Smith Barney
MUNICIPAL FUND, INC.
[GRAPHIC OMITTED]
Semi-Annual Report
June 30, 2000
<PAGE>
Smith Barney
Municipal
Fund, Inc.
[PHOTO] [PHOTO]
Heath B. Peter M.
McLendon Coffey
Chairman 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, 2000. During the
period, the Fund distributed income dividends totaling $0.38 per share. The
table below shows the annualized distribution rate and six-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 Six-Month
Per Share Distribution Rate(2) Total Return(2)
------------- -------------------- ---------------
$14.54 (NAV) 5.36% 2.48%
$12.75 (AMEX) 6.12% 5.70%
The Fund had a total return based on NAV of 2.48% for the six months ended June
30, 2000. In comparison, the Lipper Inc. ("Lipper") peer group of closed-end
municipal bond funds returned 4.00% (based on NAV) for the same period. (Lipper
is major fund-tracking organization.)
Special Shareholder Notice
On June 23, 2000, the Board of Directors of Smith Barney Intermediate Municipal
Fund, Inc. and the Board of Directors of Smith Barney Municipal
----------
(1) The NAV is calculated by subtracting total liabilities from the closing
value of all securities held by the Fund (plus all other assets) and
dividing the result (total net assets) by the total number of shares
outstanding. The NAV fluctuates with the changes in the market price of
the securities in which the Fund has invested. However, the price at which
the investor may buy or sell shares of the Fund is its market (AMEX) price
as determined by supply and demand.
(2) Total returns are based on changes in NAV or the market value,
respectively. Total returns 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 $0.065 for twelve months. The rate is as of July 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. 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
<PAGE>
Fund, Inc. each announced today their unanimous approval of a proposed plan to
combine Smith Barney Municipal Fund, Inc. (AMEX: "SBT") with and into Smith
Barney Intermediate Municipal Fund, Inc. (AMEX: "SBI").
In the transaction, SBI will acquire the assets and stated liabilities of SBT in
exchange for shares of SBI. Under the Plan of Reorganization, holders of common
stock of SBT will receive full and fractional shares of SBI common stock, with
an aggregate net asset value equal to the net asset value of their SBT common
stock, computed based on the net asset value of each fund as of the last trading
day prior to the scheduled closing date of October 13, 2000.
The close of business on July 28, 2000 is the record date for the determination
of shareholders of each Fund eligible to vote at the Special Meetings of
Shareholders scheduled for October 11, 2000, subject to such postponements as
the Boards deem appropriate.
The combination of SBT and SBI is subject to the approval of the shareholders of
each Fund, as well as various other customary closing conditions, including the
receipt of legal opinions that the transaction will qualify as a tax-free
reorganization. SBI, the surviving Fund, will continue to operate within the
parameters of its investment objective of providing shareholders with a high
level of current income exempt from regular federal income taxes consistent with
prudent investing. The Fund seeks to maintain a dollar-weighted average maturity
between three and 10 years, and invests at least two-thirds of its total assets
in municipal securities rated in the three highest rating categories at the time
of investment.
SBT invests primarily in investment grade municipal debt securities with
remaining maturities of less than fifteen years. Following the combination with
SBT, SBI's larger size may benefit shareholders through enhanced liquidity in
the secondary market and a lower expense ratio.
Investment Strategy(3)
The Fund's investment objective is to provide as high a level as possible of
current income exempt from federal income taxes.(4) 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 seek 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.)
----------
(3) The information provided represents the opinion of the managers and is not
intended to be a forecast of future events, a guarantee of future results
nor investment advice. Further, there is no assurance that certain
securities will remain in or out of the Fund.
(4) Please note a portion of the Fund's income may be subject to the
Alternative Minimum Tax ("AMT").
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2 2000 Semi-Annual Report to Shareholders
<PAGE>
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
bond 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.
In addition, we raised the credit quality of the portfolio. As of June 30, 2000,
90.6% of the Fund's holdings were rated investment grade(5) and 38.8% 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, 2000: hospital bonds (23.2%), escrowed to
maturity bonds (13.7%) and industrial development bonds (11.1%).
Municipal Bond Market Update
The municipal bond market is being influenced by two conflicting sets of
pressures. On one side is the strong U.S. economy, which is likely to keep the
Federal Reserve Board ("Fed") in a tightening mode throughout the remainder of
2000. On the other side there exists supply and demand pressures which continue
to create shortages in many municipalities and maturities.
The greatest challenge to the bond markets -- and to the capital markets in
general -- is a U.S. economy which continues to grow, at what some economists
think is an unsustainable rate, without triggering renewed inflationary fears
and pressures. Accordingly, the Fed has shifted to a more aggressive posture to
slow demand to a level that is more in line with the economy's potential
non-inflationary growth rate. The Fed has emphasized that the economic
imbalances resulting from the U.S. demand surge have become more pressing.
Despite recent stock market fluctuations, the broadest indexes remain ahead of
last year's values, suggesting that the wealth effect will diminish only
gradually.
It is important to stress that Fed tightening, and the prospect for additional
tightening, have already caused yields on non-U.S. Treasury taxable bonds to
increase sharply relative to U.S. Treasuries. However, in the municipal market,
patterns have been considerably more favorable. Yields on intermediate- and
long-term maturities are up 35 basis points(6) or so from recent lows, but we do
not expect them to move appreciably higher, for several reasons. First, new
issue supply remains very light by recent standards. New issue volume peaked
----------
(5) Investment grade bonds are those rated Aaa, Aa, A and Baa by Moody's
Investors Service, Inc. or AAA, AA, A and BBB by Standard & Poor's Ratings
Service, or that have an equivalent rating by any nationally recognized
statistical rating organization, or determined by the manager to be of
equivalent quality.
(6) A basis point is 0.01% or one one-hundredth of a percent.
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Smith Barney Municipal Fund, Inc. 3
<PAGE>
at $292 billion in 1998, and dropped to roughly $225 billion in 1999. This year,
issuance is running nearly 30% behind 1999 year-to-date levels.
Second, demand for municipals from individual investors remains extremely
strong. Yields are higher, particularly on short and intermediate maturities,
resulting in part from a continuing lack of demand from institutional buyers.
The third reason for our optimism regarding the municipal bond market relates to
asset re-allocation. Many individuals have made massive amounts of money in the
stock markets, despite recent weakness. Now, with the technology sector under
considerable pressure and the overall stock market weaker and more volatile, a
very large number of investors are seeking to diversify their risks. In many
cases, they are turning to municipal bonds as an alternative.
Portfolio Update
With the bond markets likely to remain volatile, we continue to favor a gradual
approach into the market. We tend to favor longer and intermediate maturities,
where most of the benefits of the steep positive slope of the municipal yield
curve can be obtained. (The yield curve is the graphical depiction of the
relationship between the yield on bonds of the same credit quality but different
maturities.)
Average credit quality remained relatively high in the Fund during the reporting
period. Although quality spreads have widened due to earnings pressure,
especially in hospitals and healthcare-related sectors, the difference in yield
between the highest-quality issues and medium-grade issues is, in our view,
relatively modest. We think our proprietary research enables us to invest in
select medium-term credits for which perceived market risk is greater than our
analysis indicates. Moreover, while no guarantees can be made, we think our
strategy may have the potential to increase income.
During the reporting period, we took advantage of rising interest rates to
generate additional yield in the Fund. We also wanted to incorporate additional
call protection into the Portfolio by selling off some of our higher coupon
bonds with shorter calls, and replacing them with bonds that have similar high
coupon structure, but are not subject to early call. (Callable bonds are
redeemable by the issuer before the scheduled maturity under specific conditions
and at a stated price, which usually begins at a premium to par and declines
annually. Bonds are usually "called" when interest rates fall so significantly
that the issuer can save money by floating new bonds at lower rates.)
One of our objectives in the Fund is to try to create a built-in income stream
for the long term. To this end, we have generally focused on securities with
high credit quality and good call protection, as we believe they offer good
long-term value. Moreover, we have a fairly long-weighted average life in the
Fund because we believe that the risk of higher inflation at the present time is
negligible. In addition, we think our greater emphasis on call protection should
provide our shareholders with more consistent income if interest rates do in
fact go down.
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4 2000 Semi-Annual Report to Shareholders
<PAGE>
Municipal Bond Market Outlook
In our view, the Fed has been effective in enacting monetary policy that should
facilitate a soft landing for the economy, during which growth will slow just
enough to relieve inflation worries, but not enough to threaten a recession. We
think the recent rise in interest rates has created buying opportunities. While
no guarantees can be made, we remain confident that we may be able to achieve a
high level of tax-exempt income, consistent with prudent investing and close
attention to credit quality.
In light of the recent volatility in the fixed-income markets, one surprising
result is clear to us: long-term municipal bond yields have not changed much in
several months. The relative stability of this asset class should be reassuring
for investors seeking to ride out bond market volatility (as well as higher
volatility in the other major capital markets).
We also believe that Fed monetary policy action should be sufficient to slow the
economy without triggering higher inflation. 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.
Although the bond markets remain unsettled, we maintain our positive outlook for
municipal securities for the following reasons:
o Longer intermediate and long maturity yields remain very high relative to
taxable counterparts. For example, several types of bonds are yielding
roughly 95% to 100% of similar maturity U.S. Treasuries;
o The municipal yield curve remains very steeply sloped, even as the U.S.
Treasury yield curve is inverted; and
o When capital markets begin to believe that the Fed has achieved its goal
of easing growth down to non inflationary levels, bonds could rally and
shortages of bonds with the best coupon structures and call provisions
could eventually surface.
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 18, 2000
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Smith Barney Municipal Fund, Inc. 5
<PAGE>
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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") 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 24. 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 2000 Semi-Annual Report to Shareholders
<PAGE>
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Schedule of Investments (unaudited) June 30, 2000
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================================
<C> <C> <S> <C>
Education -- 4.4%
$1,000,000 Aa2* Arizona Education Loan Corp., 6.625% due 9/1/05 (b) $ 1,031,250
120,000 Aaa* Du Page County, IL School District No. 041, Glen Ellyn,
Capital Appreciation, FGIC-Insured, zero coupon due 2/1/17 45,150
1,075,000 Aaa* Lago Vista, TX Independent School District, Capital
Appreciation, PSFG, zero coupon due 8/15/21 306,375
215,000 Aaa* Lake & McHenry Counties, IL Community School District
No. 118, Capital Appreciation, FGIC-Insured,
zero coupon due 2/1/11 121,206
1,000,000 Aaa* Nebhelp Inc., Nebraska Revenue, MBIA-Insured, Series A,
6.200% due 6/1/13 1,042,500
--------------------------------------------------------------------------------------------------------------
2,546,481
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Escrowed to Maturity (c) -- 13.7%
255,000 AAA Anderson County, SC Hospital Facilities Revenue,
7.125% due 8/1/07 273,169
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 1,390,275
655,000 AAA Illinois Health Facility Authority Revenue, (Methodist
Medical Center Project), 9.000% due 10/1/10,
Sinking Fund Average Life 10/1/05 765,531
875,000 AAA Jackson, TN Water & Sewer Revenue, 7.200% due 7/1/12,
Sinking Fund Average Life 2/7/07 965,781
415,000 AAA Lake County, OH Hospital Improvement Revenue,
Lake County Memorial Hospital, 8.625% due 11/1/09 479,325
1,270,000 NR Los Angeles, CA Hollywood Presbyterian Medical Center,
9.625% due 7/1/13, Sinking Fund Average Life 6/13/08 1,619,250
200,000 AAA Louisiana Public Facilities, Southern Baptist Hospital,
8.000% due 5/15/12, Sinking Fund Average Life 6/6/07 230,750
180,000 Aaa* Nacogdoches County, TX Hospital District Revenue,
9.000% due 5/15/04 196,200
230,000 AAA New Jersey State Turnpike Authority Revenue Refunding Bond,
10.375% due 1/1/03, Sinking Fund Average Life 1/25/02 248,400
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 1,326,850
345,000 AAA Ringwood Borough, NJ Sewer Authority Special Obligation
Refunding, 9.875% due 7/1/13 434,700
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7,930,231
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General Obligation -- 3.5%
500,000 AAA Anchorage, AK FGIC-Insured, 6.000% due 10/1/14 534,375
695,000 Aaa* East Rochester, NY Unified Free School District, FSA-Insured,
5.700% due 6/15/13 717,588
500,000 Aaa* Erie County, NY Public Improvement, AMBAC-Insured, Series C,
5.500% due 7/1/29 476,875
290,000 A3* New Haven, CT Unrefunded Balance, Series B,
9.000% due 12/1/01 306,675
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2,035,513
--------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
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Smith Barney Municipal Fund, Inc. 7
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 2000
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================================
<C> <C> <S> <C>
Hospital -- 23.2%
$ 435,000 BBB Allentown, PA Area Hospital Authority Revenue Refunding,
Sacred Heart Hospital, Series A, 6.200% due 11/15/03 $ 437,175
500,000 BBB- Arkansas Development Finance Authority Revenue,
(Washington Regional Medical Center), 7.000% due 2/1/15 490,625
650,000 AAA Calcasieu Parish, LA Memorial Hospital Service District
Revenue Refunding, Lake Charles Memorial Hospital,
Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 719,875
1,500,000 A+ California Statewide Community Development Authority
Revenue, COP Refunding Hospital, Triad Healthcare,
6.250% due 8/1/06 1,591,875
1,000,000 A Clackamas County, OR Hospital Facility Authority Revenue,
(Kaiser Permanente), Series A, 5.375% due 4/1/14 946,250
2,000,000 AA Harris County, TX Health Facilities Development Corp., (Texas
Children's Hospital Project), Series A, 5.375% due 10/1/14 1,895,000
755,000 BBB+ Henderson, NV Health Care Facility Revenue, (Catholic
Healthcare West Project), Series A, 6.200% due 7/1/09 731,406
1,300,000 A- Illinois Health Facilities Authority Revenue Friendship,
VLG Hospital, 6.650% due 12/1/06 1,313,000
1,200,000 BBB+ Klamath Falls, OR Intercommunity, Merle Hospital,
8.000% due 9/1/08 1,323,000
1,000,000 B3* Langhorne Manor Borough, PA Higher Education &
Health Authority, Bucks County, Lower Bucks Hospital,
6.750% due 7/1/02 943,750
1,000,000 BBB+ Maricopa County, AZ IDA, Health Facilities Revenue,
(Catholic Healthcare West Project), Series A,
5.250% due 7/1/06 952,500
2,000,000 AAA Orange County, FL Health Facilities Authority Revenue,
Adventist Health System/Sunbelt, FSA-Insured, FLAIRS,
6.050% due 11/15/07 (d) 2,072,500
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13,416,956
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Housing: Multi-Family -- 5.3%
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 1,119,250
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 1,447,950
500,000 BBB+@@ Montgomery County, PA Redevelopment Authority,
Multi-Family Housing Revenue, Series A,
6.375% due 7/1/12, Sinking Fund Average Life 1/29/09 504,375
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3,071,575
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Housing: Single-Family -- 7.5%
135,000 A1* Ford County, KS Single-Family Mortgage Revenue Refunding,
Series A, FHA-Insured, 7.900% due 8/1/10 140,400
190,000 AA Juneau City & Borough, AK Home Mortgage Revenue
Refunding, Mortgage-Backed Securities Program,
FNMA-Collateralized, FHA-Insured, 8.000% due 2/1/09 197,125
</TABLE>
See Notes to Financial Statements.
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8 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 7.5% (continued)
$ 500,000 NR 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 $ 516,250
920,000 Aa3* Massachusetts State HFA, Single-Family, Series 38,
7.200% due 12/1/26 (b) 960,250
60,000 Aa2* Montgomery County, MD Housing Opportunities
Commission Mortgage Revenue, Series A,
7.200% due 7/1/04 61,589
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) 824,175
1,500,000 BBB Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,655,625
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4,355,414
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Industrial Development -- 11.1%
535,000 BB+ Bourbonnais, IL IDR Refunding, (Kmart Corp. Project),
6.600% due 10/1/06 544,363
1,500,000 AAA Des Moines, IA IDR Refunding Revenue, (The Printer Project
1992), LOC Norwest Bank, 6.375% due 9/1/09 1,505,625
1,500,000 BBB+ Dickinson County, MI Economic Development Corp., Solid
Waste Disposal Refunding Revenue, Champion International,
6.550% due 3/1/07 1,536,885
1,000,000 AA- LaCrosse, WI Resource Recovery Revenue, (Northern States
Power Co. Project), 6.000% due 11/1/21 (b) 1,001,250
310,000 AAA Massachusetts State Developmental Finance Agency Revenue,
GMNA-Collateralized, Series A, 6.700% due 10/20/21 331,312
1,000,000 BBB Oklahoma Developmental Finance Authority Revenue, Hillcrest
Healthcare System, Series A, 5.625% due 8/15/19 800,000
500,000 BBB Schuylkill County, PA Industrial Development Authority Revenue,
Pine Groove Landfill Inc., 5.100% due 10/1/19 435,000
1,000,000 CC Tooele County, UT Hazardous Waste Disposal Revenue,
Laidlaw Incineration, Series A, 6.750% due 8/1/10 (b) 280,000
--------------------------------------------------------------------------------------------------------------
6,434,435
--------------------------------------------------------------------------------------------------------------
Miscellaneous -- 9.1%
500,000 NR Barona Band of Mission Indians, CA, 8.250% due 1/1/20 507,500
1,050,000 AA Bernalillo County, NM Gross Receipts Tax Revenue Refunding,
5.125% due 4/1/17 994,875
1,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp. Gas Revenue,
Series A, 7.500% due 11/1/04 1,024,530
640,000 NR Clayton County, GA Development Authority Revenue, First
Mortgage, Senior Care Group Inc., (Bayberry Project),
6.750% due 7/1/10 597,600
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 1,058,750
645,000 Baa2* Indianapolis, IN Economic Development Refunding &
Improvement Revenue, National Benevolent Association,
(Robin Run Village Project), 6.900% due 10/1/04 660,319
</TABLE>
See Notes to Financial Statements.
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Smith Barney Municipal Fund, Inc. 9
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================================
<C> <C> <S> <C>
Miscellaneous -- 9.1% (continued)
$ 430,000 AAA Massachusetts State Industrial Finance Agency Assisted
Living Facility Revenue, (Arbors at Amherst Project),
GNMA-Collateralized, 5.750% due 6/20/17 $ 434,838
--------------------------------------------------------------------------------------------------------------
5,278,412
--------------------------------------------------------------------------------------------------------------
Pollution Control -- 3.0%
1,000,000 Aa3* Brazos River, TX Navigation Harbor District, Brazonia County,
PCR, (BASF Corp. Project), 6.750% due 2/1/10 1,093,750
595,000 A+ Broward County, FL Resource Recovery PCR, (North Project),
7.950% due 12/1/08 612,368
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1,706,118
--------------------------------------------------------------------------------------------------------------
Pre-Refunded (e) -- 1.7%
460,000 Aaa* Philadelphia, PA Hospital Revenue, (United Hospital Inc.
Project), 10.875% due 7/1/08, (Call 7/1/05 @ 100),
Sinking Fund Average Life 4/6/04 549,700
370,000 NR San Leandro, CA Redevelopment Agency Residential Mortgage
Revenue, 11.250% due 4/1/13, (Call 10/1/04 @ 100),
Sinking Fund Average Life 4/13/04 447,700
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997,400
--------------------------------------------------------------------------------------------------------------
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 1,051,250
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Short-Term Securities -- 1.9%
200,000 VMIG 1* Philadelphia, PA Institution Cancer Research, Series A,
4.160% due 7/1/13 200,000
900,000 VMIG 1* Sublette County, WY Pollution Control Revenue,
(Exxon Project), Series B, 3.950% due 7/1/17 900,000
--------------------------------------------------------------------------------------------------------------
1,100,000
--------------------------------------------------------------------------------------------------------------
Transportation -- 6.3%
855,000 A Connecticut, State Special Obligation, (Bradley International
Airport), ACA-Insured, Series A, 6.375% due 7/1/12 884,925
2,000,000 BBB- Connector 2000 Association, SC Toll Road Revenue,
Capital Appreciation, Series B, zero coupon due 1/1/15 675,000
2,000,000 BBB- Pocahontas Parkway Association, Virginia Toll Road Revenue,
Capital Appreciation, Series B, zero coupon due 8/15/19 520,000
500,000 BBB- Raleigh-Durham, NC Airport Authority Special Facilities Revenue,
(American Airlines Inc. Project), 9.400% due 11/1/00 506,215
595,000 NR Sanford, FL Airport Authority IDR (Central Florida Terminals
Project), Series B, 7.500% due 5/1/06 (b) 618,800
500,000 AA+ Tri-County Metropolitan Transportation District, OR Revenue,
Series A, 5.000% due 8/1/19 455,625
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3,660,565
--------------------------------------------------------------------------------------------------------------
Utilities -- 4.6%
2,000,000 AAA Chelan County, WA Public Utililties Distribution
No. 1, Columbia River Rock Island, MBIA-Insured,
zero coupon due 6/1/23 970,000
</TABLE>
See Notes to Financial Statements.
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10 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================================
<C> <C> <S> <C>
Utilities -- 4.6% (continued)
$1,500,000 AAA Long Island Power Authority, New York Electric Systems
Revenue Capital Appreciation, FSA-Insured, Series B,
zero coupon due 6/1/15 $ 643,125
1,000,000 BBB North Carolina Eastern Municipal Power Agency, Power
System Revenue, Series D, 6.450% due 1/1/14 1,017,500
--------------------------------------------------------------------------------------------------------------
2,630,625
--------------------------------------------------------------------------------------------------------------
Water & Sewer -- 2.9%
1,000,000 AAA Jefferson County, AL Sewer Revenue, Capital Improvement
Warrants, Series A, FGIC-Insured, 5.000% due 2/1/33 868,750
765,000 AAA Pueblo, CO Bridge Waterworks, Water Revenue, Series A,
FSA-Insured, 6.000% due 11/1/14 803,250
--------------------------------------------------------------------------------------------------------------
1,672,000
--------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $57,907,669**) $57,886,975
==============================================================================================================
</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.
--------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 11
<PAGE>
--------------------------------------------------------------------------------
Bond Ratings (unaudited)
--------------------------------------------------------------------------------
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, CCC -- Bonds rated "BB","B","CCC" and "CC" are regarded, on balance,
and CC as predominantly speculative with respect to the issuer's
capacity to pay interst and repay principal in accordance with
the terms of the obligation. "BB" indicates the lowest degree
of speculation and "CC" 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 2000 Semi-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)
--------------------------------------------------------------------------------
ACA -- American Capital Assurance
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 (unaudited) June 30, 2000
--------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $57,907,669) $ 57,886,975
Interest receivable 1,153,068
Receivable for securities sold 1,715,640
-------------------------------------------------------------------------------
Total Assets 60,755,683
-------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 2,584,083
Dividends payable 94,120
Payable to bank 51,894
Management fees payable 31,515
Accrued expenses 23,827
-------------------------------------------------------------------------------
Total Liabilities 2,785,439
-------------------------------------------------------------------------------
Total Net Assets $ 57,970,244
===============================================================================
NET ASSETS:
Par value of capital shares $ 3,988
Capital paid in excess of par value 59,644,981
Undistributed net investment income 103,318
Accumulated net realized loss from security transactions (1,761,349)
Net unrealized depreciation of investments (20,694)
-------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $14.54 a share on 3,987,862 shares of $0.001
par value outstanding; 100,000,000 shares authorized) $ 57,970,244
===============================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations (unaudited)
--------------------------------------------------------------------------------
For the Six Months Ended June 30, 2000
INVESTMENT INCOME:
Interest $ 1,831,287
-------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 3) 203,517
Shareholder and system servicing fees 20,289
Shareholder communications 15,913
Audit and legal 12,183
Pricing service fees 5,469
Registration fees 2,586
Directors' fees 1,989
Custody 1,740
Other 4,972
-------------------------------------------------------------------------------
Total Expenses 268,658
-------------------------------------------------------------------------------
Net Investment Income 1,562,629
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 21,874,996
Cost of securities sold 22,544,072
-------------------------------------------------------------------------------
Net Realized Loss (669,076)
-------------------------------------------------------------------------------
Change in Net Unrealized Depreciation of Investments:
Beginning of period (201,312)
End of period (20,694)
-------------------------------------------------------------------------------
Decrease in Net Unrealized Depreciation 180,618
-------------------------------------------------------------------------------
Net Loss on Investments (488,458)
-------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 1,074,171
===============================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 15
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
For the Six Months Ended June 30, 2000 (unaudited)
and the Year Ended December 31, 1999
<TABLE>
<CAPTION>
2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,562,629 $ 3,120,283
Net realized loss (669,076) (1,091,617)
(Increase) decrease in net unrealized depreciation 180,618 (3,772,741)
-------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations 1,074,171 (1,744,075)
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (note 2):
Net investment income (1,536,769) (3,040,011)
-------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,536,769) (3,040,011)
-------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Treasury stock acquired (416,329) --
-------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (416,329) --
-------------------------------------------------------------------------------------
Decrease in Net Assets (878,927) (4,784,086)
NET ASSETS:
Beginning of period 58,849,171 63,633,257
-------------------------------------------------------------------------------------
End of period* $ 57,970,244 $ 58,849,171
=====================================================================================
* Includes undistributed net investment income of: $ 103,318 $ 77,458
=====================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
16 2000 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; 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 (unaudited) (continued)
--------------------------------------------------------------------------------
3. Management Agreement and Transactions with Affiliated Persons
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), acts as investment manager of 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, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $20,462,496
--------------------------------------------------------------------------------
Sales 21,874,996
================================================================================
At June 30, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 1,123,738
Gross unrealized depreciation (1,144,432)
--------------------------------------------------------------------------------
Net unrealized depreciation $ (20,694)
================================================================================
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 June 30, 2000, the Fund did not have any open futures contracts.
--------------------------------------------------------------------------------
18 2000 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, 2000, the Fund did not have any open purchased call or put option
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 six months ended June 30, 2000, the Fund did not enter into any
written call or put option contracts.
--------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 19
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
7. Capital Shares
At June 30, 2000, the Fund had 100,000,000 shares of common stock authorized
with a par value of $0.001.
At January 4, 2000, the Fund commenced a share repurchase plan. As of June 30,
2000, repurchased shares totaled 33,300 with a total cost of $416,329.
8. 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 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended December 31,
except where noted:
<TABLE>
<CAPTION>
2000(1) 1999 1998 1997 1996 1995
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 14.63 $ 15.82 $ 15.84 $ 15.42 $ 15.75 $ 14.30
-----------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income 0.39 0.78 0.78 0.83 0.84 0.83
Net realized and
unrealized gain (loss) (0.12) (1.21) 0.04 0.50 (0.32) 1.47
-----------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.27 (0.43) 0.82 1.33 0.52 2.30
-----------------------------------------------------------------------------------------------------
Gains from Repurchase
of Treasury Stock 0.02 -- -- -- -- --
-----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.38) (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 (0.38) (0.76) (0.84) (0.91) (0.85) (0.85)
-----------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 14.54 $ 14.63 $ 15.82 $ 15.84 $ 15.42 $ 15.75
-----------------------------------------------------------------------------------------------------
Total Return,
Based on Market Value(2) 5.70%++ (12.25)% 6.71% 10.18% 11.02% 15.83%
-----------------------------------------------------------------------------------------------------
Total Return,
Based on Net Asset Value(2) 2.48%++ (2.14)% 5.69% 9.38% 3.96% 17.11%
-----------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $ 58 $ 59 $ 64 $ 64 $ 62 $ 63
-----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.92%+ 0.91% 0.87% 0.85% 0.90% 0.86%
Net investment income 5.38+ 5.07 4.93 5.31 5.45 5.48
-----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 35% 45% 62% 58% 30% 21%
-----------------------------------------------------------------------------------------------------
Market Price, End of Period $12.750 $12.438 $15.000 $14.875 $14.375 $13.750
=====================================================================================================
</TABLE>
(1) For the six months ended June 30, 2000 (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 representative of the
total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 21
<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
2000
January 12.63 14.50 0.0630 12.56
February 12.31 14.57 0.0630 12.32
March 12.88 14.77 0.0630 12.63
April 12.19 14.65 0.0650 12.19
May 12.50 14.32 0.0650 12.49
June 12.75 14.54 0.0650 12.86
================================================================================
* On the last business day of the month.
+ Capital gain distribution.
--------------------------------------------------------------------------------
22 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
--------------------------------------------------------------------------------
On April 20, 2000, 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, Richard E. Hanson, Jr. and
Heath B. McLendon to serve as Directors until the year 2003; 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 3,864,612 98.783% 47,614 1.217%
Richard E. Hanson, Jr. 3,864,610 98.783 47,616 1.217
Heath B. McLendon 3,867,422 98.855 44,804 1.145
================================================================================
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
================================================================================
3,882,103 99.230% 9,792 0.250% 20,331 0.520%
================================================================================
* The following Directors, representing the balance of the Board of
Directors, continue to serve: Lee Abraham, Jane F. Dasher, Donald R.
Foley, Paul Hardin, Roderick C. Rasmussen and John P. Toolan.
--------------------------------------------------------------------------------
Smith Barney Municipal Fund, Inc. 23
<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"), 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
--------------------------------------------------------------------------------
24 2000 Semi-Annual Report to Shareholders
<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.
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Smith Barney Municipal Fund, Inc. 25
<PAGE>
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Smith Barney
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MUNICIPAL FUND, INC.
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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
PFPC Trust Company
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
FD0624 8/00
