<PAGE>
SEMI-ANNUAL REPORT
SMITH BARNEY
NEW JERSEY
MUNICIPALS
FUND INC.
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September 30, 1996
[LOGO] SMITH BARNEY MUTUAL FUNDS
Investing for your future.
Every day.
<PAGE>
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SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
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Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith
Barney New Jersey Municipals Fund Inc. for the period ended September 30, 1996.
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 in the
semi-annual report.
Fund Performance Update
For the six months ended September 30, 1996, the Class A shares of the New
Jersey Municipals Fund had a total return of 3.17%, consistent with the Fund's
Lipper Analytical Services, Inc. peer group average total return of 3.18% for
the same time period. (Lipper is an independent fund tracking organization.)
Over the six-month period covered by this report, the Fund distributed dividends
totaling $0.342 per share for Class A shares; based on its net asset value (NAV)
of $12.94 as of September 30, 1996, this equates to an annualized distribution
rate of 5.29%. For a New Jersey state resident in the combined federal and state
income tax bracket of 42.37%, the Fund's tax free yield of 5.29% is equivalent
to a taxable yield of 9.18%.
Market and Economic Overview
Because of the uncertainty surrounding the future direction of the U.S.
economy, the bond markets have continued to experience significant volatility.
However, this heightened volatility has been confined to a narrow trading range
of 6.75% to 7.20% on 30-year U.S. Treasury yields over the past six months.
In our view, this increased bond market volatility stems from several
conditions, with the most important being the underlying strength of the U.S.
economy. For example, gross domestic product (GDP) in the U.S. for the second
quarter of 1996 grew at an annualized rate of 4.7%, up from 2.0% in the first
quarter. This pace of economic growth has caused increased pressures on both
labor and capital, yet there have been no signs of a pick-up in inflation. Bond
market investors have closely monitored recent U.S. economic data for signs of
whether the rate of economic growth will moderate, or whether the economy will
continue to grow at its current pace. The latter scenario would most likely
cause the Federal Reserve Board to tighten monetary policy by raising short-term
interest rates. While the majority of key U.S. economic announcements over the
past six months points toward a strengthening rather than a weakening economy,
government reports released during the month of
1
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September suggest that the U.S. economy may be headed for a slowdown, and
rates have since declined from their higher levels seen in June and July.
Municipal Bond Market Update
Although this has been a challenging period for the fixed income markets, the
municipal bond market has outperformed the U.S. government bond market. In
our view, this can be attributed to the modest supply of municipal bonds that
have been issued. In recent months, investors have been seeking to reinvest
proceeds of municipal bonds that have either matured or been called, back into
the municipal bond market. However, at the same time, the supply of new issues
has been far below recent averages, and is very close to the low for the year.
This increased demand combined with light supply has caused municipal bond
prices to stay higher, and yields to conversely remain lower, relative to those
of U.S. Treasury securities.
New Jersey Economic Highlights
Despite a 30% income tax reduction implemented by Governor Whitman beginning in
1994, economic growth in New Jersey continues to remain sluggish, although
better than the other Northeastern states. With plant closings and corporate
restructurings producing massive layoffs throughout the State, New Jersey's
unemployment rate is almost 1% above the national rate, and its consumer
confidence level is below the rest of the nation. On a more positive note,
however, existing home sales in New Jersey increased 12.6% during the second
quarter of 1996, the third straight quarter that existing home sales have
increased in the State. Mortgage rates have come down in recent months, as many
investors' fears of inflation have subsided due to the latest U.S. economic
statistics.
Fund's Investment Strategy
The Smith Barney New Jersey Municipals Fund seeks to provide New Jersey
investors with as high a level of current income exempt from Federal and New
Jersey personal income taxes as is consistent with prudent investment management
and the preservation of capital. The Fund invests primarily in investment-grade
municipal securities.
Over the period covered by this report, the Fund continued to focus on high
quality issues and remained broadly diversified across various sectors. As of
September 30, 1996, approximately 85% of the Fund's holdings were rated
investment grade (BBB/Baa and higher) by either Standard and Poor's Ratings
Services or Moody's Investors Service Inc., and about 55% of the Fund's
portfolio was invested in AAA-rated bonds, the highest rating. (Standard and
Poor's and Moody's are two major credit reporting and bond rating agencies.) The
Fund's largest holdings are concentrated in hospital bonds (17.6%), utility
2
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bonds (14.4%), general obligation bonds (13.6%), and education bonds (9.6%). The
Fund's average weighted maturity was just over 20 years as of September 30,
1996.
Municipal Bond Market Outlook
Going forward, we believe that the municipal bond market should benefit
from a comfortably low annual inflation rate and municipalities that will
continue to issue new debt sparingly. In addition, the Federal Reserve seems
content with the current level of interest rates because economic growth is not
overly robust. Although it has been widely anticipated by many analysts and
investors that the Federal Reserve will increase short-term interest rates, it
is our opinion that monetary policy is on hold for now. For these reasons, we
maintain a positive outlook on the market for the balance of 1996. In addition,
we believe the municipal bond market at today's levels is attractively priced
and, with limited supply, should provide investors with attractive after-tax
yields.
In closing, thank you for investing in the Smith Barney New Jersey
Municipals Fund. We look forward to continuing to help you achieve your
financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Lawrence T. McDermott
Heath B. McLendon Lawrence T. McDermott
Chairman and Vice President and
Chief Executive Officer Investment Officer
October 14, 1996
Announcing a New Systematic Investment Program
Monthly Minimum
If you are a shareholder purchasing shares of the New Jersey Municipals
Fund Inc. through Smith Barney's Systematic Investment Program on a monthly
basis or if you plan to do so in the future, the minimum investment for Class A,
Class B and Class C shares is now $25. If you are purchasing shares on a
quarterly basis, the minimum investment for Class A, Class B and Class C shares
is $50. Please contact your Smith Barney Financial Consultant for more
information about the Systematic Investment Program. However, please note that
participating in Smith Barney's Systematic Investment Program does not ensure a
profit or protect you against a loss in declining markets.
3
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Historical Performance -- Class A Shares
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<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
=================================================================================================
<S> <C> <C> <C> <C> <C> <C>
9/30/96 $12.88 $12.94 $0.34 $0.00 $0.00 3.17%+
- -------------------------------------------------------------------------------------------------
3/31/96 12.62 12.88 0.70 0.00 0.00 7.77
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3/31/95 12.55 12.62 0.70 0.00 0.00 6.37
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3/31/94 13.16 12.55 0.70 0.15 0.00 1.66
- -------------------------------------------------------------------------------------------------
3/31/93 12.44 13.16 0.75 0.14 0.01 13.49
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3/31/92 12.17 12.44 0.77 0.13 0.04 10.22
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3/31/91 11.92 12.17 0.83 0.05 0.01 9.89
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3/31/90 11.67 11.92 0.82 0.03 0.00 9.62
- -------------------------------------------------------------------------------------------------
Inception* - 3/31/89 11.40 11.67 0.82 0.01 0.00 9.84+
=================================================================================================
Total $6.43 $0.51 $0.06
=================================================================================================
</TABLE>
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Historical Performance -- Class B Shares
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<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
=================================================================================================
<S> <C> <C> <C> <C> <C> <C>
9/30/96 $12.88 $12.94 $0.31 $0.00 $0.00 2.92%+
- -------------------------------------------------------------------------------------------------
3/31/96 12.62 12.88 0.63 0.00 0.00 7.20
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3/31/95 12.55 12.62 0.62 0.00 0.00 5.76
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3/31/94 13.16 12.55 0.63 0.15 0.00 1.15
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Inception* - 3/31/93 12.75 13.16 0.27 0.14 0.01 6.60+
=================================================================================================
Total $2.46 $0.29 $0.01
=================================================================================================
</TABLE>
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Historical Performance -- Class C Shares
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<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
=================================================================================================
<S> <C> <C> <C> <C> <C> <C>
9/30/96 $12.88 $12.93 $0.31 $0.00 $0.00 2.81%+
- -------------------------------------------------------------------------------------------------
3/31/96 12.62 12.88 0.63 0.00 0.00 7.17
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Inception* - 3/31/95 11.86 12.62 0.18 0.00 0.00 8.01+
=================================================================================================
Total $1.12 $0.00 $0.00
=================================================================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
4
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Average Annual Total Return
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<TABLE>
<CAPTION>
Without Sales Charge(1)
-------------------------------------
Class A Class B Class C
========================================================================================
<S> <C> <C> <C>
Six Months Ended 9/30/96+ 3.17% 2.92% 2.81%
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Year Ended 9/30/96 5.82 5.30 5.17
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Five Years Ended 9/30/96 7.15 N/A N/A
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Inception* through 9/30/96 8.49 6.06 10.15
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2)
-------------------------------------
Class A Class B Class C
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<S> <C> <C> <C>
Six Months Ended 9/30/96+ (0.98)% (1.58)% 1.81%
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Year Ended 9/30/96 1.57 0.80 4.17
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Five Years Ended 9/30/96 6.28 N/A N/A
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Inception* through 9/30/96 7.97 5.63 10.15
========================================================================================
</TABLE>
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Cumulative Total Return
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<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 9/30/96) 98.96%
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Class B (Inception* through 9/30/96) 25.81
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Class C (Inception* through 9/30/96) 19.02
================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from initial purchase. This CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. Class C
shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are April 22, 1988, November 6,
1992 and December 13, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
5
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Historical Performance (unaudited)
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Growth of $10,000 Invested in Class A Shares of the
Smith Barney New Jersey Municipals Fund Inc.
vs. Lehman Municipal Bond Fund Index+
- --------------------------------------------------------------------------------
April 1988 -- September 1996
[GRAPHIC]
<TABLE>
<CAPTION>
Smith Barney
New Jersey Lehman Municipal
Municipals Fund Inc. Bond Fund Index
- ----------------------------------------------------------------------
<S> <C> <C>
4/22/88 $ 9,596 $10,000
3/89 10,540 10,641
3/90 11,554 11,763
3/91 12,696 12,847
3/92 13,992 14,131
3/93 15,879 15,900
3/94 16,143 16,269
3/95 17,171 17,479
3/96 18,505 18,945
9/96 19,092 19,526
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on April 22, 1988, assuming deduction of the maximum 4.00% sales charge at
the time of investment and reinvestment of dividends and capital gains, if
any, at net asset value through September 30, 1996. The Lehman Municipal Bond
Fund Index is a broad based, total return index comprised of 8,000 bonds
which are all investment grade, fixed rate, longer term maturities (greater
than two years) and are selected from issues larger than $50 million dated
since January, 1984. The index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund. The performance of the
Fund's other classes may be greater or less than the Class A shares'
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
6
<PAGE>
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Portfolio Highlights (unaudited) September 30, 1996
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Portfolio Breakdown
[GRAPHIC]
General Obligation 13.6%
Hospital 17.6%
Utilities 14.4%
Other 10.6%
Education 9.6%
Industrial Development 8.3%
Pollution Control 10.6%
Housing 6.0%
Transportation 9.3%
Summary of Investments by Combined Ratings
<TABLE>
<CAPTION>
Standard & Percentage of
Moody's and/or Poor's Total Investments
======================================================================
<S> <C> <C>
Aaa AAA 54.9%
Aa AA 10.6
A A 8.9
Baa BBB 10.8
Ba BB 2.2
NR NR 12.4
VMIG 1 A-1 0.2
-----
100.0%
=====
</TABLE>
7
<PAGE>
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Schedule of Investments (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
Education -- 9.6%
<S> <C> <C> <C>
$ 750,000 AAA Hamilton Township Board of Education, FSA-Insured,
7.000% due 12/15/15 $ 812,812
500,000 AAA Jersey City (Hudson County) Fiscal Year
Adjustment Bonds, Series 1991 B, FSA-Insured,
8.400% due 5/15/06 617,500
650,000 AAA Lakewood Township School District, AMBAC-Insured,
Bank Qualified, Series 92, 6.250% due 2/15/11 694,688
880,000 AAA Lumberton Township, Board of Education,
5.625% due 2/15/19 863,500
New Jersey EDR:
1,000,000 AAA Educational Testing Service, MBIA-Insured,
Series E, 6.000% due 5/15/25 1,020,000
620,000 Aa3* Princeton Montessori Society, LOC Banque National De Paris,
Series S, 6.500% due 6/1/12 640,150
New Jersey State Educational Facilities,
Financing Authority Revenue:
1,000,000 NR Caldwell College, Series A, 7.25% due 7/1/25 1,000,000
1,195,000 A- Drew University, Series B, 7.450 1,254,750
Fairleigh Dickinson University, Series C:
2,700,000 NR 6.625% due 7/1/23 2,612,250
1,060,000 NR Escrowed to Maturity with U.S. Government Securities,
7.750% due 7/1/01(a) 1,128,900
2,000,000 AAA University Medicine and Dentistry, AMBAC-Insured,
Series B, 5.250% due 12/1/16 1,925,000
1,315,000 A+ New Jersey State Higher Education Assistance,
5.300% due 7/1/10(b) 1,236,100
Rutgers State University Refunding, State University of
New Jersey:
600,000 AA Series 92A, 6.400% due 5/1/13 649,500
750,000 AA Series P, 6.850% due 5/1/21 812,813
1,000,000 Baa1* Shrewsbury Board of Education, COP, due 8/15/15 1,040,000
South Brunswick Township, New Jersey Board of
Education, FGIC-Insured:
1,500,000 AAA 6.400% due 8/1/18 1,601,250
1,500,000 AAA 6.400% due 8/1/19 1,595,625
1,000,000 AAA 6.400% due 8/1/21 1,063,750
- ----------------------------------------------------------------------------------------------------
20,568,588
- ----------------------------------------------------------------------------------------------------
General Obligation -- 13.6%
2,500,000 AAA Atlantic County COP, Lease Agreement, FGIC-Insured,
7.400% due 3/1/09 2,950,000
1,340,000 AAA Bayonne GO, FGIC-Insured, 6.125% due 5/1/14 1,390,250
665,000 AAA Belvedere GO, AMBAC-Insured, 7.300% due 12/1/14 721,525
550,000 AAA Dover Board of Education, COP, FGIC-Insured,
6.600% due 6/1/11 578,186
Essex County GO:
175,000 AAA FSA-Insured, 6.500% due 12/1/11 183,312
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
General Obligation -- 13.6% (continued)
$ 2,000,000 AAA Improvement Authority, FGIC-Insured, 5.200% due 12/1/24 $ 1,872,500
1,045,000 AAA Improvement Authority, MBIA-Insured, 5.500% due 12/1/26 1,014,956
750,000 AAA Evesham Township Board of Education, COP, FGIC-Insured,
6.875% due 9/1/11 818,437
Hudson County:
200,000 AAA GO, FGIC-Insured, 6.550% due 7/1/10 220,500
425,000 AAA Correctional Facilities, MBIA-Insured, 6.600% due 12/1/21 449,969
1,000,000 AAA Lumberton Township School District, COP, MBIA-Insured,
6.100% due 10/1/13 1,028,750
Morris Township GO:
550,000 AA 6.550% due 7/1/09 611,187
550,000 AA 6.550% due 7/1/10 611,187
500,000 AA 6.550% due 7/1/11 555,625
1,200,000 A Morristown GO, Revenue Refunding, 6.500% due 2/1/06 1,230,072
2,500,000 A+ New Jersey State COP, Equipment Leasing Revenue, Series A,
6.400% due 4/1/05 2,675,000
2,500,000 AA+ New Jersey State GO, Series D, 8.000% due 2/15/07 3,090,625
1,500,000 AAA North Bergen Township Capital Appreciation, FSA-Insured,
8.000% due 8/15/07 1,833,750
1,500,000 Aaa* Passaic County GO, FGIC-Insured, 5.550% due 4/1/16 1,471,875
500,000 AAA Perth Amboy Board of Education, COP, FSA-Insured,
6.125% due 12/15/17 515,000
495,000 A Puerto Rico Commonwealth GO Unlimited, 8.000% due 7/1/08 530,887
500,000 AAA South Amboy GO Unlimited, MBIA-Insured, 6.375% due 12/1/10 530,625
750,000 AAA Trenton GO, MBIA-Insured, 6.550% due 8/15/09 798,750
900,000 AAA Union City GO, MBIA-Insured, 6.700% due 9/1/12 977,625
125,000 AAA Virgin Islands Public Financing Authority Revenue,
Series A, (Escrowed to Maturity with U.S. Government
Securities), 7.300% due 10/1/18 151,719
854,000 AAA Weehawken Township GO, FSA-Insured, 6.350% due 7/1/07 907,375
West Windsor/Plainsboro GO, Regional School District:
180,000 AA 6.750% due 4/1/06 200,925
490,000 AA 6.750% due 4/1/07 550,638
435,000 AA 6.800% due 4/1/08 492,638
170,000 AA 6.800% due 4/1/09 192,525
- ----------------------------------------------------------------------------------------------------
29,156,413
- ----------------------------------------------------------------------------------------------------
Hospital -- 17.6%
1,000,000 AAA Camden County Improvement Authority, Health Services
Project B, AMBAC-Insured, 5.250% due 12/1/18 962,500
2,500,000 AAA New Jersey EDA, Nursing Home Revenue, RWJ Health
Care Corp., FSA-Insured, 6.500% due 7/1/24 2,662,500
New Jersey Health Care Facilities Financing Authority Revenue:
Burdett Tomlin Memorial Hospital, Series D, FGIC-Insured:
1,400,000 AAA 6.500% due 7/1/12 1,484,000
850,000 AAA 6.500% due 7/1/21 906,312
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
Hospital -- 17.6% (continued)
<S> <C> <C> <C>
Columbus Hospital, Series A:
$ 900,000 Baa1* 7.200% due 7/1/01 $ 928,125
1,000,000 Baa1* 7.500% due 7/1/21 1,037,500
1,985,000 Aa* Cathedral Health Services Inc., FHA-Insured,
7.250% due 2/15/21 2,133,875
250,000 A Community Memorial Hospital Association, Series C,
8.000% due 7/1/14 267,188
2,300,000 Baa1* Deborah Heart & Lung Center, 6.300% due 7/1/23 2,311,500
750,000 A+ East Orange General Hospital, Series B, 7.750% due 7/1/20 796,875
1,500,000 A Helene Fuld Medical Center, Series C, 8.125% due 7/1/13 1,590,000
4,500,000 AAA Irvington General Hospital, FHA-Insured, 6.375% due 8/1/15 4,730,625
1,125,000 AAA J.F.K. Health System, Obligated Group, FGIC-Insured,
6.700% due 7/1/21 1,205,156
260,000 A1* Kennedy Memorial University Medical Center, Series D,
7.875% due 7/1/09 277,550
235,000 BBB+ Kimball Medical Center, Series C, 8.000% due 7/1/98 242,344
825,000 AAA Medical Center of Ocean County, Series C, FSA-Insured,
6.750% due 7/1/20 884,813
2,750,000 AAA Newark Beth Israel Medical Center, FSA-Insured,
6.000% due 7/1/24 2,787,812
525,000 BBB+ Newcomb Medical Center, Series A, 7.875% due 7/1/03 565,031
2,000,000 Baa* Ocean County Hospital, 6.250% due 7/1/23 1,957,500
585,000 AAA Overlook Hospital Association, Series E, FGIC-Insured,
6.700% due 7/1/17 607,078
1,000,000 A- Pascack Valley Hospital, Series 91, 6.700% due 7/1/11 1,017,500
1,000,000 NR Raritan Bay Medical Center, 7.250% due 7/1/27 1,026,250
825,000 AAA Riverview Medical Center, Series A, AMBAC-Insured,
8.000% due 7/1/18 892,031
1,150,000 AAA Somerset Medical Center, Series A, FGIC-Insured,
5.200% due 7/1/24 1,059,438
1,250,000 Baa* St. Elizabeth's Hospital Project, Series B,
8.250% due 7/1/20 1,353,125
750,000 AAA St. Joseph's Hospital & Medical Center,
6.000% due 7/1/26 754,688
2,750,000 Baa1* St. Mary Hospital, 5.875% due 7/1/12 2,646,875
695,000 AAA Wayne General Hospital, Series B, FHA-Insured,
5.750% due 8/1/11 699,344
- ----------------------------------------------------------------------------------------------------
37,787,535
- ----------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 4.8%
650,000 BBB+ Essex County Improvement Authority, Lease Revenue Bonds,
6.600% due 4/1/14 666,250
1,500,000 AAA Newark Housing Financing Corp., Mortgage Revenue
Refunding, Manor Apartments, Series A, FHA-Insured,
7.500% due 2/15/24 1,621,875
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
Housing: Multi-Family -- 4.8% (continued)
<S> <C> <C> <C>
New Jersey State Housing & Mortgage Finance Agency,
Multi-Family Housing Revenue:
$ 2,550,000 AAA Presidential Plaza, Series 1, FHA-Insured,
7.000% due 5/1/30(c) $ 2,667,938
1,000,000 AAA Refunding, Series A, AMBAC-Insured,
6.000% due 11/1/14 1,012,500
1,000,000 AA Regency Park Project, Series H, 7.700% due 11/1/30 1,036,250
2,500,000 AAA Series Q, MBIA-Insured, 5.875% due 4/1/17(b) 2,481,250
730,000 AAA Sayreville Housing Development Corporation, Mortgage
Revenue Refunding, Lakeview Apartments, FHA-Insured,
7.750% due 8/1/24 745,513
- ----------------------------------------------------------------------------------------------------
10,231,576
- ----------------------------------------------------------------------------------------------------
Housing: Single-Family -- 1.2%
New Jersey State Housing & Mortgage Finance Agency
Revenue, MBIA-Insured:
100,000 AAA Home Mortgage, Series A, 7.875% due 10/1/17 104,177
370,000 AAA Home Mortgage, Series C, 8.000% due 4/1/12 388,500
740,000 AAA Series B, 8.100% due 10/1/17 776,075
30,000 AAA Series C, 8.375% due 4/1/17 31,575
250,000 AAA Series D, 7.700% due 4/1/29(b) 261,250
45,000 AAA Puerto Rico Housing Finance Corp., Single-Family
Housing Mortgage, Series A, GNMA-Collateralized,
7.800% due 10/15/21 46,856
1,000,000 AAA Virgin Islands HFA, Single-Family Housing Mortgage,
GNMA-Collateralized, 6.500% due 3/1/25(b) 1,017,500
- ----------------------------------------------------------------------------------------------------
2,625,933
- ----------------------------------------------------------------------------------------------------
Industrial Development -- 8.3%
Camden County Improvement Authority,
Lease Revenue, AMBAC-Insured:
1,040,000 AAA 5.625% due 4/1/11 1,034,800
1,105,000 AAA 5.700% due 4/1/12 1,102,237
1,000,000 AAA New Jersey EDA, Natural Gas Facilities Revenue, NUI Corp.,
Series A, AMBAC-Insured, 6.350% due 10/1/22 1,048,750
New Jersey EDA, EDR:
1,000,000 Aa3* Economic Growth Bonds, LOC Banque Nationale De Paris,
6.550% due 12/1/07(b) 1,040,000
1,305,000 AA- Economic Growth Bonds, Series E, LOC National
Westminster USA, 5.400% due 10/1/13(b) 1,247,906
1,500,000 BB+ Electric Revenue, Vineland Cogeneration LP,
7.875% due 6/1/19(b) 1,620,000
1,000,000 AAA Miscellaneous Revenue, State Contract, FSA-Insured,
6.000% due 3/15/21 1,018,750
Nursing Home Revenue:
1,500,000 NR Franciscan Oaks, Series A, 8.500% due 10/1/23 1,605,000
1,000,000 A+ Morris Hall-St. Lawrence, 6.250% due 4/1/25 1,020,000
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Industrial Development -- 8.3% (continued)
$ 1,495,000 BBB+ Preston Trucking Co., 6.500% due 9/1/14 $ 1,528,638
1,120,000 Aaa* Series L, 7.100% due 12/01/11(b) 1,197,000
1,500,000 Aaa1* Terminal Revenue, GATX Terminal Corp., Series 1994,
7.300% due 9/1/19 1,670,625
1,000,000 NR Trane Division 1990 Project, 9.500% due 9/1/00 1,101,250
1,500,000 NR Zirser-Greenbriar, 7.375% due 7/15/03 1,515,000
- ----------------------------------------------------------------------------------------------------
17,749,956
- ----------------------------------------------------------------------------------------------------
Life Care -- 2.0%
1,000,000 Aaa* New Jersey EDA, EDR, Eagle Rock Convalescent, Inc.,
GNMA-Collateralized, 7.375% due 12/20/06 1,098,750
New Jersey Health Care Facilities, Financing Authority Revenue:
2,500,000 AAA Berkeley Heights Convalescent, 5.000% due 7/1/15 2,312,500
800,000 AAA Spectrum for the Living, FHA-Insured, 6.500% due 2/1/22 835,000
- ----------------------------------------------------------------------------------------------------
4,246,250
- ----------------------------------------------------------------------------------------------------
Miscellaneous -- 6.6%
615,000 A- Atlantic City COP, Series 1991 (Public Facilities Lease
Agreements Atlantic City Project), 8.875% due 1/15/13 800,269
200,000 AAA Delaware River Junction, Toll Bridge Commission, Refunding
Bonds, FGIC-Insured, 6.250% due 7/1/12 208,500
1,000,000 AAA New Brunswick Parking Authority Revenue, City Guaranteed
Parking, Series A, FGIC-Insured, 6.500% due 9/1/19 1,063,750
New Jersey EDA:
480,000 NR EDR, National Association of Accountants,
7.650% due 7/1/09 509,400
1,925,000 NR EDR, Station Plaza Park and Ride LP,
6.625% due 7/1/03 1,970,719
1,750,000 AAA Market Transition Revenue, 5.800% due 7/1/09 1,785,000
1,000,000 NR Waste Paper Recycling Revenue, (Marcal Paper Project),
8.500% due 2/1/10(b) 1,130,000
New Jersey Sports and Expo Authority:
1,250,000 AAA Convention Center, Luxury Tax Revenue, MBIA-Insured,
6.250% due 7/1/20 1,293,750
3,000,000 NR Monmouth Park, Refunding, Series A, 8.000% due 1/1/25 3,258,750
1,400,000 Aa* State Contract, Series A, 6.000% due 3/1/21 1,410,500
650,000 AAA Old Bridge Township, FGIC-Insured, 5.000% due 7/15/11 612,625
240,000 A+ The Hudson County Improvement Authority, (Essential
Purpose Pooled Governmental Loan Project), Series 1986,
7.600% due 8/1/25 265,200
- ----------------------------------------------------------------------------------------------------
14,308,463
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
Pollution Control -- 10.6%
<S> <C> <C> <C>
$ 1,950,000 Ba* Atlantic County Utilities Authority, Solid Waste Revenue,
7.125% due 3/1/16 $ 1,935,375
2,750,000 BBB- Hudson County Improvement Authority, Solid Waste
System Revenue, 7.100% due 1/1/20 2,684,688
1,200,000 AAA Mercer County Improvement Revenue, FGIC-Insured, Series A,
6.700% due 4/1/13(b) 1,257,000
Middlesex County Pollution Control Authority Financing
Revenue, Amerada Hess Corp.:
1,000,000 NR 7.875% due 6/1/22 1,108,750
2,000,000 NR 6.875% due 12/1/22 2,075,000
New Jersey EDA:
5,500,000 AAA PSE&G Corp., MBIA-Insured, 6.400% due 5/1/32(b) 5,713,125
2,420,000 A Sewer Facility, Atlantic City Sewer Co., 7.25% due 12/1/11(b) 2,643,850
1,250,000 Aa1* Solid Waste Revenue, Garden State Paper Co.,
7.125% due 4/1/22(b) 1,275,000
1,000,000 AAA Salem County Industrial Pollution Control Finance Authority,
(PSE&G Project C), MBIA-Insured, 6.200% due 8/1/30 1,025,000
1,000,000 AA Salem County Pollution Control Financing Authority,
Waste Disposal Revenue, E.I. Dupont De Nemours & Co.,
6.125% due 7/15/22(b) 1,016,250
2,000,000 BB Union County Utility Authority, Solid Waste Revenue, Series A,
7.150% due 6/15/09(b) 2,040,000
- ----------------------------------------------------------------------------------------------------
22,774,038
- ----------------------------------------------------------------------------------------------------
Short-Term (d) -- 0.2%
300,000 VMIG 1* Port Authority of NY & NJ, 3.400% due 5/1/19 300,000
100,000 VMIG 1* Puerto Rico Government Development Bank,
3.150% due 12/1/15 100,000
- ----------------------------------------------------------------------------------------------------
400,000
- ----------------------------------------------------------------------------------------------------
Transportation -- 9.3%
385,000 A1* Cape May Bridge Commission, Guaranteed Revenue Bonds,
6.700% due 6/1/02 397,031
500,000 AAA Delaware River Port Authority, PA & NJ Delaware River Bridges,
Revenue Refunding, AMBAC-Insured, 7.375% due 1/1/07 536,875
2,215,000 AAA Delaware River & Bay Authority Revenue, FGIC-Insured,
5.400% due 1/1/15 2,162,394
800,000 A1* Essex County Improvement Authority Airport Project Revenue,
Series 92, 6.800% due 11/1/21(b) 842,000
500,000 AAA Hoboken Parking Authority Revenue, FGIC-Insured,
6.000% due 6/1/24 513,750
1,000,000 Baa2* New Jersey EDA Revenue, (American Airlines Inc. Project),
7.100% due 11/1/31(b) 1,045,000
2,255,000 AAA New Jersey State Turnpike Authority Revenue Refunding,
(Escrowed to Maturity with U.S. Government Securities),
10.375% due 1/1/03(c) 2,669,356
Port Authority of New York & New Jersey:
1,500,000 AA- 67th Series, 6.875% due 1/1/25 1,599,375
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
Transportation -- 9.3% (continued)
<S> <C> <C> <C>
$ 3,000,000 AAA MBIA-Insured, 5.875% due 10/15/27 $ 3,022,500
2,000,000 AAA Special Obligation Revenue, 96th Series, FGIC-Insured,
6.600% due 10/1/23(b) 2,145,000
3,500,000 NR Special Obligation Revenue, 5th Installment,
6.750% due 10/1/19(b) 3,526,250
1,500,000 A Puerto Rico Commonwealth Highway & Transportation Authority
Highway Revenue, Series W, 5.500% due 7/1/15 1,468,125
- ----------------------------------------------------------------------------------------------------
19,927,656
- ----------------------------------------------------------------------------------------------------
Utilities -- 14.4%
700,000 Baa1* Beachwood Sewer Authority Revenue, Junior Lien,
6.500% 12/1/12 735,000
1,000,000 AAA Bordentown Sewerage Authority Revenue, Series C,
MBIA-Insured, 6.900% due 12/1/16 1,080,000
2,500,000 AAA Camden County Municipals Utilities Authority, Sewer Revenue,
FGIC-Insured, 5.125% due 7/15/17 2,331,250
500,000 AAA Essex County Utilities Authority, Solid Waste Revenue,
FSA-Insured, 5.600% due 4/1/16 496,250
Gloucester County Utilities Authority, Sewer Revenue:
1,000,000 AA- 6.500% due 1/1/21 1,042,500
900,000 AA- 6.250% due 1/1/24 940,500
1,700,000 AAA Jersey City Sewer Authority, AMBAC-Insured,
6.2500% due 1/1/14 1,844,500
1,385,000 AAA Kearney Municipal Utilities Authority Revenue, FGIC-Insured,
7.300% due 11/15/18 1,717,400
1,500,000 AAA Lower Township Municipal Utilities Authority, MBIA-Insured,
6.125% due 12/1/13 1,556,250
Middlesex County Utilities Authority, Sewer Revenue Refunding,
Series A:
1,250,000 AAA FGIC-Insured, 5.375% due 9/15/15 1,210,938
1,000,000 AAA MBIA-Insured, (Inverse Floating Rate Security Convertible
to 6.250% on 8/15/97), 7.600% due 8/15/10(e) 1,090,000
1,000,000 AAA Monmouth County Improvement Authority Revenue,
5.500% due 7/15/15 976,250
500,000 AAA Monroe Township Municipal Utilities Authority, Gloucester
County Revenue, AMBAC-Insured, 6.650% due 7/1/11 542,500
New Jersey EDA:
1,000,000 AAA Natural Gas Facilities Revenue, Series A, AMBAC-Insured,
6.250% due 8/1/24 1,036,250
750,000 A Water Facilities Revenue, Hackensack Water, Series D,
7.000% due 10/1/17(b) 769,687
1,960,000 AAA North Bergen Township Municipal Utilities Authority,
Sewer Revenue, FGIC-Insured, 7.875% due 12/15/09 2,445,100
North Jersey District Water Supply Commission Refunding,
(Wanaque North Project), Series A, MBIA-Insured:
2,500,000 AAA 6.000% due 7/1/21 2,556,250
1,195,000 AAA 6.500% due 11/15/21 1,281,638
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
====================================================================================================
<S> <C> <C> <C>
Utilities -- 14.4% (continued)
$ 750,000 AAA Old Bridge Township Municipal Utilities Authority Revenue,
FGIC-Insured, 6.400% due 11/1/09 $ 806,250
2,500,000 AA Somerset/Raritan Valley Sewer Authority Revenue,
6.750% due 7/1/10 2,675,000
1,000,000 AAA Southeast Morris County Municipal Utilities Authority,
Water Revenue, Series A, FGIC-Insured, 6.500% due 1/1/11 1,066,250
1,500,000 AAA Stafford Municipal Utilities Authority, Sewer and Water
Revenue, FGIC-Insured, 6.125% due 12/1/22 1,541,250
1,035,000 A- Union County Utilities Authority, Solid Waste Revenue,
Series A, 7.200% due 6/15/14(b) 1,053,112
- ----------------------------------------------------------------------------------------------------
30,794,125
- ----------------------------------------------------------------------------------------------------
Water & Sewer -- 1.8%
New Jersey EDA:
1,610,000 AAA Middlesex County Water Revenue, MBIA-Insured,
5.250% due 2/1/29 1,503,339
345,000 A* Pennsville Authority Sewer Revenue, 7.100% due 11/1/20 374,756
1,000,000 NR Water Facilities Revenue, Series 1991, (New Jersey
American Water Company Inc. Project),
7.400% due 11/1/01(b) 1,063,750
100,000 AAA Passaic Valley Sewer Commission Revenue, Water Supply
Revenue, Series A, FGIC-Insured, 6.400% due 12/15/22 105,250
750,000 AAA South Monmouth Regional Sewer Authority, MBIA-Insured,
6.000% due 1/15/14 777,187
- ----------------------------------------------------------------------------------------------------
3,824,282
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $205,949,096**) $214,394,815
====================================================================================================
</TABLE>
(a) Pre-Refunded bonds escrowed by U.S. Government securities and bonds
escrowed to maturity with U.S. Government securities are considered by the
investment adviser to be triple-A rated even if issuer has not applied for
new ratings.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Security segregated by Custodian for open purchase commitment.
(d) Variable rate obligation payable upon demand at any time on no more than
seven business day's notice.
(e) Residual interest bonds-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 16 and 17 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings
- --------------------------------------------------------------------------------
All ratings are by Standard & Poor's Rating Services ("Standard & Poor's"),
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and 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 it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB -- Bonds rated "BB" have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating
from "Aa" to "Ba", where 1 is the highest and 3 the lowest ranking
within its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge". Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.
A -- Bonds that are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds that are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
16
<PAGE>
- --------------------------------------------------------------------------------
Short-Term Securities Ratings
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
- --------------------------------------------------------------------------------
Security Descriptions
- --------------------------------------------------------------------------------
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
COP -- Certificate of Participation
EDA -- Economic Development Authority
EDR -- Economic Development Revenue
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
FSA -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation Bonds
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
RIBS -- Residual Interest Bonds
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value (Cost--$205,949,096 $214,394,815
Cash 20,861
Receivable for Fund shares sold 53,500
Receivable for securities sold 135,596
Interest receivable 3,775,719
- ----------------------------------------------------------------------------------
Total Assets 218,380,491
- ----------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 1,019,011
Investment advisory fees payable 54,429
Administration fees payable 36,286
Distribution fees payable 25,588
Accrued expenses 35,656
- ----------------------------------------------------------------------------------
Total Liabilities 1,170,970
- ----------------------------------------------------------------------------------
Total Net Assets $217,209,521
==================================================================================
NET ASSETS:
Par value of capital shares $ 16,789
Capital paid in excess of par value 210,413,304
Undistributed net investment income 124,991
Accumulated net realized loss from security transactions (1,791,282)
Net unrealized appreciation of investments 8,445,719
- ----------------------------------------------------------------------------------
Total Net Assets $217,209,521
==================================================================================
Shares Outstanding:
Class A 11,531,404
--------------------------------------------------------------------------------
Class B 4,913,898
--------------------------------------------------------------------------------
Class C 343,657
--------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $12.94
--------------------------------------------------------------------------------
Class B * $12.94
--------------------------------------------------------------------------------
Class C ** $12.93
--------------------------------------------------------------------------------
Class A Maximium Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) $13.48
==================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within one year from initial purchase (See Note 4).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 6,808,058
- ------------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 4) 332,105
Investment advisory fees (Note 4) 326,458
Administration fees (Note 4) 217,639
Shareholder and system servicing fees 39,142
Shareholder communications 25,069
Audit and legal 20,958
Registration fees 15,041
Pricing service fees 11,372
Directors' fees 6,568
Custody 4,353
Other 4,009
- ------------------------------------------------------------------------------------
Total Expenses 1,002,714
- ------------------------------------------------------------------------------------
Net Investment Income 5,805,344
- ------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 36,088,001
Cost of securities sold 35,482,428
- ------------------------------------------------------------------------------------
Net Realized Gain 605,573
- ------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 8,395,854
End of period 8,445,719
- ------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 49,865
- ------------------------------------------------------------------------------------
Net Gain on Investments 655,438
- ------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 6,460,782
====================================================================================
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended September 30, 1996 (unaudited) and the Year Ended March
31, 1996
<TABLE>
<CAPTION>
September 30 March 31
=======================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,805,344 $ 9,624,601
Net realized gain 605,573 1,429,693
Increase in net unrealized appreciation 49,865 380,803
- -------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 6,460,782 11,435,097
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (5,605,076) (9,588,581)
- -------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (5,605,076) (9,588,581)
- -------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 8,145,195 17,834,164
Net asset value of shares issued in connection with
the transfer of the Smith Barney Muni Funds --
New Jersey Portfolio's net assets (Note 8) -- 62,810,369
Net asset value of shares issued for reinvestment
of dividends 3,365,426 5,893,070
Cost of shares reacquired (15,930,444) (30,112,356)
- -------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (4,419,823) 56,425,247
- -------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (3,564,117) 58,271,763
NET ASSETS:
Beginning of period 220,773,638 162,501,875
- -------------------------------------------------------------------------------------------------------
End of period* $217,209,521 $220,773,638
=======================================================================================================
* Includes undistributed (overdistributed)
net investment income of: $124,991 $(75,277)
=======================================================================================================
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Smith Barney New Jersey Municipals Fund Inc. ("Fund"), a Maryland
corporation, is registered under the Investment Company Act of 1940, as amended,
as a non-diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on the trade date; (b) securities
are valued at the mean between the quoted bid and ask prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates market value; (d) gains or losses on
the sale of securities are calculated by using the specific identification
method; (e) interest income, adjusted for amortization of premiums and accretion
of original issue discount, is recorded on the accrual basis; market discount is
recognized upon the disposition of the security; (f) direct expenses are charged
to the Fund and each class; management fees and general fund expenses are
allocated on the basis of relative net assets; (g) dividends and distributions
to shareholders are recorded on the ex-dividend date; (h) the Fund intends to
comply with the applicable provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (i) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At March 31, 1996, reclassifications
were made to the Fund's capital accounts to reflect permanent book/tax
differences and income and gains available for distributions under income tax
regulations. Accordingly, a portion of accumulated realized losses amounting to
$268 has been reclassified to paid-in capital. Net investment income, net
realized gains and net assets were not affected by this change; and (j)
estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ.
2. Fund Concentration
Since the Fund invests primarily in obligations of issuers within New
Jersey, it is subject to possible concentration risks associated with economic,
political or legal developments or industrial or regional matters specifically
affecting New Jersey.
21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
3. Exempt-Interest Dividends and Other Distributions
The Fund 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 Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. Investment Advisory Agreement, Administration
Agreement and Other Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment adviser to the Fund. The Fund
pays SBMFM an advisory fee calculated at an annual rate of 0.30% of the average
daily net assets. This fee is calculated daily and paid monthly.
SBMFM also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets up to $500
million and 0.18% of the average daily net assets in excess of $500 million.
This fee is calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor
of Fund shares. For the six months ended September 30, 1996, SB received sales
charges of approximately $73,000 on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B
shares, which applies if redemption occurs within one year from initial
purchase. This CDSC declines by 0.50% the first year after purchase and
thereafter by 1.00% per year until no CDSC is incurred. Class C shares have a
1.00% CDSC, which applies if redemption occurs within the first year of
purchase. For the six months ended September 30, 1996, CDSCs paid to SB were
approximately:
Class B Class C
================================================================================
CDSCs $80,000 $1,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect
to its Class A, B and C shares, calculated at the annual rate of 0.15% of the
average daily net assets for each respective class. In addition, the Fund pays a
distribution fee with respect to its Class B and C shares calculated at the
annual rate of 0.50% and 0.55% of the average daily net assets for each class,
respectively. For the six months ended September 30, 1996, total Distribution
Plan fees incurred were:
Class A Class B Class C
================================================================================
Distribution Plan Fees $112,866 $205,257 $13,982
================================================================================
22
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
All officers and one Director of the Fund are employees of SB.
5. Investments
During the six months ended September 30, 1996, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
===============================================================================
Purchases $30,988,939
- -------------------------------------------------------------------------------
Sales 36,088,001
===============================================================================
At September 30, 1996, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
===============================================================================
Gross unrealized appreciation $9,411,368*
Gross unrealized depreciation (965,649)*
- -------------------------------------------------------------------------------
Net unrealized appreciation $8,445,719*
===============================================================================
*Substantially the same for Federal income tax purposes.
6. Capital Loss Carryforward
At March 31, 1996, the Fund had, for Federal tax purposes, approximately
$2,397,000 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:
2002 2003
===============================================================================
Carryforward Amounts $629,000 $1,768,000
===============================================================================
7. Capital Shares
As of September 30, 1996, the Fund had 100 million shares of capital stock
authorized with a par value of $0.001 per share. The Fund has the ability to
issue multiple classes of shares. Each share of a class represents an identical
interest and has the same rights, except that each class bears certain direct
expenses, including those specifically related to the distribution of its
shares.
At September 30, 1996, total paid-in capital amounted to the following for
each class:
Class A Class B Class C
===============================================================================
Total Paid-in Capital $140,996,332 $64,911,852 $4,521,909
===============================================================================
23
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
September 30, 1996 March 31, 1996
------------------------ --------------------------
Shares Amount Shares Amount
=================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 300,290 $ 3,853,185 599,655 $ 7,845,574
Net asset value of shares
issued in connection
with the transfer of the
New Jersey Portfolio's
net assets (Note 8) -- -- 4,320,421 57,233,493
Shares issued on
reinvestment 179,921 2,307,382 304,318 3,936,961
Shares redeemed (877,401) (11,239,142) (1,770,314) (23,106,072)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) (397,190) $ (5,078,575) 3,454,080 $45,909,956
=================================================================================================
Class B
Shares sold 280,167 $ 3,596,193 736,489 $ 9,548,116
Net asset value of shares
issued in connection
with the transfer of the
New Jersey Portfolio's
net assets (Note 8) -- -- 163,375 2,164,960
Shares issued on
reinvestment 76,979 987,328 147,425 1,905,056
Shares redeemed (353,601) (4,535,967) (521,676) (6,758,534)
- --------------------------------------------------------------------------------------------------
Net Increase 3,545 $ 47,554 525,613 $ 6,859,598
==================================================================================================
Class C
Shares sold 54,321 $ 695,817 33,600 $ 440,474
Net asset value of shares
issued in connection
with the transfer of the
New Jersey Portfolio's
net assets (Note 8) -- -- 257,534 3,411,916
Shares issued on
reinvestment 5,514 70,716 3,911 51,053
Shares redeemed (12,112) (155,335) (18,777) (247,750)
- --------------------------------------------------------------------------------------------------
Net Increase 47,723 $ 611,198 276,268 $ 3,655,693
==================================================================================================
</TABLE>
24
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
8. Transfer of Net Assets
On December 8, 1995, the Fund acquired the assets and certain liabilities
of the Smith Barney Muni Funds--New Jersey Portfolio ("New Jersey Portfolio")
pursuant to a plan of reorganization approved by Smith Barney New Jersey
Municipals Fund Inc. shareholders on December 1, 1995. Total shares issued by
the Fund and the total net assets of New Jersey Portfolio and the Fund on the
date of the transfer were as follows:
Total Net
Shares Assets of Total Net
Issued by Acquired Assets of
Acquired Portfolio the Fund Portfolio the Fund
================================================================================
New Jersey Portfolio 4,741,330 $62,810,369 $168,346,376
================================================================================
The total net assets of New Jersey Portfolio before acquisition included
unrealized appreciation of $4,397,508 and a net realized loss of $629,684. The
total net assets of the Fund immediately after the transfer were $231,156,745.
The transaction was structured for tax purposes to qualify as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended.
25
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1996 1995 1994 1993 1992
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.88 $12.62 $12.55 $13.16 $12.44 $12.17
- -----------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.35 0.70 0.70 0.70 0.75 0.77
Net realized and unrealized
gain (loss) 0.05 0.26 0.07 (0.46) 0.87 0.44
- -----------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.40 0.96 0.77 0.24 1.62 1.21
- -----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.70) (0.70) (0.69) (0.75) (0.77)
Overdistribution of net
investment income -- -- -- (0.01) -- --
Net realized gains -- -- (0.00)* (0.15) (0.14) (0.13)
Capital -- -- -- (0.00)* (0.01) (0.04)
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.70) (0.70) (0.85) (0.90) (0.94)
- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $12.94 $12.88 $12.62 $12.55 $13.16 $12.44
- -----------------------------------------------------------------------------------------------------------------------
Total Return 3.17%+++ 7.77% 6.37% 1.66% 13.49% 10.22%
- -----------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $149,191 $153,690 $106,919 $119,913 $115,694 $92,797
- -----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net
Assets:
Expenses(2)(3) 0.76%+ 0.84% 0.88% 0.83% 0.74% 0.67%
Net investment income 5.49+ 5.41 5.61 5.17 5.76 6.18
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 22% 32% 32% 58% 98%
=======================================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) The investment adviser waived all or part of its fees in the years ended
March 31, 1992, March 31, 1993 and March 31, 1994. If such fees were not
waived, the per share effects on net investment income and expense ratios
would have been as follows:
Per Share Decreases to Expense Ratios
Net Investment Income Without Fee Waivers
------------------------------- ----------------------------
1994 1993 1992 1994 1993 1992
----- ----- ----- ----- ----- -----
Class A $0.01 $0.02 $0.02 0.88% 0.90% 0.83%
(3) Expense ratios exclude interest expense. Expense ratios including interest
expense would have been 0.89% and 0.68% for the years ended March 31, 1995
and March 31, 1992, respectively.
* 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.
26
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
Class B Shares 1996(1) 1996 1995 1994 1993(2)
=========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.88 $12.62 $12.55 $13.16 $12.75
- ---------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.32 0.63 0.63 0.64 0.28
Net realized and unrealized
gain (loss) 0.05 0.26 0.06 (0.47) 0.55
- ---------------------------------------------------------------------------------------------------------
Total Income From Operations 0.37 0.89 0.69 0.17 0.83
- ---------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.63) (0.62) (0.62) (0.27)
Overdistribution of net
investment income -- -- -- (0.01) --
Net realized gains -- -- (0.00)* (0.15) (0.14)
Capital -- -- -- (0.00)* (0.01)
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.63) (0.62) (0.78) (0.42)
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.94 $12.88 $12.62 $12.55 $ 13.16
- ---------------------------------------------------------------------------------------------------------
Total Return 2.92%+++ 7.20% 5.76% 1.15% 6.60%+++
- ---------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $63,574 $63,272 $55,334 $48,375 $16,293
- ---------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets
Expenses(3)(4) 1.27%+ 1.36% 1.39% 1.36% 1.33%+
- ---------------------------------------------------------------------------------------------------------
Net investment income 4.98+ 4.90 5.09 4.64 5.17+
- ---------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 22% 32% 32% 58%
=========================================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) For the period from November 6, 1992 (inception date) to March 31, 1993.
(3) The investment adviser waived all or part of its fees in the years ended
March 31, 1993 and March 31, 1994. If such fees were not waived, the per
share effects on net investment income and expense ratios would have been as
follows:
Per Share Decreases to Expense Ratios
Net Investment Income Without Fee Waivers
----------------------- -------------------
1994 1993 1994 1993
----- ----- ------ ------
Class B $0.01 $0.01 1.41% 1.49%+
(4) Expense ratios exclude interest expense. Expense ratio including interest
expense would have been 1.40% for the year ended March 31, 1995.
* 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.
27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
Class C Shares 1996(1) 1996 1995(2)
====================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $12.88 $12.62 $11.86
- ------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.31 0.62 0.20
Net realized and unrealized gain 0.05 0.27 0.74
- -----------------------------------------------------------------------------------
Total Income From Operations 0.36 0.89 0.94
- -----------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.63) (0.18)
Net realized gains -- -- (0.00)*
- -----------------------------------------------------------------------------------
Total Distributions (0.31) (0.63) (0.18)
- -----------------------------------------------------------------------------------
Net Asset Value, End of Period $12.93 $12.88 $12.62
- -----------------------------------------------------------------------------------
Total Return 2.81%+++ 7.17% 8.01%+++
- -----------------------------------------------------------------------------------
Net Assets, End of Period (000s) $4,445 $3,812 $248
- -----------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.32%+ 1.41% 1.44%+
Net investment income 4.93+ 4.82 5.05+
- -----------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 22% 32%
===================================================================================
</TABLE>
(1) For the six months ended September 30, 1996 (unaudited).
(2) For the period from December 13, 1994 (inception date) to March 31, 1995.
* 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.
28
<PAGE>
SMITH BARNEY
NEW JERSEY
MUNICIPALS
FUND INC.
DIRECTORS
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt Dorsett
Elliot Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius Rose
OFFICERS
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Lawrence T. McDermott
Vice President
and Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
SMITH BARNEY
- ----------------------------------
A Member of Travelers Group [LOGO]
INVESTMENT ADVISER
AND ADMINISTRATOR
Smith Barney Mutual Funds
Management Inc.
DISTRIBUTOR
Smith Barney Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney New Jersey Municipals Fund Inc. It is not authorized for
distribution to prospective investors unless accompanied or preceded by a
current Prospectus for the Fund, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent information.
SMITH BARNEY
NEW JERSEY
MUNICIPALS FUND INC.
388 Greenwich Street
New York, New York 10013
FD0450 11/96
29
