Smith Barney
MUNICIPAL FUND, INC.
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Semi-Annual Report
June 30, 1999
<PAGE>
Smith Barney
Municipal
Fund Inc.
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HEATH B. MCLENDON
Chairman
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PETER M. COFFEY
Vice President
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Municipal Fund, Inc. ("Fund") for the period ended June 30, 1999. During the
reporting period, the Fund distributed income dividends totaling $0.38 per
share. The table below shows the annualized distribution rates based on the
Fund's net asset value ("NAV") per share and its American Stock Exchange
("AMEX") closing price.
Price Annualized Six-Month
Per Share Distribution Rate* Total Returns
-------- --------------- -----------
$15.22 (NAV) 4.97% (1.18)%
$13.50 (AMEX) 5.60% (7.56)%
The Fund had a total return based on NAV of a negative 1.18% for the six months
ended June 30, 1999, versus the average total return of a negative 2.39% for
closed-end municipal bond funds for the same period, according to Lipper, Inc.
(Lipper is a major fund tracking organization.) However, based on NAV, the
one-year total return for the Fund was 1.89% versus the 1.10% for Lipper, Inc.
peer group.
Investment Strategy
The Fund's investment objective is to provide as high a level of current income
exempt from Federal income taxes. We continue to follow an investment strategy
that emphasizes high-quality, high coupon issues. In addition, we ladder the
maturity and call structure of the Fund's portfolio in order to seek a
consistent stream of income. (One way to limit your risk in bond investing is to
set up a bond ladder -- that is, a series of bonds with a range of maturities.
The advantage is that you do not need to worry as much about interest rates --
especially if the ladder you construct has issues due each year.)
As a fund investing primarily in intermediate-term municipal bonds, it must
invest at least 80% of its total assets in municipal bonds that have remaining
maturities of less than 15 years.
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* This assumes a current monthly income dividend rate of $0.063 per share
for twelve months.
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Smith Barney Municipal Fund, Inc. 1
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During the course of the year, we slightly lengthened the Fund's average
weighted maturity to 11.7 years. In addition, we raised the credit quality of
the portfolio. As of June 30, 1999, approximately 95% of the Fund's holdings
were rated investment grade and roughly 45% of the Fund's investments were rated
triple-A.
A major portion of the Fund's assets were allocated among the following types of
municipal bond issues as of June 30, 1999; hospital bonds (20.9%), housing bonds
(14.5%) and escrowed to maturity bonds (14.3%).
Municipal Bond Market Update
The last six months were a period of economic growth at home and recovery
abroad. Following the events surrounding the Russian debt default in August of
1998 -- which included a sharp drop in bond yields and a 0.75% decrease in
long-term interest rates -- yields have markedly increased in the past two
months with greater volatility. Throughout this period of volatility, municipal
bond yields were relatively stable in comparison to U.S. Treasury bonds, and we
expect this trend to continue despite rising inflation fears and probable
interest rate hikes.
During the first half of 1999, U.S. economic growth continued at a robust pace,
posting a 4.3% annualized Gross Domestic Product growth rate for the first
quarter of 1999. Furthermore, the labor market continued to be extremely tight,
as the unemployment rate fell to a 29-year low of 4.2% in March. Defying the
expectations of many economists, inflation -- as measured by the Consumer Price
Index ("CPI") -- was virtually absent. Many economists have credited
productivity gains in the form of increased use of technology and sagging global
demand with keeping inflation under control. However, in the month of April, the
CPI rose by 0.7% -- its largest monthly increase in nine years. This, coupled
with signs that many world economies were in the nascent stages of growth and
recovery, deepened fears that inflationary pressures were reaching a breaking
point. In response, the Federal Reserve Board ("Fed") announced a bias towards a
tightening monetary policy, signaling that interest rates may be increased at
the Fed's next Federal Open Market Committee meeting on June 29th and June 30th,
1999. (Indeed, following the meeting, the Fed did raise short-term interest
rates 0.25% on June 30, 1999.)
The impact of these economic conditions on the bond market has been an increase
in yields, especially after inflation fears escalated in the second quarter.
Between April 8th and June 24th, municipal bond yields -- as measured by the
Bond Buyer's 25 Revenue Index -- grew 0.33% to 5.62. In the same period, 30-year
U.S. Treasury bond yields rose 0.71% to 6.16%. In our opinion, these rising
yields reflect that the expectation of higher inflation is already being priced
into the market. Municipal bond yields, as expected, have not risen as
dramatically as Treasury bond yields. Although municipal bonds
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2 1999 Semi-Annual Report to Shareholders
<PAGE>
may exhibit a somewhat greater degree of volatility if interest rates continue
to rise, the relative stability of municipal bonds versus many other types of
bonds may make it an attractive option for many risk-averse investors.
Over the long term, the real rate of returns (i.e., after subtracting the
effects of inflation) is what matters most for fixed-income investors. We
believe that on that basis, municipal bonds remain an excellent value. A
diligent Fed policy with the effects of global competition and the high
productivity of our economy should serve to keep inflation at historically low
levels. Moreover, long-term municipal bonds are currently providing
approximately 90% of long-term U.S. Treasury yields. Typically, municipal bonds
are considered a good value when they yield about 85% of comparable-maturity
U.S. Treasury bonds.
Municipal Bond Market Outlook
We remain cautiously optimistic on the municipal bond market in the coming
months. In our view, U.S. economic growth should remain healthy with
productivity gains helping to contain higher inflationary pressures. Clearly,
the Fed's monetary policy bias has changed from the latter part of 1998. After
raising short-term interest rates on June 30, 1999, it is possible that the Fed
will continue to take back the interest rate cuts initiated last year. However,
until more substantial evidence of rising inflation appears, we do not believe
that the Fed will embark on an extended campaign of raising interest rates.
In closing, we remain positive on the prospects for municipal bonds and believe
the Fund is well-positioned for the coming months. Thank you for investing in
the Smith Barney Municipal Fund, Inc. We look forward to continuing to help you
pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
July 16, 1999
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Smith Barney Municipal Fund, Inc. 3
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Take Advantage of the Fund's Dividend Reinvestment Plan!
Did you know that Fund investors who reinvest their dividends are taking
advantage of one of the most effective wealth-building tools available today?
Systematic investments put time to work for you through the strength of
compounding.
As an investor in the Fund, you can participate in its Dividend Reinvestment
Plan ("Plan"), a convenient, simple and efficient way to reinvest your dividends
and capital gains distributions, if any, in additional shares of the Fund. Below
is a short summary of how the Plan works.
Plan Summary
If you are a Plan participant who has not elected to receive your dividends in
the form of a cash payment, then your dividend and capital gain distributions
will be reinvested automatically in additional shares of the Fund.
The number of common stock shares in the Fund you will receive in lieu of a cash
dividend is determined in the following manner. If the market price of the
common stock is equal to or exceeds the net asset value ("NAV") per share on the
determination date, you will be issued shares by the Fund at a price reflecting
the NAV, or 95% of the market price, whichever is greater.
If the market price is less than the NAV at the time of valuation (the close of
business on the determination date), or if the Fund declares a dividend or
capital gains distribution payable only in cash, First Data Investor Services
Group, Inc. ("Plan Agent") will buy common stock for your account in the open
market.
If the Plan Agent begins to purchase additional shares in the open market and
the market price of the shares subsequently rises above the NAV previously
determined before the purchases are completed, the Plan Agent will attempt to
terminate purchases and have the Fund issue the remaining dividend or
distribution in shares at the greater of the previously determined NAV. In that
case, the number of Fund shares you receive will be based on the weighted
average of prices paid for shares purchased in the open market and the price at
which the Fund issues the remaining shares.
Restated Plan Adopted
A more complete description of the current Plan appears in the section of this
report beginning on page 21. The descriptions in here are based on a restated
version of the Plan, which was recently adopted to reflect current practices of
the Plan Agent and for the purpose of standardizing the terms among all
closed-end mutual funds managed by SSBCFund Management Inc., formerly known as
Mutual Management Corp.
To find out more detailed information about the Plan and about how you can
participate, please call First Data Investor Services Group, Inc. at (800)
331-1710.
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4 1999 Semi-Annual Report to Shareholders
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Schedule of Investments (unaudited) June 30, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Education -- 11.7%
$1,000,000 Aa2* Arizona Education Loan Corp., 6.625% due 9/1/05 (b) $1,053,750
1,000,000 AAA Bastrop, TX Independent School District, Capital
Appreciation, PSFG, zero coupon due 2/15/22 281,250
1,000,000 AAA Chicago, IL Board of Education, Capital Appreciation,
FGIC-Insured, zero coupon due 12/1/10 556,250
565,000 Aaa* Du Page County, IL School District No. 041, Glen Ellyn,
Capital Appreciation, FGIC-Insured, zero coupon due 2/1/17 215,406
1,000,000 AAA Keller, TX Independent School District, PSFG,
zero coupon due 8/15/16 388,750
Lago Vista, TX Independent School District,
Capital Appreciation, PSFG:
1,075,000 Aaa* Zero coupon due 8/15/15 446,125
1,075,000 Aaa* Zero coupon due 8/15/21 310,406
1,000,000 Aaa* Lake & McHenry Counties, IL Community School District
No. 118, Capital Appreciation, FGIC-Insured,
zero coupon due 2/1/11 546,250
1,000,000 AAA Metropolitan Government Nashville & Davidson County, TN
McHarry Medical College, AMBAC-Insured,
6.000% due 12/1/19 1,073,750
1,000,000 AA Salem-Keizer, OR School District No. 24J, 5.000% due 6/1/15 968,750
1,145,000 AAA Stephenville, TX Independent School District, Capital
Appreciation, PSFG, zero coupon due 2/15/08 741,388
Vermont State Colleges Revenue, Capital Appreciation:
500,000 A Zero coupon due 7/1/12 237,500
515,000 A Zero coupon due 7/1/13 233,038
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7,052,613
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Escrowed to Maturity(c) -- 14.3%
1,180,000 AAA Boston, MA Water & Sewer Community Revenue, Series A,
10.875% due 1/1/09, Sinking Fund Average Life 5/3/05 1,544,325
265,000 AAA Honolulu, HI City & County, Tax & Lease Revenue, Series B,
FGIC-Insured, 5.500% due 11/1/10 274,937
715,000 AAA Illinois Health Facility Authority Revenue, (Methodist
Medical Center Project), 9.000% due 10/1/10
Sinking Fund Average Life 3/31/05 850,850
875,000 AAA Jackson, TN Water and Sewer Revenue, 7.200% due 7/1/12,
Sinking Fund Average Life 2/7/07 975,625
470,000 AAA Lake County, OH Hospital Improvement Revenue,
Lake County Memorial Hospital, 8.625% due 11/1/09 558,712
1,270,000 NR Los Angeles, CA Hollywood Presbyterian Medical Center,
9.625% due 7/1/13, Sinking Fund Average Life 6/13/08 1,638,300
395,000 AAA Louisiana Public Facilities, Southern Baptist Hospital,
8.000% due 5/15/12, Sinking Fund Average Life 6/6/07 462,150
215,000 Aaa* Nacogdoches County, TX Hospital District Revenue,
9.000% due 5/15/04 240,531
290,000 AAA New Jersey State Turnpike Authority Revenue Refunding Bond,
10.375% due 1/1/03, Sinking Fund Average Life 8/16/01 323,712
1,055,000 AAA Ohio State Water Development Authority Revenue,
Safe Water, Series 2, 9.375% due 12/1/10,
Sinking Fund Average Life 5/5/05 1,287,100
</TABLE>
See Notes to Financial Statements.
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Smith Barney Municipal Fund, Inc. 5
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Schedule of Investments (unaudited) (continued) June 30, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Escrowed to Maturity (c) -- 14.3% (continued)
$ 365,000 AAA Ringwood Borough, NJ Sewer Authority Special Obligation
Refunding, 9.875% due 7/1/13 $ 468,113
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8,624,355
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General Obligation -- 3.0%
500,000 AAA Anchorage, AK FGIC-Insured, 6.000% due 10/1/14 541,250
1,000,000 AAA Chicago, IL Lakefront Millennium Parking Facilities,
MBIA-Insured, 5.000% due 1/1/13 972,500
290,000 A3* New Haven, CT, Unrefunded Balance, Series B,
9.000% due 12/1/01 320,087
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1,833,837
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Hospital -- 20.9%
500,000 A2* Abingdon, VA IDA Hospital Facilities Revenue
Refunding, Johnston Memorial Hospital, 5.000% due 7/1/10 486,875
530,000 BBB Allentown, PA Area Hospital Authority Revenue
Refunding, Sacred Heart Hospital, Series A, 6.200% due
11/15/03 555,175
1,000,000 Aaa* Amarillo, TX Health Facilities Corp., Baptist St. Anthony's
Hospital Corp., FSA-Insured, 5.500% due 1/1/11 1,022,500
650,000 AAA Calcasieu Parish, LA Memorial Hospital Service District
Revenue Refunding, Lake Charles Memorial Hospital,
Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 745,875
1,500,000 A+ California Statewide Community Development Authority
Revenue, COP Refunding Hospital, Triad Healthcare,
6.250% due 8/1/06 1,601,250
1,300,000 A- Illinois Health Facilities Authority Revenue Friendship,
VLG Hospital, 6.650% due 12/1/06 1,365,000
1,200,000 BBB+ Klamath Falls, OR Intercommunity, Merle Hospital,
8.000% due 9/1/08 1,413,000
1,000,000 B1* Langhorne Manor Borough, PA Higher Education and
Health Authority, Bucks County, Lower Bucks Hospital,
6.750% due 7/1/02 952,500
2,000,000 AAA Orange County, FL Health Facilities Authority Revenue,
Adventist Health System/Sunbelt, FSA-Insured, FLAIRS,
6.800% due 11/15/07 (d) 2,117,500
1,000,000 AAA Pennsylvania State Higher Educational Facilities Authority,
Health Services Revenue, MBIA-Insured,
5.600% due 11/15/09 1,000,000
1,345,000 AAA Rhode Island State Health & Educational Building Corp.
Revenue, Higher Education Facility, Roger Williams
University, AMBAC-Insured, 5.125% due 11/15/11 1,341,638
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12,601,313
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Housing: Multi-Family -- 9.7%
1,100,000 Baa2* Dallas, TX Housing Corp. Capital Program Revenue
Refunding, Section 8 Assisted, 7.700% due 8/1/05,
Sinking Fund Average Life 9/2/03 1,135,728
1,470,000 NR Lynchburg, VA Redevelopment & Housing Authority,
Multi-Family Housing Revenue Refunding, Princeton
Circle Association, 6.250% due 12/1/10,
Sinking Fund Average Life 9/24/07 1,503,075
</TABLE>
See Notes to Financial Statements.
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6 1999 Semi-Annual Report to Shareholders
<PAGE>
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Schedule of Investments (unaudited) (continued) June 30, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Housing: Multi-Family -- 9.7% (continued)
Maricopa County, AZ IDA, Multi-Family Housing Revenue:
$1,000,000 AAA National Health Facilities II Project A, FSA-Insured,
5.500% due 1/1/18 $ 1,021,250
300,000 AA Pines At Camelback Apartments Project A,
5.300% due 5/1/13 296,250
500,000 BBB+++ Montgomery County, PA Redevelopment Authority,
Multi-Family Housing Revenue, Series A,
6.375% due 7/1/12, Sinking Fund Average Life 1/29/09 513,125
865,000 AAA Nevada Housing Division, Multi-Unit Housing
Saratoga Palms, 6.250% due 10/1/16,
Sinking Fund Average Life 8/8/12 (b) 902,844
500,000 AA Portland, OR Housing Authority Multi-Family Revenue
Columbia Street Sports, Series B, 5.500% due 12/1/21 491,875
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5,864,147
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Housing: Single-Family -- 4.8%
170,000 A1* Ford County, KS Single-Family Mortgage Revenue
Refunding, Series A, FHA-Insured, 7.900% due 8/1/10 179,775
215,000 AA+ Juneau City and Borough, AK Home Mortgage Revenue
Refunding, Mortgage-Backed Securities Program,
FNMA-Collateralized, FHA-Insured, 8.000% due 2/1/09 226,287
500,000 A-++ Lees Summit, MO IDA Health Facilities, Refunding &
Improvement Revenue, (John Knox Village Project),
7.125% due 8/15/12, Sinking Fund Average Life 2/17/08 528,125
135,000 Aa2* Montgomery County, MD Housing Opportunities
Commission Mortgage Revenue, Series A,
7.200% due 7/1/04 139,771
810,000 AAA Pima County, AZ IDA, Single-Family Mortgage Revenue,
Series A, GNMA/FNMA-Collateralized,
step bond to yield 6.250% due 11/1/29 (b) 845,438
945,000 AAA Utah State Housing Finance Agency, Single-Family
Mortgage Revenue, Series C-2, 6.000% due 7/1/17 (b) 963,900
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2,883,296
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Industrial Development -- 10.5%
535,000 BB+ Bourbonnais, IL IDR Refunding, (K-Mart Corp. Project),
6.600% due 10/1/06 561,750
1,500,000 AAA Des Moines, IA IDR Refunding Revenue, (The Printer
Project 1992), LOC Norwest Bank, 6.375% due 9/1/09 1,533,750
1,500,000 Baa1* Dickinson County, MI Economic Development Corp., Solid
Waste Disposal Refunding Revenue, Champion International,
6.550% due 3/1/07 1,553,610
1,000,000 AA- LaCrosse, WI Resource Recovery Revenue, (Northern States
Power Co. Project), 6.000% due 11/1/21 (b) 1,063,750
600,000 NR Sussex County, DE Economic Development Refunding
Revenue Bonds, (Rehoboth Mall Project), Series 1992,
7.250% due 10/15/12 558,750
1,000,000 BBB Toole County, UT Hazardous Waste Disposal Revenue,
Laidlaw Incineration, Series A, 6.750% due 8/1/10 (b) 1,068,750
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6,340,360
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</TABLE>
See Notes to Financial Statements.
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Smith Barney Municipal Fund, Inc. 7
<PAGE>
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Schedule of Investments (unaudited) (continued) June 30, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Miscellaneous -- 11.0%
$1,885,000 AA Bernalillo County, NM Gross Receipts Tax Revenue Refunding,
5.200% due 4/1/21 $ 1,830,806
1,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp. Gas Revenue,
Series A, 7.500% due 11/1/04 1,033,850
640,000 NR Clayton County, GA Development Authority Revenue, First
Mortgage, Senior Care Group Inc., (Bayberry Project),
6.750% due 7/1/10 632,000
1,000,000 A Illinois Development Finance Authority Revenue, City of East
St. Louis, 6.875% due 11/15/05, Sinking Fund
Average Life 7/26/03 1,080,000
645,000 Baa1* Indianapolis, IN Economic Development Refunding &
Improvement Revenue, National Benevolent Association,
(Robin Run Village Project), 6.900% due 10/1/04 688,539
2,755,000 AAA Jefferson, LA Sales Tax District, Special Sales Tax Revenue
Refunding, Capital Appreciation, FSA-Insured,
zero coupon due 12/1/12 1,363,725
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6,628,920
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Pollution Control -- 4.2%
1,000,000 Aa3* Brazos River, TX Navigation Harbor District, Brazonia County,
(BASF Corp. Project), 6.750% due 2/1/10 1,140,000
635,000 A+ Broward County, FL Resource Recovery, (North Project),
7.950% due 12/1/08 662,610
750,000 A3* Port Umpqua, OR (International Paper Co. Project),
Industrial Revenue, Series B, 5.200% due 6/1/11 741,562
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2,544,172
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Pre-Refunded(e) -- 1.8%
505,000 Aaa* Philadelphia, PA Hospital Revenue (United Hospitals Inc.
Project), 10.875% due 7/1/08, (Call 7/1/05 @ 100),
Sinking Fund Average Life 4/6/04 662,181
300,000 NR San Leandro, CA Redevelopment Agency Residential Mortgage
Revenue, 11.250% due 4/1/13, (Call 10/1/04 @ 100),
Sinking Fund Average Life 4/13/04 391,125
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1,053,306
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Public Facilities -- 2.2%
1,000,000 A- Dekalb County, IN Redevelopment Authority Revenue,
(Mini-Mill LOC Public Improvement Project), Series A,
6.250% due 1/15/08 1,063,750
235,000 AAA Honolulu, HI City & County, Tax & Lease Revenue, Series B,
FGIC-Insured, 5.500% due 11/1/10 244,987
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1,308,737
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Public Power Supply -- 2.4%
1,500,000 Aa1* Washington State Public Power Supply Systems Revenue,
(Nuclear Project No. 2), Series A, 5.000% due 7/1/12 1,462,500
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Transportation -- 3.5%
500,000 BBB- Raleigh-Durham, NC Airport Authority Special Facilities
Revenue, (American Airlines Inc. Project),
9.400% due 11/1/00 530,000
</TABLE>
See Notes to Financial Statements.
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8 1999 Semi-Annual Report to Shareholders
<PAGE>
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Schedule of Investments (unaudited) (continued) June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
============================================================================================
<C> <C> <S> <C>
Transportation -- 3.5% (continued)
$ 595,000 NR Sanford, FL Airport Authority IDR (Central Florida Terminals
Project), Series B, 7.500% due 5/1/06 (b) $ 644,088
1,000,000 AA+ Tri-County Metropolitan Transportation District, OR Revenue,
Series A, 5.000% due 8/1/19 955,000
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2,129,088
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TOTAL INVESTMENTS -- 100%
(Cost-- $59,023,011**) $60,326,644
============================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those which
are identified by an asterisk (*) are rated by Moody's Investors Service,
Inc. and those identified by a double dagger (++) are rated by Fitch
Investor Services, Inc.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if the issuer has not
applied for new ratings.
(d) Inverse floating rate security - coupon varies inversely with level of
short-term tax-exempt interest rates.
(e) Bonds are escrowed with U.S. government securities and are considered by
the Manager to be triple-A rated even if the issuer has not applied for
new ratings.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 10 and 11 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
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Smith Barney Municipal Fund, Inc. 9
<PAGE>
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Bond Ratings (unaudited)
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The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard &Poor's") -- Ratings from "AA" to
"BB" may be modified by the addition of a plus (+) or a minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than for bonds in higher rated categories.
BB -- Bonds rated "BB" are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such
bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures
to adverse conditions.
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2, and 3
may be applied to each generic rating from "Aa" to "Ba," where 1 is the highest
and 3 the lowest rating within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of these bonds.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude, or there may be other elements present that make
the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present that suggest a susceptibility to
impairment some time in the future.
Baa -- Bonds rated "Baa" are considered to be medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payment and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
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10 1999 Semi-Annual Report to Shareholders
<PAGE>
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Bond Ratings (unaudited) (continued)
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Fitch IBCA, Inc. ("Fitch") -- Ratings may be modified by the addition of a plus
(+) or minus (-) sign to show relative standings within the major ratings
categories.
A -- Bonds rated "A" by Fitch are considered to have a low expectation
of credit risk. The capacity for timely payment of financial
commitments is considered to be strong, but may be more vulnerable
to changes in economic conditions and circumstances than bonds with
higher ratings.
BBB -- Bonds rated "BBB" by Fitch currently have a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
impair this capacity. This is the lowest investment grade category
assigned by Fitch.
BB -- Bonds rated "BB" by Fitch carry the possibility of credit risk
developing, particularly as the result of adverse economic change
over time. Business or financial alternatives may, how ever, be
available to allow financial commitments to be met. Securities rated
in this category are not considered by Fitch to be investment grade.
NR -- Indicates that the bond is not rated by Standard & Poor's,
Moody's or Fitch.
- --------------------------------------------------------------------------------
Short-Term Securities Ratings (unaudited)
- --------------------------------------------------------------------------------
A-1 -- Standard & Poor's highest commercial paper rating indicating that
the degree of safety regarding timely payment is either overwhelming
or very strong. Those issuers determined to possess overwhelming
safety characteristics will be denoted with a plus (+) sign
designation.
VMIG 1 -- Moody's highest rating for issues having a demand
feature--VRDO.
- --------------------------------------------------------------------------------
Security Descriptions (unaudited)
- --------------------------------------------------------------------------------
AMBAC -- AMBAC Indemnity Corporation
CONNIE LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation
IDA -- Industrial Development Agency
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
NBA -- National Benevolent Association
PCR -- Pollution Control Revenue
PSFG -- Permanent School Fund Guaranty
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost-- $59,023,011) $ 60,326,644
Interest receivable 1,047,424
Receivable for securities sold 655,586
- ----------------------------------------------------------------------------------------
Total Assets 62,029,654
- ----------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 441,317
Payable to bank 236,330
Dividend payable 79,429
Management fees payable 37,262
Accrued expenses 39,034
- ----------------------------------------------------------------------------------------
Total Liabilities 833,372
- ----------------------------------------------------------------------------------------
Total Net Assets $ 61,196,282
========================================================================================
NET ASSETS:
Par value of capital shares $ 4,021
Capital paid in excess of par value 60,061,277
Undistributed net investment income 3,384
Accumulated net realized loss from security transactions (176,033)
Net unrealized appreciation of investments 1,303,633
- ----------------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $15.22 a share on 4,021,162 shares of $0.001 par value
outstanding; 100,000,000 shares authorized) $ 61,196,282
========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 1,797,192
- ----------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 218,890
Shareholder and system servicing fees 18,448
Shareholder communications 12,893
Audit and legal 6,545
Pricing service fees 5,059
Director's fees 2,876
Custody 2,083
Registration fees 1,240
Other 2,961
- ----------------------------------------------------------------------------------------
Total Expenses 270,995
- ----------------------------------------------------------------------------------------
Net Investment Income 1,526,197
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Gain (LOSS) ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 4,328,085
Cost of securities sold 4,503,462
- ----------------------------------------------------------------------------------------
Net Realized Loss (175,377)
- ----------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 3,571,429
End of period 1,303,633
- ----------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (2,267,796)
- ----------------------------------------------------------------------------------------
Net Loss on Investments (2,443,173)
- ----------------------------------------------------------------------------------------
Decrease in Net Assets From Operations $ (916,976)
========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999 (unaudited)
and the Year Ended December 31, 1998
<TABLE>
<CAPTION>
1999 1998
=====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,526,197 $ 3,138,883
Net realized gain (loss) (175,377) 133,568
Increase (decrease) in net unrealized appreciation (2,267,796) 57,136
- -------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (916,976) 3,329,587
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,519,999) (3,240,994)
Net realized gains -- (133,568)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,519,999) (3,374,562)
- -------------------------------------------------------------------------------------
Decrease in Net Assets (2,436,975) (44,975)
NET ASSETS:
Beginning of period 63,633,257 63,678,232
- -------------------------------------------------------------------------------------
End of period* $ 61,196,282 $ 63,633,257
=====================================================================================
* Includes undistributed (overdistributed)
net investment income of: $ 3,384 $ (2,814)
=====================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Municipal Fund, Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-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 bid and ask prices provided by an independent pricing
service that are based on transactions in municipal obligations, quotations
from municipal bond dealers, market transactions in comparable securities and
various relationships between securities; (c) securities maturing within 60 days
are valued at cost plus accreted discount or minus amortized premium, which
approximates value; (d) gains or losses on the sale of securities are calculated
by using the specific identification method; (e) interest income, adjusted for
amortization of premium and accretion of original issue discount, is recorded on
the accrual basis; market discount is recognized upon the disposition of the
security; (f) dividends and distributions to shareholders are recorded on the
ex-dividend date; (g) 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; (h) the
character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. At December 31, 1998, 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 overdistributed net investment income amounting to $101,647 was
reclassified to paid-in capital. Net investment income, net realized gains and
net assets were not affected by this change; 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. 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.
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
3. Management Agreement and Transactions with Affiliated Persons
SSBC Fund Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
manager to the Fund. As compensation for its services, the Fund pays SSBC a fee
calculated at the annual rate of 0.70% of the Fund's average daily net assets.
This fee is calculated daily and paid monthly.
All officers and one Director of the Fund are employees of Salomon Smith Barney
Inc., another subsidiary of SSBH.
4. Investments
For the six months ended June 30, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
===============================================================================
Purchases $3,627,074
- -------------------------------------------------------------------------------
Sales 4,328,085
===============================================================================
At June 30, 1999, the aggregate gross unrealized appreciation and de preciation
of investments for Federal income tax purposes were substantially as follows:
===============================================================================
Gross unrealized appreciation $1,823,648
Gross unrealized depreciation (520,015)
- -------------------------------------------------------------------------------
Net unrealized appreciation $1,303,633
===============================================================================
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. The initial margin is segregated by the custodian and is noted in the
schedule of investments. During the period the futures contract is open, changes
in the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the con
tract at the end of each day's trading. Variation margin payments are made or
received and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts to hedge a
portion of its port folio. The Fund bears the market risk that arises from
changes in the value of the financial instruments and securities indices
(futures contracts).
At June 30, 1999, the Fund did not have any open futures contracts.
- --------------------------------------------------------------------------------
16 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
6. Options Contracts
Premiums paid when put or call options are purchased by the Fund represent
investments, which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
At June 30, 1999, the Fund did not have any open purchased call or put options
contracts.
When the Fund writes a covered call or put option, an amount equal to the
premium received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain or loss depending upon whether
the cost of the closing transaction is greater or less than the premium
originally received without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is eliminated.
When a written call option is exercised, the cost of the security sold will be
decreased by the premium originally received. When a put option is exercised,
the amount of the premium originally received will reduce the cost of the
security which the Fund purchased upon exercise. When written index options are
exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
call option is that the Fund gives up the opportunity to participate in any in
crease in the price of the underlying security beyond the exercise price. The
risk in writing a put option is that the Fund is exposed to the risk of a loss
if the market price of the underlying security declines.
During the six months ended June 30, 1999, the Fund did not have any open
written options contracts.
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended December 31,
except where noted:
<TABLE>
<CAPTION>
1999(1) 1998 1997 1996 1995 1994
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 15.82 $ 15.84 $ 15.42 $ 15.75 $ 14.30 $ 15.85
- -----------------------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income 0.38 0.78 0.83 0.84 0.83 0.84
Net realized and
unrealized gain (loss) (0.60) 0.04 0.50 (0.32) 1.47 (1.54)
- -----------------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations (0.22) 0.82 1.33 0.52 2.30 (0.70)
- -----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.38) (0.81) (0.84) (0.85) (0.85) (0.85)
In excess of net
investment income -- -- (0.01) -- -- --
Net realized gains -- (0.03) (0.06) -- -- --
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.38) (0.84) (0.91) (0.85) (0.85) (0.85)
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 15.22 $ 15.82 $ 15.84 $ 15.42 $ 15.75 $ 14.30
- -----------------------------------------------------------------------------------------------------------------
Total Return,
Based on Market Value(2) (7.56)%++ 6.71% 10.18% 11.02% 15.83% (12.96)%
- -----------------------------------------------------------------------------------------------------------------
Total Return,
Based on Net Asset Value(2) (1.18)%++ 5.69% 9.38% 3.96% 17.11% (4.09)%
- -----------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $ 61 $ 64 $ 64 $ 62 $ 63 $ 58
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.87%+ 0.87% 0.85% 0.90% 0.86% 0.86%
Net investment income 4.88+ 4.93 5.31 5.45 5.48 5.59
- -----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 6% 62% 58% 30% 21% 35%
- -----------------------------------------------------------------------------------------------------------------
Market Price, End of Period $ 13.500 $ 15.000 $ 14.875 $ 14.375 $ 13.750 $ 12.625
=================================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (unaudited).
(2) The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
++ Total return is not annualized, as it may not be representaive of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
18 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Data (unaudited)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
AMEX Net Asset Dividends Reinvestment
Period Closing Price* Value* Paid Price
==========================================================================================
1997
<S> <C> <C> <C> <C>
January $14.25 $15.39 $0.071 $14.18
February 14.25 15.46 0.071 14.25
March 14.13 15.22 0.071 14.22
April 14.25 15.28 0.071 14.22
May 14.13 15.40 0.071 14.17
June 14.75 15.47 0.071 14.88
July 15.00 15.78 0.071 14.78
August 14.50 15.58 0.071 14.65
September 14.75 15.71 0.071 14.70
October 14.44 15.71 0.071 14.43
November 14.56 15.74 0.071 14.78
December 14.88 15.84 0.071 14.96
December+ 14.88 15.84 0.063 15.09
1998
January 15.25 15.91 0.0685 15.10
February 15.13 15.83 0.0685 14.98
March 14.38 15.76 0.0685 14.39
April 14.06 15.65 0.0685 14.28
May 14.50 15.77 0.0685 14.57
June 15.06 15.79 0.0685 15.06
July 14.94 15.75 0.0660 14.91
August 14.88 15.91 0.0660 14.74
September 15.00 16.03 0.0660 14.89
October 14.81 15.89 0.0660 14.97
November 15.13 15.89 0.0660 15.00
December 15.00 15.82 0.0660 14.81
December+ 15.00 15.82 0.0322 14.67
1999
January 14.50 15.95 0.0630 14.64
February 14.69 15.75 0.0630 14.60
March 14.00 15.71 0.0630 14.09
April 14.19 15.69 0.0630 13.96
May 13.63 15.51 0.0630 13.57
June 13.50 15.22 0.0630 13.60
==========================================================================================
</TABLE>
* On the last business day of the month.
+ Capital gain distribution.
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On April 21, 1999, the annual meeting of shareholders of the Fund was held for
the purpose of voting on the following matters:
1. To vote on the election of Allan J. Bloostein and Richard E. Hanson, Jr.
to serve as Directors until the year 2000 and the election of Lee Abraham,
Jane F. Dasher and Donald R. Foley to serve as Directors until the year
2002; and
2. To approve or disapprove the selection of KPMG LLP as the independent
auditors for the current fiscal year of the Fund.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
% of Votes % of
Directors* Votes For Shares Voted Against Shares Voted
==========================================================================================
<S> <C> <C> <C> <C>
Allan J. Bloostein 3,364,146 99.114% 30,068 0.886%
Richard E. Hanson, Jr. 3,364,146 99.114 30,068 0.886
Lee Abraham 3,362,746 99.073 31,468 0.927
Jane F. Dasher 3,364,146 99.114 30,068 0.886
Donald R. Foley 3,362,110 99.054 32,104 0.946
==========================================================================================
</TABLE>
The results of the vote on Proposal 2 were as follows:
<TABLE>
<CAPTION>
% of Votes % of Votes % of
Votes For Shares Voted Against Shares Voted Abstained Shares Voted
==========================================================================================
<S> <C> <C> <C> <C> <C>
3,361,190 99.027% 10,697 0.315% 22,327 0.658%
==========================================================================================
</TABLE>
* The following Directors, representing the balance of the Board of
Directors, continue to serve:Paul Hardin, Heath B. McLendon, Roderick C.
Rasmussen and John P. Toolan.
- --------------------------------------------------------------------------------
20 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited)
- --------------------------------------------------------------------------------
Under the Fund's Dividend Reinvestment Plan ("Plan"), a share holder whose
shares of common stock are registered in his own name will have all
distributions from the Fund reinvested automatically by First Data Investor
Services Group, Inc. ("First Data") as purchasing agent under the Plan, unless
the shareholder elects to receive cash. Distributions with respect to shares
registered in the name of a broker-dealer or other nominee (that is, in street
name) will be reinvested by the broker or nominee in additional shares under the
Plan, unless the service is not provided by the broker or nominee or the
shareholder elects to receive distributions in cash. Investors who own common
stock registered in street name should consult their broker-dealers for details
regarding reinvestment. All distributions to shareholders who do not
participate in the Plan will be paid by check mailed directly to the record
holder by or under the direction of First Data as dividend paying agent.
The number of shares of common stock distributed to participants in the Plan in
lieu of a cash dividend is determined in the following manner. When the market
price of the common stock is equal to or exceeds the net asset value ("NAV") per
share of the common stock on the determination date (generally, the record date
for the distribution), the Plan participants will be issued shares of common
stock by the Fund at a price equal to the greater of NAV determined as described
below under NAV or 95% of the market price of the common stock.
If the market price of the common stock is less than the NAV of the common stock
at the time of valuation (which is the close of business on the determination
date), or if the Fund declares a dividend or capital gains distribution payable
only in cash, First Data will buy common stock in the open market, on the stock
exchange or elsewhere, for the participants' accounts. If following the
commencement of the purchases and before First Data has completed its purchases,
the market price exceeds the NAV of the common stock as of the valuation time,
First Data will attempt to terminate purchases in the open market and cause the
Fund to issue the remaining portion of the dividend or distribution in shares at
a price equal to the greater of (a) NAV as of the valuation time or (b) 95% of
the then current market price. In this case, the number of shares received by a
Plan participant will be based on the weighted average of prices paid for shares
purchased in the open market and the price at which the Fund issues the
remaining shares. To the extent First Data is unable to stop open market
purchases and cause the Fund to issue the remaining shares, the average per
share purchase price paid by First Data may exceed the NAV of the common stock
as of the valuation time, resulting in the acquisition of fewer shares than if
the dividend or capital gains distribution had been paid in common stock issued
by the Fund at such NAV. First Data will begin to purchase common stock on the
open mar-
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited) (continued)
- --------------------------------------------------------------------------------
ket as soon as practicable after the determination date for the dividend
or capital gains distribution, but in no event shall such purchases continue
later than 30 days after the payment date for such dividend or distribution, or
the record date for a succeeding dividend or distribution, except when necessary
to comply with applicable provisions of the federal securities laws.
First Data maintains all shareholder accounts in the Plan and furnishes written
confirmation of all transactions in each account, including information needed
by a shareholder for personal and tax records. The automatic reinvestment of
dividends and capital gains distributions will not relieve Plan participants of
any income tax that may be payable on the dividends or capital gains
distributions. Common stock in the account of each Plan participant will be held
by First Data in uncertificated form in the name of the Plan participant.
Plan participants are subject to no charge for reinvesting dividends and capital
gains distribution under the Plan. First Data's fees for handling the
reinvestment of dividends and capital gains distributions will be paid by the
Fund. No brokerage charges apply with respect to shares of common stock issued
directly by the Fund under the Plan. Each Plan participant will, however, bear a
proportionate share of any brokerage commissions actually incurred with respect
to any open market purchases made under the Plan.
Experience under the Plan may indicate that changes to it are desirable. The
Fund reserves the right to amend or terminate the Plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The Plan also may be amended or
terminated by First Data, with the Fund's prior written consent, on at least 30
days' written notice to Plan participants. All correspondence concerning the
Plan should be directed by mail to First Data Investor Services Group, Inc.,
P.O. Box 8030, Boston, Massachusetts 02266-8030 or by telephone at
1-800-451-2010.
- --------------------------------------------------------------------------------
22 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney
Municipal Fund, Inc.
- --------------------------------------------------------------------------------
DIRECTORS
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
OFFICERS
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President
Paul A. Brook
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
SSBC Fund Management Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 8030
Boston, MA 02266-8030
This report is submitted for the general information of the shareholders of
Smith Barney Municipal 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
MUNICIPAL FUND, INC.
388 Greenwich Street
New York, New York 10013
FD0624 8/99
