Smith Barney
MUNICIPAL FUND, INC.
[GRAPHIC OMITTED]
Annual Report
December 31, 1999
<PAGE>
Smith Barney
Municipal
Fund Inc.
[PHOTO OMITTED]
HEATH B. MCLENDON
Chairman
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PETER M. COFFEY
Vice President
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney
Municipal Fund, Inc. ("Fund") for the year ended December 31, 1999. During the
reporting period, the Fund distributed income dividends totaling $0.76 per
share. The table below shows the annualized distribution rate and twelve-month
total return based on the Fund's net asset value ("NAV") per share and its
American Stock Exchange ("AMEX") closing price.(1)
Price Annualized Twelve-Month
Per Share Distribution Rate(2) Total Returns
--------- -------------------- -------------
$14.63 (NAV) 5.17% (2.14)%
$12.438 (AMEX) 6.08% (12.25)%
The Fund had a total return based on NAV of negative 2.14% for the year ended
December 31, 1999, versus the average total return of negative 2.32% for
closed-end municipal bond funds for the same period, according to Lipper, Inc.
(Lipper, Inc. is major fund-tracking organization.)
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(1) The NAV is calculated by subtracting total liabilities from the closing
value of all securities held by the Fund, plus all other assets. This
result (total net assets) is divided by the total number of shares
outstanding. The NAV fluctuates with the changes in the market price of
the securities in which the fund had invested. However, the price at which
the investor buys or sells hares of the fund is its market (NYSE) price as
determined by supply and demand.
(2) Total returns are based on changes in NAV or the market value and assume
the reinvestment of all dividends and/or capital gains distributions in
additional shares. The annualized distribution rate is the Fund's current
monthly income dividend rate, annualized, and then divided by the NAV or
the market value noted in the report. This annualized distribution rate
assumes a current monthly income dividend rate of $0.063 for twelve
months. This rate is as of January 31, 2000 and is subject to change. The
important difference between a total return and an annualized distribution
rate is that the total return takes into consideration a number of factors
including the fluctuation of the NAV or the market value during the period
reported, while the distribution rate only reflects the monthly dividend.
The NAV fluctuation includes the effects of unrealized appreciation or
depreciation in the Fund. Accordingly, since an annualized distribution
rate only reflects the current monthly income dividend rate annualized, it
should not be used as the sole indicator to judge the return you receive
from your fund investment. Past performance is not indicative of future
results.
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Smith Barney Municipal Fund, Inc. 1
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Special Shareholder Notice
The weakness in the price of bonds and closed-end bond funds over the past year
is of particular concern to shareholders and management alike of the Smith
Barney Municipal Fund, Inc. Even as the Fund continued to provide investors with
a consistent monthly income, the market price suffered considerably. This
resulted, in our opinion, from a combination of several factors. During this
period, the prices of bonds moved lower as interest rates rose amid concern over
potential Federal Reserve Board ("Fed") action to slow the nation's surprisingly
robust economic growth. In addition, the excitement surrounding the returns
being generated in some sectors of the stock market drew investor interest and
money away from fixed income securities. Finally, heavy tax-loss selling that
began in the second half of the year and accelerated in the final months of 1999
led to a significant decline in the market price of the Fund.
The Fund's Board of Directors, concerned about this price weakness and its
impact on investors, is taking steps to improve the stock price. Subsequent to
the close of the Fund's reporting period, the Board of Directors approved a plan
for which the Fund began to repurchase its common stock shares on January 4,
2000. These shares are purchased on the American Stock Exchange at market prices
and then retired. Over time, a share repurchase program will reduce the number
of shares outstanding and may increase both the stock price and the net asset
value per share of the Fund by increasing the demand for the Fund's shares. As
of January 21, 2000, the Fund has repurchased 9,500 shares totaling $119,259 at
an average price of $12.534 per share. At the same time, as you will read later
on in this letter, we seek to provide investors with a strong and consistent
income stream earned from portfolio operations.
Investment Strategy
The Fund's investment objective is to provide as high a level as possible of
current income exempt from federal income taxes. (Please note a portion of the
Fund's income may be subject to the Alternative Minimum Tax ("AMT").) 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.
In accordance with the Fund's investment policy, the Fund's portfolio is
primarily invested in intermediate-term municipal bonds. At least 80% of its
total assets must be invested in municipal bonds that have remaining maturities
of less than 15 years. We believe that investing in intermediate-term municipal
bonds positions enables the Fund's portfolio to seek higher yields with only
slightly higher price volatility than short-term municipal securities.
Short-term municipal securities do have a high degree of stability because they
are less sensitive to changing interest rates, however you might be giving up
yield potential.
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2 1999 Annual Report to Shareholders
<PAGE>
During the course of the year, we maintained an average weighted maturity of
12.07 years. In addition, we raised the credit quality of the portfolio. As of
December 31, 1999, approximately 91.9% of the Fund's holdings were rated
investment grade and roughly 40.5% 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 December 31, 1999: hospital bonds (23.5%), escrowed
to maturity bonds (13.6%) and industrial development bonds (9.5%).
Municipal Bond Market Update
A robust U.S. economy and three Fed interest-rate hikes negatively affected many
bond investors in 1999, the worst year for bond investing since 1994. Last year
was particularly challenging for U.S. Treasury securities. The 30-year U.S.
Treasury bond suffered its worst decline in total return on record. This poor
performance of U.S. Treasuries reflects the reversal of the "flight to quality"
that developed during the global financial turmoil at the end of 1998. The best
performing sector of the bond market in 1999 was municipal securities.
In our view, bond yields are high enough to adequately reflect the risk of
slightly higher inflation. Indeed, we think that bond yields may be near their
peak. U.S. Treasuries have remained in a narrow trading range just above 6%,
while select long-term municipal bonds are yielding approximately 95% - 100% of
long-term U.S. Treasury bonds. Under typical market conditions, municipal bonds
yield roughly 85% of similar-maturity U.S. Treasury bonds.
Presently, the U.S economy appears to be battling opposing forces. On the one
hand, inflation appears to be well contained. On the other hand, most economic
observers -- including most Fed officials -- want the economy to slow from its
current 4% annual growth rate in order to forestall a possible rebound in
inflation. We believe that a modest amount of additional restraint could put the
U.S. economy on a path toward sustainable, noninflationary growth.
In our view, performance in the bond markets has been a direct result of Fed
monetary policy actions. While presumably aimed at stock market exuberance, it
is the bond market that has taken the brunt of any correction on fears of
further Fed interest rate increases. We believe the current lack of inflationary
evidence defies a historically tight labor market and reinforces the influence
of technology and the power of global pricing constraints.
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Smith Barney Municipal Fund, Inc. 3
<PAGE>
Municipal Bond Market Outlook
A few weeks into 2000, we think that the worst may be over. Many bond experts
expect that yields on 30-year U.S. Treasuries may trade between 6% and 6.7% over
the next 12 months. These yields can provide investors with a comfortable
cushion against declines in the bonds' prices.
Inflation is what really drives bond market returns. Concerns persist over the
acceleration in inflation in the Consumer Price Index ("CPI"), which climbed in
1999 as oil prices doubled. The bond market is likely to remain unsettled until
worries about future Fed monetary tightenings and the rapid pace of economic
growth subside. It is a possibility that the Fed may raise rates again in the
first half of the year.(3) Nevertheless, we doubt that yields will rise much
above recent levels, and we tend to use periods of market weakness to add to our
positions.
We are still confident that municipal bonds will continue to do well on a
relative basis in 2000. The new issue calendar seems quite manageable and the
artificial pressures created by tax swapping has abated to a significant degree.
Our outlook for new issue volume is for a continuation of a steady supply for
2000, likely remaining in 1999's $225.9 billion range. We also expect new money
financings to increase as a result of rebounds in transportation issues and
education financing.
Given the higher yields and tighter conditions that already prevail in many
sectors of the bond markets, the Fed's recent actions may be sufficient to slow
the economy without triggering higher inflation. We believe that the good news
is that the economy's "soft landing" is likely to be at a higher annual growth
rate than was previously thought possible due to the possible emergence of a new
economy where technological advances can spur growth without inflationary
pressures.
In our opinion, the recent rise in interest rates has created several buying
opportunities. We believe that we can maintain a competitive level of tax-exempt
income consistent with prudent investing and careful assessment of credit
quality. Yields on municipal securities have risen quite substantially and the
long end of the yield curve continues to favor municipal bonds.
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(3) On Wednesday, February 2, 2000 after this letter was written, the Fed
raised interest rates by 0.25% to 5.75%.
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4 1999 Annual Report to Shareholders
<PAGE>
Thank you for investing in the Smith Barney Municipal Fund, Inc. We look forward
to continuing to help you pursue your financial goals in the new century.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
January 31, 2000
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Smith Barney Municipal Fund, Inc. 5
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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, PFPC Global Fund Services
("Plan Agent"), formerly known as First Data Investor Services Group, Inc., 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.
A more complete description of the current Plan appears in the section of this
report beginning on page 25. To find out more detailed information about the
Plan and about how you can participate, please call PFPC Global Fund Services at
(800) 331-1710.
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6 1999 Annual Report to Shareholders
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Schedule of Investments December 31, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
===============================================================================================
<S> <C> <C> <C>
Education -- 8.3%
$1,000,000 Aa2* Arizona Education Loan Corp., 6.625% due 9/1/05 (b) $1,043,750
1,000,000 AAA Bastrop, TX Independent School District, Capital
Appreciation, PSFG, zero coupon due 2/15/22 253,750
360,000 Aaa* Blue Mountain Community College, Umatilla County, OR,
AMBAC-Insured, 5.250% due 6/15/13 350,100
565,000 Aaa* Du Page County, IL School District No. 041, Glen Ellyn,
Capital Appreciation, FGIC-Insured, zero coupon due 2/1/17 197,750
1,000,000 AAA Keller, TX Independent School District, PSFG,
zero coupon due 8/15/16 368,750
Lago Vista, TX Independent School District,
Capital Appreciation, PSFG:
1,075,000 Aaa* Zero coupon due 8/15/15 424,625
1,075,000 Aaa* Zero coupon due 8/15/21 282,187
1,000,000 Aaa* Lake & McHenry Counties, IL Community School District
No. 118, Capital Appreciation, FGIC-Insured,
zero coupon due 2/1/11 535,000
1,000,000 Aa1* Private Colleges & Universities Authority, GA Revenue,
(Emory University Project), Series A, 5.500% due 11/1/31 926,250
Vermont State Colleges Revenue, Capital Appreciation:
500,000 A Zero coupon due 7/1/12 235,000
515,000 A Zero coupon due 7/1/13 225,313
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4,842,475
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Escrowed to Maturity(c) -- 13.6%
1,110,000 AAA Boston, MA Water & Sewer Community Revenue, Series A,
10.875% due 1/1/09, Sinking Fund Average Life 9/5/05 1,415,250
655,000 AAA Illinois Health Facility Authority Revenue, (Methodist
Medical Center Project), 9.000% due 10/1/10,
Sinking Fund Average Life 10/1/05 759,800
875,000 AAA Jackson, TN Water and Sewer Revenue, 7.200% due 7/1/12,
Sinking Fund Average Life 2/7/07 951,562
415,000 AAA Lake County, OH Hospital Improvement Revenue,
Lake County Memorial Hospital, 8.625% due 11/1/09 478,806
1,270,000 NR Los Angeles, CA Hollywood Presbyterian Medical Center,
9.625% due 7/1/13, Sinking Fund Average Life 6/13/08 1,600,200
210,000 AAA Louisiana Public Facilities, Southern Baptist Hospital,
8.000% due 5/15/12, Sinking Fund Average Life 6/6/07 243,338
215,000 Aaa* Nacogdoches County, TX Hospital District Revenue,
9.000% due 5/15/04 235,694
230,000 AAA New Jersey State Turnpike Authority Revenue Refunding Bond,
10.375% due 1/1/03, Sinking Fund Average Life 1/25/02 251,563
1,115,000 AAA Ohio State Water Development Authority Revenue,
Safe Water, Series 2, 9.375% due 12/1/10,
Sinking Fund Average Life 10/1/05 1,338,000
230,000 AAA Portage County, OH Hospital Revenue, 6.700% due 12/1/07 239,775
390,000 AAA Ringwood Borough, NJ Sewer Authority Special Obligation
Refunding, 9.875% due 7/1/13 485,063
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7,999,051
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General Obligation -- 3.0%
500,000 AAA Anchorage, AK, FGIC-Insured, 6.000% due 10/1/14 519,375
</TABLE>
See Notes to Financial Statements.
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Smith Barney Municipal Fund, Inc. 7
<PAGE>
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Schedule of Investments (continued) December 31, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
=================================================================================================
<S> <C> <C> <C>
General Obligation -- 3.0% (continued)
$1,000,000 AAA Chicago, IL Lakefront Millennium Parking Facilities,
MBIA-Insured, 5.000% due 1/1/13 $ 923,750
290,000 A3* New Haven, CT, Unrefunded Balance, Series B,
9.000% due 12/1/01 312,838
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1,755,963
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Hospital -- 23.5%
435,000 BBB Allentown, PA Area Hospital Authority Revenue Refunding,
Sacred Heart Hospital, Series A, 6.200% due 11/15/03 438,262
650,000 AAA Calcasieu Parish, LA Memorial Hospital Service District Revenue
Refunding, Lake Charles Memorial Hospital, Series A,
CONNIE LEE-Insured, 7.500% due 12/1/05 727,187
1,500,000 A+ California Statewide Community Development Authority
Revenue, COP Refunding Hospital, Triad Healthcare,
6.250% due 8/1/06 1,569,375
2,000,000 AA Harris County, TX Health Facilities Development Corp., (Texas
Children's Hospital Project), Series A, 5.375% due 10/1/14 1,872,500
1,000,000 BBB+ Henderson, NV Health Care Facility Revenue, (Catholic
Healthcare West Project), Series A, 6.200% due 7/1/09 978,750
1,300,000 A- Illinois Health Facilities Authority Revenue Friendship,
VLG Hospital, 6.650% due 12/1/06 1,329,250
1,200,000 BBB+ Klamath Falls, OR Intercommunity, Merle Hospital,
8.000% due 9/1/08 1,341,000
1,000,000 B3* Langhorne Manor Borough, PA Higher Education and
Health Authority, Bucks County, Lower Bucks Hospital,
6.750% due 7/1/02 937,500
1,000,000 BBB+ Maricopa County, AZ IDA, Health Facilities Revenue,
(Catholic Healthcare West Project), Series A,
5.250% due 7/1/06 951,250
1,155,000 AA Missouri State Health & Educational Facilities Authority
Revenue, Rockhurst University, Asset-Guaranteed,
5.500% due 10/1/25 1,066,931
2,000,000 AAA Orange County, FL Health Facilities Authority Revenue,
Adventist Health System/Sunbelt, FSA-Insured, FLAIRS, 5.400%
due 11/15/07 (d) 2,057,500
500,000 AAA Wisconsin State Health & Educational Facilities Authority
Revenue, Childrens Hospital of Wisconsin Inc.,
AMBAC-Insured, 5.625% due 2/15/16 488,750
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13,758,255
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Housing: Multi-Family -- 6.8%
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 1,124,750
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 1,453,462
500,000 BBB+++ Montgomery County, PA Redevelopment Authority,
Multi-Family Housing Revenue, Series A, 6.375%
due 7/1/12, Sinking Fund Average Life 1/29/09 503,750
</TABLE>
See Notes to Financial Statements.
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8 1999 Annual Report to Shareholders
<PAGE>
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Schedule of Investments (continued) December 31, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
=================================================================================================
<S> <C> <C> <C>
Housing: Multi-Family -- 6.8% (continued)
$ 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) $ 879,056
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3,961,018
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Housing: Single-Family -- 4.8%
155,000 A1* Ford County, KS Single-Family Mortgage Revenue Refunding,
Series A, FHA-Insured, 7.900% due 8/1/10 161,781
200,000 AA Juneau City and Borough, AK Home Mortgage Revenue
Refunding, Mortgage Backed Securities Program,
FNMA-Collateralized, FHA-Insured, 8.000% due 2/1/09 208,500
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 2/17/08 519,375
960,000 Aa3* Massachusetts State HFA, Single-Family, Series 38,
7.200% due 12/1/26 (b) 980,400
135,000 Aa2* Montgomery County, MD Housing Opportunities
Commission Mortgage Revenue, Series A,
7.200% due 7/1/04 138,626
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) 823,163
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2,831,845
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Industrial Development -- 9.5%
535,000 BB+ Bourbonnais, IL IDR Refunding, (KMart Corp. Project),
6.600% due 10/1/06 543,694
1,500,000 AAA Des Moines, IA IDR Refunding Revenue, (The Printer Project
1992), LOC Norwest Bank, 6.375% due 9/1/09 1,509,375
1,500,000 Baa1* Dickinson County, MI Economic Development Corp., Solid
Waste Disposal Refunding Revenue, Champion International,
6.550% due 3/1/07 1,536,465
1,000,000 AA- LaCrosse, WI Resource Recovery Revenue, (Northern States
Power Co. Project), 6.000% due 11/1/21 (b) 983,750
1,000,000 BBB Toole County, UT Hazardous Waste Disposal Revenue,
Laidlaw Incineration, Series A, 6.750% due 8/1/10 (b) 1,012,500
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5,585,784
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Miscellaneous -- 12.0%
500,000 NR Barona Band of Mission Indians, CA, 8.250% due 1/1/20 488,125
1,050,000 AA Bernalillo County, NM Gross Receipts Tax Revenue Refunding,
5.125% due 4/1/17 980,437
1,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp. Gas Revenue,
Series A, 7.500% due 11/1/04 1,024,270
640,000 NR Clayton County, GA Development Authority Revenue, First
Mortgage, Senior Care Group Inc., (Bayberry Project),
6.750% due 7/1/10 596,000
1,250,000 AAA Delaware Valley, PA Regional Finance Authority,
AMBAC-Insured, 5.500% due 8/1/28 1,164,062
</TABLE>
See Notes to Financial Statements.
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Smith Barney Municipal Fund, Inc. 9
<PAGE>
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Schedule of Investments (continued) December 31, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
=================================================================================================
<S> <C> <C> <C>
Miscellaneous -- 12.0% (continued)
$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 $ 1,056,250
645,000 Baa2* Indianapolis, IN Economic Development Refunding &
Improvement Revenue, National Benevolent Association,
(Robin Run Village Project), 6.900% due 10/1/04 669,994
2,250,000 AAA Jefferson, LA Sales Tax District, Special Sales Tax Revenue
Refunding, Capital Appreciation, FSA-Insured,
zero coupon due 12/1/12 1,085,625
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7,064,763
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Pollution Control -- 2.9%
1,000,000 Aa3* Brazos River, TX Navigation Harbor District, Brazonia County,
PCR, (BASF Corp. Project), 6.750% due 2/1/10 1,096,250
595,000 A+ Broward County, FL Resource Recovery PCR, (North Project),
7.950% due 12/1/08 613,594
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1,709,844
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Pre-Refunded(e) -- 2.0%
135,000 AAA Honolulu, HI City & County Tax & Lease Revenue, Series B,
FGIC-Insured, 5.500% due 11/1/10 137,700
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 4/6/04 637,563
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 4/13/04 370,125
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1,145,388
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Public Facilities -- 1.8%
1,000,000 A- Dekalb County, IN Redevelopment Authority Revenue,
(Mini-Mill LOC Public Improvement Project), Series A,
6.250% due 1/15/08 1,043,750
45,000 AAA Honolulu, HI City & County Tax & Lease Revenue, Series B,
FGIC-Insured, 5.500% due 11/1/10 45,506
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1,089,256
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Transportation -- 4.3%
500,000 Aa2* New Jersey State Transportation Trust Fund Authority,
Transportation System, Series A, 5.625% due 6/15/14 500,000
500,000 BBB- Raleigh-Durham, NC Airport Authority Special Facilities
Revenue, (American Airlines Inc. Project),
9.400% due 11/1/00 516,950
595,000 NR Sanford, FL Airport Authority IDR, (Central Florida
Terminals Project), Series B, 7.500% due 5/1/06 (b) 622,519
1,000,000 AA+ Tri-County Metropolitan Transportation District, OR Revenue,
Series A, 5.000% due 8/1/19 875,000
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2,514,469
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</TABLE>
See Notes to Financial Statements.
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10 1999 Annual Report to Shareholders
<PAGE>
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Schedule of Investments (continued) December 31, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
=================================================================================================
<S> <C> <C> <C>
Utilities -- 4.1%
$1,000,000 BBB North Carolina Eastern Municipal Power Agency, Power
System Revenue, Series D, 6.450% due 1/1/14 $ 991,250
1,500,000 Aa1* Washington State Public Power Supply Systems Revenue,
(Nuclear Project No. 2), Series A,
5.000% due 7/1/12 1,395,000
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2,386,250
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Water & Sewer -- 3.4%
2,000,000 AA+ Michigan Municipal Bond Authority Revenue, Clean Water
Revolving Fund, 5.750% due 10/1/14 2,012,500
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TOTAL INVESTMENTS -- 100%
(Cost -- $58,858,173**) $58,656,861
=================================================================================================
</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 IBCA,
Inc.
(b) Income from this issue 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 12 and 13 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
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Smith Barney Municipal Fund, Inc. 12
<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, B -- Bonds rated "BB", "B" and "CCC" are regarded, on balance, as
and CCC predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. "BB" represents a lower degree of speculation than
"B"., and "CCC" the highest degree of speculation. While such
bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2, and 3
may be applied to each generic rating from "Aa" to "Ba," where 1 is the highest
and 3 the lowest rating within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of 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.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period
of time may be small.
- --------------------------------------------------------------------------------
12 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited) (continued)
- --------------------------------------------------------------------------------
Fitch IBCA, Inc. ("Fitch") -- Ratings may be modified by the addition of a plus
(+) or minus (-) sign to show relative standings within the major 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, however, 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
HFA -- Housing Finance Authority
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. 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $58,858,173) $ 58,656,861
Cash 69,546
Interest receivable 1,097,464
Receivable for securities sold 150,000
- --------------------------------------------------------------------------------
Total Assets 59,973,871
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 965,656
Dividends payable 94,412
Management fees payable 33,464
Accrued expenses 31,168
- --------------------------------------------------------------------------------
Total Liabilities 1,124,700
- --------------------------------------------------------------------------------
Total Net Assets $ 58,849,171
================================================================================
NET ASSETS:
Par value of capital shares $ 4,021
Capital paid in excess of par value 60,061,277
Undistributed net investment income 77,458
Accumulated net realized loss from security transactions (1,092,273)
Net unrealized depreciation of investments (201,312)
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $14.63 a share on 4,021,162 shares of $0.001
par value outstanding; 100,000,000 shares authorized) $ 58,849,171
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 3,678,018
- ---------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 430,866
Shareholder and system servicing fees 37,201
Shareholder communications 35,999
Audit and legal 22,948
Pricing service fees 10,202
Directors' fees 5,800
Custody 4,201
Registration fees 2,500
Other 8,018
- ---------------------------------------------------------------------------------------
Total Expenses 557,735
- ---------------------------------------------------------------------------------------
Net Investment Income 3,120,283
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Gain (LOSS) ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 27,413,598
Cost of securities sold 28,505,215
- ---------------------------------------------------------------------------------------
Net Realized Loss (1,091,617)
- ---------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of Investments:
Beginning of year 3,571,429
End of year (201,312)
- ---------------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (3,772,741)
- ---------------------------------------------------------------------------------------
Net Loss on Investments (4,864,358)
- ---------------------------------------------------------------------------------------
Decrease in Net Assets From Operations $ (1,744,075)
=======================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
1999 1998
===============================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,120,283 $ 3,138,883
Net realized gain (loss) (1,091,617) 133,568
Increase in net unrealized appreciation (depreciation) (3,772,741) 57,136
- -----------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (1,744,075) 3,329,587
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (3,040,011) (3,240,994)
Net realized gains -- (133,568)
- -----------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (3,040,011) (3,374,562)
- -----------------------------------------------------------------------------------------------
Decrease in Net Assets (4,784,086) (44,975)
NET ASSETS:
Beginning of year 63,633,257 63,678,232
- -----------------------------------------------------------------------------------------------
End of year* $ 58,849,171 $ 63,633,257
===============================================================================================
* Includes undistributed (overdistributed)
net investment income of: $ 77,458 $ (2,814)
===============================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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; 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. 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. Management Agreement and Transactions with Affiliated Persons
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., 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 year ended December 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $27,395,996
- --------------------------------------------------------------------------------
Sales 27,413,598
================================================================================
At December 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 942,633
Gross unrealized depreciation (1,143,945)
- --------------------------------------------------------------------------------
Net unrealized depreciation $ (201,312)
================================================================================
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 contract
at the end of each day's trading. Variation margin payments are made or received
and recognized as assets due from or liabilities due to broker, depending upon
whether unrealized gains or losses are incurred. When the contract is closed,
the 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
portfolio. The Fund bears the market risk that arises from changes in the value
of the financial instruments and securities indices (futures contracts).
At December 31, 1999, the Fund did not have any open futures contracts.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (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 December 31, 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
increase 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 year ended December 31, 1999, the Fund did not have any open written
options contracts.
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
7. Capital Loss Carryforward
At December 31, 1999, the Fund had, for Federal income tax purposes, a capital
loss carryforward of approximately $822,700, available to offset future capital
gains through December 31, 2007. To the extent that these carryforward losses
are used to offset capital gains, it is probable that any gains so offset will
not be distributed.
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended December 31:
1999 1998 1997 1996 1995
================================================================================
Net Asset Value,
Beginning of Year $15.82 $15.84 $15.42 $15.75 $14.30
- --------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income 0.78 0.78 0.83 0.84 0.83
Net realized and
unrealized gain (loss) (1.21) 0.04 0.50 (0.32) 1.47
- --------------------------------------------------------------------------------
Total Income (Loss)
From Operations (0.43) 0.82 1.33 0.52 2.30
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.76) (0.81) (0.84) (0.85) (0.85)
In excess of net
investment income -- -- (0.01) -- --
Net realized gains -- (0.03) (0.06) -- --
- --------------------------------------------------------------------------------
Total Distributions (0.76) (0.84) (0.91) (0.85) (0.85)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Year $14.63 $15.82 $15.84 $15.42 $15.75
- --------------------------------------------------------------------------------
Total Return,
Based on Market Value(1) (12.25)% 6.71% 10.18% 11.02% 15.83%
- --------------------------------------------------------------------------------
Total Return,
Based on Net Asset Value(1) (2.14)% 5.69% 9.38% 3.96% 17.11%
- --------------------------------------------------------------------------------
Net Assets,
End of Year (millions) $59 $64 $64 $62 $63
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.91% 0.87% 0.85% 0.90% 0.86%
Net investment income 5.07 4.93 5.31 5.45 5.48
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 45% 62% 58% 30% 21%
- --------------------------------------------------------------------------------
Market Price, End of Year $12.438 $15.000 $14.875 $14.375 $13.750
================================================================================
(1) The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of the Smith Barney Municipal Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Smith Barney Municipal Fund, Inc.
as of December 31, 1999, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. As to securities
purchased or sold but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Smith Barney Municipal Fund, Inc. as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG LLP
New York, New York
February 11, 2000
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Data (unaudited)
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
AMEX Net Asset Dividends Reinvestment
Period Closing Price* Value* Paid Price
================================================================================
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
July 13.25 15.20 0.0630 13.11
August 12.75 15.00 0.0630 12.91
September 12.63 14.92 0.0630 12.69
October 12.69 14.71 0.0630 12.70
November 12.25 14.81 0.0630 12.25
December 12.44 14.63 0.0630 12.33
================================================================================
* On the last business day of the month.
+ Capital gain distribution.
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 23
<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:
% of Votes % of
Directors* Votes For Shares Voted Against Shares Voted
================================================================================
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
================================================================================
The results of the vote on Proposal 2 were as follows:
% of Votes % of Votes % of
Votes For Shares Voted Against Shares Voted Abstained Shares Voted
================================================================================
3,361,190 99.027% 10,697 0.315% 22,327 0.658%
================================================================================
* 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.
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited)
- --------------------------------------------------------------------------------
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose shares
of common stock are registered in his own name will have all distributions from
the Fund reinvested automatically by PFPC Global Fund Services ("PFPC"),
formerly known as First Data Investor Services Group, Inc. 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 PFPC 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, PFPC 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 PFPC has completed its purchases, the
market price exceeds the NAV of the common stock as of the valuation time, PFPC
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 PFPC is unable to stop open market purchases and
cause the Fund to issue the remaining shares, the average per share purchase
price paid by PFPC 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. PFPC will begin to purchase common stock on the open market as soon as
practicable after the
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan (unaudited) (continued)
- --------------------------------------------------------------------------------
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.
PFPC 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 PFPC 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. PFPC'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 PFPC, 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 PFPC Global Fund Services, P.O. Box 8030, Boston,
Massachusetts 02266-8030 or by telephone at 1-800-331-1710.
- --------------------------------------------------------------------------------
26 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
December 31, 1999:
o 100% of the dividends paid by the Fund from net investment income as
tax exempt for regular Federal income tax purposes.
- --------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 27
<PAGE>
(This page intentionally left blank.)
<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
Anthony Pace
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
SSB Citi Fund Management LLC
CUSTODIAN
PNC Bank, N.A.
TRANSFER AGENT
PFPC Global Fund Services
P.O. Box 8030
Boston, Massachusetts 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
FD2253 2/00
