN Series A
4.50% due 6/30/98 5,006,501
7,840,000 A-1+ Sacramento Financing Authority Lease Revenue PART
Series 18 AMBAC-Insured PART 3.60% (b) 7,840,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
Schedule of Investments (continued) March 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 14,640,000 A-1+ Sacramento Municipal Utility District,
Electric Revenue PART AMBAC-Insured 3.60% (b) $14,640,000
Sacramento Municipal Utility District Series 1 TECP:
4,600,000 A-1+ 3.05% due 4/1/98 4,600,000
12,959,000 A-1+ 3.20% due 5/1/98 12,959,000
1,700,000 A-1+ Sacramento County COP Courthouse Project 3.35% (b) 1,700,000
14,000,000 SP-1+ Sacramento County TRAN 4.50% due 9/30/98 14,047,743
2,000,000 A-1 San Diego Gas & Electric TECP Series B
3.50% due 6/10/98 2,000,000
5,008,000 A-1+ San Diego Housing Authority (Carman Del Mar
Apartments) 3.40% (b) 5,008,000
4,400,000 A-1+ San Diego Multi-Family Housing Revenue Flores Project
3.45% (b) 4,400,000
3,000,000 A-1+ San Diego Public Facility Finance Sewer Revenue PART
AMBAC-Insured 3.62% (b) 3,000,000
5,000,000 MIG 1* San Diego USD TRAN 4.50% due 10/1/98 5,017,019
3,000,000 NR[dbldag] San Dimas Redevelopment Agency (San Dimas
Community Center) 3.30% (b) 3,000,000
San Francisco Airport Commission International
Airport Revenue Series:
14,410,000 VMIG 1* PART AMBAC-Insured Series 97 A 3.65% (a)(b) 14,410,000
9,775,000 A-1+ PART FGIC-Insured 3.62% (b) 9,775,000
28,005,000 A-1+ PART FGIC-Insured 3.67% (a)(b) 28,005,000
5,000,000 VMIG 1* TECP 3.45% due 4/6/98 5,000,000
San Francisco (City & County of):
16,800,000 A-1+ Multi-Family Housing Revenue City Heights
Apartments Project 3.50% (a)(b) 16,800,000
Redevelopment Agency Multi-Family Housing
(Fillmore Center):
8,500,000 A-1+ Series 92A-1 3.65%(b) 8,500,000
2,750,000 A-1+ Series B2 3.70% (b) 2,750,000
15,000,000 MIG 1* San Joaquin County TRAN 4.50% due 1/15/99 15,089,602
San Jose Multi-Family Housing Revenue:
3,300,000 A-1+ Fairway Glen FGIC-Insured 3.30% (b) 3,300,000
3,000,000 VMIG 1* Multi-Family Housing Revenue Bonds (Almaden Lake)
3.60% (a)(b) 3,000,000
6,690,000 A-1+ San Jose--Santa Clara California Water Financing
Authority Sewer Revenue PART FGIC-Insured 3.62% 6,690,000
8,560,000 SP-1+ San Jose USD TRAN 97 4.50% due 10/8/98 8,592,171
3,000,000 SP-1+ San Lorenzo USD 4.25% due 6/30/98 3,003,204
1,200,000 VMIG 1* Santa Ana Industrial Development Authority Newport
Electronics Project 3.70% (b) 1,200,000
Santa Clara County:
11,945,000 VMIG 1* Financing Authority Lease PART AMBAC-Insured
3.60% (b) 11,945,000
5,900,000 A-1+ Multi-Family Housing Revenue (Benton Park
Apartments) 3.35% (b) 5,900,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 9
<PAGE>
Schedule of Investments (continued) March 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 18,500,000 MIG 1* Solano County TRAN Series B 4.50% due 12/15/98 $ 18,593,231
4,705,000 A-1+ Southern California Public Power Authority Power
Project Revenue Series 19 PART AMBAC-Insured
3.60% (b) 4,705,000
8,200,000 A-1+ Tax-Exempt Eagle Trust California Department of Water
PART 3.62% (b) 8,200,000
4,850,000 SP-1+ Vacaville California USD TRAN 4.25% due 6/30/98 4,853,987
2,700,000 A-1+ Vallecitos California Water District 3.30% (b) 2,700,000
7,000,000 A-1+ Westminster California Redevelopment Agency
AMBAC-Insured 3.45% (b) 7,000,000
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $1,762,465,066**) $1,762,465,066
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(c) Variable rate obligation payable at par on demand on the date indicated.
(d) Pre-Refunded bonds escrowed by U.S. government securities and bonds
escrowed to maturity by U.S. government securities are considered by
manager to be triple-A rated even if issuer has not applied for new
ratings.
[dbldag] Security has not been rated by either Moody's Investors Services or
Standard & Poor's. However, the Board of Directors has determined this
security to be considered a first tier quality issue due to enhancement
features; such as insurance and/or irrevocable letters of credit.
+ 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 page 11 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
Bond Ratings (unaudited)
All ratings are by Standard & Poor's Rating Services ("Standard & Poor's"),
except that those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below.
<TABLE>
<S> <C> <C>
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
</TABLE>
Short-Term Securities Ratings (unaudited)
<TABLE>
<S> <C> <C>
SP-1 -- Standard & Poor's highest rating indicating very strong or strong capacity to pay principal
and interest; those issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand obligation
(VRDO) rating indicating that the degree of safety regarding timely payment is either
overwhelming or very strong; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
A-2 -- Standard & Poor's second highest commercial paper and VRDO rating indicating that the
degree of safety regarding timely payment is either overwhelming or very strong; those issues
determined to possess overwhelming safety characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
MIG 1 -- Moody's highest rate for short-term municipal obligations.
NR -- Indicates that the bond is not rated by either Standard & Poor's or Moody's.
</TABLE>
Security Descriptions (unaudited)
<TABLE>
<S> <C> <C>
ABAG -- Association of Bay Area
Governments
AIG -- American International Guaranty
AMBAC -- American Municipal Bond
Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance
Company
CHFCLI -- California Health Facility
Construction Loan Insurance
CONNIE -- College Construction Loan
LEE Insurance Association
COP -- Certificate of Participation
CSD -- Central School District
EDA -- Economic Development Authority
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance
Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage
Corporation
FLAIRS -- Floating Adjustable Interest
Rate Securities
FNMA -- Federal National Mortgage
Association
FRTC -- Floating Rate Trust Certificates
FSA -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National
Mortgage Association
</TABLE>
<TABLE>
<S> <C> <C>
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors
Assurance Corporation
MUD -- Municipal Utilities District
MVRICS -- Municipal Variable Rate
Inverse Coupon Security
PART -- Partnership Structure
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
RAW -- Revenue Anticipation Warrants
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt
Securities
SWAP -- Swap Structure
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bond Structure
TRAN -- Tax and Revenue Anticipation
Notes
UFSD -- Unified Free School District
UHSD -- Unified High School District
USD -- Unified School District
VA -- Veterans Administration
VRWE -- Variable Rate Wednesday Demand
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 11
<PAGE>
Statement of Assets and Liabilities March 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at amortized cost $1,762,465,066
Cash 72,815
Receivable for securities sold 20,591,089
Interest receivable 15,470,424
Other assets 208,325
- -----------------------------------------------------------------------------
Total Assets 1,798,807,719
- -----------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 2,900,000
Dividends payable 2,172,658
Management fees payable 725,942
Distribution fees payable 66,591
Accrued expenses 183,183
Other liabilities 17,783
- -----------------------------------------------------------------------------
Total Liabilities 6,066,157
- -----------------------------------------------------------------------------
Total Net Assets $1,792,741,562
- -----------------------------------------------------------------------------
NET ASSETS:
Par value of beneficial interest $ 1,792,989
Capital paid in excess of par value 1,791,103,145
Accumulated net realized loss from security transactions (154,572)
- -----------------------------------------------------------------------------
Total Net Assets $1,792,741,562
- -----------------------------------------------------------------------------
Shares Outstanding:
Class A 1,789,576,169
- -----------------------------------------------------------------------------
Class Y 3,413,146
- -----------------------------------------------------------------------------
Net Asset Value $ 1.00
- -----------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
Statement of Operations For the Year Ended March 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $55,676,521
- ------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 7,817,640
Distribution fees (Note 4) 1,561,791
Shareholder and system servicing fees 203,144
Shareholder communications 82,000
Custody 51,074
Audit and legal 33,995
Registration fees 27,269
Trustees' fees 18,444
Other 42,000
- ------------------------------------------------------------
Total Expenses 9,837,357
- ------------------------------------------------------------
Net Investment Income 45,839,164
- ------------------------------------------------------------
Net Realized Gain From Security Transactions 31,993
- ------------------------------------------------------------
Increase in Net Assets From Operations $45,871,157
- ------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 13
<PAGE>
Statements of Changes in Net Assets For the Years Ended March 31,
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 45,839,164 $ 36,945,970
Net realized gain 31,993 94,245
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 45,871,157 37,040,215
- --------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS
FROM (NOTE 3): (45,839,164) (36,945,970)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 6,873,046,899 5,459,002,289
Net asset value of shares issued
for reinvestment of dividends 44,089,569 36,681,668
Cost of shares reacquired (6,531,979,185) (5,434,040,102)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 385,157,283 61,643,855
- --------------------------------------------------------------------------------
Increase in Net Assets 385,189,276 61,738,100
NET ASSETS:
Beginning of year 1,407,552,286 1,345,814,186
- --------------------------------------------------------------------------------
End of year $1,792,741,562 $1,407,552,286
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
The California Money Market Portfolio ("Portfolio") is a separate investment
portfolio of the Smith Barney Muni Funds ("Fund"). The Fund, a Massachusetts
business trust, is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company and consists of this
Portfolio and seven other separate investment portfolios: Florida, Georgia,
Limited Term, New York, National, Pennsylvania and New York Money Market
Portfolios. The financial statements and financial highlights for the other
portfolios are presented in separate annual reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) the Portfolio uses
the amortized cost method for valuing investments; accordingly, the cost of
securities plus accreted discount, or minus amortized premium, approximates
value; (c) gains or losses on the sale of securities are calculated by using
the specific identification method; (d) interest income, adjusted for
amortization of premium and accretion of original issue discount, is recorded
on accrual basis; market discount is recognized upon the disposition of the
security; (e) dividends and distributions to shareholders are recorded on the
ex-dividend date; (f) direct expenses are charged to each portfolio and each
class; management fees and general fund expenses are allocated on the basis of
relative net assets; (g) the character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles; (h) the Portfolio intends to comply
with the applicable provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal
income and excise taxes; and (i) estimates and assumptions are required to be
made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. Portfolio Concentration
Since the Portfolio invests primarily in obligations of issuers within
California, it is subject to possible concentration risks associated with
economic, political, or legal developments or industrial or regional matters
specifically affecting California.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 15
<PAGE>
Notes to Financial Statements (continued)
3. Exempt-Interest Dividends and Other Distributions
The Portfolio declares and records a dividend of substantially all its net
investment income on each business day. Such dividends are paid or reinvested
monthly in fund shares on the payable date. Furthermore, the Portfolio intends
to satisfy conditions that will enable interest from municipal securities,
which is exempt from regular Federal income tax and from designated state
income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Portfolio.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. Management Agreement and Other Transactions
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual Funds
Management Inc., 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% on the first $2.5 billion of average
daily net assets; 0.475% on the next $2.5 billion and 0.45% on the average
daily net assets in excess of $5 billion. This fee is calculated daily and paid
monthly.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of
Fund shares. Pursuant to a Distribution Plan, the Portfolio pays a distribution
fee with respect to Class A shares calculated at the annual rate of 0.10% of
the average daily net assets of that class.
All officers and one Trustee of the Fund are employees of SB.
5. Capital Loss Carryforwards
At March 31, 1998, the Portfolio had, for Federal income tax purposes, $155,000
of unused loss carryforwards available to offset future capital gains. To the
extent that these carryforward losses are used to offset capital gains, it is
possible that the gains so offset will not be distributed. The amount and
expiration of the carryforwards are indicated below. Expiration occurs on March
31 of the year indicated:
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Carryforward Amounts $23,000 $9,000 $83,000 $1,000 $1,000 $38,000
- -------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (continued)
6. Shares of Beneficial Interest
At March 31, 1998, the Fund had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share.
At March 31, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class Y
- --------------------------------------------------------------------------
<S> <C> <C>
Total Paid-in Capital $1,789,489,571 $ 3,406,563
- --------------------------------------------------------------------------
Transactions in shares of the Portfolio were as follows:
Year Ended Year Ended
March 31, 1998 March 31, 1997*
- --------------------------------------------------------------------------
Class A
Shares sold 6,844,922,856 5,431,750,939
Shares issued on reinvestment 44,035,066 36,658,302
Shares redeemed (6,499,808,823) (5,414,170,348)
- --------------------------------------------------------------------------
Net Increase 389,149,099 54,238,893
- --------------------------------------------------------------------------
Class Y
Shares sold 28,124,043 27,251,350
Shares issued on reinvestment 54,503 23,366
Shares redeemed (32,170,362) (19,869,754)
- --------------------------------------------------------------------------
Net Increase (Decrease) (3,991,816) 7,404,962
- --------------------------------------------------------------------------
</TABLE>
* For Class Y shares, transactions are for the period from July 19, 1996
(inception date) to March 31, 1997.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 17
<PAGE>
Financial Highlights
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (1) 0.029 0.028 0.032 0.026 0.018
Dividends from net investment income (0.029) (0.028) (0.032) (0.026) (0.018)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
Total Return 2.98% 2.79% 3.22% 2.66% 1.84%
- -------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $ 1,789 $ 1,400 $ 1,346 $ 953 $ 190
- -------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (1) 0.63% 0.67% 0.64% 0.61% 0.64%
Net investment income 2.92 2.75 3.15 3.02 1.82
- -------------------------------------------------------------------------------------------------------------------------
Class Y Shares 1998 1997(2)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
Net investment income 0.031 0.020
Dividends from net investment income (0.031) (0.020)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
Total Return 3.09% 2.04%[dbldag]
- -------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 3,413 $ 7,405
- -------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.54% 0.56%+
Net investment income 3.01 2.77 +
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The manager waived all or part of its fees for the years ended March 31,
1996 and March 31, 1995. If such fees were not waived, the effect on net
investment income and expense ratios would have been as follows:
<TABLE>
<CAPTION>
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
------------------------ ---------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
---- ---- ---- ----
Class A $ 0.000* $ 0.002 0.65% 0.63%
</TABLE>
(2) For the period July 19, 1996 (inception date) to March 31, 1997.
* Amount represents less than $0.001 per share.
[dbldag] Total return is not annualized, as the result may not be
representative of the total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
Independent Auditors' Report
To the Shareholders and Board of Trustees
of the California Money Market Portfolio
of Smith Barney Muni Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the California Money Market Portfolio of Smith
Barney Muni Funds as of March 31, 1998, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended and financial highlights for each of
the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1998, by correspondence with the custodian. As to securities sold or
purchased but not yet delivered or received, we performed other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
California Money Market Portfolio of Smith Barney Muni Funds as of March 31,
1998, the results of operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended and financial
highlights for each of the years in the five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 15, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- California Money Market Portfolio 19
<PAGE>
Tax Information (unaudited)
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 1998:
-- 100% of the dividends paid by the Fund from net investment income as
tax-exempt for regular Federal income tax purposes.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
[PHOTO OMITTED]
Smith Barney Muni Funds
Florida
Portfolio
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
March 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(sm)
<PAGE>
Smith Barney
Muni Funds --
Florida Portfolio
[PHOTO OMITTED]
Heath B.
Mclendon
Chairman
[PHOTO OMITTED]
Peter M.
Coffey
Vice President
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Muni Funds --
Florida Portfolio ("Portfolio") for the year ended March 31, 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
Portfolio during the period under review. A detailed summary of performance and
current holdings for the Portfolio can be found in the appropriate sections that
follow.
Portfolio's Performance and Investment Strategy
For the year ended March 31, 1998, the Portfolio generated a total return of
11.15% for Class A shares which compares favorably with its Lipper Analytical
Services, Inc. peer group average of 10.25% (Lipper is a major fund-tracking
organization.)
We are pleased to report that your Portfolio has been given a four-star rating
overall for its Class A, Class B and Class C shares from Morningstar, Inc.* as
of March 31, 1998.
In response to the overall decline in interest rates, we have gradually pared
away bonds that were vulnerable to early calls and replaced them with newer
issues with better call protection. We slightly extended the weighted average
life of the Portfolio from 8.64 years on March 31, 1997 to 8.94 years on March
31, 1998 to help provide a more competitive stream of income over the long term.
(The weighted average life differs from the weighted average maturity in that it
is based on the length of time before the first optional call date rather than
simply the final maturity of the bond. A longer weighted average life
- ---------------------
* Morninstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through March 31, 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, 5 stars for the 3-year period and 4
stars for the 5-year period. For Class B shares, the Portfolio received 4 stars
for the overall and 4 stars for the 3-year period. For Class C shares, the
Portfolio received 4 stars for the overall, 3-year and 5-year periods. It was
rated among 1,525 municipal bond funds for the 3-year period and 782 municipal
bond funds for the 5-year period. Ten percent of the funds in a rating category
receive five stars.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 1
<PAGE>
increases exposure to current interest rates, which reduces the risk that the
bond will be called and the proceeds reinvested at a lower interest rate than
the current investment.)
Given current market conditions, we have also upgraded the overall credit
quality of the Portfolio. Because many investors have been seeking the higher
yields found in lower-rated issues, the yield gap between high- and
lower-quality bonds has narrowed during the past fiscal year. We believe that
lower-quality, higher-yielding bonds do not currently offer sufficient rewards
to justify the added risk. Therefore, we have placed an even greater emphasis on
high-quality securities. As of March 31, 1998, 94% of the Portfolio was rated
investment grade or better with roughly 55% rated AAA, the highest rating.
(Investment-grade bonds are those rated in one of the highest four rating
categories by any nationally recognized statistical rating organization, or
determined by the manager to be of equivalent quality.)
During the past year, we have also maintained a 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 March 31, 1998, the
Portfolio's assets were concentrated in hospital bonds (15.2%), transportation
bonds (11.1%) and multi-family housing bonds (10.9%).
Market and Economic Overview
During the past year, domestic bond market performance was driven primarily by a
healthy economy with low inflation and the uncertainties that continue to cloud
many of the world's major stock markets. Despite robust consumer demand and
labor shortages in many areas, consumer prices remained fairly stable while
wholesale prices for many commodities, particularly oil, actually fell. The
Gross Domestic Product ("GDP"), which measures the total output of goods and
services produced, grew at an annual rate of nearly 4% in 1997 and continued at
about the same rate in the first quarter of 1998.
In late October 1997, the U.S. stock market experienced its first major shock
during its record-setting seven-year rise when the Dow Jones Industrial Average
(a price-weighted average of 30 actively traded blue chip stocks) fell more than
554 points, the largest single-day point drop in stock market history. The stock
market plunge was triggered by concerns that Asia's spreading economic and
financial crisis might eventually impact domestic markets. Despite the ease in
which U.S. and European stock markets recovered from the downturn, many
investors began to shift their attention towards "safe haven" investments such
as U.S. Treasury securities. This renewed demand helped push the yield on the
bellwether 30-year U.S. Treasury bond, which moves in the opposite direction of
its price, to a record low of 5.73% on January 5, 1998.
Just fifteen months ago, Federal Reserve Board ("Fed") Chairman Alan Greenspan
warned against what he viewed as "irrational exuberance" in
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
financial markets. Since that time, the economy has continued to expand, the
stock market has soared to even greater heights and in May 1997, unemployment
reached its lowest level in more than 20 years. Yet, inflation has remained
subdued. In a widely expected action, Federal Reserve policymakers emerged from
their meeting on March 31, 1998 with no decision and let stand the 5.5%
federal-funds rate, which has remained unchanged since March 1997. (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.)
Interest rates, as represented by the 30-year U.S. Treasury bond yields, have
dropped nearly 1.16% in the past year. Similarly, municipal bond yields have
also declined, although not as sharply. According to the Bond Buyer 25-Year
Revenue Index, municipal bond yields have fallen from approximately 6.09% on
March 31, 1997 to 5.42% on March 31, 1998. One result of these historically low
interest rates has been a record volume of municipal bond issuance.
In the first quarter of 1998 alone, more than $68 billion of bonds were sold, an
increase of roughly 70% from the same period last year. Many municipalities took
advantage of the low interest rates by refinancing older, higher-coupon bonds.
Moreover, the strength of the economy has filled government coffers and
increased their debt capacity while the economic expansion has accelerated
demand for more infrastructure improvements, many of which have been on hold in
an era of fiscal conservatism.
In our view, this surge in municipal bond supply has created a number of
investment opportunities. The massive issuance volume that we have witnessed
recently has helped keep municipal bond yields from falling as much as their
taxable counterparts. In addition, the oversupply has resulted in a steeper
yield curve than U.S. Treasury securities and consequently created many
attractive investment opportunities, especially in the longer-term issues. (The
yield curve shows the difference between short- and long-term yields.)
Florida Economic Highlights
Florida maintained its healthy credit rating during the past year, bolstered by
a rapidly expanding economy and booming population growth. In recent years, the
Sunshine State has successfully broadened its economic base by greatly expanding
into a service and trade economy and moved away from its traditional
agricultural and seasonal tourism businesses. It is expected that as much as 90%
of all future new job creation will come from service-producing industries. One
result of Florida's recent economic transformation has been an increase in
year-round population and that has led to greater demand for infrastructure
improvement, especially educational facilities. To its credit, Florida's debt
levels have remained modest despite this heightened demand for more spending.
For these reasons, we believe that the Sunshine State's future economic
prospects remain bright.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 3
<PAGE>
Municipal Bond Market Outlook
We remain bullish on the prospects for the municipal bond market in the coming
months. We believe our positive outlook is supported by the following four
factors:
o The full impact of the Asian crisis on the U.S. economy has yet to be
realized. Economic strength continued into the first quarter of this year,
but we attribute much of that to temporary factors such as unusually warm
weather. As Asian companies attempt to recover, domestic companies will
face fierce competition and that will tend to hold prices down and help to
contain any emerging inflationary pressures.
o The rate of inflation remains historically low. Salomon Smith Barney
research forecasts a Consumer Price Index increase of approximately a 1.3%
annual rate for 1998, well below the roughly 5.5% annual average since
1970.
o The reduction of the federal budget, which should also reduce the need for
issuing Treasury securities.
o A significant possibility that the Asian economic and financial recovery
will take longer than many investment professionals currently anticipate,
therefore extending the disinflationary influence on the U.S. economy.
Thank you for investing in the Smith Barney Muni Funds - Florida Portfolio. We
look forward to helping you pursue your goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
April 21, 1998
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
=========================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/98 $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 $ 5.23 $ 0.19
=========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
=========================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/98 $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 $ 2.31 $ 0.18
=========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
=========================================================================================================
<S> <C> <C> <C> <C> <C>
3/31/98 $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 $ 3.51 $ 0.18
=========================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 5
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-----------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/98 11.15% 10.59% 10.51%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 6.92 N/A 6.28
- --------------------------------------------------------------------------------
Inception* through 3/31/98 8.18 10.24 6.80
================================================================================
With Sales Charge(2)
-----------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/98 6.70% 6.09% 9.51%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 6.05 N/A 6.28
- --------------------------------------------------------------------------------
Inception* through 3/31/98 7.55 9.76 6.80
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 3/31/98) 73.41%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/98) 38.91
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/98) 41.09
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00% and Class B shares reflect
the deduction of a 4.50% CDSC, which applies if shares are redeemed less
than one year from initial purchase. This CDSC declines by 0.50% the first
year after purchase and thereafter by 1.00% per year until no CDSC is
incurred. Class C shares reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are April 2, 1991, November
16, 1994 and january 5, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
6 1998 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 -- March 1998
[GRAPHIC OMITTED]
[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 10433 11139 11733
3/93 11916 12768 13202
3/94 12444 12915 13508
3/95 13073 14081 14513
3/96 14203 15153 15729
3/97 14977 16108 16585
3/31/98 16507 18134 18362
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on April 2, 1991, assuming deduction of the maximum 4.00% sales
charge at the time of investment and reinvestment of dividends (after
deduction of applicable sales charges through November 6, 1994, and
thereafter at net asset value) and capital gains, if any, at net asset
value through March 31, 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 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 -- Florida Portfolio 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Education -- 5.0%
$ 1,000,000 AAA Leon County School Board, COP, Master Lease Program,
MBIA-Insured, 5.125% due 7/1/22 $ 997,500
2,000,000 AAA Manatee County School Board, COP, MBIA-Insured,
4.875% due 7/1/18 1,915,000
2,000,000 AAA Polk County School Board, COP, FSA-Insured,
4.750% due 1/1/18 1,892,500
2,000,000 AAA Seminole County School Board, COP, Series A,
AMBAC-Insured, 5.000% due 7/1/19 1,962,500
Volusia County Educational Facilities Authority Revenue,
Embry-Riddle Aeronautical University:
500,000 Aaa* CONNIE LEE-Insured, 6.500% due 10/15/15 544,375
2,875,000 BBB+ Series A, 6.125% due 10/15/16 3,072,656
- -----------------------------------------------------------------------------------------------------------------------------
10,384,531
- -----------------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity(a) -- 5.4%
445,000 AAA Altamonte Springs Health Facilities Authority Hospital
Revenue, Adventist Health System,
13.000% due 10/1/01 521,206
860,000 AAA Bradford County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project),
6.050% due 11/15/16 951,375
265,000 AAA Cape Coral Health Facilities Authority Hospital
Revenue, (Cape Coral Medical Center Project),
8.125% due 11/1/08 307,400
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 1,031,250
2,015,000 AAA Gainesville Utility System Revenue,
8.125% due 10/1/14 (b) 2,627,056
310,000 AAA Jacksonville Health Facilities Authority Hospital Revenue,
(St. Vincents Medical Center Inc. Project),
9.125% due 1/1/03 350,300
200,000 AAA Lee County Justice Center Complex Inc., Improvement
Revenue, Series A, MBIA-Insured, 11.125% due 1/1/11 289,250
550,000 AAA Orange County Health Facility Authority Revenue,
Southern Adventist Hospital, 8.750% due 10/1/09 682,000
1,015,000 AAA Palm Beach County Health Facilities Authority Revenue,
(John F. Kennedy Memorial Hospital Inc. Project),
Series C, 9.500% due 8/1/13 1,351,219
625,000 AAA Palm Beach County Solid Waste Authority Revenue,
MBIA-Insured, 10.000% due 12/1/04 760,156
2,000,000 AAA Port Everglades Authority Port Improvement,
7.125% due 11/1/16 (b) 2,430,000
- -----------------------------------------------------------------------------------------------------------------------------
11,301,212
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Finance -- 1.0%
$ 485,000 AA+ Florida State Board of Education Capital Outlay,
Unrefunded Balance, Series A, 7.250% due 6/1/23 (b) $ 523,194
500,000 AAA Gulf Breeze Local Government Revenue, FGIC-Insured,
7.750% due 12/1/15 538,750
1,000,000 AA St. Lucie County Special Assessment, South Hutchinson
Island, Asset Guaranty, 6.200% due 11/1/25 1,070,000
- -----------------------------------------------------------------------------------------------------------------------------
2,131,944
- -----------------------------------------------------------------------------------------------------------------------------
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) 1,522,500
- -----------------------------------------------------------------------------------------------------------------------------
2,059,375
- -----------------------------------------------------------------------------------------------------------------------------
Government Facilities -- 0.7%
1,500,000 AAA Palm Beach County Revenue, County Courthouse
Expansion, FSA-Insured, 5.000% due 12/1/17 1,479,375
- -----------------------------------------------------------------------------------------------------------------------------
Hospital -- 15.2%
2,000,000 AAA Bay Medical Center, Florida Hospital Revenue,
(Bay Medical Center Project), AMBAC-Insured,
5.000% due 10/1/22 1,912,500
Escambia County Health Facilities Authority Revenue:
2,500,000 BBB-++ Azalea Trace Inc. Project, 6.100% due 1/1/19 2,590,625
1,750,000 BBB+ Baptist Hospital & Manor Project,
6.750% due 10/1/14 (b) 1,938,125
1,000,000 A Halifax Hospital Medical Center, Florida Health
Care Facilities Revenue, Halifax Management
System, Series A, ACA-Insured, 5.200% due 4/1/18 980,000
Jacksonville Health Facilities Authority, Hospital Revenue:
National Benevolent Association, IDR, Cypress Hill
Village Program:
750,000 Baa1* 6.400% due 12/1/16 810,938
1,000,000 Baa1* Series A, 6.250% due 12/1/26 1,076,250
2,000,000 AA+ St. Lukes Hospital Association Project,
7.125% due 11/15/20 2,220,000
310,000 AAA University Medical Center Inc. Project,
CONNIE-LEE Insured, 6.600% due 2/1/21 334,413
Lee County Hospital Board of Directors,
Hospital Revenue, MBIA-Insured:
1,000,000 AAA INFLOS, 9.316% due 4/1/20 (c) 1,180,000
4,250,000 AAA Lee Memorial Health Systems, 5.000% due 4/1/20 4,165,000
2,000,000 AAA Regular Linked SAVRS & RIBS, 6.350% due 3/26/20 2,175,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Hospital -- 15.2% (continued)
Orange County Health Facilities Authority,
Hospital Revenue Bonds:
Adventist Health Systems, FSA-Insured:
$ 1,500,000 AAA FLAIRS 6.650% due 11/15/07 (c) $ 1,599,375
1,000,000 AAA Sunbelt Inc. Project, Series B,
6.750% due 11/15/21 1,098,750
2,000,000 AAA Regular Linked SAVRS & RIBS, MBIA-Insured,
6.416% due 10/29/21 2,132,500
710,000 BB+ Pinellas County Health Facilities Authority, Sun Coast
Health System Revenue, Sun Coast Hospital
Guaranteed, Series A, 8.500% due 3/1/20 758,813
7,000,000 AAA Tampa Revenue Health Systems, Catholic Health,
Series A-1, 4.875% due 11/15/18 6,702,500
- -----------------------------------------------------------------------------------------------------------------------------
31,674,789
- -----------------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 10.9%
1,000,000 A Broward County HFA, Multi-Family Housing Revenue,
(Waterford Park Project), 7.200% mandatory
tender 5/1/02 1,021,190
380,000 AAA Clearwater Multi-Family Housing Revenue,
(Drew Gardens Project), Series A, FHA-Insured,
6.500% due 10/1/25 399,950
Dade County HFA, Multi-Family Mortgage Revenue,
Series A:
1,000,000 NR Golden Lakes Apartments Project,
6.050% due 11/1/39 (d) 1,030,000
1,000,000 AAA Siesta Pointe Apartments, FSA-Insured,
5.750% due 9/1/29 (d) 1,016,250
2,355,000 AAA Dade County IDR, Susanna Wesley Health Center,
Series A, FHA-Insured, 6.625% due 7/1/30 (b) 2,575,781
Florida Housing Finance Agency, Multi-Family
Revenue Bonds:
1,085,000 AAA Antigue Club Apartments, Series A-1,
AMBAC-Insured, 6.750% due 8/1/14 (d) 1,175,869
1,500,000 AAA Mariner Club Apartments, Series K1,
6.375% due 9/1/36 (d) 1,614,375
3,000,000 A Senior Lien, Series I-1, 6.625% due 7/1/28 (b)(d) 3,240,000
3,000,000 AAA Stoddert Arms Apartments, Series O,
AMBAC-Insured, 6.300% due 9/1/36 (d) 3,183,750
1,000,000 AAA Turtle Creek Apartments, Series C-1, AMBAC-Insured,
6.200% due 5/1/36 (d) 1,062,500
1,000,000 BBB+ The Vineyards Project, Series H, 6.500% due 11/1/25 1,047,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Housing: Multi-Family -- 10.9% (continued)
Florida Housing Finance Agency:
$ 2,000,000 AAA Glen Oaks Apartment Projects, FNMA-Collateralized,
5.900% due 2/1/30 (d) $ 2,077,500
1,000,000 AAA Crossings Indian Run Apartments, Series V,
AMBAC-Insured, 6.200% due 12/1/36 (d) 1,053,750
1,000,000 AAA Oceanside Housing Development Corp., Multi-Family
Mortgage Revenue, FHA-Insured, 6.875% due 2/1/20 1,057,500
1,095,000 AAA Southwest Housing Development Corp., Multi-Family
Housing Mortgage Revenue Refunding, FHA-Insured,
6.875% due 2/1/20 1,151,119
- -----------------------------------------------------------------------------------------------------------------------------
22,707,034
- -----------------------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 8.0%
Brevard County HFA, Single-Family Mortgage Revenue:
620,000 Aaa* GNMA-Collateralized, 6.600% due 9/1/16 (d) 662,625
900,000 Aaa* GNMA/FNMA-Collateralized, 6.400% due 9/1/23 (d) 960,750
Broward County HFA, Single-Family Mortgage Revenue:
695,000 Aa3* Capital Appreciation, zero coupon due 4/1/14 136,394
GNMA/FNMA-Collateralized:
610,000 Aaa* 6.650% due 8/1/21 (d) 658,800
1,000,000 Aaa* Series A, 6.200% due 4/1/30 (d) 1,060,000
Dade County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized:
1,500,000 AAA 6.700% due 4/1/28 (b)(d) 1,618,125
345,000 Aaa* Series B, 7.250% due 9/1/23 (d) 365,269
35,000 Aaa* Series E, 7.000% due 3/1/24 37,056
Duval County HFA, Single-Family Mortgage Revenue,
GNMA-Collateralized:
105,000 AAA 8.000% due 6/1/00 (d) 108,019
725,000 Aaa* 6.700% due 10/1/26 (d) 783,906
315,000 AAA Series A, 8.500% due 9/1/19 (d) 326,255
Escambia County HFA, Single-Family Mortgage Revenue:
215,000 Aaa* GNMA-Collateralized, Series A, 7.800% due 4/1/22 (d) 227,363
1,525,000 Aaa* Multi-County Program, Series A, GNMA/FNMA-
Collateralized, 6.100% due 4/1/30 1,612,688
Florida Housing Finance Agency:
125,000 Aaa* Home Ownership Revenue, Series G1, GNMA-
Collateralized, 7.800% due 9/1/10 (d) 132,188
500,000 AA Homeowner Mortgage, Series 2, 6.350% due 7/1/28 (d) 536,875
20,000 A+ Residential Mortgage, Capital Appreciation,
zero coupon due 11/1/12 4,600
1,210,000 AAA Single-Family Mortgage, Series B, GNMA/FNMA-
Collateralized, 6.650% due 7/1/26 (d) 1,273,525
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 8.0% (continued)
$ 440,000 Aa1* Hillsborough County HFA, Single-Family Mortgage
Revenue, Series A, GNMA-Collateralized,
7.700% due 4/1/23 (d) $ 465,850
715,000 AAA Leon County HFA, Single-Family Mortgage Revenue,
Multi-County Program, Series B, GNMA/FHLMC-
Collateralized, 7.300% due 1/1/28 (d) 824,038
Orange County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA Mortgage Backed Securities Program:
755,000 AAA 6.750% due 10/1/18 (d) 816,344
1,230,000 AAA Series A, 6.300% due 4/1/28 (d) 1,314,563
425,000 Aaa* Palm Beach HFA, Single-Family Mortgage Power
Revenue Bonds, Series A, GNMA-Collateralized,
7.875% due 4/1/23 (d) 432,438
1,310,000 Aaa* Pinnellas County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 6.550% due 8/1/27 (d) 1,391,875
1,000,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 6.500% due 3/1/25 (d) 1,065,000
- -----------------------------------------------------------------------------------------------------------------------------
16,814,546
- -----------------------------------------------------------------------------------------------------------------------------
Industrial Development -- 5.2%
1,975,000 NR Homestead IDR, Community Rehabilitation Providers
Program, Series A, 7.950% due 11/1/18 2,135,469
1,500,000 BBB- Martin County IDA, Indiantown, (Cogeneration Project),
7.875% due 12/15/25 (d) 1,745,625
500,000 NR Northern Palm Beach County Water Control District,
Unit Development No. 31, Program 1,
6.750% due 11/1/07 535,625
Osceola County IDA Revenue, (Community Provider
Pooled Loan Program), Series A, FSA-Insured:
400,000 AAA 7.500% due 7/1/02 431,500
799,000 AAA 7.750% due 7/1/10 862,920
1,000,000 AAA St. Johns County IDA, IDR, Series A, 5.500% due 3/1/17 1,022,500
Tampa Sports Authority Revenue, (Tampa Bay
Arena Project), MBIA-Insured:
500,000 AAA 6.050% due 10/1/20 568,125
1,000,000 AAA 6.100% due 10/1/26 1,152,500
2,500,000 AAA Village Center Community Development District,
Florida Recreational Revenue Refunding,
Series A, MBIA-Insured, 5.000% due 11/1/21 2,450,000
- -----------------------------------------------------------------------------------------------------------------------------
10,904,264
- -----------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 10.6%
1,000,000 AAA Dade County Aviation Facilities Revenue, Series B,
MBIA-Insured, 6.600% due 10/1/22 (d) 1,102,500
3,900,000 NR Dade County IDR, (Miami Cerebral Palsy Services Project),
8.000% due 6/1/22 4,221,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Miscellaneous -- 10.6% (continued)
$ 5,000,000 AAA Dade County Special Obligation, Series B, AMBAC-Insured,
Capital Appreciation, zero coupon due 10/1/16 $ 1,956,250
750,000 AAA Florida State Department of Corrections, COP,
Okeechobee Correctional, AMBAC-Insured,
6.250% due 3/1/15 834,375
500,000 BBB- Hillsborough County Aviation Authority, Special Purpose,
(Delta Airlines Project), 6.800% due 1/1/24 540,000
1,200,000 AAA North Springs Improvement District, MBIA-Insured,
7.000% due 10/1/09 1,464,000
2,500,000 AAA Port Palm Beach District Revenue, Series A, MBIA-Insured,
Capital Appreciation, zero coupon due 9/1/21 675,000
Puerto Rico Commonwealth Refunding
Public Improvement:
6,000,000 A 4.500% due 7/1/23 5,407,500
2,500,000 A Capital Appreciation, zero coupon due 7/1/14 1,131,250
1,200,000 BBB Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,411,500
1,745,000 A+ Tampa Capital Improvement Program Revenue,
Series B, 8.375% due 10/1/18 1,775,014
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 5/1/19 993,750
- -----------------------------------------------------------------------------------------------------------------------------
22,087,264
- -----------------------------------------------------------------------------------------------------------------------------
Nursing Home -- 2.8%
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 1,100,000
3,500,000 A- Palm Beach County Health Facilities Authority Revenue,
Retirement Community, 5.625% due 11/15/20 3,613,750
1,000,000 AA Volusia County Health Facilities Authority Revenue,
(John Knox Projects), Series A, Asset Guaranteed,
6.000% due 6/1/17 1,066,250
- -----------------------------------------------------------------------------------------------------------------------------
5,780,000
- -----------------------------------------------------------------------------------------------------------------------------
Pollution Control -- 8.0%
2,300,000 A* Broward County Resource Recovery Revenue,
Broward Waste Energy, 7.950% due 12/1/08 (b) 2,489,750
2,000,000 Aa3* Citrus County PCR, Florida Power Corp., (Crystal River
Project), Series A, 6.625% due 1/1/27 (b) 2,172,500
Escambia County PCR, (Champion
International Corp. Project):
500,000 Baa1* 6.950% due 11/1/07 553,750
3,500,000 Baa1* 6.900% due 8/1/22 (d) 3,880,625
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Pollution Control -- 8.0% (continued)
$ 2,500,000 A+ Jacksonville Sewer & Solid Waste Disposal Facilities
Revenue, (Anheuser-Busch Project),
5.875% due 2/1/36 (d) $ 2,609,374
705,000 AAA Lee County Solid Waste Revenue, MBIA-Insured,
7.000% due 10/1/11 (d) 782,550
1,000,000 Aa3* Pinellas County PCR, Florida Power Corp.,
(Anclot & Bartlow Plants Project),
7.200% due 12/1/14 1,097,500
1,390,000 Baa2* Putnam County Development Authority PCR,
Georgia Pacific Corp. 1984, 7.000% due 12/1/05 1,548,112
1,500,000 AA- St. Lucie County Solid Waste Disposal Revenue,
(Florida Power & Light Co. Project),
7.150% due 2/1/23 (d) 1,623,750
- -----------------------------------------------------------------------------------------------------------------------------
16,757,911
- -----------------------------------------------------------------------------------------------------------------------------
Pre-Refunded(e) -- 3.6%
Alachua County Health Facilities Authority Revenue,
(Santa Fe Healthcare Facilities Project):
150,000 AAA Call 11/15/00 @102, 6.875% due 11/15/02 158,813
1,000,000 AAA Call 11/15/00 @102, 7.600% due 11/15/13 1,105,000
1,500,000 AAA Bay County Hospital Revenue, (Bay Medical Center Project),
(Call 10/1/04 @ 102), 8.000% due 10/1/12 (b) 1,839,374
1,000,000 AAA Miami Sports & Exhibition Authority Special Obligation
Refunding, FGIC-Insured, (Call 4/1/00 @ 102),
7.200% due 10/1/20 1,080,000
835,000 AAA Pinellas County Health Facilities Authority, Sun Coast
Health System Revenue, Sun Coast Hospital
Guaranteed, Series A, (Call 3/1/00 @ 102),
8.500% due 3/1/20 919,543
1,000,000 AAA South Broward Hospital District Revenue Bonds, Series
1991C, RIBS, AMBAC-Insured, (Call 5/1/01 @ 104),
9.338% due 5/13/21 (c) 1,181,250
1,000,000 AAA Tampa Revenue, Allegany Health Systems,
St. Joseph's Health, MBIA-Insured,
(Call 12/1/04 @ 102), 6.700% due 12/1/18 1,156,250
- -----------------------------------------------------------------------------------------------------------------------------
7,440,230
- -----------------------------------------------------------------------------------------------------------------------------
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 1,070,000
1,185,000 A Puerto Rico Public Buildings Authority Revenue,
Series L, 5.500% due 7/1/21 1,256,100
- -----------------------------------------------------------------------------------------------------------------------------
2,326,100
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Transportation -- 11.1%
Guam Airport Authority Revenue:
$ 750,000 BBB Series A, 6.500% due 10/1/23 $ 825,000
1,000,000 BBB Series B, 6.600% due 10/1/10 (d) 1,097,500
1,000,000 AAA Hillsborough County Aviation Authority Revenue,
Tampa International Airport, Series A, FGIC-Insured,
6.000% due 10/1/23 1,093,750
1,500,000 Aa1* Ocean Highway and Port Authority, Nassau County,
Adjustable Demand Revenue Bonds,
Series 1990, LOC ABN AMRO Bank NV, 6.250%
mandatory tender 12/1/02 (d) 1,623,750
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue:
6,000,000 A Series A, 4.750% due 7/1/38 5,535,000
2,000,000 A Series Y, 5.000% due 7/1/36 1,930,000
Sanford Airport Authority IDR, (Central Florida
Terminals Inc. Project):
Series A:
1,000,000 NR 7.500% due 5/1/15 (d) 1,090,000
2,000,000 NR 7.750% due 5/1/21 (d) 2,200,000
645,000 NR Series C, 7.500% due 5/1/21 (d) 703,050
Santa Rosa Bay Bridge Authority Revenue:
3,500,000 BBB++ 6.250% due 7/1/28 3,793,124
5,000,000 BBB++ Capital Appreciation, zero coupon due 7/1/17 1,775,000
1,355,000 AAA Volusia County Airport System Revenue, Daytona
Beach Regional Airport, MBIA-Insured,
7.000% due 10/1/21 (d) 1,468,481
- -----------------------------------------------------------------------------------------------------------------------------
23,134,655
- -----------------------------------------------------------------------------------------------------------------------------
Utilities -- 8.2%
3,905,000 Aaa* Escambia County Utilities Authority Sanitation System
Revenue Refunding & Improvement, FSA-Insured,
4.500% due 1/1/22 3,534,025
3,000,000 AAA Escambia County Utility System Authority Revenue Bonds,
FGIC-Insured, Series B, 6.250% due 1/1/15 3,453,750
1,350,000 BBB Guam Power Authority Revenue, Series A,
6.750% due 10/1/24 1,493,437
930,000 BBB+ Hillsborough County Utilities Revenue, Refunding &
Improvement, 7.000% due 8/1/14 1,004,400
1,265,000 AA+++ Jacksonville Electric Authority Revenue Refunding,
St. John's River Power Park Services Refunding,
Issue 2-Series 5, 6.900% due 10/1/13 1,337,737
1,000,000 AAA Lakeland Electric & Water Revenue, Jr. Sub. Lien,
FGIC-Insured, 6.000% due 10/1/14 1,127,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 15
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=============================================================================================================================
<C> <C> <S> <C>
Utilities -- 8.2% (continued)
$ 2,440,000 AAA Puerto Rico Electric Power Authority Revenue Refunding,
Series EE, MBIA-Insured, 4.500% due 7/1/18 $ 2,257,000
3,000,000 AAA Sunrise Utility System Revenue Refunding, AMBAC-
Insured, 5.200% due 10/1/22 3,022,500
- -----------------------------------------------------------------------------------------------------------------------------
17,230,349
- -----------------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 2.2%
1,000,000 Aaa* Homestead Water & Wastewater Revenue Refunding,
AMBAC-Insured, 5.000% due 10/1/22 976,250
1,000,000 AAA Miramar Wastewater Improvement Authority,
FGIC-Insured, 6.750% due 10/1/16 1,135,000
2,250,000 AAA Seminole County Water & Sewer Refunding &
Improvement, MBIA-Insured, 6.000% due 10/1/12 2,531,250
- -----------------------------------------------------------------------------------------------------------------------------
4,642,500
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $194,980,915**) $208,856,079
=============================================================================================================================
</TABLE>
(a) Bond is escrowed to maturity by U.S. government securities and is
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 bond -- 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) Bond is escrowed by U.S. government securities and is 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 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 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 a minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than in
higher rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating
from "Aa" to "Baa", where 1 is the highest and 3 the lowest rating within its
generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
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 that are 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 that are 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.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 17
- --------------------------------------------------------------------------------
<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 (+) sign.
VMIG1 -- 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)
- --------------------------------------------------------------------------------
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 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $194,980,915) $208,856,079
Interest receivable 3,759,577
Receivable for securities sold 2,631,093
Receivable for Fund shares sold 300,265
- --------------------------------------------------------------------------------
Total Assets 215,547,014
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 4,291,624
Payable for Fund shares redeemed 204,737
Management fees payable 77,732
Distribution fees payable 23,054
Payable to bank 843
Accrued expenses 63,321
- --------------------------------------------------------------------------------
Total Liabilities 4,661,311
- --------------------------------------------------------------------------------
Total Net Assets $210,885,703
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 15,348
Capital paid in excess of par value 195,902,488
Overdistributed net investment income (7,566)
Accumulated net realized gain from security transactions 1,100,269
Net unrealized appreciation of investments 13,875,164
- --------------------------------------------------------------------------------
Total Net Assets $ 210,885,703
================================================================================
Shares Outstanding:
Class A 10,380,268
- --------------------------------------------------------------------------------
Class B 4,323,835
- --------------------------------------------------------------------------------
Class C 643,939
- --------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 13.74
- --------------------------------------------------------------------------------
Class B* $ 13.73
- --------------------------------------------------------------------------------
Class C** $ 13.74
- --------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) $ 14.31
================================================================================
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if
shares are redeemed within one year from initial purchase (See Note 4).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended March 31, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 11,969,047
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 974,400
Distribution fees (Note 4) 617,107
Registration fees 67,999
Shareholder and system servicing fees 60,751
Audit and legal 46,596
Shareholder communications 22,500
Pricing service fees 20,001
Custody 10,501
Trustees' fees 4,201
Other 8,500
- --------------------------------------------------------------------------------
Total Expenses 1,832,556
- --------------------------------------------------------------------------------
Net Investment Income 10,136,491
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 115,264,141
Cost of securities sold 111,989,070
- --------------------------------------------------------------------------------
Net Realized Gain 3,275,071
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 7,018,842
End of year 13,875,164
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 6,856,322
- --------------------------------------------------------------------------------
Net Gain on Investments 10,131,393
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 20,267,884
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended March 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 10,136,491 $ 9,255,548
Net realized gain 3,275,071 1,051,147
Increase (decrease) in net unrealized appreciation 6,856,322 (1,365,126)
- -----------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 20,267,884 8,941,569
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (10,138,329) (9,310,449)
Net realized gains (1,909,781) (793,240)
- -----------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (12,048,110) (10,103,689)
- -----------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 43,905,998 35,124,664
Net asset value of shares issued in connection with
the transfer of the Smith Barney Muni Funds --
Florida Limited Term Portfolio's net assets (Note 7) -- 13,398,911
Net asset value of shares issued for reinvestment
of dividends 5,171,877 4,141,333
Cost of shares reacquired (32,126,326) (32,193,433)
- -----------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 16,951,549 20,471,475
- -----------------------------------------------------------------------------------------------------------
Increase in Net Assets 25,171,323 19,309,355
NET ASSETS:
Beginning of year 185,714,380 166,405,025
- -----------------------------------------------------------------------------------------------------------
End of year* $ 210,885,703 $ 185,714,380
===========================================================================================================
* Includes overdistributed net investment income of: $ (7,566) $ (5,728)
===========================================================================================================
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 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 a
non-diversified, 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 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 maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (d) gains or losses on the
sale of securities are calculated by using the specific identification method;
(e) interest income, adjusted for amortization of premium and accretion of
original issue discount, is recorded on an accrual basis; market discount is
recognized upon the disposition of the security; (f) direct expenses are charged
to each class; management fees and general fund expenses are allocated on the
basis of relative net assets; (g) dividends and distributions to shareholders
are recorded on the ex-dividend date; (h) the Portfolio intends to comply with
the applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (i) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At March 31, 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 (j) estimates and assumptions are required to
be made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Portfolio Concentration
Since the Portfolio invests primarily in obligations of issuers within Florida,
it is subject to possible concentration risks associated with economic,
political, or legal developments or industrial or regional matters specifically
affecting Florida.
3. Exempt-Interest Dividends and Other Distributions
The Portfolio intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Portfolio.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. Management Agreement and Other Transactions
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual Funds
Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"),
acts as investment manager to the Fund. The Portfolio pays MMCa management fee
calculated at an annual rate of 0.50% of the average daily net assets. This fee
is calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of
Fund shares. For the year ended March 31, 1998, SB received sales charges of
approximately $319,000 on purchases of the Portfolio's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B shares,
which applies if redemption occurs within one year from initial purchase. This
CDSC declines by 0.50% the first year after purchase and thereafter by 1.00% per
year until no CDSC is incurred. Class C shares have a 1.00% CDSC, which applies
if redemption occurs within the first year of purchase. For the year ended March
31, 1998, CDSCs paid to SB for Class Bshares were approximately $52,000.
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A, B and C shares calculated at an annual rate of 0.15% of the average
daily net assets of each respective class. The Portfolio pays a distribution fee
with respect to Class B and C shares calculated at the annual rates of 0.50% and
0.55% of the average daily net assets of each class, respectively. For the year
ended March 31, 1998, total Distribution Plan fees incurred were:
Class A Class B Class C
================================================================================
Distribution Plan Fees $202,416 $360,738 $53,953
================================================================================
All officers and one Trustee of the Fund are employees of SB.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
5. Investments
During the year ended March 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $132,118,203
- --------------------------------------------------------------------------------
Sales 115,264,141
================================================================================
At March 31, 1998, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 14,354,029
Gross unrealized depreciation (478,865)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 13,875,164
================================================================================
6. Shares of Beneficial Interest
At March 31, 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 related to the
distribution of its shares.
At March 31, 1998, total paid-in capital amounted to the following for each
class:
Class A Class B Class C
================================================================================
Total Paid-in Capital $130,443,200 $56,794,343 $8,680,293
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1998 March 31, 1997
----------------------- -----------------------
Shares Amount Shares Amount
============================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 2,168,321 $ 29,686,100 1,224,389 $ 16,307,204
Net asset value of shares issued
in connection with the transfer
of Smith Barney Muni Funds --
Florida Limited Term Portfolio's
net assets (Note 7) -- -- 799,321 10,594,240
Shares issued on reinvestment 245,679 3,350,010 186,644 2,477,685
Shares redeemed (1,707,187) (23,309,310) (1,408,535) (18,699,877)
- --------------------------------------------------------------------------------------------
Net Increase 706,813 $ 9,726,800 801,819 $ 10,679,252
============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1998 March 31, 1997
----------------------- -----------------------
Shares Amount Shares Amount
========================================================================================
<S> <C> <C> <C> <C>
Class B
Shares sold 865,155 $ 11,835,656 887,861 $ 11,815,010
Shares issued on reinvestment 116,324 1,583,889 104,697 1,388,176
Shares redeemed (557,498) (7,617,726) (589,795) (7,836,748)
- ----------------------------------------------------------------------------------------
Net Increase 423,981 $ 5,801,819 402,763 $ 5,366,438
========================================================================================
Class C
Shares sold 173,864 $ 2,384,242 151,091 $ 2,002,450
Net asset value of shares issued
in connection with the transfer
of Smith Barney Muni Funds --
Florida Limited Term Portfolio's
net assets (Note 7) -- -- 212,012 2,804,671
Shares issued on reinvestment 17,468 237,978 8,648 114,600
Shares redeemed (88,301) (1,199,290) (32,355) (429,369)
- ----------------------------------------------------------------------------------------
Net Increase 103,031 $ 1,422,930 339,396 $ 4,492,352
========================================================================================
Class Y*
Shares sold -- -- 374,812 $ 5,000,000
Shares issued on reinvestment -- -- 12,070 160,872
Shares redeemed -- -- (386,882) (5,227,439)
- ----------------------------------------------------------------------------------------
Net Decrease -- -- -- $ (66,567)
========================================================================================
</TABLE>
* Transactions are for the period from August 5, 1996 (inception date) to
February 25, 1997.
7. Transfer of Net Assets
On January 17, 1997, the Portfolio acquired the assets and certain liabilities
of the Smith Barney Muni Funds -- Florida Limited Term Portfolio ("Florida
Limited Term Portfolio") pursuant to an Agreement and Plan of Reorganization
dated November 12, 1996. Total shares issued by the Portfolio and the total net
assets of Florida Limited Term Portfolio and the Portfolio on the date of
transfer were:
<TABLE>
<CAPTION>
Total Net
Assets of
Shares Florida Total Net
Issued by the Limited Term Assets of the
Acquired Portfolio Portfolio Portfolio Portfolio
=========================================================================================================
<S> <C> <C> <C>
Florida Limited Term Portfolio 1,011,333 $13,398,911 $180,720,912
=========================================================================================================
</TABLE>
The total net assets of the Florida Limited Term Portfolio before acquisition
included unrealized appreciation of $144,106 and a net realized loss of
$341,735. Total net assets of the Portfolio immediately after the transfer were
$194,119,823. The transaction was structured for tax purposes to qualify as a
tax-free reorganization under the Internal Revenue Code of 1986, as amended.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 25
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1998 1997 1996(1) 1995(2) 1994
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.16 $ 13.24 $ 12.89 $ 12.82 $ 13.21
- --------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.72 0.73 0.74 0.75 0.77
Net realized and unrealized
gain (loss) 0.72 (0.03) 0.35 0.08 (0.39)
- --------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.44 0.70 1.09 0.83 0.38
- --------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.73) (0.73) (0.74) (0.76) (0.77)
Net realized gains (0.13) (0.05) -- -- --
- --------------------------------------------------------------------------------------------------------------------
Total Distributions (0.86) (0.78) (0.74) (0.76) (0.77)
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.74 $ 13.16 $ 13.24 $ 12.89 $ 12.82
- --------------------------------------------------------------------------------------------------------------------
Total Return 11.15% 5.44% 8.65% 6.77% 2.75%
- --------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 142,667 $ 127,348 $ 117,473 $ 107,724 $ 104,681
- --------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 0.76% 0.85% 0.70% 0.61% 0.54%
Net investment income 5.28 5.56 5.62 5.97 5.71
- --------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 59% 62% 47% 43% 20%
====================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(2) On October 10, 1994 the former Class C shares were exchanged into Class A
Shares.
(3) 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.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class B Shares 1998 1997 1996(1) 1995(2)
=====================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.14 $ 13.23 $ 12.89 $ 11.91
- -----------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.65 0.65 0.68 0.30
Net realized and unrealized gain (loss) 0.72 (0.01) 0.35 0.97
- -----------------------------------------------------------------------------------------------------
Total Income From Operations 1.37 0.64 1.03 1.27
- -----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.65) (0.68) (0.69) (0.29)
Net realized gains (0.13) (0.05) -- --
- -----------------------------------------------------------------------------------------------------
Total Distributions (0.78) (0.73) (0.69) (0.29)
- -----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.73 $ 13.14 $ 13.23 $ 12.89
- -----------------------------------------------------------------------------------------------------
Total Return 10.59% 4.91% 8.09% 10.77%++
- -----------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 59,374 $ 51,261 $ 46,267 $ 1,990
- -----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 1.28% 1.35% 1.20% 1.20%+
Net investment income 4.76 4.93 5.00 5.57+
- -----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 59% 62% 47% 43%
=====================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(2) For the period from November 16, 1994 (inception date) to March 31, 1995.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.35%.
# Includes the 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 -- Florida Portfolio 27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class C Shares 1998 1997 1996(1) 1995(2) 1994
======================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.14 $ 13.22 $ 12.89 $ 12.81 $ 13.20
- ------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.64 0.65 0.66 0.67 0.68
Net realized and
unrealized gain (loss) 0.72 (0.01) 0.35 0.08 (0.39)
- ------------------------------------------------------------------------------------------------------
Total Income From Operations 1.36 0.64 1.01 0.75 0.29
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.63) (0.67) (0.68) (0.67) (0.68)
Net realized gains (0.13) (0.05) -- -- --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.76) (0.72) (0.68) (0.67) (0.68)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 13.74 $ 13.14 $ 13.22 $ 12.89 $ 12.81
- ------------------------------------------------------------------------------------------------------
Total Return 10.51% 4.94% 7.96% 6.12% 2.05%
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 8,845 $ 7,105 $ 2,665 $ 2,750 $ 2,487
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 1.33% 1.40% 1.28% 1.25% 1.24%
Net investment income 4.71 4.84 5.04 5.40 4.95
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 59% 62% 47% 43% 20%
======================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(2) On November 7, 1994 the former Class B shares were renamed Class C Shares.
(3) 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.
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 1998:
o 99.96% of the dividends paid by the Fund from net investment income as tax
exempt for regular Federal income tax purposes.
o The Taxpayer Relief Act of 1997 enacted differing rates of tax on various
long-term capital gain transactions. As a result, the Fund designates:
o Total long-term capital gain distributions paid of $1,447,711.
$195,875 are considered "28 percent rate gains".
$1,251,836 are considered "20 percent rate gains".
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
of the Florida Portfolio
of Smith Barney Muni Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Florida Portfolio of Smith Barney Muni Funds
as of March 31, 1998, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian. As to securities purchased or
sold but not yet received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Florida Portfolio of Smith Barney Muni Funds as of March 31, 1998, the results
of its operations for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended and financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 15, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Florida Portfolio 29
<PAGE>
Smith Barney SMITH BARNEY
Muni Funds A Member of TravelersGroup [LOGO]
Trustees
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
C. Richard Youngdahl, 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
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing
Agent
First Data Investor Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds -- Florida Portfolio. It is not authorized for
distribution to prospective investors unless accompanied or preceded by a
current Prospectus for the Fund, which contains information concerning the
Fund's investment policies, fees and expenses as well as other pertinent
information.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD2298 5/98
[LOGO]
Smith Barney Muni Funds
Georgia Portfolio
Pennsylvania
Portfolio
- -------------
ANNUAL REPORT
- -------------
March 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future
Every day.(SM)
<PAGE>
Georgia and Pennsylvania Portfolios
[PHOTO OMITTED]
Heath B. Mclendon
Chairman
[PHOTO OMITTED]
Peter M. Coffey
Vice President
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Muni Funds --
Georgia and Pennsylvania Portfolios for the year ended March 31, 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
During the past year, domestic bond market performance was driven primarily by a
healthy economy with low inflation and the uncertainties that continue to cloud
many of the world's major stock markets. Despite robust consumer demand and
labor shortages in many areas, consumer prices remained fairly stable while
wholesale prices for many commodities, particularly oil, actually fell. The
Gross Domestic Product ("GDP"), which measures the total output of goods and
services produced, grew at an annual rate of nearly 4% in 1997 and continued at
about the same rate in the first quarter of 1998.
In late October 1997, the U.S. stock market experienced its first major shock
during its record-setting seven-year rise when the Dow Jones Industrial Average
(a price-weighted average of 30 actively traded blue chip stocks) fell more than
554 points, the largest single-day point drop in stock market history. The stock
market plunge was triggered by concerns that Asia's spreading economic and
financial crisis might eventually impact domestic markets. Despite the ease in
which U.S. and European stock markets recovered from the downturn, many
investors began to shift their attention towards "safe haven" investments such
as U.S. Treasury securities. This renewed demand helped push the yield on the
bellwether 30-year U.S. Treasury bond, which moves in the opposite direction of
its price, to a record low of 5.73% on January 5, 1998.
Just fifteen months ago, Federal Reserve Board Chairman Alan Greenspan warned
against what he viewed as "irrational exuberance" in financial markets.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 1
<PAGE>
Since that time, the economy has continued to expand, the stock market has
soared to even greater heights and in May 1997, unemployment reached its lowest
level in more than 20 years. Yet, inflation has remained subdued. In a widely
expected action, Federal Reserve policy makers emerged from their meeting on
March 31, 1998 with no decision and let stand the 5.5% federal-funds rate, which
has remained unchanged since March 1997. (The federal-funds rate is the interest
rate banks charge each other for overnight loans and is a closely watched
indicator of the direction of interest rates.)
Interest rates, as represented by the 30-year U.S. Treasury bond yields, have
dropped nearly 1.16% in the past year. Similarly, municipal bond yields have
also declined, although not as sharply. According to the Bond Buyer 25-Year
Revenue Index, municipal bond yields have fallen from approximately 6.09% on
March 31, 1997 to 5.42% on March 31, 1998. One result of these historically low
interest rates has been a record volume of municipal bond issuance.
In the first quarter of 1998 alone, more than $68 billion of bonds were sold,
an increase of roughly 70% from the same period last year. Many municipalities
took advantage of the low interest rates by refinancing older, higher-coupon
bonds. Moreover, the strength of the economy has filled government coffers and
increased their debt capacity while the economic expansion has accelerated
demand for more infrastructure improvements, many of which have been on hold in
an era of fiscal conservatism.
In our view, this surge in municipal bond supply has created a number of
investment opportunities. The massive issuance volume that we have witnessed
recently has helped keep municipal bond yields from falling as much as their
taxable counterparts. In addition, the oversupply has resulted in a steeper
yield curve than U.S. Treasury securities and consequently created many
attractive investment opportunities, especially in the longer-term issues. (The
yield curve shows the difference between short- and long-term yields.)
Georgia Portfolio's Performance and Investment Strategy
For the year ended March 31, 1998, the Georgia Portfolio ("Portfolio") generated
a total return of 13.85% for Class A shares and significantly outperformed its
Lipper Analytical Services, Inc. ("Lipper") peer group average of 10.64%.
(Lipper is a major fund tracking organization.) During the past year, we have
continued to emphasize credit quality as the yield gap between higher- and
lower-tier securities narrowed.
As of March 31, 1998, the weighted average life of the Portfolio was roughly
12.05 years (The weighted average life differs from the weighted average
maturity in that it is based on the length of time before the first optional
call date rather than simply the final maturity of the bond. A longer weighted
average life increases exposure to current interest rates, which reduces the
risk that the bond will be called and the proceeds reinvested at a lower
interest rate
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
than the current investment.) and approximately 93% of the holdings were rated
investment grade. (Investment-grade bonds are those rated in one of the highest
four rating categories by any nationally recognized statistical rating
organization, or determined by the manager to be of equivalent quality.) In
addition, approximately 59% of the holdings had a triple-A rating, the highest
credit rating. The Portfolio's largest holdings are concentrated in water and
sewer bonds (20.3%), multi-family housing bonds (17.9%) and utility bonds
(11.8%).
We are pleased to report that your Portfolio has been given a four-star rating
overall for its Class A, Class B and Class C shares from Morningstar, Inc.* as
of March 31, 1998.
Georgia Economic Highlights
Georgia continued to enjoy very strong credit ratings thanks to its effective
debt management, sound fiscal policies and vibrant economy. Economic growth has
been robust in the Peachtree State, enabling lawmakers to provide tax relief
while also expanding the budget. For the first four months of Georgia's fiscal
year 1997-98, tax collections were up 6.3% compared with the annual anticipated
rate of 5.7%.
New job creation in Georgia has also been brisk. In the last ten years,
nonagricultural employment increased nearly 30% and Georgia's unemployment rate
of roughly 4.1% was below the national average of approximately 4.7% for the
first quarter of 1998. The booming economy in Georgia has also continued to
attract new residents. If Georgia's future population growth follows the trend
established in the last decade, more than 50% of the future population increase
in Georgia will be made up of people moving from other states and other
countries. For all of the reasons noted above, we remain very positive on
Georgia's long-term economic prospects.
Pennsylvania Portfolio's Performance and Investment Strategy
For the year ended March 31, 1998, the Pennsylvania Portfolio ("Portfolio")
posted a total return of 13.52% for Class A shares and significantly
outperformed its Lipper peer group average of 10.24%. Given current market
conditions, we have modestly lengthened the Portfolio as well as upgraded its
overall credit quality.
We extended the weighted average life of the Portfolio from 9.39 years on March
31, 1997 to 9.55 years on March 31, 1998 to help provide a more competitive
stream of income over the long term.
- ----------
* Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through March 31, 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, B and C
shares, the Portfolio received 4 stars for the overall, and 3-year period.
It was rated among 1,525 municipal bond funds for the 3-year period. Ten
percent of the funds in a rating category receive five stars.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 3
<PAGE>
As of March 31, 1998, 100% 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 (22.4%), industrial development bonds (12.8%) and transportation
bonds (9.6%).
We are pleased to report that the Portfolio has been given a four-star rating
overall for its Class A, Class B and Class C shares from Morningstar, Inc.** as
of March 31, 1998.
Pennsylvania Economic Highlights
Like many other states in the Northeast region, Pennsylvania has made great
strides toward economic recovery although it still lags much of the nation.
Employment in the Commonwealth of Pennsylvania has steadily increased and
currently stands about 7% above pre-recession levels. Manufacturing continues to
be the main driver in Pennsylvania's economy but in recent years, the service
sector has become a significant contributor. Currently, service industries
provide the largest source of both personal income and employment.
Six years of budget surpluses have enabled the Commonwealth of Pennsylvania to
build adequate reserves that should provide operating stability and serve as a
buffer in the event of an economic downturn. Moreover, we believe that
Pennsylvania's debt levels should not be especially burdensome given the State's
healthy reserves. This effective management of debt is reflected in the AA
rating assigned to Pennsylvania's general obligation bonds. In light of these
positive economic factors, we believe that Pennsylvania's future economic
prospects remain bright.
Municipal Bond Market Outlook
We remain bullish on the prospects for the municipal bond market in the coming
months. We believe our positive outlook is supported by the following four
factors:
o The full impact of the Asian crisis on the U.S. economy has yet to
be realized. Economic strength continued into the first quarter of
this year, but we attribute much of that to temporary factors such
as unusually warm weather. As Asian companies attempt to recover,
domestic companies will face fierce competition and that will tend
to hold prices down and help to contain any emerging inflationary
pressures.
- ----------
** Morningstar, Inc. proprietary ratings reflect historical risk-adjusted
performance through March 31, 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, B and C
shares, the Portfolio received 4 stars for the overall, and 3-year period.
It was rated among 1,525 municipal bond funds for the 3-year period. Ten
percent of the funds in a rating category receive five stars.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
o The rate of inflation remains historically low. Salomon Smith Barney
research forecasts a Consumer Price Index ("CPI") increase of
approximately a 1.3% annual rate for 1998, well below the roughly
5.5% annual average since 1970.
o The reduction of the federal budget, which should also reduce the
need for issuing Treasury securities.
o A significant possibility that the Asian economic and financial
recovery will take longer than many investment professionals
currently anticipate, therefore extending the disinflationary
influence on the U.S. economy.
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
April 21, 1998
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 5
<PAGE>
Georgia Portfolio
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
-----------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/98 $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 $2.66 $0.21
================================================================================
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
-----------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/98 $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 $2.35 $0.21
================================================================================
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
-----------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/98 $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 $2.39 $0.21
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
Georgia Portfolio
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
---------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/98 13.85% 13.39% 13.23%
- --------------------------------------------------------------------------------
Inception* through 3/31/98 8.92 8.02 8.21
================================================================================
With Sales Charge(2)
---------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/98 9.30% 8.89% 12.23%
- --------------------------------------------------------------------------------
Inception* through 3/31/98 7.81 7.60 8.21
================================================================================
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 3/31/98) 40.62%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/98) 34.02
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/98) 36.73
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distribu tions, if
any, at net asset value. In addi tion, Class A shares reflect the deduction
of the maximum sales charge of 4.00% and Class B shares reflect the de
duction of a 4.50% CDSC, which applies if shares are redeemed within one
year from initial purchase. This CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. Class C
shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are April 4, 1994, June 15, 1994
and April 14, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 7
<PAGE>
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
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 -- March 1998
[The following table was represented as a line graph in the printed material]
Lehman Brothers
Lehman Brothers Georgia Lehman Brothers
Georgia Municipal Long Municipal Municipal
Date Portfolio Bond Index* Bond Index* Bond Index*
- ---- --------- ----------- ----------- ----------
4/4/94 9600 10000 10000 10000
9/94 9662 10147 10180 10197
3/95 10193 10903 10744 10795
9/95 10778 11405 11319 11372
3/96 11179 11733 11645 11675
9/96 11567 12192 12002 12012
3/97 11844 12424 12278 12289
9/97 12933 13462 13084 13085
3/31/98 13485 13986 13594 13573
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on April 4, 1994, assuming deduction of the maximum 4.00% sales charge at
the time of investment and reinvestment of dividends and capital gains, if
any, at net asset value through March 31, 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 Georgia Municipal Bond Index are more
appropriate broad-based benchmark for the market in which the Georgia
Portfolio invests 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 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 mil lion 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 Annual Report to Shareholders
<PAGE>
Pennsylvania Portfolio
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
-----------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/98 $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 $2.74 $0.16
================================================================================
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
-----------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/98 $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 $2.41 $0.16
================================================================================
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
-----------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/98 $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 $2.49 $0.16
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 9
<PAGE>
Pennsylvania Portfolio
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
---------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/98 13.52% 12.97% 12.84%
- --------------------------------------------------------------------------------
Inception* through 3/31/98 9.12 8.06 8.50
================================================================================
With Sales Charge(2)
---------------------------------
Class A Class B Class C
================================================================================
Year Ended 3/31/98 8.96% 8.47% 11.84%
- --------------------------------------------------------------------------------
Inception* through 3/31/98 8.01 7.63 8.50
================================================================================
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 3/31/98) 41.67%
- --------------------------------------------------------------------------------
Class B (Inception* through 3/31/98) 34.07
- --------------------------------------------------------------------------------
Class C (Inception* through 3/31/98) 38.47
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addi tion, Class A shares reflect the deduction
of the maximum sales charge of 4.00% and Class B shares reflect the de
duction of a 4.50% CDSC, which applies if shares are redeemed within one
year from initial purchase. This CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. Class C
shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are April 4, 1994, June 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 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 -- March 1998
Lehman Brothers
Lehman Brothers Pennsylvania Lehman Brothers
Pennsylvania Municipal Long Municipal Municipal
Date Portfolio Bond Index* Bond Index* Bond Index*
- ---- --------- ----------- ----------- ----------
4/4/94 9600 10000 10000 10000
9/94 9846 10147 10180 10202
3/95 10447 10903 10744 10765
9/95 10975 11405 11319 11339
3/96 11290 11733 11645 11638
9/96 11700 12192 12002 12000
3/97 11980 12424 12278 12282
9/97 12961 13462 13084 13029
3/31/98 13601 13986 13594 13529
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on April 4, 1994, assuming deduction of the maximum 4.00% sales charge at
the time of investment and reinvestment of dividends and capital gains, if
any, at net asset value through March 31, 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 Pennsylvania Municipal Bond Index are more
appropriate broad-based benchmark for the market in which the Pennsylvania
Portfolio invests 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 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 mil lion 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 -- Georgia and Pennsylvania Portfolios 11
<PAGE>
Schedules of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Escrowed to Maturity (a) -- 7.7%
$ 195,000 AAA Cobb County Kennestone Hospital Authority Revenue,
MBIA-Insured, 10.250% due 2/1/02 $ 215,961
1,875,000 Aaa* Colquitt County Development Authority Revenue,
Sub-Series C, zero coupon due 12/1/21 534,373
485,000 AAA Puerto Rico Commonwealth Aqueduct & Sewer
Authority Revenue, 10.250% due 7/1/09 (b) 671,119
165,000 Aaa* Richmond County Water and Sewer Revenue,
9.875% due 4/1/02 187,069
1,000,000 Aaa* Savannah EDA, zero coupon due 12/1/21 285,000
300,000 AAA Tri City Hospital Authority Revenue, South Fulton
Hospital, FGIC-Insured, 10.250% due 7/1/06 (b) 393,000
2,000,000 Aaa* Washington Wilkes Payroll Development Authority
Revenue, zero coupon due 12/1/21 570,000
- ---------------------------------------------------------------------------------------------------------
2,856,522
- ---------------------------------------------------------------------------------------------------------
General Obligation -- 2.4%
1,000,000 A Puerto Rico Commonwealth, Public Improvement,
4.500% due 7/1/23 901,250
- ---------------------------------------------------------------------------------------------------------
Hospitals -- 8.2%
1,000,000 AAA Dalton Development Authority Revenue, Hamilton Health
Care Systems, MBIA-Insured, 5.250% due 8/15/26 1,007,500
1,000,000 AAA Fulco Hospital Authority Revenue, Catholic Health East,
Series A, 4.875% due 11/15/15 968,750
500,000 BBB Puerto Rico Industrial Tourist Educational, Medical &
Environmental Control Facility Finance Authority,
(Ryder Memorial Hospital Project), Series A,
6.700% due 5/1/24 542,500
500,000 Ba1* Savannah Hospital Authority Revenue Refunding &
Improvement, Candler Hospital, 7.000% due 1/1/11 (b) 535,000
- ---------------------------------------------------------------------------------------------------------
3,053,750
- ---------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 17.9%
500,000 AAA Acworth Housing Authority Revenue, (Wingate Falls
Apartments Project), 6.125% due 3/1/17 (c) 529,375
1,245,000 A Atlanta Urban Residential Finance Authority, Multi-Family
Housing Revenue, (Cascade Pines Housing Project),
6.250% due 9/1/10 (c) 1,313,475
250,000 A Cobb County Housing Authority Refunding, (Signature
Place Project), Series A, 6.875% due 10/1/17 265,625
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
Schedules of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 17.9% (continued)
De Kalb County Housing Authority,
Multi-Family Housing Revenue, Series A:
$1,000,000 NR Friendly Hills Apartments, FHA-Insured,
7.050% due 1/1/39 (c) $ 1,118,750
1,000,000 AAA Spring Chase Apartments Project, FNMA-
Collateralized, 5.400% due 11/1/30 993,750
300,000 AAA Valley Brook Apartments Project, Revenue
Refunding, MBIA-Insured, 7.750% due 1/1/26 319,125
1,000,000 A Fulton County Multi-Family Housing Authority Revenue,
(Concorde Place Apartment Project),
6.300% due 7/1/16 (c) 1,051,250
1,000,000 AAA Lawrenceville Housing Authority, Multi-Family Revenue,
(Knollwood Park Apartments Project),
6.250% due 12/1/29 (c) 1,062,500
- ---------------------------------------------------------------------------------------------------------
6,653,850
- ---------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 5.4%
155,000 AAA Fulton County Housing Authority, Single-Family Mortgage
Revenue, Series A, GNMA-Collateralized,
6.600% due 3/1/28 (c) 166,044
350,000 AA+ Georgia State HFA, Single-Family Mortgage Revenue,
Series A, FHA-Insured, 6.600% due 12/1/23 (c) 373,188
320,000 AA+ Georgia State Residential Finance Authority, Home
Ownership Mortgage, Series A, FHA-Insured,
7.250% due 12/1/21 (c) 345,200
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) 525,319
550,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized,
6.450% due 3/1/16 (c) 583,688
- ---------------------------------------------------------------------------------------------------------
1,993,439
- ---------------------------------------------------------------------------------------------------------
Industrial Development -- 1.5%
500,000 A1* Savannah EDA, PCR, (Union Camp Corp. Project),
6.150% due 3/1/17 564,375
- ---------------------------------------------------------------------------------------------------------
Miscellaneous -- 6.9%
1,000,000 Baa2* Brunswick & Glynn Counties Development Authority
Revenue, (Pacific Corp. Project),
5.550% due 3/1/26 (c) 1,001,250
1,000,000 AAA Puerto Rico Commonwealth Infrastructure Financing
Authority, Series A, AMBAC-Insured,
5.000% due 7/1/28 970,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 13
<PAGE>
Schedules of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Miscellaneous -- 6.9% (continued)
$ 500,000 BBB Puerto Rico Housing Bank and Finance Agency,
7.500% due 12/1/06 (b) $ 588,125
- ---------------------------------------------------------------------------------------------------------
2,559,375
- ---------------------------------------------------------------------------------------------------------
Pollution Control -- 5.6%
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 1/1/12 594,375
1,000,000 NR Rockdale County Development Authority, Solid Waste
Disposal Revenue, (Visy Paper Project),
7.500% due 1/1/26 1,093,750
- ---------------------------------------------------------------------------------------------------------
2,061,156
- ---------------------------------------------------------------------------------------------------------
Public Facilities -- 4.0%
250,000 AAA Butts County COP, MBIA-Insured, 6.750% due 12/1/14 281,563
1,100,000 AAA Cobb-Marietta Counties Coliseum and Exhibit Hall Authority
Revenue, MBIA-Insured, 5.625% due 10/1/26 1,211,375
- ---------------------------------------------------------------------------------------------------------
1,492,938
- ---------------------------------------------------------------------------------------------------------
Short-Term (d) -- 0.8%
300,000 VMIG1* Heard County Development Authority, PCR, Georgia
Power Co., 3.650% due 9/1/29 300,000
- ---------------------------------------------------------------------------------------------------------
Transportation -- 7.5%
1,000,000 AAA Georgia State Tollway Authority Revenue Refunding,
(Georgia 400 Project), 5.000% due 7/1/10 1,041,250
250,000 AAA Metro Atlanta Rapid Transit Authority Revenue Refunding,
Series P, AMBAC-Insured, 6.250% due 7/1/20 289,688
1,500,000 A Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series Y, 5.000% due 7/1/36 1,447,500
- ---------------------------------------------------------------------------------------------------------
2,778,438
- ---------------------------------------------------------------------------------------------------------
Utilities -- 11.8%
Georgia Municipal Electric Authority Revenue:
600,000 AAA Series EE, AMBAC-Insured, 7.250% due 1/1/24 (b) 781,500
1,000,000 AAA Series Z, MBIA-Insured, 5.500% due 1/1/20 1,055,000
500,000 A- Georgia Municipal Gas Authority Revenue, (Southern
Storage Gas Project), 6.300% due 7/1/09 546,250
1,000,000 AA Hogansville Combined Public UtiIity System, Asset
Guaranty, 5.850% due 10/1/15 1,086,250
1,000,000 AAA Puerto Rico Electric Power Authority Revenue Refunding,
Series EE, MBIA-Insured, 4.500% due 7/1/18 925,000
- ---------------------------------------------------------------------------------------------------------
4,394,000
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
Schedules of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Water & Sewer -- 20.3%
$1,000,000 Aaa* Buford Water & Sewer Revenue, FSA-Insured,
5.050% due 7/1/21 $ 987,500
500,000 A+ Cartersville Development Authority Revenue Refunding,
Sewer Facilities, Anheuser Busch,
6.125% due 5/1/27 (c) 540,625
1,000,000 AAA Cherokee County Water & Sewer Authority Revenue,
FGIC-Insured, 5.000% due 8/1/27 965,000
625,000 AAA Douglasville-Douglas County Water & Sewer Authority
Revenue, AMBAC-Insured, 5.625% due 6/1/15 673,438
300,000 AAA Fulton County Water & Sewer Revenue, FGIC-Insured,
6.375% due 1/1/14 346,125
1,000,000 AAA Henry County Water & Sewer Authority Revenue,
AMBAC-Insured, 5.000% due 2/1/26 968,750
500,000 AAA Milledgeville Water & Sewer Revenue, FSA-Insured,
6.000% due 12/1/21 568,125
1,000,000 AA Peachtree City Water & Sewer Authority, Sewer System
Revenue, Series A, 5.375% due 3/1/22 1,030,000
1,500,000 AAA Rockdale County Water & Sewer Authority Revenue,
FSA-Insured, 5.000% due 7/1/22 1,481,250
- ---------------------------------------------------------------------------------------------------------
7,560,813
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $34,842,185**) $37,169,906
=========================================================================================================
</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 is segregated by Custodian for open purchase commitments.
(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
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 15
<PAGE>
Schedules of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Education -- 5.1%
$1,000,000 AAA Butler Area School District, GO, Series B, FGIC-Insured,
4.750% due 10/1/22 $ 935,000
1,050,000 AAA McKeesport Area School District, Series B, FGIC-Insured,
zero coupon to yield 6.076% due 10/1/20 330,750
1,000,000 Baa1* New Wilmington Municipal Authority College Revenue,
Westminster College, 5.350% due 3/1/28 988,750
- ---------------------------------------------------------------------------------------------------------
2,254,500
- ---------------------------------------------------------------------------------------------------------
Escrowed to Maturity (a) -- 3.8%
510,000 AAA Cambria County Hospital Development Authority,
Conemaugh Valley Memorial Hospital,
7.625% due 9/1/11 608,175
435,000 AAA Lewisburg Area School District Building, AMBAC-Insured,
9.750% due 2/15/04 (b) 527,981
290,000 AAA Southeastern Greene School District, 9.375% due 7/1/03 331,687
165,000 AAA York County GO, Refunding, AMBAC-Insured,
8.875% due 6/1/06 198,825
- ---------------------------------------------------------------------------------------------------------
1,666,668
- ---------------------------------------------------------------------------------------------------------
General Obligation -- 5.8%
1,000,000 AAA Cambria County GO, FGIC-Insured, 5.000% due 8/15/23 968,750
1,000,000 A Puerto Rico Commonwealth GO, Public Improvement,
4.500% due 7/1/23 901,250
2,000,000 AAA Westmoreland County GO, FGIC-Insured,
zero coupon to yield 5.954% due 12/1/18 697,500
- ---------------------------------------------------------------------------------------------------------
2,567,500
- ---------------------------------------------------------------------------------------------------------
Hospital -- 22.4%
500,000 AAA Allegheny Hospital Development Authority, (General
Hospital Project), Series A, MBIA-Insured,
6.250% due 9/1/20 549,375
1,000,000 BBB Allentown Area Hospital Authority Revenue, Sacred
Heart Hospital, 6.750% due 11/15/14 1,093,750
1,000,000 BBB+ Hazelton Health Services Authority Revenue, St. Joseph's
Medical Center, 6.200% due 7/1/26 1,070,000
1,000,000 BBB Horizon Hospital System Authority Revenue, Horizon
Hospital Systems Inc., 6.350% due 5/15/26 1,076,250
1,000,000 Aaa* Lehigh County General Purpose Authority Revenues,
Lehigh Valley Health Network, Series A, MBIA-Insured,
5.000% due 7/1/18 972,500
1,600,000 AAA Philadelphia Hospital & Higher Education Facilities Authority,
Hospital Revenue, FHA-Insured, Series A,
5.300% due 1/1/18 1,594,000
1,000,000 AA Potter County Hospital Authority Revenue, Asset
Guaranteed, 6.050% due 8/1/24 1,063,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
Schedules of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Hospital -- 22.4% (continued)
$ 500,000 BBB Puerto Rico Industrial, Tourist, Educational, Medical &
Environmental Control Facilities, (Ryder Memorial
Hospital Project), Series A, 6.700% due 5/1/24 $ 542,500
Scranton-Lackawanna Health & Welfare Authority Revenue:
500,000 BBB-++ Allied Services Rehabilitation Hospitals, (Project-A),
7.600% due 7/15/20 555,625
750,000 BBB- Moses Taylor Hospital Project, 6.250% due 7/1/20 799,688
500,000 AAA Wayne County Hospital & Health Facilities Authority,
County Guaranteed Hospital Revenue, (Wayne Memorial
Hospital Project), MBIA-Insured, 6.250% due 7/1/14 553,125
- ---------------------------------------------------------------------------------------------------------
9,870,563
- ---------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 4.0%
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 1,556,250
205,000 AAA Pittsburgh Urban Redevelopment Authority, Mortgage
Revenue, FNMA/GNMA-Collateralized, Series B,
6.950% due 10/1/10 (c) 215,506
- ---------------------------------------------------------------------------------------------------------
1,771,756
- ---------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 7.6%
Allegheny County, Residential Mortgage Refunding,
Single-Family Housing, GNMA-Collateralized:
970,000 Aaa* 6.875% due 5/1/26 (b)(c) 1,052,450
1,675,000 Aaa* Zero coupon to yield 7.496% due 5/1/27 (c) 198,906
1,000,000 AA+ Pennsylvania Housing Finance Agency, Single-Family
Housing, Series A, 5.800% due 10/1/29 (c) 1,035,000
990,000 AAA Puerto Rico Single-Family Housing Mortgage Revenue,
GNMA/FNMA/FHLMC-Collateralized,
6.250% due 4/1/29 (c) 1,050,638
- ---------------------------------------------------------------------------------------------------------
3,336,994
- ---------------------------------------------------------------------------------------------------------
Industrial Development -- 12.8%
1,000,000 BBB- Allegheny County IDA Refunding Environmental
Improvement, USX Corp., 6.700% due 12/1/20 (b) 1,088,750
100,000 P-1* Beaver County IDA, Environmental Improvement,
(BASF Corp. Project), 3.950% due 9/1/32 (c)(d) 100,000
1,000,000 A- Bradford IDA Solid Waste, International Paper Co.,
6.600% due 3/1/19 (c) 1,112,500
1,000,000 A Delaware County, Industrial Development Authority
Revenue, Resource Recovery Facility, Series A,
6.200% due 7/1/19 1,081,250
1,000,000 A- Erie County IDA Environmental Improvement Revenue,
(International Paper Co. Project), Series A,
7.625% due 11/1/18 (b)(c) 1,168,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 17
<PAGE>
Schedules of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Industrial Development -- 12.8% (continued)
$ 200,000 A-1+ Philadelphia, Authority for Industrial Development
Revenues, (Fox Chase Cancer Center Project),
3.750% due 7/1/25 (d) $ 200,000
900,000 A-1+ Schuylkill County IDA, Resource Recovery Revenue,
Northeastern Power Co., 3.750% due 12/1/22 (d) 900,000
- ---------------------------------------------------------------------------------------------------------
5,651,250
- ---------------------------------------------------------------------------------------------------------
Life-Care -- 5.9%
Montgomery County IDA, Retirement Community Revenue:
1,500,000 A- Series A, 5.875% due 11/15/22 1,556,250
1,000,000 A- Series B, 5.625% due 11/15/12 1,031,250
- ---------------------------------------------------------------------------------------------------------
2,587,500
- ---------------------------------------------------------------------------------------------------------
Miscellaneous -- 6.2%
500,000 BBB- Allegheny County IDA Revenue Refunding, Environmental
Improvement, USX Corp., 5.600% due 9/1/30 503,125
1,000,000 BBB Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,176,250
1,000,000 AAA York County Solid Waste & Refuse Authority, Waste
System Revenue, FGIC-Insured, 5.500% due 12/1/14 1,066,250
- ---------------------------------------------------------------------------------------------------------
2,745,625
- ---------------------------------------------------------------------------------------------------------
Pollution Control -- 3.7%
1,000,000 AAA Northhampton County IDA, Metropolitan Edison, Series A,
MBIA-Insured, 6.100% due 7/15/21 1,080,000
500,000 BBB- Pennsylvania Economic Development Financing Authority,
Resource Recovery Revenue, (Colver Project), Series D,
7.150% due 12/1/18 (c) 557,500
- ---------------------------------------------------------------------------------------------------------
1,637,500
- ---------------------------------------------------------------------------------------------------------
Pre-Refunded(e) -- 2.7%
920,000 Aaa* Philadelphia Hospital Revenue, (United Hospital Inc. Project),
(Call 7/1/05 @ 100), 10.875% due 7/1/08 (b) 1,191,400
- ---------------------------------------------------------------------------------------------------------
Solid Waste -- 2.5%
1,000,000 A- New Morgan IDA Solid Waste Disposal, Browning Ferris
Industries Inc., 6.500% due 4/1/19 (c) 1,088,750
- ---------------------------------------------------------------------------------------------------------
Transportation -- 9.6%
1,200,000 AAA Allegheny County Airport Revenue, Pittsburgh International
Airport, Series B, MBIA-Insured, 5.000% due 1/1/17 1,174,500
1,825,000 A Puerto Rico Commonwealth Highway & Transportation
Authority, 5.000% due 7/1/36 1,761,125
1,200,000 BBB- Puerto Rico Ports Authority Revenue, American Airlines,
Series A, 6.250% due 6/1/26 (c) 1,303,500
- ---------------------------------------------------------------------------------------------------------
4,239,125
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
Schedules of Investments (continued) March 31, 1998
- --------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATINGS SECURITY VALUE
=========================================================================================================
<S> <C> <C> <C>
Utilities -- 3.1%
$ 400,000 BBB Guam Power Authority Revenue, Series A,
6.750% due 10/1/24 $ 442,500
1,000,000 AAA Puerto Rico Electric Power Authority, Power Revenue,
Series EE, MBIA-Insured, 4.500% due 7/1/18 925,000
- ---------------------------------------------------------------------------------------------------------
1,367,500
- ---------------------------------------------------------------------------------------------------------
Water and Sewer -- 4.8%
1,000,000 AAA Lancaster County Solid Waste Management, Series A,
AMBAC-Insured, 5.000% due 12/15/14 (c) 970,000
1,000,000 AAA Philadelphia Water & Wastewater Revenue, MBIA-Insured,
6.250% due 8/1/12 1,150,000
- ---------------------------------------------------------------------------------------------------------
2,120,000
- ---------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $41,570,624**) $44,096,631
=========================================================================================================
</TABLE>
(a) Bond is escrowed to maturity with U.S. government securities and is
considered by the Manager to be triple-A rated even if the issuer has not
applied for new ratings.
(b) Security segregated by Custodian for open purchase commitment.
(c) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(d) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(e) Bond is escrowed with U.S. government securities and is considered by the
Manager to be triple-A rated even if the issuer has not applied for new
ratings.
** 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 -- Georgia and Pennsylvania Portfolios 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 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 of exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic rating
from "Aa" to "Baa", where 1 is the highest and 3 the lowest rating within its
generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
- --------------------------------------------------------------------------------
20 1998 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 which are 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 con sidered 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 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 -- Georgia and Pennsylvania Portfolios 21
<PAGE>
Statements of Assets and Liabilities March 31, 1998
- --------------------------------------------------------------------------------
Georgia Pennsylvania
Portfolio Portfolio
================================================================================
ASSETS:
Investments, at value (Cost -- $34,842,185,
and $41,570,624, respectively) $37,169,906 $44,096,631
Cash 28,057 93,132
Interest receivable 485,776 680,563
Receivable for Fund shares sold 167,636 28,825
Receivable for securities sold 10,000 --
- --------------------------------------------------------------------------------
Total Assets 37,861,375 44,899,151
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 1,923,000 1,900,829
Management fees payable 38,509 13,969
Distribution fees payable 3,902 5,313
Payable for Fund shares purchased 3,400 500
Accrued expenses 37,965 26,226
- --------------------------------------------------------------------------------
Total Liabilities 2,006,776 1,946,837
- --------------------------------------------------------------------------------
Total Net Assets $35,854,599 $42,952,314
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 2,670 $ 3,175
Capital paid in excess of par value 33,463,884 39,832,873
Undistributed (overdistributed) net
investment income (2,139) 96,710
Accumulated net realized gain
on security transactions 62,463 493,549
Net unrealized appreciation of investments 2,327,721 2,526,007
- --------------------------------------------------------------------------------
Total Net Assets $35,854,599 $42,952,314
================================================================================
Shares Outstanding:
Class A 1,526,353 1,177,980
- --------------------------------------------------------------------------------
Class B 797,838 1,425,174
- --------------------------------------------------------------------------------
Class C 346,007 571,989
- --------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $13.43 $13.54
- --------------------------------------------------------------------------------
Class B* $13.43 $13.52
- --------------------------------------------------------------------------------
Class C** $13.41 $13.51
- --------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(Net asset value plus 4.17% of net asset value) $13.99 $14.10
================================================================================
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within one year from initial purchase (See Note 4).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase (See Note 4).
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
Statements of Operations For the Year Ended March 31, 1998
- --------------------------------------------------------------------------------
Georgia Pennsylvania
Portfolio Portfolio
================================================================================
INVESTMENT INCOME:
Interest $1,641,459 $2,321,385
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 131,737 179,220
Distribution fees (Note 4) 109,190 184,203
Shareholder and system servicing fees 21,600 24,600
Audit and legal 17,300 16,700
Shareholder communications 11,100 16,000
Pricing service fees 6,000 6,400
Registration fees 4,000 2,500
Trustees' fees 2,700 3,500
Custody 2,100 2,600
Other 4,600 5,850
- --------------------------------------------------------------------------------
Total Expenses 310,327 441,573
Less: Management fee waiver (Note 4) 96,279 165,251
- --------------------------------------------------------------------------------
Net Expenses 214,048 276,322
- --------------------------------------------------------------------------------
Net Investment Income 1,427,411 2,045,063
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 10,448,411 32,521,621
Cost of securities sold 10,208,823 31,696,207
- --------------------------------------------------------------------------------
Net Realized Gain 239,588 825,414
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of year 437,671 539,401
End of year 2,327,721 2,526,007
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 1,890,050 1,986,606
- --------------------------------------------------------------------------------
Net Gain on Investments 2,129,638 2,812,020
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 3,557,049 $4,857,083
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 23
<PAGE>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Years Ended
March 31,
-------------------------
Georgia Portfolio 1998 1997
===============================================================================
OPERATIONS:
Net investment income $1,427,411 $1,111,529
Net realized gain 239,588 127,579
Increase (decrease) in net unrealized appreciation 1,890,050 (150,783)
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 3,557,049 1,088,325
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (1,426,979) (1,099,230)
Net realized gains (176,258) (122,390)
- -------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,603,237) (1,221,620)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 10,292,258 9,113,953
Net asset value of shares issued
for reinvestment of dividends 1,042,371 778,557
Cost of shares reacquired (2,503,707) (2,808,135)
- -------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 8,830,922 7,084,375
- -------------------------------------------------------------------------------
Increase in Net Assets 10,784,734 6,951,080
NET ASSETS:
Beginning of year 25,069,865 18,118,785
- -------------------------------------------------------------------------------
End of year* $35,854,599 $25,069,865
===============================================================================
* Includes overdistributed net investment income of: $(2,139) $(2,571)
===============================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
For the Years Ended
March 31,
---------------------------
Pennsylvania Portfolio 1998 1997
================================================================================
OPERATIONS:
Net investment income $2,045,063 $1,819,626
Net realized gain 825,414 6,960
Increase in net unrealized appreciation 1,986,606 88,962
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 4,857,083 1,915,548
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (1,946,032) (1,826,062)
Net realized gains (322,194) --
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (2,268,226) (1,826,062)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 8,372,759 9,408,115
Net asset value of shares issued
for reinvestment of dividends 1,490,181 1,155,353
Cost of shares reacquired (5,941,286) (3,871,277)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 3,921,654 6,692,191
- --------------------------------------------------------------------------------
Increase in Net Assets 6,510,511 6,781,677
NET ASSETS:
Beginning of year 36,441,803 29,660,126
- --------------------------------------------------------------------------------
End of year* $42,952,314 $36,441,803
================================================================================
* Includes undistributed (overdistributed)
net investment income of: $96,710 $(2,321)
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 25
<PAGE>
Notes to Financial Statements
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 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
securities and various relationships between securities; (c) securities maturing
within 60 days are valued at cost plus accreted discount or minus amortized
premium, which approximates value; (d) gains or losses on the sale of securities
are calculated by using the specific identification method; (e) interest income,
adjusted for amortization of premium and original issue discount, is recorded on
an accrual basis; market discount is recognized upon the disposition of the
security; (f) dividends and distributions to shareholders are recorded on the
ex-dividend date; (g) direct expenses are charged to each Portfolio and each
class; management fees and general fund expenses are allocated on the basis of
relative net assets; (h) each Portfolio intends to comply with the applicable
provisions of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes;
(i) the character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles; and (j) estimates and assumptions are required to be made
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (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"), formerly known as Smith Barney Mutual Funds
Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"),
acts as investment manager to the Portfolios. The Portfolios pay MMC a manage
ment fee calcu lated 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 year ended March 31,
1998.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of
Fund shares. For the year ended March 31, 1998, SB received sales charges of
approximately $115,000 on purchases of the Portfolios' Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B shares,
which applies if redemption occurs less than one year from initial purchase and
declines by 0.50% the first year after purchase and by 1.00% per year until no
CDSC is incurred. Class C shares have a 1.00% CDSC if redemption occurs within
the first year of purchase. For the year ended March 31, 1998, CDSCs paid to
Smith Barney for Class B shares were approximately $10,000 and $22,000 for the
Georgia Portfolio and Pennsylvania Portfolio, respectively.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 27
<PAGE>
Notes to Financial Statements (continued)
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to Class A, B and C shares calculated at 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 C shares calculated at an annual
rate of 0.50% and 0.55% of the average daily net assets of each class,
respectively.
For the year ended March 31, 1998, total Distribution Plan fees incurred were:
Portfolio Class A Class B Class C
================================================================================
Georgia $24,898 $57,757 $26,535
- --------------------------------------------------------------------------------
Pennsylvania 23,404 113,999 46,800
================================================================================
All officers and one Trustee of the Fund are employees of SB.
5. Investments
During the year ended March 31, 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 $23,996,447 $38,125,311
- --------------------------------------------------------------------------------
Sales 10,448,411 32,521,621
================================================================================
At March 31, 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 $2,380,298 $2,576,732
Gross unrealized depreciation (52,577) (50,725)
- --------------------------------------------------------------------------------
Net unrealized appreciation $2,327,721 $2,526,007
================================================================================
6. Shares of Beneficial Interest
At March 31, 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.
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At March 31, 1998, total paid-in capital amounted to the following for each
class and their respective Portfolio:
Portfolio Class A Class B Class C
================================================================================
Georgia $19,124,215 $10,007,955 $4,334,384
- --------------------------------------------------------------------------------
Pennsylvania 14,648,665 17,987,399 7,199,984
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 1998 March 31, 1997
--------------------- ---------------------
Georgia Portfolio Shares Amount Shares Amount
=====================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 428,273 $5,703,527 457,524 $5,795,183
Shares issued on reinvestment 44,976 594,980 33,287 419,038
Shares redeemed (108,781) (1,404,440) (108,171) (1,364,400)
- -------------------------------------------------------------------------------------
Net Increase 364,468 $4,894,067 382,640 $4,849,821
=====================================================================================
Class B
Shares sold 244,140 $3,233,404 202,325 $2,540,756
Shares issued on reinvestment 22,249 294,164 17,331 218,224
Shares redeemed (58,133) (759,900) (66,812) (843,932)
- -------------------------------------------------------------------------------------
Net Increase 208,256 $2,767,668 152,844 $1,915,048
=====================================================================================
Class C
Shares sold 101,894 $1,355,327 61,542 $778,014
Shares issued on reinvestment 11,606 153,227 11,251 141,295
Shares redeemed (26,031) (339,367) (47,652) (599,803)
- -------------------------------------------------------------------------------------
Net Increase 87,469 $1,169,187 25,141 $319,506
=====================================================================================
Pennsylvania Portfolio
=====================================================================================
Class A
Shares sold 192,029 $2,564,480 307,459 $3,903,533
Shares issued on reinvestment 52,700 701,357 42,485 539,870
Shares redeemed (263,300) (3,525,081) (91,821) (1,170,767)
- -------------------------------------------------------------------------------------
Net Increase (Decrease) (18,571) $(259,244) 258,123 $3,272,636
=====================================================================================
Class B
Shares sold 265,068 $3,525,937 328,162 $4,153,859
Shares issued on reinvestment 42,873 570,003 35,686 452,643
Shares redeemed (113,579) (1,504,701) (174,300) (2,226,160)
- -------------------------------------------------------------------------------------
Net Increase 194,362 $2,591,239 189,548 $2,380,342
=====================================================================================
Class C
Shares sold 171,289 $2,282,342 106,472 $1,350,723
Shares issued on reinvestment 16,451 218,821 12,840 162,840
Shares redeemed (69,192) (911,504) (37,197) (474,350)
- -------------------------------------------------------------------------------------
Net Increase 118,548 $1,589,659 82,115 $1,039,213
=====================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 29
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------
Georgia Portfolio 1998 1997 1996 1995(1)
=========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.48 $12.50 $12.10 $12.00
- -----------------------------------------------------------------------------------------
Income From Operations:
Net investment income (2) 0.67 0.69 0.70 0.62
Net realized and unrealized gain 1.03 0.04 0.45 0.10*
- -----------------------------------------------------------------------------------------
Total Income From Operations 1.70 0.73 1.15 0.72
- -----------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.67) (0.67) (0.70) (0.62)
Net realized gains (0.08) (0.08) (0.05) --
- -----------------------------------------------------------------------------------------
Total Distributions (0.75) (0.75) (0.75) (0.62)
- -----------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.43 $12.48 $12.50 $12.10
- -----------------------------------------------------------------------------------------
Total Return 13.85% 5.95% 9.67% 6.29%++
- -----------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $20,502 $14,495 $9,744 $8,520
- -----------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (2) 0.50% 0.48% 0.38% 0.28%+
Net investment income 5.10 5.49 5.57 5.43+
- -----------------------------------------------------------------------------------------
Portfolio Turnover Rate 36% 81% 63% 34%
=========================================================================================
</TABLE>
(1) For the period from April 4, 1994 (inception date) to March 31, 1995.
(2) The Manager has waived all or part of its fees for 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
--------------------------- ---------------------------
1998 1997 1996 1995 1998 1997 1996 1995
------ ----- ----- ----- ------ ----- ----- -----
Class A $0.04 $0.04 $0.11 $0.12 0.83% 0.90% 1.23% 1.20%+
* 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.
# As a result of voluntary expense limitations, expense ratios will not exceed
0.80% for Class A shares.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
30 1998 Annual Report to Shareholders
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class B Shares
-------------------------------------------------
Georgia Portfolio 1998 1997 1996 1995(1)(2)
================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.47 $12.50 $12.11 $12.27
- ------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (3) 0.61 0.62 0.64 0.49
Net realized and unrealized gain (loss) 1.03 0.04 0.45 (0.16)*
- ------------------------------------------------------------------------------------------------
Total Income From Operations 1.64 0.66 1.09 0.33
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.60) (0.61) (0.65) (0.49)
Net realized gains (0.08) (0.08) (0.05) --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.68) (0.69) (0.70) (0.49)
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.43 $12.47 $12.50 $12.11
- ------------------------------------------------------------------------------------------------
Total Return 13.39% 5.33% 9.08% 2.88%++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $10,712 $7,354 $5,461 $2,551
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 1.02% 1.00% 0.92% 0.85%+
Net investment income 4.58 4.97 5.20 5.37+
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 36% 81% 63% 34%
================================================================================================
</TABLE>
(1) For the period from June 15, 1994 (inception date) to March 31, 1995.
(2) On November 7, 1994, the former Class E shares were renamed Class B shares.
(3) The Manager has waived all or part of its fees 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
-------------------------- ----------------------------
1998 1997 1996 1995 1998 1997 1996 1995
----- ----- ----- ----- ----- ---- ---- ----
Class B $0.04 $0.05 $0.10 $0.11 1.35% 1.42% 1.77% 1.82%+
* 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.
# As a result of voluntary expense limitations, expense ratios will not exceed
1.30% for Class B shares.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 31
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class C Shares
------------------------------------------------
Georgia Portfolio 1998 1997 1996 1995(1)(2)
=======================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.46 $12.49 $12.09 $12.06
- ---------------------------------------------------------------------------------------
Income From Operations:
Net investment income (3) 0.60 0.62 0.63 0.55
Net realized and unrealized gain 1.02 0.03 0.46 0.04*
- ---------------------------------------------------------------------------------------
Total Income From Operations 1.62 0.65 1.09 0.59
- ---------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.59) (0.60) (0.64) (0.56)
Net realized gains (0.08) (0.08) (0.05) --
- ---------------------------------------------------------------------------------------
Total Distributions (0.67) (0.68) (0.69) (0.56)
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.41 $12.46 $12.49 $12.09
- ---------------------------------------------------------------------------------------
Total Return 13.23% 5.28% 9.12% 5.11%++
- ---------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $4,641 $3,221 $2,914 $1,295
- ---------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 1.06% 1.04% 0.97% 0.90%+
Net investment income 4.54 4.93 5.18 5.22+
- ---------------------------------------------------------------------------------------
Portfolio Turnover Rate 36% 81% 63% 34%
=======================================================================================
</TABLE>
(1) For the period from April 14, 1994 (inception date) to March 31, 1995.
(2) On November 7, 1994, the former Class B shares were renamed Class C shares.
(3) The Manager has waived all or part of its fees for 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
-------------------------- -------------------------
1998 1997 1996 1995 1998 1997 1996 1995
----- ----- ----- ----- ---- ---- ---- ----
Class C $0.04 $0.05 $0.10 $0.12 1.39% 1.46% 1.82% 1.85%+
* 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.
# As a result of voluntary expense limitations, expense ratios will not exceed
1.35% for Class C shares.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
32 1998 Annual Report to Shareholders
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------
Pennsylvania Portfolio 1998 1997 1996(1) 1995(2)(3)
=============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.66 $12.62 $12.40 $12.00
- ---------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.73 0.71 0.70 0.67
Net realized and unrealized gain 0.95 0.04 0.29 0.35*
- ---------------------------------------------------------------------------------------------
Total Income From Operations 1.68 0.75 0.99 1.02
- ---------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.69) (0.71) (0.72) (0.62)
Net realized gains (0.11) -- (0.05) --
- ---------------------------------------------------------------------------------------------
Total Distributions (0.80) (0.71) (0.77) (0.62)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.54 $12.66 $12.62 $12.40
- ---------------------------------------------------------------------------------------------
Total Return 13.52% 6.11% 8.08% 8.82%++
- ---------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $15,955 $15,152 $11,847 $7,974
- ---------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 0.37% 0.37% 0.38% 0.29%+
Net investment income 5.46 5.66 5.57 5.76+
- ---------------------------------------------------------------------------------------------
Portfolio Turnover Rate 81% 122% 88% 38%
=============================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(2) For the period from April 4, 1994 (inception date) to March 31, 1995.
(3) On October 10, 1994, the former Class C shares were exchanged into Class A
shares.
(4) The Manager has waived all or part of its fees for 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
--------------------------- ----------------------------
1998 1997 1996 1995 1998 1997 1996 1995
----- ----- ----- ----- ---- ----- ----- ------
Class A $0.05 $0.06 $0.07 $0.09 0.79% 0.82% 0.93% 1.03%+
* 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.
# As a result of voluntary expense limitations, expense ratios will not exceed
0.80% for 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 -- Georgia and Pennsylvania Portfolios 33
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class B Shares
-----------------------------------------------------
Pennsylvania Portfolio 1998 1997 1996(1) 1995(2)(3)
=============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.64 $12.61 $12.39 $12.35
- ---------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.65 0.65 0.64 0.51
Net realized and unrealized gain 0.96 0.03 0.29 0.01*
- ---------------------------------------------------------------------------------------------
Total Income From Operations 1.61 0.68 0.93 0.52
- ---------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.62) (0.65) (0.66) (0.48)
Net realized gains (0.11) -- (0.05) --
- ---------------------------------------------------------------------------------------------
Total Distributions (0.73) (0.65) (0.71) (0.48)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.52 $12.64 $12.61 $12.39
- ---------------------------------------------------------------------------------------------
Total Return 12.97% 5.56% 7.61% 4.48%++
- ---------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $19,268 $15,559 $13,131 $4,850
- ---------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 0.89% 0.88% 0.88% 0.82%+
Net investment income 4.94 5.15 5.07 5.31+
- ---------------------------------------------------------------------------------------------
Portfolio Turnover Rate 81% 122% 88% 38%
=============================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(2) For the period from June 20, 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 for 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
----------------------------- -------------------------------
1998 1997 1996 1995 1998 1997 1996 1995
----- ----- ----- ----- ----- ----- ----- -----
Class B $0.05 $0.06 $0.07 $0.08 1.31% 1.33% 1.44% 1.58%+
* 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.
# As a result of voluntary expense limitations, expense ratios will not exceed
1.30% for Class B shares.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
34 1998 Annual Report to Shareholders
<PAGE>
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class C Shares
--------------------------------------------------
Pennsylvania Portfolio 1998 1997 1996(1) 1995(2)(3)
=========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.64 $12.61 $12.39 $12.00
- -----------------------------------------------------------------------------------------
Income From Operations:
Net investment income (4) 0.64 0.64 0.64 0.59
Net realized and unrealized gain 0.96 0.04 0.29 0.36*
- -----------------------------------------------------------------------------------------
Total Income From Operations 1.60 0.68 0.93 0.95
- -----------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.62) (0.65) (0.66) (0.56)
Net realized gains (0.11) -- (0.05) --
- -----------------------------------------------------------------------------------------
Total Distributions (0.73) (0.65) (0.71) (0.56)
- -----------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.51 $12.64 $12.61 $12.39
- -----------------------------------------------------------------------------------------
Total Return 12.84% 5.51% 7.56% 8.14%++
- -----------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $7,729 $5,731 $4,682 $3,337
- -----------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 0.94% 0.94% 0.94% 0.86%+
Net investment income 4.89 5.09 5.00 5.04+
- -----------------------------------------------------------------------------------------
Portfolio Turnover Rate 81% 122% 88% 38%
=========================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
(2) For the period from April 5, 1994 (inception date) to March 31, 1995.
(3) On November 7, 1994, the former Class B shares were renamed Class C shares.
(4) The Manager has waived all or part of its fees for 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
-------------------------- ------------------------------
1998 1997 1996 1995 1998 1997 1996 1995
----- ----- ----- ----- ----- ----- ----- -----
Class C $0.05 $0.06 $0.07 $0.09 1.36% 1.39% 1.49% 1.56%+
* 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.
# As a result of voluntary expense limitations, expense ratios will not exceed
1.35% for Class C shares.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 35
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
of the Georgia and Pennsylvania Portfolios
of Smith Barney Muni Funds:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Georgia and Pennsylvania Portfolios of
Smith Barney Muni Funds as of March 31, 1998, the related statements of opera
tions for the year then ended, the statements of changes in net assets for each
of the years in the two-year period then ended and financial highlights for each
of the years in the three-year period then ended and for the period from April
4, 1994 (commencement of operations) to March 31, 1995. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan
dards. Those standards require that we plan and perform the audit to obtain
reason able assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian. As to securities purchased or
sold but not yet received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Georgia and Pennsylvania Port folios of Smith Barney Muni Funds as of March 31,
1998, the results of their opera tions for the year then ended, the changes in
their net assets for each of the years in the two-year period then ended and
financial highlights for each of the years in the three-year period then ended
and for the period from April 4, 1994 to March 31, 1995, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
May 15, 1998
- --------------------------------------------------------------------------------
36 1998 Annual Report to Shareholders
<PAGE>
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 1998:
o Percentage of the dividends paid by the Fund from net investment
income as tax-exempt to regular Federal income tax purposes:
Georgia Portfolio.................. 100%
Pennsylvania Portfolio............. 100%
o The Taxpayer Relief Act of 1997 enacted differing rates of tax on
various long-term capital gain transactions. As a result, the Fund
designates:
o Total long-term capital gain distributions paid which are
considered "28 percent rate gains":
Georgia Portfolio............ $3,005
Pennsylvania Portfolio....... $54,711
o Total long-term capital gain distributions paid which are
considered "20 percent rate gains":
Georgia Portfolio............ $79,780
Pennsylvania Portfolio....... N/A
- --------------------------------------------------------------------------------
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios 37
<PAGE>
Smith Barney [LOGO]
Muni Funds
Trustees
Donald R. Foley
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
C. Richard Youngdahl, 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
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds -- Georgia and Pennsylvania Portfolios. It is not author
ized for distribution to prospective investors unless accompanied or pre ceded
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.
Smith Barney Muni Funds
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD0798 5/98
