<PAGE>
- --------------------------------------------------------------------------------
A N N U A L R E P O R T
1995
1995
1995
1995
1995
SMITH BARNEY
FLORIDA
MUNICIPALS
FUND
---------------------------------------------------
October 31, 1995
[Logo]
<PAGE>
Smith Barney Florida Municipals Fund
DEAR SHAREHOLDER:
We are pleased to provide you with this annual
report for Smith Barney Florida Municipals Fund
for the twelve-month period ended
October 31, 1995. For your convenience, we have summarized the
period's prevailing economic and market conditions below and
outlined our portfolio strategy during this time. A more detailed
summary of performance and current holdings can be found in the
appropriate sections that follow in the annual report.
FLORIDA'S ECONOMIC HIGHLIGHTS
Florida's general obligation debt holds a 'AA' rating from Standard
& Poor's Corporation, Fitch Investors Service, Inc. and Moody's
Investors Services. Florida's economy continues to diversify from a
tourism and agriculture base into a more balanced service and trade
economy characterized by increased insurance, banking and export
activity. This has helped to encourage year-round growth and overall
economic recovery, but it has also put pressure on infrastructural
and educational facilities. Nevertheless, the state's debt load
remains moderate and its financial operations are well-balanced,
pointing towards continuing economic health.
MARKET & ECONOMIC OVERVIEW
Over the past six months, the fixed income markets have been characterized by
lower interest rates, as measured by the decline of 30-year Treasury from 7.43%
on March 31, 1995 to 6.50% on September 30, 1995, a drop of nearly 100 basis
points. Long-term municipal bond yields, however, barely budged over the time
period, starting out March 30, 1995 at 6.29% as represented by the Bond Buyer's
25-Year Revenue Bond Index and finishing at 6.27% on September 28, 1995. We
believe this is due primarily to tax reform concerns.
Although some analysts have been forecasting a slight pick-up in economic
activity during the final quarter of 1995, it now appears that the Federal
Reserve Board (the 'Fed') has been successful in controlling inflation and
focusing a sustainable and slower rate of economic growth this year. The Fed did
not feel it necessary to alter
1
<PAGE>
the federal funds rate in September, leaving it
unchanged at 5.75%, reflecting its confidence in the current rate of economic
growth. Consumer spending is rising at an annual pace of 2.5% to 3%, a
relatively neutral rate further tempered by recent indications such as expected
lower-than holiday sales that consumer households are growing more cautious.
A number of other economic indicators increased slightly over the past six
months compared to early 1995, including car buying, housing starts and
industrial production, before slowing again in September. The most recent Index
of Leading Indicators -- used by the U.S. Government to forecast economic
conditions -- eased downward slightly in September, fueled by cheaper commodity
prices. This index measures eleven different indicators, ranging from
unemployment benefit claims to building permits. While a majority of these
indicators showed a slight uptick in September, others dipped. The overall
result was a confirmation of our expectations for slow economic growth and
stable, or even lower, interest rates by year end.
In response to these conditions, the performance of the municipal bond market
lagged behind that of U.S. Treasury bonds. Tax reform continues to cause
uncertainty in the municipal market. Flat tax proposals are still being
discussed, but a number of alternate reform measures are on the table as well.
We expect this issue to emerge as the centerpiece of the 1996 Presidential
elections.
In short, until a more definite consensus emerges from Washington, D.C., we
cannot be certain of the impact of ongoing budget negotiations on municipal
bonds and are holding fast on our relatively cautious investment approach.
Assuming there is no radical tax reform -- we believe municipal bonds will
perform well relative to taxable investments, due primarily to diminishing
supply. New issue activity has increased slightly toward year-end, but remains
well below the levels seen in previous years. The Public Securities Association
now predicts approximately $140 billion in new issues by the end of 1995, less
than half the record amount that came to market in 1993. This reduction in
supply has helped to support underlying values. If the supply situation
continues into 1996 as we expect, stronger investment opportunities could
develop, particularly for bonds with long maturities.
2
<PAGE>
PORTFOLIO UPDATE AND PERFORMANCE
As of October 31, 1995, 88.7% of the Fund's Portfolio was invested in investment
grade securities (i.e., bonds with ratings of 'BBB' to 'AAA'). The majority of
its holdings were in housing (17.1%), hospital (14.7%), and education (10.4%)
bonds. The Fund's average maturity at the end of October 1995 was 23.6 years.
SPECIAL SHAREHOLDER NOTICE
Effective Friday, December 8, 1995, the Smith Barney Florida Municipals Fund was
merged into the Smith Barney Muni Funds -- Florida Portfolio. It is our belief
that combining these two Florida municipal funds will be beneficial for
shareholders. In addition to providing greater economies of scale that will
lower fund expenses, the merger of these two Florida municipal bond funds will
result in a lower management fee. Of course, the Smith Barney Muni
Funds -- Florida Portfolio will continue to be managed conservatively and with
the same high-quality portfolio orientation and commitment to service that
shareholders have come to expect from the Smith Barney Florida Municipals Fund.
We look forward to serving your investment needs.
Sincerely,
<TABLE>
<S> <C>
HEATH B. MCLENDON LAWRENCE T. MCDERMOTT
Heath B. McLendon Lawrence T. McDermott
Chairman and Chief Vice President and
Executive Officer Investment Officer
</TABLE>
November 21, 1995
DIVIDEND POLICY
Although not explicitly stated in the prospectus, the Fund's policy is to pay a
level monthly dividend based on our projections for the municipal bond market
and the general direction of interest rates. This policy has no appreciable
effect on the Fund's investment strategies or net asset value per share since it
is guided by market conditions. It means that we do not invest in speculative
securities which may undermine the Fund's net asset value per share in order
to maintain an unrealistically high dividend policy. We continually monitor
both the market and the Fund's income stream to see that our dividend
projections are realistic.
3
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS A SHARES
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
<S> <C> <C> <C> <C> <C>
10/31/95 $ 9.24 $10.14 $0.50 $0.00 15.60%
10/31/94 10.53 9.24 0.52 0.03 (7.31)
Inception*- 10/31/93 9.55 10.53 0.49 0.04 16.07`D'
- -----------------------------------------------------------------------------------------------
Total $1.51 $0.07
===============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS B SHARES
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
<S> <C> <C> <C> <C> <C>
10/31/95 $ 9.24 $10.14 $0.46 $0.00 15.03%
10/31/94 10.53 9.24 0.47 0.03 (7.76)
Inception*- 10/31/93 9.55 10.53 0.44 0.04 15.52`D'
- -----------------------------------------------------------------------------------------------
Total $1.37 $0.07
===============================================================================================
</TABLE>
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS C SHARES
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End of Income Capital Gain Total
Year Ended of Year Year Dividends Distributions Returns(1)
<S> <C> <C> <C> <C> <C>
Inception*- 10/31/95 $ 8.84 $10.14 $0.44 $0.00 19.96%`D'
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
4
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
Without Sales Charge(1)
-----------------------------------
Class A Class B Class C
<S> <C> <C> <C>
Year Ended 10/31/95 15.60% 15.03% N/A
Inception* through 10/31/95 7.58 7.05 19.96%
</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2)
-----------------------------------
Class A Class B Class C
<S> <C> <C> <C>
Year Ended 10/31/95 10.98% 10.53% N/A
Inception* through 10/31/95 6.12 6.17 19.96%
</TABLE>
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
Without Sales Charge(1)
<S> <C>
Class A (Inception* through 10/31/95) 24.37%
Class B (Inception* through 10/31/95) 22.56
Class C (Inception* through 10/31/95) 19.96
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions at net
asset value and does not reflect deduction of the applicable sales charge
with respect to Class A shares or the applicable contingent deferred sales
charges ('CDSC') with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions at net
asset value. In addition, Class A shares reflect the deduction of the
maximum initial sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed less than
one year from initial purchase. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares reflect the deduction of a 1.00% CDSC, which applies if
shares are redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are November 6, 1992, November
6, 1992 and November 15, 1994, respectively.
`D' Total return is not annualized, as it may not be representative of the total
return for the year.
5
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE
GROWTH OF $10,000 INVESTED IN CLASS A SHARES OF
THE SMITH BARNEY FLORIDA MUNICIPALS FUND VS.
LEHMAN MUNICIPAL BOND FUND INDEX`D'
(UNAUDITED)
- --------------------------------------------------------------------------------
November 1992 -- October 1995
[Graph]
<TABLE>
<CAPTION>
Smith Barney Lehman Municipal
Florida Municipals Bond Fund
Fund Index
<S> <C> <C>
11/6/92 $ 9,598.0 $10,000.0
4/93 10,447.0 10,773.0
10/93 11,123.0 11,409.0
4/94 10,509.0 11,006.0
10/94 10,586.0 10,912.0
4/95 11,189.0 11,738.0
10/95 $11,736.0 $12,532.0
`D' Hypothetical illustration of $10,000 invested in Class A shares at inception
on November 6, 1992, assuming deduction of the maximum 4.00% sales charge at
the time of investment and reinvestment of dividends and capital gains at
net asset value through October 31, 1995. The Lehman Municipal Bond Fund
Index is a weighted composite which is comprised of more than 15,000 bonds
issued within the last 5 years, having a minimum credit rating of at least
Baa and a maturity of at least 2 years, excluding all bonds subject to the
Alternative Minimum Tax and bonds with floating or zero coupons. The index
is unmanaged and is not subject to the same management and trading expenses
as a mutual fund. The performance of the Fund's other classes may be greater
or less than the Class A shares' performance indicated on this chart,
depending on whether greater or lesser sales charges and fees were incurred
by shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
6
<PAGE>
Smith Barney Florida Municipals Fund
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PORTFOLIO HIGHLIGHTS OCTOBER 31, 1995
INDUSTRY BREAKDOWN [Pie Chart]
Water and Sewer - 4.2%
General Obligations - 5.1%
Pollution Control - 8.0%
Transportation - 9.3%
Industrial Development - 10.4%
Utilities - 8.9%
Education - 11.1%
Miscellaneous - 11.4%
Hospital - 16.6%
Housing - 15.0%
SUMMARY OF INVESTMENTS BY COMBINED RATINGS
</TABLE>
<TABLE>
<CAPTION>
STANDARD & PERCENTAGE OF
MOODY'S AND/OR POOR'S TOTAL INVESTMENTS
<S> <C> <C> <C>
- ----------------------------------------------------------------
Aaa AAA 50.8%
Aa AA 3.0
A A 12.3
Ba BB 1.0
Baa BBB 21.0
VMIG 1/P-1 A-1 0.6
NR NR 11.3
-----
100.0%
=====
</TABLE>
7
<PAGE>
Smith Barney Florida Municipals Fund
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SCHEDULE OF INVESTMENTS OCTOBER 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
<S> <C> <C> <C>
EDUCATION -- 11.1%
$ 400,000 AAA Brevard County School Board Authority, Series A,
AMBAC-Insured, 6.500% due 7/1/12 $ 433,000
1,000,000 AAA Broward County Educational Facilities Authority,
CONNIE LEE-Insured, 6.000% due 4/1/13 1,017,500
750,000 AA Florida State Board of Education, Capital
Outlay, Series B, 6.700% due 6/1/22 814,688
1,125,000 AAA Hillsborough County School Board, Certificate of
Participation, MBIA-Insured, 6.000% due 7/1/14 1,153,125
1,250,000 NR North Miami Educational Facilities Revenue,
(Johnson & Wales University Project), Series
A, 6.100% due 4/1/13 1,221,875
760,000 Baa* Palm Bay Lease Revenue, Florida Education and
Research Foundation, 6.850% due 9/1/13 780,900
500,000 AAA Voulsia County Educational Facilities Authority,
CONNIE LEE-Insured, 6.500% due 10/15/15 534,375
- -------------------------------------------------------------------------------------
5,955,463
- -------------------------------------------------------------------------------------
GENERAL OBLIGATION -- 5.1%
180,000 AAA Florida State Turnpike Authority Revenue, Series
A, FGIC-Insured, 6.350% due 7/1/22 189,000
445,000 AAA Fort Lauderdale Central Beach Community
Redevelopment Agency, AMBAC-Insured, 6.150%
due 9/1/08 473,369
820,000 A Hillsborough County (County Center Project),
Second Series, 6.750% due 7/1/22 885,600
750,000 AAA Orange County Tourist Development Tax Revenue,
Series B, AMBAC-Insured, 6.000% due 10/1/21 759,375
400,000 AA- Orlando Capital Improvement Special Revenue,
6.000% due 10/1/22 397,000
- -------------------------------------------------------------------------------------
2,704,344
- -------------------------------------------------------------------------------------
HOSPITAL -- 16.6%
Alachua County Health Facilities Authority,
Santa Fe Healthcare System, Health Revenue:
195,000 BBB+ 6.875% due 11/15/02 212,062
640,000 BBB+ 6.050% due 11/15/16 628,000
860,000 BBB+ Bradford County Health Facilities Authority,
(Santa Fe Project), 6.050% due 11/15/16 820,225
1,000,000 A1* Brevard County Health Facilities Authority,
(Holmes Regional Medical Center Project),
5.750% due 10/1/13 978,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
<S> <C> <C> <C>
HOSPITAL -- 16.6% (CONTINUED)
$ 500,000 AAA Dade County Health Facilities Authority,
Hospital Revenue, (North Shore Medical Center
Project), AMBAC-Insured, 6.500% due 8/15/15 $ 540,000
750,000 BBB+ Escambia County Health and Education Financing
Authority, (Baptist Hospital & Manor Project),
6.750% due 10/1/14 777,188
310,000 AAA Jacksonville Hospital Revenue, (University
Medical Center, Inc. Project), CONNIE
LEE-Insured, 6.600% due 2/1/21 330,150
1,050,000 AAA Orange County (Orlando Regional Health Center),
MBIA-Insured, 6.000% due 11/1/24 1,064,437
1,000,000 A+ Palm Beach County Health Facilities Authority,
(Good Samaritan Health Systems Project), 6.300%
due 10/1/22 1,026,250
1,500,000 A+ South Broward Hospital District, 5.500% due
5/1/28 1,385,625
1,000,000 AAA Tampa Allegheny Health Systems, (St. Joseph's
Project), MBIA-Insured, 6.700% due 12/1/18 1,113,750
- -------------------------------------------------------------------------------------
8,876,437
- -------------------------------------------------------------------------------------
HOUSING -- 15.0%
750,000 Aaa* Brevard County Housing Finance Authority, Single
Family Mortgage Revenue, 6.600% due 9/1/16 774,375
400,000 AAA Clearwater Multi-Family Housing Revenue, (Drew
Gardens Project), Series A, FHA-Insured,
6.500% due 10/1/25 408,000
1,000,000 Aaa* Duval County Housing Finance Authority,
6.700% due 10/1/26 1,041,250
Florida Housing Finance Agency General Mortgage,
Series A, FHA-Insured:
250,000 AAA 6.350% due 6/1/14 256,250
1,085,000 AAA 6.750% due 8/1/14 1,135,181
1,460,000 AAA Single-Family Mortgage, Series B, 6.650% due
7/1/26 1,523,875
750,000 AAA Williamsburg Village Apartments,
AMBAC-Insured, 6.100% due 12/1/20 751,875
1,250,000 AAA Orange County Housing Finance Authority,
Single-Family Mortgage Revenue, GNMA/FNMA
Mortgage Backed Securities Program, 6.750%
due 10/1/18 1,301,562
800,000 Aaa* Pinellas County Housing Finance Authority,
Single-Family Mortgage Revenue, Series A,
GNMA/FNMA - Collateralized, 6.550% due 8/1/27 819,000
- -------------------------------------------------------------------------------------
8,011,368
- -------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
<S> <C> <C> <C>
INDUSTRIAL DEVELOPMENT -- 10.4%
$1,000,000 NR Dade County IDA, Cerebral Palsy Services,
8.000% due 6/1/22 $ 1,005,000
980,000 NR Homestead IDR, Series A, 7.950% due 11/1/18 983,675
1,250,000 BBB+ Lake County Resource Recovery, Industrial
Revenue, Series 1993-A, 5.950% due 10/1/13 1,198,437
500,000 BBB- Martin County IDA, 7.875% due 12/15/25 568,125
500,000 NR Northern Palm Beach County Water Control
District, Unit Development No. 31, Program 1,
6.750% due 11/1/07 513,750
Tampa Sports Authority Revenue:
500,000 AAA Tampa Bay Arena Project, MBIA-Insured,
6.050% due 10/1/20 527,500
750,000 AAA Interlock Agreement-Tampa Bay, AMBAC-Insured,
6.100% due 10/1/20 766,875
- -------------------------------------------------------------------------------------
5,563,362
- -------------------------------------------------------------------------------------
MISCELLANEOUS -- 10.8%
250,000 A1* Boca Raton Special Assessment Improvement,
(Visions 90 Project), 6.000% due 7/1/22 254,688
500,000 NR Brevard County Tourist Development Tax Revenue,
4th Century-FL Marlins Spring, 6.875% due
3/1/13 516,875
300,000 BBB Collier County Special Assessment, Pine/Naples-
Municipal Services, 5.600% due 11/1/13 282,375
1,000,000 AAA Dade County Aviation Facilities Revenue, Series
B, MBIA-Insured, 6.600% due 10/1/22 1,063,750
750,000 AAA Florida State Correctional Commission, Glades
County Correctional Facility, MBIA-Insured,
6.000% due 8/1/14 768,750
750,000 AAA Florida State Department of Corrections, COP,
Okeechobee Correctional, AMBAC-Insured, 6.250%
due 3/1/15 791,250
500,000 BB Hillsborough County Aviation Authority, Special
Purpose, (Delta Airlines Project), 6.800% due
1/1/24 515,000
1,000,000 AAA Miami Sports Exhibition Authority, FGIC-Insured,
6.150% due 10/1/20 1,031,250
500,000 NR Tampa Revenue (Florida Aquarium Inc. Project),
7.750% due 5/1/27 529,375
- -------------------------------------------------------------------------------------
5,753,313
- -------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
<S> <C> <C> <C>
POLLUTION CONTROL -- 8.0%
$ 400,000 A+ Citrus County PCR, Series B, Florida Power
Corporation, (Crystal River Project), 6.350%
due 2/1/22 $ 419,500
Escambia County PCR, (Champion International
Corporation Project):
500,000 BBB 6.950% due 11/1/07 536,250
1,500,000 BBB 6.900% due 8/1/22 1,588,125
Nassau County PCR, ITT Rayonier Inc.:
1,000,000 BBB Project, 6.200% due 7/1/15 1,011,250
595,000 BBB Project 6, 6.250% due 6/1/10 606,156
100,000 AAA Orange County Solid Waste Facilities Revenue
Bonds, FGIC-Insured, 6.375% due 10/1/17 106,000
- -------------------------------------------------------------------------------------
4,267,281
- -------------------------------------------------------------------------------------
SHORT-TERM (a) -- 0.6%
300,000 VMIG 1 Dade County IDA, Exempt Facilities Revenue,
3.900% due 6/1/21 300,000
- -------------------------------------------------------------------------------------
TRANSPORTATION -- 9.3%
1,250,000 NR Florida State Mid-Bay Bridge Revenue, Series A,
6.100% due 10/1/22 1,212,500
750,000 AAA Florida State Turnpike Authority, Turnpike
Revenue Department, Series A, FGIC-Insured,
5.625% due 7/1/25 743,438
750,000 AA Florida Department of Transportation, (Right of
Way), 6.500% due 7/1/21 795,000
750,000 BBB Guam Airport Authority Revenue, Series A,
6.500% due 10/1/23 735,000
1,500,000 A- Orlando and Orange Counties Expressway
Authority, Jr. Lien, 5.950% due 7/1/23 1,498,125
- -------------------------------------------------------------------------------------
4,984,063
- -------------------------------------------------------------------------------------
UTILITIES -- 8.9%
500,000 AAA Boynton Beach Utility System Revenue Bonds,
FGIC-Insured, 6.250% due 11/1/20 520,625
500,000 AAA Crystal River Water and Sewer Revenue Bonds,
AMBAC-Insured, 6.250% due 10/1/22 516,875
500,000 AAA Davie Water and Sewer Revenue Bonds,
AMBAC-Insured, 6.250% due 10/1/17 521,875
500,000 AAA Escambia County Utility Authority Revenue,
Series A,
FGIC-Insured, 6.300% due 1/1/23 521,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
<S> <C> <C> <C>
UTILITIES -- 8.9% (CONTINUED)
Hillsborough County Utilities Revenue, Refunding
and Improvement, MBIA-Insured:
$ 930,000 BBB+ 7.000% due 8/1/14 $ 998,588
190,000 BBB+ 7.000% due 8/1/14,
(Pre-Refunded -- Escrowed
with U.S. Government securities to 8/1/01
Call @ 102)(b) 216,837
500,000 AAA North Port Utility Revenue, FGIC-Insured,
6.250% due 10/1/22 521,250
200,000 BBB Pace Property Finance Authority, Utility Systems
Refunding & Improvement, 6.250% due 9/1/13 200,500
750,000 AAA Plant City Utility System Revenue, MBIA-Insured,
6.000% due 10/1/20 765,000
- -------------------------------------------------------------------------------------
4,783,425
- -------------------------------------------------------------------------------------
WATER AND SEWER -- 4.2%
500,000 AAA Englewood, Water Distribution Utility System,
FSA-Insured, 6.000% due 10/1/23 507,500
500,000 AAA Florida Enterprise Community Development
District, MBIA-Insured, 6.125% due 5/1/24 513,125
1,000,000 AAA Miramar Wastewater Improvement Authority,
FGIC-Insured, 6.750% due 10/1/16 1,112,500
100,000 AAA Tampa Water and Sewer Revenue Bonds,
FGIC-Insured, 6.250% due 10/1/12 104,875
- -------------------------------------------------------------------------------------
2,238,000
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $51,759,873)(c) $53,437,056
=====================================================================================
</TABLE>
(a) Variable rate obligation payable at par on demand at any time on no more
than seven days' notice.
(b) Pre-Refunded bonds escrowed by U.S. Government securities and bonds
escrowed to maturity by U.S. Government securities are considered by
adviser to be AAA rated even if issuer has not applied for new ratings.
(c) Aggregate cost for federal income tax purposes is substantially the same.
See pages 13 and 14 for definitions of ratings and certain security
descriptions.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
BOND RATINGS
All ratings are by Standard & Poor's Corporation ('Standard & Poor's'), except
those identified by an asterisk (*) are rated by Moody's Investors Services
('Moody's'). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Rating from 'AA' to 'BBB' may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
<TABLE>
<S> <C>
AAA -- Bonds rated 'AAA' have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated 'AA' have a very strong capacity to pay interest and repay
principal and differs from the highest rated issue only in a small degree.
A -- Bonds rated 'A' have a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB -- Bonds rated 'BBB' are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB -- Bonds rated 'BB' have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties of
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating from
'Aa' to 'Baa,' where 1 is the highest and 3 the lowest ranking within its
generic category.
Aaa -- Bonds that are rated 'Aaa' are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as 'gilt edge.' Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa -- Bonds that are rated 'Aa' are judged to be of high quality by all
standards. Together with the 'Aaa' group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long - term risks appear
somewhat larger than in Aaa securities.
A -- Bonds that are rated 'A' possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa -- Bonds that are rated 'Baa' are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
</TABLE>
13
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
SHORT-TERM SECURITIES RATINGS
<TABLE>
<S> <C>
SP-1 -- Stardard & Poor's highest rating indicating very strong or strong capacity
to pay principal and interest; those issues determined to possess
overwhelming safety characteristics are denoted with a plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety regarding
timely payment is either overwhelming or very strong; those issues
determined to possess overwhelming safety characteristics are denoted with
a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- (VRDO)
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
</TABLE>
- --------------------------------------------------------------------------------
SECURITY DESCRIPTIONS
<TABLE>
<S> <C> <C> <C>
ABAG -- Association of Bay Area HFA -- Housing Finance Authority
Governors
AIG -- American International IDA -- Industrial Development
Guaranty
AMBAC -- American Municipal Bond Authority
Assurance Corporation IDB -- Industrial Development Board
BAN -- Bond Anticipation Notes IDR -- Industrial Development
BIG -- Bond Investors Guaranty Revenue
CGIC -- Capital Guaranty Insurance INFLOS -- Inverse Floaters
Company ISD -- Independent School District
CHFCLI -- California Health Facility LOC -- Letter of Credit
Construction Loan Insurance MBIA -- Municipal Bond Investors
CONNIE LEE -- College Construction Loan Assurance Corporation
Insurance Association MVRICS -- Municipal Variable Rate
lnverse
COP -- Certificate of Participation Coupon Security
EDA -- Economic Development PCR -- Pollution Control Revenue
Authority
ETM -- Escrowed To Maturity PSF -- Permanent School Fund
FLAIRS -- Floating Adjustable Interest RAN -- Revenue Anticipation Notes
Rate Securities RIBS -- Residual Interest Bonds
FGIC -- Financial Guaranty Insurance RITES -- Residual Interest Tax-Exempt
Company Securities
FHA -- Federal Housing TAN -- Tax Anticipation Notes
Administration
FHLMC -- Federal Home Loan Mortgage TECP -- Tax-Exempt Commercial Paper
Corporation TOB -- Tender Option Bonds
FNMA -- Federal National Mortgage TRAN -- Tax and Revenue Anticipation
Association Notes
FRTC -- Floating Rate Trust SYCC -- Structured Yield Curve
Certificates
FSA -- Federal Savings Association Certificate
GIC -- Guaranteed Investment VA -- Veterans Administration
Contract
GNMA -- Government National Mortgage VRDD -- Variable Rate Daily Demand
Association VRWE -- Variable Rate Wednesday
GO -- General Obligation Demand
HDC -- Housing Development
Corporation
</TABLE>
14
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $51,759,873) $ 53,437,056
Cash 11,059
Interest receivable 814,038
Deferred organization costs, net of amortization 58,473
Receivable for securities sold 40,000
- --------------------------------------------------------------------------------------
TOTAL ASSETS 54,360,626
- --------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 753,940
Distribution fees payable 33,825
Payable for Fund shares purchased 27,704
Investment advisory fees payable 10,973
Administration fees payable 6,257
Accrued expenses and other liabilities 110,914
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES 943,613
- --------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 53,417,013
======================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 5,267
Capital paid in excess of par value 52,157,981
Undistributed net investment income 83,596
Accumulated net realized loss on security transactions (507,014)
Net unrealized appreciation of investments 1,677,183
- --------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 53,417,013
======================================================================================
SHARES OUTSTANDING:
Class A 1,664,385
Class B 3,595,674
Class C 6,969
NET ASSET VALUE:
Class A (and redemption price) $10.14
Class B * $10.14
Class C ** $10.14
CLASS A MAXIMIUM PUBLIC OFFERING PRICE PER SHARE
(net asset value plus 4.17% of net asset value per share) $10.56
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed less than one year from initial purchase (See Note 3).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest $ 3,371,968
------------
EXPENSES:
Distribution fees (Note 3) 260,641
Investment advisory fees (Note 3) 186,495
Administration fees (Note 3) 106,568
Audit and legal 54,046
Trustees' fees 35,519
Shareholder communications 33,607
Registration fees 32,428
Amortization of deferred organization costs 29,237
Custody 20,608
Shareholder and system servicing fees 16,577
Pricing service fees 14,740
Other 10,928
- --------------------------------------------------------------------------------------
TOTAL EXPENSES 801,394
Less: Investment advisory fee waiver 90,583
- --------------------------------------------------------------------------------------
NET EXPENSES 710,811
- --------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,661,157
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 13,333,988
Cost of securities sold 13,279,529
- --------------------------------------------------------------------------------------
NET REALIZED GAIN 54,459
- --------------------------------------------------------------------------------------
Change in Unrealized Appreciation (Depreciation) of Investments:
Beginning of year (3,213,610)
End of year 1,677,183
- --------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION 4,890,793
- --------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 4,945,252
- --------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 7,606,409
======================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED OCTOBER 31,
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,661,157 $ 2,451,517
Net realized gain (loss) 54,459 (561,473)
Increase (decrease) in net unrealized appreciation 4,890,793 (5,972,896)
- ----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 7,606,409 (4,082,852)
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 2):
Net investment income (2,555,324) (2,451,517)
Overdistribution of net investment income -- (49,141)
Net realized gains -- (125,146)
DECREASE IN NET ASSETS FROM
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (2,555,324) (2,625,804)
- ----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 11,666,779 16,591,845
Net asset value of shares issued for reinvestment
of dividends 1,377,658 1,495,305
Cost of shares reacquired (13,791,176) (10,544,055)
- ----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (746,739) 7,543,095
- ----------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 4,304,346 834,439
NET ASSETS:
Beginning of year 49,112,667 48,278,228
- ----------------------------------------------------------------------------------------
END OF YEAR* $ 53,417,013 $ 49,112,667
========================================================================================
* Includes undistributed (overdistributed)
net investment income of: $83,596 $(22,237)
========================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Florida Municipals Fund ('Fund'), a Massachusetts business
trust, is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on the trade date; (b) securities
are valued at the mean between the quoted bid and asked prices by an independent
pricing service; (c) short-term securities and securities maturing within 60
days are valued at cost plus accreted discount or minus amortized premium, as
applicable; (d) gains or losses on the sale of securities are calculated by
using the specific identification method; (e) interest income, adjusted for
amortization of premiums and accretion of original issue discount, is recorded
on the accrual basis; (f) market discount is recognized upon the disposition of
the security; (g) direct expenses are charged to the Fund and each class;
management fees and general fund expenses are allocated on the basis of relative
net assets; (h) the Fund intends to comply with the applicable provisions of the
Internal Revenue Code of 1986, as amended, pertaining to regulated investment
companies and to make distributions of taxable income sufficient to relieve it
from substantially all Federal income and excise taxes; and (i) certain prior
year numbers have been restated to reflect current year's presentation. Net
investment income, net realized gains, and net assets were not affected by this
change.
In addition, organization and initial offering expenses have been deferred
and are being amortized on a straight-line method over a five-year period,
beginning with the commencement of the Fund's operations in November, 1992.
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, 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.
18
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION AGREEMENT
AND AFFILIATED TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ('SBMFM'), a subsidiary of Smith
Barney Holdings Inc. ('SBH'), acts as investment adviser to the Fund. The Fund
pays SBMFM an advisory fee calculated at an annual rate of 0.35% of average
daily net assets up to $500 million; and 0.32% of average daily net assets in
excess of $500 million. This fee is calculated daily and paid monthly.
SBMFM also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets up to $500
million and 0.18% of the average daily net assets in excess of $500 million.
This fee is calculated daily and paid monthly.
In addition, The Boston Company Advisors, Inc. ('Boston Advisors'), an
indirect wholly owned subsidiary of Mellon Bank, acted as sub-administrator to
the Fund. SBMFM paid Boston Advisors a portion of its administration fee at a
rate agreed upon from time to time between SBMFM and Boston Advisors. As of June
19, 1995 this relationship was terminated.
Smith Barney Inc. ('SB'), another subsidiary of SBH, acts as distributor of
the Fund's shares. For the year ended October 31, 1995, SB received sales
charges of approximately $32,300 on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ('CDSC') of 4.50% on Class B
shares if redemption occurs less than one year from initial purchase. This CDSC
declines by 0.50% the first year after purchase and thereafter by 1.00% per year
until no CDSC is incurred. Class C shares have a 1.00% CDSC if redemption occurs
within the first year from the date such investment was made. For the year ended
October 31, 1995, CDSCs of approximately $161,800 were paid to SB.
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
its Class A, B and C shares calculated at the annual rate of 0.15% of the
average daily net assets for each class. In addition, the Fund pays a
distribution fee with respect to its Class B and C shares calculated at the
annual rate of 0.50% and 0.55%, respectively, of the average daily net assets
for each class. For the year ended October 31, 1995, total Distribution Plan
fees for Class A, B and C shares were $23,935, $236,273 and $433, respectively.
All officers and one Trustee of the Fund are employees of SB.
19
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS
During the year ended October 31, 1995, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<S> <C>
Purchases $13,088,097
Sales 13,333,988
</TABLE>
At October 31, 1995, the net unrealized appreciation of investments for
Federal income tax purposes consisted of the following:
<TABLE>
<S> <C>
Gross unrealized appreciation $1,926,732
Gross unrealized depreciation (249,549)
- ------------------------------------------------------------------------------------
Net unrealized appreciation $1,677,183
====================================================================================
</TABLE>
5. CAPITAL LOSS CARRYFORWARD
At October 31, 1995, the Fund had for Federal tax purposes approximately
$507,014 of unused capital loss carryforwards available to offset future capital
gains expiring October 31, 2002. To the extent that these carryforward losses
are used to offset capital gains, it is probable that the gains so offset will
not be distributed.
6. SHARES OF BENEFICIAL INTEREST
As of October 31, 1995, the Fund had an unlimited number of shares of
beneficial interest with par value of $0.001 per share authorized. The Fund has
the ability to issue multiple classes of shares. Each share of a class
represents an identical interest and has the same rights, except that each class
bears certain direct expenses, including those specifically related to the
distribution of its shares. At October 31, 1995, total paid-in capital amounted
to the following for each class:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Total Paid-in Capital $16,375,620 $35,725,315 $62,313
</TABLE>
20
<PAGE>
Smith Barney Florida Municipals Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995* OCTOBER 31, 1994
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold 542,254 $ 5,041,449 613,550 $ 6,194,067
Shares issued on reinvestment 49,888 491,361 48,516 481,110
Shares redeemed (451,805) (4,277,432) (415,343) (4,165,874)
- ---------------------------------------------------------------------------------------------
Net Increase 140,337 $ 1,255,378 246,723 $ 2,509,303
=============================================================================================
CLASS B
Shares sold 707,376 $ 6,563,223 1,031,963 $10,397,778
Shares issued on reinvestment 89,485 886,091 102,199 1,014,195
Shares redeemed (991,848) (9,513,744) (651,380) (6,378,181)
- ---------------------------------------------------------------------------------------------
Net Increase (Decrease) (194,987) $(2,064,430) 482,782 $ 5,033,792
=============================================================================================
CLASS C
Shares sold 6,948 $ 62,107 -- --
Shares issued on reinvestment 21 206 -- --
Shares redeemed -- -- -- --
- ---------------------------------------------------------------------------------------------
Net Increase 6,969 $ 62,313 -- --
=============================================================================================
</TABLE>
* For Class C shares, transactions are the period from November 15, 1994
(inception date) to October 31, 1995.
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of
Florida and its political subdivisions, agencies and public authorities to
obtain funds for various public purposes. The Fund is more susceptible to
factors adversely affecting issuers of the Florida municipal securities than is
a municipal bond fund that is not concentrated in these issuers to the same
extent.
8. SUBSEQUENT EVENT
On December 8, 1995 the net assets of the Fund were merged into the Smith
Barney Muni Funds: Florida Portfolio pursuant to an Agreement and Plan of
Reorganization dated October 23, 1995.
21
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as `D'
