<PAGE>
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
SMITH BARNEY MUNI FUNDS
LIMITED TERM PORTFOLIO
STYLE PURE SERIES
ANNUAL REPORT
MARCH 31, 2000
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE
<PAGE>
Smith Barney
Muni Funds
[PHOTO]
HEATH B.
MCLENDON
Chairman
[PHOTO]
PETER M.
COFFEY
Vice President
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Muni Funds --
Limited Term Portfolio ("Fund") for the year ended March 31, 2000. In this
report, we summarize the period's prevailing economic and market conditions and
outline our portfolio strategy. A detailed summary of the Fund's performance can
be found in the appropriate sections that follow. We hope you find this report
to be useful and informative.
Performance Update
For the year ended March 31, 2000, the Fund had negative total returns of 1.46%
and 1.69%, for its Class A and L shares, respectively, without the effects of
sales charges. In comparison, the Intermediate Municipal Debt Fund peer group
average total return was a negative 0.46% for the same time period, according to
Lipper, Inc. (Lipper, Inc. is an independent fund-tracking organization.) Over
the one-year period covered by the report, the Fund distributed income dividends
totaling $0.32 per Class A share. For additional performance information please
refer to pages five and six.
Market and Economic Overview
The bond markets have changed dramatically over the past several years. In our
view, one central theme of this change, which began following the Asian crisis
in 1997, is that the capital markets can no longer rely on the U.S. Treasury
markets to provide a near-perfect "benchmark" of interest rate trends. Before
the Asian crisis, the capital markets relied on the U.S. Treasury market as a
measure to determine what bonds "should" yield.
Under these changing conditions, it may be more difficult for the Federal
Reserve Board ("Fed") to moderate the growth of the economy, since long-term
interest rates may not rise as much as the Fed puts upward pressure on short-
term rates. The shape of the U.S. Treasury yield curve just six months ago was
what we believed to be considered fairly normal. (The yield curve is a graphical
depiction of the relationship between the yield on bonds of the same credit
quality but different maturities. A normal yield curve depicts a relationship
whereby bonds with longer maturities have higher yields than bonds with shorter
maturities.) Usually, longer-term bonds are more volatile than short-term bonds
because more
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Smith Barney Muni Funds 1
<PAGE>
risk is associated with those bonds with longer maturities. As of the writing,
yields on longer-term bonds are depressed by potential reduced supply as well as
by expectations that the Fed may ultimately be successful in slowing the economy
and diffusing inflationary pressures. The result: a negatively sloped yield
curve for U.S. Treasuries. Instead of the usual upward-sloping curve, with
yields rising steadily along with the maturity of Treasury bonds, the highest
yields were for shorter-term bonds.
The U.S. economy continues to generate remarkable non-inflationary growth. The
Fed has increased short-term interest rates five times in the last nine months
by a total of 125 basis points (or 1.25%).1 The Fed remains committed to keeping
pressure on borrowing costs until the U.S. economy slows to a level that keeps
inflation from accelerating. One key question: How much tightening is necessary
to slow the economy to levels deemed desirable by the Fed? We think that
increases amounting to another 50 to 75 basis points may be sufficient to slow
economic growth. (A basis point is 0.01% or one-hundredth of a percent.)
Over the last year,the municipal bond market performed quite well,particularly
in comparison with non-U.S. Treasury taxable bonds. While municipals have been
unable to keep pace with the decline in yield in the U.S. Treasury sector, they
are clearly less volatile than many taxable bonds which are more susceptible to
credit problems and capital market liquidity issues. In our view, another factor
affecting the municipal bond market continues to be extremely tight supply. In
fact, new issue volume in January 2000 was less than half of that sold in
January 1999.
While no guarantees can be made, we believe that short-term and intermediate-
term municipal yields are likely to increase slightly in value for the following
reasons:
. The expected continuing increases in the federal funds rate which would put
upward pressure on short-term yields (The federal funds rate is the interest
rate that banks with excess reserves at a Federal Reserve district bank charge
other banks that need overnight loans.)
. A likely increase in supply, which would be felt most dramatically in the
supply of the short end of the yield curve
. The yields on municipal bonds with longer maturities are not nearly as
attractive as yields offered on short and intermediate term taxable bonds
The last factor is particularly important in terms of the Fund's current
investment portfolio strategy. While the U.S. Treasury yield curve has an
inverted shape, with the highest yields in five years, the municipal yield curve
has maintained a sharp positive slope. In fact, the difference in yield between
20-year and 30-year municipal bonds is only ten basis points as of this
writing.2
----------
1 On May 16, 2000, after this letter was written, the Fed raised interest
rates 0.50%, to 6.50%
2 Source: Salomon Smith Barney, a member of Citigroup
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2 2000 Annual Report to Shareholders
<PAGE>
Investment Strategy
The Fund 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.3
The Fund invests primarily in high-grade municipal securities with effective
maturities of less than ten years. One of our goals in the portfolio is to
deliver the performance of a longer-maturity fund with less market volatility.
While no guarantees can be made, we believe the combination of intermediate-term
securities and the Fund's high-quality orientation should help to reduce credit
risk and net asset value ("NAV") price volatility, while still maintaining a
competitive dividend yield for our shareholders.
As of March 31, 2000, the Fund's average weighted maturity was 5.1 years. The
Fund's largest holdings were concentrated in hospital bonds (21.5%), education
bonds (11.2%), and transportation bonds (9.8%).
As previously noted, the Fund's high-credit-quality orientation during the
reporting period remained unchanged. At the close of the period, approximately
94% of its holdings were rated investment grade (BBB/Baa and higher) by either
Standard & Poor's Corporation or Moody's Investors Service Inc. at the end of
March. (Standard & Poor's Corporation and Moody's Investors Service Inc. are two
major credit reporting and bond-rating agencies.)
While no guarantees can be given, we seek to attain an optimal balance between
our high and low coupon structures in the Fund. We are seeking to incorporate
additional call protection into the portfolio by selling off some of our older
higher-coupon bonds with shorter calls, and replacing them with bonds that have
a similar coupon structure, but are subject to early call.
Our bias has been toward higher coupons, as we believe they currently offer
excellent relative value. Our objective is to create a built-in income stream
for a long-term time frame if interest rates were to rise. To that end, we have
focused on securities with good credit quality and solid call protection, as we
believe they offer good long-term value versus many types of municipal
securities.
Market Outlook
In our opinion, the recent rise in interest rates has created some buying
opportunities. While no guarantees can be made, we believe that we can maintain
a competitive level of tax-exempt income consistent with prudent investing and
due diligence with respect to credit quality.
----------
3 Please note a portion of the income from this Fund may be subject to the
alternative minimum tax ("AMT")
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Smith Barney Muni Funds 3
<PAGE>
In light of the recent volatility in the bond markets, one surprising result has
been clear to us: Long-term municipal bond yields have not changed much in
several months. The relative stability of this asset class may be reassuring for
investors seeking to ride out bond market volatility (as well as higher
volatility found in the other major capital markets).
We also believe that Fed monetary policy action should be sufficient to slow the
economy without triggering higher inflation. The good news is that the economy's
"soft landing" is likely to be at a higher annual growth rate than was
previously thought possible due to the possible emergence of a "New Economy"
where technological advances can spur growth without inflationary pressures.
Although the bond markets remain unsettled, we maintain our positive outlook for
municipal securities because:
. Longer intermediate and long maturity yields remain very high relative to
their taxable counterparts. For example, some bonds are yielding roughly 95%
to 100% of similar maturity U.S. Treasuries
. The municipal yield curve remains very steeply sloped, even as the U.S.
Treasury yield curve is inverted
. When capital markets begin to believe that the Fed has achieved its goal of
easing growth down to non-inflationary levels, bonds may rally and shortages
of bonds with the best coupon structures and call provisions could eventually
take place
In closing, thank you for investing in the Smith Barney Muni Fund-Limited Term
Portfolio. We look forward to continuing to help you pursue your financial goals
in the years to come.
Sincerely,
/s/Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
April 3, 2000
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4 2000 Annual Report to Shareholders
<PAGE>
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Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
Net Asset Value
----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
3/31/00 $6.78 $6.36 $0.32 (1.46)%
3/31/99 6.76 6.78 0.33 5.29
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
================================================================================
Total $3.65
================================================================================
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Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
Net Asset Value
----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
3/31/00 $6.79 $6.37 $0.30 (1.69)%
3/31/99 6.76 6.79 0.31 5.04
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 $2.40
================================================================================
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Historical Performance -- Class Y Shares
--------------------------------------------------------------------------------
Net Asset Value
-----------------------
Beginning End Income Total
Year Ended of Year of Year Dividends Returns(1)
================================================================================
3/31/00 $6.78 $6.36 $0.33 (1.31)%
Inception* - 3/31/99 6.82 6.78 0.14 1.46+
================================================================================
Total $0.47
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
Smith Barney Muni Funds 5
<PAGE>
--------------------------------------------------------------------------------
Average Annual Total Return
--------------------------------------------------------------------------------
Without Sales Charge(1)
----------------------------------
Class A Class L Class Y
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Year Ended 3/31/00 (1.46)% (1.69)% (1.31)%
Five Years Ended 3/31/00 4.63 4.39 N/A
Ten Years Ended 3/31/00 5.84 N/A N/A
Inception* through 3/31/00 6.04 4.55 0.09
--------------------------------------------------------------------------------
With Sales Charge(2)
----------------------------------
Class A Class L Class Y
--------------------------------------------------------------------------------
Year Ended 3/31/00 (3.45)% (3.62)% (1.31)%
Five Years Ended 3/31/00 4.22 4.17 N/A
Ten Years Ended 3/31/00 5.62 N/A N/A
Inception* through 3/31/00 5.84 4.40 0.09
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cumulative Total Return
--------------------------------------------------------------------------------
Without Sales Charge(1)
--------------------------------------------------------------------------------
Class A (3/31/90 through 3/31/00) 76.33%
Class L (Inception* through 3/31/00) 38.02
Class Y (Inception* through 3/31/00) 0.13
--------------------------------------------------------------------------------
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 2.00% and 1.00%,
respectively, and Class L shares reflect the deduction of a 1.00% CDSC,
which applies if shares are redeemed within one year from initial
purchases.
* Inception dates for Class A, L and Y shares are November 28, 1988,
January 5, 1993 and November 12, 1998, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
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6 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the Limited Term Portfolio vs.
Lehman Brothers Municipal Bond Index
and Lehman Brothers Municipal 10-Year Bond Index+
--------------------------------------------------------------------------------
March 1990--March 2000
[GRAPH]
Limited Term Lehman Brothers Lehman Brothers
Portfolio Municipal Bond Index 10-Year Bond Index
Mar-90 9,797 10,000 10,000
Mar-91 10,603 10,922 10,968
Mar-92 11,450 12,013 11,990
Mar-93 12,574 13,517 13,576
Mar-94 13,034 13,831 13,958
Mar-95 13,776 14,860 15,007
Mar-96 14,691 16,105 16,338
Mar-97 15,323 16,982 17,191
Mar-98 16,650 18,801 18,976
Mar-99 17,531 19,967 20,166
Mar-00 17,276 19,950 20,470
+ Hypothetical illustration of $10,000 invested in Class A shares on March
31, 1990, 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, 2000. The
Lehman Brothers Municipal 10-Year Bond Index (consisting of maturities of
10 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 1984. Each index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund. The performance of the
Portfolio's other classes may be greater or less than the Class A shares'
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
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Smith Barney Muni Funds 7
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Schedule of Investments March 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT RATING+ SECURITY VALUE
====================================================================================================================================
Education -- 11.2%
<S> <C> <C> <C>
Arizona Education Loan Marketing Corp.,
Education Loan Revenue Bonds:
$ 2,825,000 Aa2* 7.000% due 3/1/02(a) $2,916,812
1,000,000 Aa* 6.375% due 9/1/05(a) 1,030,000
1,655,000 A Connecticut State Health & Educational Facilities
Authority Revenue, Hartford University, Series D,
6.750% due 7/1/12 1,729,475
1,000,000 AAA Franklin, TN Special School District, Capital Appreciation,
FSA-Insured, zero coupon due 6/1/18 350,000
1,940,000 AAA Granbury, TX GO, ISD Refunding, Capital Appreciation,
PSFG, zero coupon due 8/1/18 669,300
1,000,000 A+ Illinois Student Assistance Commission, Student Loan
Revenue, Series H, 6.100% due 3/1/01(a) 1,008,680
2,000,000 Aaa* Indiana State Educational Facilities Authority Revenue,
Rose Hulman Institute of Technology, MBIA-Insured,
5.000% due 6/1/17 1,817,500
1,000,000 Aaa* Kentucky Higher Education Student Loan Corp.,
Insured Student Loan Revenue, Series 91B,
6.500% due 12/1/00(a) 1,014,000
3,075,000 AAA McKeesport, PA GO, Area School District,
Capital Appreciation, Series C, AMBAC-Insured,
zero coupon due 10/1/18 1,057,031
3,515,000 Aaa* Midlothian, TX ISD, Capital Appreciation Refunding,
PSFG, zero coupon due 2/15/17 1,252,219
465,000 AA Monroe County, NY IDA, Civic Facilities Revenue,
(St. John Fisher College Project), Asset Guaranteed,
5.500% due 6/1/10 470,813
1,005,000 A* Montana State Higher Education Student Assistance
Corp., Student Loan Revenue, Series 92B,
7.050% due 6/1/04(a) 1,028,869
New York State Dormitory Authority Revenue:
1,205,000 AAA City University System, FSA-Insured, 5.750% due 7/1/12 1,254,706
1,025,000 AA Long Island University, Asset Guaranteed,
5.000% due 9/1/14 954,531
1,780,000 AA Marymount Manhattan College, Asset Guaranteed,
6.375% due 7/1/14 1,893,475
1,715,000 AAA State University Educational Facilities, MBIA-Insured,
6.000% due 5/15/15 1,798,606
2,950,000 AAA New York State Urban Development Corp. Revenue
Refunding, (CTR Individual Project), MBIA-Insured,
5.500% due 1/1/13 2,968,438
North Texas Higher Education Authority Inc.,
Student Loan Revenue:
1,475,000 AAA AMBAC-Insured, 7.000% due 4/1/01(a) 1,510,267
2,400,000 A* Series D, 6.300% due 4/1/09(a) 2,403,000
</TABLE>
See Notes to Financial Statements.
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8 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
-------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
Education -- 11.2% (continued)
<S> <C> <C> <C>
$ 1,500,000 A* Rhode Island Student Loan Authority Revenue Refunding,
Series 92B, 6.750% due 12/1/01(a) $ 1,539,375
1,320,000 BBB- Savannah, GA EDA, Revenue, (College of Art & Design Inc.
Project), 6.200% due 10/1/09 1,336,500
1,500,000 AAA Schuylkill, PA Redevelopment Authority Revenue,
Commonwealth Lease Revenue Bonds, Series A,
FGIC-Insured, 6.850% due 6/1/03 1,563,750
-------------------------------------------------------------------------------------------------------------------------
31,567,347
-------------------------------------------------------------------------------------------------------------------------
Escrowed to Maturity(b) -- 7.4%
205,000 AAA Albuquerque, NM Hospital Revenue, 7.500% due 7/1/08 223,963
40,000 AAA Belleville, IL Hospital Facilities Revenue, 7.750% due 42,950
9/1/06
215,000 Aaa* Bolingbrook, IL Will & DuPage Counties, (Hinsdale &
Sanitarium Hospital Project), 7.250% due 8/1/08 233,544
1,780,000 AAA Boston, MA Water & Sewer Community Revenue,
10.875% due 1/1/09 2,269,500
85,000 Aaa* Camarillo, CA Hospital Revenue, Pleasant Valley Hospital
Building Corp., 9.700% due 12/15/07 100,300
525,000 AAA Cambria County, PA Hospital Development Authority,
Hospital Revenue, Conemaugh Valley Memorial Hospital,
7.625% due 9/1/11 595,875
105,000 AAA Coatesville, PA Water Guaranteed Revenue,
6.250% due 10/15/13 111,038
500,000 AAA Cobb County, GA Kennestone Hospital Authority Revenue,
Series 86A, MBIA-Insured, 7.750% due 2/1/07 545,625
270,000 Baa3* Delaware County, PA Development Authority Revenue,
(Elwyn Inc. Project), 7.750% due 6/1/00 271,455
830,000 AAA Erie County, OH Hospital Improvement, Sandusky
Memorial Hospital, 8.750% due 1/1/06 916,112
65,000 AAA Farmington, NM Utilities Systems Revenue,
10.000% due 1/1/02 68,575
Franklin County, OH Hospital Revenue:
980,000 NR Children's Hospital Project, 10.375% due 6/1/13 1,259,300
60,000 AAA Grant Hospital Project, 10.000% due 12/1/01 62,475
935,000 AAA Houston, TX Airport Systems Revenue, 5.500% due 7/1/12 946,688
1,205,000 AAA Illinois Educational Facilities Authority Revenue, Chicago
Osteopathic Medical, Series A, 8.750% due 7/1/05 1,328,512
95,000 A Illinois Health Facilities Authority Revenue,
Victory Memorial Hospital Association Project,
7.500% due 10/1/06 101,531
95,000 AAA Indiana Bond Bank, Special Program, Series A,
AMBAC-Insured, 9.750% due 8/1/09 116,969
295,000 NR Lafayette, LA Public Trust Financing Authority,
Single-Family Mortgage Revenue, FHA-Insured,
7.200% due 4/1/10 323,763
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
-------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT RATING+ SECURITY VALUE
====================================================================================================================================
Escrowed to Maturity(b) -- 7.4% (continued)
<S> <C> <C> <C> <C> <C>
$ 120,000 AAA Lake County, OH Hospital Improvement Revenue,
(Lake County Memorial Hospitals Project),
8.675% due 11/1/09 $ 138,750
45,000 AAA Lee County, FL Southwest Florida Regional Airport
Revenue, MBIA-Insured, 8.675% due 10/1/09 52,594
205,000 NR Lehigh County, PA IDA, Industrial & Commercial
Development Revenue, (Strawbridge Project),
7.200% due 12/15/01 207,306
510,000 AAA Louisiana Public Facilities Hospital Authority Revenue
Refunding, (Southern Baptist Hospital Inc. Project),
AETNA-Insured, 8.000% due 5/15/12 599,887
130,000 AAA Maricopa County, AZ Hospital Revenue, Intercommunity
Healthcare, (Sun City Project), 8.675% 152,425
due 1/1/10
65,000 AAA Montana State University Revenue, MBIA-Insured,
10.000% due 11/15/08 75,725
395,000 AAA Muscatine, IA Electric Revenue, 9.500% 427,094
due 1/1/04
1,135,000 A3* New Haven, CT GO, Series B, 9.000% due 1,214,450
12/1/01
180,000 AAA North Carolina Municipal Power Agency,
No. 1 Catawba
Electric Revenue, 10.500% due 1/1/10 231,750
Ohio State Water Development Authority Revenue:
20,000 AAA Armco Steel Corp. Project, 7.875% due 20,211
11/1/00
255,000 Aaa* Recycle Energy, (Akron Ohio Project),
8.000% due 12/1/04 269,663
1,800,000 AAA Safe Water, Series 3, 9.000% due 12/1/10 2,052,000
2,500,000 AAA 9.375% due 12/1/10 3,021,875
320,000 A Ouachita Parish, LA Hospital Services District #1, Hospital
Revenue Bonds, Glenwood Regional Medical Center,
Series 1991, 7.250% due 7/1/00 322,250
920,000 AAA Owensboro, KY Electric, Light & Power,
10.500% due 1/1/04 1,023,500
60,000 Aa2* Philadelphia, PA Hospitals and Higher Education Facilities
Authority Revenue, (St. Agnes Medical Center Project),
FHA-Insured, 6.750% due 8/15/01 60,375
140,000 AAA Pima County, AZ Hospital Revenue, Tucson Medical
Center, 10.375% due 4/1/07 166,075
230,000 AAA Portage County, OH Hospital Revenue, 240,637
6.700% due 12/1/07
130,000 AAA Santa Rosa, CA Hospital Revenue, (Santa Rosa Hospital
Memorial Project), 10.300% due 3/1/11 169,975
120,000 AAA Tamarac, FL Water & Sewer Utilities Revenue,
AMBAC-Insured, 9.250% due 10/1/10 145,500
650,000 NR Tom Green County, TX Hospital Authority,
7.875% due 2/1/06 693,875
135,000 AAA Wichita, KS Hospital Revenue, Wesley Medical Center,
MBIA-Insured, 10.000% due 4/1/02 143,100
-------------------------------------------------------------------------------------------------------------------------
20,947,192
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
General Obligation -- 5.8%
<S> <C> <C> <C>
$ 1,000,000 AAA Arizona COP, Refunding, GO, FSA-Insured,
6.500% due 3/1/08 $ 1,052,500
Chicago, IL GO, FGIC-Insured:
1,000,000 AAA Neighborhoods Alive, 21 Program A, 6.000% due 1/1/18 1,026,250
1,500,000 AAA Series A, 6.000% due 1/1/14 1,565,625
1,000,000 AAA Cranston, RI GO, FGIC-Insured, 6.375% due 11/15/14 1,078,750
1,000,000 AAA Keller, TX GO, ISD Refunding, Capital Appreciation,
Series A, zero coupon due 8/15/16 392,500
5,085,000 AAA Kenosha, WI Capital Appreciation, GO, Series B,
FSA-Insured, zero coupon due 10/15/08(a) 3,235,331
6,705,000 AA- Massachusetts State GO, Series C, zero coupon due 8/1/18 2,321,606
865,000 A3* New Haven, CT GO, Series B, 9.000% due 12/1/01 923,387
New York City GO:
2,500,000 A- Series A, 6.250% due 8/1/08 2,662,500
2,000,000 A- Series H, 5.900% due 8/1/09 2,090,000
140,000 Aa1* Texas State Veterans Housing Assistance Fund, GO,
FHA-Insured, 6.050% due 12/1/12(a) 140,105
-------------------------------------------------------------------------------------------------------------------------
16,488,554
-------------------------------------------------------------------------------------------------------------------------
Government Facilities -- 0.8%
2,200,000 AAA Walnut Grove, MI Correctional Authority, COP,
AMBAC-Insured, 6.000% due 11/1/10 2,345,750
-------------------------------------------------------------------------------------------------------------------------
Hospitals -- 21.5%
330,000 AA- ABAG Finance Authority Nonprofit Corps, California
Insured, COP, (Rehabilitation Mental Health
Services Inc. Project), 6.100% due 6/1/02 339,900
4,500,000 BBB+ Arizona Health Facilities Authority Revenue, Catholic
Healthcare West, Series A, 6.125% due 7/1/09 4,426,875
1,500,000 BBB- Arkansas State Development Financing Authority Hospital
Revenue, Washington Regional Medical Center,
7.000% due 2/1/15 1,486,875
1,000,000 AAA Calcasieu Parish, LA Memorial Hospital Services District
Revenue, Lake Charles Memorial Hospital, Series A,
CONNIE LEE-Insured, 7.500% due 12/1/05 1,112,500
Colorado Health Facilities Authority Hospital
Revenue Bonds:
1,035,000 Baa2* National Benevolent, Series A, 6.125% due 9/1/16 927,619
2,510,000 Ba1* Series 1993, Rocky Mountain Adventist Health
Guaranteed, 6.250% due 2/1/04 2,390,775
1,000,000 AA Cumberland County, NC Hospital Facilities Revenue,
Cumberland County Hospital System Inc.,
5.250% due 10/1/13 950,000
Harris County, TX Health Facilities Development Corp.:
2,135,000 NR Memorial Health System Guaranteed, 7.125% due 6/1/05 2,276,444
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
Hospitals -- 21.5% (continued)
<S> <C> <C> <C>
$ 2,000,000 AA Texas Childrens Hospital Project, Series A,
5.375% due 10/1/16 $1,860,000
Illinois Health Facilities Authority Revenue:
5,000,000 A Healthcare System, 6.250% due 11/15/19 4,893,750
1,000,000 BBB+ Refunding, Trinity Medical Center, 6.500% due 7/1/00 1,005,390
2,200,000 BBB- Maplewood, MN Healthcare Facilities Revenue,
(Health East Project), 5.950% due 11/15/06 2,051,500
2,190,000 A Massachusetts State Health & Educational Facilities
Authority Revenue, South Shore Hospital, Series F,
5.500% due 7/1/12 2,053,125
1,000,000 BBB+ Montgomery County, OH Hospital Revenue Facilities,
Kettering Medical Center, 6.750% due 4/1/18 955,000
New Jersey Healthcare Facilities Financing
Authority Revenue:
1,030,000 NR Pascack Valley Hospital, Series 91, 6.500% due 7/1/01 1,053,175
2,000,000 BBB- Pascack Valley Hospital Association,
5.125% due 7/1/18 1,555,000
3,000,000 BBB- Trinitas Hospital Obligation Group, 7.375% due 7/1/15 3,015,000
1,900,000 AAA New York State Dormitory Authority Lease Revenue,
Municipal Health Facilities, (Import Project), Series 1,
FSA-Insured, 5.000% due 1/15/17 1,726,625
1,000,000 AA- North Carolina Medical Care Common Hospital Revenue,
Pitt County Memorial Hospital, Series A,
5.000% due 12/1/18 877,500
Oklahoma Development Financing Authority Revenue
Refunding, Hillcrest Healthcare System, Series A:
1,500,000 BBB 5.750% due 8/15/15 1,293,750
3,000,000 BBB 5.625% due 8/15/19 2,456,250
5,050,000 AAA Pennsylvania State Higher Educational Facilities Authority,
Health Services Revenue, Allegheny Delaware Valley
Obligation, Series A, 5.600% due 11/15/09 5,018,438
1,750,000 A Riverside, CA Asset Leasing Corp., Leasehold Revenue
Bonds, 1993 Series A, (Riverside Hospital Project),
6.000% due 6/1/04 1,795,938
Scranton-Lackawanna, PA Health & Welfare
Authority Revenue:
3,000,000 NR Allied Services Rehabilitation Hospitals,
7.125% due 7/15/05 3,056,250
1,000,000 BBB- Moses Taylor Hospital Project, 6.050% due 7/1/10 912,500
1,210,000 AAA St. Tammany Parish, LA Hospital Service District No. 2
Hospital Revenue, CONNIE LEE-Insured,
6.250% due 10/1/14 1,252,350
2,000,000 AAA Tarrant County, TX Health Facilities, Development Corp.
Health System Revenue, Texas Health Resources System,
Series A, MBIA-Insured, 5.750% due 2/15/12 2,057,500
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
Hospitals -- 21.5% (continued)
<S> <C> <C> <C>
$ 4,650,000 Baa2* Tomball, TX Hospital Authority Revenue, Tomball
Regional Hospital, 5.500% due 7/1/09 $ 4,289,625
3,955,000 A Wisconsin State Health & Educational Facilities
Authority Revenue, (Kenosha Hospital & Medical
Center Project), 5.500% due 5/15/15 3,603,994
-------------------------------------------------------------------------------------------------------------------------
60,693,648
-------------------------------------------------------------------------------------------------------------------------
Housing -- 7.7%
735,000 AAA Arkansas, State Development Finance Authority,
Single-Family Mortgage Revenue, Series A,
GNMA/FNMA-Collateralized, 6.200% due 7/1/15 753,375
2,250,000 AAA Dekalb County, GA HFA, Multi-Family Housing Revenue,
(Chimney Trace Project), FNMA-Collateralized,
5.625% mandatory tender 5/1/05 2,300,625
285,000 AAA Fairfax County, VA Redevelopment & Housing Authority,
Multi-Family Refunding, Kingsley 91A, FHA-Insured,
6.500% due 11/1/01 289,988
500,000 AAA Georgia State HFA Revenue, Single-Family Mortgage,
Subseries A-2, FHA-Insured, 6.550% due 12/1/27(a) 512,500
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) 1,010,000
1,800,000 AA Louisiana Public Facilities Authority Revenue,
Multi-Family Housing, Oakleigh Apartments,
Series A, 5.950% mandatory tender 3/15/05 1,842,750
1,200,000 NR Maricopa County, AZ IDA, Multi-Family Housing Revenue,
Stanford Court Apartments, Series B, 5.750% due 7/1/08 1,170,000
Massachusetts State HFA, Single-Family Housing Revenue:
3,205,000 Aa3* Series 38, 7.200% due 12/1/26(a) 3,273,106
2,470,000 Aa3* Series 41, 6.300% due 12/1/14 2,556,450
1,440,000 AA+ Minnesota State HFA Revenue, Single-Family Mortgage,
Series H, 6.700% due 1/1/18 1,499,400
108,811 AAA Monroe-West Monroe, LA Public Trust Financing Authority,
FHLMC-Collateralized, 8.500% due 5/20/02 111,123
325,000 Ba2* Odessa, TX Housing Development Corp. #2, Multi-Family
Revenue Refunding, Chaparral Village, Series A,
6.375% due 12/1/03 329,062
875,000 AAA Onterie Center Housing Finance Corp., Illinois Mortgage
Revenue Refunding, (Onterie Center Project), Series A,
MBIA-Insured, 6.500% due 7/1/02 897,969
1,000,000 Aa2* Oregon State Housing & Community Services, Department
Mortgage Revenue, Single-Family Mortgage Program,
Series B, 6.875% due 7/1/28 1,036,250
50,000 AAA St. Louis County, MO Single-Family Mortgage Revenue,
MBIA-Insured, 6.125% due 4/1/03 50,687
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
Housing -- 7.7% (continued)
<S> <C> <C> <C>
$ 2,500,000 A3* Stamford, CT Housing Authority, Multi-Family Revenue
Refunding, (Fairfield Apartments Project),
4.750% due 12/1/28(a) $ 2,278,125
300,000 AAA Texas State Department of Housing & Community Affairs,
GNMA/FNMA/FHLMC-Collateralized, Home Mortgage
Revenue Bonds, Series B-2, RIBS Variable Rate,
9.612% due 6/18/23(a)(c) 303,927
1,595,000 A+ Vermont HFA, Single-Family Revenue, Series 2,
6.875% due 5/1/25 1,628,894
-------------------------------------------------------------------------------------------------------------------------
21,844,231
-------------------------------------------------------------------------------------------------------------------------
Industrial Development -- 4.4%
2,000,000 AAA Clarion County, PA IDA, Energy Development Revenue,
(Piney Creek Project), LOC Swiss Bank,
7.250% mandatory tender 12/1/00(a) 2,033,020
3,500,000 NR Metropolitan Government Nashville & Davidson County,
TN IDB, Revenue Refunding & Improvement, Osco
Treatment Inc. Guaranteed, 6.000% due 5/1/03(a) 3,430,000
1,000,000 NR Minneapolis, MN Commercial Development Revenue,
(Holiday Inn Metrodome Project), 6.000% due 12/1/01 997,500
1,030,000 Aa3* New Jersey EDA, Growth Bonds, LOC Banque Nationale
de Paris, 6.200% due 12/1/02(a) 1,054,463
New York City IDA:
1,135,000 NR Community Hospital, Brooklyn, 6.875% due 11/1/10 1,041,362
540,000 Aa2* IDR, Oakdale Knitting Mills Inc., Composite Offering
XXX 1990, Series G, LOC ABN AMRO Bank, NV,
7.700% mandatory tender 11/1/00(a) 541,188
1,000,000 BBB Schuylkill County, PA IDA, Revenue, Pine Grove Landfill Inc.,
5.100% mandatory tender 4/1/09(a) 871,250
2,350,000 AAA Sioux City, IA IDR, (Terra Centre Project), LOC Rabobank
Nederland, 6.800% due 5/1/07 2,438,125
-------------------------------------------------------------------------------------------------------------------------
12,406,908
-------------------------------------------------------------------------------------------------------------------------
Life Care -- 1.6%
1,000,000 BBB- John Tolfree Health Systems Corp., Michigan Mortgage
Revenue Refunding, 5.850% due 9/15/13 871,250
1,595,000 AAA Massachusetts State Individual Finance Agency Revenue,
University Commons Nursing, Series A, FHA-Insured,
6.550% due 8/1/18 1,650,825
900,000 AA Orange County, FL Health Facilities Authority Revenue
Refunding, (Mayflower Retirement Project),
Asset Guaranteed, 5.125% due 6/1/14 871,875
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
Life Care -- 1.6% (continued)
<S> <C> <C> <C>
$ 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 $ 1,070,000
-------------------------------------------------------------------------------------------------------------------------
4,463,950
-------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 10.1%
2,150,000 AAA Arizona State Municipal Financing Program, COP,
Series 1, AMBAC-Insured, 6.000% due 8/1/17 2,179,563
3,000,000 NR Barona Band of Mission Indians, CA GO,
8.250% due 1/1/20 3,007,500
2,595,000 BBB- Clarksville, TN Natural Gas Acquisition Corp.,
Gas Revenue, Series A, 6.500% due 11/1/00 2,619,497
2,750,000 A2* Hoffman Estate, IL Tax Increment Junior Lien, Hoffman
Estate Development, Series 91, 6.500% due 5/15/01 2,794,687
2,700,000 A Illinois Development Finance Authority Revenue, Debt
Restructure -- East St. Louis, 6.875% due 11/15/05 2,851,875
3,130,000 NR Littleton, CO GO, Highline Business Improvement District,
7.000% due 6/15/03 3,149,563
2,500,000 AAA Louisiana Local Government Environmental Facilities,
Community Development Authority Revenue, Capital
Projects & Equipment Acquisition, AMBAC-Insured,
5.250% due 12/1/18 2,387,500
4,000,000 Aa2* Massachusetts State Grant, Series B, zero coupon
due 6/15/12 2,050,000
1,895,000 A Pendleton County, KY Multi-County Lease Revenue,
Association Counties Leasing Trust, Program A,
6.500% due 3/1/19 1,947,112
750,000 AAA SCA Tax Exempt Trust, Knox Health Educational & Housing,
FSA-Insured, 7.125% due 1/1/30 798,750
3,900,000 BB- Spokane, WA Downtown Foundation Parking Revenue,
(River Park Square Project), 5.000% due 8/1/08 3,661,125
915,000 AA Tucson, AZ COP, Asset Guaranty, 6.000% due 7/1/04 947,025
-------------------------------------------------------------------------------------------------------------------------
28,394,197
-------------------------------------------------------------------------------------------------------------------------
Pollution Control -- 3.2%
Detroit, MI Economic Development Corp.,
Facilities Recovery Revenue, FSA-Insured:
1,770,000 AAA Series A, 7.000% due 5/1/01(a) 1,799,949
1,000,000 AAA Series 91A, 6.600% due 5/1/02(a) 1,037,500
1,500,000 BBB Illinois Development Financing Authority, Solid Waste
Disposal Revenue Bonds, (Waste Management Inc.
Project), Series 1990, 7.125% due 1/1/01(a) 1,513,665
1,000,000 A3* Massachusetts State IDB, Finance Agency, PCR,
(Eastern Edison Co. Project), 5.875% due 8/1/08 983,750
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
Pollution Control -- 3.2% (continued)
<S> <C> <C> <C>
$ 1,500,000 AAA Montgomery, AL IDB, PCR, (General Electric Co.
Project), 7.000% mandatory tender, 9/15/00(a) $1,516,890
600,000 Baa1* Onondaga County, NY Resource Recovery Agency Project
Revenue Bonds, Series 1992, 6.625% due 5/1/00(a) 600,864
1,500,000 BBB- St. Charles Parish, LA Pollution Control Revenue
Refunding, (Entergy LA Inc. Project), Series C,
5.350% due 10/1/29 1,483,125
-------------------------------------------------------------------------------------------------------------------------
8,935,743
-------------------------------------------------------------------------------------------------------------------------
Pre-Refunded(d) -- 3.2%
Austin, TX Water, Sewer & Electric Refunding Revenue:
15,000 A Call 5/15/99 @ 100, 14.000% due 11/15/01 15,000
55,000 A Various Call Dates @ 100, 14.000% due 11/15/01 59,056
1,730,000 NR Berks County, PA Municipal Authority Refunding,
(Phoebe Berks Village Inc. Project),
(Call 5/15/06 @ 102), 7.500% due 5/15/13 1,885,700
495,000 AAA Gila County, AZ IDA, PCR, (Call 2/15/01 @ 101),
11.250% due 4/1/01 524,155
3,200,000 AAA Jefferson County, KY Hospital Revenue, MBIA-Insured,
(Various Call Dates @ Various Prices),
6.346% due 10/23/14(c) 3,376,000
235,000 AAA Massachusetts State Port Authority Revenue, FGIC-Insured,
Series A, (Call 7/1/00 @ 102), 7.200% due 7/1/03(a) 241,293
135,000 AAA Ohio State Building Authority, Toledo Government Office
Building, (Call 4/1/03 @ 100), 10.125% due 10/1/06 151,031
2,170,000 AAA Palm Beach County, FL Health Facilities Authority
Revenue, Good Samaritan Health System Guaranteed,
(Call 10/1/05 @ 100), 6.150% due 10/1/06 2,305,625
335,000 AAA Philadelphia, PA Hospitals Authority Revenue,
(United Hospitals Inc. Project), (Call 7/1/05 @ 100),
10.875% due 7/1/08 402,837
-------------------------------------------------------------------------------------------------------------------------
8,960,697
-------------------------------------------------------------------------------------------------------------------------
Public Facilities -- 1.3%
2,500,000 AAA Las Vegas New Convention & Visitors Authority
Revenue, AMBAC-Insured, 6.000% due 7/1/14 2,593,750
1,140,000 BBB- Massachusetts Rail Connections Inc., Revenue,
Route 128, Parking Garage, Series A,
6.000% due 7/1/13 1,141,425
-------------------------------------------------------------------------------------------------------------------------
3,735,175
-------------------------------------------------------------------------------------------------------------------------
Solid Waste -- 1.1%
3,000,000 A2* Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue, Montgomery County,
6.200% due 7/1/10(a) 3,093,750
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
16 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
Tax Allocation -- 0.5%
<S> <C> <C> <C>
$ 1,050,000 AA Bernalillo County, NM Gross Receipts, Tax Revenue
Refunding, 5.125% due 4/1/16 $1,019,813
1,150,000 AAA Pittsburg, CA Redevelopment Agency Tax Allocation,
(Los Medanos Community Development Project),
AMBAC-Insured, zero coupon due 8/1/19 372,313
-------------------------------------------------------------------------------------------------------------------------
1,392,126
-------------------------------------------------------------------------------------------------------------------------
Transportation -- 9.8%
2,000,000 A Connecticut State, Special Obligation Package Revenue,
Bradley International Airport, Series A, ACA-Insured,
6.375% due 7/1/12 2,037,500
6,400,000 BBB- Connector 2000 Association Inc.,
SC Toll Road Revenue, Capital Appreciation,
Series B, zero coupon due 1/1/16 1,960,000
Denver, CO City & County Airport Revenue:
1,510,000 AAA Series B, MBIA-Insured, 6.250% due 11/15/06(a) 1,611,925
1,590,000 BBB+ Series 1992B, 7.000% due 11/15/01(a) 1,629,750
1,000,000 BBB+ Series 1992B, 7.000% due 11/15/02(a) 1,038,750
1,000,000 BBB+ Series 1994A, 7.200% due 11/15/02(a) 1,043,750
E-470 Public Highway Authority, Colorado Sr.
Revenue Bonds, MBIA-Insured:
3,455,000 AAA Zero coupon due 9/1/14 1,533,156
5,000,000 AAA Zero coupon due 9/1/16 1,943,750
3,000,000 NR Kenton County, KY Airport Board, Special Facilities
Revenue, (Mesaba Aviation Inc. Project), Series A,
6.675% due 7/1/19(a) 2,906,250
765,000 AAA Massachusetts State Port Authority Revenue, Series A,
FGIC-Insured, 7.200% due 7/1/03(a) 784,018
1,000,000 AAA Memphis-Shelby County, TN Airport Authority,
Airport Revenue, Series D, AMBAC-Insured,
6.250% due 3/1/14(a) 1,047,500
900,000 AAA Miami-Dade County, FL Aviation Revenue Bond,
Series C, 5.250% due 10/1/17 848,250
2,000,000 A New York State Thruway Authority Service Contract
Revenue, Local Highway & Bridge, 6.000% due 4/1/11 2,095,000
3,000,000 AA Ocean Highway and Port Authority, Nassau County, FL
Adjustable Demand Revenue Bonds,
Series 1990, LOC ABN AMRO Bank, NV,
6.250% mandatory tender 12/1/02(a) 3,112,500
10,000,000 BBB- Pocahontas Parkway Association, Virginia Toll Road
Revenue, Capital Appreciation, Series B,
zero coupon to yield 5.800% due 8/15/19 2,587,500
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 17
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
Transportation -- 9.8% (continued)
<S> <C> <C> <C>
$ 1,570,000 AAA Port of Portland, OR Airport Revenue, Portland
International Airport, Series B, AMBAC-Insured,
5.500% due 7/1/14(a) $ 1,566,075
-------------------------------------------------------------------------------------------------------------------------
27,745,674
-------------------------------------------------------------------------------------------------------------------------
Utilities -- 8.8%
Austin, TX Water, Sewer & Electric Refunding Revenue:
335,000 A* Refunded -- 1998, 14.000% due 11/15/01 359,287
2,465,000 A* Unrefunded Balance -- 1998, 14.000% due 11/15/01 2,662,200
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) 1,543,125
14,215,000 AAA Columbia River Rock Capital Appreciation,
MBIA-Insured, zero coupon due 6/1/13 6,823,200
600,000 A- Georgia Municipal Gas Authority Revenue,
(Southern Storage Gas Project), 6.300% due 7/1/09 626,250
Grand Prairie, TX GO, Metropolitan Utility &
Capital Appreciation Refunding:
1,000,000 A Zero coupon due 4/1/06 721,250
1,000,000 A Zero coupon due 4/1/07 680,000
1,400,000 VMIG1* Knoxville, TN Utilities Board Revenue, Electric System,
FSA-Insured, 3.450% due 1/15/05(e) 1,400,000
825,000 A- New York State Energy, Research & Development Authority,
Electric Facilities Revenue, Unrefunded Balance, Series A,
7.150% due 12/1/20(a) 858,000
North Carolina, Eastern Municipal Power Agency, Power
System Revenue Refunding, Series B, ACA-CBI Insured:
1,000,000 A 5.600% due 1/1/15 968,750
1,000,000 A 5.650% due 1/1/16 967,500
3,000,000 A North Carolina, Municipal Power Agency, No. 1 Catawba
Electric Revenue, Series B, ACA-CBI Insured,
6.375% due 1/1/13 3,198,750
770,000 BBB Philadelphia, PA Gas Works Revenue Bonds, 13th Series,
7.400% due 6/15/00 774,150
1,000,000 BB Sam Rayburn, TX Municipal Power Supply System,
Revenue Refunding, Series A, 6.200% due 10/1/01 1,000,000
2,495,000 AAA Union County, NJ Utilities Authority, Series A,
AMBAC-Insured, 5.000% due 6/1/14(a) 2,332,825
-------------------------------------------------------------------------------------------------------------------------
24,915,287
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
18 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING+ SECURITY VALUE
=========================================================================================================================
<S> <C> <C> <C>
Water and Sewer -- 1.6%
$ 2,425,000 AAA Clark County, NV GO Refunding, Flood Control,
FGIC-Insured, 4.500% due 11/1/16 $ 2,103,687
1,000,000 AA- Macon, GA Water Authority, Water & Sewer Revenue,
4.500% due 10/1/08 856,250
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) 1,530,000
-------------------------------------------------------------------------------------------------------------------------
4,489,937
-------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $283,571,721**) $282,420,166
=========================================================================================================================
</TABLE>
+ All ratings are by Standard & Poor's Ratings Service except those
identified by an asterisk (*) which are rated by Moody's Investors Service
Inc.
(a) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Bonds 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) Residual interest bonds-coupon varies inversely with level of short-term
tax-exempt interest rates.
(d) Bonds 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.
(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 20 and 21 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<PAGE>
--------------------------------------------------------------------------------
Bond Ratings (unaudited)
--------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("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 Investor's Services Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3
may be applied to each generic rating from "Aa" to "Ba", where 1 is the highest
and 3 the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large in Aaa securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A -- Bonds rated "A" possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative
characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
--------------------------------------------------------------------------------
20 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Bond Ratings (unaudited) (continued)
--------------------------------------------------------------------------------
Fitch IBCA, Inc. ("Fitch") -- Ratings may be modified by the addition of a plus
(+) or minus (-) sign to show relative standings within the major rating
categories.
A -- Bonds rated "A" are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and/or dividends
and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances
than securities with higher ratings.
BBB -- Bonds rated "BBB" are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest or
dividends and repay principal is considered to be adequate. Adverse
changes in economic conditions and circumstances, however, are more
likely to have adverse impact on these securities and, therefore,
impair timely payment. The likelihood that the ratings of these bonds
will fall below investment grade is higher than for securities with
higher ratings.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's or
Fitch.
--------------------------------------------------------------------------------
Short-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
VRDN -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday Demand
--------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value (Cost -- $283,571,721) $ 282,420,166
Interest receivable 4,926,573
Receivable for securities sold 1,111,207
Receivable for Fund shares sold 180,854
----------------------------------------------------------------------------------
Total Assets 288,638,800
----------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 6,130,360
Dividends payable 475,623
Payable for Fund shares purchased 197,977
Management fees payable 137,594
Payable to bank 42,501
Distribution fees payable 18,799
Accrued expenses 75,355
----------------------------------------------------------------------------------
Total Liabilities 7,078,209
----------------------------------------------------------------------------------
Total Net Assets $ 281,560,591
==================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 44,288
Capital paid in excess of par value 298,285,204
Undistributed net investment income 353,795
Accumulated net realized loss from security transactions (15,971,141)
Net unrealized depreciation of investments (1,151,555)
----------------------------------------------------------------------------------
Total Net Assets $ 281,560,591
==================================================================================
Shares Outstanding:
Class A 37,065,064
-------------------------------------------------------------------------------
Class L 5,201,844
-------------------------------------------------------------------------------
Class Y 2,020,814
-------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $6.36
-------------------------------------------------------------------------------
Class L * $6.37
-------------------------------------------------------------------------------
Class Y (and redemption price) $6.36
-------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 2.04% of net asset value per share) $6.49
-------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $6.43
==================================================================================
</TABLE>
* Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within one year from initial purchase.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
22 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations For the Year Ended March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest $ 19,988,407
---------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 1,755,970
Distribution fees (Note 3) 559,958
Registration fees 97,838
Shareholder and system servicing fees 75,674
Shareholder communications 56,842
Audit and legal 40,331
Pricing service fees 35,053
Custody 21,613
Trustees' fees 1,517
Other 16,590
---------------------------------------------------------------------------------------
Total Expenses 2,661,386
---------------------------------------------------------------------------------------
Net Investment Income 17,327,021
---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 472,840,459
Cost of securities sold 486,644,340
---------------------------------------------------------------------------------------
Net Realized Loss (13,803,881)
---------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of Investments:
Beginning of year 10,479,804
End of year (1,151,555)
---------------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (11,631,359)
---------------------------------------------------------------------------------------
Net Loss on Investments (25,435,240)
---------------------------------------------------------------------------------------
Decrease in Net Assets From Operations $ (8,108,219)
=======================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 23
<PAGE>
--------------------------------------------------------------------------------
Statement of Changes in Net Assets For the Years Ended March 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
==========================================================================================================
OPERATIONS:
<S> <C> <C>
Net investment income $ 17,327,021 $ 15,293,295
Net realized gain (loss) (13,803,881) 1,463,568
Increase in net unrealized depreciation (11,631,359) (986,611)
----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (8,108,219) 15,770,252
----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (16,971,039) (15,675,859)
In excess of net investment income -- (157,571)
----------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (16,971,039) (15,833,430)
----------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 63,248,493 166,645,885
Net asset value of shares issued
for reinvestment of dividends 9,871,529 9,197,538
Cost of shares reacquired (164,806,886) (65,668,310)
----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (91,686,864) 110,175,113
----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (116,766,122) 110,111,935
NET ASSETS:
Beginning of year 398,326,713 288,214,778
----------------------------------------------------------------------------------------------------------
End of year* $ 281,560,591 $398,326,713
==========================================================================================================
* Includes undistributed (overdistributed)
net investment income of: $ 353,795 $ (2,187)
==========================================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
24 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Limited Term Portfolio ("Portfolio") is a separate, diversified 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 eight other separate investment portfolios: Florida, Georgia, New
York, Pennsylvania, National, California Money Market, New York Money Market and
Massachusetts Money Market Portfolios. The financial statements and financial
highlights for the other portfolios are presented in separate shareholder
reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between the quoted bid and ask prices provided by an independent
pricing service that are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; (c) securities for
which market quotations are not available will be valued in good faith at fair
value by or under the direction of the Board of Trustees; (d) securities for
which market quotations are not available will be valued in good faith at fair
market value by or under the direction of the Board of Trustees; (e) securities
maturing within 60 days are valued at cost plus accreted discount or minus
amortized premium, which approximates value; (f) gains or losses on the sale of
securities are calculated by using the specific identification method; (g)
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; (h) dividends and distributions to
shareholders are recorded on the ex-dividend date; (i) 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; (j) the
Portfolio intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; (k) 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
(l) 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 25
<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
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), acts as investment manager to the Fund. The Portfolio pays SSBC 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.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, became the Fund's transfer agent and PFPC Global Fund
Services ("PFPC") became the sub-transfer agent. CFTC receives account fees and
asset-based fees that vary according to the size and type of account. PFPC is
responsible for shareholder recordkeeping and financial processing for all
shareholder accounts and is paid by CFTC. During the period October 1, 1999
through March 31, 2000,the Portfolio paid transfer agent fees of $28,560 to
CFTC.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
There are maximum initial sales charges of 2.00% and 1.00% for Class A and L
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
1.00% on Class A shares,which applies if redemption occurs within one year from
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. Class L
shares also have a 1.00% CDSC, which applies if redemption occurs within the
first year of purchase.
--------------------------------------------------------------------------------
26 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
For the year ended March 31, 2000, SSB and CFBDS received sales charges of
approximately $259,000 and $45,000 on sales of the Portfolio's Class A and Class
L shares, respectively. In addition, for the year ended March 31, 2000, CDSCs
paid to SSB were approximately:
Class A Class L
================================================================================
CDSCs $103,000 $18,000
================================================================================
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A and L shares calculated at an annual rate of 0.15% of the average
daily net assets of each class. In addition, the Portfolio pays a distribution
fee with respect to Class L shares calculated at an annual rate of 0.20% of the
average daily net assets.
For the year ended March 31, 2000, total Distribution Plan fees incurred were:
Class A Class L
================================================================================
Distribution Plan Fees $422,895 $137,063
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
4. Investments
During the year ended March 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
================================================================================
Purchases $377,098,856
--------------------------------------------------------------------------------
Sales 472,840,459
================================================================================
At March 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 4,115,748
Gross unrealized depreciation (5,267,303)
--------------------------------------------------------------------------------
Net unrealized depreciation $(1,151,555)
================================================================================
--------------------------------------------------------------------------------
Smith Barney Muni Funds 27
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
5. Capital Loss Carryforward
At March 31, 2000, the Portfolio had, for Federal income tax purposes,
approximately $11,508,000 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 probable that the gains so offset will not be
distributed. The amount and expiration of the carryforwards are indicated below.
Expiration occurs on March 31, of the year indicated:
2003 2004 2008
================================================================================
Carryforward Amounts $273,000 $1,740,000 $9,495,000
================================================================================
6. Shares of Beneficial Interest
At March 31, 2000, 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, 2000, total paid-in capital amounted to the following for each
class:
Class A Class L Class Y
================================================================================
Total Paid-in Capital $247,097,182 $35,732,148 $15,500,162
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 2000 March 31, 1999++
-------------------- ----------------------
Shares Amount Shares Amount
=========================================================================================================
Class A
<S> <C> <C> <C> <C>
Shares sold 8,454,416 $ 55,324,785 14,845,279 $101,467,691
Shares issued on reinvestment 1,279,885 8,257,254 1,146,421 7,802,565
Shares reacquired (18,524,812) (119,106,571) (8,138,352) (55,401,082)
---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (8,790,511) $ (55,524,532) 7,853,348 $ 53,869,174
=========================================================================================================
Class L+
Shares sold 1,045,498 $ 6,895,708 2,424,398 $ 16,578,194
Shares issued on reinvestment 182,565 1,179,244 152,139 1,036,463
Shares reacquired (2,186,785) (14,093,158) (1,020,319) (6,958,879)
---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (958,722) $ (6,018,206) 1,556,218 $ 10,655,778
=========================================================================================================
Class Y
Shares sold 153,008 $ 1,028,000 7,128,561 $ 48,600,000
Shares issued on reinvestment 67,343 435,031 52,583 358,510
Shares reacquired (4,895,234) (31,607,157) (485,447) (3,308,349)
---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (4,674,883) $ (30,144,126) 6,695,697 $ 45,650,161
=========================================================================================================
</TABLE>
+ On June 12, 1998, Class C shares were renamed as Class L shares.
++ For Class Y shares, transactions are for the period from November 12, 1998
(inception date) to March 31, 1999.
--------------------------------------------------------------------------------
28 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares 2000(1) 1999(1) 1998 1997 1996
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.78 $ 6.76 $ 6.54 $ 6.61 $ 6.54
-----------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.32 0.32 0.34 0.34 0.36
Net realized and unrealized gain (loss) (0.42) 0.03 0.22 (0.06) 0.07
-----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.10) 0.35 0.56 0.28 0.43
-----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.33) (0.34) (0.35) (0.36)
Excess of net investment income -- (0.00)* -- -- --
-----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.32) (0.33) (0.34) (0.35) (0.36)
-----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 6.36 $ 6.78 $ 6.76 $ 6.54 $ 6.61
-----------------------------------------------------------------------------------------------------------------------
Total Return (1.46)% 5.29% 8.66% 4.30% 6.65%
-----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $ 236 $ 311 $ 257 $ 260 $ 278
-----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.75% 0.72% 0.74% 0.75% 0.75%
Net investment income 4.97 4.72 5.14 5.16 5.43
-----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 108% 52% 58% 46% 26%
=======================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.85%.
* Amount represents less than $0.01.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 29
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
Class L Shares 2000(1) 1999(1)(2) 1998 1997 1996
=========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 6.79 $ 6.76 $ 6.54 $ 6.61 $ 6.54
---------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.31 0.31 0.33 0.33 0.35
Net realized and unrealized gain (loss) (0.43) 0.03 0.21 (0.06) 0.06
---------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.12) 0.34 0.54 0.27 0.41
---------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.30) (0.31) (0.32) (0.34) (0.34)
Excess of net investment income -- (0.00)* -- -- --
---------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.31) (0.32) (0.34) (0.34)
---------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 6.37 $ 6.79 $ 6.76 $ 6.54 $ 6.61
---------------------------------------------------------------------------------------------------------
Total Return (1.69)% 5.04% 8.36% 4.10% 6.45%
---------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $33,113 $41,844 $31,133 $28,325 $28,824
---------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.98% 0.94% 0.99% 0.97% 0.96%
Net investment income 4.74 4.50 4.89 4.94 5.22
---------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 108% 52% 58% 46% 26%
=========================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.05%.
* Amount represents less than $0.01.
--------------------------------------------------------------------------------
30 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
Class Y Shares 2000(1) 1999(1)(2)
================================================================================
Net Asset Value, Beginning of Year $ 6.78 $ 6.82
--------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.33 0.12
Net realized and unrealized loss (0.42) (0.02)
--------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.09) 0.10
--------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.33) (0.14)
Excess of net investment income -- (0.00)*
--------------------------------------------------------------------------------
Total Distributions (0.33) (0.14)
--------------------------------------------------------------------------------
Net Asset Value, End of Year $ 6.36 $ 6.78
--------------------------------------------------------------------------------
Total Return (1.31)% 1.46%++
--------------------------------------------------------------------------------
Net Assets, End of Year (000s) $12,843 $45,408
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.55% 0.53%+
Net investment income 5.09 4.65+
--------------------------------------------------------------------------------
Portfolio Turnover Rate 108% 52%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period November 12, 1998 (inception date) to March 31, 1999.
(3) As a result of voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.70%.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 31
<PAGE>
--------------------------------------------------------------------------------
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, 2000, the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the 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 auditing standards generally accepted
in the United States of America. 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, 2000, 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, 2000, the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended and the financial
highlights for each of the years in the five-year period then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ KPMG LLP
New York, New York
May 11, 2000
--------------------------------------------------------------------------------
32 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes the Portfolio hereby designates for the fiscal year
ended March 31, 2000:
. 99.99% of the dividends paid by the fund from net investment income as tax
exempt for regular Federal income tax purposes.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 33
<PAGE>
--------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
--------------------------------------------------------------------------------
On April 19, 1999, a special meeting of shareholders of the Trust was held for
the purpose of electing Trustees to the Trust.
The results were as follows:
<TABLE>
<CAPTION>
Shares Percentage Shares Percentage
Voted Of Shares Voted of Shares
Name of Trustees For Voted Against Voted
================================================================================================
<S> <C> <C> <C> <C>
Lee Abraham 1,350,265,160.850 97.943% 28,359,584.139 2.057%
Allan J. Bloostein 1,351,356,664.226 98.022 27,268,080.763 1.978
Jane F. Dasher 1,352,390,291.715 98.097 26,234,456.274 1.903
Donald R. Foley 1,350,867,506.020 97.987 27,757,238.969 2.013
Richard E. Hanson, Jr. 1,351,302,644.963 98.018 27,322,100.026 1.982
Paul Hardin 1,352,452,572.699 98.102 26,172,172.290 1.898
Heath B. McLendon 1,352,481,643.116 98.104 26,143,101.873 1.896
Roderick C. Rasmussen 1,351,438,798.818 98.028 27,185,946.171 1.972
John P. Toolan 1,352,497,455.396 98.105 26,127,289.594 1.895
================================================================================================
</TABLE>
--------------------------------------------------------------------------------
34 2000 Annual Report to Shareholders
<PAGE>
(This page intentionally left blank.)
<PAGE>
(This page intentionally left blank.)
<PAGE>
[LOGO OF SALOMON SMITH BARNEY]
Trustees
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Anthony Pace
Controller
Christina T. Sydor
Secretary
Investment Manager
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PFPC Trust Company
Transfer Agent
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds -- Limited Term Portfolio, but it may also be used as
sales literature when preceded or accompanied by the current Prospectus which
gives details about changes, expenses, investment objectives and operating
policies of the Portfolio. If used as sales material after June 30, 2000, this
report must be accompanied by performance information for the most recently
completed calendar quarter.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Muni Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutual funds
<PAGE>
[LOGO OF SMITH BARNEY MUNI FUNDS]
SMITH BARNEY MUNI FUNDS
NATIONAL PORTFOLIO
STYLE PURE SERIES
ANNUAL REPORT
MARCH 31, 2000
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
Smith Barney Muni Funds National Portfolio
The Smith Barney Muni Funds - National Portfolio seeks to pay its shareholders
as high a level of The monthly income exempt from federal income taxes Smith
Barney Muni Funds - National Portfolio as is consistent with prudent investing.
(Please note that a portion of the income from this Fund may be subject to the
Alternative Minimum Tax.)
Smith Barney Muni Funds - National Portfolio
Average Annual Total Returns
March 31, 2000
Without Sales Charges(1)
-----------------------------------------------
Class A Class B Class L
================================================================================
One-Year (2.03)% (2.56)% (2.57)%
--------------------------------------------------------------------------------
Five-Year 5.74 5.18 5.10
--------------------------------------------------------------------------------
Ten-Year 7.21 N/A N/A
--------------------------------------------------------------------------------
Since Inception+ 7.23 6.67 5.21
================================================================================
With Sales Charges(2)
-----------------------------------------------
Class A Class B Class L
================================================================================
One-Year (5.94)% (6.73)% (4.46)%
--------------------------------------------------------------------------------
Five-Year 4.87 5.02 4.89
--------------------------------------------------------------------------------
Ten-Year 6.77 N/A N/A
--------------------------------------------------------------------------------
Since Inception+ 6.91 6.67 5.06
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.00% and 1.00%,
respectively. Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed within one year from purchase. This CDSC
declines by 0.50% the first year after purchase and thereafter by 1.00% per
year until no CDSC is incurred. Class L shares also reflect the deduction
of a 1.00% CDSC, which applies if shares are redeemed also within the first
year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Inception dates for Class A, B and L shares are August 20, 1986, November
7, 1994 and January 5, 1993, respectively.
--------------------------------------------------------------------------------
FUND HIGHLIGHT
--------------------------------------------------------------------------------
During the period covered by this report, we took advantage of rising interest
rates to generate additional yield in the National Portfolio. Also in select
instances, we began selling bonds with shorter calls without giving up income.
We feel that this should enable us to replace a much higher percentage of the
older high coupon bonds that may be subject to early call. (Callable bonds are
redeemable by the issuer before the scheduled maturity under specific conditions
and at a stated price, which usually begins at a premium to par and declines
annually. Bonds are usually "called" when interest rates fall so significantly
that the issuer can save money by floating new bonds at lower rates.)
--------------------------------------------------------------------------------
NASDAQ SYMBOL
--------------------------------------------------------------------------------
Class A SBBNX
Class B SBNBX
Class L SBNLX
--------------------------------------------------------------------------------
WHAT'S INSIDE
--------------------------------------------------------------------------------
A Message from the Chairman ............................................... 1
Shareholder Letter ........................................................ 2
Historical Performance .................................................... 5
Smith Barney Muni Funds - National Portfolio
at a Glance ............................................................... 7
Schedule of Investments ................................................... 8
Statement of Assets and Liabilities ....................................... 21
Statement of Operations ................................................... 22
Statements of Changes in Net Assets ....................................... 23
Notes to Financial Statements ............................................. 24
Financial Highlights ...................................................... 27
Independent Auditors' Report .............................................. 29
Tax Information ........................................................... 30
Additional Shareholder Information ........................................ 30
<PAGE>
--------------------------------------------------------------------------------
A MESSAGE FROM THE CHAIRMAN OF THE SMITH BARNEY MUNI FUNDS - NATIONAL PORTFOLIO
--------------------------------------------------------------------------------
[PHOTO]
HEATH B. MCLENDON
Chairman
Dear Shareholder:
The economic environment in which the Smith Barney Muni Funds - National
Portfolio has operated has been one of high expectations and rapid change. The
U.S. economy continues its tremendous growth. Unemployment is at an all time low
as consumer confidence reaches all time highs. While this economic strength has
proven to be supportive of stocks, it has hurt bonds as fears of inflationary
pressures rise and the Fed continues to raise rates.
Since 1998, worldwide economic underpinnings have improved significantly. The
global credit crunch that had taken hold on financial markets has subsided, with
credit concerns limited to specific situations, but positive on an overall
basis. Moreover, despite continued economic growth, inflationary pressures have
been negligible allowing for increasingly competitive real rates of return
(i.e., yield adjusted for inflation). In addition, we are experiencing a
historically unique circumstance wherein the U.S. government is buying back U.S.
Treasury securities in order to reduce federal debt. This active buying of
outstanding U.S. Treasury bonds by the government has created a situation where
Treasury yields are low compared to the income return available on other fixed
income instruments. These conditions have added a new complexity to bond
investing, which we believe makes professional money management more valuable
today than ever before.
We continue to believe that municipal bonds represent excellent value. The
relative stability and historically high yields available in this sector should
restore a level of confidence to those investors seeking to ride out the
volatility apparent in other asset classes.
Despite more volatile markets and the great debate about the future shape of the
global economy, putting clients needs first has been Citigroup's tradition for
over a century. We provide some 100 million people, businesses, governments and
institutions in 100 countries with a broad range of financial products and
services. SSB Citi Fund Management LLC ("SSBC"), Citigroup's asset management
division, offers you access to a broad range of products including equities,
fixed income and money markets. Our global resources are extensive, far-reaching
and powerful, with a strong presence in the U.S., Europe, Japan, Latin America,
Asia Pacific and Australia
We invite you to explore our capabilities as a market leader in areas such as
retirement, tax and estate planning, and we encourage you to work closely with
your Salomon Smith Barney Financial Consultant to discuss the full range of
services we offer. He or she can further discuss the unique advantages of
professional investment management and how SSBC can help you to develop a
long-term disciplined plan to help you achieve your investment goals.
When you invest with SSBC, you can do so with the confidence that your interests
come first, your investment success is paramount, and that the ultimate in
resources is being committed to your financial future. Thank you for investing
with us.
Sincerely,
/s/ Heath B McLendon
Heath B. McLendon
Chairman April 25, 2000
--------------------------------------------------------------------------------
Smith Barney Muni Funds 1
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
[PHOTO]
PETER M. COFFEY
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, 2000. In this
report, we summarize the period's prevailing economic and market conditions and
outline our investment strategy. A detailed summary of the Portfolio's
performance can be found in the appropriate sections that follow. We hope you
find this report to be useful and informative.
Performance Update
For the year ended March 31, 2000, the Class A, B and L shares of the Portfolio
reported negative total returns of 2.03%, 2.56% and 2.57%, without sales
charges, respectively. The Portfolio's Class A, B and L shares, with sales
charges, returned negative total returns of 5.94%, 6.73% and 4.46%,
respectively, for the same time period. In comparison, the average total return
for general municipal bond funds for the same period was negative 2.40%,
according to Lipper, Inc. (Lipper, Inc. is an independent fund-tracking
organization.)
Based on its net asset value ("NAV") of $12.94 as of March 31, 2000 for Class A
shares and the current monthly income distribution rate of $0.061 per Class A
share, the annualized distribution for the Portfolio equates to 5.66%./1/
Market and Economic Overview
The bond markets have changed dramatically over the past several years. In our
view, one central theme of this change, which began following the Asian crisis
in 1997, is that the capital markets can no longer rely on the U.S. Treasury
markets to provide a near-perfect "benchmark" of interest rates. Before the
Asian crisis, the capital markets relied on the U.S. Treasury market as a
measure to determine what bonds "should" yield.
Under these changing conditions, it may be more difficult for the Federal
Reserve Board ("Fed") to moderate the growth of the economy, since long-term
interest rates may not rise as the Fed puts upward pressure on short-term rates.
The shape of the U.S. Treasury yield curve just six months ago was fairly
normal. (The yield curve is a graphical depiction of the relationship between
the yield on bonds of the same credit quality but different maturities. A normal
yield curve depicts a relationship whereby bonds with longer maturities have
higher yields than bonds with shorter maturities.) Historically, longer-term
bonds are more volatile than short-term bonds because more risk is associated
with those bonds with longer maturities.
As of the writing, yields on longer-term bonds are depressed by a potential
reduced supply, as well as by expectations that the Fed may ultimately be
successful in slowing the economy and diffusing inflationary pressures. The
result: A negatively sloped yield curve for U.S. Treasuries. Instead of the
usual upward-sloping curve, with yields rising steadily along with the maturity
of Treasury bonds, the highest yields were for shorter-term bonds.
The U.S. economy continues to generate remarkable non-inflationary growth. The
Fed has increased short-
----------
1 Annualized distribution rate is the Fund's current monthly income dividend
rate, annualized and then divided by the NAV. This annualized distribution
rate assumes a current monthly income dividend rate of $0.061 for twelve
months. This rate is as of March 31, 2000 and is subject to change. The
important difference between a total return and an annualized distribution
rate is that the total return takes into consideration a number of factors
including the fluctuation of the NAV or the market value during the period
reported. The NAV fluctuation includes the effects of unrealized
appreciation or depreciation in the Fund. Accordingly, since an annualized
distribution rate only reflects the current monthly income dividend rate
annualized, it should not be used as the sole indicator to judge the return
you receive from your fund investment. Past performance is not indicative
of future results.
--------------------------------------------------------------------------------
2 2000 Annual Report to Shareholders
<PAGE>
term interest rates five times in the last nine months by a total of 125 basis
points (or 1.25%).2 The Fed remains committed to keeping pressure on borrowing
costs until the U.S. economy slows to a level that keeps inflation from
accelerating. One key question: How much tightening is necessary to slow the
economy to levels deemed desirable by the Fed? We think that increases amounting
to another 50 to 75 basis points may be sufficient to slow economic growth. (A
basis point is 0.01% or one one-hundredth of a percent.)
During the period, the municipal bond market performed quite well, particularly
in comparison with non-U.S. Treasury taxable bonds. While municipals have been
unable to keep pace with the decline in yields in the Treasury sector, they have
clearly been able to avoid the higher volatility, credit worries and reduced
access to capital that have begun to influence taxable bonds. In our view, the
chief problem with municipal securities continues to be extremely tight supply.
In fact, new issue volume in January 2000 was less than half of that sold in
January 1999.
And while no assurances can be made, we believe that short-term and
intermediate-term municipal yields are likely to increase slightly in value for
the following reasons:
. The expected continuing increases in the federal funds rate which would
put upward pressure on short-term yields (The federal funds rate is the
interest rate that banks with excess reserves at a Federal Reserve
district bank charge other banks that need overnight loans.);
. A likely increase in supply, which would be felt most dramatically in
the supply of the short end of the yield curve; and
. The yields on municipal bonds with longer maturities are not nearly as
attractive as yields offered on a short and intermediate term taxable
bond.
The last factor is particularly important in terms of the Portfolio's current
investment strategy. While the U.S. Treasury yield curve has an inverted shape,
with the highest yields in five years, the municipal yield curve has maintained
a sharp positive slope. In fact, the difference in yield between 20-year and
30-year municipal bonds is only 10 basis points as of this writing.
As previously noted, the Portfolio seeks to provide investors with as high a
level of income exempt from federal income taxes as is consistent with prudent
investing.3
With the bond markets likely to remain volatile, we continue to favor an "ease
into the market" approach. We tend to favor longer and intermediate maturities,
where most of the benefits of the steep positive slope of the municipal yield
curve can be obtained.
Average credit quality remained relatively high in the Portfolio during the
reporting period. Although quality spreads have widened due to earnings
pressure, especially in hospitals and healthcare related sectors, the difference
in yield between the highest quality issues and medium grade issues is, in our
view, relatively modest. We think our proprietary research enables us to invest
in select medium-term credits for which perceived market risk is greater than
our analysis indicates. Moreover, while no guarantees may be given we think our
strategy may have the potential to increase income.
During the reporting period, we took advantage of rising interest rates to
generate additional yield in the Portfolio. We also wanted to incorporate
additional call protection into the Portfolio by selling off some of our higher
coupon bonds with shorter calls, and replacing them with bonds that have similar
high coupon structure, but are not subject to early call. (Callable bonds are
redeemable by the issuer before the scheduled maturity under specific conditions
and at a stated price, which usually begins at a premium to
----------
2 On May 16, 2000, after this letter was written, the Fed raised interest
rates 0.50% to 6.5%.
3 Please note that a portion of the income from this Portfolio may be subject
to the Alternative Minimum Tax ("AMT").
--------------------------------------------------------------------------------
Smith Barney Muni Funds 3
<PAGE>
par and declines annually. Bonds are usually "called" when interest rates fall
so significantly that the issuer can save money by floating new bonds at lower
rates.)
One of our objectives in the Portfolio is to try and create a built-in income
stream for the long-term. To this end, we have generally focused on securities
with high credit quality and good call protection, as we believe they offer good
long-term value. Moreover, we have a fairly long weighted average life in the
Portfolio because we believe that the risk of higher inflation at the present
time is negligible. In addition, we think our greater emphasis on call
protection should provide our shareholders with more consistent income if
interest rates do in fact go down.
Also as of March 31, 2000, 92.6% of the Portfolio's holdings were rated
investment grade or better (BBB/Bbb and higher) by either Standard & Poor's
Rating Group or Moody's Investors Services Inc., with approximately 41.7% of the
Portfolio invested in AAA/Aaa, the highest possible rating, (Standard & Poor's
and Moody's are two major credit reporting and bond-rating agency.)
During the past twelve months, the Portfolio was broadly diversified over a
range of different kinds of bonds. As of March 31, 2000, the Portfolio's assets
were concentrated in hospital bonds (18.4%), transportation bonds (12.8%) and
education bonds (9.5%).
Municipal Bond Market Outlook
We think the recent rise in interest rates has created buying opportunities.
While no guarantees can be made, we remain confident that we may be able to
achieve a high level of tax-exempt income, consistent with prudent investing and
close attention to credit quality.
In light of the recent volatility in the fixed income markets, one surprising
result is clear to us that long-term municipal bond yields have not changed much
in several months. We believe the relative stability of many municipals bonds
may offer investors stability in a highly volatile bond market (as well as the
higher volatility that may be associated with other capital markets.) (Of
course, no guarantees can be given.)
We also believe that Fed monetary policy action should be sufficient to slow the
economy without triggering higher inflation. The good news is that the economy's
"soft landing" is likely to be at a higher annual growth rate than was
previously thought possible due to the possible emergence of a New Economy where
technological advances can spur growth without inflationary pressures.
Although the bond markets remain unsettled, we maintain our positive outlook for
municipal securities for the following reasons:
. Longer intermediate and long maturity yields remain very high relative
to taxable counterparts. For example, some bonds are yielding roughly
95% to 100% of similar maturity U.S. Treasuries;
. The municipal yield curve remains very steeply sloped, even as the
U.S. Treasury yield curve is inverted; and
. When capital markets begin to believe that the Fed has achieved its
goal of easing growth down to non-inflationary levels, bonds could
rally and shortages of bonds with the best coupon structures and call
provisions may eventually surface.
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 in the future.
Sincerely,
/s/ Peter M. Coffey
Peter M. Coffey
Vice President
April 25, 2000
--------------------------------------------------------------------------------
4 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.97 $12.94 $0.73 $0.01 (2.03)%
--------------------------------------------------------------------------------
3/31/99 14.16 13.97 0.75 0.21 5.50
--------------------------------------------------------------------------------
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
================================================================================
Total $8.20 $0.44
================================================================================
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.96 $12.93 $0.66 $0.01 (2.56)%
--------------------------------------------------------------------------------
3/31/99 14.16 13.96 0.68 0.21 4.92
--------------------------------------------------------------------------------
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 $3.85 $0.38
================================================================================
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
Net Asset Value
-------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.97 $12.95 $0.65 $0.01 (2.57)%
--------------------------------------------------------------------------------
3/31/99 14.16 13.97 0.65 0.21 4.79
--------------------------------------------------------------------------------
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 $5.16 $0.44
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 5
<PAGE>
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
Without Sales Charges(1)
----------------------------------------
Class A Class B Class L
================================================================================
Year Ended 3/31/00 (2.03)% (2.56)% (2.57)%
--------------------------------------------------------------------------------
Five Years Ended 3/31/00 5.74 5.18 5.10
--------------------------------------------------------------------------------
Ten Years Ended 3/31/00 7.21 N/A N/A
--------------------------------------------------------------------------------
Inception* through 3/31/00 7.23 6.67 5.21
================================================================================
With Sales Charges(2)
----------------------------------------
Class A Class B Class L
================================================================================
Year Ended 3/31/00 (5.94)% (6.73)% (4.46)%
--------------------------------------------------------------------------------
Five Years Ended 3/31/00 4.87 5.02 4.89
--------------------------------------------------------------------------------
Ten Years Ended 3/31/00 6.77 N/A N/A
--------------------------------------------------------------------------------
Inception* through 3/31/00 6.91 6.67 5.06
================================================================================
--------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (3/31/90 through 3/31/00) 100.61%
--------------------------------------------------------------------------------
Class B (Inception* through 3/31/00) 41.71
--------------------------------------------------------------------------------
Class L (Inception* through 3/31/00) 44.43
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions at net
asset value and does not reflect the deduction of the applicable sales
charges with respect to Class A and L shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions at net
asset value. In addition, Class A and L shares reflect the deduction of the
maximum initial sales charge of 4.00% and 1.00%, respectively. Class B
shares reflect the deduction of a 4.50% CDSC, which applies if shares are
redeemed within one year from purchase. This CDSC declines by 0.50% the
first year after purchase and thereafter by 1.00% per year until no CDSC is
incurred. Class L shares also reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within the first year of purchase.
* Inception dates for Class A, B and L shares are August 20, 1986, November
7, 1994 and January 5, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
--------------------------------------------------------------------------------
6 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS-- NATIONAL PORTFOLIO AT A GLANCE (UNAUDITED)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the National Portfolio vs.
Lehman Brothers Municipal Bond Index+
--------------------------------------------------------------------------------
March 1990 -- March 2000
[GRAPH]
Lehman
Brothers
Municipal
Date National Bond Index
------------------------------------------------
3/90 9,600 10,000
3/91 10,449 10,922
3/92 11,587 12,013
3/93 13,169 13,517
3/94 13,552 13,831
3/95 14,395 14,860
3/96 15,667 16,105
3/97 16,514 16,982
3/98 18,408 18,801
3/99 19,255 19,967
03/31/00 18,864 19,950
+ Hypothetical illustration of $10,000 invested in Class A shares on March
31, 1990, 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, 2000. The Lehman
Brothers Municipal Bond Index is a broad-based, total return index
comprised of investment grade, fixed rate municipal bonds selected from
issues larger than $50 million issued since January 1984. This index is
unmanaged and is not subject to the same management and trading expenses as
a mutual fund. An investor may not invest directly in an index. 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.
Industry Diversification*
--------------------------------------------------------------------------------
9.5% Education
4.2% Escrowed to Maturity
5.2% General Obligation
18.4% Hospital
11.1% Housing
7.4% Pollution Control
3.5% Public Facilities
12.8% Transportation
8.0% Utility
5.5% Water & Sewer
14.4% Other
* As a percentage of total investments.
Summary of Investments by Combined Ratings
--------------------------------------------------------------------------------
Standard Percentage
Moody's & Poor's of Total Investments
--------------------------------------------------------------------------------
Aaa AAA 41.7%
Aa AA 14.7
A A 17.2
Baa BBB 19.0
Ba BB 0.5
VMIG 1/P-1 A-1 0.4
NR NR 6.5
-----
100.0%
=====
--------------------------------------------------------------------------------
Smith Barney Muni Funds 7
<PAGE>
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Education -- 9.5%
$ 1,000,000 A2* Arizona Student Loan Acquisition Authority, Student Loan Revenue,
Series B1, 6.150% due 5/1/29 (b) $ 998,750
Boerne, TX ISD, PSFG:
1,040,000 Aaa* Zero coupon bond to yield 5.140% due 2/1/17 395,200
3,285,000 Aaa* Zero coupon bond to yield 5.220% due 2/1/19 1,079,944
Chicago, IL Board of Education:
5,000,000 AAA Lease Certificates, Series A, Refunding, MBIA-Insured,
6.000% due 1/1/20 5,218,750
School Reform, FGIC-Insured:
7,300,000 AAA Series A, zero coupon bond to yield 5.300% due 12/1/31 1,067,625
1,175,000 AAA Series B-1, zero coupon bond to yield 5.100% due 12/1/16 447,969
950,000 AA Delaware State EDA Revenue, Student Housing, University Courtyard,
Series A, Asset Guaranteed, 5.900% due 8/1/19 948,813
Dexter, MI Community Schools, FGIC-Insured:
2,500,000 AAA 5.000% due 5/1/23 2,256,250
1,000,000 AAA 5.100% due 5/1/28 906,250
1,845,000 AAA Franklin, TN Special School District, FSA-Insured,
zero coupon bond to yield 5.750% due 6/1/17 689,569
2,000,000 AAA Granbury, TX ISD, PSFG, zero coupon bond to yield 5.544% due 8/1/19 645,000
Grapevine-Colleyville, TX ISD, PSFG:
3,925,000 AAA Zero coupon bond to yield 5.050% due 8/15/16 1,540,562
2,250,000 AAA Zero coupon bond to yield 5.100% due 8/15/17 826,875
Massachusetts State Health & Educational Facilities Authority Revenue:
1,175,000 AAA Northeastern University, Series I, MBIA-Insured,
5.000% due 10/1/29 1,023,719
3,000,000 AAA Series G-4, INFLOS, 8.066% due 7/1/25 (c) 2,913,750
3,480,000 Aaa* Midlothian, TX ISD, PSFG, zero coupon bond to yield 6.271% due 2/15/20 991,800
1,705,000 Baa3* Monroe County, NY IDA Revenue, Student Housing, Series A,
5.250% due 4/1/19 1,491,875
1,500,000 Baa3* New Hampshire Higher Education & Health, Brewster Academy,
6.750% due 6/1/25 1,526,250
1,500,000 A New York State Dormitory Authority Revenue, State University
Educational Facilities, Series B, 7.500% due 5/15/11 1,706,250
1,000,000 AAA Philadelphia, PA School District, Series A, MBIA-Insured,
4.500% due 4/1/23 817,500
Private Colleges & Universities Authority:
1,130,000 A3* Georgia Revenue, (Mercer University Project), Series A,
5.250% due 10/1/20 1,028,300
1,420,000 A Georgia Student Housing Revenue, (Mercer Housing Corp. Project),
Series A, ACA-Insured, 5.375% due 6/1/17 1,341,900
2,500,000 AAA Redford, MI ISD, AMBAC-Insured, 5.000% due 5/1/22 2,262,500
860,000 AA Richland County, SC Educational Facilities Revenue, (Benedict College
Project), Asset Guaranteed, 5.750% due 7/1/19 846,025
1,000,000 BBB- Savannah, GA EDA Revenue, (College of Art & Design Inc. Project),
6.900% due 10/1/29 1,017,500
Southern Illinios University Revenue, Housing & Auxiliary,
Series A, MBIA-Insured:
4,950,000 AAA Zero coupon bond to yield 5.510% due 4/1/21 1,410,750
3,000,000 AAA Zero coupon bond to yield 5.530% due 4/1/23 753,750
3,000,000 AAA Zero coupon bond to yield 5.540% due 4/1/25 667,500
1,000,000 AAA St. John's, MI Public Schools, FGIC-Insured, 5.000% due 5/1/21 908,750
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
8 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Education -- 9.5% (continued)
Texas State Higher Education Coordinating Board,
College Student Loan Revenue:
$ 1,140,000 A* 7.450% due 10/1/06 (b) $ 1,175,625
160,000 A* 7.700% due 10/1/25 (b) 164,600
1,000,000 AAA Utah Student Loan Revenue, Series 1991F, AMBAC-Insured,
7.450% due 11/1/08 (b) 1,033,620
1,500,000 Aaa* Weatherford, TX ISD, PSFG, Capital Appreciation, zero coupon
bond to yield 6.730% due 2/15/21 388,125
------------------------------------------------------------------------------------------------------------------
40,491,646
------------------------------------------------------------------------------------------------------------------
Escrowed To Maturity(d) -- 4.2%
735,000 AAA Boston, MA Water & Sewer Revenue, Series A, 10.875% due 1/1/09 937,125
1,005,000 AAA Douglas County, NE Hospital Authority No. 2, Bergan Mercy,
9.500% due 7/1/10 1,217,306
1,515,000 AAA Fairmont, WV Water & Sewer Revenue, AMBAC-Insured,
9.250% due 11/1/11 1,861,556
5,010,000 AAA Indiana Bond Bank, AMBAC-Insured, 9.750% due 8/1/09 6,168,563
1,670,000 AAA Ohio State Water Development Authority Revenue, Safe Water,
Series 2, 9.375% due 12/1/10 2,018,613
1,025,000 AAA Philadelphia Hospitals & Higher Education Facilities Authority,
Hospital Revenue, Presbyterian Medical Center, 6.650% due 12/1/19 1,150,562
3,000,000 AAA Port Everglades Authority, FL Port Revenue, 7.125% due 11/1/16 3,510,000
815,000 AAA Weber County, UT Hospital Revenue, St. Benedict's Hospital,
10.000% due 3/1/10 1,002,450
------------------------------------------------------------------------------------------------------------------
17,866,175
------------------------------------------------------------------------------------------------------------------
General Obligation -- 5.2%
5,000,000 NR Barona Band of Mission Indians, CA GO, 8.250% due 1/1/20 5,012,500
2,640,000 AAA Bastrop, TX GO, ISD, PSFG, zero coupon bond to yield
5.629% due 2/15/19 874,500
2,000,000 AAA Berks County, PA GO, MVRICS, FGIC-Insured, 8.381% due 11/10/20 (c) 2,147,500
5,000,000 AAA Center Unified School District, CA GO, Series C, MBIA-Insured,
zero coupon bond to yield 5.838% due 9/1/20 1,525,000
District of Columbia, Series A, MBIA-Insured:
4,000,000 AAA 5.000% due 6/1/18 3,605,000
2,125,000 AAA 5.500% due 6/1/29 1,976,250
1,075,000 Aaa* Lago Vista, TX GO, ISD, PSFG, zero coupon bond to yield
5.689% due 8/15/22 286,219
1,875,000 AAA McKeesport, PA GO, Area School District, MBIA-Insured,
zero coupon bond to yield 5.662% due 10/1/23 466,406
10,000 A- New York City, NY GO, Series D, 7.500% due 2/1/16 10,600
100,000 A Puerto Rico Commonwealth, Public Improvement, 4.500% due 7/1/23 82,750
1,000,000 Aa1* Texas State GO, Veterans Housing Assistance, 6.450% due 12/1/20 (b) 1,031,250
5,000,000 AAA Washoe County, NV GO, Reno-Sparks Convention, Series A, FSA-Insured,
6.400% due 7/1/29 5,131,250
------------------------------------------------------------------------------------------------------------------
22,149,225
------------------------------------------------------------------------------------------------------------------
Hospital -- 18.4%
3,000,000 BBB+ Arizona Health Facilities Authority Revenue, Catholic Healthcare West,
Series A, 6.625% due 7/1/20 2,958,750
3,000,000 BBB- Arkansas State Development Finance Authority Hospital Revenue,
Washington Regional Medical Center, 7.375% due 2/1/29 2,977,500
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Hospital -- 18.4% (continued)
$ 1,690,000 A2* California Health Facilities Finance Authority Revenue, Cedars-Sinai
Medical Center, Series A, 6.250% due 12/1/34 $1,694,225
1,000,000 A Colorado Health Facilities Authority Revenue Bonds, Vail Valley
Medical Center, 6.500% due 1/15/13 1,032,500
725,000 A1* Elkhart County, IN Hospital Authority Revenue, Elkhart General
Hospital Inc., 7.000% due 7/1/12 754,000
350,000 BB- Green Springs, OH Health Care Facilities Revenue, (St. Francis Health Care
Center Project), Series A, 7.125% due 5/15/25 323,313
1,500,000 AA Harris County, TX Health Facilities Development Corp., Hospital Revenue,
Texas Children's Hospital Project, Series A, 5.250% due 10/1/29 1,301,250
2,200,000 A Harrison County, TX Health Facilities Development Corp. Revenue,
(Marshall Regional Medical Center Project), 5.500% due 1/1/18 2,032,250
Hawaii State Department Budget & Finance, Special Purpose Revenue,
(Wilcox Memorial Hospital Project):
1,000,000 BBB+ 5.350% due 7/1/18 815,000
1,750,000 BBB+ 5.500% due 7/1/28 1,402,188
3,000,000 BBB+ Henderson, NV Health Care Facility Revenue, Catholic Healthcare West,
Series A, 6.750% due 7/1/20 2,913,750
5,000,000 A- Illinois Development Finance Authority Hospital Revenue, Adventist Health
System, Sunbelt Obligation, 5.500% due 11/15/29 3,968,750
Illinois Health Facilities Authority Revenue:
3,000,000 AAA Alexian Brothers Health System, FSA-Insured, 5.000% due 1/1/19 2,640,000
1,000,000 A- Centegra Health System, 5.250% due 9/1/18 808,750
937,000 AAA Community Provider Pooled Loan Program, FSA-Insured,
7.350% due 8/15/10 983,850
3,500,000 BBB Mercy Hospital and Medical Center, 7.000% due 1/1/07 3,583,125
1,000,000 AAA Methodist Health System, Series B, AMBAC-Insured,
RIBS, 9.466% due 5/18/21 (c) 1,093,130
3,000,000 A OSF Healthcare Systems, 6.250% due 11/15/29 2,917,500
4,000,000 AAA Rush-Presbyterian St. Luke's Medical Center, INFLOS, MBIA-Insured,
9.361% due 10/1/24 (c) 4,405,000
3,000,000 AA- Iowa Finance Authority Revenue, Catholic Health Initiatives, Series A,
6.000% due 12/1/18 2,970,000
900,000 BBB+ Klamath Falls, OR Inter-Community Hospital Merle West,
7.100% due 9/1/24 913,500
4,000,000 BBB- Louisiana Public Facilities Authority Revenue, (General Health
Systems Project), 6.800% due 11/1/16 3,960,000
1,000,000 BBB+ Maricopa County, AZ IDA Health Facilities Revenue, (Catholic
Healthcare West Project), Series A, 5.000% due 7/1/16 802,500
1,000,000 AAA Massachusetts State Health & Educational Facilities Authority Revenue,
St. Elizabeth Hospital, LEVRRS, FSA-Insured, 9.240% due 8/12/21 (c) 1,075,000
950,000 BBB+ Montgomery County, OH Hospital Revenue Facilities, Kettering Medical
Center, 6.750% due 4/1/22 903,687
New Jersey Health Care Facilities Financing Authority Revenue:
1,000,000 BBB- St. Elizabeth Hospital Obligation Group, 6.000% due 7/1/27 811,250
2,000,000 BBB- Trinitas Hospital Obligation Group, 7.400% due 7/1/20 2,005,000
450,000 A New York State Medical Care Facilities Financing Agency,
Long Term Health Care, Medical Health Services, Series 91B,
7.400% due 2/15/18 476,438
870,000 AA North Carolina Medical Care Community, Hospital Revenue,
(Duke University Hospital Project), Series C, 5.250% due 6/1/26 775,387
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Annual Report to Shareholders
<PAGE>
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Hospital -- 18.4% (continued)
$ 5,000,000 BBB Oklahoma Development Finance Authority Refunding Revenue, Hillcrest
Healthcare System, Series A, 5.625% due 8/15/29 $ 3,937,500
1,000,000 A Oregon State Health, Housing, Educational & Cultural Facilities Authority,
Western State Chiropractic, Series A, ACA-Insured,
6.350% due 12/1/20 1,028,750
1,000,000 Aaa* Randolph County, WV Community Health System Revenue, Davis Health
System, Series A, FSA-Insured, 5.200% due 11/1/21 903,750
3,900,000 Aa3* Rhode Island State Health & Educational Building Corp. Revenue, Health
Facilities, St. Antoine Residence, Series A, 6.125% due 11/15/18 3,831,750
2,000,000 Baa2* Tomball, TX Hospital Authority Revenue, Tomball Regional Hospital,
6.000% due 7/1/19 1,752,500
Vermont Educational & Health Building Finance Agency:
2,375,000 AA- H. Porter, FHA-Insured, 7.100% due 2/1/31 2,445,846
2,000,000 AA Middlebury College Project, 5.000% due 11/1/38 1,702,500
1,500,000 NR Washington Health Care Facilities Authority Refunding 1990,
Our Lady of Lourdes Health Center, Pasco, LOC AIB Group,
7.875% due 12/1/09 1,564,845
Wisconsin State Health & Educational Facilities Authority Revenue:
5,000,000 BBB+ Aurora Health Care Inc., Series A, 5.600% due 2/15/29 4,031,250
2,100,000 A Kenosha Hospital & Medical Center Project, 5.700% due 5/15/20 1,874,250
2,500,000 A3* Monroe Clinic Inc., 5.375% due 2/15/22 2,037,500
------------------------------------------------------------------------------------------------------------------
78,408,034
------------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 7.0%
250,000 Aaa* Cuyahoga County, OH Multi-Family Housing, Dalebridge Apartments,
GNMA-Collateralized, FHA-Insured, 6.500% due 10/20/20 (b) 256,562
1,000,000 A3* El Paso County, TX Housing Finance Corp., Multi-Family Housing
Revenue, Las Lomas Apartments, Series A, 6.375% due 12/1/29 986,250
1,500,000 A+ Illinois Housing Development Authority, Multi-Family Housing Revenue,
Series 1991A, 8.125% due 7/1/10 1,571,250
1,500,000 AA- Indiana State HFA, Multi-Family Housing Mortgage Revenue, Hunters Run,
FHA-Insured, 7.250% due 5/1/18 (b) 1,571,250
5,000,000 Aa2* Iowa Finance Authority, Prestwick Apartments, FHA-Insured,
7.500% due 12/1/36 (b) 6,031,250
1,000,000 A+ King County, WA Housing Authority Revenue, Series A, 6.800% due 3/1/26 1,023,750
Maricopa County, AZ IDA, Multi-Family Housing Revenue, (National Health
Facilities II Project), FSA-Insured:
3,480,000 AAA 5.500% due 1/1/24 3,332,100
2,770,000 AAA Series A, 5.500% due 1/1/18 2,738,837
1,915,000 AAA Mohave County, AZ IDA, Multi-Family Housing, Copper Ridge Apartments,
FHA-Insured, 7.375% due 4/1/32 (b) 2,022,719
Nevada Housing Division, Multi-Unit Housing:
1,250,000 Aa3* Campaige, Series A, 5.450% due 10/1/18 (b) 1,173,437
1,025,000 AAA Saratoga Palms, FNMA-Collateralized, 6.350% due 10/1/28 (b) 1,042,937
990,000 AAA New Mexico Mortgage Finance Authority, Multi-Family Housing Revenue,
Bluffs at Tierra Contenta, Series A, FSA-Insured, 5.200% due 1/1/19 (b) 914,513
500,000 Aa3* Portland, OR Multi-Family Housing, 6.250%, due 5/1/12 (b) 508,125
1,000,000 BBB Roanoke, VA Redevelopment & Housing Authority, Multi-Family Housing
Revenue Refunding, United Dominion-Laurel Ridge,
6.625% due 5/1/23 (b) 1,023,750
1,000,000 AAA Rogers County, OK HFA, Multi-Family Revenue, FNMA-Collateralized,
Series A, FHA-Insured, 7.750% due 8/1/23 1,032,500
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Housing: Multi-Family -- 7.0% (continued)
$ 2,347,000 AAA Seattle Housing Authority, WA Low Income Housing Revenue,
GNMA-Collateralized, 7.400% due 11/20/36 $ 2,605,170
1,875,000 AAA Yuma, AZ IDA, Multi-Family Mortgage Revenue Refunding, Series A,
GMNA-Collateralized, 6.100% due 9/20/34 (b) 1,896,094
------------------------------------------------------------------------------------------------------------------
29,730,494
------------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 4.1%
460,000 AAA Arkansas Housing Development, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 7.400% due 9/1/23 (b) 474,950
75,000 Aaa* Aurora Kane & Dupage, IL Single-Family Mortgage Revenue,
Series A, GNMA/FHLMC-Collateralized, 7.950% due 10/1/25 (b) 80,250
1,000,000 Aaa* Chicago, IL Single-Family Mortgage Revenue, Series A,
FNMA/GNMA-Collateralized, 6.350% due 10/1/30 (b) 1,015,000
315,000 Aa2* Colorado HFA, Single-Family Program Refunding, Sr. Bonds,
Series 94 D-1, 8.000% due 12/1/24 326,812
2,530,000 AAA Cowley & Shawnee Counties, KS Mortgage Revenue, Series B,
AMBAC-Insured, GNMA-Collateralized, zero coupon
bond to yield 7.868% due 6/1/22 (b) 458,562
700,000 AAA District of Columbia HFA, Collateralized Revenue, Single-Family, Series 90A,
GNMA/FNMA/FHLMC-Collateralized, 8.100% due 12/1/23 (b) 719,677
395,000 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 (b) 72,088
410,000 AA Idaho Housing Agency, Single-Family Mortgage, Series C-2, FHA-Insured,
7.900% due 1/1/22 (b) 418,200
510,000 Aa1* Illinois Housing Development Authority, Residential Mortgage Revenue,
Series 89A, 7.400% due 2/1/20 (b) 516,553
325,000 Aa2* Labette County, KS Single-Family Mortgage Revenue Refunding, Series A,
8.400% due 12/1/11 335,969
335,000 Aa2* Maryland State Community Development Administration, Single-Family
Mortgage Revenue, FHA-Insured, 7.450% due 4/1/32 (b) 343,794
1,920,000 Aa3* Massachusetts State Housing Finance Agency, Housing Revenue,
Single-Family Mortgage, Series 38, 7.200% due 12/1/26 (b) 1,960,800
Missouri State Housing Development Community Mortgage Revenue:
440,000 AAA GNMA-Collateralized, Series A, zero coupon to yield 7.337% due 7/1/23 80,850
710,000 AAA GNMA/FNMA-Collateralized, Series C, 7.450% due 9/1/27 (b) 770,350
Nebraska Investments Finance Authority:
300,000 AAA GNMA-Collateralized, RIBS, 9.507% due 10/17/23 (b)(c) 317,625
100,000 AAA Single-Family Mortgage Revenue, 1990 Series 3, GNMA-Collateralized,
RIBS, 10.669% due 9/10/30 (b)(c) 105,156
1,140,000 Aa3* New Hampshire State HFA, Single-Family Residential Mortgage,
7.250% due 7/1/15 (b) 1,177,050
220,000 AAA Ohio Housing Finance Agency Residential Mortgage, Series A-2,
GNMA-Collateralized, 6.625% due 3/1/26 (b) 226,050
90,000 BBB- Panhandle, TX Regional Housing Finance Corp., Single-Family Mortgage
Revenue, 10.375% due 3/1/09 90,661
1,000,000 AA+ Pennsylvania State HFA, Single-Family Mortgage Revenue, Series 39B,
6.875% due 10/1/24 (b) 1,036,250
1,425,000 AAA Pima County, AZ Single-Family Mortgage Revenue, Series A,
GNMA/FNMA/FHLMC-Collateralized, step bond to yield
6.250% due 11/1/29 (b) 1,448,156
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 4.1% (continued)
$ 280,000 AAA Prince Georges County, MD Housing Authority, Single-Family Mortgage
Revenue Refunding, Series A, GNMA-Collateralized, 8.000% due 1/1/17 $ 296,100
825,000 AAA Reno County, KS Single-Family Mortgage Revenue, Series A, AMBAC-Insured,
zero coupon bond to yield 11.039% due 12/1/14 160,875
1,500,000 AA+ Rhode Island Housing & Mortgage Financing Corp., Home Ownership
Opportunity Bonds, Series 8, INFLOS, 9.987% due 4/1/24 (b)(c) 1,571,250
258,870 A1* St. Bernard Parish, LA Home Mortgage Authority, Single-Family Mortgage
Revenue Refunding, Series A, 8.000% due 3/25/12 267,931
315,000 AAA Travis County, TX Housing Finance Corp., Single-Family Mortgage Revenue,
Series B, GNMA/FNMA-Collateralized, 7.100% due 10/1/27 (b) 328,388
225,000 AAA Utah HFA, Single-Family Mortgage Revenue, FHA-Insured,
7.300% due 7/1/16 231,750
2,375,000 AA+ Virginia State Housing Development Authority, Commonwealth Mortgage,
Series A, 7.150% due 1/1/33 2,449,219
145,000 AA Wyoming Community Development Authority, FHA-Insured,
8.125% due 6/1/21 (b) 148,154
------------------------------------------------------------------------------------------------------------------
17,428,470
------------------------------------------------------------------------------------------------------------------
Industrial Development -- 1.6%
1,050,000 NR Brookhaven, NY IDA Revenue, TDS Realty/Island ADC Income Facility,
LOC Fleet Bank, 6.550% due 12/1/19 (b) 1,071,000
1,640,000 AA- Oklahoma City, OK Industrial & Culture Facilities, 6.750% due 9/15/17 (b) 1,644,887
1,000,000 A+ Rensselaer County, NY IDA, Albany International Corp.,
7.550% due 6/15/07 (b) 1,105,000
1,000,000 BBB- Tucson, AZ Airport Authority Inc., Special Facilities Revenue Bonds,
Lockheed Aeromod Center Inc., Series 1990, 8.700% due 9/1/19 (b) 1,031,340
2,000,000 A+ West Chicago, IL IDR, (Leggett & Platt Inc. Project), 6.900% due 9/1/24 (b) 2,082,500
------------------------------------------------------------------------------------------------------------------
6,934,727
------------------------------------------------------------------------------------------------------------------
Life Care -- 2.2%
2,925,000 Aa* Hamilton County, OH Mortgage Revenue, Judson Care Center, Series A,
FHA-Insured, 6.500% due 8/1/26 2,990,813
2,500,000 BBB Illinois Development Finance Authority Health Facilities, Community Living,
7.125% due 3/1/10 2,493,750
1,000,000 Baa2* Indianapolis, IN Industrial EDR, 7.625% due 10/1/22 1,036,250
1,000,000 BBB- John Tolfree Health System Corp., MI Mortgage Revenue,
6.000% due 9/15/23 833,750
1,000,000 AAA Massachusetts State Industrial Finance Agency Revenue, Chelsea Jewish,
Series A, FHA-Insured, 6.500% due 8/1/37 1,026,250
1,000,000 A- Montgomery County, PA IDA, Retirement Community Revenue,
Life Communities Inc., 5.250% due 11/15/28 763,750
------------------------------------------------------------------------------------------------------------------
9,144,563
------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 7.4%
1,885,000 AA Bernalillo County, NM Gross Receipts Tax Revenue, 5.200% due 4/1/21 1,755,406
Dauphin County, PA General Authority:
4,000,000 NR Hyatt Regency, 6.200% due 1/1/29 3,605,000
1,000,000 NR Riverfront Office, 6.000% due 1/1/25 895,000
1,000,000 Baa3* Edmond, OK EDA, Collegiate Housing Foundation, Series A,
5.375% due 12/1/19 913,750
2,000,000 Ba1* Galveston, TX Special Contract Revenue, (Farmland Industries Inc. Project),
5.500% due 5/1/15 1,817,500
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Miscellaneous -- 7.4% (continued)
$ 3,000,000 AAA Georgia Local Government COP, Series A, MBIA-Insured,
4.750% due 6/1/28 $ 2,531,250
2,000,000 A Illinois Development Finance Authority Revenue Refunding,
City of East St. Louis, 7.250% due 11/15/09 2,145,000
1,500,000 AAA Indiana Bond Bank Guaranty State Revolving Fund, Series B,
6.875% due 2/1/12 1,627,500
2,375,000 NR Maryland State Economic Development Corp. Revenue, Health
& Mental Hygiene Program, Series A, 7.750% due 3/1/25 2,395,781
2,500,000 AA Massachusetts State Development Finance Agency Revenue, May
Institute Issue, Asset Guaranteed, 5.750% due 9/1/29 2,387,500
3,000,000 A3* Port Longview, WA Revenue Refunding, Series A, 6.250% due 12/1/18 (b) 3,071,250
950,000 A Quinault Indian Nation, WA Refunding & Improvement, Quinault Beach,
Series A, ACA-Insured, 5.800% due 12/1/15 927,438
1,330,000 NR Seward, AK (Sealife Center Project), 7.650% due 10/1/16 1,343,300
2,500,000 BBB+ Summit County, CO Sports Facilities Refunding Revenue, (Keystone
Resorts Management Inc. Project), Ralston Purina Co. Guaranteed,
7.750% due 9/1/06 2,790,625
3,550,000 AAA Wisconsin Center District, WI Tax Revenue, FSA-Insured,
5.250% due 12/15/23 3,359,188
------------------------------------------------------------------------------------------------------------------
31,565,488
------------------------------------------------------------------------------------------------------------------
Pollution Control -- 7.4%
1,700,000 A3* Adams County, MS Environmental Improvement Revenue Refunding,
(International Paper Co. Project), Series A, 6.800% due 8/1/24 (b) 1,740,375
5,000,000 Aa3* Brazos River, TX Navigation District, (BASF Corp. Project),
6.750% due 2/1/10 5,481,250
900,000 VMIG1* Burke County, GA Development Authority, Pollution Control Revenue,
(Georgia Power Co. Plant Project), 2.400% due 7/1/24 (e) 900,000
1,500,000 A3* De Soto Parish, LA Environmental Improvement Revenue, (International
Paper Co. Project), Series A, 5.600% due 11/1/22 (b) 1,327,500
3,600,000 AA- La Crosse, WI Resource Recovery Revenue, (Northern States Power Co.
Project), 6.000% due 11/1/21 (b) 3,604,500
3,000,000 A Lowndes County, MS Solid Waste Disposal & Pollution Control Revenue,
(Weyerhaeuser Co. Project), Series A, 6.800% due 4/1/22 3,213,750
1,000,000 A3* Mobile, AL Industrial Development Board, Environmental Improvement
Revenue, (International Paper Co. Project), Series B,
6.450% due 5/15/19 (b) 1,006,250
1,500,000 AAA Monroe County, MI, (Detroit Edison Co. Project), 7.650% due 9/1/20 (b) 1,544,490
830,000 NR New Jersey EDA Revenue, (Atlantic City Sewer Project),
7.250% due 12/1/11 (b) 871,500
500,000 NR Ohio State Solid Waste Revenue, Republic Engineered Steels Inc.,
9.000% due 6/1/21 (b) 250,000
1,000,000 A3* Rapides, LA Finance Authority, Environmental Improvement Revenue,
(International Paper Co. Project), Series A, 6.550% due 11/15/23 (b) 1,005,000
1,850,000 A3* Richland, SC Solid Waste Facility, (Union Camp Project),
7.125% due 9/1/21 (b) 1,891,625
3,000,000 NR Rockdale County, GA Solid Waste Authority Revenue,
7.500% due 1/1/26 (b) 3,090,000
1,945,000 BBB Saint Charles Parish, LA Union Carbide, 7.350% due 11/1/22 (b) 2,013,075
1,130,000 A Southwestern Illinois Development Authority, Solid Waste Disposal
Revenue, (Laclede Steel Co. Project), 8.500% due 8/1/20 (b) 1,152,600
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2000 Annual Report to Shareholders
<PAGE>
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Pollution Control -- 7.4% (continued)
$ 2,200,000 Baa2* Sweetwater County, WY Solid Waste Disposal Revenue,
(FMC Corp. Project), 7.000% due 6/1/24 (b) $ 2,230,250
------------------------------------------------------------------------------------------------------------------
31,322,165
------------------------------------------------------------------------------------------------------------------
Pre-Refunded(f) -- 2.1%
1,500,000 AAA Chattanooga-Hamilton County, TN Hospital Authority Revenue,
FSA-Insured, (Call 5/1/01 @ 104), 9.368% due 5/25/21 (c) 1,640,625
1,000,000 AAA Delaware County, PA Authority Revenue, (Elwyn Inc. Project),
(Call 6/1/00 @ 102), 8.350% due 6/1/15 1,026,100
85,000 AAA Denver, CO City & County Airport Revenue, Series A,
(Call 11/15/00 @ 102), 8.500% due 11/15/23 (b) 88,807
2,000,000 AAA Fairfax County, VA IDA, Series A, (Call 8/28/01 @ 104),
7.699% due 8/29/23 (c) 2,202,500
500,000 AAA Illinois Health Facility Authority Revenue, United Medical Center,
(Call 7/1/03 @ 100), 8.375% due 7/1/12 551,875
150,000 AAA New York City, NY GO, Series D, (Call 2/1/02 @ 101.5),
7.500% due 2/1/16 159,562
North Carolina Eastern Municipal Power Agency, Power System Revenue
Refunding, (Call 1/1/22 @ 100):
1,000,000 AAA 4.500% due 1/1/24 861,250
1,310,000 AAA 6.000% due 1/1/26 1,383,687
35,000 AAA Oregon State Bond Bank Revenue, Series 1, (Call 1/1/03 @ 102),
6.700% due 1/1/15 36,794
1,095,000 AAA Portland, TX Community Center Sales Tax Gross Revenue,
(Call 2/15/04 @ 102), 7.000% due 2/15/25 1,190,813
------------------------------------------------------------------------------------------------------------------
9,142,013
------------------------------------------------------------------------------------------------------------------
Public Facilities -- 3.5%
2,500,000 AAA Chicago, IL Lakefront Millennium Parking Facilities, MBIA-Insured,
step bond to yield 5.750% due 1/1/29 1,625,000
2,500,000 A- Dekalb County, IN Redevelopment, (Mini-Mill Local Public Improvement
Project), 6.500% due 1/15/14 2,612,500
2,750,000 AAA Harrisburg, PA Redevelopment Authority, FSA-Insured, zero coupon
bond to yield 5.220% due 5/1/21 807,812
3,685,000 AA Indianapolis, IN Local Public Improvement Bond Bank,
Series 1992 D, 6.750% due 2/1/14 4,090,350
1,250,000 NR Port Authority, NY & NJ Special Obligation Revenue, (5th Installment
Special Project), Series 4, 6.750% due 10/1/19 (b) 1,271,875
3,960,000 A Tulsa, OK Public Facilities Authority, Lease Payment Revenue Refunding,
Assembly Center, 6.600% due 7/1/14 4,375,800
------------------------------------------------------------------------------------------------------------------
14,783,337
------------------------------------------------------------------------------------------------------------------
Solid Waste -- 0.4%
2,000,000 Baa1* Courtland, AL Industrial Development Board, Solid Waste Disposal
Revenue, (Champion International Corp. Project), 6.000% due 8/1/29 (b) 1,827,500
------------------------------------------------------------------------------------------------------------------
Tax Allocation -- 0.7%
7,695,000 AAA Pittsburg, CA Redevelopment Agency, Tax Allocation, (Los Medanos
Community Development Project), AMBAC-Insured,
zero coupon bond to yield 6.200% due 8/1/28 1,442,812
1,000,000 BBB- Providence, RI Special Obligation, Tax Increment, Series D,
6.650% due 6/1/16 1,030,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Tax Allocation -- 0.7% (continued)
$ 2,650,000 AAA San Francisco, CA Redevelopment Financing Authority, Tax Allocation,
Capital Appreciation, (City & County Redevelopment Project),
Series D, MBIA-Insured, zero coupon bond to yield 5.200% due 8/1/24 $ 632,688
------------------------------------------------------------------------------------------------------------------
3,105,500
------------------------------------------------------------------------------------------------------------------
Transportation -- 12.8%
3,000,000 Baa1* Alliance Airport Authority Inc., Texas Special Facilities Revenue,
(American Airlines Inc. Project), 7.500% due 12/1/29 (b) 3,075,000
2,000,000 AAA Atlanta, GA Airport Revenue, Series B, FGIC-Insured,
5.625% due 1/1/30 (b) 1,920,000
2,010,000 NR Connecticut Development Authority, Airport Facilities Revenue,
6.625% due 12/1/14 (b) 2,062,763
Connector 2000 Association Inc., SC Toll Road Revenue, Capital
Appreciation, Series B:
4,000,000 BBB- Zero coupon bond to yield 5.830% due 1/1/27 525,000
20,000,000 BBB- Zero coupon bond to yield 5.850% due 1/1/37 1,225,000
15,000,000 BBB- Zero coupon bond to yield 5.850% due 1/1/38 843,750
Dallas-Fort Worth, TX International Airport Revenue:
2,515,000 Baa1* Facility Improvement Corp. Revenue, American Airlines Inc.,
6.375% due 5/1/35 (b) 2,398,681
1,000,000 AAA Series A, FGIC-Insured, 5.750% due 11/1/30 (b) 968,750
3,000,000 AAA Delaware Valley, PA Regional Finance Authority, Local Government
Revenue, Series A, AMBAC-Insured, 5.500% due 8/1/28 2,853,750
Denver, CO City & County Airport Revenue:
915,000 BBB+ Series A, 8.500% due 11/15/23 (b) 949,569
3,130,000 BBB+ Series B, 7.250% due 11/15/07 (b) 3,317,800
E-470 Public Highway Authority, CO Revenue Bonds, Capital
Appreciation, Series B, MBIA-Insured:
3,000,000 AAA Zero coupon bond to yield 5.520% due 9/1/22 787,500
10,000,000 AAA Zero coupon bond to yield 5.520% due 9/1/24 2,325,000
18,200,000 AAA Zero coupon bond to yield 5.520% due 9/1/25 3,981,250
2,000,000 NR Kenton County, KY Airport Board, Special Facilities Revenue, (Mesaba
Aviation Inc. Project), Series A, 6.700% due 7/1/29 (b) 1,905,000
2,605,000 AAA Massachusetts Bay Transportation Authority, General Transportation
System, Series A, MBIA-Insured, 4.500% due 3/1/26 2,113,306
Massachusetts State Turnpike Authority, Highway System Revenue:
6,330,000 AAA Series A, AMBAC-Insured, 5.000% due 1/1/39 5,427,975
2,470,000 Aaa* Series C, MBIA-Insured, zero coupon bond to yield 5.545% due 1/1/21 725,562
New Hampshire State Turnpike Systems Revenue Refunding,
FGIC-Insured:
2,500,000 AAA 6.750% due 11/1/11 2,756,250
1,000,000 AAA RIBS, Series C, 9.323% due 11/1/17 (c) 1,171,250
Pocahontas Parkway Association, VA Toll Road Revenue, Capital
Appreciation, Series B:
25,000,000 BBB- Zero coupon bond to yield 5.950% due 8/15/34 2,218,750
35,000,000 BBB- Zero coupon bond to yield 5.950% due 8/15/35 2,887,500
3,000,000 AAA Puerto Rico Commonwealth Highway & Transportation Authority Revenue,
Series Y, MBIA-Insured, 5.000% due 7/1/36 2,670,000
1,045,000 AAA Regional Transit Authority, Illinois, Series C, FGIC-Insured,
7.750% due 6/1/20 1,254,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
16 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Transportation -- 12.8% (continued)
San Joaquin Hills, CA Transportation Corridor Agency, Toll Road
Revenue, Series A, MBIA-Insured:
$ 4,000,000 AAA Zero coupon bond to yield 5.670% due 1/15/30 $ 685,000
8,135,000 AAA Zero coupon bond to yield 5.670% due 1/15/34 1,098,225
2,000,000 A Triborough Bridge & Tunnel Authority, NY Revenue, Convention
Center Project, Series E, 7.250% due 1/1/10 2,222,500
------------------------------------------------------------------------------------------------------------------
54,369,131
------------------------------------------------------------------------------------------------------------------
Utility -- 8.0%
2,120,000 AAA Alaska Energy Authority Power Revenue, Bradley Lake, Series 5,
FSA-Insured, 5.000% due 7/1/21 1,881,500
4,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp., Series A, 7.500% due 11/1/04 4,083,320
195,000 AAA Cleveland, OH Public Power System, MBIA-Insured, Series B,
7.000% due 11/15/17 205,237
Georgia Municipal Electric Authority Power Revenue:
1,500,000 AAA Series EE, AMBAC-Insured, 7.250% due 1/1/24 1,798,125
2,500,000 A Series X, 6.500% due 1/1/12 2,734,375
1,250,000 AAA Hawaii State Department Budget & Finance, Hawaiian Electric Co., Inc.,
Series A, MBIA-Insured, 5.650% due 10/1/27 (b) 1,206,250
5,000,000 AAA Matagorda County, TX Navigational District No. 1 Revenue,
Houston Lighting, AMBAC-Insured, 5.125% due 11/1/28 (b) 4,437,500
2,500,000 NR Michigan State Strategic Fund, Resource Recovery, Limited Obligation
Revenue, Central Wayne Energy Recovery, Series A,
7.000% due 7/1/27 (b) 2,284,375
1,000,000 A+ New York State Energy Research & Development, (Con Edison Project A),
7.125% due 12/1/29 (b) 1,088,750
North Carolina Eastern Municipal Power Agency, Power System Revenue,
Series B:
1,775,000 BBB 6.000% due 1/1/22 1,675,156
1,700,000 A ACA-Insured, 5.750% due 1/1/24 1,634,125
2,500,000 BBB Series D, 6.700% due 1/1/19 2,540,625
Piedmont, SC Municipal Power Agency, Electric Revenue Refunding:
1,235,000 AAA FGIC-Insured, 6.750% due 1/1/20 1,395,550
5,705,000 AAA Series A, MBIA-Insured, 4.750% due 1/1/25 4,813,594
1,875,000 Aa1* San Antonio, TX Electric & Gas, Series A, 4.500% due 2/1/21 1,558,594
900,000 VMIG1* Valdez, AK Marine Terminal Revenue, (Exxon Pipeline Co. Project),
Series A, 3.400% due 12/1/33 (e) 900,000
------------------------------------------------------------------------------------------------------------------
34,237,076
------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 5.5%
6,000,000 AAA Atlanta, GA Water & Wastewater Revenue, Series A, FGIC-Insured,
5.000% due 11/1/38 5,160,000
2,400,000 A Dauphin County, PA IDA, General Water Works Corp.,
6.900% due 6/1/24 (b) 2,667,000
1,000,000 AAA Detroit, MI Water Supply System, Series A, FGIC-Insured,
5.750% due 7/1/26 990,000
Honolulu, HI City & County Wastewater System Revenue,
Second Bond Resolution, Jr. Series, FGIC-Insured:
4,000,000 AAA 4.500% due 7/1/28 3,220,000
2,025,000 Aaa* Zero coupon bond to yield 5.050% due 7/1/16 802,406
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 17
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================================
<C> <C> <S> <C>
Water & Sewer -- 5.5% (continued)
$ 2,000,000 AAA Houston, TX Water & Sewer System Revenue, Series A, FSA-Insured,
zero coupon bond to yield 5.490% due 12/1/22 $ 522,500
2,000,000 A Idaho State Water Resources Board, Water Revenue, Resource
Development, Borse Water Corp., 7.250% due 12/1/21 (b) 2,087,500
1,000,000 AAA Massachusetts State Water Reservoir Authority, Series A, FGIC-Insured,
5.750% due 8/1/39 985,000
400,000 A- Ohio Water Development Authority, (Broken Hill Project),
6.450% due 9/1/20 (b) 409,000
3,400,000 Aa2* Port of Umatilla, OR Water Project Revenue, Series 1994,
LOC ABN AMRO Bank, 6.650% due 8/1/22 (b) 3,514,750
2,750,000 A Trumbull County, OH Sewer Disposal Revenue, (General Motors Corp.
Project), 6.750% due 7/1/14 (b) 2,949,375
------------------------------------------------------------------------------------------------------------------
23,307,531
------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $420,876,216**) $425,813,075
==================================================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except for those
identified by an asterisk (*) which are rated by Moody's Investors Service,
Inc.
(b) Income from this issue is considered a preference item for purpose of
calculating the alternative minimum tax.
(c) Residual interest bond-coupon varies inversely with level of short-term
tax-exempt interest rates.
(d) Bonds 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.
(e) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(f) Bonds 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 19 and 20 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
18 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
BOND RATINGS (UNAUDITED)
--------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"B" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in
a small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than for bonds in higher rated categories.
BB and B -- Bonds rated "BB" and "B" are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms
of the obligation. "BB" indicates the lowest degree of
speculation and "B" the highest degree of speculation. While such
bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3
may be applied to each generic rating from "Aa" to "Baa," where 1 is the highest
and 3 the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
in "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in "Aaa"
securities.
A -- Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa -- Bonds rated "Baa" are considered to be medium grade obligations,
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
NR -- Indicates that the bond is not rated by either Standard & Poor's
or Moody's.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<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
ACA -- American Capital Assurance
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
--------------------------------------------------------------------------------
20 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $420,876,216) $ 425,813,075
Cash 77,228
Interest receivable 7,041,334
Receivable for securities sold 2,055,571
Receivable for Fund shares sold 440,883
Other assets 1,388
-------------------------------------------------------------------------------------
Total Assets 435,429,479
-------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 8,093,152
Dividends payable 940,326
Management fees payable 170,904
Payable for Fund shares purchased 39,030
Distribution fees payable 34,243
Accrued expenses 34,082
-------------------------------------------------------------------------------------
Total Liabilities 9,311,737
-------------------------------------------------------------------------------------
Total Net Assets $ 426,117,742
=====================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 32,940
Capital paid in excess of par value 430,279,185
Undistributed net investment income 289,999
Accumulated net realized loss on security transactions (9,421,241)
Net unrealized appreciation on investments 4,936,859
-------------------------------------------------------------------------------------
Total Net Assets $ 426,117,742
=====================================================================================
Shares Outstanding:
Class A 28,123,289
-------------------------------------------------------------------------------------
Class B 3,315,272
-------------------------------------------------------------------------------------
Class L 1,500,956
-------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $12.94
-------------------------------------------------------------------------------------
Class B * $12.93
-------------------------------------------------------------------------------------
Class L ** $12.95
-------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $13.48
-------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $13.08
=====================================================================================
</TABLE>
* Redemption price is NAV of Class B reduced by a 4.50% CDSC if shares are
redeemed within one year from purchase (See Note 3).
** Redemption price is NAV of Class L reduced by a 1.00% CDSC if shares are
redeemed within one year from purchase.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 27,660,634
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 1,990,024
Distribution fees (Note 3) 966,012
Shareholder and system servicing fees 112,742
Registration fees 101,138
Shareholder communications 55,614
Pricing service fees 28,076
Audit and legal 28,051
Custody 22,111
Trustees' fees 6,017
Other 10,138
--------------------------------------------------------------------------------
Total Expenses 3,319,923
--------------------------------------------------------------------------------
Net Investment Income 24,340,711
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 299,289,364
Cost of securities sold 308,568,235
--------------------------------------------------------------------------------
Net Realized Loss (9,278,871)
--------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 30,492,586
End of year 4,936,859
--------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (25,555,727)
--------------------------------------------------------------------------------
Net Loss on Investments (34,834,598)
--------------------------------------------------------------------------------
Decrease in Net Assets From Operations $ (10,493,887)
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
22 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED MARCH 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
=======================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 24,340,711 $ 22,652,846
Net realized gain (loss) (9,278,871) 2,183,730
Decrease in net unrealized appreciation (25,555,727) (2,091,457)
-------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (10,493,887) 22,745,119
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (24,043,941) (22,962,050)
Net realized gains (242,860) (6,368,394)
-------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (24,286,801) (29,330,444)
-------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 137,891,715 109,110,684
Net asset value of shares issued for reinvestment of dividends 12,615,893 15,859,957
Cost of shares reacquired (149,086,200) (66,059,971)
-------------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 1,421,408 58,910,670
-------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (33,359,280) 52,325,345
NET ASSETS:
Beginning of year 459,477,022 407,151,677
-------------------------------------------------------------------------------------------------------
End of year* $ 426,117,742 $ 459,477,022
=======================================================================================================
* Includes undistributed (overdistributed) net investment income of: $ 289,999 $ (6,771)
=======================================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 23
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The National Portfolio ("Portfolio") is a separate diversified 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 eight other separate investment portfolios: Florida, Georgia,
Limited Term, New York, Pennsylvania, California Money Market, Massachusetts
Money Market and New York Money Market Portfolios. The financial statements and
financial highlights for the other portfolios are presented in separate
shareholder reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between the bid and ask prices provided by an independent pricing
service which are based on transactions in municipal obligations, quotations
from municipal bond dealers, market transactions in comparable securities and
various relationships between securities; (c) securities for which market
quotations are not available will be valued in good faith at fair value by or
under the direction of the Board of Trustees; (d) securities maturing within 60
days are valued at cost plus accreted discount or minus amortized premium, if
any, which approximates value; (e) gains or losses on the sale of securities are
calculated by using the specific identification method; (f) interest income,
adjusted for amortization of premium and accretion of original issue discount,
is recorded on an accrual basis; market discount is recognized upon the
disposition of the security; (g) dividends and distributions to shareholders are
recorded on the ex-dividend date; (h) direct expenses are charged to each
Portfolio and each class; management fees and general fund expenses are
allocated on the basis of relative net assets by class; (i) the character of
income and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles; (j)
the Portfolio intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; and (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. Exempt-Interest Dividends and Other Distributions
The Portfolio intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Portfolio.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Management Agreement and Other Transactions
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), which, in
turn, is a subsidiary of Citigroup Inc. ("Citigroup"), acts as investment
manager to the Fund. The Portfolio pays SSBC 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.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, became the Fund's transfer agent and PFPC Global Fund
--------------------------------------------------------------------------------
24 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
Services ("PFPC") became the sub-transfer agent. CFTC receives account fees and
asset-based fees that vary according to the account size and type of account.
PFPC is responsible for shareholder recordkeeping and financial processing for
all sharholder accounts and is paid by CFTC. During the period October 1, 1999
through March 31, 2000, the Fund paid transfer agent fees of $47,536 to CFTC.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
There are maximum initial sales charges of 5.00% and 1.00% for Class A and L
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
4.50% on Class B shares, which applies if redemption occurs within one year from
purchase. This CDSC declines by 0.50% the first year after purchase and
thereafter by 1.00% per year until no CDSC is incurred. Class L shares also have
a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. In certain cases, Class A shares have a 1.00% CDSC, which applies if
redemption occurs within the first year of purchase. This CDSC only applies to
those purchases of Class A shares, which when combined with current holdings of
Class A shares, equal or exceed $500,000 in the aggregate. These purchases do
not incur an initial sales charge.
For the year ended March 31, 2000, CFBDS and SSB received sales charges of
$343,000 and $19,000 on sales of the Fund's Class A and L shares, respectively.
In addition, CDSCs paid to SSB were approximately:
Class A Class B Class L
================================================================================
CDSCs $16,000 $82,000 $5,000
================================================================================
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A, B and L shares calculated at the annual rate of 0.15% of the average
daily net assets of each respective class. In addition, the Portfolio pays a
distribution fee with respect to Class B and L shares calculated at the annual
rates of 0.50% and 0.55% of the average daily net assets of each class,
respectively. For the year ended March 31, 2000, total Distribution Plan fees
incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $575,400 $257,153 $133,459
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
4. Investments
During the year ended March 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $297,431,079
--------------------------------------------------------------------------------
Sales 299,289,364
================================================================================
At March 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 15,265,408
Gross unrealized depreciation (10,328,549)
--------------------------------------------------------------------------------
Net unrealized appreciation $ 4,936,859
================================================================================
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are made or
--------------------------------------------------------------------------------
Smith Barney Muni Funds 25
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Portfolio records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Portfolio's basis in the contract. The Portfolio enters into such contracts
to hedge a portion of its portfolio. The Portfolio bears the market risk that
arises from changes in the value of the financial instruments and securities
indices (futures contracts).
At March 31, 2000, the Portfolios had no open futures contracts.
6. Capital Loss Carryforward
At March 31, 2000, the Portfolio had, for Federal income tax purposes,
approximately $4,176,000, respectively, of unused capital loss carryforwards
available to offset future capital gains expiring March 31, 2008. To the extent
that these carryforward losses are used to offset capital gains, it is probable
that the gains so offset will not be distributed.
7. Shares of Beneficial Interest
At March 31, 2000, 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, 2000, total paid-in capital amounted to the following for each
class:
Class A Class B Class L
================================================================================
Total Paid-in Capital $364,023,938 $45,172,740 $21,115,447
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 2000 March 31, 1999
----------------------------- ----------------------------
Shares Amount Shares Amount
==================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 7,907,403 $ 103,472,952 5,972,128 $ 84,705,473
Shares issued on reinvestment 833,099 10,908,420 999,932 14,128,508
Shares reacquired (9,573,264) (124,636,681) (4,199,657) (59,498,849)
--------------------------------------------------------------------------------------------------
Net Increase (Decrease) (832,762) $ (10,255,309) 2,772,403 $ 39,335,132
==================================================================================================
Class B
Shares sold 1,886,113 $ 24,554,298 1,355,808 $ 19,259,918
Shares issued on reinvestment 82,080 1,069,880 72,634 1,024,830
Shares reacquired (1,264,157) (16,286,306) (251,968) (3,557,223)
--------------------------------------------------------------------------------------------------
Net Increase 704,036 $ 9,337,872 1,176,474 $ 16,727,525
==================================================================================================
Class L+
Shares sold 758,614 $ 9,864,465 361,021 $ 5,145,293
Shares issued on reinvestment 48,787 637,593 50,013 706,619
Shares reacquired (632,320) (8,163,213) (211,749) (3,003,899)
--------------------------------------------------------------------------------------------------
Net Increase 175,081 $ 2,338,845 199,285 $ 2,848,013
==================================================================================================
</TABLE>
+ On June 12, 1998 Class C shares were renamed Class L shares.
--------------------------------------------------------------------------------
26 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31:
<TABLE>
<CAPTION>
Class A Shares 2000(1) 1999(1) 1998 1997 1996
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.97 $14.16 $13.60 $13.67 $13.32
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.74 0.74 0.79 0.81 0.81
Net realized and unrealized gain (loss) (1.03) 0.03 0.73 (0.09) 0.35
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.29) 0.77 1.52 0.72 1.16
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.73) (0.75) (0.80) (0.79) (0.81)
Net realized gains (0.01) (0.21) (0.16) -- --
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) (0.96) (0.96) (0.79) (0.81)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.94 $13.97 $14.16 $13.60 $13.67
-----------------------------------------------------------------------------------------------------------------------------------
Total Return (2.03)% 5.50% 11.47% 5.41% 8.83%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $363,812 $404,498 $370,891 $351,395 $378,421
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.68% 0.66% 0.66% 0.70% 0.70%
Net investment income 5.59 5.21 5.61 5.92 5.88
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 68% 61% 87% 31% 27%
===================================================================================================================================
<CAPTION>
Class B Shares 2000(1) 1999(1) 1998 1997 1996
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.96 $14.16 $13.61 $13.67 $13.33
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.67 0.67 0.70 0.74 0.73
Net realized and unrealized gain (loss) (1.03) 0.02 0.74 (0.08) 0.35
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.36) 0.69 1.44 0.66 1.08
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.66) (0.68) (0.73) (0.72) (0.74)
Net realized gains (0.01) (0.21) (0.16) -- --
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.67) (0.89) (0.89) (0.72) (0.74)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.93 $13.96 $14.16 $13.61 $13.67
-----------------------------------------------------------------------------------------------------------------------------------
Total Return (2.56)% 4.92% 10.80% 4.95% 8.26%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $42,872 $36,451 $20,313 $12,691 $11,605
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.18% 1.16% 1.29% 1.20% 1.19%
Net investment income 5.11 4.71 4.95 5.42 5.37
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 68% 61% 87% 31% 27%
===================================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
-------------------------------------------------------------------------------
Smith Barney Muni Funds 27
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31:
<TABLE>
<CAPTION>
Class L Shares 2000(1) 1999(1)(2) 1998 1997 1996
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.97 $ 14.16 $ 13.59 $ 13.65 $ 13.32
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.66 0.65 0.69 0.73 0.73
Net realized and unrealized gain (loss) (1.02) 0.02 0.74 (0.08) 0.34
-----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.36) 0.67 1.43 0.65 1.07
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.65) (0.65) (0.70) (0.71) (0.74)
Net realized gains (0.01) (0.21) (0.16) -- --
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.66) (0.86) (0.86) (0.71) (0.74)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.95 $ 13.97 $ 14.16 $ 13.59 $ 13.65
-----------------------------------------------------------------------------------------------------------------------------------
Total Return (2.57)% 4.79% 10.71% 4.90% 8.13%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 19,434 $ 18,528 $ 15,926 $ 14,901 $ 16,563
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.26% 1.24% 1.35% 1.27% 1.27%
Net investment income 5.03 4.63 4.91 5.35 5.31
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 68% 61% 87% 31% 27%
===================================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
--------------------------------------------------------------------------------
28 2000 Annual Report to Shareholders
<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, 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2000, 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, 2000, 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
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
New York, New York
May 11, 2000
--------------------------------------------------------------------------------
Smith Barney Muni Funds 29
<PAGE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 2000:
. 99.98% of the dividends paid by the Fund from net investment income as
tax exempt for regular Federal income tax purposes.
. Long-term capital gain distributions paid of $242,860.
--------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
--------------------------------------------------------------------------------
On April 19, 1999, a special meeting of shareholders of the Trust was held for
the purpose of electing Trustees to the Trust.
The results were as follows:
<TABLE>
<CAPTION>
Percentage Percentage
Shares Voted of Shares Shares Voted of Shares
Name of Trustees For Voted Against Voted
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lee Abraham 1,350,265,160.850 97.943% 28,359,584.139 2.057%
Allan J. Bloostein 1,351,356,664.226 98.022 27,268,080,763 1.978
Jane F. Dasher 1,352,390,291.715 98.097 26,234,453.274 1.903
Donald R. Foley 1,350,867,506.020 97.987 27,757,238.969 2.013
Richard E. Hanson, Jr. 1,351,302,644.963 98.018 27,322,100.026 1.982
Paul Hardin 1,352,452,572.699 98.102 26,172,172.290 1.898
Heath B. McLendon 1,352,481,643.116 98.104 26,143,101.873 1.896
Roderick C. Rasmussen 1,351,438,798.818 98.028 27,185,946.171 1.972
John P. Toolan 1,352,497,455.395 98.105 26,127,289.594 1.895
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
30 2000 Annual Report to Shareholders
<PAGE>
(This page intentionally left blank.)
<PAGE>
(This page intentionally left blank.)
<PAGE>
Smith Barney
Muni Funds
Trustees
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Peter M. Coffey
Vice President
Anthony Pace
Controller
Christina T. Sydor
Secretary
Investment Manager
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PFPC Trust Company
Transfer Servicing Agent
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, NY 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds National Portfolio, but it may also be used as sales
literature when proceeded or accompanied by the current Prospectus, which gives
details about charges, expenses, investment objectives and operating policies of
the Fund. If used as sales material after June 30, 2000, this report must be
accompanied by performance information for the most recently completed calendar
quarter.
[LOGO OF SALOMON SMITH BARNEY]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Muni Funds
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD2304 5/00
<PAGE>
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
SMITH BARNEY MUNI FUNDS
NEW YORK MONEY MARKET PORTFOLIO
NEW YORK PORTFOLIO
ANNUAL REPORT
MARCH 31, 2000
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
Smith Barney
Muni Funds
[PHOTO] [PHOTO]
Heath B. McLendon Joseph P. Deane
Chairman Vice President
[PHOTO]
Joseph Benevento
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 ("Portfolios")
for the year ended March 31, 2000. For your convenience, we have summarized the
period's prevailing economic and market conditions below and outlined each
Portfolio's investment strategy. A detailed summary of performance can be found
in the appropriate sections that follow. We hope you find this report to be
useful and informative.
New York Portfolio's Performance Update 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.1
For the year ended March 31, 2000, the Class A shares of the New York Portfolio,
without sales charges, returned a negative 1.61% versus its New York municipal
bond fund peer group average total return of negative 2.43% for the same time
period, according to Lipper, Inc. (Lipper, Inc. is an independent fund-tracking
organization.)
As of March 31, 2000, 99.3% of the Portfolio's holdings were rated investment
grade or better and 57.6% were rated AAA, the highest possible rating. As of
March 31, 2000, the Portfolio's holdings were concentrated among education bonds
(16.4%), hospital bonds (12.6%) and pre-refunded bonds (12.5%).
While no guarantees can be made, we think that select municipal securities may
be undervalued and this has caused us to rebalance our holdings. In general,
this means we are buying bonds carrying maturities of 20 years or longer with
solid
-----------
1 A portion of the Portfolio's income may be subject to the Alternative
Minimum Tax ("AMT").
--------------------------------------------------------------------------------
Smith Barney Muni Funds 1
<PAGE>
credit ratings and trading below what we believe may be fair market value
in price. Moreover, we have targeted, among others, general obligation bonds and
high-grade revenue credits like water, sewer and toll-road bonds.
Our investment strategy for the Portfolio, during the period, has been to
maximize the Portfolio's dividend yield. In our view, the municipal bond market
has provided us with excellent opportunities during the reporting period. Since
interest rates have gone up to higher levels, we have been able to invest our
excess cash in bonds with higher yields. In addition, we also focused on adding
high-grade bonds to the Portfolio.
Our investment strategy going forward will be three-fold:
. We plan to lengthen maturities in the Portfolio to take advantage of the
inexpensive valuations of municipal bonds relative to U.S. Treasuries bonds;
. We will continue to focus on investing in high-grade issues (rated triple-A
or double-A by either Standard & Poor's Ratings Service or Moody's Investors
Service, Inc.); and
. We intend to invest in discount paper because this is where we believe we can
obtain the best values.
Another key goal will be to sell off some of our intermediate-term maturities
that were defensive and stretch out longer on the yield curve to lock in today's
higher rates. (The yield curve is a graphical depiction of the relationship
between the yield on bonds of the same credit quality but different maturities.)
We see the best opportunities for potential reward right now at the long end of
the yield curve.
Market and Economic Overview
In our view, bond yields may be high enough to adequately reflect the risk of
slightly higher inflation. The period covered by this report was marked by
continued robust U.S. economic growth, historically low inflation and low
unemployment.
The Federal Reserve Board ("Fed") has increased short-term interest rates five
times in the last nine months by a total of 125 basis points (or 1.25%).2 The
Fed remains committed to keeping pressure on borrowing costs until the U.S.
economy slows to levels that keep inflation from accelerating. Perhaps more
significant than the Fed's actions was its accompanying statement that rapid
growth could foster inflationary imbalances that might undermine the economy's
record economic expansion.
------------
2 On May 16, 2000, after this letter was written, the Fed raised interest
rates by 0.50% to 6.50%.
--------------------------------------------------------------------------------
2 2000 Annual Report to Shareholders
<PAGE>
We believe that this cautionary statement may hint at a slightly more aggressive
approach by the Fed in the months ahead. However, in our view, bond yields are
high enough to adequately reflect the risk of slightly higher inflation. Indeed,
we think that bond yields may be near their peak.
Also, we think performance in the bond market during the period has been a
direct result of Fed monetary policy actions. While presumably aimed at stock
market exuberance, it is the bond market that has taken the brunt of any
correction on fears of further Fed rate increases. We believe the current lack
of inflationary evidence defies a historically tight labor market and reinforces
the influence of technology and the power of global pricing constraints.
To be sure, the bond market experienced a tough year in 1999. Tax-loss selling
and asset allocation shifts out of municipal securities precipitated massive
outflows in the fourth quarter of 1999, prompting many bond funds to sell their
holdings. This trend in turn drove yields even higher and sent the net asset
values of many funds lower, accelerating outflows and leaving bond dealers
reluctant to stock municipal securities. Additionally, the bond market has
suffered in recent months from uncertainty over the outlook for future Fed
monetary policy, given the ongoing resilience of the stock market and the
apparent acceleration of consumer demand at the end of 1999. Also, as we have
previously noted, supply in the new issue market is down substantially from last
year.
These factors, in addition to the considerable momentum going into 2000, may
mean that there is less financial restraint in the economy than previously
believed. The pace of demand growth is surpassing even optimistic assessments of
the economy's limits, threatening to reignite inflation and underscoring the
need for Fed vigilance and restraint.
Under "normal" market conditions, municipal investors pay for the tax-free
income benefits by getting a lower return. Today, however, investors are in
effect saving on taxes without sacrificing returns. It is possible to buy
double- and triple- A-rated bonds yielding nearly 100% or more of similar
maturity U.S. Treasury bonds, well above the historical average of roughly 80%.
We think these yields represent extraordinarily good value for municipal
securities.
New York Economic Highlights
The Empire State is moving aggressively to create a more favorable business
climate, and this is clearly having a positive impact on its economy. This
turnaround comes as New York continues to reduce taxes, eliminate red tape and
other bureaucratic obstacles and change ineffective state government programs
that may have previously held back New York's economic growth.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 3
<PAGE>
New York State is home to the 10th largest economy in the world. With a Gross
State Product of roughly $593 billion, New York accounts for nearly 8% of the
nation's Gross Domestic Product ("GDP"). New York is home to 65 FORTUNE 500
companies -- more than any other U.S. state. In fact, more than $1 trillion in
financial transactions take place at the New York Stock Exchange on a typical
trading day, making New York City the undisputed financial capital of the
world.3
We continue to be somewhat optimistic on New York's financial future and our
outlook for New York State municipal securities is that they should remain
relatively stable. In our opinion, the large surpluses that New York achieved in
recent years make near-term credit risks very low. However, over the
longer-term, New York's future budgetary and financing decisions scheduled to
take place over the next few years may increase credit risk as the state once
again confronts budget gaps and narrower cash margins.
Increased cash balances, largely generated by the extraordinary profitability of
the financial services sector, we believe provide, a near-term buffer against
the historic volatility of stock market-driven revenue growth. However, while
the broader economy is also growing, so too is New York's debt load, and funding
for multi-year tax reductions and expenditure commitments are based on continued
economic growth. Despite the many challenges that lie ahead, we are optimistic
about the long-term attractiveness of the tax-exempt bond market in New York
State.
Market Outlook
We think the U.S. economy should remain stable this year, as low unemployment
and strong consumer confidence will likely support demand for goods.
Additionally, we think that the Fed has engineered a good balance between strong
economic growth and an "acceptable" rate of inflation.
Regarding further Fed tightenings, we think that such future moves may not be
detrimental to the bond market, particularly as the U.S. Treasury continues to
pay down debt and inflation remains moderate. It is our belief that any further
Fed policy actions have already been comfortably priced into the bond market. We
believe that the good news is that the economy's "soft landing" is likely to be
at a higher annual growth rate than was previously thought possible due to the
possible emergence of a "New Economy," where technological advances can spur
economic growth without inflationary pressures because of higher productivity.
-------------
3 Source: Fitch IBCA Inc., an internationally recognized rating agency
--------------------------------------------------------------------------------
4 2000 Annual Report to Shareholders
<PAGE>
In our judgment, a number of factors bode well for the municipal bond market.
The new issue market is expected to shrink this year, boosting demand for bonds
currently outstanding and enhancing interest for the roughly $175 billion of new
munis expected in 2000. Fiscal trends are another major plus. During past
economic downturns, some municipal issuers facing declining tax receipts were
hard-pressed to repay their bond obligations. Today, many state and local
governments boast budget surpluses. We believe these surpluses indicate that
investors will feel more comfortable holding munis, even in a downturn. And
lastly, recent narrowing of spreads in the taxable market has made alternatives
less attractive. All of these trends help to explain why we remain optimistic
about the long-term prospects for the municipal bond market.
New York Money Market Portfolio Investment Strategy
The New York Money Market Portfolio seeks to provide investors with income
exempt from federal income tax (other than the Alternative Minimum Tax) and New
York State and City personal income taxes by investing in high quality,
short-term New York municipal obligations selected for liquidity and stability
of principal.
The New York Money Market Portfolio invests only in short-term securities that
we feel carry minimal credit risk. All of the Portfolio's holdings are rated
within the top two short-term credit rating categories or are of comparable
quality.
Please note that your investment in the New York Money Market Portfolio is
neither insured, nor guaranteed, by the Federal Deposit Insurance Corporation or
any other government agency. Although the Portfolio seeks to preserve the value
of your investment at $1.00 per share, it is possible to lose money by investing
in the Portfolio.
For the year ended March 31, 2000, the Portfolio posted a total return of 2.76%.
As of March 31, 2000, the New York Money Market Portfolio's 7-day current yield
was 3.06%. The Portfolio's 7-day effective yield -- which reflects compounding
-- was 3.11%.
The 7-day current yield is an average of the past seven-days daily yields while
the one-year total return reflects the entire year's performance. (Total return
is the annual return on an investment including appreciation and dividends or
interest.) During the Fund's fiscal year the Fed raised the overnight bank
lending rate 125 basis points. (A basis point is 0.01% or one-hundredth of a
percent of yield.) Because rates have been rising, the Fund's 7-day yield will
reflect the higher market rates.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 5
<PAGE>
During the reporting period, in expectation of increasing rates, we have
shortened our average maturity target to a 35 to 40 day range. In addition we
have positioned the Portfolio with an increased variable rate position which
will help the Portfolio to contend with seasonal redemptions that normally occur
during April's tax season.
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 in the new century.
Sincerely,
/s/ Heath B. McLendon /s/ J. P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President
New York Portfolio
/s/ Joseph Benevento
Joseph Benevento
Vice President
New York Money Market Portfolio
April 18, 2000
--------------------------------------------------------------------------------
6 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
New York Portfolio
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.69 $12.78 $0.67 $0.01 (1.61)%
--------------------------------------------------------------------------------
3/31/99 13.91 13.69 0.70 0.27 5.50
--------------------------------------------------------------------------------
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
================================================================================
Total $7.61 $0.33
================================================================================
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.68 $12.78 $0.60 $0.01 (2.09)%
--------------------------------------------------------------------------------
3/31/99 13.89 13.68 0.62 0.27 5.02
--------------------------------------------------------------------------------
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 $3.52 $0.33
================================================================================
--------------------------------------------------------------------------------
Smith Barney Muni Funds 7
<PAGE>
--------------------------------------------------------------------------------
New York Portfolio
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.67 $12.77 $0.59 $0.01 (2.14)%
--------------------------------------------------------------------------------
3/31/99 13.88 13.67 0.61 0.27 4.95
--------------------------------------------------------------------------------
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 $4.70 $0.33
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------
Class A Class B Class L
================================================================================
Year Ended 3/31/00 (1.61)% (2.09)% (2.14)%
--------------------------------------------------------------------------------
Five Years Ended 3/31/00 5.89 5.33 5.29
--------------------------------------------------------------------------------
Ten Years Ended 3/31/00 7.31 N/A N/A
--------------------------------------------------------------------------------
Inception* through 3/31/00 6.79 6.78 5.28
================================================================================
With Sales Charges(2)
--------------------------------------------
Class A Class B Class L
================================================================================
Year Ended 3/31/00 (5.54)% (6.29)% (4.06)%
--------------------------------------------------------------------------------
Five Years Ended 3/31/00 5.03 5.17 5.08
--------------------------------------------------------------------------------
Ten Years Ended 3/31/00 6.87 N/A N/A
--------------------------------------------------------------------------------
Inception* through 3/31/00 6.46 6.78 5.13
================================================================================
--------------------------------------------------------------------------------
8 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
New York Portfolio
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (3/31/90 through 3/31/00) 102.53%
--------------------------------------------------------------------------------
Class B (Inception* through 3/31/00) 42.54
--------------------------------------------------------------------------------
Class L (Inception* through 3/31/00) 45.02
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charges with respect to Class A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed within one year from purchase. This CDSC
declines by 0.50% the first year after purchase and thereafter by 1.00% per
year until no CDSC is incurred. Class L shares also reflect the deduction of
a 1.00% CDSC, which applies if shares are redeemed within the first year of
purchase.
* Inception dates for Class A, B and L shares are January 16, 1987, November
11, 1994 and January 8, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
--------------------------------------------------------------------------------
Historical Performance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the New York Portfolio vs.
Lehman Brothers Municipal Bond Index+
--------------------------------------------------------------------------------
March 1990 -- March 2000
[GRAPH]
New York Lehman Brothers
Portfolio Municipal Bond Index
3/90 9,597 10,000
3/91 10,405 10,922
3/92 11,619 12,013
3/93 13,268 13,517
3/94 13,590 13,831
3/95 14,428 14,860
3/96 15,685 16,105
3/97 16,544 16,982
3/98 18,501 18,801
3/99 19,224 19,967
3/00 18,915 19,950
+ Hypothetical illustration of $10,000 invested in Class A shares on March
31, 1990, 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, 2000. The
Lehman Brothers Municipal Bond Index is 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. This index is
unmanaged and is not subject to the same management and trading expenses of
a mutual fund. The performance of the Portfolio's other classes may be
greater or less than the Class A shares' performance indicated on this
chart, depending on whether greater or lesser sales charges and fees were
incurred by shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital
gains.
--------------------------------------------------------------------------------
10 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments March 31, 2000
--------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$12,350,000 VMIG 1* Albany NY IDR United Cerebral Palsy Series B
3.800% VRDO $12,350,000
7,500,000 SP-1+ Buffalo NY BAN Series 99A 4.650% due 7/25/00 7,519,609
3,600,000 NR++ Chautauqua County IDA (Red Wing Co. Project)
3.950% VRDO 3,600,000
4,900,000 A-1 Columbia County IDR (Rural Manufacturing Project)
3.950% VRDO (b) 4,900,000
10,230,000 NR+ Commack UFSD BAN Series 99 3.750% due 6/23/00 10,237,840
Dutchess County NY IDA:
6,600,000 A-1+ Marist College Series 98A 3.750% VRDO 6,600,000
4,500,000 A-1+ St. Francis Hospital Series B 3.750% VRDO 4,500,000
10,000,000 NR+ East Greenbush CSD BAN Series 99 3.750% due 6/28/00 10,008,114
16,000,000 NR+ Eastern Suffolk BOCES RAN 3.750% due 6/28/00 16,011,887
Erie County IDA:
3,550,000 A-1 Colad Group Inc. Project Series 96 3.950% VRDO (b) 3,550,000
3,325,000 P-1* Rosina Food Products Inc. 3.950% VRDO (b) 3,325,000
7,900,000 A-1 Franklin County Trudeau Institute Series 98 3.850%
VRDO 7,900,000
1,920,000 A-1 Fulton County IDR (Fiber Conversion Inc. Project)
3.950% VRDO (b) 1,920,000
9,350,000 A-1+ Hempstead IDA Nassau Energy 3.800% VRDO (b) 9,350,000
1,410,000 A-1 Hudson County IDA (Emsig Manufacturing Corp.)
Series 98 4.000% VRDO (b) 1,410,000
Jefferson County IDA:
790,000 A-1 The Climax Manufacturing Co. Project
3.950% VRDO (b) 790,000
2,145,000 A-1 Fisher Guage 3.950% VRDO (b) 2,145,000
370,000 A-1 Lewis County IDA IDR (The Climax Manufacturing
Co. Project) 3.950% VRDO (b) 370,000
Long Island Power Authority:
19,100,000 A-1+ Series 1 1998 3.800% VRDO 19,100,000
1,100,000 A-1+ Series 2 1998 3.650% VRDO 1,100,000
2,700,000 A-1+ Series 3 3.600% due 4/7/00 2,700,000
10,000,000 A-1+ Series 3 1998 TECP 4.050% due 8/8/00 10,000,000
3,500,000 A-1+ Series 4 1998 TECP 3.750% due 4/12/00 3,500,000
5,470,000 A-1+ Series 6 4.000% VRDO 5,470,000
3,195,000 A-1+ Series 565 PART MBIA-Insured 3.960% VRDO 3,195,000
14,380,000 A-1+ Series A PART 4.060% VRDO 14,380,000
10,000,000 A-1+ Series A PART MBIA-Insured 4.060% VRDO 10,000,000
Madison Country BOCES:
3,250,000 NR+ Monroe Orleans RAN 3.750% due 6/30/00 3,252,083
7,500,000 NR+ Onondaga Cortland 3.750% due 6/23/00 7,504,926
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Monroe County IDA:
$ 8,315,000 A-1 Collegiate Housing Foundation Series A
3.900% VRDO $ 8,315,000
3,615,000 A-1 Granite Building Series 1992 3.850% VRDO 3,615,000
5,790,000 A-1 JADA Precision Plastic Series 97
3.950% VRDO (b) 5,790,000
15,000,000 A-1 Municipal Assistance Corp. Series J 5.500% due 7/1/00 15,056,846
Nassau County:
3,730,000 A-1+ Rubies Costume Project IDA 3.950% VRDO (b) 3,730,000
20,000,000 NR++ Series B RAN 3.750% due 4/19/00 20,013,408
New York City GO:
23,690,000 A-1+ PART AMBAC-Insured 3.900% VRDO 23,690,000
13,500,000 A-1+ PART MBIA-Insured 3.960% VRDO 13,500,000
11,085,000 A-1+ Series 94 B-5 3.950% VRDO 11,085,000
4,500,000 A-1+ Series 94 H-3 FSA-Insured 3.700% due 4/11/00 4,500,000
5,000,000 A-1+ Series 96E AMBAC-Insured 3.925% due 9/7/00 5,000,000
1,200,000 A-1+ Series 98A TECP 3.650% due 5/4/00 1,200,000
9,400,000 A-1+ Series B-6 MBIA-Insured 3.950% VRDO 9,400,000
6,800,000 A-1+ Series C 4.100% VRDO 6,800,000
4,125,000 A-1+ Series D 4.500% VRDO 4,130,964
19,900,000 A-1+ Series F-3 3.800% VRDO 19,900,000
5,600,000 A-1+ Series H Sub-Series H-3 FSA-Insured
3.750% due 4/12/00 5,600,000
1,700,000 A-1+ Series H Sub-Series H-6 MBIA-Insured
4.000% due 6/12/00 1,700,000
21,650,000 A-1+ Series J-2 3.800% 21,650,000
3,050,000 A-1 Series L 5.250% due 8/1/00 3,063,704
3,900,000 A-1+ Sub-Series B-2 B-9 3.800% VRDO 3,900,000
Sub-Series H-6 MBIA-Insured:
5,000,000 A-1+ 3.750% due 4/11/00 5,000,000
2,600,000 A-1+ 3.950% due 6/14/00 2,600,000
New York City HDC Multi-Family Housing:
10,000,000 A-1+ Brittany Development Series A 3.800% VRDO (b) 10,000,000
1,300,000 A-1+ Columbus Apartments Series A 3.650% VRDO 1,300,000
33,000,000 A-1+ 1 Columbus Place Series A 3.800% VRDO 33,000,000
1,500,000 A-1+ Harmony House Project 3.800% VRDO 1,500,000
4,100,000 A-1+ Spring Creek 3.800% VRDO 4,100,000
New York City Health & Hospital Corp. Revenue:
2,410,000 A-1+ Series C 3.700% VRDO 2,410,000
11,200,000 A-1+ Series F 3.650% VRDO 11,200,000
New York City IDA:
19,000,000 A-1+ Air Express International Corp. Project
3.850% VRDO (b) 19,000,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 3,900,000 A-1+ Childrens Oncology Society 3.750% VRDO $ 3,900,000
4,950,000 A-1 Columbia Grammar School Project
3.750% VRDO 4,950,000
6,100,000 SP-1+ Gary Plastic Packaging Corp. 98 3.950% VRDO (b) 6,100,000
7,000,000 A-1+ Linear Lighting Corp. 3.950% VRDO (b) 7,000,000
12,000,000 A-1 USA Waste Services 3.850% VRDO (b) 12,000,000
New York City Metropolitan Transit Authority:
PART FSA-Insured:
5,470,000 A-1+ 3.910% VRDO 5,470,000
9,425,000 A-1+ 3.950% VRDO 9,425,000
10,000,000 VMIG 1* Munitop Series 99-2 3.300% due 5/10/00 10,000,000
12,000,000 A-1+ Series A 4.050% due 6/13/00 12,000,000
Series CP1 Sub-Series A TECP:
5,000,000 A-1+ 3.750% due 4/6/00 5,000,000
20,000,000 A-1+ 4.000% due 8/9/00 20,000,000
7,000,000 A-1+ Sub-Series 98B BAN CP1 3.950% due 6/9/00 7,000,000
Sub-Series CP1 TECP:
9,000,000 A-1+ 3.700% due 4/6/00 9,000,000
16,300,000 A-1+ 3.750% due 5/4/00 16,300,000
New York City Municipal Water Financial Authority:
12,500,000 A-1+ Series 4 TECP 3.850% due 4/27/00 12,500,000
3,000,000 NR+ Series 5 3.500% due 4/27/00 3,000,000
2,500,000 A-1+ Series 5-B TECP 3.600% due 4/27/00 2,500,000
25,854,000 VMIG 1* Series 98-2 PART 4.030% VRDO 25,854,000
5,000,000 A-1+ Series 98C PART FGIC-Insured 3.910% VRDO 5,000,000
Series A:
1,675,000 A-1+ 6.000% due 6/15/00 1,683,621
13,875,000 A-1+ 7.500% due 6/15/00 14,184,140
4,225,000 A-1+ FGIC-Insured 4.100% VRDO 4,225,000
6,800,000 A-1+ Series G FGIC-Insured 3.950% VRDO 6,800,000
New York City Transitional Financial Authority:
15,000,000 A-1+ 3.750% VRDO 15,000,000
Future Tax Secured:
8,300,000 A-1+ Series 98B PART 3.910% VRDO 8,300,000
24,900,000 VMIG 1* Series A-2 3.650% VRDO 24,900,000
11,300,000 A-1 Series B-1 3.950% VRDO 11,300,000
4,400,000 A-1 Series B-2 3.950% VRDO 4,400,000
New York State:
30,000,000 A-1+ Series A 4.050% due 6/8/00 30,000,000
10,000,000 A-1+ Series B 4.050% due 8/9/00 10,000,000
New York State Dormitory Authority:
8,625,000 A-1+ Colgate University PART FGIC-Insured 3.900% VRDO 8,625,000
9,800,000 A-1+ Cornell University TECP 3.950% due 5/31/00 9,800,000
8,945,000 A-1+ Memorial Sloan Kettering Series 89A 3.990% VRDO 8,945,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 8,000,000 A-1+ Public Library Series 99A 3.650% VRDO $ 8,000,000
3,500,000 A-1+ Public Library Series 99B 3.650% VRDO 3,500,000
12,235,000 NR+ Revenue City University Series C (Pre-Refunded --
Escrowed with U.S. government securities
to 7/1/00 Call @ 100) 6.000% due 7/1/00 12,307,566
5,210,000 A-1+ United Health Services PART AMBAC-Insured
3.910% VRDO 5,210,000
9,500,000 A-1+ Wagner College 3.750% VRDO 9,500,000
New York State Energy Research & Development Authority:
Con Edison:
27,000,000 A-1 Sub-Series A-2 3.850% VRDO 27,000,000
25,000,000 A-1 Sub-Series A-3 3.850% VRDO 25,000,000
14,000,000 VMIG 1* LILCO Series A 3.800% VRDO (b) 14,000,000
New York State Electric & Gas:
12,500,000 VMIG 1* 3.700% due 10/15/00 (c) 12,500,000
7,000,000 A-1+ 3.900% due 12/1/00 (b) 7,000,000
Niagara Mohawk:
7,000,000 A-1+ PART AMBAC-Insured 3.910% VRDO 7,000,000
14,000,000 A-1+ Series A 4.100% VRDO 14,000,000
8,800,000 A-1+ Series B 3.150% VRDO (b) 8,800,000
Rochester Gas & Electric MBIA-Insured:
4,800,000 A-1+ Series 97A 3.700% VRDO 4,800,000
8,000,000 A-1+ Series B 3.750% VRDO 8,000,000
New York State Environmental Quality Series TECP:
9,995,000 A-1+ PART MBIA-Insured 3.910% VRDO 9,995,000
4,000,000 A-1+ Series 97A TECP 3.700% due 4/10/00 4,000,000
New York State Housing Finance Authority:
27,500,000 A-1+ 250 West 50th Street Series A 3.700% VRDO (b) 27,500,000
3,500,000 A-1+ 750 Sixth Avenue Housing Series A
3.800% VRDO (b) 3,500,000
33,100,000 VMIG 1* E84th Street Series A 3.750% VRDO (b) 33,100,000
16,400,000 A-1+ Liberty View Apartment Series 97A
3.650% VRDO (b) 16,400,000
24,000,000 VMIG 1* Saxony Housing Series 97A 3.800% VRDO (b) 24,000,000
8,500,000 VMIG 1* Talleyrand Crescent Housing Series 99A
3.800% VRDO (b) 8,500,000
8,800,000 VMIG 1* Tribeca Park Housing Series A 3.700% VRDO (b) 8,800,000
New York State Local Government Assistance Corp.:
19,405,000 A-1+ Series 93A 3.600% VRDO 19,405,000
15,400,000 A-1+ Series 94B 3.650% VRDO 15,400,000
1,200,000 A-1+ Series 95B 3.600% VRDO 1,200,000
2,750,000 A-1+ Series 95C 3.600% VRDO 2,750,000
12,050,000 AAA Series C (Pre-Refunded -- Escrowed with U.S.
government securities to 4/1/01 Call @ 100)
6.500% due 4/1/15 12,340,807
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York State Medicare Facilities Finance Agency:
$ 5,400,000 VMIG 1* Lenox Hill Hospital 3.600% VRDO $ 5,400,000
6,900,000 VMIG 1* St. Lukes PART FHA-Insured 3.910% VRDO 6,900,000
New York State Mortgage Agency Revenue PART:
13,995,000 VMIG 1* 3.960% VRDO (b) 13,995,000
12,475,000 VMIG 1* SONYMA Series 38 3.960% VRDO (b) 12,475,000
New York State Power Authority:
27,200,000 A-1 Series 2 TECP 3.700% due 4/3/00 27,200,000
6,000,000 A-1 Series 2 TECP 3.900% due 5/4/00 6,000,000
6,450,000 A-1 Series 4 3.950% due 6/9/00 6,450,000
4,500,000 A-1 Series 4 3.900% due 6/12/00 4,500,000
New York State Thruway:
5,000,000 NR++ Highway & Bridge AMBAC-Insured Series B
5.000% due 4/1/00 5,000,000
4,945,000 A-1+ PART 3.990% VRDO 4,945,000
23,095,000 A-1+ PART Series 1997 3.900% VRDO 23,095,000
New York State UDC:
17,525,000 Aaa* Pre-Refunded -- Escrowed with U.S. government
securities to 4/1/01 Call @ 102 7.500% due 4/1/20 18,417,873
8,000,000 VMIG 1* Series N PART AMBAC-Insured 4.000% VRDO 8,000,000
Niagara County IDA (American Re-Fuel Co.):
13,505,000 A-1+ Series 94C 3.750% VRDO (b) 13,505,000
8,000,000 A-1+ Series 96D 3.750% VRDO (b) 8,000,000
12,800,000 A-1+ Series 97B 3.900% VRDO (b) 12,800,000
3,000,000 A-1 Oneida County IDR (Harden Furniture) Series 98
3.950% VRDO (b) 3,000,000
Onondaga County IDA Southern Container:
3,930,000 NR++ Series A 3.850% VRDO (b) 3,930,000
1,300,000 NR++ Series B 3.850% VRDO (b) 1,300,000
Port Authority of New York & New Jersey:
9,700,000 NR+ PART MBIA-Insured 3.760% VRDO 9,700,000
5,000,000 NR+ Series 95 4.000% VRDO 5,000,000
3,500,000 NR+ Series 98-1 4.100% VRDO 3,500,000
3,500,000 NR+ Series 98-2 4.000% VRDO 3,500,000
5,250,000 A-1+ Series B 3.300% due 4/4/00 5,250,000
100,000 A-1+ Puerto Rico Government Development Bank MBIA-Insured
3.150% VRDO 100,000
100,000 A-1+ Puerto Rico Highway Transportation Authority Revenue
Series A AMBAC-Insured 3.250% VRDO 100,000
Rochester BAN:
10,000,000 A-1 4.750% due 3/7/01 10,048,197
26,702,000 A-1 Series II 4.500% due 10/26/00 26,809,981
900,000 A-1 Rotterdam IDA IDR Rotterdam Park 3.850% VRDO 900,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,700,000 A-1 Schenectady County IDR Scotia Industrial Park
Project Series 98A 3.850% VRDO $ 1,700,000
20,150,000 A-1 Seneca County IDA (Chiropractic College)
3.850% VRDO 20,150,000
St. Lawrence County IDA:
11,700,000 A-1 Reynolds Metals 3.700% VRDO 11,700,000
3,800,000 A-1 United Helpers Living 3.850% VRDO 3,800,000
Suffolk County:
5,460,000 A-1+ JBC Realty/Wibar International IDR
3.950% VRDO (b) 5,460,000
10,000,000 VMIG 1* Series 38A 4.000% VRDO 10,000,000
4,950,000 A-1+ Series C FGIC-Insured 5.100% due 11/1/00 4,980,712
50,000,000 NR+ Series I TAN 4.500% due 8/10/00 50,091,918
Triborough Bridge & Tunnel Authority:
22,905,000 VMIG 1* PART FGIC-Insured 3.900% VRDO (b) 22,905,000
20,000,000 VMIG 1* Series C 3.700% VRDO 20,000,000
5,000,000 A-1+ Westchester County Boys and Girls Club Project
IDA 3.750% VRDO 5,000,000
---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $1,562,718,196**) $1,562,718,196
---------------------------------------------------------------------------------------------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except that those
identified by an asterisk (*) are rated by Moody's Investors Service, Inc.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Variable rate obligation payable at par on demand on the date indicated.
++ Security has not been rated by either Moody's Investors Service, Inc. or
Standard & Poor's Ratings Service. However, the Board of Trustees 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, Inc. or
Standard & Poor's Ratings Service. 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 28 through 30 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
16 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Education -- 16.4%
$ 710,000 A- Hempstead Town, IDA, Civic Facilities Revenue,
Adelphi University, 5.250% due 2/1/14 $ 679,825
New York State Dormitory Authority Revenue Bonds:
City University Systems:
Series A, FGIC-Insured:
16,000,000 AAA 5.000% due 7/1/16 14,880,000
5,825,000 AAA 5.625% due 7/1/16 5,956,063
7,000,000 AAA Series B, FSA-Insured, 6.000% due 7/1/14 7,472,500
2,500,000 Baa1* Series C, 7.500% due 7/1/10 2,831,250
2,000,000 AAA Columbia University, 5.000% due 7/1/18 1,857,500
Cornell University, Series A:
2,000,000 AA 7.375% due 7/1/20 2,051,180
1,000,000 AA 7.375% due 7/1/30 1,025,540
200,000 Baa1* Department of Health, State of New York Issue,
7.250% due 7/1/02 205,152
2,700,000 AA Manhattan College, Asset Guaranty,
6.500% due 7/1/19 2,797,875
New York Medical College:
1,010,000 AAA 7.250% due 10/1/03 1,021,797
220,000 AA Asset Guaranty, 6.700% due 7/1/01 225,775
10,260,000 AAA Rockefeller University, 5.000% due 7/1/28 9,067,275
1,000,000 A School Program, 5.000% due 7/1/18 895,000
4,475,000 AAA State University Athletic Facility, MBIA-Insured,
4.500% due 7/1/21 3,775,781
State University Educational Facility:
Series A:
12,110,000 AAA FSA-Insured, 5.875% due 5/15/17 12,670,088
7,030,000 AAA MBIA-Insured, 5.000% due 5/15/16 6,537,900
Series B:
1,000,000 A 7.500% due 5/15/11 1,137,500
5,000,000 AAA FGIC-Insured, 5.250% due 5/15/19 4,825,000
University of Rochester, Series A:
7,370,000 A+ 6.500% due 7/1/19 7,830,625
3,915,000 AAA MBIA-Insured, 5.000% due 7/1/16 3,636,056
285,000 A Upstate Community College, Series B,
7.100% due 7/1/01 293,550
Rensselaer County, IDA, Civic Facilities Revenue
Bonds, Polytechnic Institute Dormitory Project:
5,430,000 A+ Series A, 5.125% due 8/1/29 4,866,638
5,820,000 A+ Series B, 5.125% due 8/1/27 5,230,725
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 17
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Education -- 16.4% (continued)
Schenectady IDA, Civic Facilities Revenue Bonds,
Union College, Series A, AMBAC-Insured:
$ 2,000,000 Aaa* 5.375% due 12/1/19 $ 1,930,000
3,000,000 Aaa* 5.450% due 12/1/29 2,857,500
---------------------------------------------------------------------------------------------
106,558,095
---------------------------------------------------------------------------------------------
Escrowed to Maturity (b) -- 0.8%
1,435,000 AAA Commonwealth of Puerto Rico, Aqueduct & Sewer
Authority Revenue Bonds, 10.250% due 7/1/09 1,809,894
3,150,000 AAA New York City GO, Series I, AMBAC-Insured,
7.250% due 8/15/14 3,204,558
90,000 AAA New York State Power Authority Revenue & General
Purpose, 9.500% due 1/1/01 91,439
---------------------------------------------------------------------------------------------
5,105,891
---------------------------------------------------------------------------------------------
Finance -- 9.9%
New York City Municipal Water Finance Authority,
Water & Sewer Systems Revenue Bonds:
25,050,000 AAA Series A, FGIC-Insured, 4.750% due 6/15/31 21,010,686
Series B:
2,750,000 AAA 5.000% due 6/15/29 2,447,500
5,205,000 AAA FGIC-Insured, 5.125% due 6/15/30 4,677,994
4,875,000 AAA Series D, MBIA-Insured, 5.000% due 6/15/15 4,582,500
New York City Transitional Finance Authority Revenue,
Future Tax:
6,000,000 AA Series B, 4.750% due 11/1/23 5,115,000
15,000,000 AA Series C, 4.750% due 5/1/23 12,843,750
New York State Local Government Assistance Corp.:
5,000,000 AAA Series B, MBIA-Insured, 4.875% due 4/1/20 4,400,000
6,450,000 AAA Series C, FGIC-Insured, 5.500% due 4/1/17 6,474,188
New York State Municipal Bond Bank Agency,
Special Revenue Program:
1,000,000 BBB+ City of Buffalo, 6.875% due 3/15/06 1,038,750
1,500,000 AAA City of Rochester, 6.750% due 3/15/11 1,575,000
---------------------------------------------------------------------------------------------
64,165,368
---------------------------------------------------------------------------------------------
General Obligation -- 3.1%
Buffalo School District, Series B:
1,380,000 AAA 4.750% due 2/1/17 1,228,200
FSA-Insured:
500,000 AAA 4.750% due 2/1/18 440,625
575,000 AAA 4.750% due 2/1/19 503,844
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
18 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation -- 3.1% (continued)
Green Island:
$ 100,000 Baa3* 9.375% due 11/1/01 $ 106,375
125,000 Baa3* 9.375% due 11/1/02 136,875
5,000,000 A3* New York City Refunding Bonds, Series C,
6.660% due 8/1/09 5,106,250
New York State:
1,000,000 A+ 12.000% due 11/15/03 1,228,750
2,750,000 A+ 9.875% due 11/15/05 3,382,500
North Hempstead, FGIC-Insured:
4,505,000 Aaa* Series A, 5.000% due 9/1/22 4,020,712
1,500,000 Aaa* Series B, 4.750% due 3/1/18 1,329,375
Yonkers, Series C, FGIC-Insured, State Aid Withholding:
2,050,000 AAA 5.000% due 6/1/15 1,909,062
1,000,000 AAA 5.000% due 6/1/19 898,750
---------------------------------------------------------------------------------------------
20,291,318
---------------------------------------------------------------------------------------------
Government Facilities -- 3.1%
New York State Dormitory Authority Lease Revenue:
Capital Appreciation, Court Facilities, AMBAC-Insured:
3,255,000 Aa1* Zero coupon due 8/1/19 1,066,013
5,895,000 Aa1* Zero coupon due 8/1/20 1,805,344
1,725,000 Aa1* Zero coupon due 8/1/21 498,094
1,600,000 Aa1* Zero coupon due 8/1/22 434,000
835,000 AAA Office Facilities - Audit & Control, MBIA-Insured,
4.875% due 4/1/16 764,025
New York State Urban Development Corp. Revenue:
6,600,000 AAA Correctional Facilities Service Contract-C,
6.000% due 1/1/29 6,723,750
3,000,000 A State Facilities, 5.700% due 4/1/20 2,992,500
Suffolk County Judicial Facilities Agency Service
Agreement Revenue Bonds, John P. Cohalan Complex,
AMBAC-Insured:
3,350,000 AAA 5.250% due 10/15/15 3,216,000
2,720,000 AAA 5.000% due 4/15/16 2,522,800
---------------------------------------------------------------------------------------------
20,022,526
---------------------------------------------------------------------------------------------
Hospitals -- 12.6%
Nassau Health Care Corp., Health System Revenue
Bonds, Nassau County Guaranteed, FSA-Insured:
5,000,000 AAA 5.500% due 8/1/19 4,806,250
7,000,000 AAA 5.750% due 8/1/29 6,886,250
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hospitals -- 12.6% (continued)
$ 3,000,000 AAA New York City Health & Hospital Corporate Revenue,
Health System, Series A, 5.000% due 2/15/20 $ 2,692,500
New York State Dormitory Authority Revenue:
5,350,000 Aa3* Lutheran Center at Poughkeepsie, LOC Key Bank,
6.050% due 7/1/26 5,289,812
Mental Health Services Facilities, Series B:
2,500,000 A 5.000% due 2/15/18 2,250,000
7,000,000 A 5.625% due 2/15/21 6,763,750
15,000,000 AAA New York & Presbyterian Hospital, FHA-Insured,
4.750% due 8/1/16 13,368,750
3,000,000 AA St. Luke's Home, Residential Health, FHA-Insured,
6.375% due 8/1/35 3,090,000
2,450,000 AAA St. Vincent's Hospital & Medical Center, FHA-Insured,
7.400% due 8/1/30 2,560,250
2,000,000 AAA Victory Memorial Hospital, MBIA-Insured,
5.375% due 8/1/25 1,867,500
New York State Medical Care Facility Finance
Agency Revenue:
1,985,000 A3* 8.875% due 8/15/07 1,996,215
540,000 A3* 7.700% due 2/15/18 545,497
Hospital & Nursing Home Insured Mortgage,
FHA-Insured:
Series A:
10,000 AA 6.100% due 2/15/02 10,200
2,855,000 AA 7.450% due 8/15/31 3,019,162
990,000 AA Series B, 7.000% due 8/15/32 1,041,975
2,385,000 AA Series C, 6.650% due 8/15/32 2,477,419
Series A:
2,500,000 BB Central Suffolk Hospital Mortgage Project,
6.125% due 11/1/16 2,200,000
955,000 Aa1* Health Center Projects, Secured Mortgage
Program, 6.375% due 11/15/19 999,169
6,800,000 AA Methodist Hospital, FHA-Insured,
6.700% due 8/15/23 7,225,000
4,000,000 AA Mortgage Project, FHA-Insured,
6.375% due 8/15/24 4,310,000
Series B:
1,860,000 AAA Long Term Healthcare, FSA-Insured,
6.450% due 11/1/14 1,932,075
3,500,000 AA Mortgage Project, FHA-Insured,
6.100% due 2/15/15 3,561,250
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
20 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hospitals -- 12.6% (continued)
Series F, Mental Health Services Facilities
Improvement:
$ 710,000 A 6.500% due 8/15/12 $ 744,612
730,000 A 6.500% due 2/15/19 753,725
1,000,000 AAA Otsego County Industrial Development Agency,
Civic Facilities Revenue, Aurelia Osborn Fox
Memorial Hospital, Series A, FSA-Insured,
4.500% due 10/1/19 852,500
690,000 A Valley Health Development Corp., Mortgage Revenue
Bonds, Mortgage Loan, FHA-Insured,
11.300% due 2/1/23 769,585
---------------------------------------------------------------------------------------------
82,013,446
---------------------------------------------------------------------------------------------
Housing: Multi-Family -- 5.5%
6,470,000 BBB Commonwealth of Puerto Rico, Urban Renewal &
Housing Corp. Revenue Bonds, 7.875% due 10/1/04 6,614,022
New York City Housing Development Corp.:
1,489,768 NR Cadman Project, 6.500% due 11/15/18 1,413,418
944,585 NR Heywood Towers Project, 6.500% due 10/15/17 903,259
1,203,313 NR Kelly Project, 6.500% due 2/15/18 1,147,660
686,961 AAA Pass Through Certificates, AMBAC-Insured,
6.500% due 12/20/01 722,167
1,541,286 NR Riverside Project, 6.500% due 11/15/18 1,618,596
Series A, FHA-Insured:
4,000,000 AAA 6.600% due 4/1/30 4,100,000
5,000,000 AAA Multi-Unit Mortgage Refunding, 7.350% due 6/1/19 5,168,750
New York State Housing Finance Agency Revenue:
FHA-Insured:
2,000,000 Aa1* Secured Mortgage, Series A,
6.200% due 8/15/15 (c) 2,052,500
1,500,000 AAA Series C, 6.500% due 8/15/24 1,545,000
Secured Mortgage Project, SONYMA-Insured:
Series A:
500,000 Aa1* 7.000% due 8/15/12 (c) 522,500
500,000 Aa1* 7.050% due 8/15/24 (c) 519,375
6,870,000 Aa1* Series B, 6.250% due 8/15/29 (c) 6,998,812
1,750,000 Aa1* Series C, 6.600% due 8/15/27 1,811,250
930,000 A1* Rensselaer Housing Authority, Multi-Family Mortgage
Revenue, Rensselaer Elderly Apartments, Series A,
7.750% due 1/1/11 991,612
---------------------------------------------------------------------------------------------
36,128,921
---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Housing: Single-Family -- 5.0%
New York State Mortgage Agency Revenue,
Homeowner Mortgage:
$ 2,625,000 Aa1* Series 37-A, 6.375% due 10/1/14 $ 2,716,875
1,000,000 Aa1* Series 41-A, 6.450% due 10/1/14 1,037,500
4,000,000 Aa1* Series 42, FHA-Insured, 6.650% due 4/1/26 (c) 4,115,000
9,140,000 Aa1* Series 46, 6.650% due 10/1/25 (c) 9,414,200
4,380,000 Aa1* Series 65, 5.850% due 10/1/28 (c) 4,215,750
4,990,000 Aa1* Series 67, 5.800% due 10/1/28 (c) 4,771,687
6,500,000 Aa1* Series 71, 5.350% due 10/1/18 6,126,250
---------------------------------------------------------------------------------------------
32,397,262
---------------------------------------------------------------------------------------------
Industrial Development -- 7.1%
2,250,000 A3* Essex County IDA Revenue, Solid Waste, (International
Paper Co. Project), Series A, 6.150% due 4/1/21 (c) 2,199,375
500,000 A+ Monroe County IDA, Public Improvement,
Canal Ponds Park, Series A, 7.000% due 6/15/13 526,250
New York City IDA:
Civic Facilities Revenue:
3,695,000 AAA Horace Mann School Project, MBIA-Insured,
5.000% due 7/1/18 3,380,925
1,710,000 AAA Lighthouse International Project, MBIA-Insured,
4.500% due 7/1/23 1,421,437
The Lighthouse Project:
1,000,000 NR 6.375% due 7/1/10 1,055,000
2,250,000 NR 6.500% due 7/1/22 2,379,375
900,000 Aa2* Prime Laboratories Inc., Series C,
7.700% Mandatory Tender 11/1/00 901,980
8,000,000 AAA Onondaga County IDA, Sewer Facilities Revenue,
(Bristol-Myers Squibb Co. Project),
5.750% due 3/1/24 (c) 7,810,000
Port Authority of New York & New Jersey:
8,000,000 BBB- Delta Airlines Inc. Project, Series 1R,
6.950% due 6/1/08 8,330,000
12,000,000 NR Special Project, 5th Installment, 6.750%
due 10/1/19 (c) 12,210,000
1,410,000 A+ Rensselaer County IDA, Albany International Corp.,
7.550% due 6/1/07(c) 1,558,050
1,000,000 AAA St. Lawrence County IDA, Civic Facilities Revenue,
(St. Lawrence University Project), Series A,
MBIA-Insured, 5.375% due 7/1/18 971,250
1,250,000 AAA Syracuse GO, IDA, James Square Association,
FHA-Insured, 7.000% due 8/1/25 1,293,750
1,945,000 B2* Warren & Washington Counties IDA, Resource Recovery
Revenue Bonds, Series A, 7.900% due 12/15/07 1,957,156
---------------------------------------------------------------------------------------------
45,994,548
---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
22 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Life Care Systems -- 3.6%
New York State Dormitory Authority Revenue Bonds:
$ 1,100,000 Aa3* Chapel Oaks Inc., 5.375% due 7/1/17 $ 1,021,625
FHA-Insured:
1,230,000 AAA Crouse Community Center, 7.500% due 8/1/29 1,256,138
Genessee Valley:
1,000,000 AA Series A, 6.900% due 2/1/32 1,036,250
685,000 AA Series B, 6.850% due 8/1/16 714,113
3,815,000 AA Hebrew Nursing Home, 6.125% due 2/1/37 3,819,769
1,285,000 AAA Heritage House Nursing Center, 7.000% due 8/1/31 1,329,975
2,450,000 AA- Iroquois Nursing Home, 7.050% due 2/1/31 2,552,998
2,000,000 AAA Jewish Geriatric Center, 7.150% due 8/1/14 2,165,000
1,500,000 AAA Menorah Campus, Nursing Home,
6.100% due 2/1/37 1,498,125
1,600,000 AA Niagara Frontier Home, Mortgage Revenue,
6.200% due 2/1/15 1,658,000
3,350,000 AA Wesley Garden Nursing Home, 6.125% due 8/1/35 3,333,250
2,160,000 A Oneida Health Care Corp. Mortgage Revenue,
Series A, FHA-Insured, 7.200% due 8/1/31 2,205,900
750,000 AA- Onondaga County Industrial Development Agency,
Civic Facilities Revenue, (Syracuse Home Assistance
Project), 5.200% due 12/1/18 687,188
---------------------------------------------------------------------------------------------
23,278,331
---------------------------------------------------------------------------------------------
Miscellaneous -- 2.0%
4,250,000 AA New York City Transitional Finance Authority
Revenue, Future Tax, Series B, 4.750% due 11/1/19 3,718,750
1,655,000 AAA New York City Trust Cultural Resource Revenue Bonds,
Series A, American Museum of Natural History,
AMBAC-Insured, 5.250% due 7/1/17 1,586,731
New York State Dormitory Authority Lease Revenue,
Court Facilities, City of New York Issue:
5,000,000 A 6.000% due 5/15/39 5,006,250
3,000,000 AAA AMBAC-Insured, 5.750% due 5/15/30 2,992,500
---------------------------------------------------------------------------------------------
13,304,231
---------------------------------------------------------------------------------------------
Pollution Control Revenue -- 2.4%
3,000,000 A- New York State Energy, Research & Development
Authority, LILCO Project, Series A, 5.150%
due 3/1/16 2,775,000
New York State Environmental Facilities Corp.:
State Clean Water & Drinking Revolving Fund,
Series B:
1,260,000 AAA 5.250% due 4/15/17 1,220,625
2,490,000 AAA 5.250% due 10/15/17 2,412,188
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 23
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pollution Control Revenue -- 2.4% (continued)
$ 1,740,000 AAA 5.250% due 4/15/18 $ 1,674,750
1,880,000 AAA 5.250% due 10/15/18 1,809,500
State Water Revolving Fund, Series A:
805,000 Aaa* 7.250% due 6/15/10 845,250
1,950,000 Aa1* 7.500% due 6/15/12 1,999,160
1,000,000 AAA North Country Development Authority, Solid Waste
Management System Revenue Refunding,
FSA-Insured, 6.000% due 5/15/15 1,063,750
1,710,000 A3* Puerto Rico Industrial, Medical & Environmental
Facilities Finance Authority Revenue, Series A,
American Airlines Inc., 6.450% due 12/1/25 1,739,925
---------------------------------------------------------------------------------------------
15,540,148
---------------------------------------------------------------------------------------------
Pre-Refunded (d) -- 12.5%
35,000 NR Battery Park City Authority Housing Revenue,
FHA-Insured, (Call 6/1/05 @ 100), 8.625% due 6/1/23 40,819
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 1,078,750
2,150,000 AAA Monroe County Water Authority Revenue,
AMBAC-Insured, (Call 8/1/04 @ 101),
7.000% due 8/1/19 2,348,875
New York City GO:
85,000 AAA Series A, (Call 8/15/01 @ 101.5), 7.750% due 8/15/16 89,888
4,000,000 AAA Series B1, MBIA-Insured, (Call 8/15/04 @ 101),
6.950% due 8/15/12 4,365,000
2,375,000 A- Series H, (Call 2/1/02 @ 101.5), 7.000% due 2/1/21 2,502,656
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 3,384,450
5,000,000 Baa1* New York State Dormitory Authority Revenue,
Department of Education, State of New York Issue,
(Call 7/1/01 @ 102), 7.750% due 7/1/21 5,287,500
New York State Energy, Research & Development
Authority, Electric Facilities Revenue:
2,935,000 A- Series A, (Call 6/15/02 @ 102),
7.150% due 12/1/20 (c) 3,118,438
2,190,000 A- Series B, (Call 6/15/02 @ 102),
7.150% due 12/1/22 (c) 2,335,087
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
24 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pre-Refunded (d) -- 12.5% (continued)
New York State Medical Care Facilities Finance
Agency Revenue:
$ 6,950,000 AA Hospital & Nursing Home, FHA-Insured,
Series A, (Call 2/15/04 @ 102),
6.200% due 2/15/21 $7,340,938
135,000 AAA MBIA-Insured, Partially Pre-Refunded,
(Call 2/15/00 @ 102), 7.750% due 2/15/20 138,037
Mental Health Improvement, Series F,
(Call 8/15/02 @ 102):
4,010,000 A 6.500% due 8/15/12 4,240,575
3,885,000 A 6.500% due 2/15/19 4,108,387
515,000 A- Partially Pre-Refunded, (Call 2/15/00 @ 102),
7.750% due 2/15/20 530,079
Series A:
3,000,000 AAA Beth Israel Medical Center, MBIA-Insured,
(Call 11/1/00 @ 102), 7.500% due 11/1/10 3,117,330
4,000,000 AAA Brookdale Hospital Medical Center,
(Call 2/15/05 @ 102), 6.800% due 8/15/12 4,400,000
1,120,000 AA Call 8/15/01 @ 102, 7.450% due 8/15/31 1,184,400
4,700,000 AAA New York Downtown Hospital,
(Call 2/15/05 @ 102), 6.800% due 2/15/20 5,170,000
New York Hospital, Series A, FHA-Insured,
(Call 2/15/05 @ 102):
8,500,000 AAA 6.800% due 8/15/24 9,350,000
7,600,000 AAA 6.500% due 8/15/29 8,265,000
2,500,000 AAA 6.900% due 8/15/34 2,759,375
5,000,000 AAA Secured Hospital Revenue Bonds 1991,
(Call 8/15/01 @ 102), 7.400% due 8/15/21 5,287,500
1,000,000 A1* Orangetown Housing Authority, Housing Facility
Revenue, Orangetown Senior Housing Center,
(Call 10/1/00 @ 102), 7.600% due 4/1/30 1,036,610
---------------------------------------------------------------------------------------------
81,479,694
---------------------------------------------------------------------------------------------
Public Facilities -- 4.4%
1,000,000 A Albany Parking Authority Revenue Refunding,
(Green & Hudson Street Garage Project),
Series A, 7.150% due 9/15/16 1,035,000
915,000 A New York State COP, (Hanson Redevelopment Project),
8.375% due 5/1/08 1,033,950
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 25
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Public Facilities -- 4.4% (continued)
Triborough Bridge & Tunnel Authority:
$ 1,500,000 A Convention Center Project, Series E,
7.250% due 1/1/10 $ 1,666,875
General Purpose Revenue Bonds, Series B, GO:
4,200,000 Aa3* 5.375% due 1/1/19 4,053,000
10,125,000 Aa3* 5.500% due 1/1/30 9,656,719
13,100,000 AAA Special Obligation, Series A, MBIA-Insured,
4.750% due 1/1/24 11,266,000
---------------------------------------------------------------------------------------------
28,711,544
---------------------------------------------------------------------------------------------
Transportation -- 8.7%
Metropolitan Transportation Authority:
5,000,000 AAA Commuter Facilities Revenue, Series D, MBIA-Insured,
5.000% due 7/1/16 4,693,750
2,290,000 AAA Dedicated Tax Fund, Series A, FSA-Insured,
5.125% due 4/1/19 2,112,525
Transit Facilities Revenue:
Series A:
5,000,000 BBB+ 6.000% due 7/1/19 5,062,500
10,000,000 AAA MBIA-Insured, 5.625% due 7/1/25 9,887,500
5,000,000 AAA Series B, 4.750% due 7/1/26 4,262,500
2,000,000 AAA Series C, FSA-Insured, 4.750% due 7/1/16 1,802,500
5,000,000 A Series N, 7.125% due 7/1/09 5,337,500
4,230,000 AAA New York State Highway Authority, Emergency Services,
Construction & Reconstruction, Series A,
FSA-Insured, 6.600% due 3/1/01 4,319,084
5,000,000 AA- New York State Thruway Authority, General
Revenue Bonds, Series E, 5.000% due 1/1/25 4,425,000
15,000,000 AAA New York State Thruway Authority, Local Highway &
Bridge Authority, FGIC-Insured, Series B,
5.000% due 4/1/19 13,725,000
1,000,000 AAA Niagara Falls Bridge Authority, Toll Revenue,
Series B, FGIC-Insured, 5.250% due 10/1/15 986,250
---------------------------------------------------------------------------------------------
56,614,109
---------------------------------------------------------------------------------------------
Utilities -- 2.0%
New York State Energy, Research & Development
Authority, Electric Facilities Revenue:
1,065,000 A- Series A, 7.150% due 12/1/20 (c) 1,107,600
810,000 A2* Series B, 7.150% due 2/1/22 (c) 841,387
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
26 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Utilities -- 2.0% (continued)
New York State Energy, Research & Development
Authority, Facilities Revenue Bonds:
$ 3,000,000 A1* Brooklyn Union Gas Co. Project, Regular RIBS,
Series B, 6.952% due 7/15/26 (c)(e) $ 3,453,750
5,750,000 A+ Consolidated Edison Co. Inc. Project, Series A,
7.125% due 12/1/29 (c) 6,260,313
1,500,000 Baa2* Corning National Gas Corp., Series A,
8.250% due 12/1/18 (c) 1,544,700
---------------------------------------------------------------------------------------------
13,207,750
---------------------------------------------------------------------------------------------
Water & Sewer -- 0.9%
6,040,000 Aa1* New York State Environmental Facilities Corp.,
Clean Water & Drinking Revolving Funds, Series C,
5.000% due 6/15/16 5,632,300
---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $641,619,369**) $650,445,482
=============================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*) are rated by Moody's Investors Service, Inc.
(b) 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.
(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 issuer 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 substantially the same.
See pages 28 through 30 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 27
<PAGE>
--------------------------------------------------------------------------------
Bond Ratings (unaudited)
--------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("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
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest rated 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 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 of
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments.
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3
may be applied to each generic rating from "Aa" to "B", where 1 is the highest
and 3 the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of these bonds.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities, or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear
somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payment
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of the desirable
investments. Assurance of interest and principal payments or maintenance
of other terms of the contract over any long period of time may be
small.
NR -- Indicates the bond is not rated by Standard & Poor's or Moody's.
--------------------------------------------------------------------------------
28 2000 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 determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
MIG 1 -- Moody's highest rating for short-term municipal obligations.
MIG 2 -- Moody's second highest rating for short-term municipal obligations.
--------------------------------------------------------------------------------
Security Descriptions (unaudited)
--------------------------------------------------------------------------------
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
BOCES -- Board of Cooperative Education Services
CGIC -- Capital Guaranty Insurance Company
COP -- Certificate of Participation
CSD -- Central School District
ETM -- Escrowed to Maturity
FAIRS -- Floating Adjustable Interest Rate Securities
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financial Security Assurance
GDB -- Government Development Bank
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
--------------------------------------------------------------------------------
Smith Barney Muni Funds 29
<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
VRDO -- Variable Rate Demand Obligation
VRWE -- Variable Rate Wednesday Demand
--------------------------------------------------------------------------------
30 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Assets and Liabilities March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $1,562,718,196 and
$641,619,369, respectively) $1,562,718,196 $650,445,482
Cash 10,255 372,588
Interest receivable 13,086,202 11,130,336
Receivable for securities sold -- 170,000
Receivable for Fund shares sold -- 112,720
Other assets -- 864
---------------------------------------------------------------------------------------------
Total Assets 1,575,814,653 662,231,990
---------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 2,391,752 1,174,858
Management fees payable 632,235 286,384
Distribution fees payable 56,554 85,772
Deferred compensation payable 8,190 10,058
Payable for Fund shares purchased -- 4,764,611
Accrued expenses 137,241 113,317
---------------------------------------------------------------------------------------------
Total Liabilities 3,225,972 6,435,000
---------------------------------------------------------------------------------------------
Total Net Assets $1,572,588,681 $655,796,990
=============================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 1,572,712 $ 51,307
Capital paid in excess of par value 1,571,043,681 661,980,905
Undistributed net investment income -- 315,938
Accumulated net realized loss
from security transactions (27,712) (15,377,273)
Net unrealized appreciation of investments -- 8,826,113
---------------------------------------------------------------------------------------------
Total Net Assets $1,572,588,681 $655,796,990
=============================================================================================
Shares Outstanding:
Class A 1,572,712,053 37,695,172
---------------------------------------------------------------------------------------------
Class B -- 12,230,579
---------------------------------------------------------------------------------------------
Class L -- 1,381,073
---------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $1.00 $12.78
---------------------------------------------------------------------------------------------
Class B * -- $12.78
---------------------------------------------------------------------------------------------
Class L ** -- $12.77
---------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value) -- $13.31
---------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value) -- $12.90
=============================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within one year from purchase (See Note 4).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 31
<PAGE>
--------------------------------------------------------------------------------
Statements of Operations For the Year Ended March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New York Money New York
Market Portfolio Portfolio
---------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 48,564,835 $ 41,656,148
---------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 7,182,349 3,530,004
Distribution fees (Note 4) 1,436,470 2,019,081
Shareholder and system servicing fees 614,950 214,732
Registration fees 126,270 40,043
Shareholder communications 91,500 50,237
Audit and legal 28,014 25,355
Custody 10,249 45,098
Trustees' fees 6,954 6,017
Pricing service fees -- 28,769
Other 39,135 17,957
---------------------------------------------------------------------------------------------
Total Expenses 9,535,891 5,977,293
---------------------------------------------------------------------------------------------
Net Investment Income 39,028,944 35,678,855
---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 5):
Realized Loss From Security Transactions
(excluding short-term securities*):
Proceeds from sales 3,697,040,122 286,248,783
Cost of securities sold 3,697,069,408 301,463,426
---------------------------------------------------------------------------------------------
Net Realized Loss (29,286) (15,214,643)
---------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year -- 44,396,530
End of year -- 8,826,113
---------------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation -- (35,570,417)
---------------------------------------------------------------------------------------------
Net Loss on Investments (29,286) (50,785,060)
---------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations $ 38,999,658 $(15,106,205)
=============================================================================================
</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.
--------------------------------------------------------------------------------
32 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended March 31,
New York Money Market Portfolio 2000 1999
---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 39,028,944 $ 32,445,056
Net realized gain (loss) (29,286) 110,729
---------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 38,999,658 32,555,785
---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (39,028,944) (32,445,466)
---------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (39,028,944) (32,445,466)
---------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 5,872,896,953 4,688,765,979
Net asset value of shares issued
for reinvestment of dividends 37,246,509 31,572,842
Cost of shares reacquired (5,717,261,587) (4,501,713,460)
---------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 192,881,875 218,625,361
---------------------------------------------------------------------------------------------
Increase in Net Assets 192,852,589 218,735,680
NET ASSETS:
Beginning of year 1,379,736,092 1,161,000,412
---------------------------------------------------------------------------------------------
End of year $1,572,588,681 $1,379,736,092
=============================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 33
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended March 31,
New York Portfolio 2000 1999
---------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 35,678,855 $ 36,593,367
Net realized gain (loss) (15,214,643) 5,085,143
Decrease in net unrealized appreciation (35,570,417) (1,673,251)
---------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (15,106,205) 40,005,259
---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (35,355,510) (36,595,900)
Net realized gains (394,886) (15,207,668)
---------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (35,750,396) (51,803,568)
---------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Proceeds from sale of shares 79,456,295 115,233,343
Net asset value of shares issued
for reinvestment of dividends 21,054,255 32,044,219
Cost of shares reacquired (159,480,306) (129,108,886)
---------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (58,969,756) 18,168,676
---------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (109,826,357) 6,370,367
NET ASSETS:
Beginning of year 765,623,347 759,252,980
---------------------------------------------------------------------------------------------
End of year* $655,796,990 $765,623,347
=============================================================================================
* Includes undistributed (overdistributed)
net investment income of: $315,938 $(7,407)
=============================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
34 2000 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 seven other separate investment portfolios: Florida,
Georgia, Pennsylvania, Limited Term, National, Massachusetts Money Market and
California Money Market Portfolios. The New York Portfolio is an open-end
non-diversified investment portfolio of this Fund. The financial statements and
financial highlights for the other portfolios are presented in separate
shareholder reports.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) with respect to
the New York Portfolio, 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; the New York Money Market Portfolio uses the amortized cost method
for valuing investments; accordingly, the cost of securities plus accreted
discount, or minus amortized premium, approximates value; (c) securities
maturing within 60 days are valued at cost plus accreted discount or minus
amortized premium, which approximates value; (d) securities for which market
quotations are not available will be valued in good faith at fair value by or
under the directions of the Board of Trustees; (e) gains or losses on the sale
of securities are calculated by using the specific identification method; (f)
interest income, adjusted for amortization of premium and accretion of original
issue discount, is recorded on an accrual basis; market discount is recognized
upon the disposition of the security; (g) dividends and distributions to
shareholders are recorded on the ex-dividend date; (h) direct expenses are
charged to each portfolio and each class; management fees and general fund
expenses are allocated on the basis of relative net assets; (i) the Portfolios
intend to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to relieve them from substantially
all Federal income and excise taxes; (j) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. At March 31, 2000,
reclassifications were made to the New York Money Market Portfolio's capital
accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, for the
New York Money Market Portfolio a portion of accumulated net realized loss
amounting to $95,660 was reclassified to paid-in capital. Net investment income,
--------------------------------------------------------------------------------
Smith Barney Muni Funds 35
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
net realized gains and net assets were not affected by this change; and (k)
estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ.
2. Portfolio Concentration
Since the Portfolios invest primarily in obligations of issuers within New
York, it is subject to possible concentration risks associated with economic,
political, or legal developments or industrial or regional matters specifically
affecting New York.
3. Exempt-Interest Dividends and Other Distributions
The New York Money Market Portfolio declares and records a dividend of
substantially all of its net investment income on each business day. Such
dividends are paid or reinvested monthly in Portfolio shares on the payable
date. Furthermore, each Portfolio intends to satisfy conditions that will enable
interest from municipal securities, which is exempt from Federal income tax and
from designated state income taxes, to retain such tax-exempt status when
distributed to the shareholders of the Portfolio.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. Management Agreement and Other Transactions
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), which, in
turn, is a subsidiary of Citigroup Inc. ("Citigroup"), acts as investment
manager to the Portfolio. The New York Money Market Portfolio pays SSBC 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
SSBC 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.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, became the Portfolios' transfer agent and PFPC Global
Fund Services ("PFPC") became the Portfolios' sub-transfer agent. CFTC receives
fees and asset-based fees that vary according to the account size and type of
account. PFPC is responsible for shareholder recordkeeping and
--------------------------------------------------------------------------------
36 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
financial processing for all shareholder accounts and is paid by CFTC. During
the period October 1, 1999 through March 31, 2000, the Portfolios paid transfer
agent fees of $283,648 to CFTC.
CFBDS, Inc. acts as the Fund's distributor. Salomon Smith Barney Inc. ("SSB"),
another subsidiary of SSBH, as well as certain other broker-dealers, continues
to sell Fund shares to the public as a member of the selling group.
There are maximum initial sales charges of 4.00% and 1.00% for Class A and L
shares, respectively. There is also a contingent deferred sales charge ("CDSC")
of 4.50% on Class B shares of the New York Portfolio, which applies if
redemption occurs within one year from purchase. This CDSC declines by 0.50% the
first year after purchase and thereafter by 1.00% per year until no CDSC is
incurred. Class L shares also have a 1.00% CDSC, which applies if redemption
occurs within the first year of purchase. In certain cases, Class A shares have
a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. This CDSC only applies to those purchases of Class A shares, which,
when combined with current holdings of Class A shares, equal or exceed $500,000
in the aggregate. These purchases do not incur an initial sales charge.
For the year ended March 31, 2000, SSB received sales charges of approximately
$358,000 and $44,000 on sales of the New York Portfolio's Class A and L shares,
respectively. In addition, for the year ended March 31, 2000, CDSCs paid to SSB
or CFBDS were approximately:
Class A Class B Class L
================================================================================
New York Portfolio $5,000 $205,000 $7,000
================================================================================
Pursuant to a Distribution Plan, the New York Money Market Portfolio pays a
distribution fee calculated at the annual rate of 0.10% of the average daily net
assets of its Class A shares. The New York Portfolio pays a service fee with
respect to Class A, B and L shares calculated at the annual rate of 0.15% of the
average daily net assets of each respective class. In addition, the New York
Portfolio pays a distribution fee with respect to Class B and L shares
calculated at the annual rates of 0.50% and 0.55% of the average daily net
assets of each class, respectively.
For the year ended March 31, 2000, total Distribution Plan fees incurred were:
Portfolio Class A Class B Class L
================================================================================
New York Money Market $1,436,470 -- --
--------------------------------------------------------------------------------
New York 773,742 $1,116,337 $129,002
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 37
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
5. Investments
During the year ended March 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
New York Money New York
Market Portfolio Portfolio
================================================================================
Purchases -- $233,496,325
--------------------------------------------------------------------------------
Sales -- 286,248,783
================================================================================
At March 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
New York Money New York
Market Portfolio Portfolio
================================================================================
Gross unrealized appreciation -- $20,492,037
Gross unrealized depreciation -- (11,665,924)
--------------------------------------------------------------------------------
Net unrealized appreciation -- $ 8,826,113
================================================================================
6. Futures Contracts
The New York Portfolio may from time to time enter into futures contracts.
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by marking to market on a daily basis to reflect the
market value of the contract at the end of each day's trading. Variation margin
payments are received or made and recognized as assets due from or liabilities
due to broker, depending upon whether unrealized gains or losses are incurred.
When the contract is closed, the Portfolio records a realized gain or loss equal
to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract.
The Portfolio enters into such contracts to hedge a portion of its portfolio.
The Portfolio bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At March 31, 2000, the Portfolio had no open futures contracts.
--------------------------------------------------------------------------------
38 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
7. Capital Loss Carryforward
At March 31, 2000, the New York Money Market Portfolio and the New York
Portfolio had, for Federal income tax purposes, approximately $29,300 and
$9,400,000, respectively, of unused capital loss carryforwards available to
offset future capital gains expiring March 31, 2008. 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.
8. Shares of Beneficial Interest
At March 31, 2000, 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, 2000, total paid-in capital amounted to the following for each
Portfolio and their respective classes:
Portfolio Class A Class B Class L
================================================================================
New York Money Market $1,572,616,393 -- --
--------------------------------------------------------------------------------
New York 473,781,031 $169,426,547 $18,824,634
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 2000 March 31, 1999
------------------------------ --------------------------------
New York
Money Market Portfolio Shares Amount Shares Amount
=============================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 5,872,896,953 $5,872,896,953 4,688,765,979 $ 4,688,765,979
Shares issued on
reinvestment 37,246,509 37,246,509 31,572,842 31,572,842
Shares reacquired (5,717,261,587) (5,717,261,587) (4,501,713,460) (4,501,713,460)
---------------------------------------------------------------------------------------------
Net Increase 192,881,875 $ 192,881,875 218,625,361 $ 218,625,361
=============================================================================================
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Muni Funds 39
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 2000 March 31, 1999
------------------------------ --------------------------------
New York Portfolio Shares Amount Shares Amount
=============================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 4,382,172 $ 56,724,394 6,136,857 $ 85,359,204
Shares issued on reinvestment 1,227,851 15,835,149 1,709,746 23,667,296
Shares reacquired (8,506,358) (109,374,730) (7,094,852) (98,680,940)
---------------------------------------------------------------------------------------------
Net Increase (Decrease) (2,896,335) $ (36,815,187) 751,751 $ 10,345,560
=============================================================================================
Class B
Shares sold 1,310,330 $ 16,759,165 1,502,683 $ 20,871,651
Shares issued on reinvestment 355,205 4,648,373 558,853 7,727,572
Shares reacquired (3,441,442) (44,277,729) (2,064,796) (28,667,854)
---------------------------------------------------------------------------------------------
Net Decrease (1,775,907) $ (22,870,191) (3,260) $ (68,631)
=============================================================================================
Class L*
Shares sold 457,526 $ 5,972,736 648,457 $ 9,002,488
Shares issued on reinvestment 44,348 570,733 47,032 649,351
Shares reacquired (453,869) (5,827,847) (127,053) (1,760,092)
---------------------------------------------------------------------------------------------
Net Increase 48,005 $ 715,622 568,436 $ 7,891,747
=============================================================================================
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
--------------------------------------------------------------------------------
40 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year ended March
31:
<TABLE>
<CAPTION>
New York Money Market Portfolio
--------------------------------------------------
Class A Shares 2000 1999 1998 1997 1996
===============================================================================================
<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 0.027 0.027 0.030 0.028 0.038
Dividends from net investment income (0.027) (0.027) (0.030) (0.028) (0.038)
-----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------------------------------
Total Return 2.76% 2.72% 3.04% 2.85% 3.17%
-----------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $1,573 $1,380 $1,161 $937 $882
-----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(1) 0.67% 0.65% 0.65% 0.67% 0.67%
Net investment income 2.73 2.65 2.99 2.80 3.11
===============================================================================================
</TABLE>
(1) As a result of voluntary expense limitations, the expense ratio will not
exceed 0.80%.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 41
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year ended March
31:
<TABLE>
<CAPTION>
New York Portfolio
---------------------------------------------------
Class A Shares 2000(1) 1999(1) 1998 1997 1996
==============================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.69 $13.91 $13.16 $13.19 $12.83
----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.68 0.68 0.72 0.74 0.75
Net realized and unrealized gain (loss) (0.91) 0.07 0.81 (0.03) 0.35
----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.23) 0.75 1.53 0.71 1.10
----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.67) (0.70) (0.73) (0.74) (0.74)
Net realized gains (0.01) (0.27) (0.05) -- --
----------------------------------------------------------------------------------------------
Total Distributions (0.68) (0.97) (0.78) (0.74) (0.74)
----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.78 $13.69 $13.91 $13.16 $13.19
----------------------------------------------------------------------------------------------
Total Return (1.61)% 5.50% 11.83% 5.48% 8.71%
----------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $482 $556 $554 $531 $558
----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.71% 0.70% 0.71% 0.75% 0.72%
Net investment income 5.20 4.94 5.28 5.58 5.84
----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 60% 71% 53% 36%
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares 2000(1) 1999(1) 1998 1997 1996
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.68 $13.89 $13.15 $13.18 $12.84
----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.61 0.61 0.65 0.67 0.67
Net realized and unrealized gain (loss) (0.90) 0.07 0.80 (0.03) 0.35
----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.29) 0.68 1.45 0.64 1.02
----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.60) (0.62) (0.66) (0.67) (0.68)
Net realized gains (0.01) (0.27) (0.05) -- --
----------------------------------------------------------------------------------------------
Total Distributions (0.61) (0.89) (0.71) (0.67) (0.68)
----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.78 $13.68 $13.89 $13.15 $13.18
----------------------------------------------------------------------------------------------
Total Return (2.09)% 5.02% 11.19% 4.96% 8.05%
----------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $156 $192 $195 $185 $181
----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.23% 1.23% 1.23% 1.27% 1.25%
Net investment income 4.67 4.42 4.76 5.06 5.45
----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 60% 71% 53% 36%
==============================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) As a result of voluntary expense limitations, the expense ratio will not
exceed 0.85% for Class A shares.
(3) As a result of voluntary expense limitations, the expense ratio will not
exceed 1.35% for Class B shares.
--------------------------------------------------------------------------------
42 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year ended March
31:
<TABLE>
<CAPTION>
New York Portfolio
----------------------------------------------------
Class L Shares 2000(1) 1999(1)(2) 1998 1997 1996
===============================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.67 $13.88 $13.14 $13.17 $12.83
-----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.60 0.60 0.64 0.66 0.66
Net realized and unrealized gain (loss) (0.90) 0.07 0.80 (0.02) 0.36
-----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.30) 0.67 1.44 0.64 1.02
-----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.59) (0.61) (0.65) (0.67) (0.68)
Net realized gains (0.01) (0.27) (0.05) -- --
-----------------------------------------------------------------------------------------------
Total Distributions (0.60) (0.88) (0.70) (0.67) (0.68)
-----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.77 $13.67 $13.88 $13.14 $13.17
-----------------------------------------------------------------------------------------------
Total Return (2.14)% 4.95% 11.13% 4.91% 8.07%
-----------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $17,633 $18,221 $10,611 $10,055 $8,931
-----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.27% 1.27% 1.28% 1.32% 1.28%
Net investment income 4.64 4.37 4.71 5.01 5.02
-----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 60% 71% 53% 36%
===============================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) As a result of voluntary expense limitations, the expense ratio will not
exceed 1.40%.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 43
<PAGE>
--------------------------------------------------------------------------------
Independent Auditors' Report
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of the New York Money Market Portfolio
and New York Portfolio 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 Portfolio and New
York Portfolio of Smith Barney Muni Funds as of March 31, 2000, 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 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 auditing standards generally accepted
in the United States of America. 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, 2000 by correspondence with the custodian. As
to securities sold but not yet 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 Portfolio and New York Portfolio of Smith Barney Muni
Funds as of March 31, 2000, 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 their financial highlights for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
New York, New York
May 11, 2000
--------------------------------------------------------------------------------
44 2000 Annual Report to Shareholders
<PAGE>
Additional Shareholder Information (unaudited)
On April 19, 1999, a special meeting of shareholders of the Fund was held for
the purpose of electing Trustees to the Fund.
The results were as follows:
<TABLE>
<CAPTION>
Shares Percentage Shares Percentage
Voted of Shares Voted of Shares
Name of Trustees For Voted Against Voted
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lee Abraham 1,350,265,160.850 97.943% 28,359,584.139 2.057%
Allan J. Bloostein 1,351,356,664.226 98.022 27,268,080.763 1.978
Jane F. Dasher 1,352,390,291.715 98.097 26,234,453.274 1.903
Donald R. Foley 1,350,867,506.020 97.987 27,757,238.969 2.013
Richard E. Hanson, Jr. 1,351,302,644.963 98.018 27,322,100.026 1.982
Paul Hardin 1,352,452,572.699 98.102 26,172,172.290 1.898
Heath B. McLendon 1,352,481,643.116 98.104 26,143,101.873 1.896
Roderick C. Rasmussen 1,351,438,798.818 98.028 27,185,946.171 1.972
John P. Toolan 1,352,497,455.395 98.105 26,127,289.594 1.895
--------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes, the Fund hereby designates for the fiscal year ended
March 31, 2000:
. Percentages of dividends paid by the Portfolios from net investment
income as tax exempt for regular Federal income tax purposes:
New York Money Market Portfolio 100%
New York Portfolio 100%
. Total long-term capital gain distributions paid:
New York Portfolio $2,201
--------------------------------------------------------------------------------
Smith Barney Muni Funds 45
<PAGE>
[LOGO OF SALOMON SMITH BARNEY]
Trustees
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Joseph P. Deane
Vice President
Joseph Benevento
Vice President
Irving P. David
Controller -- New York
Money Market Portfolio
Anthony Pace
Controller -- New York Portfolio
Christina T. Sydor
Secretary
Investment Manager
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PFPC Trust Company
Transfer Agent
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney Muni Funds - New York Money Market and New York Portfolios, but it may
also be used as sales literature when proceeded or accompanied by the current
Prospectus, which gives details about charges, expenses, investment objectives
and operating policies of the Portfolios. If used as sales material after June
30, 2000, this report must be accompanied by performance information for the
most recently completed calender quarter.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Muni Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD2397 5/00
<PAGE>
[front cover]
[SBMF logo]
SMITH BARNEY MUNI FUNDS
MASSACHUSETTS MONEY
MARKET PORTFOLIO
ANNUAL REPORT
MARCH 31, 2000
[Smith Barney Mutual Funds logo]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
Smith Barney
Muni Funds
[Photos of Heath B. McLendon, Chairman; Joseph P. Deane, Vice President and
Joseph Benevento, Vice President]
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Massachusetts
Money Market Portfolio ("Portfolio") for the year ended March 31, 2000.
The Portfolio offers investors in Massachusetts the opportunity to participate
in money market securities that are exempt from both federal income taxes and
Massachusetts personal income taxes.(1) For your convenience, we have summarized
the period's prevailing economic and market conditions below and outlined the
Portfolio's investment strategy. A detailed summary of performance and current
holdings can be found in the appropriate sections that follow. We hope you find
this report to be useful and informative.
Please note that your investment in the Massachusetts Money Market Portfolio is
neither insured, nor guaranteed, by the Federal Deposit Insurance Corporation or
any other government agency. Although the Portfolio seeks to preserve the value
of your investment at $1.00 per share, it is possible to lose money by investing
in the Portfolio.
Massachusetts Economic Highlights(2)
Massachusetts' economy continues to be one of the nation's most prosperous, due
in a large part to Massachusetts' fiscal stability, diversified economy,
balanced budgets and an improving business climate.
Revenues have widely exceeded estimates in recent years, enabling the buildup of
large reserves as well as providing Massachusetts taxpayers with a degree of tax
relief. The economy continues its expansion at still better than national
performance rates.
The Bay State's economy has evolved from one dominated by defense and computer
hardware to more knowledge-intensive services. This transformation
___________________
(1) A portion of the Portfolio's income may be subject to the Alternative
Minimum Tax ("AMT").
(2) Source: Fitch IBCCA, an internationally recognized rating agency
--------------------------------------------------------------------------------
Smith Barney Muni Funds 1
<PAGE>
has resulted in strong job growth in high-paying industries, more mobility for
skilled workers and greater competitiveness. Massachusetts' current unemployment
rate is lower than the national average and lowest among industrial states.
Also, the Bay State has the third highest level of personal income per-capita
($32,902), which is 24% higher than the U.S. average.
We believe that the Commonwealth's economy should remain healthy and in a strong
position to excel in the 21(st) century. As a result, Massachusetts' general
obligation debt has received high ratings from the major credit agencies.
Investment Strategy and Performance Update
As previously noted, the Portfolio seeks to provide investors with income exempt
from federal income tax (other than the alternative minimum tax) and
Massachusetts state personal income taxes by investing in high-quality, short-
term Massachusetts municipal obligations selected for liquidity and stability of
principal.
As of March 31, 2000, the Portfolio's 7-day current yield was 3.16%. The
Portfolio's 7-day effective yield -- which reflects compounding -- was 3.21%.
During the reporting period and in expectation of higher rates, we have
shortened our average target maturity to a 35- to 40-day range. In addition, we
have positioned the Portfolio with an increased variable-rate position which
should help the Portfolio to better deal with seasonal redemptions that normally
occur during April's tax season.
Economic & Market Overview
In our opinion, the past year has brought continued strong growth and increased
productivity while inflation, with the exception of crude oil prices, has
remained largely contained. In an effort to keep the economy from overheating
and inflation from accelerating, Federal Reserve policy makers raised the
overnight bank lending rate one quarter of a percentage point to 6.00%.(3) This
move was the fifth in a series of quarter-point moves aimed at slowing consumer
spending and helping to contain the threat of inflation.
The effects of higher rates on the short-term municipal market have been
somewhat muted by the reality of decreased supply. State and local governments
have enjoyed the benefits of increased tax collections and solid fiscal
positions, and that in turn has translated into less need for short-term cash
flow borrowing. Along with decreased issuance, many large issuers have shifted
their supply away from one-year municipal note financing to tax-exempt
commercial paper programs. Tax-exempt commercial paper enables the issuer to
have greater flexibility to change the amount of debt outstanding and the range
of maturities
_________________
(3) On May 16, 2000, after this letter was written, the Fed raised interest
rates by .50% to 6.5%.
--------------------------------------------------------------------------------
2 2000 Annual Report to Shareholders
<PAGE>
throughout the year. This type of financing also offers the Portfolio more
flexibility in achieving its average maturity targets. We believe the trend is
also heading toward increased Variable Rate Demand Obligation issuance
("VRDO").(4) As a function of less supply, this segment of the market has been
trading at levels that are rich on a historical basis to its taxable
counterparts and longer-term municipal debt. For this reason, we believe, this
segment of the market has become an attractive option to municipal debt issuers,
and is where most of the growth in supply has taken place.
In closing, thank you for investing in the Smith Barney Massachusetts Money
Market Portfolio. We look forward to continuing to help you pursue your
financial goals in the new century.
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President
/s/ Joseph Benevento
Joseph Benevento
Vice President
Sincerely,
April 18, 2000
__________________
(4) VRDO's are demand instruments that usually have an indicated maturity of
more than one year, but they contain a demand feature that enables the
holder to redeem the investment on no more than 30 days notice. These
instruments provide for automatic adjustment of new rates on set dates and
are generally supported by letters of credit issued by domestic or foreign
banks.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 3
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 2,178,000 NR+ Barnstable Massachusetts BAN 4.25% due 6/28/00 $ 2,178,771
5,300,000 A-1 Boston IDR (Boston Home Inc.) 4.05% VRDO 5,300,000
Boston Massachusetts Water Sewer Series A:
1,950,000 A-1+ 3.55% VRDO 1,950,000
1,000,000 Aa3 5.90% due 7/1/00 1,004,424
3,374,700 MIG 1* Bourne Massachusetts BAN 4.25% due 7/26/00 3,380,468
Clipper Massachusetts Tax Exempt Trust PART
AMBAC-Insured:
7,500,000 VMIG 1* Series 98-4 4.01% VRDO 7,500,000
6,710,000 VMIG 1* Series 98-8 3.96% VRDO 6,710,000
8,575,000 MIG 1* Dover Massachusetts BAN 4.25% due 6/23/00 8,579,429
2,835,000 A-1+ Dudley Charlton Regional School District PART
3.79% VRDO 2,835,000
Massachusetts Bay Transportation Authority:
3,150,000 A-1+ General Transportation System 3.95% VRDO 3,150,000
5,000,000 Aaa* Series A (Pre-Refunded -- Escrowed with U.S.
government securities to 3/1/01 Call @ 102) 7.00%
due 3/1/22 5,218,945
4,000,000 AAA Series A FSA-Insured 7.65% due 8/1/00 4,129,145
1,500,000 A-1+ Series D 3.70% due 4/6/00 1,500,000
Massachusetts Development Finance Agency Revenue:
3,700,000 A-1 Cider Mill Farms Series 99 AMT 4.05% VRDO 3,700,000
1,000,000 VMIG 1* Dean College 3.85% VRDO 1,000,000
3,620,000 NR++ Hatfield Inc. Project AMT 3.95% VRDO 3,620,000
4,700,000 A-1 Leaktite Corp. 4.05% VRDO 4,700,000
4,980,000 A-1 Metalcrafters Series 99 4.05% VRDO 4,980,000
9,850,000 VMIG 1* Notre Dame Health Care 3.80% VRDO 9,850,000
9,300,000 NR++ Riverwalk Senior Living 3.85% VRDO 9,300,000
1,000,000 VMIG 1* Wentworth Institutional 3.85% VRDO 1,000,000
Massachusetts HEFA:
200,000 A-1+ Amherst College 3.50% VRDO 200,000
9,720,000 A-1+ Berklee College of Music Series D MBIA-Insured
3.80% VRDO 9,720,000
6,000,000 VMIG 1* Boston University Series H 3.85% VRDO 6,000,000
5,510,000 VMIG 1* Brigham & Women's Hospital 3.80% VRDO 5,510,000
Capital Asset Program:
1,500,000 VMIG 1* Series 3.60% VRDO 1,500,000
1,100,000 VMIG 1* Series C 3.90% VRDO 1,100,000
3,385,000 VMIG 1* Series E 3.95% VRDO 3,385,000
3,500,000 VMIG 1* Corporate Independent Living Series 99 3.85% VRDO 3,500,000
4,500,000 A-1+ Harvard University 3.60% VRDO 4,500,000
5,000,000 A-1+ Massachusetts University Series A 3.85% VRDO 5,000,000
Partners Healthcare FSA-Insured:
7,975,000 A-1+ Series P-1 3.80% VRDO 7,975,000
4,750,000 VMIG 1* Series P-2 3.85% VRDO 4,750,000
5,000,000 VMIG 1* Simmons College Merlot Series D 4.00% VRDO 5,000,000
1,260,000 A-1+ Williams College PART Series SGA 65 4.00% VRDO 1,260,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
4 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Massachusetts HFA:
$ 1,100,000 A-1+ Multi-Family Housing Project A 3.80% VRDO $1,100,000
1,350,000 A-1+ Series A 3.80% VRDO 1,350,000
1,000,000 A-1+ Series PT 271 PART MBIA-Insured 3.79% VRDO 1,000,000
Massachusetts IDR:
2,210,000 A-1+ KMS Companies Series 96 AMT 3.90% VRDO 2,210,000
4,850,000 A-1+ US Tsubaki Project AMT 4.00% VRDO 4,850,000
Massachusetts Industrial Finance Agency:
1,840,000 A-1 420 Newburyport Turnpike Series 98 AMT
4.05% VRDO 1,840,000
2,000,000 Aaa* Cape Cod (Pre-Refunded -- Escrowed with U.S.
government securities to 11/15/20 Call @ 102)
8.50% due 11/15/20 2,091,254
500,000 A-1+ Gordon College 3.80% VRDO 500,000
1,000,000 NR++ Peterson American Corp. AMT 4.10% VRDO 1,000,000
960,000 VMIG 1* Quamco Inc. Series B 3.95% VRDO 960,000
1,500,000 VMIG 1* Whitehead Institutional of Biomed 3.80% VRDO 1,500,000
4,792,000 A-1+ Massachusetts Koch Floating Rate Certificates, Ambac
Insured, 4.06% VRDO 4,792,000
3,000,000 A-1+ Massachusetts Muni Wholesale Electric Co.
4.05% due 8/8/00 3,000,000
Massachusetts PCR:
Holyoke Water Power:
4,607,000 A-1+ 3.50% VRDO 4,607,000
1,000,000 A-1+ 3.55% VRDO 1,000,000
New England Power 93A:
1,000,000 A-1 3.70% due 4/10/00 1,000,000
1,000,000 A-1 3.75% due 4/10/00 1,000,000
5,000,000 A-1 3.75% due 4/11/00 5,000,000
2,500,000 A-1 3.90% due 6/6/00 2,500,000
Massachusetts State GO:
Series A:
2,675,000 AA- 5.50% due 7/1/00 2,686,360
1,500,000 AA- 5.00% due 8/1/00 1,506,314
5,700,000 A-1+ 3.80% VRDO 5,700,000
900,000 A-1+ Series B 3.80% VRDO 900,000
1,000,000 A-1+ Series D 3.95% due 5/12/00 1,000,000
625,000 A-1 Lexington 4.75% due 2/15/00 627,913
2,500,000 A-1 Lowell 7.625% due 2/15/01 2,645,212
300,000 A-1 Lynn 4.50% due 3/1/01 300,755
6,500,000 VMIG 1* Massachusetts State Port Authority Merlot 3.79% VRDO 6,500,000
3,000,000 A-1+ Massachusetts State Turnpike Authority AMBAC-Insured
3.79% VRDO 3,000,000
Massachusetts Water Resource Authority:
4,000,000 A-1+ 3.80% due 4/5/00 4,000,000
2,635,000 VMIGI* Abatement Floating Trust 182 3.93% VRDO 2,635,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 5
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5,800,000 AAA Series A (Pre-Refunded -- Escrowed with U.S.
government securities to 4/1/00 Call @ 102)
7.50% due 4/1/16 $ 5,916,000
3,500,000 A-1+ Series B 3.80% VRDO 3,500,000
1,650,000 A-1+ Series D 3.80% VRDO 1,650,000
3,700,000 AAA Series 1990A (Pre-Refunded -- Escrowed with U.S.
government securities to 4/1/00 Call @ 102)
6.00% due 4/1/20 3,700,000
2,000,000 A-1+ Series 1995 3.95% due 6/9/00 2,000,000
5,000,000 MIG 1* Narragansett Massachusetts School District BAN
4.25% due 6/9/00 5,003,956
5,000,000 MIG 1* South Hadley Massachusetts BAN 4.25% due 8/11/00 5,009,058
6,865,000 A-1 Winchester Massachusetts BAN 4.25% due 7/3/00 6,871,404
---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--100%
(Cost -- $257,438,408**) $257,438,408
---------------------------------------------------------------------------------------------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except those identified by an asterisk (*) which are rated by Moody's
Investors Service, Inc. ("Moody's").
+ Security has not been rated by either Moody's or Standard & Poor's.
However, the Board of Trustees has determined that the security presents
minimal credit risk.
++ Security has not been rated by either Moody's or Standard & Poor's.
However, the Board of Trustees has determined this security to be
considered a first tier quality issue due to enhancement features; such as
insurance and/or irrevocable letters of credit.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 7 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
6 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Bond Ratings (unaudited)
--------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
--------------------------------------------------------------------------------
Short-Term Securities Ratings (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.
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.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
NR -- Indicates that the bond is not rated by either Standard & Poor's
or Moody's.
--------------------------------------------------------------------------------
Security Descriptions (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
ABAG -- Association of Bay Area GO -- General Obligation
Governments HDC -- Housing Development Corporation
AIG -- American International Guaranty HEFA -- Health & Educational Facilities Authority
AMBAC -- American Municipal Bond HFA -- Housing Finance Authority
Assurance Corporation IDA -- Industrial Development Authority
AMT -- Alternative Minimum Tax IDB -- Industrial Development Board
BAN -- Bond Anticipation Notes IDR -- Industrial Development Revenue
BIG -- Bond Investors Guaranty INFLOS -- Inverse Floaters
CGIC -- Capital Guaranty Insurance LOC -- Letter of Credit
Company MBIA -- Municipal Bond Investors
CHFCLI -- California Health Facility Assurance Corporation
Construction Loan Insurance MFH -- Multi-Family Housing
CONNIE -- College Construction Loan MUD -- Municipal Utilities District
LEE Insurance Association MVRICS -- Municipal Variable Rate
COP -- Certificate of Participation Inverse Coupon Security
CSD -- Central School District PART -- Partnership Structure
EDA -- Economic Development Authority PCR -- Pollution Control Revenue
ETM -- Escrowed To Maturity RAN -- Revenue Anticipation Notes
FGIC -- Financial Guaranty Insurance RAW -- Revenue Anticipation Warrants
Company RIBS -- Residual Interest Bonds
FHA -- Federal Housing Administration RITES -- Residual Interest Tax-Exempt
FHLMC -- Federal Home Loan Mortgage Securities
Corporation SWAP -- Swap Structure
FLAIRS -- Floating Adjustable Interest TAN -- Tax Anticipation Notes
Rate Securities TECP -- Tax Exempt Commercial Paper
FNMA -- Federal National Mortgage TOB -- Tender Option Bond Structure
Association TRAN -- Tax and Revenue Anticipation Notes
FRTC -- Floating Rate Trust Certificates UFSD -- Unified Free School District
FSA -- Federal Savings Association UHSD -- Unified High School District
GIC -- Guaranteed Investment Contract USD -- Unified School District
GNMA -- Government National VA -- Veterans Administration
Mortgage Association VRDO -- Variable Rate Demand Obligation
VRWE -- Variable Rate Wednesday Demand
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Muni Funds 7
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 2000
--------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost $257,438,408
Cash 4,191
Interest receivable 1,665,462
Receivable for securities sold 1,000,389
--------------------------------------------------------------------------------
Total Assets 260,108,450
--------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 399,978
Distribution fees payable 5,466
Accrued expenses 108,617
--------------------------------------------------------------------------------
Total Liabilities 514,061
--------------------------------------------------------------------------------
Total Net Assets $259,594,389
--------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 259,594
Capital paid in excess of par value 259,334,795
--------------------------------------------------------------------------------
Total Net Assets $259,594,389
--------------------------------------------------------------------------------
Shares Outstanding 259,594,389
--------------------------------------------------------------------------------
Net Asset Value, Per Share $ 1.00
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
8 2000 Annual Report to Shareholders
<PAGE>
-------------------------------------------------------------------------------
Statement of Operations For the Period Ended March 31, 2000(a)
-------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $3,373,545
-------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 457,792
Distribution fees (Note 4) 91,214
Registration fees 74,000
Audit and legal 32,705
Shareholder and system servicing fees 18,952
Shareholder communications 11,410
Custody fees 6,732
Trustees' fees 943
Other 2,498
-------------------------------------------------------------------------------
Total Expenses 696,246
Less: Management fee waiver (101,448)
-------------------------------------------------------------------------------
Net Expenses 594,798
-------------------------------------------------------------------------------
Net Investment Income $2,778,747
-------------------------------------------------------------------------------
(a) For the period from September 14, 1999 (commencement of operations) to
March 31, 2000.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
--------------------------------------------------------------------------------
Statement of Changes in Net Assets For the Period Ended March 31, 2000(a)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
OPERATIONS:
Net investment income $ 2,778,747
--------------------------------------------------------------------------------
Increase in Net Assets From Operations 2,778,747
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (2,778,747)
--------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (2,778,747)
--------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 684,430,653
Net asset value of shares issued
for reinvestment of dividends 2,338,475
Cost of shares reacquired (427,174,739)
--------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 259,594,389
--------------------------------------------------------------------------------
Increase in Net Assets 259,594,389
NET ASSETS:
Beginning of period --
--------------------------------------------------------------------------------
End of period $ 259,594,389
--------------------------------------------------------------------------------
</TABLE>
(a) For the period from September 14, 1999 (commencement of operations) to
March 31, 2000.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Massachusetts 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 eight other separate investment portfolios: Florida, Georgia,
Limited Term, New York, National, Pennsylvania, California Money Market and New
York Money Market Portfolios. The financial statements and financial highlights
for the other portfolios are presented in separate shareholder 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
Massachusetts, it is subject to possible concentration risks associated with
economic, political, or legal developments or industrial or regional matters
specifically affecting Massachusetts.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<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
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), acts as investment manager to the Fund. The Portfolio pays SSBC 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.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, became the Fund's transfer agent and PFPC Global Fund
Services ("PFPC") became the sub-transfer agent. CFTC receives account fees and
asset-based fees that vary according to the account size and type of account.
PFPC is responsible for shareholder recordkeeping and financial processing for
all shareholder accounts and is paid by CFTC. During the period October 1, 1999
through March 31, 2000, the Fund paid transfer agent fees of $12,341 to CFTC.
CFBDS, Inc. acts as the Fund's distributor. Salomon Smith Barney Inc. ("SSB"),
another subsidiary of SSBH, as well as certain other broker-dealers, continues
to sell Fund shares to the public as a member of the selling group.
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 SSB.
--------------------------------------------------------------------------------
12 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
5. Shares of Beneficial Interest
At March 31, 2000, the Fund had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share.
Transactions in shares of the Portfolio were as follows:
Period Ended
March 31, 2000*
--------------------------------------------------------------------------------
Class A
Shares sold 684,430,653
Shares issued on reinvestment 2,338,475
Shares reacquired (427,174,739)
--------------------------------------------------------------------------------
Net Increase 259,594,389
--------------------------------------------------------------------------------
* For the period from September 14, 1999 (commencement of operations) to
March 31, 2000.
--------------------------------------------------------------------------------
Barney Muni Funds 13
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout the period:
Class A Shares 2000(1)
-------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 1.00
-------------------------------------------------------------------------------
Net investment income(2) 0.016
Dividends from net investment income (0.016)
-------------------------------------------------------------------------------
Net Asset Value, End of Period $ 1.00
-------------------------------------------------------------------------------
Total Return++ 1.66%
-------------------------------------------------------------------------------
Net Assets, End of Period (millions) $ 260
-------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses(2)(3) 0.65%
Net investment income 3.05
-------------------------------------------------------------------------------
(1) For the period from September 14, 1999 to March 31, 2000.
(2) The manager waived a portion of its fees for the period ended March 31,
2000. If such fees were not waived, the per share decrease on net
investment income and the actual expense ratio would have been as follows:
Per Share Decreases to Expense Ratios
Net Investment Income Without Waiver
--------------------- --------------
2000(1) $0.001 0.76%
(3) As a result of voluntary expense limitations, the expense ratio will not
exceed 0.65%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
14 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Independent Auditors' Report
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of the Massachusetts Money Market
Portfolio of the Smith Barney Muni Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Massachusetts Money Market Portfolio of the
mith Barney Muni Funds as of March 31, 2000, and the related statement of
operations, the statement of changes in net assets and the financial highlights
for the period from September 14, 1999 (commencement of operations) to March 31,
2000. 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 audit in accordance with auditing standards generally accepted
in the United States of America. 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, 2000, by correspondence with the custodian. As
to securities sold but not yet 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 audit 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
Massachusetts Money Market Portfolio of the Smith Barney Muni Funds as of March
31, 2000, and the results of its operations the changes in its net assets and
its financial highlights for the period from September 14, 1999 to March 31,
2000, in conformity with accounting principles generally accepted in the United
States of America.
/s/ KPMG LLP
New York, New York
May 11, 2000
--------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 2000:
. 100% of the dividends paid by the Fund from net investment income as
tax exempt for regular Federal income tax purposes.
--------------------------------------------------------------------------------
16 2000 Annual Report to Shareholders
<PAGE>
[back cover]
[Salomon Smith Barney Logo]
Trustees
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Joseph Benevento
Vice President
Joseph P. Deane
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Manager
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PFPC Trust Company
Transfer Agent
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds - Massachusetts Money Market Portfolio, but it may also
be used as sales literature when proceeded or accompanied by the current
Prospectus, which gives details about charges, expenses, investment objectives
and operating policies of the Fund. If used as sales material after June 30,
2000, this report must be accompanied by performance information for the most
recently completed calendar quarter.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Muni Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
<PAGE>
[front cover]
[SBMF logo]
SMITH BARNEY MUNI FUNDS
CALIFORNIA MONEY
MARKET PORTFOLIO
ANNUAL REPORT
MARCH 31, 2000
[Smith Barney Mutual Funds logo]
NOT FDIC INSURED . NO BANK GUARANTEE . MAY LOSE VALUE
<PAGE>
Smith Barney
Muni Funds
[Photos of Heath B. McLendon, Chairman; Joseph P. Deane, Vice President and
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 ("Fund") for the year ended March 31,
2000. In this report, we summarize the period's prevailing economic and market
conditions and outline our investment strategy. A detailed summary of the Fund's
performance can be found in the appropriate sections that follow. We hope you
find this report to be useful and informative.
Performance Update
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.
As of March 31, 2000, the Fund's 7-day current yield was 2.62%. The Fund's
7-day effective yield -- which reflects compounding -- was 2.65%.
Please note that your investment in the Fund is neither insured, nor guaranteed,
by the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.
California Economic Highlights(1)
The end of 1999 saw a flourish of holiday sales, which contributed to a burst of
year-end job creation in California. Rising home prices and mortgage rates may
have slowed home sales, but California home and business construction continued
to grow. An important sign of the Golden State's current economic strength and
future prospects is the explosion of capital investment in emerging businesses.
Fueled by booming Internet-related companies, venture capital investments in
Northern California tripled in 1999 to $16.2 billion -- over 33% of total
venture capital investment for the entire U.S. Based on estimates from National
Venture
-----------------
(1) Source: Fitch IBCA, Inc., an internationally recognized rating agency
--------------------------------------------------------------------------------
Smith Barney Muni Funds 1
<PAGE>
Capital Association/Venture Economics, the state as a whole accounted for over
42% of the nation's total venture capital investments.
California's economy passed several important milestones over the period,
reaching a 30-year low in unemployment and passing the 14 million job mark in
nonfarm wage and salary employment. Moreover, California's unemployment rate
dropped to 4.9% -- the lowest level since 1969. The Golden State accounts for
approximately 40 percent of the entire nation's job growth, with the service
sector, particularly business services, adding the greatest number of jobs.
We believe strong building activity and swelling personal consumption are
driving the distribution of employment gains. We also think these gains,
combined with factors such as strong employment growth, high real estate
values, a more broadly diversified state economy and an annual state Gross
Domestic Product ("GDP") of more than $1 trillion, should allow California to
remain a competitive economic force for many years to come.
Market Overview and Outlook
The U.S. economic expansion is now in its 108th month, setting a record for
longevity. The past year has brought continued strong growth and higher labor
productivity while inflation, with the exception of crude oil prices, has
remained largely subdued. In an effort to keep the economy from overheating and
inflation from accelerating, the Federal Reserve Board's ("Fed") policy makers
raised the overnight bank lending rate one quarter of a percentage point to
6.00%.(2) This move was the fifth in a series of quarter point moves that are
aimed at slowing consumer spending and therefore possibly containing the threat
of inflation.
The effects of higher rates on the short-term municipal market have been
somewhat muted by the reality of lower supply. State and local governments have
enjoyed the benefits of increased tax collections and solid fiscal positions,
and that, in turn, has resulted in less need for short-term cash flow
borrowing. Along with decreased issuance, many large issuers have shifted their
supply away from one-year municipal note financing to tax-exempt commercial
paper programs.
Tax-exempt commercial paper enables the issuer to have greater flexibility to
change the amount of debt outstanding and the range of maturities throughout
the year. This type of financing also offers the Fund more flexibility in
achieving its average maturity targets.
The trend is also heading toward increased Variable Rate Demand Obligation
issuance (VRDO).(3)
-----------------
(2) On May 16, 2000, after this letter was written, the Fed raised interest
rates by 0.50%, to 6.50%.
(3) VRDO's are demand instruments that usually have an indicated maturity of
more than one year, but they contain a demand feature that enables the
holder to redeem the investment on no more than 30 days notice. These
instruments provide for automatic adjustment of new rates on set dates and
are generally supported by letters of credit issued by domestic or foreign
banks.
--------------------------------------------------------------------------------
2 2000 Annual Report to Shareholders
<PAGE>
As a function of less supply, this segment of the market has been trading at
levels that are rich on an historical basis to its taxable counterparts and
longer municipal debt. For this reason, we view this segment of the market to
be a more attractive option to municipal debt issuers, and that is where most
of the growth in supply has taken place.
Investment Strategy
During the reporting period, in expectation of increasing rates, we have
shortened our average maturity target to a 35 to 40 day range. In addition we
have positioned the Fund's portfolio with an increased variable rate position
which we believe will help the Fund to contend with seasonal redemptions that
normally occur during April's tax season.
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,
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President
/s/ Joseph Benevento
Joseph Benevento
Vice President
April 18, 2000
--------------------------------------------------------------------------------
Smith Barney Muni Funds 3
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alameda Contra Costa Schools Financing
Authority Project:
$ 6,325,000 A-1+ Series A 3.30% VRDO $ 6,325,000
13,005,000 A-1+ Series B 3.30% VRDO 13,005,000
3,660,000 A-1+ Series C 3.30% VRDO 3,660,000
4,800,000 A-1+ Series F 3.30% VRDO 4,800,000
24,415,000 A-1+ Series G 3.25% VRDO 24,415,000
Alameda County:
1,250,000 SP-1+ IDR Design Workshops 3.50% VRDO(b) 1,250,000
7,740,000 A-1+ Transportation Authority PART MBIA-Insured 3.45% VRDO 7,740,000
20,000,000 SP-1+ 1999 TRAN 4.00% due 7/7/00 20,034,867
8,600,000 A-1+ Anaheim TECP 3.20% due 6/8/00 8,600,000
Anaheim UHSD FSA-Insured:
5,300,000 VMIG 1* 3.25% VRDO 5,300,000
8,160,000 A-1+ 3.36% VRDO 8,160,000
3,500,000 A-1 Auburn USD COP Capital Improvement Financing
Project 3.20% VRDO 3,500,000
4,550,000 VMIG 1* Barstow MFH Rimrock Village 3.35% VRDO(b) 4,550,000
4,685,000 A-1 Berkeley Revenue Bonds YMCA Series 93 3.25% VRDO 4,685,000
4,500,000 VMIG 1* California Alternative Energy Rock Creek Project
Series 86 4.40% VRDO(b) 4,500,000
California EDA Financial Authority:
2,250,000 A-1+ IDR Coast Grain 3.40% VRDO(b) 2,250,000
13,000,000 A-1+ ISO Corporation Project Series A 3.20% VRDO 13,000,000
1,500,000 A-1+ ISO Corporation Project Series B 3.30% VRDO 1,500,000
1,900,000 A-1+ Lion Raisins Project Series 3.35% VRDO(b) 1,900,000
4,000,000 NR++ River Ranch Foods 98 3.05% VRDO(b) 4,000,000
1,400,000 A-1+ Roller Bearing Co. Of America 3.40% VRDO(b) 1,400,000
California Department of Water:
1,719,000 A-1+ Series 1 TECP 3.30% due 6/13/00 1,719,000
4,896,000 A-1+ Series 1 TECP 3.40% due 6/13/00 4,896,000
1,325,000 A-1+ Series I TECP 3.25% due 4/3/00 1,325,000
2,233,000 A-1+ Series I TECP 3.35% due 5/12/00 2,233,000
530,000 A-1 Series J-3 5.40% due 12/1/00 535,852
California Health Facility Authority:
5,300,000 VMIG 1* Adventist Health Series A 3.45% VRDO 5,300,000
6,365,000 VMIG 1* Ceders PART 3.85% VRDO(b) 6,365,000
29,600,000 A-1+ Presbyterian Homes MBIA-Insured 3.40% VRDO 29,600,000
Scripps Hospital MBIA-Insured:
6,000,000 A-1+ Series 85 B 3.15% VRDO 6,000,000
3,500,000 A-1+ Series 91 B 3.15% VRDO 3,500,000
5,000,000 A-1+ Series 98 A 3.15% VRDO 5,000,000
15,200,000 A-1+ Series 98 B 3.15% VRDO 15,200,000
8,000,000 A-1+ St. Joseph System Series B 3.45% VRDO 8,000,000
California HFA Revenue Home Mortgage Revenue:
7,720,000 VMIG 1* PART FHA-Insured 3.41% VRDO(b) 7,720,000
11,410,000 A-1+ PART MBIA-Insured Series J2 3.20% VRDO 11,410,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
4 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 2,695,000 A-1+ PART MBIA-Insured Series M 3.41% VRDO(b) $ 2,695,000
10,400,000 A-1+ Series 1 3.15% VRDO 10,400,000
California MFH:
10,300,000 A-1+ Azusa Pacific Apartments 3.30% VRDO 10,300,000
5,400,000 VMIG 1* Livermore Portola Meadows Apartments A 3.35% VRDO(b) 5,400,000
4,300,000 VMIG 1* Walnut Creek Creekside Drive 2.95% VRDO 4,300,000
California Pollution Control Finance Authority:
8,600,000 VMIG 1* Acro Environmental Improvement Bonds 3.35% VRDO(b) 8,600,000
5,500,000 NR++ Athens Series A 3.35% VRDO 5,500,000
5,000,000 NR++ Bay Leasing Series A 3.35% VRDO 5,000,000
2,000,000 NR++ BLT Enterprises Series 99A 3.35% VRDO(b) 2,000,000
5,000,000 NR++ Blue Line Transfer 3.35% VRDO(b) 5,000,000
2,290,000 NR++ California County Sanitary Series 99A 3.35% VRDO(b) 2,290,000
2,200,000 P-1* Mining Series 84A MBIA-Insured 3.20% VRDO 2,200,000
Pacific Gas & Electric:
5,600,000 A-1+ Series A 3.45% VRDO 5,600,000
3,400,000 A-1+ Series 95 A 2.75%(b) 3,400,000
15,800,000 A-1+ Series 96 A 3.25% VRDO(b) 15,800,000
40,800,000 A-1+ Series 96 B 3.25% VRDO(b) 40,800,000
11,850,000 A-1+ San Diego Gas & Electric PART MBIA-Insured
3.36% VRDO 11,850,000
8,675,000 P-1* Sierra Pacific Project 3.35% VRDO(b) 8,675,000
5,695,000 A-1+ Southdown Series 83A 3.25% VRDO 5,695,000
6,700,000 A-1+ Southdown Series 83B 3.325% VRDO 6,700,000
5,610,000 A-1 Wadham Energy Series A 4.10% VRDO(b) 5,610,000
8,245,000 A-1 Wadham Energy Series B 4.10% VRDO(b) 8,245,000
California Port of Oakland:
25,450,000 A-1+ Series A TECP 3.00% due 4/7/00(b) 25,450,000
4,000,000 VMIG 1* Series B 3.30% VRDO(b) 4,000,000
23,500,000 VMIG 1* California Public Capital Improvement Financing Authority
Series C 3.50% due 6/15/00 23,500,000
1,200,000 A-1+ California Putters Series 142 GO PART 3.46% VRDO 1,200,000
8,750,000 A-1+ California Rancho Water District Finance Authority
FGIC-Insured PART 3.36% VRDO 8,750,000
2,400,000 A-1 California Redwood City Hall Project PART 3.30% VRDO 2,400,000
7,500,000 A-1+ California School Financing Corp. Project
Series C 3.30% VRDO 7,500,000
50,000,000 SP-1+ California School Cash Reserve Program Authority
Series 99A 4.00% due 7/3/00 50,094,358
5,000,000 A-1+ California Floating Rate Series 85 PART 3.36% VRDO 5,000,000
10,840,000 A-1+ California Floating Rate Series 90 PART 3.36% VRDO 10,840,000
California State GO TECP:
11,500,000 A-1 3.10% due 4/4/00 11,500,000
6,500,000 A-1 2.70% due 4/6/00 6,500,000
5,000,000 A-1 3.50% due 4/7/00 5,000,000
9,655,000 A-1 2.75% due 4/14/00 9,655,000
12,500,000 A-1 3.25% due 4/28/00 12,500,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 5
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$16,500,000 A-1 3.40% due 5/12/00 $16,500,000
5,400,000 A-1 3.35% due 5/18/00 5,400,000
California State RAN Series A:
26,100,000 VMIG 1* PART 4.00% VRDO 26,100,000
62,750,000 SP-1+ 4.00% due 6/30/00 62,846,869
3,050,000 VMIG 1* California State Public AMBAC-Insured 3.27% VRDO 3,050,000
California Statewide Development Authority:
1,850,000 A-1 Aegis Project Y 3.55% VRDO 1,850,000
1,975,000 A-1+ American Zettler Incorporated 3.35% VRDO(b) 1,975,000
17,000,000 A-1+ Canyon Creek Apartments 3.20% VRDO(b) 17,000,000
5,100,000 P-1* Chevron 3.40% VRDO(b) 5,100,000
2,150,000 A-1 Foxwood Apartments Series J 3.25% VRDO 2,150,000
5,000,000 VMIG 1* Merlot Series E FSA-Insured 3.65% VRDO 5,000,000
3,000,000 NR++ Mesa Farms Project 3.35% VRDO(b) 3,000,000
10,000,000 A-1+ One Park Place 3.25% VRDO(b) 10,000,000
7,500,000 NR++ Parkway Apartments Series 98 Z 3.70% VRDO(b) 7,500,000
10,000,000 SP-1+ Series A-1 4.00% due 6/30/00(b) 10,019,529
3,200,000 A-1+ Sunclipse Inc. 3.35% VRDO(b) 3,200,000
2,600,000 NR++ Supreme Truck Bodies 3.35% VRDO(b) 2,600,000
28,500,000 A-1+ California Transit Finance Authority Series
FSA-Insured 97 3.25% VRDO 28,500,000
15,135,000 A-1 California Veterans Affairs Series 98 AMBAC-Insured
PART 3.50% due 4/6/00 VRDO(b) 15,135,000
20,000,000 A-1+ California Wateruse Revenue FSA-Insured 3.25% VRDO 20,000,000
26,500,000 A-1 Chula Vista IDR San Diego Gas & Electric
Series 92B 3.30% VRDO(b) 26,500,000
38,922,000 VMIG 1* Clipper California Tax-Exempt Trust Part
Series 98-99 AMBAC-Insured 3.86% VRDO(b) 38,922,000
31,000,000 MIG 1* Clovis USD TRAN 3.45% due 6/30/00 31,025,836
25,400,000 A-1+ Contra Costa County MFH Revenue
Series A 3.25% VRDO(b) 25,400,000
3,000,000 SP-1+ Contra Costa County TRAN Series A
4.00% due 9/29/00 3,008,863
3,000,000 VMIG 1* Contra Costa Water Revenue FGIC-Insured
3.50% due 4/26/00 3,000,000
Corona MFH:
2,600,000 A-1+ Country Hills Project 3.30% VRDO 2,600,000
11,000,000 A-1 Series B 3.35% VRDO 11,000,000
East Bay Municipal Utility District TECP:
16,700,000 A-1+ 2.55% due 4/10/00 16,700,000
8,000,000 A-1+ 2.60% due 4/10/00 8,000,000
11,000,000 A-1+ 3.55% due 7/27/00 11,000,000
2,500,000 VMIG 1* Elsinore Valley Muni Water FGIC-Insured 3.20% VRDO 2,500,000
3,600,000 VMIG 1* Escondido COP Escondid Promenade Series 86
3.35% VRDO(b) 3,600,000
5,000,000 SP-1+ Fairfield Suisun USD TRAN 3.50% due 6/30/00 5,004,525
3,900,000 A-1 Fremont COP Project A 3.30% VRDO 3,900,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
6 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5,800,000 A-1+ Fremont Treetops Apartments Series A 3.25% VRDO(b) $ 5,800,000
7,150,000 A-1+ Garden Grove MFH Apartment Series A 3.15% VRDO(b) 7,150,000
21,130,000 VMIG 1* Irvine Public Facilities Capital Improvement
Series 85 3.20% VRDO 21,130,000
Irvine Ranch Water Districts:
100,000 A-1 + Series A 3.60% VRDO 100,000
4,800,000 A-1 + Series B 3.60% VRDO 4,800,000
5,900,000 A-1 + Series 85B 3.60% VRDO 5,900,000
21,000,000 SP-1+ Kern County California TRAN 4.00% due 6/30/00 21,030,764
49,985,612 A-1+ Koch Floating Rate Trust AMBAC-Insured 3.86% VRDO 49,985,612
3,650,000 A-1 Lancaster MFA (Willows Project) Series A 3.36% VRDO 3,650,000
8,000,000 A-1+ Lodi IDA (Dart Container) 3.70% VRDO 8,000,000
36,450,000 A-1+ Long Beach California Health Facility Revenue
(Memorial Health Services) Series 1991 3.25% VRDO 36,450,000
Los Angeles Capital Asset Program TECP:
3,000,000 A-1+ 2.60% due 4/10/00 3,000,000
5,500,000 A-1+ 3.35% due 5/18/00 5,500,000
9,735,000 AAA Los Angeles COP Correct Facility Pre-Refunded--
Escrowed with U.S. government securities to 9/1/00
Call @ 100, 6.50% due 9/13/00 10,047,506
3,000,000 Aa2* Los Angeles County GO Series B 6.00% due 9/1/00 3,030,527
Los Angeles County TRANS:
7,800,000 A-1+ MBIA-Insured 3.15% VRDO 7,800,000
48,700,000 SP-1+ Series A 4.00% due 6/30/00 48,779,212
6,310,000 A-1+ Los Angeles FGIC-Insured 3.36% VRDO 6,310,000
20,408,000 A-1 Los Angeles Tax Series A TECP 3.40% due 6/9/00 20,408,000
Los Angeles County Department of Water:
20,000,000 VMIG 1* Series A 3.30% VRDO 20,000,000
30,500,000 VMIG 1* Series B 3.30% VRDO 30,500,000
11,700,000 VMIG 1* Series D 3.20% VRDO 11,700,000
60,000,000 VMIG 1* Series E 3.20% VRDO 60,000,000
20,000,000 VMIG 1* Series F 3.20% VRDO 20,000,000
3,900,000 VMIG 1* Los Angeles Convention Center MBIA-Insured 4.00% VRDO 3,900,000
8,750,000 A-1+ Los Angeles Sanitation District PART 3.36% VRDO 8,750,000
Los Angeles Wastewater:
10,000,000 A-1+ PART MBIA-Insured 3.50% VRDO 10,000,000
16,000,000 VMIG 1* PART FGIC-Insured 3.50% VRDO 16,000,000
5,000,000 A-1+ TECP 3.25% due 4/4/00 5,000,000
17,000,000 A-1+ TECP 2.55% due 4/10/00 17,000,000
5,000,000 A-1+ TECP 2.75% due 4/13/00 5,000,000
1,500,000 A-1+ TECP 3.50% due 5/4/00 1,500,000
7,400,000 A-1+ TECP 3.35% due 6/7/00 7,400,000
4,000,000 A-1+ TECP 3.30% due 6/8/00 4,000,000
7,000,000 A-1+ TECP 3.40% due 6/9/00 7,000,000
13,500,000 A-1+ TECP 3.30% due 6/12/00 13,500,000
Los Angeles MFH:
2,400,000 A-1+ Fountain Park 3.30% VRDO 2,400,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 7
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$10,000,000 A-1+ Baldwin Hills 3.15% VRDO $10,000,000
5,200,000 A-1+ Loans To Lender 3.50% VRDO 5,200,000
3,650,000 A-1+ Malibu Meadows Project Series A 3.15%(b) 3,650,000
13,000,000 VMIG 1* Los Angeles CA USD Series A19 4.00% VRDO 13,000,000
3,000,000 VMIG 1* Modesto Irrigation Series 96 3.25% due 4/6/00 3,000,000
5,500,000 VMIG 1* Modesto MFH Shadowbrook Project Series A 3.32% VRDO 5,500,000
400,000 A-1+ MSR Public Power Agency San Juan Project
MBIA-Insured Series 98F 3.50% VRDO 400,000
3,350,000 VMIG 1* Monterey MFH Slautterback Project 3.40% VRDO(b) 3,350,000
3,000,000 SP-1+ Moreland California School District TRAN 3.50% due 6/30/00 3,002,715
4,600,000 SP-1+ New Haven TRAN 3.50% due 6/30/00 4,604,163
Northern California Transmission Authority TECP:
2,000,000 A-1+ 2.60% due 4/10/00 2,000,000
30,300,000 A-1+ 3.55% due 4/11/00 30,300,000
9,000,000 A-1+ 2.65% due 4/11/00 9,000,000
3,000,000 VMIG 1* Oakland Merlot Series M PART AMBAC-Insured 3.65% VRDO 3,000,000
14,780,000 VMIG 1* Oakland COP Project J 3.20% VRDO 14,780,000
13,700,000 A-1+ Oakland Joint Power Finance Authority Lease Bonds
FSA-Insured Series 98 A 1 3.30% VRDO 13,700,000
4,200,000 SP-1+ Oakland TRAN 4.25% due 9/29/00 4,218,456
Orange County Apartment Housing Development:
5,275,000 VMIG 1* Alicia Series A 3.85% VRDO 5,275,000
15,000,000 VMIG 1* Capistrano Pointe A 3.25% VRDO 15,000,000
10,300,000 VMIG 1* Foothill Oaks 3.25% VRDO(b) 10,300,000
5,000,000 A-1+ Lantern Pines 3.10%(b) 5,000,000
1,680,000 VMIG 1* Niguel 3.10%(b) 1,680,000
10,000,000 A-1+ Oasis Martinique Project 3.30% VRDO 10,000,000
2,670,000 A-1+ Trabuco Woods Series 98J 3.15%(b) 2,670,000
9,500,000 A-1+ Vintage Woods Series 98H 3.15%(b) 9,500,000
7,000,000 A-1+ WLCO Series 98G1 3.15%(b) 7,000,000
1,700,000 A-1+ Wood Canyon Villas 3.30% VRDO(b) 1,700,000
Orange County California Sanitation Districts:
1,800,000 A-1+ Series 90 FGIC-Insured 3.20% VRDO 1,800,000
24,000,000 A-1+ Series 92 AMBAC-Insured 3.20% VRDO 24,000,000
6,700,000 A-1+ Series 93 AMBAC-Insured 3.40% VRDO 6,700,000
26,000,000 A-1+ Orange County TECP 3.30% 4/6/00 26,000,000
12,470,000 A-1+ Palo Alto USD Series R PART 3.65% VRDO 12,470,000
Pasadena COP Rose Bowl Improvement Project:
6,300,000 VMIG 1* Series 91 3.15%(b) 6,300,000
4,520,000 VMIG 1* Series 96 3.15%(b) 4,520,000
8,086,553 VMIG 1* Pitney Bowes California Lease Topps Series 99-1
AMBAC-Insured 3.80% due 7/12/00 8,086,553
5,000,000 SP-1+ Pleasanton TRAN 3.50% due 6/30/00 5,004,525
6,700,000 A-1+ Ponoma Redevelopment Agency MFH Park and
Plaza Apartment Series A 3.15%(b) 6,700,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
8 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Puerto Rico Commonwealth Governmental Bond
MBIA-Insured:
$63,500,000 VMIG 1* Series A-1 3.85% VRDO $63,500,000
6,035,000 A-1+ 3.36% VRDO 6,035,000
5,255,000 VMIG 1* 3.41% VRDO 5,255,000
4,655,000 A-1+ Puerto Rico GO 3.36% VRDO 4,655,000
Puerto Rico Governmental Development Bond Bank:
7,950,000 A-1+ Bond Bank MBIA-Insured 3.15% VRDO(b) 7,950,000
7,320,000 A-1+ TECP 3.15% due 4/4/00 7,320,000
12,000,000 A-1+ TECP 3.30% due 4/5/00 12,000,000
6,923,000 A-1+ TECP 3.70% due 4/11/00 6,923,000
17,920,000 A-1+ TECP 3.40% due 4/12/00 17,920,000
37,145,000 A-1+ TECP 2.95% due 4/18/00 37,145,000
10,000,000 A-1+ TECP 3.05% due 4/19/00 10,000,000
9,600,000 A-1+ TECP 3.05% due 4/20/00 9,600,000
23,143,000 A-1+ TECP 3.00% due 4/25/00 23,143,000
2,000,000 A-1+ TECP 3.05% due 4/26/00 2,000,000
5,200,000 A-1+ TECP 3.15% due 5/1/00 5,200,000
2,000,000 A-1+ TECP 3.55% due 6/23/00 2,000,000
2,500,000 A-1+ TECP 5.50% due 7/1/00 2,511,835
6,000,000 A-1+ TECP 3.55% due 7/28/00 6,000,000
10,000,000 A-1+ TECP 3.70% due 8/16/00 10,000,000
Puerto Rico Highway Transportation Authority
Series A AMBAC-Insured:
11,595,000 A-1+ PART MBIA-Insured 3.50% due 6/15/00 11,595,000
500,000 A-1+ 3.25% VRDO 500,000
Puerto Rico Public Muni Finance Agency FSA-Insured:
3,335,000 VMIG 1* PART 3.41% VRDO 3,335,000
4,850,000 A-1+ PART 3.36% VRDO 4,850,000
7,300,000 A-1 Puerto Rico Public Finance Corp. PART AMBAC-Insured
3.36% VRDO 7,300,000
5,860,000 A-1+ Puerto Rico Infrastructure PART AMBAC-Insured
3.60% VRDO 5,860,000
9,000,000 SP-1 Puerto Rico Electric Power MBIA-Insured 3.50% due 11/1/00 9,000,000
Puerto Rico Electric Power:
6,820,000 VMIG 1* PART MBIA-Insured 3.41% VRDO 6,820,000
10,200,000 A-1+ PART MBIA-Insured 3.45% VRDO 10,200,000
33,630,000 AAA Puerto Rico Industrial Medical and Environmental
PCR Abbot Laboratories 4.00% due 3/1/01 33,630,000
14,005,000 A-1 Regents University of California Series E
PART MBIA-Insured 3.50% VRDO 14,005,000
Regents University of California Series A TECP:
8,700,000 A-1+ 3.50% due 4/11/00 8,700,000
16,500,000 A-1+ 3.40% due 6/13/00 16,500,000
1,900,000 VMIG 1* Riverside County IDA Rockwin Corp.
Series II 3.40% VRDO(b) 1,900,000
Riverside Country MFH:
5,600,000 VMIG 1* Amanda Park Project Series A 3.20% VRDO(b) 5,600,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 2,500,000 A-1 MFH Countrywood Apartments Series D 3.32% VRDO $ 2,500,000
15,567,000 SP-1+ Riverside Teeter Obligation TECP Series B
2.95% due 4/6/00 15,567,000
6,500,000 VMIG 1* Sacramento Airport PART FGIC-Insured 3.50% VRDO 6,500,000
60,000,000 A-1 Sacramento County TRAN 99 Series 4.00% VRDO 60,000,000
5,600,000 A-1 Sacramento Electric Series X Escrowed to maturity with
U.S. government securities 7.00% due 7/1/00 5,760,809
15,200,000 SP-1+ San Bernardino TRANS 3.75% due 9/29/00 15,228,136
48,300,000 A-1+ San Bernardino County COP Medical Center Project
3.15% VRDO 48,300,000
San Bernardino County MFH:
1,800,000 VMIG 1* Series A-2 5.15% due 6/1/00 1,833,576
5,700,000 NR++ Sycmore Terr 3.15%(b) 5,700,000
17,000,000 SP-1+ San Diego TAN Series A 4.25% due 9/29/00 17,067,223
10,005,000 VMIG 1* San Diego TRAN 5.00% due 9/29/00 10,082,109
10,000,000 SP-1+ San Diego Government Pool TRAN Series A
4.00% due 9/29/00 10,000,000
10,408,000 A-1+ San Diego Housing Authority (Carman Del Mar
Apartments) Project 3.15%(b) 10,408,000
10,200,000 A-1+ San Diego Regional Sales Tax TECP 3.40% due 6/14/00 10,200,000
5,000,000 A-1 San Diego Water Series 1 TECP 3.40% due 6/14/00 5,000,000
10,000,000 VMIG 1* San Diego Water Project PART FGIC-Insured 3.50% VRDO 10,020,244
San Diego Teeter Note TECP:
7,000,000 NR++ 3.40% due 5/5/00 7,000,000
4,300,000 NR++ 3.50% due 8/10/00 4,300,000
San Diego USD:
15,000,000 A-1 PART MBIA-Insured 3.50% VRDO 15,000,000
1,700,000 A-1+ Series B 3.40% due 6/12/00 1,700,000
1,000,000 A-1+ Series B TECP 3.45% due 6/7/00 1,000,000
San Diego Unified Port District:
4,820,000 P-1 TECP 3.55% due 8/8/00(b) 4,820,000
8,349,000 P-1 TECP 3.55% due 8/10/00(b) 8,349,000
3,000,000 NR++ San Dimas California Redevelopment Agency (San Dimas
Community Center) 3.70% VRDO 3,000,000
San Francisco Airport TECP:
18,580,000 A-1+ 3.35% due 4/6/00 18,580,000
4,700,000 A-1+ 2.80% due 4/14/00 4,700,000
2,600,000 A-1+ 3.35% due 4/27/00 2,600,000
1,500,000 A-1 San Francisco Bay Area Rapid Transit Series B TECP
3.40% due 6/9/00 1,500,000
16,800,000 A-1+ San Francisco MFH City Heights Apartments Project
Series 97 A 3.20% VRDO(b) 16,800,000
San Francisco MFH:
33,600,000 VMIG 1* Bayside Village Series 85A 3.05% VRDO 33,600,000
25,000,000 A-1+ Bayside Village Series 85B 3.05% VRDO 25,000,000
23,800,000 A-1+ Fillmore Center 3.15% VRDO 23,800,000
30,730,000 VMIG 1* St. Francis Housing Series 89A 3.35% VRDO 30,730,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 3,000,000 VMIG 1* Series C 3.20% VRDO(b) $ 3,000,000
5,000,000 A-1+ San Francisco Public Water TECP 2.65% due 4/7/00 5,000,000
4,722,500 VMIG 1* San Francisco Sewer Revenue 3.41% VRDO 4,722,500
San Joaquin TRAN Authority TECP:
3,500,000 A-1+ 3.45% due 5/4/00 3,500,000
15,700,000 A-1+ 3.30% due 6/8/00 15,700,000
San Jose MFH:
3,000,000 VMIG 1* Almaden Lake Village Apartment Project
3.35% VRDO(b) 3,000,000
2,000,000 VMIG 1* Somerset Park 3.05% VRDO(b) 2,000,000
6,690,000 A-1+ San Jose-Santa Clara California Water Authority PART
FGIC-Insured 3.36% VRDO 6,690,000
24,000,000 SP-1+ San Jose-Santa Clara County TRAN
4.25% due 10/26/00 24,114,747
1,000,000 P-1* Santa Ana IDA Newport Electronics Project 3.35% VRDO 1,000,000
2,700,000 VMIG 1* Santa Clara County Finance Authority Lease 3.25% VRDO 2,700,000
5,900,000 A-1+ Santa Clara County MFH (Benton Park Apartments
Project) 3.15% VRDO 5,900,000
10,000,000 SP-1+ Santa Cruz County TRAN 4.50% 10/6/00 10,049,224
12,870,000 A-1+ Santa Margarita PART MBIA-Insured 3.36% VRDO 12,870,000
Simi Valley MFH:
6,245,000 VMIG 1* Creekside Village Apartments Series A 3.15%(b) 6,245,000
26,500,000 A-1 Lincoln Wood Ranch 3.30% VRDO 26,500,000
7,800,000 VMIG 1* Shadowridge 3.25% VRDO 7,800,000
South East Recovery Facilities Authority:
48,079,000 A-1+ Series A 3.20% VRDO 48,079,000
6,800,000 A-1+ Series B 3.25% VRDO 6,800,000
4,750,000 A-1+ Southern California Metropolitan Water District PART
3.36% VRDO 4,750,000
Southern California Metropolitan Water District
Series B TECP:
2,300,000 A-1+ 2.60% due 4/1/00 2,300,000
5,000,000 A-1+ 2.65% due 4/7/00 5,000,000
15,000,000 A-1+ 3.30% due 4/7/00 15,000,000
24,000,000 A-1+ 3.55% due 4/10/00 24,000,000
4,000,000 A-1+ 3.45% due 5/4/00 4,000,000
4,000,000 A-1+ 3.40% due 6/9/00 4,000,000
7,000,000 A-1+ 3.25% due 6/12/00 7,000,000
62,800,000 A-1+ Southern California Public Power Authority Project
South Transmission FSA-Insured 3.30% VRDO 62,800,000
10,000,000 SP-1+ Stainslaus County TRAN 4.00% due 8/1/00 10,019,255
6,000,000 A-1+ Union City MFH 3.15%(b) 6,000,000
7,000,000 A-1+ Upland California Mountain Springs
Series 98A 3.15%(b) 7,000,000
2,950,000 A-1+ Upland California MFH Northwoods Project A 3.25% VRDO 2,950,000
9,600,000 A-1+ Vacaville Apartments Series 99 3.15% VRDO 9,600,000
5,000,000 SP-1+ Vacaville USD TRAN 3.50% due 6/30/00 5,004,525
5,150,000 A-1+ Vallejo MFH Hillside Terrace Apartments 3.20% VRDO(b) 5,150,000
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Vallejo USD TRAN:
$ 2,750,000 NR++ 3.60% due 4/5/00 $ 2,750,000
10,000,000 SP-1+ 4.00% due 10/13/00 10,033,496
7,000,000 A-1+ West Basin Muni Water District 3.15% VRDO 7,000,000
9,465,000 A-1+ Westminster Redevelopment Agency
AMBAC-Insured 3.30% VRDO 9,465,000
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $3,078,440,411**) $3,078,440,411
--------------------------------------------------------------------------------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service with the exception of
those identified by an asterisk (*) which are rated by Moody's Investors
Service, Inc.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
++ Security has not been rated by either Moody's or Standard & Poor's.
However, the Board of Trustees has determined this security to be
considered a first tier quality issue due to enhancement features; such as
insurance and/or irrevocable letters of credit.
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 13 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Bond Ratings (unaudited)
--------------------------------------------------------------------------------
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.
Aaa -- Bonds rated "Aaa" by Moody's 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 these bonds.
</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.
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.
NR -- Indicates that the bond is not rated by either Standard & Poor's or
Moody's.
</TABLE>
--------------------------------------------------------------------------------
Security Descriptions (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
ABAG -- Association of Bay Area GO -- General Obligation
Governments HDC -- Housing Development Corporation
AIG -- American International Guaranty HFA -- Housing Finance Authority
AMBAC -- American Municipal Bond IDA -- Industrial Development Authority
Assurance Corporation IDB -- Industrial Development Board
BAN -- Bond Anticipation Notes IDR -- Industrial Development Revenue
BIG -- Bond Investors Guaranty INFLOS -- Inverse Floaters
CGIC -- Capital Guaranty Insurance LOC -- Letter of Credit
Company MBIA -- Municipal Bond Investors
CHFCLI -- California Health Facility Assurance Corporation
Construction Loan Insurance MFH -- Multi-Family Housing
CONNIE -- College Construction Loan MUD -- Municipal Utilities District
LEE Insurance Association MVRICS -- Municipal Variable Rate
COP -- Certificate of Participation Inverse Coupon Security
CSD -- Central School District PART -- Partnership Structure
EDA -- Economic Development Authority PCR -- Pollution Control Revenue
ETM -- Escrowed To Maturity RAN -- Revenue Anticipation Notes
FGIC -- Financial Guaranty Insurance RAW -- Revenue Anticipation Warrants
Company RIBS -- Residual Interest Bonds
FHA -- Federal Housing Administration RITES -- Residual Interest Tax-Exempt
FHLMC -- Federal Home Loan Mortgage Securities
Corporation SWAP -- Swap Structure
FLAIRS -- Floating Adjustable Interest TAN -- Tax Anticipation Notes
Rate Securities TECP -- Tax Exempt Commercial Paper
FNMA -- Federal National Mortgage TOB -- Tender Option Bond Structure
Association TRAN -- Tax and Revenue Anticipation Notes
FRTC -- Floating Rate Trust Certificates UFSD -- Unified Free School District
FSA -- Federal Savings Association UHSD -- Unified High School District
GIC -- Guaranteed Investment Contract USD -- Unified School District
GNMA -- Government National VA -- Veterans Administration
Mortgage Association VRDO -- Variable Rate Demand Obligation
VRWE -- Variable Rate Wednesday Demand
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
-----------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 2000
-----------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at amortized cost $3,078,440,411
Cash 45,583
Interest receivable 22,413,314
-----------------------------------------------------------------------------
Total Assets 3,100,899,308
-----------------------------------------------------------------------------
LIABILITIES:
Dividends payable 3,972,312
Management fees payable 1,231,708
Distribution fees payable 89,035
Deferred compensation payable 8,062
Accrued expenses 279,474
-----------------------------------------------------------------------------
Total Liabilities 5,580,591
-----------------------------------------------------------------------------
Total Net Assets $3,095,318,717
-----------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 3,095,463
Capital paid in excess of par value 3,092,274,212
Accumulated net realized loss from security transactions (50,958)
-----------------------------------------------------------------------------
Total Net Assets $3,095,318,717
-----------------------------------------------------------------------------
Shares Outstanding:
Class A 3,095,460,358
-----------------------------------------------------------------------------
Class Y 2,498
-----------------------------------------------------------------------------
Net Asset Value, Per Share:
Class A $1.00
-----------------------------------------------------------------------------
Class Y $1.00
-----------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations For the Year Ended March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $72,529,683
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 11,636,111
Distribution fees (Note 4) 2,326,276
Shareholder and system servicing fees 741,169
Registration fees 310,357
Shareholder communications 114,319
Custody 60,526
Audit and legal 42,691
Trustees' fees 13,783
Other 46,049
--------------------------------------------------------------------------------
Total Expenses 15,291,281
--------------------------------------------------------------------------------
Net Investment Income 57,238,402
--------------------------------------------------------------------------------
Net Realized Loss From Security Transactions (49,952)
--------------------------------------------------------------------------------
Increase in Net Assets From Operations $57,188,450
--------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended March 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
--------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 57,238,402 $ 49,115,513
Net realized gain (loss) (49,952) 153,566
--------------------------------------------------------------------------------
Increase in Net Assets From Operations 57,188,450 49,269,079
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (57,238,402) (49,115,513)
--------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (57,238,402) (49,115,513)
--------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 11,645,496,175 8,107,812,026
Net asset value of shares issued
for reinvestment of dividends 54,034,083 47,695,059
Cost of shares reacquired (10,740,660,084) (7,811,903,718)
--------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 958,870,174 343,603,367
--------------------------------------------------------------------------------
Increase in Net Assets 958,820,222 343,756,933
NET ASSETS:
Beginning of year 2,136,498,495 1,792,741,562
--------------------------------------------------------------------------------
End of year $ 3,095,318,717 $2,136,498,495
--------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
16 2000 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 eight other separate investment portfolios: Florida, Georgia,
Limited Term, New York, National, Pennsylvania, Massachusetts 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) 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 17
<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
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), acts as investment manager to the Fund. The Portfolio pays SSBC 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.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, became the Fund's transfer agent and PFPC Global Fund
Services ("PFPC") became the sub-transfer agent. CFTC receives account fees and
asset-based fees that vary according to the size and type of account. PFPC is
responsible for shareholder recordkeeping and financial processing for all
shareholder accounts and is paid by CFTC. During the period October 1, 1999
through March 31, 2000, the Portfolio paid transfer agent fees of $218,228 to
CFTC.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
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 SSB.
5. Capital Loss Carryforwards
At March 31, 2000, the Portfolio had, for Federal income tax purposes, a capital
loss carryforward of approximately $50,600 available to offset future capital
gains. To the extent that these carryforward losses are used to offset capital
gains, it is probable
--------------------------------------------------------------------------------
18 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
that any 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>
2004 2008
--------------------------------------------------------------------------------
<S> <C> <C>
Carryforward Amounts $1,000 $49,600
--------------------------------------------------------------------------------
</TABLE>
6. Shares of Beneficial Interest
At March 31, 2000, the Fund had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share.
At March 31, 2000, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class Y
--------------------------------------------------------------------------------
<S> <C> <C>
Total Paid-in Capital $3,095,367,177 $2,498
--------------------------------------------------------------------------------
</TABLE>
Transactions in shares of the Portfolio were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, 2000 March 31, 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Class A
Shares sold 11,645,496,175 8,107,803,549
Shares issued on reinvestment 54,034,021 47,691,799
Shares reacquired (10,740,660,084) (7,808,481,271)
--------------------------------------------------------------------------------
Net Increase 958,870,112 347,014,077
--------------------------------------------------------------------------------
Class Y
Shares sold -- 8,477
Shares issued on reinvestment 62 3,260
Shares reacquired -- (3,422,447)
--------------------------------------------------------------------------------
Net Increase (Decrease) 62 (3,410,710)
--------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------
<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) 0.025 0.026 0.029 0.028 0.032
Dividends from
net investment income (0.025) (0.026) (0.029) (0.028) (0.032)
-----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------------------------
Total Return 2.49% 2.61% 2.98% 2.79% 3.22%
-----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $ 3,095 $ 2,136 $ 1,789 $ 1,400 $ 1,346
-----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (1)(2) 0.66% 0.64% 0.63% 0.67% 0.64%
Net investment income 2.46 2.55 2.92 2.75 3.15
-----------------------------------------------------------------------------------------------------------
Class Y Shares 2000 1999 1998 1997(3)
-----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------------------------
Net investment income 0.025 0.026 0.031 0.020
Dividends from
net investment income (0.025) (0.026) (0.031) (0.020)
-----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------------------------
Total Return 2.57% 2.60% 3.09% 2.04%++
-----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000's) $ 2 $ 2 $ 3,413 $ 7,405
-----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (4) 0.55% 0.51% 0.54% 0.56%+
Net investment income 2.58 2.68 3.01 2.77 +
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The manager waived a portion of its fees for the year ended March 31, 1996.
If such fees were not waived, the effect on net investment income and
expense ratios would have been as follows:
<TABLE>
<CAPTION>
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
------------------------ --------------------
1996 1996
---- ----
<S> <C> <C>
Class A $0.000* 0.65%
</TABLE>
(2) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.80% for Class A shares.
(3) For the period July 19, 1996 (inception date) to March 31, 1997.
(4) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.70% for Class Y shares.
* Amount represents less than $0.01.
++ Total return is not annualized, as the result may not be representative of
the total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
20 2000 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, 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2000, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements 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,
2000, 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 accounting principles generally accepted in the United States of
America.
/s/ KPMG LLP
New York, New York
May 11, 2000
--------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes the Portfolio hereby designates for the fiscal year
ended March 31, 2000:
. 100.00% of the dividends paid by the fund from net investment income as
tax-exempt for regular Federal income tax purposes.
--------------------------------------------------------------------------------
22 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
--------------------------------------------------------------------------------
On April 19, 1999, a special meeting of shareholders of the Fund was held for
the purpose of electing Trustees to the Fund.
The results were as follows:
<TABLE>
<CAPTION>
Shares Percentage Shares Percentage
Voted of Shares Voted of Shares
Name of Trustee For Voted Against Voted
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lee Abraham 1,350,265,160.850 97.943% 28,359,584.139 2.057%
Allan J. Bloostein 1,351,356,664.226 98.022 27,268,080.763 1.978
Jane F. Dasher 1,352,390,291.715 98.097 26,234,453.274 1.903
Donald R. Foley 1,350,867,506.020 97.987 27,757,238.969 2.013
Richard E. Hanson, Jr. 1,351,302,644.963 98.018 27,322,100.026 1.982
Paul Hardin 1,352,452,572.699 98.102 26,172,172.290 1.898
Heath B. McLendon 1,352,481,043.116 98.104 26,143,101.873 1,896
Roderick C. Rasmussen 1,351,438,708.918 98.028 27,185,946.171 1.972
John P. Toolan 1,352,497,455.395 98.105 26,127,289.594 1.895
----------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Muni Funds
23
<PAGE>
[This page intentionally left blank]
<PAGE>
[back cover]
[Salomon Smith Barney Logo]
Trustees
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Joseph Benevento
Vice President
Joseph P. Deane
Vice President
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Manager
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PFPC Trust Company
Transfer Agent
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds - California Money Market Portfolio, but it may also be
used as sales literature when preceded or accompanied by the current Prospectus,
which gives details about charges, expenses, investment objectives and operating
policies of the Portfolio. If used as sales material after June 30, 2000, this
report must be accompanied by performance information for the most recently
completed calendar quarter.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Muni Funds
388 Greenwich Street, MF-2
New York, New York 10013
<PAGE>
SBMF
SMITH BARNEY MUNI FUNDS
FLORIDA PORTFOLIO
SPECIAL DISCIPLINE SERIES
ANNUAL REPORT
MARCH 31, 2000
[SBMF LOGO]
Smith Barney
Mutual Funds
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
SMITH BARNEY MUNI FUNDS
PHOTOS OF: HEATH B. PETER M.
MCLENDON COFFEY
Chairman 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, 2000. 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. We hope that you find this report useful and informative.
PERFORMANCE AND INVESTMENT STRATEGY
For the year ended March 31, 2000, the Portfolio's Class A shares returned a
negative 2.25%, without sales charges. In comparison, the Florida Municipal Debt
Fund peer group average total return was a negative 2.37% for the same time
period, according to Lipper, Inc. (Lipper, Inc. is a major fund-tracking
organization.) For additional performance information on the Portfolio's other
share classes, please refer to pages six through eight.
With the bond markets likely to remain volatile, we continue to favor an "ease
into the market" approach. We tend to prefer longer and intermediate maturities
where we think the benefits of the steep positive slope of the municipal yield
curve can be obtained. (The yield curve is the graphical depiction of the
relationship between the yield on bonds of the same credit quality but different
maturities.)
Average credit quality is relatively high in the Portfolio. Although quality
spreads have widened due to earnings pressure, especially in hospitals and
healthcare related sectors, the difference in yield during the period between
the highest-quality issues and medium grade issues was, in our view, relatively
modest. We think our proprietary research enables us to invest in select
medium-term credits for which perceived market risk may be more than our
analysis indicates. Moreover, while no guarantees can be given, we think our
strategy may have the potential to increase the Portfolio's income.
During the past year, we took advantage of rising interest rates to generate
additional yield in the Portfolio. We also wanted to incorporate additional call
--------------------------------------------------------------------------------
Smith Barney Muni Funds 1
<PAGE>
protection into the Portfolio by selling off some of our higher coupon bonds
with shorter calls, and replacing them with bonds that have a similar high
coupon structure, but are not subject to early call. (Callable bonds are
redeemable by the issuer before the scheduled maturity under specific conditions
and at a stated price, which usually begins at a premium to par and declines
annually. Bonds are usually "called" when interest rates fall so significantly
that the issuer can save money by floating new bonds at lower rates.)
While no guarantees can be given, one of our objectives in the Portfolio is to
create a built-in income stream for the long-term. To this end, we have
generally focused on securities with high credit quality and good call
protection, as we believe they offer good long-term value. Moreover, we have a
fairly long weighted average life in the Portfolio because we believe that the
risk of higher inflation at the present time may be negligible.
As of the close of the reporting period, 97.3% of the Portfolio's bond holdings
were rated investment grade or better (BBB/Baa and higher). The Portfolio's
largest holdings were concentrated among the following: hospital bonds (17.3%),
transportation bonds (14.9%), and utility bonds (11.1%).
MARKET AND ECONOMIC OVERVIEW
The bond markets have changed dramatically over the past several years. In our
view, one central theme of this change, which began following the Asian crisis
in 1997, is that the capital markets can no longer rely on the U.S. Treasury
markets to provide a near-perfect "benchmark" of trends in interest rates.
Before the Asian crisis, the capital markets relied on the U.S. Treasury market
as a measure to determine what bonds "should" yield.
Under these changing conditions, it may be more difficult for the Federal
Reserve Board ("Fed") to moderate the growth of the economy, since long-term
interest rates may not rise as the Fed puts upward pressure on short-term rates.
The shape of the U.S. Treasury yield curve just six months ago was fairly
normal. (A normal yield curve depicts a relationship whereby bonds with longer
maturities have higher yields than bonds with shorter maturities.) Usually,
longer-term bonds are more volatile than shorter term bonds because more risk is
associated with those bonds with longer maturities. Now, yields on longer-term
bonds are depressed by a potential reduced supply as well as by expectations
that the Fed may ultimately be successful in slowing the economy and diffusing
inflationary pressures. The result: A negatively sloped yield curve for U.S.
Treasuries. Instead of the usual upward-sloping curve, with yields rising
steadily along with the maturity of Treasury bonds, the highest yields were for
shorter-term bonds.
The U.S. economy continues to generate remarkable non-inflationary growth. The
Fed has increased short-term interest rates five times in the last nine months
by a total of 125 basis points (or 1.25%).1 The Fed remains committed to keeping
pressure on borrowing costs until the U.S. economy slows to a level that keeps
inflation from
--------------------------------------------------------------------------------
2 2000 Annual Report to Shareholders
<PAGE>
accelerating. The question: How much tightening is necessary to slow the economy
to levels deemed desirable by the Fed? We think that increases amounting to
another 50 to 75 basis points may be sufficient to slow economic growth.
Over the past year, the municipal bond market performed quite well, particularly
in comparison to taxable bonds. While municipals have been unable to keep pace
with the decline in yield on the U.S. Treasury sector, they are clearly less
volatile than many taxable bonds which are more susceptible to credit problems
and capital market liquidity issues. In our view, another factor affecting the
municipal bond market continues to be extremely tight supply. In fact, new issue
volume in January 2000 was less than half of that sold in January 1999.
While no guarantees can be made, we believe that short-term and intermediate-
term municipal yields are likely to increase slightly for the following reasons:
. The expected continuing increases in the federal funds rate which would put
upward pressure on all short-term yields (The federal funds rate is the
interest rate that banks with excess reserves at a Federal Reserve district
bank charge other banks that need overnight loans.)
. A likely increase in supply, which would be felt most dramatically in the
supply of the short end of the yield curve
. The yields on municipal bonds with longer maturities are not nearly as
attractive as the yields offered by short and intermediate term taxable
bonds
The last factor is particularly important in terms of the Portfolio's current
investment strategy. While the U.S. Treasury yield curve has an inverted shape,
with the highest yields in five years, the municipal yield curve has maintained
a sharp positive slope. In fact, the difference in yield between 20-year and
30-year municipal bonds is only 10 basis points as of this writing.
FLORIDA ECONOMIC HIGHLIGHTS2
Florida can be characterized by rapid growth, economic broadening and increasing
diversification. The Sunshine State's economy has continued its transformation
from a narrow base of agriculture and seasonal tourism into a service and trade
economy with substantial insurance, banking and export participation, as well as
a greater year-round tourist attraction.
This has brought pressures for more infrastructure, educational facilities and
other needs in a state that is now the fourth largest in the U.S. Debt has
remained moderate, but increasingly special obligation debt payable from
dedicated revenues is being used to meet purposes not covered by the
constitutional authority to issue
-----------
1 On May 16, 2000, after this letter was written, the Federal Reserve Board
raised interest rates by 0.50%, to 6.50%.
2 Source: Fitch IBCA, Inc. is an internationally recognized rating agency.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 3
<PAGE>
general obligations. Most recently, $2.5 billion bonds were authorized for
school construction, with a dedicated portion of lottery proceeds providing
security. Financial operations in Florida have been successful during the period
with better-than-expected revenue collections. However, in our view,
over-dependence on the sensitive sales tax creates vulnerability to both
recession and longer-term slower growth in the tax base. A revenue limit may
also become operationally constraining, but revenues pledged for debt service on
state bonds are exempt from it.
We think the future of Florida remains bright, especially with the prospect of
increasingly open trade and commerce with the rest of the world. In a more open
trade environment, Florida should be able to take advantage of its unique
geographic location and its well-established ties with many regional economies
in Latin America.
MARKET OUTLOOK
We believe that the recent rise in interest rates may create buying
opportunities. While no guarantees can be made, we seek to achieve a high level
of tax-exempt income3, consistent with prudent investing and close attention to
credit quality. Yields on short-term and long-term municipal securities have
risen substantially during the last year. However, in light of recent bond
market volatility, long-term municipal yields have not changed much during the
past few months.
We believe that the relative stability of many municipals bonds may offer
investors stability in a highly volatile bond market (as well as the higher
volatility that may be associated with other capital). (Of course, no guarantees
can be given.)
We also believe that Fed monetary policy action should be sufficient to slow the
economy without triggering higher inflation. The good news is that the economy's
"soft landing" is likely to be at a higher annual growth rate than was
previously thought possible due to the possible emergence of a "New Economy"
where technological advances can spur growth without inflationary pressures.
Although the bond markets remain unsettled, we maintain our positive outlook for
municipal securities for the following reasons:
. Longer intermediate and long maturity yields remain very high relative to
taxable counterparts. For example, some bonds are yielding roughly 95% to
100% of similar maturity U.S. Treasuries
. The municipal yield curve remains very steeply sloped, even as the U.S.
Treasury yield curve is inverted
-----------
3 Please note that a portion of the Portfolio's income may be subject to the
Alternative Minimum Tax ("AMT").
--------------------------------------------------------------------------------
4 2000 Annual Report to Shareholders
<PAGE>
. When capital markets begin to believe that the Fed has achieved its goal of
easing growth down to non-inflationary levels, bonds could rally and
shortages of bonds with the best coupon structures and call provisions may
eventually surface
Thank you for investing in the Smith Barney Muni Funds -- Florida Portfolio. We
look forward to helping you pursue your financial goals in the new century.
Sincerely,
/S/ HEATH B. MCLENDON /S/ PETER M. COFFEY
HEATH B. MCLENDON PETER M. COFFEY
Chairman Vice President
April 3, 2000
--------------------------------------------------------------------------------
Smith Barney Muni Funds 5
<PAGE>
HISTORICAL PERFORMANCE -- CLASS A SHARES
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.70 $12.70 $0.68 $0.00 (2.25)%
--------------------------------------------------------------------------------
3/31/99 13.74 13.70 0.70 0.09 5.56
--------------------------------------------------------------------------------
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 $6.61 $0.28
================================================================================
HISTORICAL PERFORMANCE -- CLASS B SHARES
Net Asset Value
-------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.69 $12.70 $0.61 $0.00 (2.70)%
--------------------------------------------------------------------------------
3/31/99 13.73 13.69 0.63 0.09 5.01
--------------------------------------------------------------------------------
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 $3.55 $0.27
================================================================================
--------------------------------------------------------------------------------
6 2000 Annual Report to Shareholders
<PAGE>
HISTORICAL PERFORMANCE -- CLASS L SHARES
Net Asset Value
-------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.69 $12.70 $0.60 $0.00 (2.78)%
--------------------------------------------------------------------------------
3/31/99 13.74 13.69 0.62 0.09 4.87
--------------------------------------------------------------------------------
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 $4.73 $0.27
================================================================================
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
AVERAGE ANNUAL TOTAL RETURN
Without Sales Charges(1)
--------------------------------
Class A Class B Class L
================================================================================
Year Ended 3/31/00 (2.25)% (2.70)% (2.78)%
--------------------------------------------------------------------------------
Five Years Ended 3/31/00 5.61 5.08 5.00
--------------------------------------------------------------------------------
Inception* through 3/31/00 6.68 6.73 5.15
================================================================================
With Sales Charges(2)
--------------------------------
Class A Class B Class L
================================================================================
Year Ended 3/31/00 (6.16)% (6.88)% (4.68)%
--------------------------------------------------------------------------------
Five Years Ended 3/31/00 4.75 4.92 4.79
--------------------------------------------------------------------------------
Inception* through 3/31/00 6.19 6.73 5.01
================================================================================
--------------------------------------------------------------------------------
Smith Barney Muni Funds 7
<PAGE>
CUMULATIVE TOTAL RETURN
Without Sales Charges(1)
================================================================================
Class A (Inception* through 3/31/00) 78.93%
--------------------------------------------------------------------------------
Class B (Inception* through 3/31/00) 41.93
--------------------------------------------------------------------------------
Class L (Inception* through 3/31/00) 43.85
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 4.50% CDSC,
which applies if shares are redeemed within one year from purchase. This
CDSC declines by 0.50% the first year after purchase and thereafter by
1.00% per year until no CDSC is incurred. Class L shares also reflect the
deduction of a 1.00% CDSC, which applies if shares are redeemed within the
first year of purchase.
* Inception dates for Class A, B and L shares are April 2, 1991, November 16,
1994 and January 5, 1993, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
--------------------------------------------------------------------------------
8 2000 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 BOND INDEX+
--------------------------------------------------------------------------------
April 1991 -- March 2000
[LINE CHART]
Lehman Brothers Municipal
Bond Index Florida Portfolio
4/2/91 10000 9600
3/92 10999 10410
3/93 12376 11859
3/94 12663 12158
3/95 14605 12963
3/96 14746 14084
3/97 15548 14850
3/98 17214 16507
3/99 18281 17425
3/00 18266 17032
+ 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, 2000. The Lehman Brothers Municipal Bond Index is a
broad-based, total return index comprised of investment grade, fixed rate
municipal bonds selected from issues larger than $50 million issued since
January 1984. The index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund. The performance of the
Portfolio's other classes may be greater or less than the Class A shares'
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
ALL FIGURES REPRESENT PAST PERFORMANCE AND ARE NOT A GUARANTEE OF FUTURE
RESULTS. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 9
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS MARCH 31, 2000
FACE
AMOUNT RATING(A) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
EDUCATION -- 3.7%
$ 350,000 AAA Dade County School Board, Series C, FSA-Insured,
5.000% due 8/1/17 $ 323,313
1,530,000 AAA Florida State Board Regent Housing Revenue,
University of Florida, MBIA-Insured, 4.500% due 7/1/19 1,306,237
710,000 AA Hillsborough County Educational Facilities Authority
Revenue, (University of Tampa Project), 5.000% due 12/1/18 637,225
2,790,000 A Virgin Islands University Refunding & Improvement,
Series A, ACA-Insured, 6.250% due 12/1/29 2,842,313
Volusia County Educational Facilities Authority Revenue,
Embry-Riddle Aeronautical University:
2,875,000 Baa2* Series A, 6.125% due 10/15/16 2,907,344
150,000 AAA Unrefunded Balance, CONNIE LEE-Insured,
6.500% due 10/15/15 157,500
---------------------------------------------------------------------------------------------------
8,173,932
---------------------------------------------------------------------------------------------------
ESCROWED TO MATURITY(B) -- 5.3%
210,000 AAA Altamonte Springs Health Facilities Authority Hospital
Revenue, Adventist Health System, 13.000% due 10/1/01 223,912
860,000 AAA Bradford County Health Facilities Authority Revenue,
(Santa Fe Health Care Facilities Project),
6.050% due 11/15/16 903,000
230,000 AAA Cape Coral Health Facilities Authority Hospital Revenue,
(Cape Coral Medical Center Project),
8.125% due 11/1/08 250,987
250,000 AAA Dunedin Health Facilities Authority Revenue, Mease
Hospital Inc., 7.600% due 10/1/08 276,875
3,000,000 AAA Escambia County HFA, Multi-Family Housing Revenue,
Genesis Healthcare, Principal Custodial Receipts,
Series A, FGIC-Insured, zero coupon due 10/15/18 975,000
2,015,000 AAA Gainesville Utility System Revenue, 8.125% due 10/1/14 2,420,519
495,000 AAA Lee County Justice Center Complex Inc., Improvement
Revenue, Series A, MBIA-Insured,
11.125% due 1/1/11 663,919
215,000 AAA Lee County Southwest Regional Airport Revenue, MBIA-
Insured, 8.625% due 10/1/09 251,281
495,000 AAA Orange County Health Facility Authority Revenue,
Southern Adventist Hospital, 8.750% due 10/1/09 576,675
990,000 AAA Palm Beach County Health Facilities Authority Revenue,
(John F. Kennedy Memorial Hospital Inc. Project),
Series C, 9.500% due 8/1/13 1,249,875
1,185,000 AAA Palm Beach County Solid Waste Authority Revenue, MBIA-
Insured, 10.000% due 12/1/04 1,331,644
2,230,000 AAA Port Everglades Authority Port Improvement,
7.125% due 11/1/16 2,609,100
---------------------------------------------------------------------------------------------------
11,732,787
---------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
10 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
FACE
AMOUNT RATING(A) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
FINANCE -- 1.9%
$ 485,000 AA+ Florida State Board of Education Capital Outlay,
Unrefunded Balance, Series A, 7.250% due 6/1/23 $ 497,004
Virgin Island Public Finance Authority Revenue:
2,000,000 A Series A, ACA-Insured, 5.500% due 10/1/18 1,835,000
Series E:
1,000,000 NR 5.750% due 10/1/13 925,000
1,000,000 NR 6.000% due 10/1/22 917,500
---------------------------------------------------------------------------------------------------
4,174,504
---------------------------------------------------------------------------------------------------
GENERAL OBLIGATION -- 1.9%
500,000 NR Brevard County Tourist Development Tax Revenue,
4th Century Marlins Spring, 6.875% due 3/1/13 511,875
1,000,000 AA+ Florida State Broward County, 10.000% due 7/1/14 1,408,750
2,250,000 AAA Puerto Rico Commonwealth, Public Improvement,
MBIA-Insured, 5.750% due 7/1/26 2,261,250
---------------------------------------------------------------------------------------------------
4,181,875
---------------------------------------------------------------------------------------------------
HOSPITAL -- 17.3%
Escambia County Health Facilities Authority Revenue:
2,500,000 BBB-++ Azalea Trace Inc. Project, 6.100% due 1/1/19 2,262,500
310,000 BBB+ Unrefunded Balance, Baptist Hospital,
6.750% due 10/1/14 312,325
1,000,000 A Halifax Hospital Medical Center, Florida Health Care
Facilities Revenue, Halifax Management System,
Series A, ACA-Insured, 5.200% due 4/1/18 901,250
2,000,000 A- Highlands County Health Facilities Authority Revenue,
Adventist Health System, 5.250% due 11/15/20 1,615,000
Jacksonville Health Facilities Authority, Hospital Revenue:
2,000,000 AAA Charity Obligation Group, Series C, MBIA-Insured,
5.375% due 8/15/29 1,867,500
National Benevolent Association, IDR, Cypress Hill
Village Program:
1,000,000 Baa2* Series A, 6.250% due 12/1/26 908,750
750,000 Baa2* 6.400% due 12/1/16 728,438
2,000,000 AA+ St. Luke's Hospital Association Project,
7.125% due 11/15/20 2,100,000
205,000 AAA St. Vincent's Medical Center, 9.125% due 1/1/03 217,812
310,000 AAA University Medical Center Inc. Project, CONNIE
LEE-Insured, 6.600% due 2/1/21 321,237
Lee County Hospital Board of Directors, Hospital Revenue,
MBIA-Insured, Regular Linked SAVRS & RIBS:
1,000,000 AAA 8.269% due 3/26/20(c) 1,050,000
1,000,000 AAA 9.671% due 4/1/20(c) 1,080,390
Miami Beach Health Facilities Authority Hospital Revenue:
1,100,000 BBB Mt. Sinai Medical Center Project,
5.375% due 11/15/28 845,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 11
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
FACE
AMOUNT RATING(A) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
HOSPITAL -- 17.3% (CONTINUED)
$1,000,000 A South Shore Hospital, Series A, ACA-Insured,
5.250% due 8/1/13 $ 977,500
Orange County Health Facilities Authority,
Hospital Revenue Bonds:
Adventist Health Systems, FSA-Insured:
1,000,000 AAA Sunbelt Inc. Project, Series B, 6.750% due 11/15/21 1,036,250
1,500,000 AAA 6.050% due 11/15/07 1,545,000
1,100,000 AA Mayflower Retirement Center Project, Asset
Guaranteed, 5.250% due 6/1/19 1,002,375
1,000,000 AAA MBIA-Insured, 8.746% due 10/29/21(c) 1,095,000
1,650,000 A2* Orlando Regional Healthcare System, Series E,
6.000% due 10/1/26 1,524,188
460,000 BB+ Pinellas County Health Facilities Authority, Sun Coast
Health System Revenue, Sun Coast Hospital
Guaranteed, Series A, 8.500% due 3/1/20 471,500
Sarasota County Public Hospital Board Revenue,
Sarasota Memorial Hospital, Series B, MBIA-Insured:
6,745,000 AAA 5.250% due 7/1/24 6,230,694
3,485,000 AAA 5.500% due 7/1/28 3,358,669
2,000,000 A2* South Lake County Hospital District Revenue,
South Lake Hospital Inc., Orlando Regional Healthcare,
6.000% due 10/1/22 1,900,000
1,740,000 A Suwannee County Health Care Facilities Revenue,
Advent Christian Village Inc., ACA-Insured,
5.250% due 4/1/19 1,544,250
4,000,000 AAA Tampa Revenue Health Systems, Catholic Health, Series A-1,
4.875% due 11/15/18 3,575,000
---------------------------------------------------------------------------------------------------
38,471,253
---------------------------------------------------------------------------------------------------
HOUSING: MULTI-FAMILY -- 9.6%
370,000 AAA Clearwater Multi-Family Housing Revenue, (Drew Gardens
Project), Series A, FHA-Insured, 6.500% due 10/1/25 376,937
Dade County HFA, Multi-Family Mortgage Revenue:
1,085,000 AAA Antigue Club Apartments, Series A-1, AMBAC-Insured,
6.750% due 8/1/14(d) 1,132,469
1,000,000 NR Golden Lakes Apartments Project,
6.050% due 11/1/39(d) 973,750
1,500,000 AAA Mariner Club Apartments, Series K-1,
6.375% due 9/1/36(d) 1,543,125
2,900,000 A Sr. Lien, Series I-1, 6.625% due 7/1/28(d) 3,005,125
1,000,000 BBB+ The Vineyards Project, Series H, 6.500% due 11/1/25 1,018,750
2,355,000 AAA Dade County IDR, Susanna Wesley Health Center,
Series A, FHA-Insured, 6.625% due 7/1/30 2,440,369
1,950,000 AAA Florida HFA, (Glen Oaks Apartment Projects),
FNMA-Collateralized, 5.900% due 2/1/30(d) 1,920,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
12 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
FACE
AMOUNT RATING(A) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
HOUSING: MULTI-FAMILY -- 9.6% (CONTINUED)
$1,500,000 AAA Lee County HFA, Multi-Family Revenue, (Brittany
Phase II Project), Series A, FNMA-Collateralized,
6.100% due 12/1/32(d) $ 1,501,875
1,000,000 AAA Oceanside Housing Development Corp., Multi-Family
Mortgage Revenue, FHA-Insured, 6.875% due 2/1/20 1,021,250
Orange County HFA, Multi-Family Revenue:
Loma Vista Project, Series G:
1,000,000 A3* 5.450% due 9/1/24(d) 903,750
1,000,000 A3* 5.500% due 3/1/32(d) 912,500
2,065,000 Aaa* Series A, MBIA-Insured, 6.200% due 7/1/20 2,114,044
1,300,000 A Pasco County HFA, Multi-Family Revenue, (Pasco Woods
Apartments Project), Series A, 5.700% due 8/1/19(d) 1,264,250
1,095,000 AAA Southwest Housing Development Corp., Multi-Family
Housing Mortgage Revenue Refunding, FHA-Insured,
6.875% due 2/1/20 1,114,163
---------------------------------------------------------------------------------------------------
21,243,107
---------------------------------------------------------------------------------------------------
HOUSING: SINGLE-FAMILY -- 5.6%
Brevard County HFA, Single-Family Mortgage Revenue:
380,000 Aaa* GNMA-Collateralized, 6.600% due 9/1/16(d) 390,925
900,000 Aaa* GNMA/FNMA-Collateralized, 6.400% due 9/1/23(d) 915,750
Broward County HFA, Single-Family Mortgage Revenue:
220,000 Aa2* Capital Appreciation, zero coupon due 4/1/14 53,350
610,000 Aaa* GNMA/FNMA-Collateralized, 6.650% due 8/1/21(d) 629,825
Dade County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized:
285,000 Aaa* Series B, 7.250% due 9/1/23(d) 293,068
30,000 Aaa* Series E, 7.000% due 3/1/24 30,787
1,500,000 AAA 6.700% due 4/1/28(d) 1,561,875
Duval County HFA, Single-Family Mortgage Revenue,
GNMA-Collateralized:
70,000 AAA 8.000% due 6/1/00(d) 70,198
555,000 Aaa* 6.700% due 10/1/26(d) 571,650
125,000 Aaa* Escambia County HFA, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 7.800% due 4/1/22(d) 128,750
Florida HFA:
75,000 Aaa* Home Ownership Revenue, Series G-1, GNMA-Collateralized,
7.800% due 9/1/10(d) 76,903
420,000 AA Homeowner Mortgage, Series 2, 6.350% due 7/1/28(d) 424,200
1,010,000 AAA Single-Family Mortgage, Series B, GNMA/FNMA-
Collateralized, 6.650% due 7/1/26(d) 1,036,512
2,400,000 A Sunset Place, Series K-1, 6.000% due 10/1/19 2,373,000
295,000 Aa1* Hillsborough County HFA, Single-Family Mortgage
Revenue, Series A, GNMA-Collateralized,
7.700% due 4/1/23(d) 303,788
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 13
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
HOUSING: SINGLE-FAMILY -- 5.6% (CONTINUED)
$ 600,000 AAA Leon County HFA, Single-Family Mortgage Revenue,
Multi-County Program, Series B, GNMA/FHLMC-
Collateralized, 7.300% due 1/1/28(d) $ 640,500
755,000 AAA Orange County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA Mortgage Backed Securities Program,
6.750% due 10/1/18(d) 785,200
330,000 Aa1* Palm Beach HFA, Single-Family Mortgage Power
Revenue, Series A, GNMA-Collateralized,
7.875% due 4/1/23(d) 330,413
1,310,000 Aaa* Pinnellas County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 6.550% due 8/1/27(d) 1,334,563
380,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 6.500% due 3/1/25(d) 389,025
---------------------------------------------------------------------------------------------------
12,340,282
---------------------------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT -- 3.3%
1,775,000 NR Homestead IDR, Community Rehabilitation Providers
Program, Series A, 7.950% due 11/1/18 1,843,781
1,000,000 BBB- Lee County IDA, Health Care Facilities Revenue,
(Shell Point Village Project), Series A,
5.500% due 11/15/21 786,250
1,500,000 BBB- Martin County IDA, Indiantown, (Cogeneration Project),
7.875% due 12/15/25(d) 1,515,000
500,000 NR Northern Palm Beach County Water Control District,
Unit Development No. 31, Program 1,
6.750% due 11/1/07 514,375
Osceola County IDA, Revenue, Community Provider
Pooled Loan Program, Series A, FSA-Insured:
215,000 AAA 7.500% due 7/1/02 220,889
799,000 AAA 7.750% due 7/1/10 820,996
Tampa Sports Authority Revenue, (Tampa Bay Arena
Project), MBIA-Insured:
500,000 AAA 6.050% due 10/1/20 529,375
1,000,000 AAA 6.100% due 10/1/26 1,060,000
---------------------------------------------------------------------------------------------------
7,290,666
---------------------------------------------------------------------------------------------------
MISCELLANEOUS -- 7.9%
Boca Raton Community Redevelopment Agency Tax Increment
Revenue, Capital Appreciation, (Mizner Park Project),
FSA-Insured:
2,100,000 AAA Zero coupon due 12/1/18 714,000
1,200,000 AAA Zero coupon due 3/1/27 454,500
1,000,000 AAA Dade County Aviation Facilities Revenue, Series B,
MBIA-Insured, 6.600% due 10/1/22(d) 1,032,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
14 2000 Annual Report to Shareholders
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
MISCELLANEOUS -- 7.9% (CONTINUED)
$3,500,000 NR Dade County IDR, (Miami Cerebral Palsy Services
Project), 8.000% due 6/1/22 $ 3,535,000
750,000 AAA Florida State Department of Corrections, COP,
Okeechobee Correctional, AMBAC-Insured,
6.250% due 3/1/15 785,625
2,700,000 AAA Gulf Breeze Capital Funding, Series B, MBIA-Insured,
4.500% due 10/1/27 2,197,125
500,000 BBB- Hillsborough County Aviation Authority, Special Purpose,
(Delta Airlines Project), 6.800% due 1/1/24 506,250
Miami-Dade County Special Obligation, Series B,
MBIA-Insured:
9,025,000 AAA Zero coupon due 10/1/31 1,308,625
10,410,000 AAA Zero coupon due 10/1/32 1,418,363
1,200,000 AAA North Springs Improvement District, MBIA-Insured,
7.000% due 10/1/09 1,377,000
1,000,000 NR Orlando Special Assessment Revenue, (Conroy
Interchange Project), Series A, 5.500% due 5/1/10 951,250
2,500,000 AAA Port Palm Beach District Revenue, Series A,
Capital Appreciation, MBIA-Insured,
zero coupon due 9/1/21 687,500
1,200,000 BBB Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,323,000
500,000 NR Tampa Revenue, (Florida Aquarium Inc. Project),
7.750% due 5/1/27 538,750
815,000 AAA Village Center Community Development District No. 2,
Florida Special Assessment Revenue,
MBIA-Insured, 5.200% due 5/1/19 766,100
---------------------------------------------------------------------------------------------------
17,595,588
---------------------------------------------------------------------------------------------------
NURSING HOME -- 1.8%
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 1,047,500
3,500,000 A- Palm Beach County Health Facilities Authority Revenue,
Retirement Community, 5.625% due 11/15/20 3,027,500
---------------------------------------------------------------------------------------------------
4,075,000
---------------------------------------------------------------------------------------------------
POLLUTION CONTROL -- 6.5%
2,060,000 A+ Broward County Resource Recovery Revenue,
Broward Waste Energy, 7.950% due 12/1/08 2,125,899
2,000,000 A+ Citrus County PCR, Florida Power Corp., (Crystal River
Project), Series A, 6.625% due 1/1/27 2,040,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 15
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
POLLUTION CONTROL -- 6.5% (CONTINUED)
Escambia County PCR (Champion International
Corp. Project):
$ 500,000 Baa1* 6.950% due 11/1/07 $ 523,125
3,500,000 Baa1* 6.900% due 8/1/22(d) 3,565,625
705,000 AAA Lee County Solid Waste Revenue, MBIA-Insured,
7.000% due 10/1/11(d) 741,131
500,000 VMIG1* Martin County PCR, (Florida Power & Light Co. Project),
3.900% due 9/1/24(e) 500,000
1,000,000 A+ Pinellas County PCR, Florida Power Corp., (Anclot &
Bartlow Plants Project), 7.200% due 12/1/14 1,043,750
1,000,000 BBB Puerto Rico Industrial, Medical & Environmental
Control Facilities, (Ana G. Mendez University System
Project), 5.375% due 2/1/29 887,500
1,390,000 Baa2* Putnam County Development Authority, PCR, Georgia
Pacific Corp. 1984, 7.000% due 12/1/05 1,459,500
1,500,000 AA- St. Lucie County Solid Waste Disposal Revenue,
(Florida Power & Light Co. Project),
7.150% due 2/1/23(d) 1,554,195
---------------------------------------------------------------------------------------------------
14,440,725
---------------------------------------------------------------------------------------------------
PRE-REFUNDED(F) -- 2.6%
Alachua County Health Facilities Authority Revenue, (Santa
Fe Healthcare Facilities Project), (Call 11/15/00 @ 102):
95,000 AAA 6.875% due 11/15/02 97,884
1,000,000 AAA 7.600% due 11/15/13 1,040,360
1,500,000 Aaa* Bay County Hospital Revenue, (Bay Medical Center Project),
(Call 10/1/04 @ 102), 8.000% due 10/1/12 1,674,375
1,375,000 AAA Escambia County Health Facilities Authority, Baptist
Hospital, (Call 10/1/03 @ 102), 6.750% due 10/1/14 1,485,000
1,000,000 AAA South Broward, Hospital District Revenue Bonds, Series
1991C, RIBS, AMBAC-Insured, (Call 5/1/01 @104),
9.247% due 5/13/21(c) 1,086,820
350,000 AAA Volusia County Educational Facility Authority Revenue,
Embry-Riddle Aeronautical University,
CONNIE LEE-Insured, (Call 10/15/02 @102),
6.500% due 10/15/15 371,438
---------------------------------------------------------------------------------------------------
5,755,877
---------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
16 2000 Annual Report to Shareholders
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
PUBLIC FACILITIES -- 1.0%
$1,000,000 BBB Miami Beach Redevelopment Agency Tax Increment
Revenue, City Center-Historic Convention, Series B,
6.350% due 12/1/22 $ 1,008,750
1,185,000 A Puerto Rico Public Buildings Authority Revenue,
Series L, 5.500% due 7/1/21 1,145,006
---------------------------------------------------------------------------------------------------
2,153,756
---------------------------------------------------------------------------------------------------
TRANSPORTATION -- 14.9%
5,000,000 AAA Broward County Airport System Revenue, Passenger
Facility, AMBAC-Insured, 4.750% due 10/1/23 4,293,750
2,755,000 AAA Florida Ports Financing Community Revenue,
FGIC-Insured, 5.500% due 10/1/29(d) 2,603,475
2,895,000 AAA Florida State Mid-Bay Bridge Authority Revenue,
Series A, AMBAC-Insured, zero coupon due 10/1/19 901,069
2,000,000 AAA Florida State Turnpike Authority Revenue, Department
of Transportation, Series A, FGIC-Insured,
4.500% due 7/1/27 1,635,000
Guam Airport Authority Revenue:
750,000 BBB Series A, 6.500% due 10/1/23 786,562
1,000,000 BBB Series B, 6.600% due 10/1/10(d) 1,055,000
1,500,000 AA Ocean Highway and Port Authority, Nassau County,
Adjustable Demand Revenue Bonds, Series 1990, LOC ABN
AMRO Bank NV, 6.250% mandatory tender
12/1/02(d) 1,556,250
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, MBIA-Insured:
9,000,000 AAA Series A, 4.750% due 7/1/38 7,548,750
Series Y:
2,000,000 AAA 5.000% due 7/1/36 1,780,000
1,000,000 AAA 5.500% due 7/1/36 972,500
Sanford Airport Authority IDR, (Central Florida
Terminals Inc. Project):
Series A:
1,000,000 NR 7.500% due 5/1/15(d) 1,043,750
2,000,000 NR 7.750% due 5/1/21(d) 2,097,500
645,000 NR Series C, 7.500% due 5/1/21(d) 666,769
Santa Rosa Bay Bridge Authority Revenue:
5,000,000 BB+ Capital Appreciation, zero coupon due 7/1/17 1,550,000
3,500,000 BB+ 6.250% due 7/1/28 3,281,250
1,355,000 AAA Volusia County Airport System Revenue, Daytona
Beach Regional Airport, MBIA-Insured,
7.000% due 10/1/21(d) 1,391,111
---------------------------------------------------------------------------------------------------
33,162,736
---------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 17
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
===================================================================================================
<S> <C> <C> <C>
UTILITIES -- 11.1%
$3,905,000 Aaa* Escambia County Utilities Authority Sanitation System
Revenue Refunding & Improvement, FSA-Insured,
4.500% due 1/1/22 $ 3,250,912
3,000,000 AAA Escambia County Utility System Authority Revenue
Bonds, Series B, FGIC-Insured, 6.250% due 1/1/15 3,277,500
4,350,000 Aaa* Florida State Golden Gate Governmental Utility System
Revenue, AMBAC-Insured, 5.000% due 7/1/29 3,849,750
Guam Power Authority Revenue, Series A:
2,475,000 AAA MBIA-Insured, 5.250% due 10/1/34 2,264,625
1,350,000 AAA 6.750% due 10/1/24 1,485,000
930,000 A3* Hillsborough County Utilities Revenue Refunding &
Improvement, 7.000% due 8/1/14 966,037
5,300,000 AAA Lakeland Electric & Water Revenue Refunding,
Series B, FSA-Insured, 6.050% due 10/1/14 4,690,500
1,000,000 Aaa* St. Petersburg Public Utilities Revenue, Series A,
FSA-Insured, 5.000% due 10/1/28 886,250
3,000,000 AAA Sunrise Utility System Revenue Refunding,
AMBAC-Insured, 5.200% due 10/1/22 2,771,250
1,220,000 Aaa* Village Center Community Development,
Utility District Revenue Refunding Bonds, Series A,
MBIA-Insured, 5.000% due 10/1/23 1,090,375
---------------------------------------------------------------------------------------------------
24,532,199
---------------------------------------------------------------------------------------------------
WATER AND SEWER -- 5.6%
1,610,000 Aaa* Bay County Water System Revenue,
AMBAC-Insured, 5.625% due 9/1/19 1,610,000
3,000,000 AAA Lee County Water & Sewer Revenue, Series A,
AMBAC-Insured, 4.750% due 10/1/23 2,576,250
5,000,000 AAA Miami-Dade County Water & Sewer Revenue,
Series A, 5.000% due 10/1/29 4,418,750
640,000 AAA Miramar Wastewater Improvement Authority,
FGIC-Insured, 6.750% due 10/1/16 695,200
3,400,000 AAA St. Lucie West Services District Special Assessment Revenue,
Water Management Benefit, MBIA-Insured, Series A,
5.250% due 5/1/25 3,170,500
---------------------------------------------------------------------------------------------------
12,470,700
---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $221,179,351**) $221,794,987
===================================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except that those
which are identified by an asterisk (*) are rated by Moody's Investors
Service, Inc. and those identified by a double dagger (++) are rated by
Fitch IBCA, Inc.
(b) Bonds are escrowed to maturity by U.S. government securities and are
considered by the manager to be triple-A rated even if issuer has not
applied for new ratings.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
18 2000 Annual Report to Shareholders
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2000
(c) Residual interest bonds-- coupon varies inversely with level of short-term
tax-exempt interest rates.
(d) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(e) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(f) Bonds are escrowed by U.S. government securities and are considered by the
manager to be triple-A rated even if issuer has not applied for new
ratings.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 20 and 21 for definition of ratings and certain security
descriptions.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 19
<PAGE>
BOND RATINGS (UNAUDITED)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("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 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 Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2, and 3
may be applied to each generic rating from "Aa" to "Baa", where 1 is the highest
and 3 the lowest-rating within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment some time in
the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
--------------------------------------------------------------------------------
20 2000 Annual Report to Shareholders
<PAGE>
BOND RATINGS (UNAUDITED) (CONTINUED)
Fitch IBCA, Inc. ("Fitch") -- Ratings may be modified by the addition of a plus
(+) sign or minus (-) sign to show relative standings within the major ratings
categories.
AA -- Bonds rated "AA" are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and/or dividends
and repay principal is very strong.
BBB -- Bonds rated "BBB" are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest or
dividends and repay principal is considered to be adequate. Adverse
changes in economic conditions and circumstances, however, are more
likely to have adverse impact on these securities and, therefore, impair
timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for securities with higher ratings.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's or
Fitch.
SHORT-TERM SECURITY RATINGS (UNAUDITED)
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable rate demand
obligation (VRDO) rating indicating that the degree of safely
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a (+) sign.
VMIG 1 -- Moody's highest rating for issues having demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
SECURITY DESCRIPTIONS (UNAUDITED)
ACA -- American Capital Assurance
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
CGIC -- Capital Guaranty Insurance
Company
CONNIE LEE -- College Construction Loan
Insurance Association
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance
Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage
Corporation
FNMA -- Federal National Mortgage
Association
FSA -- Financial Security Assurance
GEMICO -- General Electric Mortgage
Insurance Company
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage
Association
GO -- General Obligation
HFA -- Housing Finance Authority
IDA -- Industrial Development Agency
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors
Assurance Corporation
PCFA -- Pollution Control Financing
Authority
PCR -- Pollution Control Revenue
RIBS -- Residual Interest Bonds
SAVRS -- Select Auction Variable Rate
Securities
VRDD -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday
Demand
--------------------------------------------------------------------------------
Smith Barney Muni Funds 21
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2000
ASSETS:
Investments, at value (Cost-- $221,179,351) $221,794,987
Cash 55,174
Interest receivable 4,588,208
Receivable for Fund shares sold 58,820
Receivable for securities sold 2,775,983
-------------------------------------------------------------------------------
TOTAL ASSETS 229,273,172
-------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 5,341,841
Dividends payable 506,317
Management fees payable 93,660
Distribution fees payable 32,107
Accrued expenses 70,775
-------------------------------------------------------------------------------
TOTAL LIABILITIES 6,044,700
-------------------------------------------------------------------------------
TOTAL NET ASSETS $223,228,472
===============================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 17,576
Capital paid in excess of par value 226,435,058
Undistributed net investment income 85,141
Accumulated net realized loss from security transactions (3,924,939)
Net unrealized appreciation of investments 615,636
-------------------------------------------------------------------------------
TOTAL NET ASSETS $223,228,472
===============================================================================
SHARES OUTSTANDING:
Class A 11,881,337
-------------------------------------------------------------------------------
Class B 4,688,627
-------------------------------------------------------------------------------
Class L 1,005,996
-------------------------------------------------------------------------------
NET ASSET VALUE:
Class A (and redemption price) $12.70
-------------------------------------------------------------------------------
Class B * $12.70
-------------------------------------------------------------------------------
Class L ** $12.70
-------------------------------------------------------------------------------
MAXIMUM PUBLIC OFFERING PRICE PER SHARE:
Class A (net asset value plus 4.17% of net asset value per share) $13.23
-------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $12.83
===============================================================================
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within one year from initial purchase (See Note 4).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
22 2000 Annual Report to Shareholders
<PAGE>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2000
INVESTMENT INCOME:
Interest $ 13,684,983
-------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 1,132,816
Distribution fees (Note 4) 719,482
Shareholder and system servicing fees 61,920
Registration fees 45,124
Audit and legal 29,065
Shareholder communications 28,865
Pricing service fees 22,549
Custody 10,830
Trustees' fees 4,213
Other 10,983
-------------------------------------------------------------------------------
TOTAL EXPENSES 2,065,847
-------------------------------------------------------------------------------
NET INVESTMENT INCOME 11,619,136
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 5):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 125,989,172
Cost of securities sold 129,647,907
-------------------------------------------------------------------------------
NET REALIZED LOSS (3,658,735)
-------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 14,421,377
End of year 615,636
-------------------------------------------------------------------------------
DECREASE IN NET UNREALIZED APPRECIATION (13,805,741)
-------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (17,464,476)
-------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM OPERATIONS $ (5,845,340)
===============================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 23
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED MARCH 31,
2000 1999
===============================================================================
OPERATIONS:
Net investment income $ 11,619,136 $ 10,708,737
Net realized gain (loss) (3,658,735) 38,595
Increase (decrease) in net
unrealized appreciation (13,805,741) 546,213
-------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS (5,845,340) 11,293,545
-------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (11,524,617) (10,710,549)
In excess of net investment income -- (130,174)
Net realized gains -- (1,405,068)
-------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (11,524,617) (12,245,791)
-------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 69,567,854 72,836,296
Net asset value of shares issued for
reinvestment of dividends 5,134,686 5,361,998
Cost of shares reacquired (71,815,893) (50,419,969)
-------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 2,886,647 27,778,325
-------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS (14,483,310) 26,826,079
NET ASSETS:
Beginning of year 237,711,782 210,885,703
-------------------------------------------------------------------------------
END OF YEAR* $ 223,228,472 $237,711,782
===============================================================================
* Includes undistributed (overdistributed)
net investment income of: $ 85,141 $ (9,378)
===============================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
24 2000 Annual Report to Shareholders
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Florida Portfolio ("Portfolio") is a separate investment portfolio of the
Smith Barney Muni Funds ("Funds"). The Fund, a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as an open-end,
non-diversified management investment company. The Fund consists of this
Portfolio and eight other separate investment portfolios: Georgia, Limited Term,
National, New York, Pennsylvania, New York Money Market, California Money Market
and Massachusetts Money Market Portfolios. The financial statements and
financial highlights for the other portfolios are presented in separate
shareholder reports.
The significant accounting policies consistently followed by the Portfolio are:
(a) security transactions are accounted for on trade date; (b) securities are
valued at the mean between the quoted bid and ask prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities for which market quotations are not available are valued in good
faith at fair market value by or under the direction of the Board of Trustees;
(d) securities maturing within 60 days are valued at cost plus accreted discount
or minus amortized premium, which approximates value; (e) gains or losses on the
sale of securities are calculated by using the specific identification method;
(f) interest income, adjusted for amortization of premium and accretion of
original issue discount, is recorded on an accrual basis; market discount is
recognized upon the disposition of the security, (g) direct expenses are charged
to each class; management fees and general fund expenses are allocated on the
basis of relative net assets; (h) dividends and distributions to shareholders
are recorded on the ex-dividend date; (i) the Portfolio intends to comply with
the applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal Income
and excise taxes; (j) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles; and (k) estimates and assumptions are
required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in the
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 25
<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
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), acts as investment manager to the Fund. The Portfolio pays SSBC 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.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, became the Fund's transfer agent and PFPC Global Fund
Services ("PFPC") became the sub-transfer agent. CFTC receives account fees and
asset-based fees that vary according to the size and type of account. PFPC is
responsible for shareholder recordkeeping and financial processing for all
shareholder accounts and is paid by CFTC. During the period October 1, 1999
through March 31, 2000, the Portfolio paid transfer agent fees of $22,556 to
CFTC.
CFBDS, Inc. acts as the Fund's distributor. Salomon Smith Barney Inc. ("SSB"),
as well as certain other broker-dealers, continues to sell Fund shares to the
public as a member of the selling group.
There are maximum initial sales charges of 4.00% and 1.00% for Class A and L
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
4.50% on Class B shares, which applies if redemption occurs within one year from
purchase. This CDSC declines by 0.50% the first year after purchase and
thereafter by 1.00% per year until no CDSC is incurred. Class L shares also have
a 1.00% CDSC, which applies if
--------------------------------------------------------------------------------
26 2000 Annual Report to Shareholders
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
redemption occurs within the first year of purchase. In addition, Class A shares
also have a 1.00% CDSC, which applies if redemption occurs within the first year
of purchase. This CDSC only applies to those purchases of Class A shares, which,
when combined with current holdings of Class A shares, equal or exceed $500,000
in the aggregate. These purchases do not incur an initial sales charge.
For the year ended March 31, 2000, CFBDS and SSB received sales charges of
approximately $235,000 and $13,000 on sales of the Portfolio's Class A and Class
L shares, respectively. In addition, for the year ended March 31, 2000, CDSCs
paid to SSB were approximately:
CLASS A CLASS B CLASS L
================================================================================
CDSCs $8,000 $92,000 $4,000
================================================================================
Pursuant to a Distribution Plan, the Portfolio pays a service fee with respect
to Class A, B and L shares calculated at an annual rate of 0.15% of average
daily net assets for each respective class. The Portfolio pays a distribution
fee with respect to Class B and L shares calculated at the annual rates of 0.50%
and 0.55% of the average daily net assets of those classes, respectively. For
the year ended March 31, 2000, total Distribution Plan fees incurred were:
CLASS A CLASS B CLASS L
================================================================================
Distribution Plan Fees $227,824 $404,396 $87,262
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
5. INVESTMENTS
During the year ended March 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $132,617,520
--------------------------------------------------------------------------------
Sales 125,989,172
================================================================================
At March 31, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 5,745,763
Gross unrealized depreciation (5,130,127)
--------------------------------------------------------------------------------
Net unrealized appreciation $ 615,636
================================================================================
--------------------------------------------------------------------------------
Smith Barney Muni Funds 27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FUTURES CONTRACTS
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are made or received and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract.
The Portfolio enters into such contracts to hedge a portion of its portfolio.
The Portfolio bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At March 31, 2000, the Portfolio had no open futures contracts.
7. CAPITAL LOSS CARRYFORWARD
At March 31, 2000, the Portfolio had, for Federal income tax purposes,
approximately $2,430,000 of unused capital loss carryforwards available to
offset future capital gains expiring March 31, 2008. 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.
8. SHARES OF BENEFICIAL INTEREST
At March 31, 2000, the Fund had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Portfolio has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest in the Portfolio and has the same rights, except that each
class bears certain expenses related to the distribution of its shares.
At March 31, 2000, total paid-in capital amounted to the following for each
class:
CLASS A CLASS B CLASS L
================================================================================
Total Paid-in Capital $150,863,524 $61,989,957 $13,599,153
================================================================================
--------------------------------------------------------------------------------
28 2000 Annual Report to Shareholders
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Transactions in shares of each class were as follows:
YEAR ENDED YEAR ENDED
MARCH 31, 2000 MARCH 31, 1999
---------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
================================================================================
CLASS A
Shares sold 3,691,646 $ 47,345,497 3,713,071 $ 51,274,245
Shares issued on
reinvestment 267,199 3,436,536 257,237 3,548,355
Shares reacquired (3,715,684) (47,640,592) (2,712,400) (37,457,704)
--------------------------------------------------------------------------------
Net Increase 243,161 $ 3,141,441 1,257,908 $ 17,364,896
================================================================================
CLASS B
Shares sold 1,371,065 $ 17,567,901 1,226,118 $ 16,937,395
Shares issued on
reinvestment 106,687 1,371,213 110,453 1,522,397
Shares reacquired (1,616,174) (20,654,677) (833,357) (11,511,522)
--------------------------------------------------------------------------------
Net Increase (Decrease) (138,422) $ (1,715,563) 503,214 $ 6,948,270
================================================================================
CLASS L*
Shares sold 361,575 $ 4,654,456 334,515 $ 4,624,656
Shares issued on
reinvestment 25,444 326,937 21,122 291,246
Shares reacquired (275,391) (3,520,624) (105,208) (1,450,743)
--------------------------------------------------------------------------------
Net Increase 111,628 $ 1,460,769 250,429 $ 3,465,159
================================================================================
* On June 12, 1998, Class C shares were renamed Class L shares.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 29
<PAGE>
FINANCIAL HIGHLIGHTS
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
CLASS A SHARES 2000(1) 1999(1) 1998 1997 1996(1)
<S> <C> <C> <C> <C> <C>
=========================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $13.70 $13.74 $13.16 $13.24 $12.89
-----------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.69 0.69 0.72 0.73 0.74
Net realized and unrealized gain (loss) (1.01) 0.06 0.72 (0.03) 0.35
-----------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.32) 0.75 1.44 0.70 1.09
-----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.68) (0.69) (0.73) (0.73) (0.74)
In excess of net investment income -- (0.01) -- -- --
Net realized gains -- (0.09) (0.13) (0.05) --
-----------------------------------------------------------------------------------------
Total Distributions (0.68) (0.79) (0.86) (0.78) (0.74)
-----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.70 $13.70 $13.74 $13.16 $13.24
-----------------------------------------------------------------------------------------
TOTAL RETURN (2.25)% 5.56% 11.15% 5.44% 8.65%
-----------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (MILLIONS) $ 151 $ 160 $ 143 $ 127 $ 117
-----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(2) 0.74% 0.73% 0.76% 0.85% 0.70%
Net investment income 5.32 4.99 5.28 5.56 5.62
-----------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 56% 43% 59% 62% 47%
=========================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.85%.
--------------------------------------------------------------------------------
30 2000 Annual Report to Shareholders
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
CLASS B SHARES 2000(1) 1999(1) 1998 1997 1996(1)
<S> <C> <C> <C> <C> <C>
==========================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $13.69 $13.73 $13.14 $13.23 $12.89
------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.62 0.62 0.65 0.65 0.68
Net realized and unrealized gain (loss) (1.00) 0.06 0.72 (0.01) 0.35
------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.38) 0.68 1.37 0.64 1.03
------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.61) (0.62) (0.65) (0.68) (0.69)
In excess of net investment income -- (0.01) -- -- --
Net realized gains -- (0.09) (0.13) (0.05) --
------------------------------------------------------------------------------------------
Total Distributions (0.61) (0.72) (0.78) (0.73) (0.69)
------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.70 $13.69 $13.73 $13.14 $13.23
------------------------------------------------------------------------------------------
TOTAL RETURN (2.70)% 5.01% 10.59% 4.91% 8.09%
------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (MILLIONS) $ 59 $ 66 $ 59 $ 51 $ 46
------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(2) 1.26% 1.24% 1.28% 1.35% 1.20%
Net investment income 4.80 4.48 4.76 4.93 5.00
------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 56% 43% 59% 62% 47%
==========================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.35%.
--------------------------------------------------------------------------------
Smith Barney Muni Funds 31
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, except where noted:
<TABLE>
<CAPTION>
CLASS L SHARES 2000(1) 1999(1)(2) 1998 1997 1996(1)
<S> <C> <C> <C> <C> <C>
============================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $13.69 $13.74 $13.14 $13.22 $12.89
--------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.61 0.61 0.64 0.65 0.66
Net realized and unrealized gain (loss) (1.00) 0.05 0.72 (0.01) 0.35
--------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.39) 0.66 1.36 0.64 1.01
--------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.60) (0.61) (0.63) (0.67) (0.68)
In excess of net investment income -- (0.01) -- -- --
Net realized gains -- (0.09) (0.13) (0.05) --
--------------------------------------------------------------------------------------------
Total Distributions (0.60) (0.71) (0.76) (0.72) (0.68)
--------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.70 $13.69 $13.74 $13.14 $13.22
--------------------------------------------------------------------------------------------
TOTAL RETURN (2.78)% 4.87% 10.51% 4.94% 7.96%
--------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (MILLIONS) $ 13 $ 12 $ 9 $ 7 $ 3
--------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3) 1.32% 1.31% 1.33% 1.40% 1.28%
Net investment income 4.74 4.41 4.71 4.84 5.04
--------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 56% 43% 59% 62% 47%
============================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.40%.
--------------------------------------------------------------------------------
32 2000 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, 2000, 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 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 auditing standards generally accepted
in the United States of America. 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 at March 31, 2000, 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, 2000, 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
accounting principles generally accepted in the United States of America.
/S/KPMG LLP
New York, New York
May 11, 2000
--------------------------------------------------------------------------------
Smith Barney Muni Funds 33
<PAGE>
TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 2000:
. 99.99% of the dividends paid by the Fund from net investment income as tax
exempt for regular Federal income tax purposes.
--------------------------------------------------------------------------------
34 2000 Annual Report to Shareholders
<PAGE>
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED)
On April 19, 1999, a special meeting of shareholders of the Fund was held for
the purpose of electing Trustees to the Fund.
The results were as follows:
<TABLE>
<CAPTION>
SHARES PERCENTAGE SHARES PERCENTAGE
VOTED OF SHARES VOTED OF SHARES
NAME OF TRUSTEES FOR VOTED AGAINST VOTED
===================================================================================
<S> <C> <C> <C> <C>
Lee Abraham 1,350,265,160.850 97.943% 28,359,584.139 2.057%
Allan J. Bloostein 1,351,356,664.226 98.022 27,268,080.763 1.978
Jane F. Dasher 1,352,390,291.715 98.097 26,234,453.274 1.903
Donald R. Foley 1,350,867,506.020 97.987 27,757,238.969 2.013
Richard E. Hanson, Jr. 1,351,302,644.963 98.018 27,322,100.026 1.982
Paul Hardin 1,352,452,572.699 98.102 26,172,172.290 1.898
Heath B. McLendon 1,352,481,643.116 98.104 26,143,101.873 1.896
Roderick C. Rasmussen 1,351,438,798.818 98.028 27,185,946.171 1.972
John P. Toolan 1,352,497,455.395 98.105 26,127,289.594 1.895
===================================================================================
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Muni Funds 35
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[Salomon Smith Barney logo]
--------------------------------------------------------------------------------
A member of citigroup [Umbrella logo]
TRUSTEES
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
OFFICERS
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Anthony Pace
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
SSB Citi Fund Management LLC
DISTRIBUTOR
CFBDS, Inc.
CUSTODIAN
PFPC Trust Company
TRANSFER AGENT
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
SUB-TRANSFER AGENT
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds -- Florida Portfolio, but it may also be used as sales
literature when proceeded or accompanied by the current Prospectus, which gives
details about charges, expenses, investment objectives and operating policies of
the Portfolio. If used as sales material after June 30, 2000, this report must
be accompanied by performance information for the most recently completed
calendar quarter.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
SMITH BARNEY MUNI FUNDS
388 Greenwich Street, MF-2
New York, New York 100013
WWW.SMITHBARNEY.COM/MUTUALFUNDS
<PAGE>
SBMF
SMITH BARNEY MUNI FUNDS
GEORGIA PORTFOLIO
PENNSYLVANIA PORTFOLIO
SPECIAL DISCIPLINE SERIES
ANNUAL REPORT
MARCH 31, 2000
[SBMF LOGO]
Smith Barney
Mutual Funds
NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
<PAGE>
Smith Barney Muni Funds
PHOTOS OF: HEATH B. PETER M.
MCLENDON COFFEY
Chairman Vice President
DEAR SHAREHOLDER:
We are pleased to provide the annual report for the Smith Barney Muni Funds -
Georgia and Pennsylvania Portfolios ("Portfolios") for the year ended March 31,
2000. 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. We hope you find this report to be useful and informative.
MARKET AND ECONOMIC OVERVIEW
The bond markets have changed dramatically over the past several years. In our
view, one central theme of this change, which began following the Asian crisis
in 1997, is that the capital markets can no longer rely on the U.S. Treasury
markets to provide a near-perfect "benchmark" of interest rate trends. Before
the Asian crisis, the capital markets relied on the U.S. Treasury market as a
measure to determine what bonds "should" yield.
Under these changing conditions, it may be more difficult for the Federal
Reserve Board ("Fed") to moderate the growth of the economy, since long-term
interest rates may not rise as much as the Fed puts upward pressure on
short-term rates. The shape of the U.S. Treasury yield curve just six months ago
was fairly "normal". (The yield curve is the graphical depiction of the
relationship between the yield on bonds of the same credit quality but different
maturities. Maturity refers to the date on which the principal is required to be
paid on the bond. A normal yield curve depicts a relationship whereby bonds with
longer maturities have higher yields than bonds with shorter maturities.)
Usually, longer-term bonds are more volatile than shorter-term bonds because
more risk is associated with those bonds with longer maturities. As of this
writing, yields on longer-term bonds are depressed by a potentially reduced
supply as well as by expectations that the Fed may ultimately be successful in
slowing the U.S. economy and diffusing inflationary pressures. The result: a
negatively sloped yield curve for U.S. Treasuries. Instead of the usual
upward-sloping curve with yields rising steadily along with the maturity of U.S.
Treasury bonds, the highest yields were for shorter-term bonds.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 1
<PAGE>
The U.S. economy continues to generate remarkable non-inflationary growth. The
Fed has increased short-term interest rates five times in the last nine months
by a total of 125 basis points (or 1.25%).1 The Fed remains committed to keeping
pressure on borrowing costs until the U.S. economy slows to a level that keeps
inflation from accelerating. One key question: How much tightening is necessary
to slow the economy to levels deemed desirable by the Fed? We think that
increases amounting to another 50 to 75 basis points may be sufficient to slow
economic growth. (A basis point is 0.01% or one one-hundredth of a percent.)
During the period covered by the report, the municipal bond market performed
quite well in comparison with non-U.S. Treasury taxable bonds. While municipal
bonds have been unable to keep pace with the decline in yield on U.S.
Treasuries, they are clearly less volatile than many non-U.S. Treasury taxable
bonds which are more susceptible to credit problems and capital market liquidity
issues. In our view, another factor affecting the municipal market continues to
be extremely tight supply. In fact, new issue volume in January 2000 was less
than half of that sold in January 1999.
While no guarantees can be made, we believe that short-term and
intermediate-term municipal yields are likely to slightly increase because of:
o The expected continuing increases in the federal funds rate which would put
upward pressure on short-term yields (The federal funds rate is the interest
rate that banks with excess reserves at a Federal Reserve district bank
charge other banks that need overnight loans.)
o A likely increase in supply, which would be felt most dramatically in the
supply at the short end of the yield curve.
o The yield on municipal bonds with longer maturities are not nearly as
attractive as the yields offered by short and intermediate term taxable
bonds.
The last factor is particularly important in terms of the Portfolios' current
investment strategy. While the U.S. Treasury yield curve has an inverted shape,
with the highest yields in five years, the municipal yield curve has maintained
a sharp positive slope. In fact, the difference in yield between 20-year and
30-year municipal bonds is only 10 basis points as of this writing.
-----------
1 ON MAY 16, 2000, AFTER THIS LETTER WAS WRITTEN, THE FED RAISED INTEREST RATES
BY 0.50% TO 6.50%.
--------------------------------------------------------------------------------
2 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
GEORGIA PORTFOLIO'S PERFORMANCE AND INVESTMENT STRATEGY
The Georgia Portfolio seeks as high a level of current income exempt from
federal income taxes and Georgia personal income taxes as is consistent with
prudent investing. (Please note that a portion of the Portfolio's income may be
subject to the Alternative Minimum Tax ("AMT").)
For the year ended March 31, 2000, the Portfolio generated a total return of a
negative 2.97% for Class A shares, without sales charges, compared to its
Lipper, Inc. peer group average of negative 2.16%. (Lipper, Inc. is a major fund
tracking organization.) For additional performance information please refer to
pages 6 and 7.
As of March 31, 2000, 58.5% of the Portfolio's holdings had a triple-A rating,
the highest credit rating by Standard & Poor's Ratings Service or Moody's
Investors Service, Inc. As of March 31, 2000 the Portfolio's largest holdings
were concentrated in education bonds (12.8%), water and sewer bonds (11.6%) and
pollution control revenue bonds (11.5%).
GEORGIA ECONOMIC HIGHLIGHTS2
Georgia's superior credit standing during the period covered by this report was
the result of excellent debt policies, consistent maintenance of conservative
and sound financial operations and solid past growth and future development
potential. Georgia's financial operations remain strong, particularly the
personal income tax revenues, which were above consensus estimates. The state's
economic progress, with steady improvement in economic diversification and
income levels, is obviously important to its credit standing.
Georgia's economy has undergone considerable expansion, with the level of wealth
as measured by per capita personal income showing steady growth. In addition,
the state's population has also grown rapidly, at about twice the national rate.
Manufacturing plays a major role in the economy, and trade is more significant
than in the rest of the U.S.
Atlanta, a prominent regional center, has been a primary influence in the
state's development, with trade and service facilities, and the site of a
Federal Reserve Bank. Moreover, much of the state's growth has been in the
Atlanta metropolitan region, which is more prosperous than the rural areas.
In our opinion, Georgia should remain a powerful force in the U.S. economy. Its
trade, service, and transportation-oriented diversified economy should continue
to generate superior revenue growth, and that in turn should enable the state to
meet the needs of its growing population.
-----------
2 SOURCE: FITCH IBCA, INC., AN INTERNATIONALLY RECOGNIZED RATING AGENCY
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 3
<PAGE>
PENNSYLVANIA PORTFOLIO'S PERFORMANCE AND INVESTMENT STRATEGY
The Pennsylvania Portfolio seeks as high a level of income exempt from federal
income taxes and Pennsylvania personal income taxes as is consistent with
prudent investing. (Please note that a portion of the Portfolio's income may be
subject to the Alternative Minimum Tax ("AMT").)
For the year ended March 31, 2000, the Portfolio returned a negative 4.31% for
Class A shares, without sales charges, compared to its Lipper, Inc. peer group
average of a negative 2.72%. For additional performance information please refer
to pages 9 and 10.
As of March 31, 2000, 43.0% of the Portfolio had a triple-A rating, the highest
credit rating. As of March 31, 2000, the Portfolio's largest holdings were
concentrated in hospital bonds (20.8%), education bonds (14.0%) and industrial
development bonds (9.7%).
PENNSYLVANIA ECONOMIC HIGHLIGHTS3
In our view, Pennsylvania's credit standing during the period was supported by
the maintenance of debt at a level that should not overburden the state's
resources. The economy continues to show steady growth and some diversification
as manufacturing employment stabilizes and the service sector expands. These
economic trends - together with conservative budgeting - have allowed for
successful financial operations, with revenues well in excess of estimates.
Considerable surplus has been generated and used for budgetary purposes, tax
relief, and building of reserves.
The state's economy has been changing over the past decade, as the importance of
manufacturing has sharply declined and service industries continue to grow.
While manufacturing remains more significant here than in the nation, the
restructuring has made Pennsylvania's economy more closely resemble that of the
U.S., reducing vulnerability to regional or statewide recession. In addition,
the state has targeted various areas for economic development and lowered
business taxes and these policies together with more investment in basic
infrastructure, should improve its foundation for the future. Also, employment
is growing at a steady pace.
Our economic outlook for Pennsylvania remains favorable because of its
conservative budgeting practices and effective debt management. While no
guarantees can be made, we believe Pennsylvania is moving in the right direction
and may very well regain its position as a leader in the U.S. economy in the
coming years.
-----------
3 SOURCE: FITCH IBCA, INC., AN INTERNATIONALLY RECOGNIZED RATING AGENCY, IS
THE SOURCE OF THESE STATISTICS
--------------------------------------------------------------------------------
4 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
MARKET OUTLOOK
We believe that the recent rise in interest rates has created buying
opportunities in municipals. We remain confident that we can achieve a high
level of tax-exempt income, consistent with prudent investing and close
attention to credit quality.
In light of the recent confusion and volatility in the bond markets, one
surprising result has been that long-term municipal bonds have not changed much
in several months. We believe that the relative stability of many municipal
bonds may offer investors stability in a highly volatile bond market (as well as
the higher volatility that may be associated with other capital markets). (Of
course, no guarantees can be given.)
We also believe that Fed monetary policy action should be sufficient to slow the
economy without triggering higher inflation. The good news is that the economy's
"soft landing" is likely to be at a higher annual growth rate than was
previously thought possible due to the possible emergence of a New Economy where
technological advances can spur growth without inflationary pressures.
Although the bond markets remain unsettled, we maintain our positive outlook for
municipal securities because:
o Real municipal yields remain very high by historical standards, representing
excellent values in our opinion;
o Longer intermediate and long maturity yields remain very high relative to
their taxable counterparts. For example, some bonds are
yielding roughly 95% to 100% of similar maturity U.S. Treasuries;
o The municipal yield curve remains very steeply sloped, even as the U.S.
Treasury yield curve is inverted; and
o When capital markets begin to believe that the Fed has achieved its goal of
easing growth down to non-inflationary levels, bonds could rally and
shortages of bonds with the best coupon structures and call provisions may
eventually take place.
In closing, thank you for investing in the Smith Barney Muni Funds -- Georgia
and Pennsylvania Portfolios. We look forward to helping you pursue your
financial goals in the future.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
APRIL 3, 2000
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 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)
================================================================================
3/31/00 $13.43 $12.40 $0.62 $0.00 (2.97)%
================================================================================
3/31/99 13.43 13.43 0.65 0.09 5.61
================================================================================
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 $3.93 $0.30
--------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS B SHARES
Net Asset Value
================================================================================
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.42 $12.40 $0.55 $0.00 (3.45)%
================================================================================
3/31/99 13.43 13.42 0.58 0.09 4.99
================================================================================
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 $3.48 $0.30
--------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS L SHARES
Net Asset Value
================================================================================
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
3/31/00 $13.41 $12.39 $0.54 $0.00 (3.51)%
================================================================================
3/31/99 13.41 13.41 0.58 0.09 5.01
================================================================================
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 $3.51 $0.30
--------------------------------------------------------------------------------
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
--------------------------------------------------------------------------------
6 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
GEORGIA PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS
Without Sales Charges(1)
================================================================================
Class A Class B Class L
================================================================================
Year Ended 3/31/00 (2.97)% (3.45)% (3.51)%
================================================================================
Five Years Ended 3/31/00 6.28 5.72 5.68
================================================================================
Inception* through 3/31/00 6.29 5.43 5.61
================================================================================
With Sales Charges(2)
================================================================================
Class A Class B Class L
================================================================================
Year Ended 3/31/00 (6.85)% (7.60)% (5.43)%
================================================================================
Five Years Ended 3/31/00 5.42 5.56 5.47
================================================================================
Inception* through 3/31/00 5.56 5.43 5.44
================================================================================
CUMULATIVE TOTAL RETURNS
Without Sales Charges(1)
================================================================================
Class A (Inception* through 3/31/00) 44.11%
================================================================================
Class B (Inception* through 3/31/00) 35.87
================================================================================
Class L (Inception* through 3/31/00) 38.54
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charges with respect to Class A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum sales charge of 4.00% and 1.00%, respectively;
Class B shares reflect the deduction of a 4.50% CDSC, which applies if
shares are redeemed within one year from initial purchase. This CDSC
declines by 0.50% the first year after purchase and thereafter by 1.00% per
year until no CDSC is incurred. Class L shares also reflect the deduction of
a 1.00% CDSC, which applies if shares are redeemed within the first year of
purchase.
* Inception dates for Class A, B and L shares are April 4, 1994, June 15, 1994
and April 14, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 7
<PAGE>
HISTORICAL PERFORMANCE (UNAUDITED)
GROWTH OF $10,000 INVESTED IN CLASS A SHARES OF THE
GEORGIA PORTFOLIO VS. LEHMAN BROTHERS MUNICIPAL BOND INDEX
AND LEHMAN BROTHERS GEORGIA MUNICIPAL BOND INDEX+
================================================================================
APRIL 1994 -- MARCH 2000
================================================================================
CHART:
Lehman Brothers Lehman Brothers
Georgia Muni, Muni, Georgia
Bond Index Bond Index Portfolio
4/4/94 10000 10000 9600
3/95 10795 10744 10193
3/96 11675 11645 11179
3/97 12289 12278 11844
3/98 13573 13594 13485
3/99 14362 14437 14242
3/00 14365 14424 13820
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on April 4, 1994, assuming a 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, 2000. The Lehman Brothers Georgia
Municipal Bond Index (consisting of Georgia municipal bonds) 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. The performance of the Portfolio's other classes may be
greater or less than the Class A shares' performance indicated on this
chart, depending on whether greater or lesser sales charges and fees were
incurred by shareholders investing in the other classes.
ALL FIGURES REPRESENT PAST PERFORMANCE AND ARE NOT A GUARANTEE OF FUTURE
RESULTS. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
--------------------------------------------------------------------------------
8 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
PENNSYLVANIA PORTFOLIO
HISTORICAL PERFORMANCE -- CLASS A SHARES
Net Asset Value
<TABLE>
<CAPTION>
================================================================================
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
<S> <C> <C> <C> <C> <C>
3/31/00 $13.44 $12.18 $0.66 $0.02 (4.31)%
================================================================================
3/31/99 13.54 13.44 0.69 0.15 5.61
================================================================================
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 $4.09 $0.33
--------------------------------------------------------------------------------
</TABLE>
HISTORICAL PERFORMANCE -- CLASS B SHARES
Net Asset Value
<TABLE>
<CAPTION>
================================================================================
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
<S> <C> <C> <C> <C> <C>
3/31/00 $13.42 $12.17 $0.59 $0.02 (4.78)%
================================================================================
3/31/99 13.52 13.42 0.62 0.15 5.07
================================================================================
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 $3.62 $0.33
--------------------------------------------------------------------------------
</TABLE>
HISTORICAL PERFORMANCE -- CLASS L SHARES
Net Asset Value
<TABLE>
<CAPTION>
================================================================================
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
================================================================================
<S> <C> <C> <C> <C> <C>
3/31/00 $13.41 $12.16 $0.58 $0.02 (4.83)%
================================================================================
3/31/99 13.51 13.41 0.61 0.15 5.02
================================================================================
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 $3.68 $0.33
--------------------------------------------------------------------------------
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 9
<PAGE>
PENNSYLVANIA PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
Without Sales Charges(1)
================================================================================
Class A Class B Class L
================================================================================
<S> <C> <C> <C>
Year Ended 3/31/00 (4.31)% (4.78)% (4.83)%
================================================================================
Five Years Ended 3/31/00 5.64 5.12 5.06
================================================================================
Inception* through 3/31/00 6.17 5.21 5.57
================================================================================
<CAPTION>
With Sales Charges(2)
================================================================================
Class A Class B Class L
================================================================================
<S> <C> <C> <C>
Year Ended 3/31/00 (8.13)% (8.87)% (6.71)%
================================================================================
Five Years Ended 3/31/00 4.78 4.96 4.84
================================================================================
Inception* through 3/31/00 5.45 5.21 5.40
================================================================================
</TABLE>
CUMULATIVE TOTAL RETURNS
Without Sales Charges(1)
================================================================================
Class A (Inception* through 3/31/00) 43.18%
================================================================================
Class B (Inception* through 3/31/00) 34.12
================================================================================
Class L (Inception* through 3/31/00) 38.39
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum sales charge of 4.00% and 1.00%, respectively;
Class B shares reflect the deduction of a 4.50% CDSC, which applies if
shares are redeemed within one year from initial purchase. This CDSC
declines by 0.50% the first year after purchase and thereafter by 1.00% per
year until no CDSC is incurred. Class L shares also reflect the deduction
of a 1.00% CDSC, which applies if shares are redeemed within the first year
of purchase.
* Inception dates for Class A, B and L shares are April 4, 1994, June 20,
1994 and April 5, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
--------------------------------------------------------------------------------
10 2000 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 BOND INDEX
AND LEHMAN BROTHERS PENNSYLVANIA MUNICIPAL BOND INDEX+
================================================================================
APRIL 1994 -- MARCH 2000
================================================================================
CHART:
<TABLE>
<CAPTION>
Lehman Brothers Lehman Brothers
Penn. Muni, Muni, Pennsyvania
Bond Index Bond Index Portfolio
<S> <C> <C> <C>
4/4/94 10000 10000 9600
3/95 10795 10744 10447
3/96 11638 11645 11290
3/97 12282 12278 11980
3/98 13529 13594 13601
3/99 14341 14437 14364
3/00 14297 14424 13745
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on April 4, 1994, assuming a 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, 2000. The Lehman Brothers
Pennsylvania Municipal Bond Index (consisting of Pennsylvania municipal
bonds) 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. 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.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 11
<PAGE>
SCHEDULES OF INVESTMENTS MARCH 31, 2000
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
EDUCATION -- 12.8%
$1,000,000 AA Fulton County School District, 5.375% due 1/1/18 $ 988,750
Private Colleges & Universities Authority Revenue:
1,000,000 AAA Agnes Scott College Project, 4.750% due 6/1/28 835,000
Emory University Project:
2,000,000 Aa1* Series A, 5.500% due 11/1/31 1,905,000
200,000 Aa1* Series C, 5.750% due 10/1/02 205,000
1,000,000 A Mercer Housing Corp. Project, ACA-Insured,
Series A, 5.375% due 6/1/17 945,000
750,000 BBB Puerto Rico Industrial Tourist Educational,
Medical & Environmental Control Facilities
Finance Authority, (Ana G. Mendez University
System Project), 5.375% due 2/1/19 683,438
250,000 A1* Rockdale County School District, 6.000% due 1/1/04 259,063
1,000,000 BBB- Savannah EDA, (College of Art & Design Inc.
Project), 6.800% due 10/1/19 1,016,250
1,000,000 A Virgin Islands University, Series A, ACA-Insured,
6.000% due 12/1/24 1,000,000
--------------------------------------------------------------------------------
7,837,501
--------------------------------------------------------------------------------
ESCROWED TO MATURITY (B) -- 10.0%
140,000 AAA Athens Water & Sewer Revenue, 10.000% due 7/1/01 149,100
885,000 AAA Burke County Development Authority PCR, (Oglethorpe
Power Co. Vogtle Project), MBIA-Insured,
7.500% due 1/1/03 913,762
Cobb County Kennestone Hospital Authority Revenue,
MBIA-Insured:
75,000 AAA 10.250% due 2/1/02 77,531
305,000 AAA Series 86A, 7.750% due 2/1/07 332,831
1,875,000 Aaa* Colquitt County Development Authority Revenue,
Sub. Series C, zero coupon due 12/1/21 447,656
1,175,000 AAA Columbus Medical Center Hospital Authority Revenue,
Antic Certificates, 7.750% due 7/1/10 1,354,188
300,000 NR Columbus Water & Sewer Revenue, 8.000% due 5/1/00 300,834
290,000 AAA Fulton County Water & Sewer Revenue, FGIC-Insured,
6.375% due 1/1/14 319,363
485,000 AAA Puerto Rico Commonwealth Aqueduct & Sewer Authority
Revenue, 10.250% due 7/1/09 611,706
100,000 Aaa* Richmond County Water & Sewer Revenue,
9.875% due 4/1/02 105,625
1,000,000 Aaa* Savannah EDA, zero coupon due 12/1/21 242,500
640,000 AAA Tri City Hospital Authority Revenue, South Fulton
Hospital, FGIC-Insured, 10.250% due 7/1/06 772,000
2,000,000 Aaa* Washington Wilkes Payroll Development Authority
Revenue, zero coupon due 12/1/21 485,000
--------------------------------------------------------------------------------
6,112,096
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
12 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2000
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
GENERAL OBLIGATION -- 5.6%
$1,000,000 AAA Georgia State, Series B, 5.750% due 8/1/17 $1,038,750
300,000 AA- Marietta, 9.300% due 1/1/01 310,758
Puerto Rico Commonwealth, Public Improvement:
1,000,000 AAA AMBAC-Insured, 4.500% due 7/1/23 836,250
1,250,000 AAA MBIA-Insured, 5.750% due 7/1/26 1,256,250
--------------------------------------------------------------------------------
3,442,008
--------------------------------------------------------------------------------
HOSPITALS -- 3.2%
500,000 AAA Fulco Hospital Authority Revenue, Catholic Health
East, Series A, 4.875% due 11/15/15 456,875
1,000,000 Aaa* Newton County Hospital Authority Revenue, (Newton
Health System Project), 6.100% due 2/1/24 1,016,250
500,000 BBB- Puerto Rico Industrial Tourist Educational,
Medical & Environmental Control Facilities
Finance Authority,(Ryder Memorial Hospital
Project), Series A, 6.700% due 5/1/24 486,875
--------------------------------------------------------------------------------
1,960,000
--------------------------------------------------------------------------------
HOUSING: MULTI-FAMILY -- 10.1%
500,000 AAA Acworth Housing Authority Revenue, (Wingate Falls
Apartments Project), 6.125% due 3/1/17 (c) 506,250
Atlanta Urban Residential Finance Authority,
Multi-Family Housing Revenue:
1,115,000 B Cascade Pines Housing Project, 6.250% due
9/1/10 (c) 1,141,481
1,025,000 AAA Shamrock Garden Apartments Project, Series A,
FNMA-Collateralized, 5.250% due 4/1/19 (c) 954,531
1,000,000 Baa1* Clayton County Housing Authority, Multi-Family
Housing Revenue, (Magnolia Park Apartments
Project), Series A, 6.125% due 6/1/18 943,750
235,000 A Cobb County Housing Authority Refunding,
(Signature Place Project), Series A, 6.875%
due 10/1/17 242,637
De Kalb County Housing Authority, Multi-Family
Housing Revenue, Series A:
1,000,000 Aa2* Friendly Hills Apartments, Series A,
FHA-Insured, 7.050% due 1/1/39 (c) 1,075,000
300,000 AAA Valley Brook Apartments Project, Revenue
Refunding, MBIA-Insured, 7.750% due 1/1/26 311,625
1,000,000 AAA Lawrenceville Housing Authority, Multi-Family
Revenue,(Knollwood Park Apartments Project),
6.250% mandatory tender 6/1/15 (c) 1,026,250
--------------------------------------------------------------------------------
6,201,524
--------------------------------------------------------------------------------
HOUSING: SINGLE-FAMILY -- 4.9%
115,000 AAA Fulton County Housing Authority, Single-Family Mortgage
Revenue, Series A, GNMA-Collateralized,
6.600% due 3/1/28 (c) 117,588
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 13
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2000
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
HOUSING: SINGLE-FAMILY -- 4.9% (CONTINUED)
Georgia State HFA, Single-Family Mortgage Revenue:
$1,970,000 AAA Series A-2, FHA-Insured, 6.550% due
12/1/27 (c) $2,019,250
100,000 AAA Series D-1, 4.300% due 12/1/05 95,000
225,000 AA+ Georgia State Residential Finance Authority,
Home Ownership Mortgage, Series A, FHA-Insured,
7.250% due 12/1/21(c) 233,438
315,000 AAA Puerto Rico Housing Bank & Finance Agency,
Single-Family Mortgage, Affordable Housing
Mortgage, Portfolio I,GNMA/FNMA-Collateralized,
6.250% due 4/1/29 (c) 321,694
210,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
Series A, GNMA-Collateralized, 6.450% due
3/1/16 (c) 215,775
--------------------------------------------------------------------------------
3,002,745
--------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT -- 0.3%
175,000 A3* Tift County IDA, (Union Camp Corp. Project),
5.250% due 2/1/08 172,156
--------------------------------------------------------------------------------
LIFE-CARE -- 2.0%
660,000 BBB+ Fulton County Residential Care Facilities, (Canterbury
Court Project), 6.300% due 10/1/24 581,625
660,000 NR Savannah EDA, First Mortgage, Senior Care Group Inc.,
Shadowmoss, Series A, 6.750% due 7/1/10 624,525
--------------------------------------------------------------------------------
1,206,150
--------------------------------------------------------------------------------
MISCELLANEOUS -- 11.4%
1,000,000 Aaa* Albany Dougherty Inner City Authority, (Public
Purpose Project), AMBAC-Insured, 5.625%
due 1/1/26 995,000
1,000,000 AAA Association County Commoners, Leasing Program,
(Rockdale County Public Purpose Project),
AMBAC-Insured, 5.625% due 7/1/20 973,750
1,000,000 AAA Fulton County Facilities Corp., (Fulton County
Public Purpose Project), 5.500% due 11/1/18 987,500
2,000,000 AAA Georgia Local Government, Public Improvement
Grant, Series A, MBIA-Insured, 4.750%
due 6/1/28 1,687,500
500,000 BBB Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 551,250
1,000,000 BBB Puerto Rico Industrial Tourist Educational,
Medical & Environmental Control Facilities
Finance Authority, (San Lucas & Cristo Project),
Series A, 5.750% due 6/1/19 866,250
1,000,000 AAA Puerto Rico Municipal Finance Agency,
FSA-Insured, 5.500% due 8/1/23 973,750
--------------------------------------------------------------------------------
7,035,000
--------------------------------------------------------------------------------
POLLUTION CONTROL -- 11.5%
1,800,000 A Burke County Development Authority PCR, (Georgia
Power Co. Vogtle Project), 4.100% due
7/1/24 (d) 1,800,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
14 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2000
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
POLLUTION CONTROL -- 11.5% (CONTINUED)
$ 200,000 BBB Camden County Joint Development Authority PCR,
Revenue Refunding, (Union Carbide Corp.
Project), 5.000% due 1/1/12 $ 182,000
1,000,000 Baa2* Effingham County Development Authority,
Solid Waste Disposal Revenue, (Fort James
Project), 5.625% due 7/1/18 (c) 898,750
500,000 A- Monroe County Development Authority PCR,
(Oglethorpe Power Co. Scherer Project),
Series A, 6.800% due 1/1/12 543,125
2,000,000 A3* Richmond County Development Authority,
Solid Waste Disposal Revenue, (International
Paper Project), Series A,5.400% due 2/1/23 (c) 1,762,500
1,000,000 NR Rockdale County Development Authority, Solid
Waste Disposal Revenue, (Visy Paper Project),
7.500% due 1/1/26 (c) 1,030,000
Savannah EDA PCR, (Union Camp Corp. Project):
370,000 A3* 5.200% due 9/1/04 366,763
500,000 A3* 6.150% due 3/1/17 496,875
--------------------------------------------------------------------------------
7,080,013
--------------------------------------------------------------------------------
PRE-REFUNDED (E) -- 3.0%
1,000,000 AAA Fulton County Multi-Family Housing Authority
Revenue,(Concorde Place Apartment Project),
6.300% due 7/1/16 (c) 1,075,000
200,000 AAA Georgia State, Series B, 6.800% due 11/1/04 206,982
500,000 Ba1* Savannah Hospital Authority Revenue Refunding &
Improvement, Candler Hospital, 7.000%
due 1/1/11 535,625
--------------------------------------------------------------------------------
1,817,607
--------------------------------------------------------------------------------
PUBLIC FACILITIES -- 2.1%
250,000 AAA Butts County COP, MBIA-Insured, 6.750% due
12/1/14 270,000
1,050,000 AAA Cobb-Marietta Counties Coliseum & Exhibit Hall
Authority Revenue, MBIA-Insured, 5.625%
due 10/1/26 1,044,750
--------------------------------------------------------------------------------
1,314,750
--------------------------------------------------------------------------------
SOLID WASTE -- 1.4%
1,000,000 AA Albany Dougherty Payroll Development Authority,
Solid Waste Disposal Revenue, Proctor & Gamble
Paper Products, 5.200% due 5/15/28 (c) 882,500
--------------------------------------------------------------------------------
TRANSPORTATION -- 4.2%
1,000,000 AAA Atlanta Airport Revenue, Series A, FGIC-Insured,
5.500% due 1/1/26 962,500
250,000 AAA Metropolitan Atlanta Rapid Transit Authority
Revenue Refunding, Series P, AMBAC-Insured,
6.250% due 7/1/20 268,437
1,500,000 AAA Puerto Rico Commonwealth Highway & Transportation
Authority Highway Revenue, Series Y,
MBIA-Insured, 5.000% due 7/1/36 1,335,000
--------------------------------------------------------------------------------
2,565,937
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 15
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2000
GEORGIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
UTILITIES -- 5.9%
Clayton County Water Authority, Water & Sewer
Revenue:
$ 310,000 Aa3* 6.100% due 5/1/00 $ 310,434
175,000 Aa3* 6.100% due 5/1/01 178,351
Georgia Municipal Electric Authority Power
Revenue:
600,000 AAA Series EE, AMBAC-Insured, 7.250% due 1/1/24 719,250
1,000,000 AAA Series Z, MBIA-Insured, 5.500% due 1/1/20 986,250
500,000 A- Georgia Municipal Gas Authority Revenue,
(Southern Storage Gas Project), 6.300%
due 7/1/09 521,875
1,000,000 AAA Guam Power Authority Revenue, Series A,
MBIA-Insured, 5.250% due 10/1/34 915,000
--------------------------------------------------------------------------------
3,631,160
--------------------------------------------------------------------------------
WATER & SEWER -- 11.6%
Atlanta Water & Wastewater Revenue, Series A,
FGIC-Insured:
1,000,000 AAA 5.500% due 11/1/19 987,500
2,000,000 AAA 5.000% due 11/1/38 1,720,000
500,000 A+ Cartersville Development Authority Revenue
Refunding, Sewer Facilities, Anheuser Busch,
6.125% due 5/1/27 (c) 503,750
1,000,000 AAA Columbia County Water & Sewer Revenue,
FGIC-Insured, 5.500% due 6/1/25 978,750
10,000 AAA Fulton County Water & Sewer Revenue,
FGIC-Insured, 6.375% due 1/1/14 10,837
500,000 AAA Milledgeville Water & Sewer Revenue,
FSA-Insured, 6.000% due 12/1/21 521,875
1,000,000 AA Peachtree City Water & Sewer Authority, Sewer
System Revenue, Series A, 5.375% due 3/1/22 961,250
1,500,000 AAA Rockdale County Water & Sewer Authority Revenue,
Series A, MBIA-Insured, 5.500% due 7/1/25 1,456,875
--------------------------------------------------------------------------------
7,140,837
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $61,627,285**) $61,401,984
================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*), which are rated by Moody's Investors
Service, Inc.
(b) Bonds are escrowed to maturity with U.S. government securities and are
considered by the manager to be triple-A rated even if the issuer has
not applied for new ratings.
(c) 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) Bonds are escrowed with U.S. government securities and are considered
by the manager to be triple-A rated even if the issuer had not applied
for new ratings.
** Aggregate cost for Federal income tax purposes is substantially the
same.
See pages 22 and 23 for definitions of ratings and certain security
definitions.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
16 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2000
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
EDUCATION -- 14.0%
$ 700,000 AA Chester County Health & Education Facilities
Authority College Revenue, Immaculata
College, 5.600% due 10/15/18 $ 678,125
750,000 AA Delaware County, College Revenue, Haverford
College, 5.750% due 11/15/29 737,813
1,615,000 AAA Erie School District, Capital Appreciation,
Refunding, FSA-Insured, zero coupon due 9/1/18 557,175
McKeesport Area School District, Capital
Appreciation,
Series C, AMBAC-Insured:
1,310,000 AAA Zero coupon due 10/1/17 481,425
3,000,000 AAA Zero coupon due 10/1/20 900,000
2,340,000 AAA Zero coupon due 10/1/28 429,975
1,400,000 AAA Pennsylvania Cambria School District, Capital
Appreciation, FGIC-Insured, zero coupon due
8/15/23 351,750
Pennsylvania State Higher Education Facilities
Authority Revenue:
1,000,000 A- Drexel University, 6.000% due 5/1/29 995,000
920,000 AAA Thomas Jefferson University, AMBAC-Insured,
5.000% due 7/1/19 831,450
1,250,000 NR Philadelphia Hospitals & Higher Education
Facilities Authority Revenue, Chestnut Hill
College, 6.000% due 10/1/29 1,118,750
2,000,000 AAA Philadelphia School District, Series A,
MBIA-Insured, 4.500% due 4/1/23 1,635,000
--------------------------------------------------------------------------------
8,716,463
--------------------------------------------------------------------------------
ESCROWED TO MATURITY (B) -- 6.0%
405,000 NR Allegheny County Hospital Development Authority
Revenue, Montefiore Hospital Association
Western Pennsylvania, 6.875% due 7/1/09 433,856
295,000 AAA Berks County, PA Municipal Hospital Authority
Revenue,(General Hospital Project), 9.500%
due 7/1/05 331,506
1,550,000 AAA Cambria County Hospital Development Authority,
Conemaugh Valley Memorial Hospital,
7.625% due 9/1/11 1,759,245
365,000 AAA Lewisburg Area School District Building,
AMBAC-Insured, 9.750% due 2/15/04 409,713
85,000 AAA Pennsylvania State Educational Facilities
Authority, College & University Revenue,
Temple University, MBIA-Insured, 9.375%
due 6/15/03 84,986
155,000 AAA Scranton-Lackawanna Health & Welfare Authority
Revenue,(Scranton University Project),
AMBAC-Insured, 10.000% due 10/1/03 170,306
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 17
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2000
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
ESCROWED TO MATURITY (B) -- 6.0% (CONTINUED)
$ 245,000 AAA Southeastern Greene School District, 9.375%
due 7/1/03 $ 263,069
80,000 AAA West Chester Sewer Revenue, 9.750% due 5/1/07 93,900
185,000 AAA York County GO, Refunding, AMBAC-Insured,
8.875% due 6/1/06 207,894
--------------------------------------------------------------------------------
3,754,475
--------------------------------------------------------------------------------
FINANCE -- 1.6%
1,000,000 BBB- Virgin Islands Public Finance Authority Revenue,
Gross Receipts Taxes, Series A, 6.500%
due 10/1/24 1,010,000
--------------------------------------------------------------------------------
GENERAL OBLIGATION -- 7.4%
4,185,000 AAA Erie County GO, Capital Appreciation, Series B,
zero coupon due 11/15/18 1,428,131
1,500,000 AAA Lancaster County GO, Series A, FGIC-Insured,
4.500% due 5/1/28 1,207,500
1,500,000 AAA Philadelphia GO, FGIC-Insured, 4.750%
due 5/15/20 1,293,750
2,000,000 AAA Westmoreland County GO, FGIC-Insured,
zero coupon due 12/1/18 680,000
--------------------------------------------------------------------------------
4,609,381
--------------------------------------------------------------------------------
HOSPITAL -- 20.8%
500,000 AAA Allegheny County Hospital Development Authority
Revenue, (General Hospital Project), Series A,
MBIA-Insured, 6.250% due 9/1/20 488,750
1,000,000 BBB Allentown Area Hospital Authority Revenue, Sacred
Heart Hospital, 6.750% due 11/15/14 975,000
1,000,000 NR Chartiers Valley Industrial & Commercial
Development Authority, Mortgage Revenue, Asbury
Health Center, 6.375% due 12/1/19 891,250
1,000,000 AAA Delaware County Health System Authority Revenue,
Catholic Health East, Series A, AMBAC-Insured,
4.875% due 11/15/26 842,500
1,260,000 AA Erie County Hospital Authority, Health Facilities
Revenue,(St. Mary's Home Project), Asset
Guaranteed, 6.000% due 8/15/23 1,236,375
1,000,000 AA Geisinger County Health System Authority,
Series A, 5.000% due 8/15/28 831,250
1,000,000 BBB+ Hazelton Health Services Authority Revenue,
St. Joseph's Medical Center, 6.200% due 7/1/26 876,250
1,000,000 BBB Horizon Hospital System Authority Revenue,
Horizon Hospital Systems Inc., 6.350% due
5/15/26 922,500
1,000,000 NR Philadelphia Authority for Industrial Development,
Health Care Facility Revenue, Baptist Home of
Philadelphia, Series A, 5.600% due 11/15/28 746,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
18 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2000
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
HOSPITAL -- 20.8% (CONTINUED)
$1,410,000 AAA Philadelphia Hospital & Higher Education
Facilities Authority, Hospital Revenue,
Series A, FHA-Insured, 5.300% due 1/1/18 $ 1,291,913
525,000 AA Potter County Hospital Authority Revenue, Asset
Guaranteed, 6.050% due 8/1/24 528,281
500,000 BBB- Ryder Memorial Hospital Project, Series A,
6.700% due 5/1/24 486,875
Scranton-Lackawanna Health & Welfare Authority
Revenue:
500,000 BBB-++ Allied Services Rehabilitation Hospitals,
(Project-A),
7.600% due 7/15/20 522,500
1,000,000 NR Lackawanna Junior College, 5.750% due 11/1/20 860,000
750,000 BBB- Moses Taylor Hospital Project, 6.250%
due 7/1/20 651,563
1,000,000 AA- St. Mary Hospital Authority, Bucks County,
Catholic Health Initiatives, Series A, 5.000%
due 12/1/18 863,750
--------------------------------------------------------------------------------
13,015,007
--------------------------------------------------------------------------------
HOUSING: MULTI-FAMILY -- 2.8%
1,500,000 BBB+++ Montgomery County Redevelopment Authority,
Multi-Family Housing Revenue, (KBF Associates
L.P. Project) Series A, 6.375% due 7/1/12 1,516,875
205,000 AAA Pittsburgh Urban Redevelopment Authority,
Mortgage Revenue, Series B,
FNMA/GNMA-Collateralized, 6.950%
due 10/1/10 (c) 209,613
--------------------------------------------------------------------------------
1,726,488
--------------------------------------------------------------------------------
HOUSING: SINGLE-FAMILY -- 7.1%
Allegheny County, Residential Mortgage Refunding,
Single-Family Housing, GNMA-Collateralized:
970,000 Aaa* 6.875% due 5/1/26 (c) 1,012,438
1,000,000 Aaa* Series FF-2, 6.000%, due 11/1/31 (c) 976,250
1,535,000 Aaa* Zero coupon due 5/1/27 (c) 209,144
1,500,000 AA+ Pennsylvania HFA, Single-Family Housing Mortgage
Revenue, Series 40, 6.900% due 4/1/25 (c) 1,556,250
640,000 AAA Puerto Rico Single-Family Housing Mortgage Revenue,
GNMA/FNMA/FHLMC-Collateralized,
6.250% due 4/1/29 (c) 653,600
--------------------------------------------------------------------------------
4,407,682
--------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT -- 9.7%
1,000,000 Baa2* Allegheny County IDA Refunding Environmental
Improvement, USX Corp., 6.700% due 12/1/20 1,018,750
1,000,000 A3* Bradford County IDA Solid Waste, International
Paper Co., 6.600% due 3/1/19 (c) 1,011,250
1,000,000 BB- Delaware County IDA Revenue, Resource Recovery
Facility, Series A, 6.200% due 7/1/19 892,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 19
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2000
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
INDUSTRIAL DEVELOPMENT -- 9.7% (CONTINUED)
$1,000,000 A3* Erie County IDA Environmental Improvement Revenue,
(International Paper Co. Project), Series A,
7.625% due 11/1/18 (c) $1,075,000
1,000,000 NR Pennsylvania Economic Development Finance
Authority Facilities Revenue, National
Gypsum Co., Series A, 6.250% due 11/1/27 908,750
300,000 AA Philadelphia IDR, Cancer Research Institute,
Series A, 3.950% due 7/1/23 (d) 300,000
1,000,000 BBB Schuykill County IDA, Pine Grove Landfill Inc.,
5.100% mandatory tender 10/1/19 (c) 871,250
--------------------------------------------------------------------------------
6,077,500
--------------------------------------------------------------------------------
LIFE CARE -- 6.3%
Montgomery County IDA, Retirement Community Revenue:
1,500,000 A- 5.250% due 11/15/28 1,145,625
1,500,000 A- Series A, 5.875% due 11/15/22 1,327,500
1,000,000 A- Series B, 5.625% due 11/15/12 953,750
610,000 AA Schuykill County IDA, Charity Obligation Group,
Series A, 5.000% due 11/1/28 506,300
--------------------------------------------------------------------------------
3,933,175
--------------------------------------------------------------------------------
MISCELLANEOUS -- 10.8%
Dauphin County General Authority:
1,255,000 NR Hotel & Conference Center, Hyatt Regency,
6.200% due 1/1/29 1,131,069
1,000,000 NR Office & Package, Riverfront Office, 6.000%
due 1/1/25 895,000
1,000,000 AAA Delaware Valley Regional Finance Authority, Local
Government Revenue, Series A, AMBAC-Insured,
5.500% due 8/1/28 951,250
Pittsburgh & Allegheny County Public Auditorium:
1,175,000 AAA Hotel Room, AMBAC-Insured, 5.000% due 2/1/17 1,079,531
1,000,000 AAA Regional Asset District Sales Tax,
AMBAC-Insured, 5.000% due 2/1/24 882,500
1,000,000 BBB Puerto Rico Industrial, Tourist, Educational,
Medical & Environmental Control Facilities,
(San Lucas & Cristo Project), Series A, 5.750%
due 6/1/19 866,250
1,000,000 AAA Puerto Rico Municipal Finance Agency, Series A,
FSA-Insured, 5.500% due 8/1/23 973,750
--------------------------------------------------------------------------------
6,779,350
--------------------------------------------------------------------------------
POLLUTION CONTROL -- 0.8%
500,000 BBB- Pennsylvania EDA, Resource Recovery Revenue,
(Colver Project), Series D, 7.150%
due 12/1/18 (c) 514,375
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
20 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2000
PENNSYLVANIA PORTFOLIO
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
================================================================================
<S> <C> <C> <C>
PRE-REFUNDED (E) -- 0.9%
$ 465,000 Aaa* Philadelphia Hospital Revenue, (United Hospital
Inc. Project), (Call 7/1/05 @ 100),
10.875% due 7/1/08 $ 559,163
--------------------------------------------------------------------------------
PUBLIC FACILITIES -- 2.6%
Harrisburg Redevelopment Authority, FSA-Insured:
1,750,000 AAA Zero coupon bond due 5/1/17 675,938
2,750,000 AAA Zero coupon bond due 5/1/19 928,125
--------------------------------------------------------------------------------
1,604,063
--------------------------------------------------------------------------------
SOLID WASTE -- 1.5%
1,000,000 BB- New Morgan IDA Solid Waste Disposal, Browning Ferris
Industries Inc., 6.500% due 4/1/19 (c) 940,000
--------------------------------------------------------------------------------
TRANSPORTATION -- 7.0%
950,000 AAA Delaware River Port Authority, (Port District
Project), Series B, MBIA-Insured, 5.000%
due 1/1/26 846,688
815,000 AAA Philadelphia IDA, Airport Revenue, Philadelphia
Airport Revenue, (Philadelphia Airport System
Project), Series A, 5.000% due 7/1/15 (c) 746,744
1,825,000 AAA Puerto Rico Commonwealth Highway & Transportation
Authority, 5.000% due 7/1/36 1,624,250
1,200,000 Baa2* Puerto Rico Port Authority Revenue, American
Airlines, Series A, 6.250% due 6/1/26 (c) 1,183,500
--------------------------------------------------------------------------------
4,401,182
--------------------------------------------------------------------------------
UTILITIES -- 0.7%
400,000 AAA Guam Power Authority Revenue, Series A,
6.750% due 10/1/24 (d) 440,000
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $65,447,300**) $62,488,304
================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*) which are rated by Moody's Investors
Service, Inc. and those identified by a double dagger (++) which are
rated Fitch IBCA, Inc.
(b) Bonds are escrowed to maturity with U.S. government securities and are
considered by the manager to be triple-A rated even if the issuer has
not applied for new ratings.
(c) 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 22 and 23 for definitions of ratings and certain security
definitions.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 21
<PAGE>
BOND RATINGS (UNAUDITED)
The definitions of the applicable rating symbols are set forth below:
STANDARD & POOR'S RATINGS SERVICE ("STANDARD & POOR'S") -- Ratings from "AA" to
"B" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories. AAA -- Bonds rated "AAA"
have the highest rating assigned by Standard & Poor's. Capacity to pay interest
and repay principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated 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" and "B" are regarded, on balance, as predominantly
and B speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "B" the highest
degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") -- Numerical modifiers 1, 2, and 3
may be applied to each generic rating from "Aa" to "Ba", where 1 is the highest
and 3 the lowest rating within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by
an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes in this class.
--------------------------------------------------------------------------------
22 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
BOND RATINGS (UNAUDITED) (CONTINUED)
FITCH IBCA, INC. ("FITCH") -- Ratings may be modified by the addition of a plus
(+) sign or minus (-) sign to show relative standings within the major ratings
categories.
BBB -- Bonds rated "BBB" by Fitch currently have a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
impair this capacity. This is the lowest investment grade category
assigned by Fitch.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's
or Fitch.
SHORT-TERM SECURITY RATINGS (UNAUDITED)
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of safely
regarding timely payment is either overwhelming or very strong;
those issues determined to possess overwhelming safety
characteristics are denoted with a (+) sign.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
VMIG 1 -- Moody's highest rating for issues having demand feature -- VRDO.
VMIG 2 -- Moody's second highest rating for issues having a demand feature --
VRDO.
SECURITY DESCRIPTIONS (UNAUDITED)
ABAG -- Association of Bay Area
Governments
ACA -- American Capital Assurance
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 -- College Construction Loan
LEE 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 Agency
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors
Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse
Coupon Security
PCR -- Pollution Control Revenue
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt
Securities
SYCC -- Structured Yield Curve Certificate
TAN -- Tax Anticipation Notes
TECP -- Tax-Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation
Notes
VA -- Veterans Administration
VRWE -- Variable Rate Wednesday
Demand
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 23
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 2000
<TABLE>
<CAPTION>
GEORGIA PENNSYLVANIA
PORTFOLIO PORTFOLIO
================================================================================
<S> <C> <C>
ASSETS:
Investments, at value (Cost-- $61,627,285
and $65,447,300, respectively) $61,401,984 $62,488,304
Cash 50,954 21,567
Receivable for securities sold 1,393,931 151,382
Interest receivable 1,089,479 1,163,689
Receivable for Fund shares sold 1,309 142,232
Other assets 22,656 --
--------------------------------------------------------------------------------
TOTAL ASSETS 63,960,313 63,967,174
--------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 3,161,902 728,039
Dividend payable 140,596 112,337
Management fees payable 132,192 88,498
Distribution fees payable 7,422 9,919
Payable for Fund shares purchased -- 42,621
Accrued expenses 23,555 76,909
--------------------------------------------------------------------------------
TOTAL LIABILITIES 3,465,667 1,058,323
--------------------------------------------------------------------------------
TOTAL NET ASSETS $60,494,646 $62,908,851
================================================================================
NET ASSETS:
Par value of beneficial interest $ 4,882 $ 5,167
Capital paid in excess of par value 62,504,664 67,419,292
Undistributed net investment income 21,537 40,880
Accumulated net realized loss from
security transactions (1,811,136) (1,597,492)
Net unrealized depreciation of investments (225,301) (2,958,996)
--------------------------------------------------------------------------------
TOTAL NET ASSETS $60,494,646 $62,908,851
================================================================================
SHARES OUTSTANDING:
Class A 3,477,238 2,296,364
--------------------------------------------------------------------------------
Class B 928,722 2,160,866
--------------------------------------------------------------------------------
Class L 476,112 710,071
--------------------------------------------------------------------------------
NET ASSET VALUE:
Class A (and redemption price) $12.40 $12.18
--------------------------------------------------------------------------------
Class B * $12.40 $12.17
--------------------------------------------------------------------------------
Class L ** $12.39 $12.16
--------------------------------------------------------------------------------
MAXIMUM PUBLIC OFFERING PRICE PER SHARE:
Class A (net asset value plus 4.17%
of net asset value) $12.92 $12.69
--------------------------------------------------------------------------------
Class L (net asset value plus 1.01%
of net asset value) $12.52 $12.28
================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within one year from initial purchase (See Note 4).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
24 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
GEORGIA PENNSYLVANIA
PORTFOLIO PORTFOLIO
================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 3,182,840 $ 4,072,866
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 249,390 310,437
Distribution fees (Note 4) 184,106 290,920
Shareholder and system servicing fees 27,798 32,892
Audit and legal 19,355 15,002
Shareholder communications 13,838 23,498
Pricing service fees 8,422 11,001
Registration fees 3,921 8,488
Custody 2,875 3,654
Trustees' fees 1,743 3,000
Other 8,191 8,465
--------------------------------------------------------------------------------
TOTAL EXPENSES 519,639 707,357
Less: Management fee waiver (Note 4) -- (81,072)
--------------------------------------------------------------------------------
NET EXPENSES 519,639 626,285
--------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,663,201 3,446,581
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (NOTE 5):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 54,007,134 36,133,700
Cost of securities sold 55,682,039 37,710,390
--------------------------------------------------------------------------------
NET REALIZED LOSS (1,674,905) (1,576,690)
--------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED DEPRECIATION (NOTE 7) (2,644,325) (5,444,951)
--------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (4,319,230) (7,021,641)
--------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM OPERATIONS $(1,656,029) $(3,575,060)
================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 25
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
GEORGIA PORTFOLIO 2000 1999
==========================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,663,201 $ 1,970,936
Net realized gain (loss) (1,674,905) 123,595
(Increase) decrease in net unrealized depreciation (2,644,325) 91,303
------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (1,656,029) 2,185,834
-----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (2,638,507) (1,971,954)
In excess of net investment income -- (104,830)
Net realized gains -- (290,345)
------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (2,638,507) (2,367,129)
------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 9,525,730 22,627,987
Net asset value of shares issued in connection
with the transfer of the Alterman Investment
Fund's net assets (Note 7) 21,598,463 --
Net asset value shares issued
for reinvestment of dividends 1,367,928 1,517,319
Cost of shares reacquired (23,320,000) (4,201,549)
------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 9,172,121 19,943,757
------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 4,877,585 19,762,462
NET ASSETS:
Beginning of year 55,617,061 35,854,599
------------------------------------------------------------------------------------------
END OF YEAR* $60,494,646 $55,617,061
==========================================================================================
* Includes undistributed (overdistributed)
net investment income of: $21,537 $(3,157)
==========================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
26 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
PENNSYLVANIA PORTFOLIO 2000 1999
======================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,446,581 $ 2,431,899
Net realized gain (loss) (1,576,690) 207,244
Increase in net unrealized depreciation (5,444,951) (40,052)
--------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (3,575,060) 2,599,091
--------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (3,409,604) (2,524,706)
Net realized gains (114,455) (607,140)
--------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (3,524,059) (3,131,846)
--------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS FROM (NOTE 9):
Net proceeds from sale of shares 26,277,685 42,109,612
Net asset value shares issued
for reinvestment of dividends 2,075,666 2,087,057
Cost of shares reacquired (25,787,914) (19,173,695)
--------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 2,565,437 25,022,974
--------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS (4,533,682) 24,490,219
NET ASSETS:
Beginning of year 67,442,533 42,952,314
--------------------------------------------------------------------------------------
END OF YEAR* $62,908,851 $67,442,533
======================================================================================
* Includes undistributed net investment income of: $40,880 $3,903
======================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 27
<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 non-diversified management investment company and
consists of these Portfolios and seven other separate investment portfolios:
Florida, New York, National, Limited Term, California Money Market,
Massachusetts Money Market and New York Money Market portfolios. The financial
statements and financial highlights for the other portfolios are presented in
separate shareholder 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 for
which market quotations are not available will be valued in good faith at fair
value by or under the direction of the Board of Trustees; (d) securities
maturing within 60 days are valued at cost plus accreted discount or minus
amortized premium, which approximates value; (e) gains or losses on the sale of
securities are calculated by using the specific identifications method; (f)
interest income, adjusted for amortization of premium and original issue
discount, is recorded on an accrual basis; market discount is recognized upon
the disposition of the security; (g) dividends and distributions to shareholders
are recorded on the ex-dividend date; (h) direct expenses are charged to each
Portfolio and each class; management fees and general fund expenses are
allocated on the basis of relative net assets; (i) each Portfolio intends to
comply with the applicable provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (j) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At March 31, 2000, reclassifications
were made to the capital accounts of Georgia Portfolio and Pennsylvania
Portfolio to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Accordingly, for the
Georgia Portfolio, a portion of accumulated net realized loss amounting to
$31,944 was reclassified to paid-in capital. Net investment income, net realized
gains and net assets were not affected by these changes; and (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from
--------------------------------------------------------------------------------
28 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), which, in
turn, is a subsidiary of Citigroup Inc. ("Citigroup"), acts as investment
manager to the Portfolios. The Portfolios pay SSBC a management fee calculated
at an annual rate of 0.45% of their respective average daily net assets. This
fee is calculated daily and paid monthly. For the year ended March 31, 2000,
SSBC waived management fees of $81,072 for the Pennsylvania Portfolio.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, became the Portfolios' transfer agent and PFPC Global
Fund Services ("PFPC") acts as the Portfolios' sub-transfer agent. CFTC receives
account fees and asset-based fees that vary according to account size and type
of account. PFPC is responsible for shareholder recordkeeping and financial
processing for all shareholder accounts and is paid by CFTC. During the period
October 1, 1999 through March 31, 2000, the Portfolios paid transfer agent fees
totaling $15,472 to CFTC.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), as well as certain other broker-dealers, continues to sell Fund shares
to the public as a member of the selling group.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
There are maximum initial sales charges of 5.00% and 1.00% for Class A and L
shares, respectively. 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. This CDSC declines by 0.50% the first year after purchase
and by 1.00% per year until no CDSC is incurred. Class L shares also have a
1.00% CDSC, which applies if redemption occurs within the first year of
purchase. In certain cases, Class A shares have a 1.00% CDSC, which applies if
redemption occurs within the first year of purchase. This CDSC only applies to
those purchases of Class A shares, which, when combined with current holdings of
Class A shares, equal or exceed $500,000 in the aggregate. These purchases do
not incur an initial sales charge.
For the year ended March 31, 2000, CDSC's paid to SSB and sales charges received
by CFBDS and SSB were approximately:
CDSC'S SALES CHARGES
------------------------------ -------------------
PORTFOLIO CLASS A CLASS B CLASS L CLASS A CLASS L
--------------------------------------------------------------------------------
Georgia $21,000 $34,000 $3,000 $61,000 $ 9,000
--------------------------------------------------------------------------------
Pennsylvania 2,000 37,000 6,000 93,000 18,000
--------------------------------------------------------------------------------
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to Class A, B and L shares calculated at an annual rate of 0.15% of the average
daily net assets of each respective class. The Portfolios also pay a
distribution fee with respect to Class B and L shares calculated at an annual
rate of 0.50% and 0.55% of the average daily net assets of each class,
respectively.
For the year ended March 31, 2000, total Distribution Plan fees incurred were:
PORTFOLIO CLASS A CLASS B CLASS L
--------------------------------------------------------------------------------
Georgia $53,885 $ 81,307 $48,914
--------------------------------------------------------------------------------
Pennsylvania 48,736 172,681 69,503
--------------------------------------------------------------------------------
All officers and one Trustee of the Fund are employees of SSB.
5. INVESTMENTS
During the year ended March 31, 2000, 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 $63,449,059 $39,320,050
--------------------------------------------------------------------------------
Sales 54,007,134 36,133,700
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
30 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At March 31, 2000, 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 $ 1,200,414 $ 663,245
Gross unrealized depreciation (1,425,715) (3,622,241)
--------------------------------------------------------------------------------
Net unrealized depreciation $ (225,301) $(2,958,996)
--------------------------------------------------------------------------------
6. FUTURES CONTRACTS
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are made or received and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract.
The Portfolio enters into such contracts to hedge a portion of its portfolio.
The Portfolio bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At March 31, 2000, the Portfolios had no open futures contracts.
7. TRANSFER OF NET ASSETS
On December 10, 1999, the Georgia Portfolio acquired the assets and certain
liabilities of the Alterman Investment Fund, Inc. ("Alterman Fund") pursuant to
a plan of reorganization approved by Alterman Fund shareholders on December 7,
1999. Total Class A shares issued by the Georgia Portfolio and the total net
assets of the Alterman Fund and the Georgia Portfolio on the date of the
transfer were as follows:
CLASS A SHARES TOTAL NET TOTAL NET
ISSUED BY THE ASSETS OF THE ASSETS OF THE
ACQUIRED PORTFOLIO GEORGIA PORTFOLIO ALTERMAN FUND GEORGIA PORTFOLIO
--------------------------------------------------------------------------------
Alterman Fund 1,756,148 $21,598,463 $46,533,613
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The total net assets of the Alterman Fund before acquisition included unrealized
appreciation of $5,627. Total net assets of the Georgia Portfolio immediately
after the transfer were $68,132,076. The transaction was structured to qualify
as a tax-free reorganization under the Internal Revenue Code of 1986, as
amended.
8. CAPITAL LOSS CARRYFORWARDS
At March 31, 2000, the Georgia Portfolio and Pennsylvania had, for Federal
income tax purposes, approximately $1,015,300 and $668,000, respectively, of
unused capital loss carryforwards available to offset future capital gains. To
the extent that these capital carryforward losses are used to offset capital
gains, it is probable that the gains so offset will not be distributed.
The amount and expiration of the carryforwards are indicated below. Expiration
occurs on March 31 of the year indicated:
2007 2008 TOTAL
--------------------------------------------------------------------------------
Georgia Portfolio $32,000 $983,300 $1,015,300
--------------------------------------------------------------------------------
Pennsylvania Portfolio -- 668,000 668,000
--------------------------------------------------------------------------------
9. SHARES OF BENEFICIAL INTEREST
At March 31, 2000, 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, 2000, total paid-in capital amounted to the following for each
class and their respective Portfolio:
PORTFOLIO CLASS A CLASS B CLASS L
--------------------------------------------------------------------------------
Georgia $44,459,130 $11,864,130 $6,186,286
--------------------------------------------------------------------------------
Pennsylvania 30,309,167 27,882,604 9,232,688
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
32 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Transactions in shares of each class were as follows:
YEAR ENDED YEAR ENDED
MARCH 31, 2000 MARCH 31, 1999
--------------------------------------------------------------------------------
GEORGIA PORTFOLIO SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------
CLASS A
Shares sold 433,730 $ 5,489,120 1,200,278 $ 16,271,337
Net asset value of shares issued
in connection with the transfer
of the Alterman Investment
Fund, Inc.'s net assets
(Note 7) 1,756,148 21,598,463 -- --
Shares issued on
reinvestment 66,344 833,376 67,730 914,734
Shares reacquired (1,361,842) (16,857,809) (211,503) (2,869,561)
--------------------------------------------------------------------------------
Net Increase 894,380 $ 11,063,150 1,056,505 $ 14,316,510
--------------------------------------------------------------------------------
CLASS B
Shares sold 165,268 $ 2,079,687 261,025 $ 3,530,318
Shares issued on
reinvestment 23,121 290,041 27,819 375,581
Shares reacquired (275,576) (3,444,014) (70,773) (957,095)
--------------------------------------------------------------------------------
Net Increase (Decrease) (87,187) $ (1,074,286) 218,071 $ 2,948,804
--------------------------------------------------------------------------------
CLASS L*
Shares sold 156,250 $ 1,956,923 209,651 $ 2,826,332
Shares issued on
reinvestment 19,527 244,511 16,827 227,004
Shares reacquired (244,377) (3,018,177) (27,773) (374,893)
--------------------------------------------------------------------------------
Net Increase (Decrease) (68,600) $ (816,743) 198,705 $ 2,678,443
--------------------------------------------------------------------------------
PENNSYLVANIA PORTFOLIO
--------------------------------------------------------------------------------
CLASS A
Shares sold 1,221,597 $ 15,315,858 2,220,491 $ 30,095,215
Shares issued on
reinvestment 88,369 1,101,770 74,724 1,013,016
Shares reacquired (1,373,637) (16,745,468) (1,113,160) (15,119,889)
--------------------------------------------------------------------------------
Net Increase (Decrease) (63,671) $ (327,840) 1,182,055 $ 15,988,342
--------------------------------------------------------------------------------
CLASS B
Shares sold 657,252 $ 8,326,581 619,028 $ 8,397,240
Shares issued on
reinvestment 57,077 709,871 55,942 756,780
Shares reacquired (434,227) (5,325,766) (219,380) (2,969,501)
--------------------------------------------------------------------------------
Net Increase 280,102 $ 3,710,686 455,590 $ 6,184,519
--------------------------------------------------------------------------------
CLASS L*
Shares sold 205,594 $ 2,635,246 266,841 $ 3,617,157
Shares issued on
reinvestment 21,188 264,025 23,458 317,261
Shares reacquired (299,024) (3,716,680) (79,975) (1,084,305)
--------------------------------------------------------------------------------
Net Increase (Decrease) (72,242) $ (817,409) 210,324 $ 2,850,113
--------------------------------------------------------------------------------
*On June 12, 1998, Class C shares were renamed Class L shares.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 33
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR ENDED MARCH 31:
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------
GEORGIA PORTFOLIO 2000(1) 1999(1) 1998 1997 1996
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 13.43 $ 13.43 $ 12.48 $ 12.50 $ 12.10
-----------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(2) 0.65 0.62 0.67 0.69 0.70
Net realized and unrealized
gain (loss) (1.06) 0.12 1.03 0.04 0.45
-----------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.41) 0.74 1.70 0.73 1.15
-----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.62) (0.62) (0.67) (0.67) (0.70)
In excess of net investment income -- (0.03) -- -- --
Net realized gains -- (0.09) (0.08) (0.08) (0.05)
-----------------------------------------------------------------------------------------
Total Distributions (0.62) (0.74) (0.75) (0.75) (0.75)
-----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 12.40 $ 13.43 $ 13.43 $ 12.48 $ 12.50
-----------------------------------------------------------------------------------------
TOTAL RETURN (2.97)% 5.61% 13.85% 5.95% 9.67%
-----------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $ 43,100 $34,680 $ 20,502 $ 14,495 $ 9,744
-----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(2)(3) 0.68% 0.64% 0.50% 0.48% 0.38%
Net investment income 4.74 4.63 5.10 5.49 5.57
-----------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 98% 48% 36% 81% 63%
-----------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The Manager has waived all or part of its fees for the years ended March
31, 1999, 1998, 1997 and 1996. In addition, the Manager reimbursed expenses
of $56,755 for the year ended March 31, 1996. 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
------------------------------- --------------------------------
1999 1998 1997 1996 1999 1998 1997 1996
----- ----- ----- ----- ----- ----- ----- -----
Class A $0.01 $0.04 $0.04 $0.11 0.74% 0.83% 0.90% 1.23%
(3) As a result of voluntary expense limitations, expense ratios will not
exceed 0.80%.
--------------------------------------------------------------------------------
34 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR ENDED MARCH 31:
<TABLE>
<CAPTION>
CLASS B SHARES
---------------------------------------------
GEORGIA PORTFOLIO 2000(1) 1999(1) 1998 1997 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 13.42 $ 13.43 $ 12.47 $12.50 $12.11
----------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(2) 0.56 0.56 0.61 0.62 0.64
Net realized and unrealized
gain (loss) (1.03) 0.10 1.03 0.04 0.45
----------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.47) 0.66 1.64 0.66 1.09
----------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.55) (0.55) (0.60) (0.61) (0.65)
In excess of net investment income -- (0.03) -- -- --
Net realized gains -- (0.09) (0.08) (0.08) (0.05)
----------------------------------------------------------------------------------
Total Distributions (0.55) (0.67) (0.68) (0.69) (0.70)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 12.40 $ 13.42 $ 13.43 $12.47 $12.50
----------------------------------------------------------------------------------
TOTAL RETURN (3.45)% 4.99% 13.39% 5.33% 9.08%
----------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $11,503 $13,633 $10,712 $7,354 $5,461
----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(2)(3) 1.30% 1.15% 1.02% 1.00% 0.92%
Net investment income 4.47 4.12 4.58 4.97 5.20
----------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 98% 48% 36% 81% 63%
----------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The Manager has waived all or part of its fees for the years ended March
31, 1999, 1998, 1997 and 1996. In addition, the Manager reimbursed expenses
of $56,755 for the year ended March 31, 1996. 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
------------------------------- --------------------------------
1999 1998 1997 1996 1999 1998 1997 1996
----- ----- ----- ----- ----- ----- ----- -----
Class B $0.02 $0.04 $0.05 $0.10 1.26% 1.35% 1.42% 1.77%
(3) As a result of voluntary expense limitations, expense ratios will not
exceed 1.30%.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 35
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR ENDED MARCH 31:
CLASS L SHARES
---------------------------------------------
GEORGIA PORTFOLIO 2000(1) 1999(1)(2) 1998 1997 1996
--------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $13.41 $13.41 $12.46 $12.49 $12.09
--------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(3) 0.56 0.55 0.60 0.62 0.63
Net realized and unrealized
gain (loss) (1.04) 0.12 1.02 0.03 0.46
--------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.48) 0.67 1.62 0.65 1.09
--------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.54) (0.55) (0.59) (0.60) (0.64)
In excess of net investment income -- (0.03) -- -- --
Net realized gains -- (0.09) (0.08) (0.08) (0.05)
--------------------------------------------------------------------------------
Total Distributions (0.54) (0.67) (0.67) (0.68) (0.69)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.39 $13.41 $13.41 $12.46 $12.49
--------------------------------------------------------------------------------
TOTAL RETURN (3.51)% 5.01% 13.23% 5.28% 9.12%
--------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $5,893 $7,304 $4,641 $3,221 $2,914
--------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)(4) 1.33% 1.20% 1.06% 1.04% 0.97%
Net investment income 4.44 4.07 4.54 4.93 5.18
--------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 98% 48% 36% 81% 63%
--------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) The Manager has waived all or part of its fees for the years ended March
31, 1999, 1998, 1997 and 1996. In addition, the Manager reimbursed expenses
of $56,755 for the year ended March 31, 1996. 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
------------------------------- --------------------------------
1999 1998 1997 1996 1999 1998 1997 1996
----- ----- ----- ----- ----- ----- ----- -----
Class L $0.02 $0.04 $0.05 $0.10 1.31% 1.39% 1.46% 1.82%
(4) As a result of voluntary expense limitations, expense ratios will not
exceed 1.35%.
--------------------------------------------------------------------------------
36 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR ENDED MARCH 31:
CLASS A SHARES
---------------------------------------------
PENNSYLVANIA PORTFOLIO 2000(1) 1999(1) 1998 1997 1996(1)
--------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $13.44 $13.54 $12.66 $12.62 $12.40
--------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(2) 0.67 0.66 0.73 0.71 0.70
Net realized and unrealized
gain (loss) (1.25) 0.08 0.95 0.04 0.29
--------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.58) 0.74 1.68 0.75 0.99
--------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.66) (0.69) (0.69) (0.71) (0.72)
Net realized gains (0.02) (0.15) (0.11) -- (0.05)
--------------------------------------------------------------------------------
Total Distributions (0.68) (0.84) (0.80) (0.71) (0.77)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.18 $13.44 $13.54 $12.66 $12.62
--------------------------------------------------------------------------------
TOTAL RETURN (4.31)% 5.61% 13.52% 6.11% 8.08%
--------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $27,978 $31,718 $15,955 $15,152 $11,847
--------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(2)(3) 0.63% 0.50% 0.37% 0.37% 0.38%
Net investment income 5.29 4.94 5.46 5.66 5.57
--------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 54% 49% 81% 122% 88%
--------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The Manager has waived all or part of its fees for the years ended March
31, 2000, 1999, 1998, 1997 and 1996. In addition, the Manager reimbursed
expenses of $23,433 for the year ended March 31, 1996. 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
------------------------------- --------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Class A $0.01 $0.03 $0.05 $0.06 $0.07 0.75% 0.75% 0.79% 0.82% 0.93%
(3) As a result of voluntary expense limitations, expense ratios will not
exceed 0.80%.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 37
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR ENDED MARCH 31:
CLASS B SHARES
---------------------------------------------
PENNSYLVANIA PORTFOLIO 2000(1) 1999(1) 1998 1997 1996(1)
--------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $13.42 $13.52 $12.64 $12.61 $12.39
--------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(2) 0.60 0.60 0.65 0.65 0.64
Net realized and unrealized
gain (loss) (1.24) 0.07 0.96 0.03 0.29
--------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.64) 0.67 1.61 0.68 0.93
--------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.59) (0.62) (0.62) (0.65) (0.66)
Net realized gains (0.02) (0.15) (0.11) -- (0.05)
--------------------------------------------------------------------------------
Total Distributions (0.61) (0.77) (0.73) (0.65) (0.71)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.17 $13.42 $13.52 $12.64 $12.61
--------------------------------------------------------------------------------
TOTAL RETURN (4.78)% 5.07% 12.97% 5.56% 7.61%
--------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $26,296 $25,234 $19,268 $15,559 $13,131
--------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(2)(3) 1.15% 1.01% 0.89% 0.88% 0.88%
Net investment income 4.79 4.45 4.94 5.15 5.07
--------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 54% 49% 81% 122% 88%
--------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The Manager has waived all or part of its fees for the years ended March
31, 2000, 1999, 1998, 1997 and 1996. In addition, the Manager reimbursed
expenses of $23,433 for the year ended March 31, 1996. 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
------------------------------- --------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Class B $0.01 $0.03 $0.05 $0.06 $0.07 1.26% 1.26% 1.31% 1.33% 1.44%
(3) As a result of voluntary expense limitations, expense ratios will not
exceed 1.30%.
--------------------------------------------------------------------------------
38 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR ENDED MARCH 31:
CLASS L SHARES
---------------------------------------------
PENNSYLVANIA PORTFOLIO 2000(1) 1999(1)(2) 1998 1997 1996(1)
--------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $13.41 $13.51 $12.64 $12.61 $12.39
--------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(3) 0.59 0.60 0.64 0.64 0.64
Net realized and unrealized
gain (loss) (1.24) 0.06 0.96 0.04 0.29
--------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.65) 0.66 1.60 0.68 0.93
--------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.58) (0.61) (0.62) (0.65) (0.66)
Net realized gains (0.02) (0.15) (0.11) -- (0.05)
--------------------------------------------------------------------------------
Total Distributions (0.60) (0.76) (0.73) (0.65) (0.71)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.16 $13.41 $13.51 $12.64 $12.61
--------------------------------------------------------------------------------
TOTAL RETURN (4.83)% 5.02% 12.84% 5.51% 7.56%
--------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $8,635 $10,490 $7,729 $5,731 $4,682
--------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3)(4) 1.20% 1.07% 0.94% 0.94% 0.94%
Net investment income 4.70 4.40 4.89 5.09 5.00
--------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 54% 49% 81% 122% 88%
--------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) The Manager has waived all or part of its fees for the years ended March
31, 2000, 1999, 1998, 1997 and 1996. In addition, the Manager reimbursed
expenses of $23,433 for the year ended March 31, 1996. If such fees were
not waived and expenses not reimbursed, the effect on net investment income
and expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers and/or
Per Share Decreases Expense Reimbursements(4)
------------------------------- --------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Class L $0.01 $0.03 $0.05 $0.06 $0.07 1.32% 1.32% 1.36% 1.39% 1.49%
(4) As a result of voluntary expense limitations, expense ratios will not
exceed 1.35%.
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 39
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF THE GEORGIA PORTFOLIO AND PENNSYLVANIA PORTFOLIO
OF SMITH BARNEY MUNI FUNDS:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Georgia Portfolio and Pennsylvania Portfolio of
Smith Barney Muni Funds as of March 31, 2000, the related statements of
operations for the year 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 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 auditing standards generally accepted
in the United States of America. 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, 2000, 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 Portfolio and Pennsylvania Portfolio of Smith Barney Muni Funds as of
March 31, 2000, 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 their financial highlights for each of the years in the five-year
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
/s/ KPMG LLP
New York, New York
May 11, 2000
--------------------------------------------------------------------------------
40 2000 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED)
On April 19, 1999, a special meeting of shareholders of the Fund was held for
the purpose of electing Trustees to the Fund.
The results were as follows:
SHARES PERCENTAGE SHARES PERCENTAGE
VOTED OF SHARES VOTED OF SHARES
NAME OF TRUSTEES FOR VOTED AGAINST VOTED
================================================================================
Lee Abraham 1,350,265,160.850 97.943% 28,359,584.139 2.057%
Allan J. Bloostein 1,351,356,664.226 98.022 27,268,080.763 1.978
Jane F. Dasher 1,352,390,291.715 98.097 26,234,453.274 1.903
Donald R. Foley 1,350,867,506.020 97.987 27,757,238.969 2.013
Richard E. Hanson, Jr. 1,351,302,644.963 98.018 27,322,100.026 1.982
Paul Hardin 1,352,452,572.699 98.102 26,172,172.290 1.898
Heath B. McLendon 1,352,481,643.116 98.104 26,143,101.873 1.896
Roderick C. Rasmussen 1,351,438,798.818 98.028 27,185,946.171 1.972
John P. Toolan 1,352,497,455.395 98.105 26,127,289.594 1.895
================================================================================
TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates for the fiscal year ended
March 31, 2000:
o Percentages of dividends paid by the Portfolios from net investment income as
tax exempt for regular Federal income tax purposes:
Georgia Portfolio 100%
Pennsylvania Portfolio 100%
o Total long-term capital gain distributions paid:
Pennsylvania Portfolio $57,924
--------------------------------------------------------------------------------
SMITH BARNEY MUNI FUNDS 41
<PAGE>
TRUSTEES
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, CHAIRMAN
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, EMERITUS
OFFICERS
Heath B. McLendon
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Lewis E. Daidone
SENIOR VICE PRESIDENT
AND TREASURER
Peter M. Coffey
VICE PRESIDENT
Anthony Pace
CONTROLLER
Christina T. Sydor
SECRETARY
INVESTMENT MANAGER
SSB Citi Fund Management LLC
DISTRIBUTOR
CFBDS, Inc.
CUSTODIAN
PFPC Trust Company
TRANSFER AGENT
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
SUB-TRANSFER AGENT
PFPCGlobal Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney Muni Funds -- Georgia and Pennsylvania Portfolios, but it may also be
used as sales literature when proceeded or accompanied by the current
Prospectus, which gives details about charges, expenses, investment objectives
and operating policies of the Portfolios. If used as sales material after June
30, 2000, this report must be accompanied by performance information for the
most recently completed calendar quarter.
SALOMON SMITH BARNEY IS A SERVICE MARK OF SALOMON SMITH BARNEY INC.
SMITH BARNEY MUNI FUNDS
388 Greenwich Street, MF-2
New York, New York 10013
WWW.SMITHBARNEY.COM/MUTUALFUNDS
