================================================================================
SEMI-ANNUAL REPORT
================================================================================
Smith Barney
New Jersey
Municipals
Fund Inc.
----------------------------------
September 30, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
============================================
Smith Barney New Jersey Municipals Fund Inc.
============================================
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney New Jersey
Municipals Fund Inc. ("Fund") for the period ended September 30, 1997. 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.
Performance Update
For the six months ended September 30, 1997, the Class A shares of the Fund had
a total return of 6.22% which compares favorably to its Lipper Analytical
Services, Inc. ("Lipper") peer group average total return of 6.04% for the same
period. (Lipper is an independent fund-tracking organization.) During the six
months covered by this report, the Fund distributed income dividends totaling
$0.354 per Class A share. Based on its net asset value (NAV) of $13.36 as of
September 30, 1997 for Class A shares and the current income dividend of $0.059
per Class A share, this equates to an annualized yield of 5.30%. Performance
information for other share classes of the Fund appears on page 4.
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 5.30% is equivalent to a taxable
yield of 9.20%. (This figure assumes an investor is in the 36% federal tax
bracket, which according to the Internal Revenue Service constitutes nearly 10%
of all U.S. taxpayers.) We believe the Fund's emphasis on income and its
defensive posture over the reporting period contributed to its competitive
performance.
Market and Economic Overview
The municipal bond market experienced a strong rally in September after the
downturn in August. The downturn was primarily fueled by renewed investor
concerns of higher inflationary pressures and signs of growing strength in the
U.S. economy. Despite the recent increase in volatility in the financial
markets, the U.S. economy has continued to grow strongly with low unemployment
and a noticeable absence of signs of higher inflation.
At its March 1997 meeting, the Federal Reserve Board ("Fed") raised the
federal-funds rate by 25 basis points, or 0.25%. (The federal-funds rate is the
interest rate banks charge each other for overnight loans and is a closely
watched indicator of the direction of interest rates.) Nevertheless, since that
time, the Fed has remained on the sidelines, leaving interest rates unchanged at
1
<PAGE>
their May, July, August and September meetings. However, in testimony delivered
to the House Budget Committee on October 8, 1997, Fed Chairman Alan Greenspan
again warned that strong economic growth could lead to a resurgence in
inflation.
Another sign of strength in the bond market was the continuing high demand for
municipal bonds. In August and September, there was an unusually heavy seasonal
supply of new bond issues, with New Jersey making up a large part of these
issues. Despite the heavy supply, investor demand for these issues remained
strong. We believe this high demand for tax-exempt bonds will continue to
support today's prices.
New Jersey Economic Highlights
Many key economic decisions remain on hold awaiting the outcome of the upcoming
New Jersey gubernatorial election on November 4, 1997. We expect minimal
municipal bond activity in New Jersey for the remainder of 1997. New Jersey's
economy has recovered as evidenced by the Garden State's strong job growth.
Employment in nonagricultural industries is expected to rise by 1.8%, creating
65,000 new jobs by the end of 1997. Moreover, personal income is expected to
jump by 5%, while consumer prices are expected to increase by only 3%. Many
economists attribute this favorable economic climate in New Jersey to low
inflation, low interest rates, strong corporate profits and high levels of
consumer confidence.
Investment Strategy
The 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, 1997, approximately 83% of the Fund's holdings were rated
investment grade. (Investment-grade bonds are those rated Aaa, Aa, A and Baa by
Moody's Investors Service, Inc. or AAA, AA, A and BBB by Standard & Poor's
Ratings Services, or have an equivalent rating by any nationally recognized
statistical rating organization, or determined by the manager to be equivalent.)
The Fund's largest holdings are concentrated in hospital bonds (22.9%), general
obligation bonds (12.3%), education bonds (10.2%) and housing bonds (9.8%). The
Fund's average weighted maturity was just over 20 years as of September 30,
1997.
2
<PAGE>
Municipal Bond Market Outlook
Some investors have expressed concerns that certain provisions of the recently
enacted Federal Taxpayer Relief Act of 1997 (which was part of the Balanced
Budget Agreement) could erode many of the tax advantages that municipal bonds
currently offer investors. However, we believe this tax legislation is largely
positive for the municipal bond market. The reduction in the long-term capital
gains tax rate could benefit investors who receive capital gain dividends from
municipal bond funds. In addition, the repeal of the alternative minimum tax for
small business corporations provides favorable tax treatment for many corporate
municipal bond investors. Moreover, the new tax legislature expands the issuance
of education and housing bonds, two key segments of the municipal bond market.
Going forward, we believe that the municipal bond market should remain strong
over the next few months. In our opinion, the Federal Reserve should continue to
remain on the sidelines and not raise interest rates unless greater inflationary
pressures appear.
We believe that a moderate U.S. economy with low inflation will continue to be
favorable for municipal bonds. We also believe that today's municipal bond
market is attractively priced and, in light of the limited supply of issues,
should continue to provide investors with attractive after-tax yields. Given our
expectations for a strong municipal bond market and the lofty valuations of the
stock market, we believe it may be appropriate for some investors to consider
reallocating their portfolios and increasing their exposure to bonds.
In closing, thank you for investing in the Smith Barney New Jersey Municipals
Fund. We look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Lawrence T. McDermott
Heath B. McLendon Lawrence T. McDermott
Chairman Vice President and
Investment Officer
October 24, 1997
3
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================
Historical Performance -- Class A Shares
===================================================================================================
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>
9/30/97 $12.92 $13.36 $0.35 $0.00 $0.00 6.22%+
- ---------------------------------------------------------------------------------------------------
3/31/97 12.88 12.92 0.68 0.00 0.00 5.74
- ---------------------------------------------------------------------------------------------------
3/31/96 12.62 12.88 0.70 0.00 0.00 7.77
- ---------------------------------------------------------------------------------------------------
3/31/95 12.55 12.62 0.70 0.00 0.00 6.37
- ---------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------
3/31/92 12.17 12.44 0.77 0.13 0.04 10.22
- ---------------------------------------------------------------------------------------------------
3/31/91 11.92 12.17 0.83 0.05 0.01 9.89
- ---------------------------------------------------------------------------------------------------
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 $7.12 $0.51 $0.06
===================================================================================================
<CAPTION>
===================================================================================================
Historical Performance -- Class B Shares
===================================================================================================
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>
9/30/97 $12.92 $13.36 $0.32 $0.00 $0.00 5.97%+
- ---------------------------------------------------------------------------------------------------
3/31/97 12.88 12.92 0.62 0.00 0.00 5.23
- ---------------------------------------------------------------------------------------------------
3/31/96 12.62 12.88 0.63 0.00 0.00 7.20
- ---------------------------------------------------------------------------------------------------
3/31/95 12.55 12.62 0.62 0.00 0.00 5.76
- ---------------------------------------------------------------------------------------------------
3/31/94 13.16 12.55 0.63 0.15 0.00 1.15
- ---------------------------------------------------------------------------------------------------
Inception* - 3/31/93 12.75 13.16 0.27 0.14 0.01 6.60+
===================================================================================================
Total $3.09 $0.29 $0.01
===================================================================================================
<CAPTION>
===================================================================================================
Historical Performance -- Class C Shares
===================================================================================================
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>
9/30/97 $12.92 $13.34 $0.32 $0.00 $0.00 5.79%+
- ---------------------------------------------------------------------------------------------------
3/31/97 12.88 12.92 0.61 0.00 0.00 5.17
- ---------------------------------------------------------------------------------------------------
3/31/96 12.62 12.88 0.63 0.00 0.00 7.17
- ---------------------------------------------------------------------------------------------------
Inception* - 3/31/95 11.86 12.62 0.18 0.00 0.00 8.01+
===================================================================================================
Total $1.74 $0.00 $0.00
===================================================================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
4
<PAGE>
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 9/30/97+ 6.22% 5.97% 5.79%
- --------------------------------------------------------------------------------
Year Ended 9/30/97 8.86 8.34 8.22
- --------------------------------------------------------------------------------
Five Years Ended 9/30/97 6.79 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 9/30/97 8.53 6.52 9.46
================================================================================
<CAPTION>
With Sales Charge(2)
------------------------------
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Six Months Ended 9/30/97+ 1.95% 1.47% 4.79%
- --------------------------------------------------------------------------------
Year Ended 9/30/97 4.50 3.84 7.22
- --------------------------------------------------------------------------------
Five Years Ended 9/30/97 5.92 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 9/30/97 8.05 6.36 9.46
================================================================================
</TABLE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 9/30/97) 116.59%
- --------------------------------------------------------------------------------
Class B (Inception* through 9/30/97) 36.31
- --------------------------------------------------------------------------------
Class C (Inception* through 9/30/97) 28.80
================================================================================
</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
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of the
Smith Barney New Jersey Municipals Fund Inc.
vs. Lehman Brothers Municipal Bond Index+
- --------------------------------------------------------------------------------
April 1988 -- September 1997
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Smith Barney New Jersey Lehman Brothers
Date Municipals Fund Inc. Municipal Bond 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
3/97 $19,568 $19,975
9/30/97 $21,659 $21,286
</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, 1997. The Lehman
Brothers Municipal Bond Index is a broad based, total return index
comprised of investment grade, fixed rate municipal bonds selected from
issues larger than $50 million dated since January 1991. 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>
================================================================================
Portfolio Highlights (unaudited) September 30, 1997
================================================================================
Portfolio Breakdown
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Transportation 8.3%
General Obligation 12.3%
Hospitals 22.9%
Utilities 9.1%
Other 11.9%
Education 10.2%
Industrial Development 8.3%
Pollution Control 7.2%
Housing 9.8%
</TABLE>
Summary of Investments by Combined Ratings
<TABLE>
<CAPTION>
Standard & Percentage of
Moody's and/or Poor's Total Investments
- --------------------------------------------------------------------------------
<S> <C> <C>
Aaa AAA 52.0%
Aa AA 12.6
A A 4.7
Baa BBB 13.0
Ba BB 4.6
VMIG 1 A-1 0.8
NR NR 12.3
-----
100.0%
=====
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Schedule of Investments (unaudited) September 30, 1997
==========================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================================
<S> <C> <C> <C>
Education -- 10.2%
$ 750,000 AAA Hamilton Township Board of Education, FSA-Insured,
7.000% due 12/15/15 $ 818,437
500,000 AAA Jersey City (Hudson County) Fiscal Year
Adjustment Bonds, Series 1991 B, FSA-Insured,
8.400% due 5/15/06 633,750
650,000 AAA Lakewood Township School District, AMBAC-Insured,
Bank Qualified, Series 92, 6.250% due 2/15/11 730,437
1,180,000 AAA Monmouth County Improvement Authority Revenue,
(Howell Township Board of Education Project),
AMBAC-Insured, 5.800% due 7/15/17 1,236,050
New Jersey EDR:
1,000,000 AAA Educational Testing Service, MBIA-Insured,
Series E, 6.000% due 5/15/25 1,061,250
600,000 Aa3* Princeton Montessori Society, LOC Banque National
De Paris, Series S, 6.500% due 6/1/12 634,500
New Jersey State Educational Facilities,
Financing Authority Revenue:
1,000,000 NR Caldwell College, Series A, 7.250% due 7/1/25 1,052,500
Fairleigh Dickinson University, Series C:
2,700,000 NR 6.625% due 7/1/23 2,737,125
880,000 NR Escrowed to Maturity with U.S. government
securities, 7.750% due 7/1/01 (a) 949,300
3,000,000 AAA Princeton Theological, Series A, 5.000% due 7/1/22 2,887,500
4,365,000 AAA Richard Stockton College, AMBAC-Insured,
Series F, 5.400% due 7/1/21 4,392,281
2,500,000 AAA New Jersey State Higher Educational Assistance Authority,
Student Loan Revenue, New Jersey Class Loan Program,
Series A, MBIA-Insured, 5.800% due 6/1/16 (b) 2,596,875
Rutgers State University Refunding, State University of
New Jersey:
600,000 AA Series 92A, 6.400% due 5/1/13 692,250
750,000 AA Series P, 6.850% due 5/1/21 811,875
1,000,000 Baa1* Shrewsbury Board of Education, COP, 6.600% due 8/15/15 1,070,000
- ----------------------------------------------------------------------------------------------------------
22,304,130
- ----------------------------------------------------------------------------------------------------------
General Obligation -- 12.3%
2,500,000 AAA Atlantic County COP, Public Facilities Lease
Agreements, FGIC-Insured, 7.400% due 3/1/09 (c) 3,096,875
1,340,000 AAA Bayonne GO, FGIC-Insured, 6.125% due 5/1/14 1,428,775
665,000 AAA Belvedere GO, AMBAC-Insured, 7.300% due 12/1/14 716,537
2,595,000 AA Bernards Township School District, 5.300% due 1/1/18 2,575,537
550,000 AAA Dover Board of Education, COP, FGIC-Insured,
6.600% due 6/1/11 590,562
200,000 AAA Hudson County GO, FGIC-Insured, 6.550% due 7/1/10 231,250
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1997
==========================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================================
<S> <C> <C> <C>
General Obligation -- 12.3% (continued)
$1,000,000 AAA Lumberton Township School District COP, MBIA-Insured,
6.100% due 10/1/13 $ 1,057,500
Morris Township GO:
550,000 AA 6.550% due 7/1/09 642,125
550,000 AA 6.550% due 7/1/10 642,125
500,000 AA 6.550% due 7/1/11 585,625
2,500,000 A+ New Jersey State COP, Equipment Leasing Revenue,
Series A, 6.400% due 4/1/05 2,703,125
2,500,000 AA+ New Jersey State GO, Series D, 8.000% due 2/15/07 3,146,875
1,500,000 AAA North Bergen Township Capital Appreciation,
FSA-Insured, 8.000% due 8/15/07 1,888,125
495,000 A Puerto Rico Commonwealth GO Unlimited,
8.000% due 7/1/08 517,813
500,000 AAA South Amboy GO Unlimited, MBIA-Insured,
6.375% due 12/1/10 543,125
2,500,000 AAA South Brunswick Township Board of Education,
Series AA, FGIC-Insured, 5.500% due 8/1/24 2,518,750
750,000 AAA Trenton GO, MBIA-Insured, 6.550% due 8/15/09 815,625
900,000 AAA Union City GO, MBIA-Insured, 6.700% due 9/1/12 996,750
854,000 AAA Weehawken Township GO, FSA-Insured, 6.350% due 7/1/07 919,117
West Windsor/Plainsboro GO, Regional School District:
180,000 AA 6.750% due 4/1/06 207,000
490,000 AA 6.750% due 4/1/07 568,400
435,000 AA 6.800% due 4/1/08 510,038
170,000 AA 6.800% due 4/1/09 200,600
- ----------------------------------------------------------------------------------------------------------
27,102,254
- ----------------------------------------------------------------------------------------------------------
Hospitals -- 22.9%
Camden County Improvement Authority Revenue:
3,500,000 Baa2* Health Care Redevelopment Project, (Cooper Health),
5.875% due 2/15/15 3,552,500
1,000,000 AAA Health Services Project B, AMBAC-Insured,
5.250% due 12/1/18 1,002,500
2,500,000 AAA New Jersey EDA, Nursing Home Revenue, RWJ Health
Care Corp., FSA-Insured, 6.500% due 7/1/24 2,728,125
New Jersey Health Care Facilities Financing Authority Revenue:
5,500,000 AAA AHS Hospital Corp., Series A, AMBAC-Insured,
5.375% due 7/1/19 5,506,875
Burdett Tomlin Memorial Hospital, Series D, FGIC-Insured:
1,400,000 AAA 6.500% due 7/1/12 1,508,500
850,000 AAA 6.500% due 7/1/21 911,625
1,985,000 AA Cathedral Health Services Inc., FHA-Insured,
7.250% due 2/15/21 2,161,168
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1997
==========================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================================
<S> <C> <C> <C>
Hospitals -- 22.9% (continued)
Columbus Hospital, Series A:
$ 750,000 Baa3* 7.200% due 7/1/01 $ 770,625
1,000,000 Baa3* 7.500% due 7/1/21 1,071,250
250,000 A+ Community Memorial Hospital Association, Series C,
8.000% due 7/1/14 261,465
2,300,000 Baa1* Deborah Heart & Lung Center, 6.300% due 7/1/23 2,397,750
750,000 BBB+ East Orange General Hospital, Series B,
7.750% due 7/1/20 806,250
1,500,000 A Helene Fuld Medical Center, Series C,
8.125% due 7/1/13 1,562,895
4,500,000 AAA Irvington General Hospital, FHA-Insured,
6.375% due 8/1/15 4,899,375
1,125,000 AAA J.F.K. Health System, Obligated Group, FGIC-Insured,
6.700% due 7/1/21 1,213,594
260,000 A1* Kennedy Memorial University Medical Center,
Series D, 7.875% due 7/1/09 271,531
120,000 BBB- Kimball Medical Center, Series C, 8.000% due 7/1/98 122,707
825,000 AAA Medical Center of Ocean County, Series C, FSA-Insured,
6.750% due 7/1/20 887,906
825,000 AAA Muhlenberg Regional Medical Center, Series A,
AMBAC-Insured, 8.000% due 7/1/18 865,970
2,750,000 AAA Newark Beth Israel Medical Center, FSA-Insured,
6.000% due 7/1/24 2,860,000
445,000 BBB+ Newcomb Medical Center, Series A, 7.875% due 7/1/03 477,263
585,000 AAA Overlook Hospital Association, Series E, FGIC-Insured,
6.700% due 7/1/17 597,215
1,000,000 BBB+ Pascack Valley Hospital, Series 91, 6.700% due 7/1/11 1,038,750
2,500,000 NR Raritan Bay Medical Center, 7.250% due 7/1/27 2,687,500
1,150,000 AAA Somerset Medical Center, Series A, FGIC-Insured,
5.200% due 7/1/24 1,121,250
2,000,000 Baa* South Ocean County Hospital, 6.250% due 7/1/23 2,080,000
2,000,000 BBB St. Elizabeth's Hospital, 6.000% due 7/1/14 2,067,500
2,750,000 Baa1* St. Mary Hospital, 5.875% due 7/1/12 2,794,688
665,000 AAA Wayne General Hospital, Series B, FHA-Insured,
5.750% due 8/1/11 692,431
1,500,000 AAA University Medicine & Dentistry, Series A, MBIA-Insured,
5.000% due 9/1/22 1,438,125
- ----------------------------------------------------------------------------------------------------------
50,357,333
- ----------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.1%
650,000 BBB+ Essex County Improvement Authority, Lease Revenue
Bonds, 6.600% due 4/1/14 686,563
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1997
==========================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 3.1% (continued)
$1,500,000 AAA Newark Housing Financing Corp., Mortgage Revenue
Refunding, Manor Apartments, Series A, FHA-Insured,
7.500% due 2/15/24 $ 1,659,375
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) 2,712,563
1,000,000 AA Regency Park Project, Series H,
7.700% due 11/1/30 1,041,920
720,000 AAA Sayreville Housing Development Corp., Mortgage
Revenue Refunding, Lakeview Apartments,
FHA-Insured, 7.750% due 8/1/24 729,295
- ----------------------------------------------------------------------------------------------------------
6,829,716
- ----------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 6.7%
New Jersey State Housing & Mortgage Finance Agency
Revenue, MBIA-Insured:
7,300,000 AAA Home Buyer, Series U, 5.850% due 4/1/29 (b) 7,519,000
100,000 AAA Home Mortgage, Series A, 7.875% due 10/1/17 103,842
330,000 AAA Home Mortgage, Series C, 8.000% due 4/1/12 342,926
740,000 AAA Series B, 8.100% due 10/1/17 768,675
30,000 AAA Series C, 8.375% due 4/1/17 31,202
190,000 AAA Series D, 7.700% due 10/1/29 (b) 199,025
1,940,000 AAA Series R, 5.750% due 4/1/17 (c) 2,034,575
2,440,000 AAA Series S, 5.950% due 10/1/17 (b)(c) 2,555,900
30,000 AAA Puerto Rico Housing Finance Corp., Single-Family
Housing Mortgage, Series A, GNMA-Collateralized,
7.800% due 10/15/21 31,088
1,000,000 AAA Virgin Islands HFA, Single-Family Mortgage,
GNMA-Collateralized, 6.500% due 3/1/25 (b) 1,055,000
- ----------------------------------------------------------------------------------------------------------
14,641,233
- ----------------------------------------------------------------------------------------------------------
Industrial Development -- 8.3%
New Jersey EDA, EDR:
970,000 Aa3* Economic Growth Bonds, LOC Banque National De Paris,
6.550% due 12/1/07 (b) 1,026,988
1,500,000 BB+ Electric Revenue, Vineland Cogeneration LP,
7.875% due 6/1/19 (b) 1,644,375
1,000,000 AAA Miscellaneous Revenue, State Contract, FSA-Insured,
6.000% due 3/15/21 1,040,000
Nursing Home Revenue:
1,500,000 NR Franciscan Oaks, Series A, 8.500% due 10/1/23 1,651,875
1,000,000 A+ Morris Hall-St. Lawrence, 6.250% due 4/1/25 1,043,750
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1997
==========================================================================================================
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 $ 1,590,306
1,085,000 Aaa* Series L, 7.100% due 12/1/11 (b) 1,171,800
1,500,000 BBB+ Terminal Revenue, GATX Terminal Corp.,
Series 1994, 7.300% due 9/1/19 1,708,125
1,000,000 NR Trane Division, 1990 Project, 9.500% due 9/1/00 1,102,500
1,500,000 NR Zirbser-Greenbriar, 7.375% due 7/15/03 1,573,125
New Jersey EDA Revenue Refunding,
Harrogate Inc., Series A:
2,000,000 BBB 5.750% due 12/1/16 2,020,000
1,500,000 BBB 5.875% due 12/1/26 1,516,875
1,000,000 AAA New Jersey EDA, Natural Gas Facilities Revenue,
NUI Corp., Series A, AMBAC-Insured,
6.350% due 10/1/22 1,076,250
- ----------------------------------------------------------------------------------------------------------
18,165,969
- ----------------------------------------------------------------------------------------------------------
Life Care -- 0.9%
1,000,000 Aaa* New Jersey EDA, EDR, Eagle Rock Convalescent, Inc.,
GNMA-Collateralized, 7.375% due 12/20/06 1,100,000
780,000 AAA New Jersey Health Care Facilities Financing Authority
Revenue, Spectrum for the Living, FHA-Insured,
6.500% due 2/1/22 835,575
- ----------------------------------------------------------------------------------------------------------
1,935,575
- ----------------------------------------------------------------------------------------------------------
Miscellaneous -- 4.2%
615,000 A- Atlantic City COP, Series 1991 (Public Facilities Lease
Agreements Atlantic City Project), 8.875% due 1/15/13 834,863
240,000 A+ The Hudson County Improvement Authority, (Essential
Purpose Pooled Governmental Loan Project),
Series 1986, 7.600% due 8/1/25 262,500
1,000,000 AAA New Brunswick Parking Authority Revenue, City Guaranteed
Parking, Series A, FGIC-Insured, 6.500% due 9/1/19 1,077,500
New Jersey EDA:
480,000 NR EDR, National Association of Accountants,
7.650% due 7/1/09 514,200
1,865,000 NR Industrial Revenue, State Plaza Park and Ride LP,
6.625% due 7/1/03 (b) 1,951,256
1,000,000 NR Waste Paper Recycling Revenue, (Marcal Paper Project),
8.500% due 2/1/10 (b) 1,170,000
3,000,000 NR New Jersey Sports and Expo Authority, Monmouth Park,
Refunding, Series A, 8.000% due 1/1/25 3,382,500
- ----------------------------------------------------------------------------------------------------------
9,192,819
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1997
==========================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================================
<S> <C> <C> <C>
Pollution Control -- 7.2%
$1,950,000 Ba* Atlantic County Utilities Authority, Solid Waste Revenue,
7.125% due 3/1/16 $ 1,976,813
Middlesex County Pollution Control Authority Financing
Revenue, Amerada Hess Corp.:
1,000,000 NR 7.875% due 6/1/22 1,162,500
2,000,000 NR 6.875% due 12/1/22 2,147,500
New Jersey EDA:
5,500,000 AAA PSE&G Corp., MBIA-Insured, 6.400% due 5/1/32 (b) 5,864,375
2,335,000 A Sewer Facility, Atlantic City Sewer Co.,
7.250% due 12/1/11 (b) 2,568,500
1,000,000 AAA Salem County Industrial Pollution Control Finance
Authority, (PSE&G Project C), MBIA-Insured, 6.200% due
8/1/30 1,070,000
1,000,000 AA Salem County Pollution Control Financing Authority,
Waste Disposal Revenue, E.I. du Pont De Nemours
& Co., 6.125% due 7/15/22 (b) 1,048,750
- ----------------------------------------------------------------------------------------------------------
15,838,438
- ----------------------------------------------------------------------------------------------------------
Public Facilities -- 0.8%
1,750,000 AAA New Jersey EDA, Market Transition Facilities
Revenue, Senior Lien, Series A, MBIA-Insured,
5.800% due 7/1/09 1,868,125
- ----------------------------------------------------------------------------------------------------------
Solid Waste -- 4.7%
2,500,000 Aa2* Mercer County Improvement Authority,
County Guaranteed Solid Waste Revenue,
5.750% due 9/15/16 2,596,875
1,250,000 Aa1* New Jersey EDA, Solid Waste Revenue, Garden State
Paper Co., 7.125% due 4/1/22 (b) 1,304,688
Union County Utility Authority, Solid Waste Revenue,
Series A:
5,130,000 BB 7.150% due 6/15/09 (b) 5,296,725
1,035,000 BB 7.200% due 6/15/14 (b) 1,068,638
- ----------------------------------------------------------------------------------------------------------
10,266,926
- ----------------------------------------------------------------------------------------------------------
Transportation -- 8.3%
385,000 A1* Cape May Bridge Commission, Guaranteed Revenue
Bonds, 6.700% due 6/1/02 391,179
500,000 AAA Delaware River Port Authority, PA & NJ Delaware
River Bridges, Revenue Refunding, AMBAC-Insured, 7.375%
due 1/1/07 529,375
800,000 Baa1* Essex County Improvement Authority Airport Project
Revenue, Series 92, 6.800% due 11/1/21 (b) 847,000
1,000,000 Baa2* New Jersey EDA Revenue, (American Airlines Inc.
Project ), 7.100% due 11/1/31 (b) 1,087,500
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1997
==========================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================================
<S> <C> <C> <C>
Transportation -- 8.3% (continued)
Port Authority of New York & New Jersey:
$1,500,000 AA- 67th Series, 6.875% due 1/1/25 $ 1,584,375
3,000,000 AA- 110th Series, 2nd Installment,
5.300% due 7/1/16 (b) 2,947,500
3,000,000 AAA MBIA-Insured, 5.875% due 10/15/27 3,063,750
Special Obligation Revenue:
3,500,000 NR 5th Installment, 6.750% due 10/1/19 (b) 3,771,250
2,000,000 AAA 96th Series, FGIC-Insured,
6.600% due 10/1/23 (b) 2,200,000
1,800,000 A-1+ Versatile Structure Obligation, Series 4,
3.800% due 4/1/24 (b)(d) 1,800,000
- ----------------------------------------------------------------------------------------------------------
18,221,929
- ----------------------------------------------------------------------------------------------------------
Utilities -- 9.1%
700,000 Baa1* Beachwood Sewer Authority Revenue, Junior Lien,
6.500% due 12/1/12 746,375
1,000,000 AAA Bordentown Sewerage Authority Revenue, Series C,
MBIA-Insured, 6.900% due 12/1/16 1,082,500
2,500,000 AAA Camden County Municipals Utilities Authority, Sewer
Revenue, FGIC-Insured, 5.125% due 7/15/17 2,465,625
1,400,000 AAA Essex County, New Jersey, Improvement Authority
Revenue, Utility Systems, Orange Franchise,
Series A, MBIA-Insured, 5.375% due 7/1/18 1,405,250
1,700,000 AAA Jersey City Sewer Authority, AMBAC-Insured,
6.250% due 1/1/14 1,952,875
1,385,000 AAA Kearney Municipal Utilities Authority Revenue,
FGIC-Insured, 7.300% due 11/15/18 1,791,844
Middlesex County Utilities Authority, Sewer Revenue,
Series A:
2,500,000 AAA FGIC-Insured, 5.125% due 12/1/16 2,450,000
1,000,000 AAA MBIA-Insured, 6.250% due 8/15/10 1,136,250
1,000,000 AAA New Jersey EDA, Natural Gas Facilities Revenue,
Series A, AMBAC-Insured, 6.250% due 8/1/24 1,065,000
750,000 AAA Old Bridge Township Municipal Utilities Authority
Revenue, FGIC-Insured, 6.400% due 11/1/09 823,125
2,500,000 AA Somerset/Raritan Valley Sewer Authority Revenue,
6.750% due 7/1/10 2,681,250
1,000,000 AAA Southeast Morris County Municipal Utilities Authority,
Water Revenue, Series A, FGIC-Insured,
6.500% due 1/1/11 1,076,250
1,400,000 AAA Stafford Municipal Utilities Authority, Water & Sewer
Revenue, FGIC-Insured, 5.000% due 12/1/22 1,342,250
- ----------------------------------------------------------------------------------------------------------
20,018,594
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Schedule of Investments (unaudited) (continued) September 30, 1997
==========================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
==========================================================================================================
<S> <C> <C> <C>
Water & Sewer -- 1.3%
New Jersey EDA:
$1,610,000 AAA Middlesex County Water Revenue, MBIA-Insured,
5.250% due 2/1/29 (b) $ 1,595,913
1,000,000 NR Water Facilities Revenue, Series 1991, (New Jersey
American Water Co., Inc. Project),
7.400% due 11/1/01 (b) 1,072,500
100,000 AAA Passaic Valley Sewer Commission Revenue,
Water Supply Revenue, Series A, FGIC-Insured,
6.400% due 12/15/22 107,500
- ----------------------------------------------------------------------------------------------------------
2,775,913
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $206,768,502**) $ 219,518,954
==========================================================================================================
</TABLE>
(a) Pre-Refunded bonds escrowed with 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 this issue 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 at par on demand on no more than seven
days notice.
** 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 Security 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 -- Financing Security Assurance
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, 1997
================================================================================
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost-- $206,768,502) $219,518,954
Cash 48,171
Receivable for Fund shares sold 520,339
Receivable for securities sold 20,000
Interest receivable 3,706,375
- --------------------------------------------------------------------------------
Total Assets $223,813,839
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 2,461,667
Investment advisory fees payable 74,110
Distribution fees payable 25,349
Administration fees payable 19,439
Accrued expenses 41,407
- --------------------------------------------------------------------------------
Total Liabilities 2,621,972
- --------------------------------------------------------------------------------
Total Net Assets $221,191,867
================================================================================
NET ASSETS:
Par value of capital shares $ 16,558
Capital paid in excess of par value 207,409,463
Undistributed net investment income 220,403
Accumulated net realized gain from security transactions 794,991
Net unrealized appreciation of investments 12,750,452
- --------------------------------------------------------------------------------
Total Net Assets $221,191,867
================================================================================
Shares Outstanding:
Class A 11,392,759
-----------------------------------------------------------------------------
Class B 4,766,200
-----------------------------------------------------------------------------
Class C 398,958
-----------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $13.36
-----------------------------------------------------------------------------
Class B * $13.36
-----------------------------------------------------------------------------
Class C ** $13.34
-----------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) $13.92
================================================================================
</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, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 6,639,804
- --------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 4) 335,613
Investment advisory fees (Note 4) 327,698
Administration fees (Note 4) 218,465
Shareholder and system servicing fees 40,309
Audit and legal 21,034
Shareholder communications 16,697
Pricing service fees 12,032
Registration fees 10,028
Directors' fees 7,772
Custody 5,471
Other 3,762
- --------------------------------------------------------------------------------
Total Expenses 998,881
- --------------------------------------------------------------------------------
Net Investment Income 5,640,923
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 64,708,681
Cost of securities sold 63,290,464
- --------------------------------------------------------------------------------
Net Realized Gain 1,418,217
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 6,851,702
End of period 12,750,452
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 5,898,750
- --------------------------------------------------------------------------------
Net Gain on Investments 7,316,967
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $12,957,890
================================================================================
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
================================================================================
Statements of Changes in Net Assets
================================================================================
For the Six Months Ended September 30, 1997 (unaudited)
and the Year Ended March 31, 1997
<TABLE>
<CAPTION>
September 30 March 31
================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,640,923 $ 11,461,123
Net realized gain 1,418,217 1,773,629
Increase (decrease) in net unrealized appreciation 5,898,750 (1,544,152)
- ------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 12,957,890 11,690,600
- ------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (5,685,838) (11,120,528)
- ------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (5,685,838) (11,120,528)
- ------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 10,568,590 18,876,611
Net asset value of shares issued for
reinvestment of dividends 3,385,314 6,665,371
Cost of shares reacquired (15,391,661) (31,528,120)
- ------------------------------------------------------------------------------------------------
Decrease in Net Assets From Fund Share Transactions (1,437,757) (5,986,138)
- ------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 5,834,295 (5,416,066)
NET ASSETS:
Beginning of period 215,357,572 220,773,638
- ------------------------------------------------------------------------------------------------
End of period* $ 221,191,867 $ 215,357,572
================================================================================================
* Includes undistributed net investment income of: $ 220,403 $ 265,318
================================================================================================
</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 asked 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 amotized premium, which approximates value; (d) gains or losses on the
sale of securities are calculated by using the specific identification method;
(e) interest income, adjusted for amortization of premium and accretion of
original issue discount, is recorded on 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 by class; (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; and (i) estimates and assumptions are required
to be made regarding assets, liabilities and changes in net assets resulting
from operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. 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, 1997, SB received sales
charges of approximately $82,000 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, 1997, CDSCs paid to SB were
approximately:
<TABLE>
<CAPTION>
Class B Class C
================================================================================
<S> <C> <C>
CDSCs $57,000 $1,000
================================================================================
</TABLE>
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, 1997, total Distribution
Plan fees incurred were:
<TABLE>
<CAPTION>
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Distribution Plan Fees $112,695 $205,370 $17,548
================================================================================
</TABLE>
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, 1997, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
<TABLE>
================================================================================
<S> <C>
Purchases $58,767,595
- --------------------------------------------------------------------------------
Sales 64,708,681
================================================================================
</TABLE>
At September 30, 1997, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
================================================================================
<S> <C>
Gross unrealized appreciation $12,812,996
Gross unrealized depreciation (62,544)
- --------------------------------------------------------------------------------
Net unrealized appreciation $12,750,452
================================================================================
</TABLE>
6. CAPITAL LOSS CARRYFORWARD
At March 31, 1997, the Fund had, for Federal income tax purposes,
approximately $622,700 of capital loss carryforwards available to offset future
capital gains through March 31, 2003. To the extent that these carryforward
losses are used to offset capital gains, it is probable that the gains so offset
will not be distributed.
7. CAPITAL SHARES
At September 30, 1997, 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, 1997, total paid-in capital amounted to the following for
each class:
<TABLE>
<CAPTION>
Class A Class B Class C
================================================================================
<S> <C> <C> <C>
Total Paid-in Capital $139,204,817 $62,972,135 $5,249,069
================================================================================
</TABLE>
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, 1997 March 31, 1997
------------------------ -------------------------
Shares Amount Shares Amount
====================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 477,349 $ 6,306,988 754,734 $ 9,803,565
Shares issued on reinvestment 175,444 2,311,260 351,876 4,551,202
Shares redeemed (733,586) (9,667,454) (1,561,652) (20,175,651)
- ----------------------------------------------------------------------------------------------------
Net Decrease (80,793) $ (1,049,206) (455,042) $ (5,820,884)
====================================================================================================
Class B
Shares sold 275,020 $ 3,621,380 591,988 $ 7,667,049
Shares issued on reinvestment 74,765 984,502 151,661 1,961,786
Shares redeemed (401,930) (5,294,778) (835,657) (10,832,102)
- ----------------------------------------------------------------------------------------------------
Net Decrease (52,145) $ (688,896) (92,008) $ (1,203,267)
====================================================================================================
Class C
Shares sold 48,428 $ 640,222 108,779 $ 1,405,997
Shares issued on reinvestment 6,803 89,552 11,777 152,383
Shares redeemed (32,665) (429,429) (40,098) (520,367)
- ----------------------------------------------------------------------------------------------------
Net Increase 22,566 $ 300,345 80,458 $ 1,038,013
====================================================================================================
</TABLE>
24
<PAGE>
================================================================================
Financial Highlights
================================================================================
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
Class A Shares 1997(1) 1997 1996 1995 1994 1993
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.92 $12.88 $12.62 $12.55 $13.16 $12.44
- -----------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(2) 0.35 0.70 0.70 0.70 0.70 0.75
Net realized and
unrealized gain (loss) 0.44 0.02 0.26 0.07 (0.46) 0.87
---------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.79 0.72 0.96 0.77 0.24 1.62
- -----------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.35) (0.68) (0.70) (0.70) (0.70) (0.75)
Net realized gains -- -- -- -- (0.15) (0.14)
Capital -- -- -- -- -- (0.01)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.35) (0.68) (0.70) (0.70) (0.85) (0.90)
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $13.36 $12.92 $12.88 $12.62 $12.55 $13.16
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 6.22%++ 5.74% 7.77% 6.37% 1.66% 13.49%
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $152,214 $148,248 $153,690 $106,919 $119,913 $115,694
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(2) 0.75%+ 0.76% 0.84% 0.88%* 0.83% 0.74%
Net investment income 5.33+ 5.44 5.41 5.61 5.17 5.76
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 36% 22% 32% 32% 58%
=============================================================================================================================
</TABLE>
(1) For the six months ended September 30, 1997 (unaudited).
(2) 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:
<TABLE>
<CAPTION>
Per Share Decreases to Expense Ratios
Net Investment Income Without Fee Waivers
--------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Class A $0.01 $0.02 0.88% 0.90%
</TABLE>
* Expense ratios exclude interest expense. Expense ratio including interest
expense would have been 0.89% for the year ended March 31, 1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
25
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
Class B Shares 1997(1) 1997 1996 1995 1994 1993(2)
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.92 $12.88 $12.62 $12.55 $13.16 $12.75
- ----------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.32 0.64 0.63 0.63 0.64 0.28
Net realized and
unrealized gain (loss) 0.44 0.02 0.26 0.06 (0.47) 0.55
- ----------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.76 0.66 0.89 0.69 0.17 0.83
- ----------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.62) (0.63) (0.62) (0.63) (0.27)
Net realized gains -- -- -- -- (0.15) (0.14)
Capital -- -- -- -- -- (0.01)
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.32) (0.62) (0.63) (0.62) (0.78) (0.42)
Net Asset Value,
End of Period $13.36 $12.92 $12.88 $12.62 $12.55 $13.16
- ----------------------------------------------------------------------------------------------------------------------------
Total Return 5.97%++ 5.23% 7.20% 5.76% 1.15% 6.60%++
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $63,654 $62,249 $63,272 $55,334 $48,375 $16,293
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(3) 1.27%+ 1.28% 1.36% 1.39%* 1.36% 1.33%+
Net investment income 4.81+ 4.92 4.90 5.09 4.64 5.17+
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 36% 22% 32% 32% 58%
============================================================================================================================
</TABLE>
(1) For the six months ended September 30, 1997 (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:
<TABLE>
<CAPTION>
Per Share Decreases to Expense Ratios
Net Investment Income Without Fee Waivers
--------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Class B $0.01 $0.01 1.41% 1.49%+
</TABLE>
* Expense ratios exclude interest expense. Expense ratio including interest
expense would have been 1.40% for the year ended March 31, 1995.
++ 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 C Shares 1997(1) 1997 1996 1995(2)
============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.92 $12.88 $12.62 $11.86
- --------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.30 0.63 0.62 0.20
Net realized and unrealized gain 0.44 0.02 0.27 0.74
- --------------------------------------------------------------------------------------------
Total Income From Operations 0.74 0.65 0.89 0.94
- --------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.61) (0.63) (0.18)
- --------------------------------------------------------------------------------------------
Total Distributions (0.32) (0.61) (0.63) (0.18)
- --------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.34 $12.92 $12.88 $12.62
- --------------------------------------------------------------------------------------------
Total Return 5.79%++ 5.17% 7.17% 8.01%++
- --------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $5,324 $4,861 $3,812 $248
- --------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.41%+ 1.32% 1.41% 1.44%+
Net investment income 4.67+ 4.88 4.82 5.05+
- --------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 36% 22% 32%
============================================================================================
</TABLE>
(1) For the six months ended September 30, 1997 (unaudited).
(2) For the period from December 13, 1994 (inception date) to March 31, 1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
27
<PAGE>
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<PAGE>
SMITH BARNEY
------------
Smith Barney A Member of TravelersGroup[LOGO]
New Jersey
Municipals
Fund Inc. Investment Adviser
and Administrator
Smith Barney Mutual Funds
Directors Management Inc.
Herbert Barg
Alfred J. Bianchetti
Martin Brody Distributor
Dwight B. Crane Smith Barney Inc.
Burt Dorsett
Elliot Jaffe
Stephen E. Kaufman Custodian
Joseph J. McCann PNC Bank, N.A.
Heath B. McLendon, Chairman
Cornelius Rose
James J. Crisona, Emeritus Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
Officers P.O. Box 9134
Heath B. McLendon Boston, MA 02205-9134
Chief Executive Officer
Lewis E. Daidone This report is submitted for the general
Senior Vice President information of the shareholders of Smith
and Treasurer Barney New Jersey Municipals Fund Inc.
It is not authorized for distribution to
Lawrence T. McDermott prospective investors unless accompanied
Vice President or preceded by a current Prospectus for
and Investment Officer the Fund, which contains information
concerning the Fund's investment
Thomas M. Reynolds policies and expenses as well as other
Controller pertinent information.
Christina T. Sydor
Secretary Smith Barney
New Jersey
Municipals Fund Inc.
388 Greenwich Street
New York, New York 10013
FD0450 11/97
