1 9 9 4
ANNUAL
REPORT
DESCRIPTION OF ART WORK ON REPORT COVER
Small box above fund name showing a highway going across New Jersey's
homes and trees.
Smith Barney Shearson
NEW JERSEY MUNICIPALS FUND INC.
MARCH 31, 1994
SMITH BARNEY SHEARSON
NEW JERSEY MUNICIPALS FUND INC.
DEAR SHAREHOLDER:
We are pleased to provide you with the Annual Report for Smith Barney
Shearson New Jersey Municipals Fund Inc. for the fiscal year ended March
31, 1994. In this report we will provide you with a review of the Fund's
performance, the market environment and portfolio activities during the
past twelve months. In addition, you will notice that we have taken this
opportunity to simplify the report by separating the historical perfor-
mance information for A and B classes of shares into two distinct sec-
tions. Our goal is to give you clear, concise information that makes it
easier for you to follow your investment. We have done this because Smith
Barney Shearson believes that an informed investor and an experienced Fi-
nancial Consultant form the most productive partnerships.
THE MUNICIPAL MARKET AND THE ECONOMIC ENVIRONMENT
The economy remained weak during the first six months of the Fund's fiscal
year and the Federal Reserve Board maintained an accommodative policy to
keep interest rates low. Consumers took advantage of low rates by refi-
nancing mortgages in record number, which increased their disposable in-
come. The consumer drives two-thirds of this country's economic growth, so
this increase in disposable income was quite significant and in fact was
one of the major factors igniting the strong economic growth of the fourth
quarter of 1993 and first quarter of 1994. The growth during the last two
quarters of the fiscal year was so strong that the Federal Reserve Board
viewed it as a possible portent of inflation. In a preemptive move, the
Fed attempted to rein in the economy's growth by increasing the Federal
funds rate (an important indicator of the general direction of interest
rates) to 3.75% from 3% in three successive moves between February 4 and
April 18, 1994; another increase to 4% is likely in the months ahead.
These increases in short-term rates were intended to control possible in-
flationary pressures and keep long-term interest rates low. However, at
the time there were an enormous amount of investments in the marketplace
predicated on short-term interest rates staying low. As short-term rates
rose, investors met liquidity demands by selling long-term U.S. Treasuries
which caused an unintended and unwarranted rise in long-term interest
rates. Interest rates on municipals followed suit as dealers sold their
municipal inventory in order to meet the selling demands of Treasury secu-
rity investors. This uncertain investment environment caused many inves-
tors to head for the higher ground of shorter maturities which are gener-
ally less volatile than longer-term issues, and this also contributed to
higher interest rates on tax-exempt securities.
DIVIDEND POLICY
Although not explicitly stated in the prospectus, the Fund's policy is to
pay a level monthly dividend based on our projections for the municipal
bond market and the general direction of interest rates. This policy has
no appreciable affect on the Fund's investment strategies or net asset
value per share since it is guided by market conditions. It means that we
do not invest in more speculative securities that may undermine the Fund's
net asset value per share in order to maintain an unrealistically high
dividend policy. We continually monitor both the market and the Fund's in-
come stream to see that our dividend projections are realistic.
Like the national economy, New Jersey's economy is also doing better since
so much of it relies on consumer spending. Statistical evidence confirms
this as does our own anecdotal evidence. In recent months we've noticed an
increasing ratio of cars to parking spots at many of New Jersey's shopping
malls. Although disposable income is higher, we don't see much evidence of
wage growth. Governor Whitman, elected on a platform of cutting government
and spending, followed through on her campaign promise and twice has made
modest tax cuts but we believe that these are unlikely to provide an in-
flationary boost to the economy.
New Jersey taxes remain high, however, making New Jersey tax-exempt paper
quite expensive relative to the general municipal market. We think that
this situation is likely to continue, primarily because the supply of
high-quality tax-exempt issues is almost certain to decrease as higher
interest rates make it far less attractive for municipalities to issue new
bonds. In addition, the scarcity of bonds is being compounded by taxpayer
revolt that has manifested itself in defeated school budgets and bond
referendums.
PORTFOLIO STRATEGY
As investment managers, our goal is to provide investors with tax-free in-
come and stability of principal through investments in securities exempt
from Federal and New Jersey state income taxes. We are focusing on high-
quality, longer-term securities. Our belief is that lower-rated issues
simply don't adequately compensate the investor for the additional risk
they are taking, even in an improving economic environment. We generally
prefer to invest in general obligations bonds and essential service reve-
nue bonds backed by water, sewer, and utility projects because people tend
to pay these bills on a timely basis. We are hesitant to invest in health
care bonds until the Clinton health care package is finalized.
As interest rates rose during the fourth quarter of 1993 and first quarter
of 1994, we shortened the Fund's average maturity to approximately 18.5
years to avoid some of the volatility of the long-term bond market. More
recently, believing that the worst of the interest rate rise is behind us,
we have begun extending the average maturity of the Fund to the 20- to 21-
year range to try and capture a little bit more yield. This higher yield
is important to maintaining the Fund's income stream which was somewhat
reduced by the bond calls and refinancings of the past year and will con-
tinue to be challenged by bond calls during the rest of 1994.
In closing, we welcome new investors to the Fund and thank longer term in-
vestors for their continued trust. As we have since the Fund's inception
in 1988, we will strive to provide you with investment performance that
best serves the interests of the Fund's investors.
Sincerely,
Heath B. McLendon
Chairman of the Board
Lawrence T. McDermott
Vice President and
Investment Officer
May 16, 1994
HISTORICAL PERFORMANCE -- CLASS A SHARES
<TABLE>
<CAPTION>
Net Asset Value
Year Ended Capital Dividends Total
March 31 Beginning Ending Gains Paid+ Paid+
Return*
<S> <C> <C> <C> <C> <C>
4/22/88 - 3/31/89 $11.40 $11.67 $0.01 $0.82
9.84%
1990 $11.67 $11.92 $0.03 $0.82
9.62%
1991 $11.92 $12.17 $0.05 $0.84
9.89%
1992 $12.17 $12.44 $0.13 $0.81
10.22%
1993 $12.44 $13.16 $0.14 $0.76
13.49%
1994 $13.16 $12.55 $0.15 $0.70
1.66%
Total $0.51 $4.75
Cumulative Total Return -- (4/22/88 through 3/31/94)
68.25%
<FN>
* Figures assume reinvestment of all dividends and capital gains distri-
butions at net asset value and do not assume deduction of the front-end
sales charge (maximum 4.5%).
+ The above distributions are reported in accordance with generally ac-
cepted accounting principles and may differ from the figures reported
on Form 1099 due to timing differences.
</TABLE>
THE FUND'S POLICY IS TO DISTRIBUTE DIVIDENDS MONTHLY
AND CAPITAL GAINS, IF ANY, ANNUALLY.
AVERAGE ANNUAL TOTAL RETURN** -- CLASS A SHARES
<TABLE>
<CAPTION>
Without Sales Charge With Sales
Charge***
With Fee Without With Fee
Without
Waiver Fee Waiver Waiver
Fee Waiver
and Expense and Expense and Expense
and Expense
Reimbursement Reimbursement Reimbursement
Reimbursement
<S> <C> <C> <C>
<C>
Year Ended 3/31/94 1.66% 1.61% (2.91)%
(2.96)%
Five Years Ended
3/31/94 8.90% 8.65% 7.90%
7.65%
Inception 4/22/88
through 3/31/94 9.16% 8.82% 8.31%
7.98%
<FN>
** All average annual total return figures shown reflect reinvestment of
dividends and capital gains at net asset value. The Fund commenced op-
erations April 22, 1988. The Fund waived investment advisory, sub-
investment advisory and administration fees and reimbursed expenses
from April 1988 to March 1994. A shareholder's actual return for peri-
ods during which waivers and reimbursements were in effect would be
the higher of the two numbers shown.
*** Average annual total return figures shown assume the deduction of the
maximum 4.5% sales charge. NOTE: On November 6, 1992, existing shares
of the Fund were designated Class A shares. Class A shares are subject
to a maximum 4.5% front-end sales charge and an annual service fee of
0.15% of the value of the average daily net assets attributable to
that class. The Fund's annual rates of return would have been lower
had service fees been in effect prior to November 6, 1992.
</TABLE>
GROWTH OF $10,000 INVESTED IN CLASS A SHARES OF
SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC.+
DESCRIPTION OF MOUNTAIN CHART IN SHEARSON COVERS (CLASS A)
A line graph depicting the total growth (including reinvestment of divi-
dends and capital gains) of a hypothetical investment of $10,000 in New
Jersey Municipals Fund's Class A shares on April 22, 1988 through March
31, 1994 as compared with the growth of a $10,000 investment in the Lipper
New Jersey Peer Group Average and Lehman Municipal Bond Index. The plot
points used to draw the line graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
GROWTH OF $10,000 INVESTMENT IN THE
GROWTH OF $10,000 INVESTED IN THE LEHMAN BROTHERS
INVESTED IN CLASS A LIPPER NEW JERSEY MUNICIPAL
MONTH ENDED SHARES OF THE FUND PEER GROUP AVERAGE BOND INDEX
<S> <C> <C> <C>
04/22/88 $9,550 - -
04/88 $9,600 $10,000 $10,000
05/88 $9,676 $10,002 $9,971
06/88 $9,864 $10,212 $10,117
09/88 $10,183 $10,537 $10,377
12/88 $10,475 $10,781 $10,570
03/89 $10,490 $10,847 $10,640
06/89 $11,102 $11,520 $11,270
09/89 $11,101 $11,451 $11,277
12/89 $11,446 $11,858 $11,710
03/90 $11,498 $11,873 $11,762
06/90 $11,799 $12,164 $12,037
09/90 $11,793 $12,115 $12,044
12/90 $12,364 $12,697 $12,564
03/91 $12,635 $12,985 $12,848
06/91 $12,876 $13,264 $13,122
09/91 $13,455 $13,814 $13,632
12/91 $13,876 $14,242 $14,089
03/92 $13,926 $14,268 $14,131
06/92 $14,501 $14,850 $14,667
09/92 $14,892 $15,196 $15,057
12/92 $15,184 $15,504 $15,331
03/93 $15,805 $16,098 $15,900
06/93 $16,366 $16,694 $16,421
09/93 $16,949 $17,275 $16,976
12/93 $17,156 $17,444 $17,214
03/94 $16,068 $16,389 $16,269
<FN>
+ Illustration of $10,000 invested in Class A shares on April 22, 1988 as-
suming deduction of the maximum 4.5% sales charge at the time of invest-
ment and reinvestment of dividends and capital gains at net asset value
through March 31, 1994.
</TABLE>
LIPPER NEW JERSEY PEER GROUP AVERAGE -- The Lipper New Jersey Peer Group
Average is composed of an average of the Fund's peer group of mutual
funds (34 as of March 31, 1994) investing in New Jersey tax-exempt
bonds.
LEHMAN MUNICIPAL BOND INDEX -- The Lehman Municipal Bond Index is an un-
managed, broad-based index which includes about 8,000 tax-free bonds and
reflects approximately $300 billion of market capitalization.
Index information is available at month-end only; therefore the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here and on the following pages represent past
performance of the Fund and do not guarantee future results of Class A
shares.
HISTORICAL PERFORMANCE -- CLASS B SHARES
<TABLE>
<CAPTION>
Net Asset Value
Year Ended Capital Dividends
Total
March 31 Beginning Ending Gains Paid+ Paid+
Return*
<S> <C> <C> <C> <C>
<C>
11/6/92 - 3/31/93 $12.75 $13.16 $0.14 $0.28
6.60%
1994 $13.16 $12.55 $0.15 $0.63
1.15%
Total $0.29 $0.91
Cumulative Total Return -- (11/6/92 through 3/31/94)
7.82%
<FN>
* Figures assume reinvestment of all dividends and capital gains distri-
butions at net asset value and do not assume deduction of the contin-
gent deferred sales charge ("CDSC").
+ The above distributions are reported in accordance with generally ac-
cepted accounting principles and may differ from the figures reported
on Form 1099 due to timing differences.
</TABLE>
THE FUND'S POLICY IS TO DISTRIBUTE DIVIDENDS MONTHLY
AND CAPITAL GAINS, IF ANY, ANNUALLY.
AVERAGE ANNUAL TOTAL RETURN** -- CLASS B SHARES
<TABLE>
<CAPTION>
Without CDSC With
CDSC***
With Fee Without With Fee
Without
Waiver Fee Waiver Waiver
Fee Waiver
and Expense and Expense and Expense
and Expense
Reimbursement Reimbursement Reimbursement
Reimbursement
<S> <C> <C> <C>
<C>
Year Ended 3/31/94 1.15% 1.09% (3.14)%
(3.19)%
Inception 11/6/92
through 3/31/94 5.53% 5.44% 2.76%
2.67%
<FN>
** All average annual total return figures shown reflect reinvestment of
dividends and capital gains at net asset value. The Fund waived fees
and reimbursed expenses from November 6, 1992 to the present. A share-
holder's actual return for periods during which waivers and reimburse-
ments were in effect would be the higher of the two numbers shown.
*** Average annual total return figures shown assume the deduction of the
maximum applicable CDSC which is described in the prospectus.
</TABLE>
NOTE: The Fund began offering Class B shares on November 6, 1992.
Class B shares are subject to a maximum 4.5% CDSC and an annual ser-
vice and distribution fees of 0.15% and 0.50%, respectively, of the
value of the average daily net assets attributable to that class.
GROWTH OF $10,000 INVESTED IN CLASS B SHARES OF
SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC.+
DESCRIPTION OF MOUNTAIN CHART IN SHEARSON COVERS (CLASS B)
A line graph depicting the total growth (including reinvestment of divi-
dends and capital gains) of a hypothetical investment of $10,000 in New
Jersey Municipals Fund's Class B shares on November 6, 1992 through March
31, 1994 as compared with the growth of a $10,000 investment in Lipper New
Jersey Peer Group Average and Lehman Municipal Bond Index. The plot points
used to draw the line graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000 GROWTH OF $10,000
GROWTH OF $10,000 INVESTED IN THE INVESTMENT IN THE
INVESTED IN CLASS B LIPPER NEW JERSEY LEHMAN MUNICIPAL
MONTH ENDED SHARES OF THE FUND PEER GROUP AVERAGE BOND INDEX
<S> <C> <C> <C>
10/31/92 - $10,000 $10,000
11/06/92 $10,000 - -
11/92 $10,140 $10,267 $10,179
12/92 $10,255 $10,400 $10,283
03/93 $10,660 $10,799 $10,665
06/93 $11,025 $11,199 $11,014
09/93 $11,404 $11,588 $11,386
12/93 $11,529 $11,701 $11,546
03/94 $10,389 $10,994 $10,913
<FN>
+ Illustration of $10,000 invested in Class B shares on November 6, 1992
assuming deduction of the maximum CDSC at the time of redemption and
reinvestment of dividends and capital gains at net asset value through
March 31, 1994.
++ Value does not assume deduction of applicable CDSC.
+++ Value assumes deduction of applicable CDSC (assuming redemption on
March 31, 1994).
</TABLE>
LIPPER NEW JERSEY PEER GROUP AVERAGE - The Lipper New Jersey Peer Group
Average is composed of an average of the Fund's peer group of mutual funds
(34 as of March 31, 1994) investing in New Jersey tax-exempt bonds.
LEHMAN MUNICIPAL BOND INDEX - The Lehman Municipal Bond Index is an unman-
aged, broad-based index which includes about 8,000 tax-free bonds and re-
flects approximately $300 billion of market capitalization.
Index information is available at month-end only; therefore, the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here and on the other pages represent past per-
formance of the Fund and do not guarantee future results of Class B
shares.
PORTFOLIO HIGHLIGHTS (UNAUDITED)
MARCH 31, 1994
INDUSTRY BREAKDOWN
DESCRIPTION OF PIE CHARTS IN SHAREHOLDER REPORT
Pie chart depicting the allocation of the New Jersey Municipals Fund's in-
vestment securities held at March 31, 1994 by industry classification. The
pie is broken in pieces representing industries in the following percent-
ages:
<TABLE>
<CAPTION>
INDUSTRY PERCENTAGE
<S> <C>
UTILITY REVENUE 16.2%
TRANSPORTATION 3.5%
HOSPITAL 17.2%
OTHER 16.9%
POLLUTION CONTROL REVENUE 7.9%
HOUSING 4.9%
EDUCATION 8.5%
SHORT-TERM MUNICIPAL BONDS AND NOTES AND 0.7%
NET OTHER ASSETS AND LIABILITIES
GENERAL OBLIGATIONS 24.2%
</TABLE>
SUMMARY OF MUNICIPAL BONDS AND SHORT-TERM
TAX-EXEMPT INVESTMENTS BY COMBINED RATINGS
<TABLE>
<CAPTION>
STANDARD & PERCENTAGE OF
MOODY'S POOR'S MARKET VALUE
<S> <C> <C> <C>
Aaa or AAA 54%
Aa AA 14
A A 13
Baa BBB 10
NR NR 9
100%
</TABLE>
AVERAGE MATURITY 19.7 years
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
KEY TO INSURANCE ABBREVIATIONS
AMBAC -- American Municipal Bond Assurance Corporation
BIGI -- Bond Investors Guaranty Insurance
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Administration
FSA -- Federal Security Assurance
MBIA -- Municipal Bond Investors Assurance
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
MARKET
VALUE
FACE VALUE MOODY'S S&P (NOTE
1)
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- 98.5%
NEW JERSEY -- 98.2%
Atlantic County, New Jersey, Cer-
tificates of Participation, Pub-
lic Facilities Lease Agreement,
(FGIC Insured),
$2,500,000 7.400% due 3/1/2009 Aaa AAA $
2,828,125
Atlantic County, New Jersey, Im-
provement Authority Revenue, Lux-
ury Tax Revenue, Convention Cen-
ter, (MBIA Insured),
375,000 7.400% due 7/1/2016 Aaa AAA
441,563
Atlantic County, New Jersey,
Utilities Authority Revenue,
Solid Waste Revenue,
950,000 7.125% due 3/1/2016 Baa NR
955,938
Avalon Boro, New Jersey, Revenue,
(MBIA Insured),
550,000 5.400% due 7/1/2013 Aaa AAA
501,188
Beachwood, New Jersey, Sewer Au-
thority Revenue, Junior Lien,
700,000 6.500% due 12/1/2012 Baa1 NR
702,625
Belvedere, New Jersey, General
Obligation Refunding Bonds,
(AMBAC Insured),
665,000 7.300% due 12/1/2014 Aaa AAA
729,006
Bordentown, New Jersey, Sewerage
Authority Revenue, Series C,
(MBIA Insured),
1,000,000 6.900% due 12/1/2016 Aaa AAA
1,076,250
Camden County, New Jersey, Im-
provement Authority Revenue, Se-
ries B, (AMBAC Insured),
1,000,000 5.250% due 12/1/2018 Aaa AAA
881,250
Cape May County, New Jersey,
Bridge Commission, County Guaran-
teed Revenue,
385,000 6.700% due 6/1/2002 A1 A
399,919
Delaware River Junction Toll
Bridge Commission Refunding
Bonds, (FGIC Insured),
200,000 6.250% due 7/1/2012 Aaa AAA
202,250
Delaware River Port Authority,
Pennsylvania and New Jersey, Del-
aware River Bridge Revenue Re-
funding, (AMBAC Insured),
500,000 7.375% due 1/1/2007 Aaa AAA
545,625
Dover, New Jersey, Board of Edu-
cation, Certificates of Partici-
pation, (FGIC Insured),
550,000 6.600% due 6/1/2011 Aaa AAA
569,938
Essex County, New Jersey, General
Obligation Bonds, (FSA Insured),
175,000 6.500% due 12/1/2011 Aaa AAA
180,688
Essex County, New Jersey, Im-
provement Authority, (FGIC In-
sured),
3,000,000 5.200% due 12/1/2024 Aaa AAA
2,583,750
Essex County, New Jersey, Im-
provement Authority, Lease-
Newark,
650,000 6.600% due 4/1/2014 Baa1 BBB+
628,875
Evesham Township, New Jersey,
Board of Education, Certificates
of Participation,
(FGIC Insured),
750,000 6.875% due 9/1/2011 Aaa AAA
810,000
Glassboro, New Jersey, School
District, Refundable Bonds,
1,510,000 5.000% due 5/1/2017 NR AA
1,272,175
Gloucester County, New Jersey,
Utilities Sewerage System, Series
91A,
1,000,000 6.500% due 1/1/2021 A1 AA-
1,047,500
Hudson County, New Jersey, Cer-
tificates of Participation, Cor-
rectional Facilities,
(MBIA Insured),
425,000 6.600% due 12/1/2021 Aaa AAA
443,594
Hudson County, New Jersey,
General Obligation Bonds,
(FGIC Insured),
200,000 6.550% due 7/1/2010 Aaa AAA
211,250
Hudson County, New Jersey, Im-
provement Authority, Solid Waste
System Revenue,
3,750,000 7.100% due 1/1/2020 NR BBB-
3,806,250
Hudson County, New Jersey, Im-
provement Authority, Solid Waste
System Revenue,
Series A,
1,000,000 6.100% due 7/1/2020 NR A+
942,500
Jersey City, New Jersey, Sewerage
Authority, (AMBAC Insured),
1,700,000 6.250% due 1/1/2014 Aaa AAA
1,723,375
Jersey City, New Jersey, Water
Utility, General Obligation
Bonds, (AMBAC Insured),
530,000 7.500% due 10/1/2003 Aaa AAA
579,025
Keansburg, New Jersey, Board of
Education, Certificates of Par-
ticipation,
500,000 8.000% due 11/1/2014 NR BBB-
569,375
Keansburg, New Jersey, Municipal
Utilities Authority Revenue,
(FGIC Insured),
1,500,000 6.000% due 12/1/2019 Aaa AAA
1,462,500
Kearney, New Jersey, Municipal
Utilities Authority Revenue,
(FGIC Insured),
1,385,000 7.300% due 11/15/2018 Aaa AAA
1,608,331
Lower Township, New Jersey, Mu-
nicipal Utilities Authority,
(MBIA Insured),
1,500,000 6.125% due 12/1/2013 Aaa AAA
1,496,250
Lumberton Township, New Jersey,
School District, Certificates of
Participation, (Fiscal Funding
New Jersey, Inc.), (MBIA In-
sured),
1,000,000 6.100% due 10/1/2013 Aaa AAA
993,750
Manchester Township, New Jersey,
(MBIA Insured),
1,010,000 5.350% due 12/15/2009 Aaa AAA
927,938
Mercer County, New Jersey, Im-
provement Authority Revenue, Re-
funding Bonds, Solid Waste, Se-
ries A, (FGIC Insured),
200,000 6.700% due 4/1/2013 Aaa AAA
210,500
Middlesex County, New Jersey,
Pollution Control Authority Fi-
nancing Revenue,
(Amerada Hess):
1,000,000 7.875% due 6/1/2022++ NR NR
1,017,500
2,000,000 6.875% due 12/1/2022 NR NR
2,062,500
Monmouth County, New Jersey, Sew-
erage Facilities, Improvement Au-
thority Revenue, (Wall and Key-
port Projects):
(BIGI Insured):
1,500,000 5.250% due 8/1/2012 Aaa AAA
1,361,250
500,000 6.750% due 2/1/2013 Aaa AAA
552,500
670,000 7.900% due 7/15/2013 Aaa AAA
747,050
(MBIA Insured),
1,250,000 5.550% due 2/15/2018 Aaa AAA
1,150,000
Monroe Township, New Jersey, Mu-
nicipal Utilities Authority,
Gloucester County Revenue, (AMBAC
Insured),
500,000 6.650% due 7/1/2011 Aaa AAA
525,000
Morris Township, New Jersey, Gen-
eral Obligation Notes:
550,000 6.550% due 7/1/2009 Aa Aa
588,500
550,000 6.550% due 7/1/2010 Aa Aa
587,125
500,000 6.550% due 7/1/2011 Aa Aa
531,875
Morristown, New Jersey, Revenue
Refunding, General Obligation
Bonds,
1,200,000 6.500% due 2/1/2006 A1 A+
1,258,500
New Brunswick, New Jersey, Hous-
ing & Urban Development Author-
ity, (MBIA Insured),
525,000 5.500% due 8/1/2016 Aaa AAA
483,656
New Brunswick, New Jersey, Park-
ing Authority Revenue, City Guar-
anteed Parking,
(FGIC Insured):
2,000,000 5.400% due 9/1/2015 Aaa AAA
1,847,500
Series A,
1,000,000 6.500% due 9/1/2019 Aaa AAA
1,038,750
New Jersey, Economic Development
Authority:
(Garden State Paper),
1,250,000 7.125% due 4/1/2022 Aa1 NR
1,323,438
(GATX Term Corporation), Series
1994,
1,500,000 7.300% due 9/1/2019 Baa1 A-
1,621,875
(Greater New York Boy Scouts),
(MBIA Insured),
1,580,000 5.450% due 9/1/2023 Aaa AAA
1,420,025
(Morris Hall-St. Lawrence),
1,000,000 6.250% due 4/1/2025 NR A+
955,000
(St. Barnabas Realty Development
Corporation), (MBIA Insured):
2,000,000 5.250% due 7/1/2013 Aaa AAA
1,795,000
1,000,000 5.250% due 7/1/2020 Aaa AAA
875,000
(State Contract), (FSA Insured),
1,500,000 6.000% due 3/15/2021 Aaa AAA
1,456,875
(Station Place),
2,005,000 6.625% due 7/1/2003 NR NR
2,030,063
(Vineland Congeration),
750,000 7.875% due 6/1/2019 NR NR
800,625
(Zirser-Greenbriar),
1,500,000 7.375% due 7/15/2003 NR NR
1,492,500
New Jersey Economic Revenue, Na-
tional Association of Accoun-
tants,
480,000 7.650% due 7/1/2009 NR NR
488,400
Nursing Home Revenue:
(Absecon Manor Project), (FHA In-
sured),
500,000 8.250% due 2/1/2028 NR AA+
534,375
Series S,
660,000 6.500% due 6/1/2012 Aaa NR
679,800
Sewer Facilities -- Atlantic City
Sewer Company,
1,500,000 7.250% due 12/1/2011 NR A
1,625,625
Sports and Expo Authority,
Series A, State Contract,
1,900,000 6.000% due 3/1/2021 Aa A+
1,864,375
Trane Division, Economic Develop-
ment Revenue, (1990 Project),
1,000,000 9.500% due 9/1/2000 NR NR
1,130,000
Waste Paper Recycling Revenue,
(Marcel Paper Mills Inc.
Project),
1,000,000 8.500% due 2/1/2010 NR NR
1,117,500
Water Facilities Revenue, (Hack-
ensack Company Project):
Series A,
100,000 8.750% due 10/1/2017 A2 NR
98,750
Series D,
750,000 7.000% due 10/1/2017 NR A
787,500
New Jersey Educational Develop-
ment Revenue, (Health Village
Inc.),
1,000,000 7.800% due 5/1/2016 NR BBB
1,062,500
Series A, (Franciscan Oaks),
1,500,000 8.500% due 10/1/2023 NR NR
1,505,625
New Jersey Health Care Facili-
ties, Financing Authority Reve-
nue:
(Allegany Health), (MBIA In-
sured),
2,200,000 5.200% due 7/1/2018 Aaa AAA
1,916,750
(Atlantic City Medical Center),
Series B,
(FHA Insured),
250,000 8.375% due 8/1/2020 Aaa AAA
286,875
(Atlantic City Medical Center),
Series C,
1,000,000 6.800% due 7/1/2011 A A-
1,027,500
(Burdett Tomlin Memorial Hospi-
tal), Series D, (FGIC Insured):
1,400,000 6.500% due 7/1/2012 Aaa AAA
1,438,500
850,000 6.500% due 7/1/2021 Aaa AAA
873,375
(Columbus Hospital), Series A:
1,350,000 7.200% due 7/1/2001 Baa1 BB-
1,368,563
1,000,000 7.500% due 7/1/2021 Baa1 BB-
936,250
(Community Memorial Hospital As-
sociation), Series C,
250,000 8.000% due 7/1/2014 A A-
269,063
(Deborah Heart & Lung Center),
1,550,000 6.300% due 7/1/2023 Baa1 BBB+
1,470,561
(Helene Fuld Medical Center), Se-
ries C,
1,500,000 8.125% due 7/1/2013 Aaa A
1,640,625
(J.F.K. Health System), Obligated
Group,
(FGIC Insured),
1,125,000 6.700% due 7/1/2021 Aaa AAA
1,188,281
(Jersey Shore Medical Center),
Series B, (AMBAC Insured),
475,000 8.000% due 7/1/2018 Aaa AAA
530,218
(Kennedy Memorial University Med-
ical Center), Series D,
260,000 7.875% due 7/1/2009 A A-
278,525
(Kimball Medical Center), Series
C,
525,000 8.000% due 7/1/1998 Baa BBB-
552,562
(Medical Center of Ocean County),
Series C, (FSA Insured),
830,000 6.750% due 7/1/2020 Aaa AAA
886,025
(Mountainside Hospital), (MBIA
Insured),
1,000,000 5.400% due 7/1/2008 Aaa AAA
942,500
(Newcomb Medical Center), Series
A,
600,000 7.875% due 7/1/2003 Baa BBB+
652,500
(Ocean County Hospital),
2,000,000 6.250% due 7/1/2023 Baa NR
1,795,000
(Overlook Hospital Association),
Series E,
(FGIC Insured),
1,000,000 6.700% due 7/1/2017 Aaa AAA
1,061,250
(Riverview Medical Center),
(AMBAC Insured), Series A:
1,000,000 5.500% due 7/1/2013 Aaa AAA
922,500
1,000,000 5.500% due 7/1/2018 Aaa AAA
907,500
825,000 8.000% due 7/1/2018 Aaa AAA
920,905
(St. Elizabeth's Hospital
Project), Series B,
1,250,000 8.250% due 7/1/2020 Baa BBB
1,340,625
(St. Mary Hospital),
1,750,000 5.875% due 7/1/2012 Baa BBB-
1,588,125
(Somerset Medical Center), (FGIC
Insured),
2,000,000 5.200% due 7/1/2024 Aaa AAA
1,715,000
(Spectrum for Living),
830,000 6.500% due 2/1/2022 NR AAA
831,038
(Wayne General Hospital), (FHA
Insured),
1,250,000 5.750% due 8/1/2011 NR AAA
1,182,813
New Jersey State, Certificates of
Participation, Equipment, Series
A,
2,500,000 6.400% due 4/1/2005 A1 A+
2,550,000
New Jersey State Educational Fa-
cilities, Financing Authority
Revenue, Higher
Education:
(Drew University), Series B,
1,335,000 7.450% due 2/1/2005 NR A
1,435,125
(Fairleigh Dickinson University),
Series C,
2,700,000 6.625% due 7/1/2023 NR NR
2,527,875
(Trenton State College), Series
E,
(AMBAC Insured),
2,000,000 6.000% due 7/1/2019 Aaa AAA
1,950,000
(Jersey City State College), Se-
ries H,
(MBIA Insured),
1,280,000 5.125% due 7/1/2018 Aaa AAA
1,112,000
New Jersey State Higher Education
Assistance,
2,500,000 5.300% due 7/1/2010 NR A+
2,256,250
New Jersey State Highway Author-
ity, General Revenue Bonds,
2,000,000 5.750% due 1/1/2019 A1 AA-
1,905,000
New Jersey State Housing & Mort-
gage Finance Agency, Multifamily
Housing Revenue:
(Presidential Plaza-FHA), Series
1,
1,550,000 7.000% due 5/1/2030 NR AAA
1,615,875
(Regency Park Project), Series H,
1,000,000 7.700% due 11/1/2030 NR AA
1,052,500
New Jersey State Housing & Mort-
gage Finance Agency Revenue, Home
Mortgage,
(MBIA Insured):
Series B,
740,000 8.100% due 10/1/2017 Aaa AAA
793,650
Series C,
30,000 8.375% due 4/1/2017 Aaa AAA
32,437
Series D,
430,000 7.700% due 10/1/2029 Aaa AAA
452,575
New Jersey State Transportation
Authority, Series D,
2,500,000 8.000% due 2/15/2007+++ AA1 AA+
2,971,875
New Jersey State Turnpike, Trans-
portation Revenue Bonds, (MBIA
Insured):
2,000,000 6.500% due 1/1/2016 Aaa AAA
2,070,000
2,000,000 10.070% due 1/1/2016 A A
2,225,000
New Jersey State Transportation
Trust Fund, (FSA Insured),
1,500,000 4.750% due 6/15/2003 Aaa AAA
1,363,125
North Bergen, New Jersey, Town-
ship, Capital Appreciation, (FSA
Insured),
1,500,000 8.000% due 8/15/2007 Aaa AAA
1,796,250
North Bergen, New Jersey, Town-
ship, Municipal Utilities Author-
ity, Sewer Revenue, Refunding,
(FGIC Insured),
1,960,000 7.875% due 12/15/2009 Aaa AAA
2,310,350
North Jersey District Water Sup-
ply Commission, New Jersey Re-
funding, (Wanaque North Project),
Series A, (MBIA Insured):
1,500,000 6.000% due 7/1/2021 Aaa AAA
1,460,625
1,195,000 6.500% due 11/15/2021 Aaa AAA
1,229,355
Old Bridge Township, New Jersey,
General Obligation Bonds, (FGIC
Insured):
560,000 6.550% due 7/15/2010 Aaa AAA
588,000
720,000 6.550% due 7/15/2011 Aaa AAA
756,000
Old Bridge Township, New Jersey,
Municipal Utilities Authority
Revenue, (FGIC Insured), 6.400%
750,000 due 11/1/2009 Aaa AAA
773,437
Passaic Valley, New Jersey, Sewer
Commission Revenue, Water Supply
Revenue, Series A, (FGIC In-
sured):
2,000,000 5.000% due 12/15/2022 Aaa AAA
1,692,500
100,000 6.400% due 12/15/2022 Aaa AAA
101,375
Perth Amboy, New Jersey, Board of
Education, Certificates of Par-
ticipation, (FSA Insured),
500,000 6.125% due 12/15/2017 Aaa AAA
495,625
Perth Amboy, New Jersey, Ref-
Series A,
(FSA Insured),
1,600,000 5.300% due 9/1/2011 Aaa AAA
1,464,000
Piscataway Township, New Jersey
School District, (FHA Insured),
1,750,000 5.375% due 12/15/2010 Aaa AAA
1,610,000
Pleasantville, New Jersey, School
District, Certificates of Partic-
ipation, Fiscal Funding New Jer-
sey, Inc., (BIGI Insured),
1,750,000 7.700% due 10/1/2013 Aaa AAA
1,935,938
Rutgers State University, New
Jersey, University of New Jer-
sey:
Series A,
1,000,000 6.500% due 5/1/2018 A1 AA
1,027,500
Series P,
750,000 6.850% due 5/1/2021 A1 AA
796,875
Salem County, New Jersey, Indus-
trial Pollutant Control, (MBIA
Insured),
2,500,000 5.550% due 11/1/2033 Aaa AAA
2,234,375
Sayreville, New Jersey, Housing
Development Corporation Mortgage
Revenue, FHA Refunding,
(Lakeview-Section 8),
750,000 7.750% due 8/1/2024 NR AAA
783,750
Scotch Plains Township, New Jer-
sey,
1,500,000 5.750% due 9/1/2023 Aa NR
1,443,750
Somerset Raritan Valley, New Jer-
sey, Sewer Authority Revenue, Se-
ries G,
2,500,000 6.750% due 7/1/2010 A1 AA
2,665,625
South Amboy, New Jersey, General
Obligation Bonds, (MBIA Insured),
500,000 6.375% due 12/1/2010 Aaa AAA
510,625
Southeast Morris County, New Jer-
sey, Municipal Utilities Author-
ity, Water Revenue, Series A,
(FGIC Insured),
1,000,000 6.500% due 1/1/2011 Aaa AAA
1,040,000
Stafford, New Jersey, Municipal
Utilities Authority, Sewer and
Water Revenue,
(FGIC Insured),
1,500,000 6.125% due 12/1/2022 Aaa AAA
1,486,875
Tinton Falls, New Jersey, School
Board of Education, Certificates
of Participation,
(FSA Insured),
1,000,000 6.500% due 6/15/2017 Aaa AAA
1,026,250
Trenton, New Jersey, General Ob-
ligation Bonds, (MBIA Insured),
750,000 6.550% due 8/15/2009 Aaa AAA
784,686
Union City, New Jersey, General
Obligation Bonds, (MBIA Insured),
900,000 6.700% due 9/1/2012 Aaa AAA
952,875
Union County, New Jersey, Im-
provement Authority Revenue,
(Cranford Township Project),
1,000,000 7.750% due 5/1/2003 A1 A+
1,098,750
University of New Jersey, School
of Medicine and Dentistry, Series
C,
1,140,000 7.200% due 12/1/2019 A AA
1,246,875
Warren Hills, New Jersey, Re-
gional School District, (FSA In-
sured),
1,400,000 5.250% due 12/15/2009 Aaa AAA
1,267,000
Washington Township, New Jersey,
Fire District, (FGIC Insured),
500,000 5.150% due 1/1/2014 Aaa AAA
443,125
Weehawken Township, New Jersey,
General Obligation Bonds, (FSA
Insured),
854,000 6.350% due 7/1/2007 Aaa AAA
883,890
West New York, New Jersey, Gen-
eral Obligation Bonds, (AMBAC In-
sured),
1,000,000 6.450% due 7/15/2006 Aaa AAA
1,038,750
West New York, New Jersey, Munic-
ipal
Utilities Authority, Sewer Reve-
nue, Series A,
(FGIC Insured),
1,500,000 5.125% due 12/15/2017 Aaa AAA
1,314,375
West Windsor, Plainsboro, New
Jersey, Regional School Dis-
trict:
180,000 6.750% due 4/1/2006 A1 AA
195,525
490,000 6.750% due 4/1/2007 A1 AA
529,812
435,000 6.800% due 4/1/2008 A1 AA
471,975
170,000 6.800% due 4/1/2009 A1 AA
185,938
Winslow Township, New Jersey, Re-
funding Bonds, General Obligation
Bonds,
(FGIC Insured),
1,030,000 6.400% due 10/1/2010 Aaa AAA
1,049,313
165,276,545
PUERTO RICO -- 0.3%
Commonwealth of Puerto Rico,
495,000 8.000% due 7/1/2008 Baa1 A
555,020
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $165,808,903)
165,831,565
SHORT-TERM MUNICIPAL BONDS AND NOTES -- 0.7%
(Cost $1,100,000)
PUERTO RICO -- 0.7%
Commonwealth of Puerto Rico, Gov-
ernment Development Bank,
$1,100,000 2.000% due 12/1/2015+ VMIG-1 A1+ $
1,100,000
TOTAL INVESTMENTS (Cost $166,908,903*) 99.2%
166,931,565
OTHER ASSETS AND LIABILITIES (NET) 0.8
1,356,229
NET ASSETS 100.0%
$168,287,794
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand notes are payable upon not more than seven busi-
ness days' notice.
++ When-issued security (Note 1).
+++ Collateral with a face value of $1,000,000 held for when-issued secu-
rity.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $166,908,903) (Note
1)
See accompanying schedule $
166,931,565
Cash
68,018
Interest receivable
2,885,169
Receivable for investment securities sold
1,504,250
Receivable for Fund shares sold
641,564
TOTAL ASSETS
172,030,566
LIABILITIES:
Payable for investment securities purchased $ 2,882,589
Payable for Fund shares redeemed 388,610
Investment advisory fee payable (Note 2) 140,271
Dividends payable 131,292
Administration fee payable (Note 2) 83,012
Service fee payable (Note 3) 22,080
Distribution fee payable (Note 3) 20,918
Custodian fees payable (Note 2) 7,400
Transfer agent fees payable (Note 2) 5,500
Accrued expenses and other payables 61,100
TOTAL LIABILITIES
3,742,772
NET ASSETS $
168,287,794
NET ASSETS CONSIST OF:
Distributions in excess of net investment income $
(131,292)
Accumulated net realized gain on investments sold
29,220
Unrealized appreciation of investments
22,662
Par value
13,409
Paid-in capital in excess of par value
168,353,795
TOTAL NET ASSETS $
168,287,794
NET ASSET VALUE:
CLASS A SHARES
NET ASSET VALUE and redemption price per share
($119,912,994 / 9,553,890 shares of common stock
outstanding)
$ 12.55
Maximum offering price per share ($12.55 / 0.955)
(based on sales charge of 4.5% of the offering
price on March 31, 1994)
$ 13.14
CLASS B SHARES
NET ASSET VALUE and offering price per share+
($48,374,800 / 3,855,197 shares of common stock
outstanding)
$ 12.55
<FN>
+ Redemption price per share is equal to Net Asset Value less any applica-
ble contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $
9,595,388
EXPENSES:
Investment advisory fee (Note 2) $ 559,176
Sub-investment advisory and administration fee
(Note 2) 319,529
Service fee (Note 3) 239,646
Distribution fee (Note 3) 176,771
Legal and audit fees 63,298
Transfer agent fees (Notes 2 and 4) 61,490
Custodian fees (Note 2) 49,662
Directors' fees and expenses (Note 2) 16,869
Other (Notes 4 and 8) 110,031
Fees waived by investment adviser and administrator
(Note 2) (77,757)
TOTAL EXPENSES
1,518,715
NET INVESTMENT INCOME
8,076,673
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(NOTES 1 AND 5):
Net realized gain on investments sold during the
year
1,474,192
Net unrealized depreciation of investments during
the year
(8,942,109)
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(7,467,917)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $
608,756
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
3/31/94
3/31/93
<S> <C> <C>
Net investment income $ 8,076,673 $
6,206,374
Net realized gain on investments sold during the
year 1,474,192
1,691,586
Net unrealized appreciation/(depreciation) of
investments during the year (8,942,109)
5,652,365
Net increase in net assets resulting from opera-
tions 608,756
13,550,325
Distributions to shareholders from net invest-
ment income:
Class A (6,377,318)
(6,050,482)
Class B (1,613,063)
(155,892)
Distribution to shareholders in excess of net
investment income:
Class A (68,872) --
Class B (17,420) --
Distribution to shareholders from net realized
gain on investments:
Class A (1,446,042)
(1,169,374)
Class B (490,715)
(45,312)
Distribution to shareholders from capital (Note
1):
Class A (35,156)
(110,696)
Class B (9,844)
(2,852)
Net increase in net assets from capital share
transactions (Note 6):
Class A 10,438,364
17,097,356
Class B 35,313,040
16,076,163
Net increase in net assets 36,301,730
39,189,236
NET ASSETS:
Beginning of year 131,986,064
92,796,828
End of year (including distributions in excess
of net investment income of $131,292 and
$86,292, respectively) $ 168,287,794 $
131,986,064
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
3/31/94 3/31/93
3/31/92
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of year $13.16 $12.44
$12.17
Income from investment operations:
Net investment income*** 0.70 0.75
0.77
Net realized and unrealized gain/(loss) on
investments (0.46) 0.87
0.44
Total from investment operations 0.24 1.62
1.21
Distributions:
Distributions from net investment income (0.69) (0.75)
(0.77)
Distributions in excess of net investment
income (0.01) -- --
Distributions from net realized gains (0.15) (0.14)
(0.13)
Distributions from capital (Note 1) (0.00)** (0.01)
(0.04)
Total distributions (0.85) (0.90)
(0.94)
Net asset value, end of year $12.55 $13.16
$12.44
Total return+++ 1.66% 13.49%
10.22%
Ratios/supplemental data:
Net assets, end of year (in 000's) $119,913 $115,694
$92,797
Ratio of operating expenses to average net
assets+ 0.83% 0.74%
0.67%++
Ratio of net investment income to average
net assets 5.17% 5.76%
6.18%
Portfolio turnover rate 32% 58%
98%
<FN>
** Amount represents less than $0.01 per Class A share.
*** Net investment income before waiver of fees and/or reimbursement of
expenses by investment adviser, sub-investment adviser and administra-
tor for the years ended March 31, 1994, 1993, 1992,1991,1990 and 1989
would have been $.69, $.73, $.75, $.78, $.77 and $.74, respectively.
+ Expense ratios before partial waiver of fees by investment adviser and
sub-investment adviser and/or administrator for the years ended March
31, 1994, 1993, 1992, 1991, and 1990 and before the partial waiver of
fees and reimbursement of expenses by investment adviser and sub-
investment adviser and/or administrator for the period ended March
31,1989 were 0.88%, 0.90%, 0.83%, 1.08% and 1.23%, respectively.
++ The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense was 0.68% for the year ended
March 31,1992.
+++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any applicable sales charges.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS (continued)
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR
PERIOD
ENDED ENDED ENDED
3/31/91 3/31/90
3/31/89*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of year $11.92 $11.67
$11.40
Income from investment operations:
Net investment income*** 0.82 0.83
0.82
Net realized and unrealized gain/(loss) on
investments 0.32 0.27
0.28
Total from investment operations 1.14 1.10
1.10
Distributions:
Distributions from net investment income (0.83) (0.82)
(0.82)
Distributions in excess of net investment
income -- -- --
Distributions from net realized gains (0.05) (0.03)
(0.01)
Distributions from capital (Note 1) (0.01) -- --
Total distributions (0.89) (0.85)
(0.83)
Net asset value, end of year $12.17 $11.92
$11.67
Total return++ 9.89% 9.62%
9.84%
Ratios/supplemental data:
Net assets, end of year (in 000's) $65,378 $38,728
$29,265
Ratio of operating expenses to average net
assets+ 0.57% 0.55%
0.52%**
Ratio of net investment income to average
net assets 6.74% 6.89%
7.23%**
Portfolio turnover rate 44% 42%
25%
<FN>
* The Fund commenced operations on April 22, 1988. Those shares in ex-
istence prior to November 6, 1992 were designated as Class A shares.
** Annualized.
*** Net investment income before waiver of fees and/or reimbursement of
expenses by investment adviser, sub-investment adviser and/or adminis-
trator for the years ended March 31, 1994, 1993, 1992,1991,1990, and
1989 would have been $.69, $.73, $.75, $.78, $.77, and $.74,
respectively.
+ Expense ratios before partial waiver of fees by investment adviser and
sub-investment adviser and administrator for the years ended March 31,
1994, 1993, 1992, 1991, and 1990 and before the partial waiver of fees
and reimbursement of expenses by investment adviser and sub-investment
adviser and administrator for the period ended March 31,1989 were
0.88%, 0.90%, 0.83%, 1.08% and 1.23%, respectively.
++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any applicable sales charges.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
YEAR
PERIOD
ENDED ENDED
3/31/94
3/31/93*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $13.16
$12.75
Income from investment operations:
Net investment income*** 0.64
0.28
Net realized and unrealized gain/(loss) on in-
vestments (0.47)
0.55
Total from investment operations 0.17
0.83
Distributions:
Distributions from net investment income (0.62)
(0.27)
Distributions in excess of net investment income (0.01) --
Distributions from net realized gains (0.15)
(0.14)
Distributions from capital (Note 1) (0.00)+++
(0.01)
Total distributions (0.78)
(0.42)
Net asset value, end of period $12.55
$13.16
Total return++ 1.15%
6.60%
Ratios/supplemental data:
Net assets, end of period (in 000's) $48,375
$16,293
Ratio of operating expenses to average net as-
sets+ 1.36%
1.33%**
Ratio of net investment income to average net
assets 4.64%
5.17%**
Portfolio turnover rate 32%
58%
<FN>
* The Fund commenced selling Class B shares on November 6, 1992.
** Annualized.
*** Net investment income before waiver of fees and/or reimbursement of
expenses by investment
adviser, sub-investment adviser and/or administrator for the years
ended March 31, 1994 and 1993 would have been $.63 and $.27,
respectively.
+ Annualized expense ratio before partial waivers of fees by investment
adviser and sub-investment adviser and administrator for the years
ended March 31, 1994 and 1993 were 1.41% and 1.49%, respectively.
++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any
applicable sales charges.
+++ Amount represents less than $0.01 per Class B share.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENT
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Shearson New Jersey Municipals Fund Inc. (the "Fund") was in-
corporated under the laws of the State of Maryland on November 12, 1987.
The Fund is a non-diversified, open-end management investment company reg-
istered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund commenced oper-
ations on April 22, 1988. As of November 6, 1992, the Fund began offering
two classes of shares to the general public: Class A shares and Class B
shares. Class A shares are sold with a front-end sales charge. Class B
shares may be subject to a contingent deferred sales charge ("CDSC").
Class B shares will automatically convert to Class A shares eight years
after the original purchase date. Each class of shares has identical
rights and privileges except with respect to the effect of the respective
sales charges, the distribution and/or service fees borne by each class,
expenses allocable specifically to each class, voting rights on matters
affecting a single class, the exchange privilege of each class and the
conversion feature of Class B shares. The following is a summary of sig-
nificant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
Portfolio valuation: Securities are valued at the close of trading on the
New York Stock Exchange by The Boston Company Advisors, Inc. ("Boston Ad-
visors") after consultation with an independent pricing service (the "Ser-
vice") approved by the Board of Directors. When, in the judgment of the
Service, quoted bid prices for investments are readily available and are
representative of the bid side of the market, these investments are valued
at the mean between the quoted bid prices and asked prices (as obtained by
the Service from dealers in such securities). Securities for which, in the
judgment of the Service, there are no readily available market quotations
(which may constitute a majority of the portfolio securities) are carried
at fair value as determined by the Service, based on methods which include
consideration of: yields or prices of municipal securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Short-term investments that mature in 60
days or less are valued at amortized cost whenever the Board of Directors
determines that amortized cost reflects the fair value of those invest-
ments.
Securities transactions and investment income: Securities transactions
are recorded as of the trade date. Realized gains and losses from securi-
ties sold are recorded on the identified cost basis. Investment income and
realized and unrealized gains and losses are allocated based upon relative
net assets of each class. Interest income is recorded on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date; interest income
is not accrued until settlement date. When required, the Fund instructs
the custodian to segregate assets in a separate account with a current
value at least equal to the amount of its when-issued purchase commit-
ments.
Dividends and distributions to shareholders: Dividends from net invest-
ment income determined on a class level, if any, of the Fund are declared
daily and paid on the last business day of the Smith Barney Shearson Inc.
("Smith Barney Shearson") statement month. Distributions determined on a
fund level, if any, of any net short- and long-term capital gains earned
by the Fund will be declared and paid annually after the close of the fis-
cal year in which they are earned. Additional distributions of net invest-
ment income and capital gains for the Fund may be made at the discretion
of the Board of Directors in order to avoid the application of a 4% nonde-
ductible excise tax on certain undistributed amounts of net investment in-
come and capital gains. To the extent net realized capital gains can be
offset by capital losses and loss carryforwards, it is the policy of the
Fund not to distribute such gains.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally ac-
cepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities
held by the Fund, timing differences and differing characterization of
distributions made by the Fund.
Permanent differences incurred during the year ended March 31, 1994,
resulting from a redesignation of income, were reclassified to accumulated
net realized gains on investments sold at year end.
Reclassifications: During the current period, the Fund adopted Statement
of Position 93-2 "Determination, Disclosure, and Financial Statement Pre-
sentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies." Accordingly, certain reclassifications have been
made to the components of capital in the Statement of Net Assets to con-
form with the accounting and reporting guidelines of this statement. Dis-
tributions in excess of book basis accumulated realized gains or undis-
tributed net investment income that were the result of permanent book and
tax accounting differences have been reclassified to paid-in capital. In
addition, amounts distributed in excess of undistributed net investment
income as determined for financial statement purposes but as distributions
from net investment income or net realized gains for tax purposes, previ-
ously reported as distributions from paid-in capital, have been reclassi-
fied to reflect the tax characterization. Accordingly, amounts as of March
31, 1993 have been restated to reflect an increase in paid-in capital, an
increase in distributions in excess of net investment income and a de-
crease in accumulated net realized gains of $398,427, $86,292, and
$312,135, respectively. The Statement of Changes in Net Assets and Finan-
cial Highlights for prior periods have not been restated to reflect this
change in presentation. Net investment income, net realized gains, and net
assets on a book and tax basis were not affected by this change.
Federal income taxes: The Fund intends to qualify as a regulated invest-
ment company, if such qualification is in the best interests of its share-
holders, by complying with the requirements of the Internal Revenue Code
of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. There-
fore, no Federal income tax provision is required.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE
AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement the ("Advisory
Agreement") with Greenwich Street Advisors, a division of Mutual Manage-
ment Corp., which is controlled by Smith Barney Shearson Holdings Inc.
("Holdings"). Holdings is a wholly owned subsidiary of The Travelers Inc.
Under the Advisory Agreement, the Fund pays a monthly fee at the following
annual rates: .35% of the value of its average daily net assets up to $500
million and .32% of the value of its average daily net assets in excess of
$500 million. Prior to July 30, 1993, Shearson Lehman Advisors served as
investment adviser to the Fund.
The Fund has also entered into an administration agreement (the "Adminis-
tration Agreement") dated May 21, 1993, with Boston Advisors, an indirect
wholly owned subsidiary of Mellon Bank Corporation ("Mellon"). Under the
Administration Agreement, the Fund pays a monthly fee at the following an-
nual rates: .20% of the value of its average daily net assets up to $500
million and .18% of the value of its average daily net assets in excess of
$500 million. Prior to the close of business on May 21, 1993, Boston Advi-
sors served as sub- investment adviser and administrator to the Fund.
Greenwich Street Advisors and Boston Advisors voluntarily waived fees in
the amounts of $49,482 and $28,275, respectively, for the year ended March
31, 1994.
For the year ended March 31, 1994, Smith Barney Shearson Inc. received
from investors $586,302 representing commissions (sales charges) on sales
of Class A shares.
A CDSC is generally payable by a shareholder in connection with the re-
demption of Class B shares within five years after the date of purchase.
In circumstances in which the CDSC is imposed, the amount of the charge
ranges between 4.5% and 1% of net asset value depending on the number of
years since the date of purchase. For the year ended March 31, 1994, Smith
Barney Shearson received from shareholders $49,338 in CDSC on the redemp-
tion of Class B shares.
No officer, director or employee of Smith Barney Shearson Inc. ("Smith
Barney Shearson") or Boston Advisors or of any parent or subsidiary of
those corporations receives any compensation from the Fund for serving as
a Director or officer of the Fund. The Fund pays each Director who is not
an officer, director, or employee of Smith Barney Shearson or Boston Advi-
sors or any of their affiliates $1,000 per annum plus $100 per meeting at-
tended and reimburses each such Director for travel and out-of-pocket ex-
penses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary
of Mellon, serves as the Fund's custodian. The Shareholder Services Group,
Inc., a subsidiary of First Data Corporation, serves as the Fund's trans-
fer agent.
3. DISTRIBUTION AGREEMENT
Smith Barney Shearson acts as distributor of the Fund's shares pursuant to
a distribution agreement with the Fund, and sells shares of the Fund
through Smith Barney Shearson or its affiliates.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a Service
and Distribution Plan (the "Plan"). Under this Plan, the Fund compensates
Smith Barney Shearson for servicing shareholder accounts for Class A and
Class B shareholders, and covers expenses incurred in distributing Class B
shares. Smith Barney Shearson is paid an annual service fee with respect
to Class A and Class B shares of the Fund at the rate of .15% of the value
of the average daily net assets of each respective class of shares. Smith
Barney Shearson is also paid an annual distribution fee with respect to
Class B shares at the rate of .50% of the value of the average daily net
assets attributable to those shares. For the year ended March 31, 1994,
the Fund incurred $186,615 and $53,031 in service fees for Class A and
Class B shares, respectively. For the year ended March 31, 1994, the Fund
incurred $176,771 in distribution fees for Class B shares. Prior to July
31, 1993, Shearson Lehman Brothers served as the Fund's distributor and
received fees equal to the current rates for its services.
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any
class of shares are prorated among the classes based upon the relative net
assets of each class. Operating expenses directly attributable to a class
of shares are charged to that class' operations. In addition to the above
servicing and distribution fees, class specific operating expenses include
transfer agent fees of $40,273 and $21,217 for Class A and Class B shares,
respectively.
5. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities, ex-
cluding short-term investments, for the year ended March 31, 1994,
amounted to $93,691,530 and $50,526,308, respectively.
At March 31, 1994, the aggregate gross unrealized appreciation for all se-
curities in which there was an excess of value over tax cost amounted to
$5,211,809, and the aggregate gross unrealized depreciation for all secu-
rities in which there was an excess of tax cost over value amounted to
$5,189,147.
6. COMMON STOCK
At March 31, 1994, 100 million shares of $.001 par value common stock were
authorized. Changes in shares of common stock outstanding for the Fund
which are divided into two classes, Class A and Class B, were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
3/31/94 3/31/93
CLASS A SHARES: Shares Amount Shares
Amount
<S> <C> <C> <C> <C>
Sold 1,647,480 $22,242,307 2,285,179
$29,496,695
Issued as reinvestment of
dividends 392,313 5,278,384 398,847
5,133,958
Redeemed (1,274,430) (17,082,327) (1,353,960)
(17,533,297)
Net increase 765,363 $10,438,364 1,330,066
$17,097,356
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
3/31/94 3/31/93*
CLASS B SHARES: Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 2,659,770 $35,847,840 1,233,973
$16,027,426
Issued as reinvestment of
dividends 114,141 1,536,557 11,453
149,470
Redeemed (156,456) (2,071,357) (7,684)
(100,733)
Net increase 2,617,455 $35,313,040 1,237,742
$16,076,163
<FN>
* The Fund commenced selling Class B shares on November 6, 1992. Any
shares outstanding prior to November 6, 1992 were designated as Class A
shares.
</TABLE>
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of New
Jersey and its political subdivisions, agencies and public authorities to
obtain funds for various public purposes. The Fund is more susceptible to
factors adversely affecting issuers of New Jersey municipal securities
than is a municipal bond fund that is not concentrated in these issuers to
the same extent.
8. LINE OF CREDIT
The Fund and several affiliated entities participate in a $50 million line
of credit provided by Continental Bank N.A. under an Amended and Restated
Line of Credit Agreement (the "Agreement") dated April 30, 1992, primarily
for temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of securi-
ties. Under this Agreement, the Fund may borrow up to the lesser of $25
million or 10% of its net assets. Interest is payable either at the bank's
Money Market Rate or the London Interbank Offered Rate (LIBOR) plus .375%
on an annualized basis. The Fund and the other affiliated entities are
charged an aggregate commitment fee of $125,000 which is allocated equally
among each of the participants. The Agreement requires, among other provi-
sions, each participating fund to maintain a ratio of net assets (not in-
cluding funds borrowed pursuant to the Agreement) to aggregate amount of
indebtedness pursuant to the Agreement of no less than 5 to 1. At March
31, 1994, the Fund had no outstanding borrowings under this Agreement.
During the year ended March 31, 1994, the Fund had an average outstanding
daily balance of $2,740 with an interest rate equaling 3.56%. Interest ex-
pense totalled $99 for the year ended March 31, 1994 and is offset against
interest income on the Fund's Statement of Operations.
9. SUBSEQUENT EVENT
On April 20, 1994, the Fund's Board of Directors approved a new adminis-
tration agreement with Smith, Barney Advisers, Inc. ("Smith Barney Advis-
ers") containing substantially the same terms and conditions, including
the level of fees, as the current agreement. The Board also approved a
sub-administration agreement with Boston Advisors. Under the proposed ar-
rangements, Boston Advisors would be paid a portion of the amount paid by
the Fund to Smith Barney Advisers at a rate agreed upon from time to time
between Smith Barney Advisers and Boston Advisors.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC.:
We have audited the accompanying statement of assets and liabilities of
Smith Barney Shearson New Jersey Municipals Fund Inc., including the
schedule of portfolio investments, as of March 31, 1994, the related
statement of operations for the year then ended, and the statement of
changes in net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period
ended March 31, 1994 and for the period from April 22, 1988 (commencement
of operations) to March 31, 1989. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsi-
bility is to express an opinion on these financial statements and finan-
cial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 1994 by correspondence with the custodian
and brokers. 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 Smith Barney Shearson New Jersey Municipals Fund Inc. as of March 31,
1994, the results of its operations for the year then ended, and the
changes in its net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the pe-
riod then ended and for the period from April 22, 1988 (commencment of op-
erations) to March 31, 1989, in conformity with generally accepted ac-
counting principles.
COOPERS & LYBRAND
Boston, Massachusetts
May 10, 1994
TAX INFORMATION (UNAUDITED)
FISCAL YEAR ENDED MARCH 31, 1994
The amount of long term capital gain for the fiscal year ended March 31,
1994 was as follows:
Smith Barney Shearson
New Jersey Municipals Fund Inc. ...................... $1,432,430
Of the dividends paid by Smith Barney Shearson New Jersey Municipals Fund
Inc. from net investment income for the year ended March 31, 1994, 100% is
tax-exempt for regular Federal income tax purposes.
The above figure may differ from those cited elsewhere in this report due
to differences in the calculations of income and capital gains for Securi-
ties and Exchange Commission (book) purposes and Internal Revenue Service
(tax) purposes.
NEW JERSEY
MUNICIPALS
FUND INC.
DIRECTORS
Herbert Barg
Alfred J. Bianchetti
Robert Borgesen
Martin Brody
Dwight B. Crane
James J. Crisona
Robert A. Frankel
Dr. Paul Hardin
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon
OFFICERS
Heath B. McLendon
Chairman of the Board
and Investment Officer
Stephen J. Treadway
President
Richard P. Roelofs
Executive Vice President
Lawrence T. McDermott
Vice President and
Investment Officer
Karen L. Mahoney-Malcomson
Investment Officer
Lewis E. Daidone
Treasurer
Christina T. Sydor
Secretary
This report is submitted for the
general information of the
shareholders of Smith Barney
Shearson New Jersey Municipals
Fund Inc. It is not authorized
for distribution to prospective
investors unless accompanied
or preceded by an effective
Prospectus for the Fund, which
contains information concerning
the Fund's investment policies, fees
and expenses as well as other
pertinent information.
SMITH BARNEY SHEARSON
SMITH BARNEY SHEARSON
MUTUALS FUNDS
Two World Trade Center
New York, New York 10048
Fund 66,206
FD0370 E4