UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4395
Smith Barney Muni Funds
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004 |
(Address of principal executive offices) (Zip code) |
Robert I. Frenkel, Esq.
C/o Citigroup Asset Management
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 451-2010
Date of fiscal year end: March 31
Date of reporting period: September 30, 2005
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
EXPERIENCE
SEMI-ANNUAL
REPORT
SEPTEMBER 30, 2005
Smith Barney Muni Funds
Limited Term Portfolio
INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
Smith Barney Muni Funds
Limited Term Portfolio
Semi-Annual Report • September 30, 2005
Inside
Fund Objective
The Fund seeks to pay its shareholders as high a level of income exempt from regular federal income tax as is consistent with prudent investing.
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R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
Dear Shareholder,
There was no shortage of potential threats to the U.S. economy during the reporting period. These included record high oil prices, rising short-term interest rates, the devastation inflicted by Hurricanes Katrina and Rita, geopolitical issues and falling consumer confidence. However, the economy proved to be surprisingly resilient. First quarter 2005 gross domestic product (“GDP”)i growth was 3.8% and second quarter GDP growth was 3.3%, another solid advance. This marked nine consecutive quarters in which GDP grew 3.0% or more.
The Federal Reserve Board (“Fed”)ii continued to raise interest rates in an attempt to ward off inflation. After raising rates seven times from June 2004 through March 2005, the Fed increased its target for the federal funds rateiii in 0.25% increments four additional times over the period. All told, the Fed’s eleven rate hikes have brought the target for the federal funds rate from 1.00% to 3.75%. This also represents the longest sustained Fed tightening cycle since 1977-1979. Following the end of the Fund’s reporting period, at its November meeting, the Fed once again raised the target rate by 0.25% to 4.00%.
During much of the reporting period, the fixed income market confounded investors as short-term interest rates rose in concert with the Fed rate tightening, while longer-term rates, surprisingly, declined. When the period began, the federal funds target rate was 2.75% and the yield on the 10-year Treasury was 4.13%. When the reporting period ended, the federal funds rate rose to 3.75%. Due to a spike in September, the 10-year yield was 4.29% at that time, slightly higher than when the period began, but still lower than its yield of 4.62% when the Fed began its tightening cycle on June 30, 2004. This trend also occurred in the municipal bond market.
Smith Barney Muni Funds 2005 Semi-Annual Report 1
Performance Review
For the six months ended September 30, 2005, Class A shares of the Smith Barney Muni Funds — Limited Term Portfolio, excluding sales charges, returned 1.16%. These shares underperformed the Lipper Intermediate Municipal Debt Funds Category Average,1 which increased 1.99% over the same time frame. The Fund’s unmanaged benchmark, the Lehman Brothers Municipal Bond Index,iv returned 2.80% for the same period.
Certain investors may be subject to the Federal Alternative Minimum Tax, and state and local taxes may apply. Capital gains, if any, are fully taxable. Please consult your personal tax or legal adviser.
Performance Snapshot as of September 30, 2005 (excluding sales charges) (unaudited) | ||||||
6 Months | ||||||
Limited Term Portfolio — Class A Shares | 1.16% | |||||
Lehman Brothers Municipal Bond Index | 2.80% | |||||
Lipper Intermediate Municipal Debt Funds Category Average | 1.99% | |||||
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.citigroupam.com. | ||||||
All share class returns assume the reinvestment of all distributions, including returns of capital, if any, at net asset value and the deduction of all Fund expenses. Returns have not been adjusted to include sales charges that may apply when shares are purchased or the deduction of taxes that a shareholder would pay on Fund distributions. Excluding sales charges, Class B shares returned 0.90%, Class C shares returned 0.84% and Class O shares returned 1.19% over the six months ended September 30, 2005. |
Special Shareholder Notice
On June 24, 2005, Citigroup Inc. (“Citigroup”) announced that it has signed a definitive agreement under which Citigroup will sell substantially all of its worldwide asset management business to Legg Mason, Inc. (“Legg Mason”).
As part of this transaction, Smith Barney Fund Management LLC (the “Manager”), currently an indirect wholly owned subsidiary of Citigroup, would become an indirect
1 | Lipper, Inc. is a major independent mutual-fund tracking organization. Returns are based on the 6-month period ended September 30, 2005, including the reinvestment of distributions, including returns of capital, if any, calculated among the 148 funds in the Fund’s Lipper category, and excluding sales charges. |
2 Smith Barney Muni Funds 2005 Semi-Annual Report
wholly owned subsidiary of Legg Mason. The Manager is the investment manager to the Fund.
The transaction is subject to certain regulatory approvals, as well as other customary conditions to closing. Subject to such approvals and the satisfaction of the other conditions, Citigroup expects the transaction to be completed later this year.
Under the Investment Company Act of 1940, consummation of the transaction will result in the automatic termination of the investment management contract between the Fund and the Manager. Therefore the Trust’s Board of Trustees has approved a new investment management contract between the Fund and the Manager to become effective upon the closing of the sale to Legg Mason. The new investment management contract has been presented to shareholders for their approval.
Information About Your Fund
As you may be aware, several issues in the mutual fund industry have recently come under the scrutiny of federal and state regulators. The Fund’s Manager and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the Fund’s response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The Fund has been informed that the Manager and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.
Important information concerning the Fund and its Manager with regard to recent regulatory developments is contained in the Notes to Financial Statements included in this report.
Smith Barney Muni Funds 2005 Semi-Annual Report 3
As always, thank you for your confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.
Sincerely,
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
November 1, 2005
The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.
RISKS: The Fund’s investments are subject to interest rate and credit risks. As interest rates rise, bond prices fall, reducing the value of the Fund’s share price. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Please see the Fund’s prospectus for more information on these and other risks.
All index performance reflects no deduction for fees, expenses or taxes. Please note an investor cannot invest directly in an index.
i | Gross domestic product is a market value of goods and services produced by labor and property in a given country. |
ii | The Federal Reserve Board is responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. |
iii | The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. |
iv | The Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond market with maturities of at least one year. |
4 Smith Barney Muni Funds 2005 Semi-Annual Report
Smith Barney Muni Funds 2005 Semi-Annual Report 5
Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested on April 1, 2005 and held for the six months ended September 30, 2005.
Actual Expenses
The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.
Based on Actual Total Return(1) | |||||||||||||||
Actual Total Return Without Sales Charges(2) | Beginning Account Value | Ending Account | Annualized Expense Ratio | Expenses Paid During the Period(3) | |||||||||||
Class A | 1.16 | % | $ | 1,000.00 | $ | 1,011.60 | 0.70 | % | $ | 3.53 | |||||
Class B | 0.90 | 1,000.00 | 1,009.00 | 1.23 | 6.19 | ||||||||||
Class C | 0.84 | 1,000.00 | 1,008.40 | 1.33 | 6.70 | ||||||||||
Class O | 1.19 | 1,000.00 | 1,011.90 | 0.93 | 4.69 | ||||||||||
(1) | For the six months ended September 30, 2005. |
(2) | Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the 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 O shares. Total return is not annualized, as it may not be representative of the total return for the year. Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would have been lower. |
(3) | Expenses are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
6 Smith Barney Muni Funds 2005 Semi-Annual Report
Fund Expenses (unaudited) (continued)
Hypothetical Example for Comparison Purposes
The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Based on Hypothetical Total Return(1) | |||||||||||||||
Hypothetical Annualized Total Return | Beginning Account Value | Ending Account Value | Annualized Expense Ratio | Expenses Paid During the Period(2) | |||||||||||
Class A | 5.00 | % | $ | 1,000.00 | $ | 1,021.59 | 0.70 | % | $ | 3.55 | |||||
Class B | 5.00 | 1,000.00 | 1,018.93 | 1.23 | 6.23 | ||||||||||
Class C | 5.00 | 1,000.00 | 1,018.43 | 1.33 | 6.73 | ||||||||||
Class O | 5.00 | 1,000.00 | 1,020.44 | 0.93 | 4.71 | ||||||||||
(1) | For the six months ended September 30, 2005. |
(2) | Expenses are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
Smith Barney Muni Funds 2005 Semi-Annual Report 7
Schedule of Investments (September 30, 2005) (unaudited)
LIMITED TERM PORTFOLIO
Face Amount | Rating‡ | Security | Value | ||||||
MUNICIPAL BONDS — 96.4% | |||||||||
Alabama — 2.7% | |||||||||
$ | 5,000,000 | AAA | Alabama State Public School & College Authority, FSA-Insured, | $ | 5,278,000 | ||||
3,040,000 | AAA | Birmingham, AL, Airport Authority, Airport Revenue, MBIA-Insured, | 3,146,704 | ||||||
7,000,000 | AAA | Jefferson County, AL, Sewer Revenue, Refunding, Series B 8, | 7,463,890 | ||||||
1,000,000 | A- | Marshall County, AL, Health Care Authority Revenue, Series A, | 1,076,880 | ||||||
2,540,000 | AAA | Mobile, AL, GO, 10.875% due 11/1/07 (b) | 2,746,934 | ||||||
1,000,000 | AAA | Saraland, AL, GO, MBIA-Insured, 5.250% due 1/1/14 | 1,079,910 | ||||||
Total Alabama | 20,792,318 | ||||||||
Alaska — 0.1% | |||||||||
1,000,000 | NR | Alaska Industrial Development & Export Authority Revenue, Williams Lynxs Alaska Cargo Port LLC, 8.000% due 5/1/23 (c) | 1,004,810 | ||||||
American Samoa — 0.1% | |||||||||
1,000,000 | A | Territory of American Samoa, ACA-Insured, | 1,056,550 | ||||||
Arizona — 0.7% | |||||||||
1,430,000 | A- | Arizona Health Facilities Authority Revenue, Catholic Health Care West, Series A, 6.125% due 7/1/09 | 1,497,053 | ||||||
1,000,000 | AAA | Arizona State University, Revenue Bonds, FGIC-Insured, | 1,117,810 | ||||||
Maricopa County, AZ, Hospital Revenues, St. Lukes Medical Center: | |||||||||
1,320,000 | AAA | 8.750% due 2/1/10 (b) | 1,480,789 | ||||||
260,000 | AAA | 10.250% due 2/1/11 (b) | 309,891 | ||||||
115,000 | AAA | Intercommunity Healthcare, Sun City Project, 8.625% due 1/1/10 (b) | 128,253 | ||||||
470,000 | NR | Maricopa County, AZ, IDA, MFH Revenue, Stanford Court Apartments, Series B, 5.750% due 7/1/08 (e)(f) | 47,000 | ||||||
671,000 | AAA | Pima County, AZ, Hospital Revenue, Tucson Medical Center, | 718,091 | ||||||
Total Arizona | 5,298,887 | ||||||||
Arkansas — 0.9% | |||||||||
495,000 | AAA | Arkansas Housing Development Agency, Single-Family Mortgage, | 558,548 | ||||||
Arkansas State Development Finance Authority Hospital Revenue, Washington Regional Medical Center, Call 2/1/10 @ 100: | |||||||||
1,500,000 | BBB | 7.000% due 2/1/15 (d) | 1,719,165 | ||||||
2,500,000 | BBB | 7.250% due 2/1/20 (d) | 2,890,225 | ||||||
565,000 | AAA | Pulaski County, AR, Hospital Revenue, Arkansas Children’s Hospital, 9.250% due 3/1/10 (b) | 643,117 |
See Notes to Financial Statements.
8 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Arkansas — 0.9% (continued) | |||||||||
$ | 1,000,000 | BB+ | Warren County, AR, Solid Waste Disposal Revenue, Potlatch Corp. Project, 7.000% due 4/1/12 (c) | $ | 1,104,420 | ||||
Total Arkansas | 6,915,475 | ||||||||
California — 4.7% | |||||||||
3,000,000 | NR | Barona, CA, Band of Mission Indians, GO, 8.250% due 1/1/20 | 3,145,050 | ||||||
2,250,000 | AA | Beverly Hills, CA, USD, Election 2002, Series B, 5.000% due 8/1/24 | 2,382,368 | ||||||
4,000,000 | A3(g) | California Health Facilities Financing Authority Revenue, Cedars Sinai Medical Center, 5.000% due 11/15/20 (a) | 4,187,360 | ||||||
California State: | |||||||||
5,000,000 | AAA | Department Water Resources Power Supply Revenue, Series A, | 5,486,950 | ||||||
5,000,000 | AA- | Economic Recovery, GO, Series A, 5.000% due 7/1/16 (a) | 5,306,500 | ||||||
4,245,000 | A- | Public Works Board Lease Revenue, Department of Corrections, Series A, 5.250% due 9/1/16 (a) | 4,497,662 | ||||||
Los Angeles, CA: | |||||||||
360,000 | NR | COP, Hollywood Presbyterian Medical Center, | 450,569 | ||||||
8,000,000 | AAA | USD, RITES, MBIA-Insured, 5.375% due 7/1/17 (a)(h) | 8,871,440 | ||||||
175,000 | Aaa(g) | Pleasant Valley Hospital Building Corp., Camarillo California Hospital Revenue, 9.700% due 12/15/07 (b) | 188,251 | ||||||
215,000 | AAA | San Leandro, CA, Hospital Revenue, Vesper Memorial Hospital, 11.500% due 5/1/11 (b) | 269,535 | ||||||
865,000 | AAA | Santa Rosa, CA, Hospital Revenue, Santa Rosa Hospital Memorial Project, 10.300% due 3/1/11 (b) | 1,038,908 | ||||||
Total California | 35,824,593 | ||||||||
Colorado — 1.6% | |||||||||
1,025,000 | BBB- | Colorado Educational & Cultural Facilities Authority Revenue, Charter School, Bromley East Project, Series A, Call 9/15/11 @ 100, | 1,217,218 | ||||||
860,000 | NR | Colorado Health Facilities Authority, Hospital Revenue, Weld County General Hospital Project, 9.375% due 7/1/09 (b) | 974,836 | ||||||
300,000 | AA | Colorado HFA, Single-Family Mortgage Program, Senior Bonds, | 313,539 | ||||||
Denver, CO, City & County: | |||||||||
3,000,000 | AAA | Excise Tax Revenue, Refunding, Series A, FSA-Insured, | 3,222,810 | ||||||
1,480,000 | AAA | Wastewater Revenue, FGIC-Insured, 5.250% due 11/1/14 | 1,628,326 | ||||||
2,200,000 | AAA | Longmont, CO, Sales & Use Tax Revenue, 5.750% due 11/15/19 | 2,423,256 | ||||||
35,000 | AAA | Loveland, CO, GO, 8.875% due 11/1/05 (b) | 35,154 | ||||||
2,500,000 | AAA | Northwest Parkway Public Highway Authority, Series A, | 2,741,125 | ||||||
Total Colorado | 12,556,264 | ||||||||
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 9
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Connecticut — 3.0% | |||||||||
$ | 5,000,000 | AA | Connecticut State, Series D, Call 11/15/12 @ 100, | $ | 5,572,150 | ||||
Connecticut State GO: | |||||||||
2,500,000 | AAA | AMBAC-Insured, Series B, 5.250% due 6/1/18 | 2,802,550 | ||||||
5,000,000 | AA | Series C, 5.000% due 12/15/11 (a) | 5,417,050 | ||||||
2,000,000 | A | Connecticut State Special Obligation Parking Revenue, Bradley International Airport, Series A, ACA-Insured, 6.375% due 7/1/12 (c) | 2,177,140 | ||||||
Connecticut State Special Tax Obligation Revenue: | |||||||||
2,000,000 | AAA | RITES, Series A, FSA-Insured, 7.800% due 10/1/09 (h)(i) | 2,365,920 | ||||||
2,000,000 | AAA | RITES, Series B, FSA-Insured, 7.800% due 10/1/09 (h)(i) | 2,350,240 | ||||||
2,000,000 | AAA | Transportation Infrastructure, Series A, FSA-Insured, | 2,220,740 | ||||||
Total Connecticut | 22,905,790 | ||||||||
Delaware — 0.3% | |||||||||
Delaware State: | |||||||||
404,000 | AAA | GO, Series A, Call 7/1/10 @ 100, 5.000% due 7/1/13 (d) | 434,247 | ||||||
1,596,000 | AAA | GO, Series A, 5.000% due 7/1/13 | 1,696,756 | ||||||
Total Delaware | 2,131,003 | ||||||||
Florida — 8.6% | |||||||||
655,000 | NR | Bonita Springs, FL, Vasari Community Development District Revenue, Capital Improvement, Series B, 6.200% due 5/1/09 | 664,511 | ||||||
3,000,000 | NR | Capital Projects Finance Authority, Florida Student Housing Revenue, Cafra Capital Corp., Series A, 7.750% due 8/15/20 | 2,971,680 | ||||||
225,000 | NR | Capital Region Community Development, Florida Development District Revenue, Capital Improvement, 5.950% due 5/1/06 | 226,118 | ||||||
350,000 | NR | Fishhawk Community Development District II Special Assessment Revenue, Series B, 5.000% due 11/1/07 | 351,298 | ||||||
Florida Municipal Loan Council Revenue, Series A, MBIA-Insured: | |||||||||
1,790,000 | AAA | 5.250% due 11/1/13 | 1,951,888 | ||||||
3,175,000 | AAA | 5.250% due 11/1/16 | 3,483,927 | ||||||
1,500,000 | AAA | Florida State Board of Education GO, Series A, 5.500% due 6/1/16 | 1,635,810 | ||||||
5,520,000 | AAA | Florida State Turnpike Authority Revenue, Department of Transportation, Series A, AMBAC-Insured, 5.000% due 7/1/24 (a) | 5,888,350 | ||||||
1,220,000 | NR | Gateway Services Community Development District, Florida Special Assessment Revenue, Sun City Center, Fort Meyers Project, Series B, 5.500% due 5/1/10 | 1,242,167 | ||||||
1,125,000 | NR | Greyhawk Landing Community Development District, Florida Special Assessment Revenue, Series B, 6.250% due 5/1/09 | 1,148,681 | ||||||
Hillsborough County, FL: | |||||||||
2,185,000 | AA | EFA Revenue, Refunding, University of Tampa Project, Radian-Insured, 5.750% due 4/1/18 | 2,341,817 | ||||||
3,500,000 | AAA | School District Sales Tax Revenue, AMBAC-Insured, | 3,875,690 |
See Notes to Financial Statements.
10 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Florida — 8.6% (continued) | |||||||||
Jacksonville Beach, FL, Utility Revenue: | |||||||||
$ | 2,305,000 | AAA | 7.900% due 10/1/14 (b) | $ | 2,749,243 | ||||
2,145,000 | Aaa(g) | 5.000% due 4/1/18 | 2,264,948 | ||||||
1,500,000 | NR | Killarney Community Development District Special Assessment Revenue, Series B, 5.125% due 5/1/09 | 1,508,250 | ||||||
5,160,000 | AAA | Lee Memorial Health System Board of Directors, Florida Hospital Revenue, FSA-Insured, 5.750% due 4/1/13 (a) | 5,758,921 | ||||||
395,000 | NR | Mediterra North Community Development District, Florida Capital Improvement Revenue, Series B, 6.000% due 5/1/08 | 400,471 | ||||||
1,000,000 | BB+ | Miami Beach, FL, Health Facilities Authority, Hospital Revenue, Mount Sinai Medical Center, Series A, 6.700% due 11/15/19 | 1,096,450 | ||||||
6,855,000 | AAA | Miami, FL, Homeland and Defense/Neighborhood GO, | 7,445,695 | ||||||
Orange County, FL, Health Facilities Authority Revenue: | |||||||||
1,835,000 | NR | First Mortgage, 8.875% due 7/1/21 | 1,999,728 | ||||||
2,000,000 | A+ | Hospital Adventist Health Systems, 6.250% due 11/15/24 | 2,245,780 | ||||||
1,470,000 | AA | Orlando, FL, Utilities Commission Water & Electric Revenue, Series A, 5.250% due 10/1/13 | 1,594,671 | ||||||
60,000 | NR | Panther Trace Community Development District, Florida Special Assessment Revenue, Series B, 6.500% due 5/1/09 | 61,102 | ||||||
275,000 | NR | Parklands West Community Development District, Florida Special Assessment Revenue, Series B, 6.000% due 5/1/06 | 275,995 | ||||||
3,000,000 | AAA | Pasco County, FL, Optional Gas Tax Revenue, Refunding, FGIC-Insured, 5.250% due 8/1/11 | 3,285,810 | ||||||
785,000 | NR | Port Saint Lucie, FL, Special Assessment Revenue, Series A, | 816,785 | ||||||
1,185,000 | NR | Renaissance Community Development District, Florida Capital Improvement Revenue, Series B, 6.250% due 5/1/08 | 1,205,418 | ||||||
1,260,000 | NR | Reunion East Community Development District, Florida Special Assessment Revenue, Series B, 5.900% due 11/1/07 | 1,277,552 | ||||||
3,965,000 | NR | Sterling Hill, FL, Community Development District, Series B, | 4,024,316 | ||||||
820,000 | NR | Sumter Landing Community Development District Special Assessment Revenue, 6.250% due 5/1/13 | 862,968 | ||||||
170,000 | AAA | Tamarac, FL, Water & Sewer Utilities Revenue, AMBAC-Insured, | 194,368 | ||||||
1,320,000 | NR | Village Community Development District North 5, Florida Special Assessment Revenue, Series B, 5.000% due 5/1/08 | 1,328,554 | ||||||
150,000 | NR | Waterlefe Community Development District, Florida Capital Improvement Revenue, Series B, 6.250% due 5/1/10 | 152,249 | ||||||
Total Florida | 66,331,211 | ||||||||
Georgia — 2.2% | |||||||||
1,980,000 | AAA | East Point, GA, Building Authority Revenue, FSA-Insured, zero coupon bond to yield 6.249% due 2/1/20 | 908,563 | ||||||
1,630,000 | AAA | Fulton County, GA, Water and Sewer Revenue, 5.000% due 1/1/16 | 1,717,694 |
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 11
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Georgia — 2.2% (continued) | |||||||||
$ | 7,000,000 | AAA | Georgia State, GO, Series D, Call 10/1/10 @ 100, | $ | 7,789,740 | ||||
Municipal Electronic Authority Revenue, Combustion Turbine Project, Series A: | |||||||||
2,415,000 | AAA | MBIA-Insured, 5.250% due 11/1/19 | 2,512,952 | ||||||
85,000 | AAA | Unrefunded Balance, MBIA-Insured, Call 11/1/07 @ 100, | 88,952 | ||||||
2,500,000 | Aaa(g) | Rockdale County, GA, Water & Sewer Authority Revenue, | 2,691,500 | ||||||
1,320,000 | NR | Savannah, GA, EDA, College of Art and Design Inc. Project, | 1,400,560 | ||||||
Total Georgia | 17,109,961 | ||||||||
Hawaii — 0.6% | |||||||||
- | Hawaii State, Series CW, FGIC-Insured: | ||||||||
2,895,000 | AAA | 5.375% due 8/1/15 | 3,160,993 | ||||||
1,105,000 | AAA | Call 8/1/11 @ 100, 5.375% due 8/1/15 (d) | 1,220,572 | ||||||
Total Hawaii | 4,381,565 | ||||||||
Idaho — 0.2% | |||||||||
10,000 | Aaa(g) | Idaho Falls, ID, Electric Revenue, 10.250% due 4/1/06 (b) | 10,356 | ||||||
1,500,000 | BB+ | Nez Perce County, ID, PCR, Refunding, Potlatch Corp. Project, | 1,552,560 | ||||||
Total Idaho | 1,562,916 | ||||||||
Illinois — 6.3% | |||||||||
140,000 | AA | Chicago Heights, IL, Single-Family Mortgage Revenue, | 155,616 | ||||||
Chicago, IL: | |||||||||
120,000 | AAA | GO, 5.375% due 1/1/16 | 131,360 | ||||||
5,000,000 | AAA | GO, Refunding, Series A, 5.000% due 1/1/20 (a) | 5,327,050 | ||||||
2,000,000 | AA+ | Metropolitan Water Reclamation District Greater Chicago, Capital Improvement, Series A, Call 12/1/12 @ 101, | 2,261,340 | ||||||
O’Hare International Airport: | |||||||||
1,500,000 | AAA | Second Lien Passenger Facility, Series B, AMBAC-Insured, | 1,622,655 | ||||||
2,500,000 | NR | Special Facilities Revenue, United Airlines Project, Series C, | 306,125 | ||||||
3,880,000 | AAA | Project and Refunding, Series A, AMBAC-Insured, | 4,308,235 | ||||||
1,500,000 | AAA | Series A, FGIC-Insured, Call 7/1/10 @ 101, 6.000% due 1/1/14 (d) | 1,690,485 | ||||||
Cicero, IL: | |||||||||
2,415,000 | AAA | GO, MBIA-Insured, 5.625% due 12/1/16 (a) | 2,728,250 | ||||||
1,250,000 | AAA | GO, Tax Increment, Series A, XCLA-Insured, 5.250% due 1/1/20 | 1,350,562 |
See Notes to Financial Statements.
12 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Illinois — 6.3% (continued) | |||||||||
$ | 3,000,000 | Aaa(g) | Cook Kane Lake and Mc Henry Counties, IL, Community College, District North 512, William Rainey Harper College, Series A, | $ | 3,267,360 | ||||
4,790,000 | AAA | Glendale Heights, IL, Hospital Revenue, Refunding Glendale Heights Project, Series B, 7.100% due 12/1/15 (a)(b) | 5,639,363 | ||||||
Illinois DFA Revenue: | |||||||||
515,000 | A | Debt Restructure-East St. Louis, 6.875% due 11/15/05 | 517,369 | ||||||
2,000,000 | Aaa(g) | Revolving Fund-Master Trust, 5.500% due 9/1/17 | 2,204,740 | ||||||
Illinois Health Facilities Authority Revenue: | |||||||||
515,000 | AAA | Methodist Medical Center of Illinois Project, | 579,200 | ||||||
5,000,000 | A | Order of St. Francis Healthcare System, Call 11/15/09 @ 101, 6.250% due 11/15/19 (a)(d) | 5,618,550 | ||||||
1,140,000 | A | Passavant Memorial Area Hospital, 6.250% due 10/1/17 | 1,256,166 | ||||||
20,000 | A | Victory Memorial Hospital Area Hospital Association Project, 7.500% due 10/1/06 (b) | 20,417 | ||||||
5,000,000 | AAA | Illinois State, GO, First Series, 5.375% due 7/1/19 (a) | 5,445,400 | ||||||
2,440,000 | AAA | Kane County, IL, GO, FGIC-Insured, 5.500% due 1/1/15 (a) | 2,711,767 | ||||||
1,020,000 | AAA | Northern, IL, University Revenue, Call 10/1/09 @ 100, | 1,210,434 | ||||||
Total Illinois | 48,352,444 | ||||||||
Indiana — 2.8% | |||||||||
1,720,000 | AAA | Evansville Vanderburgh Public Library Leasing Corp., First Mortgage, MBIA-Insured, Call 1/15/12 @ 100, 5.750% due 7/15/18 (d) | 1,938,388 | ||||||
2,500,000 | AAA | Hamilton County, IN, County Optional Income Tax Revenue, FSA-Insured, 5.250% due 1/10/20 | 2,614,050 | ||||||
655,000 | AAA | Indiana Bond Bank, Special Program, Series A, AMBAC-Insured, 9.750% due 8/1/09 (b) | 740,713 | ||||||
3,920,000 | AAA | Indiana State Toll Road Commission Toll Road Revenue, | 5,183,769 | ||||||
3,000,000 | AAA | Indianapolis Local Public Improvement Bond Bank, Waterworks Project, Series A, 5.500% due 7/1/19 | 3,279,990 | ||||||
1,000,000 | AAA | Lawrence Township, IN, Metropolitan School District, First Mortgage, IBC/MBIA-Insured, 6.750% due 7/5/13 | 1,187,450 | ||||||
Madison County, IN, Hospital Authority Facilities Revenue: | |||||||||
675,000 | AAA | Community Hospital of Anderson Project, 9.250% due 1/1/10 (b) | 762,716 | ||||||
345,000 | Aaa(g) | St. Johns Hickey Memorial Hospital Project, | 386,107 | ||||||
1,075,000 | AAA | Mishawaka, IN, School Building Corp., First Mortgage, AMBAC-Insured, 5.500% due 7/15/18 | 1,164,881 | ||||||
2,000,000 | NR | North Manchester, IN, Industrial Revenue, Peabody Retirement Community Project, Series A, 7.125% due 7/1/22 | 2,105,140 | ||||||
1,670,000 | AAA | St. Joseph County, IN, Hospital Authority Facilities Revenue, Memorial Hospital South Bend, 9.400% due 6/1/10 (b) | 1,929,752 | ||||||
Total Indiana | 21,292,956 | ||||||||
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 13
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Iowa — 1.2% | |||||||||
$ | 3,000,000 | A1(g) | Iowa Finance Authority, Health Care Facilities Revenue, Genesis Medical Center, 6.250% due 7/1/20 | $ | 3,241,470 | ||||
4,185,000 | AAA | Muscatine, IA, Electric Revenue, 9.700% due 1/1/13 (a)(b) | 5,144,202 | ||||||
1,085,000 | AAA | University of Iowa Facilities Corp., Medical Education and Biomed Research Facilities Project, AMBAC-Insured, 5.375% due 6/1/18 | 1,147,735 | ||||||
Total Iowa | 9,533,407 | ||||||||
Kansas — 0.5% | |||||||||
4,000,000 | BBB | Burlington, KS, Environmental Improvement Revenue, Kansas City Power & Light Project, Refunding, 4.750% due 9/1/15 (a)(i) | 4,092,920 | ||||||
Kentucky — 0.7% | |||||||||
5,000,000 | AAA | Kentucky Property & Buildings, Call 10/1/11 @ 100, | 5,536,700 | ||||||
Louisiana — 1.3% | |||||||||
1,000,000 | AAA | Calcasieu Parish, LA, Memorial Hospital Service District Hospital Revenue, Lake Charles Memorial Hospital Project, Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 | 1,006,590 | ||||||
495,000 | Aaa(g) | Jefferson Parish, LA, Home Mortgage Authority, Single-Family Mortgage Revenue, Series G, GNMA/FNMA-Collateralized, | 520,072 | ||||||
625,000 | NR | Lafayette, LA, Public Trust Financing Authority, Single-Family Mortgage Revenue, FHA-Insured, 7.200% due 4/1/10 (b) | 675,706 | ||||||
1,480,000 | AAA | Louisiana Local Government Environmental Facilities and Community Development Authority Revenue, Series A, AMBAC-Insured, Parking Facilities Corp. Garage Project, 5.625% due 10/1/17 | 1,624,285 | ||||||
385,000 | AAA | Louisiana Public Facilities Authority Hospital Revenue, Southern Baptist Hospital Inc. Project, Aetna-Insured, | 441,953 | ||||||
5,555,000 | AAA | State of Louisiana, Series A, FGIC-Insured, 5.250% due 5/1/19 (a) | 6,061,005 | ||||||
Total Louisiana | 10,329,611 | ||||||||
Maryland — 0.6% | |||||||||
3,000,000 | AA+ | Anne Arundel County, MD, GO, 5.375% due 3/1/14 | 3,311,130 | ||||||
1,000,000 | A+ | Maryland State Health & Higher EFA Revenue, University of Maryland Medical System, 6.000% due 7/1/22 | 1,100,310 | ||||||
Total Maryland | 4,411,440 | ||||||||
Massachusetts — 3.6% | |||||||||
1,700,000 | AAA | Boston, MA, Water & Sewer Commission Revenue, | 1,922,190 | ||||||
1,140,000 | Aaa(g) | Massachusetts Rail Connections Inc., Route 128, Parking Garage Revenue, Series A, Call 7/1/09 @ 102, 6.000% due 7/1/13 (d) | 1,273,973 | ||||||
2,000,000 | Aa3(g) | Massachusetts State, GAN, Series A, 5.750% due 6/15/15 | 2,204,940 | ||||||
Massachusetts State: | |||||||||
1,500,000 | AAA | GO, RITES, Series PA 993-R, MBIA-Insured, | 1,810,050 | ||||||
3,500,000 | AAA | GO, RITES, Series PA 964-R, MBIA-Insured, | 4,223,450 |
See Notes to Financial Statements.
14 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Massachusetts — 3.6% (continued) | |||||||||
$ | 585,000 | BBB- | Massachusetts State DFA Revenue, First Mortgage, Edgecombe Project, Series A, 6.000% due 7/1/11 | $ | 615,724 | ||||
Massachusetts State HEFA Revenue: | |||||||||
2,000,000 | AAA | Berkshire Health Systems, Series F, 5.000% due 10/1/19 | 2,109,380 | ||||||
Caritas Christi Obligation, Series B: | |||||||||
2,000,000 | BBB | 6.500% due 7/1/12 | 2,202,060 | ||||||
3,000,000 | BBB | 6.750% due 7/1/16 | 3,380,760 | ||||||
1,000,000 | AAA | Harvard University, Series Z, 5.000% due 1/15/16 | 1,065,610 | ||||||
1,300,000 | AAA | University of Massachusetts, Series C, 5.500% due 10/1/18 | 1,423,669 | ||||||
1,275,000 | AAA | Massachusetts State IFA Revenue, University Commons Nursing, Series A, FHA-Insured, 6.550% due 8/1/18 | 1,394,213 | ||||||
1,515,000 | AAA | Massachusetts State Port Authority Revenue, 13.000% due 7/1/13 (b) | 2,130,105 | ||||||
2,000,000 | AAA | Pittsfield, MA, GO, MBIA-Insured, 5.500% due 4/15/17 | 2,220,340 | ||||||
Total Massachusetts | 27,976,464 | ||||||||
Michigan — 2.1% | |||||||||
1,165,000 | NR | Allen Academy COP, 7.000% due 6/1/15 | 1,156,810 | ||||||
1,000,000 | AAA | Carman-Ainsworth, MI, Community School District GO, FGIC-Insured, Call 5/1/12 @ 100, 5.500% due 5/1/19 (d) | 1,117,730 | ||||||
1,775,000 | AA | Chippewa Valley, MI, Schools Administration Building, Q-SBLF-Insured, Call 5/1/12 @ 100, 5.500% due 5/1/18 (d) | 1,983,971 | ||||||
1,000,000 | AAA | Holland, MI, Area Community Swimming Pool Authority GO, FGIC-Insured, Call 5/1/06 @ 100, 5.125% due 5/1/19 (d) | 1,013,030 | ||||||
1,000,000 | AAA | Michigan Municipal Bond Authority Revenue, School District City of Detroit, 5.000% due 6/1/16 | 1,079,390 | ||||||
3,500,000 | A- | Michigan State Strategic Fund Limited Obligation Revenue, Refunding, Dow Chemical Project, 4.600% due 6/1/08 (i) | 3,599,365 | ||||||
1,000,000 | AA | Mount Clemens, MI, GO, Community School District, Q-SBLF-Insured, | 1,111,990 | ||||||
2,000,000 | AAA | Southfield, MI, Library Building Authority GO, MBIA-Insured, | 2,190,600 | ||||||
2,985,000 | NR | Wenonah Park Properties, Inc. Revenue, Michigan Bay City Hotel, 7.875% due 4/1/22 | 3,052,431 | ||||||
Total Michigan | 16,305,317 | ||||||||
Minnesota — 1.0% | |||||||||
1,000,000 | A- | Minneapolis, MN, Health Care System Revenue, Allina Health Systems, Series A, 6.000% due 11/15/18 | 1,117,430 | ||||||
5,255,000 | AAA | Minnesota Public Facilities Authority, Water PCR, Series A, | 5,559,790 | ||||||
1,000,000 | A | Saint Paul, MN, Housing & Redevelopment Authority, Hospital Revenue, Health East Project, Series B, ACA/CBI-Insured, | 1,043,610 | ||||||
Total Minnesota | 7,720,830 | ||||||||
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 15
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Missouri — 0.6% | |||||||||
$ | 15,000 | AAA | Chillicothe, MO, Electric Revenue, AMBAC-Insured, | $ | 15,972 | ||||
1,000,000 | A- (k) | Lees Summit, MO, IDA Health Facilities Revenue, John Knox Village, 5.750% due 8/15/11 | 1,070,620 | ||||||
1,500,000 | Aaa (g) | Missouri State Environmental Improvement & Energy Resource Authority, Water Pollution State Revolving Funds Programs, | 1,616,385 | ||||||
910,000 | AA | Missouri State Housing Development Community, MFH Revenue, Series I, 5.500% due 12/1/15 | 961,442 | ||||||
25,000 | BBB- | Nevada, MO, Waterworks Systems Revenue, | 26,681 | ||||||
1,000,000 | AAA | Saint Louis, MO, Airport Revenue, Airport Development Program, Series A, MBIA-Insured, Call 7/1/11 @ 100, | 1,116,170 | ||||||
Total Missouri | 4,807,270 | ||||||||
Montana — 0.0% | |||||||||
95,000 | AAA | Montana State Board of Regents Revenue, MBIA-Insured, | 105,186 | ||||||
Nebraska — 0.0% | |||||||||
15,000 | Aaa (g) | Douglas County, NE, Hospital Authority No. 2, Archbishop Bergan Mercy Hospital, 9.500% due 7/1/10 (b) | 17,438 | ||||||
Nevada — 1.1% | |||||||||
1,185,000 | BBB+ | Carson City, NV, Hospital Revenue, Carson-Tahoe Hospital Project, 6.000% due 9/1/14 | 1,303,346 | ||||||
3,000,000 | AAA | Clark County, NV, School District, GO, Building Renovation, Series B, | 3,143,160 | ||||||
2,500,000 | AAA | Las Vegas New Convention & Visitors Authority Revenue, AMBAC-Insured, Call 7/1/09 @ 101, 6.000% due 7/1/14 (d) | 2,771,550 | ||||||
865,000 | AAA | Nevada Housing Division, Multi-Unit Housing, Saratoga Palms, FNMA-Collateralized, 6.250% due 10/1/16 (c) | 888,182 | ||||||
Total Nevada | 8,106,238 | ||||||||
New Hampshire — 0.8% | |||||||||
New Hampshire HEFA Revenue: | |||||||||
3,470,000 | A | Covenant Healthcare System, 6.500% due 7/1/17 | 3,936,680 | ||||||
900,000 | AAA | University System of New Hampshire, AMBAC-Insured, | 984,546 | ||||||
1,000,000 | AA | New Hampshire State, GO, Capital Improvement, Series A, | 1,051,830 | ||||||
Total New Hampshire | 5,973,056 | ||||||||
New Jersey — 4.1% | |||||||||
2,200,000 | AAA | Casino Reinvestment Development Authority, NJ Hotel Room Fee Revenue, AMBAC-Insured, 5.000% due 1/1/14 | 2,380,268 |
See Notes to Financial Statements.
16 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
New Jersey — 4.1% (continued) | |||||||||
$ | 3,440,000 | AAA | Delaware River Port Authority Pennsylvania and New Jersey, RITES, Series 964, FSA-Insured, 8.030% due 1/1/10 (a)(h) | $ | 4,184,485 | ||||
New Jersey Health Care Facilities Financing Authority Revenue: | |||||||||
320,000 | AAA | Hackensack Hospital, 8.750% due 7/1/09 (b) | 348,371 | ||||||
3,000,000 | BBB- | Trinitas Hospital Obligation Group, 7.375% due 7/1/15 | 3,404,910 | ||||||
3,500,000 | AAA | New Jersey State EDA Lease Revenue, Office Building Projects, | 3,781,680 | ||||||
New Jersey State Transportation Trust Fund Authority: | |||||||||
RITES, MBIA-Insured: | |||||||||
2,500,000 | AAA | Series PA 958R, 9.031% due 12/15/09 (h) | 3,208,350 | ||||||
1,000,000 | AAA | Series PA 958R-B, 9.031% due 12/15/09 (h) | 1,283,340 | ||||||
Transportation Systems, Series B, MBIA-Insured: | |||||||||
5,350,000 | AAA | 5.250% due 12/15/14 (a) | 5,933,792 | ||||||
1,890,000 | AAA | Call 12/15/11 @ 100, 6.000% due 12/15/19 (d) | 2,157,756 | ||||||
New Jersey State Turnpike Authority Revenue: | |||||||||
725,000 | AAA | 6.750% due 1/1/09 (b) | 732,214 | ||||||
295,000 | AAA | 6.000% due 1/1/14 (b) | 321,252 | ||||||
3,095,000 | Aaa (g) | Passaic Valley, NJ, Sewage Commissioners Sewer System, Series E, AMBAC-Insured, 5.625% due 12/1/17 | 3,385,280 | ||||||
205,000 | AAA | Ringwood Boro, NJ, Sewage Authority, 9.875% due 1/1/14 (b) | 255,149 | ||||||
Total New Jersey | 31,376,847 | ||||||||
New Mexico — 0.5% | |||||||||
Bernalillo County, NM, Gross Receipts Tax Revenue, AMBAC-Insured: | |||||||||
1,925,000 | AAA | 5.250% due 10/1/17 | 2,150,437 | ||||||
1,100,000 | AAA | 5.250% due 10/1/21 | 1,236,246 | ||||||
150,000 | AAA | Farmington, NM, Utilities Systems Revenue, AMBAC-Insured, 9.875% due 1/1/08 (b) | 160,191 | ||||||
Total New Mexico | 3,546,874 | ||||||||
New York — 4.5% | |||||||||
1,000,000 | Baa3 (g) | Albany, NY, IDA, Civic Facility Revenue, Charitable Leadership Project, Series A, 6.000% due 7/1/19 | 1,078,570 | ||||||
2,500,000 | A+ | New York City, NY, GO, Series A, 6.250% due 8/1/08 | 2,600,300 | ||||||
1,000,000 | AAA | New York City, NY, Health & Hospital Corp. Revenue, Health Systems, Series A, FSA-Insured, 5.500% due 2/15/19 | 1,095,800 | ||||||
1,360,000 | NR | New York City, NY, IDA, Civic Facility Revenue, Community Hospital Brooklyn, 6.875% due 11/1/10 | 1,404,826 | ||||||
1,090,000 | NR | New York City, NY, IDA, Special Needs Facilities Pooled Program A-1, 6.100% due 7/1/12 | 1,125,687 | ||||||
New York State Dormitory Authority Revenue: | |||||||||
1,000,000 | AAA | Columbia University, Series B, 5.250% due 7/1/17 | 1,099,150 | ||||||
1,780,000 | AA | Marymount Manhattan College, Radian-Insured, | 1,978,701 | ||||||
5,000,000 | AAA | Mental Health Services Facilities, 5.000% due 2/15/18 (a) | 5,358,750 |
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 17
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
New York — 4.5% (continued) | |||||||||
$ | 2,500,000 | AAA | School Districts Financing Programs, Series D, MBIA-Insured, 5.500% due 10/1/17 | $ | 2,766,775 | ||||
State University Educational Facilities: | |||||||||
1,715,000 | AAA | MBIA-Insured, 6.000% due 5/15/15 | 1,911,436 | ||||||
2,000,000 | AAA | Third Generation, Series A, FGIC-Insured, | 2,286,380 | ||||||
Tobacco Settlement Financing Corp., New York, Asset-Backed, | |||||||||
6,000,000 | AA- | 5.500% due 6/1/14 (a) | 6,414,480 | ||||||
5,000,000 | AA- | 5.500% due 6/1/16 (a) | 5,401,400 | ||||||
Total New York | 34,522,255 | ||||||||
North Carolina — 3.5% | |||||||||
745,000 | NR | Asheville, NC, HDC, First Lien Revenue, Asheville Gardens, HUD Section 8-Insured, Call 11/1/09 @ 100, 10.500% due 5/1/11 (d) | 885,090 | ||||||
3,000,000 | AAA | Guilford County, NC, GO, Public Improvement, Series B, Call 10/1/10 @ 102, 5.250% due 10/1/15 (d) | 3,320,940 | ||||||
North Carolina Eastern Municipal Power Agency, Power Systems Revenue: | |||||||||
550,000 | A | Series B, ACA/CBI-Insured, 5.650% due 1/1/16 | 585,910 | ||||||
2,000,000 | BBB | Series D, 5.500% due 1/1/14 | 2,157,680 | ||||||
North Carolina Municipal Power Agency No. 1, Catawba Electricity Revenue: | |||||||||
3,750,000 | AAA | 10.500% due 1/1/10 (b)(j) | 4,358,662 | ||||||
Series B: | |||||||||
3,000,000 | A | ACA-CBI-Insured, 6.375% due 1/1/13 | 3,331,410 | ||||||
5,000,000 | AAA | MBIA-Insured, 5.250% due 1/1/18 (a) | 5,405,450 | ||||||
North Carolina State: | |||||||||
3,000,000 | AAA | Public Improvement, Series A, Call 3/1/09 @ 102, | 3,296,610 | ||||||
3,000,000 | AAA | Series A, Call 9/1/10 @ 102, 5.250% due 3/1/18 (d) | 3,258,840 | ||||||
Total North Carolina | 26,600,592 | ||||||||
Ohio — 6.2% | |||||||||
5,450,000 | AAA | Butler County, OH, Transportation Improvement District, Series A, | 5,739,177 | ||||||
1,750,000 | AAA | Cleveland, OH, Public Power Systems Revenue, AMBAC-Insured, | 1,920,800 | ||||||
Cuyahoga County, OH, Hospital Facilities Revenue, Canton, Inc. Project: | |||||||||
2,275,000 | BBB | 6.750% due 1/1/10 | 2,419,713 | ||||||
3,400,000 | AA+ | GO, 5.000% due 12/1/15 | 3,722,932 | ||||||
195,000 | Aaa(g) | Erie County, OH, Hospital Improvement Revenue, Sandusky Memorial Hospital, 8.750% due 1/1/06 (b) | 197,718 | ||||||
2,280,000 | NR | Franklin County, OH, Hospital Revenue, Children Hospital Project, | 2,910,830 | ||||||
1,500,000 | Aaa(g) | Hamilton County, OH, Sales Tax Revenue, Series B, AMBAC-Insured, | 1,616,910 |
See Notes to Financial Statements.
18 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Ohio — 6.2% (continued) | |||||||||
$ | 1,240,000 | AAA | Jackson, OH, Local School District, GO, Stark & Summit Counties, FSA-Insured, 5.000% due 12/1/18 | $ | 1,330,222 | ||||
1,105,000 | AAA | Lake County, OH, Hospital Improvement Revenue, Lake County Memorial Hospital Project, 8.625% due 11/1/09 (b) | 1,219,058 | ||||||
175,000 | AAA | Lima, OH, Hospital Revenue, St. Rita Hospital of Lima, | 179,172 | ||||||
1,410,000 | Aaa(g) | Logan Hocking, OH, Local School District, GO, Construction & Improvement, MBIA-Insured, 5.500% due 12/1/16 | 1,543,626 | ||||||
2,775,000 | AA | Montgomery County, OH, Revenue, Catholic Health Initiatives, | 3,011,652 | ||||||
5,000,000 | BBB- | Ohio State Air Quality Development Authority Revenue, Cleveland Pollution Control, Series A, 6.000% due 12/1/13 (a) | 5,271,400 | ||||||
Ohio State Building Authority, Series A: | |||||||||
3,000,000 | AAA | Call 10/1/14, 5.375% due 10/1/14 (d) | 3,274,860 | ||||||
3,600,000 | AAA | State Facilities-Administration Building Fund, FSA-Insured, | 3,957,408 | ||||||
Ohio State Water Development Authority Revenue: | |||||||||
5,990,000 | AAA | 9.375% due 12/1/10 (a)(b) | 6,679,749 | ||||||
885,000 | AAA | Safe Water, Series 3, 9.000% due 12/1/10 (b) | 986,102 | ||||||
1,960,000 | AAA | University of Akron, OH, General Receipts Bonds, AMBAC-Insured, | 2,046,750 | ||||||
Total Ohio | 48,028,079 | ||||||||
Oklahoma — 0.6% | |||||||||
2,750,000 | AA | Oklahoma DFA Revenue, Refunding, St. John’s Health Systems, | 2,977,150 | ||||||
1,725,000 | AAA | Tulsa, OK, Airport Improvement Trust General Revenue, Series A, 6.000% due 6/1/14 (c) | 1,881,595 | ||||||
Total Oklahoma | 4,858,745 | ||||||||
Oregon — 1.8% | |||||||||
1,000,000 | AA | Clackamas County, OR, Hospital Facilities Authority Revenue, Legacy Health System, 5.750% due 5/1/16 | 1,096,200 | ||||||
1,500,000 | BBB | Klamath Falls, OR, Intercommunity Hospital Authority Revenue, Merle West Medical Center Project, 6.125% due 9/1/22 | 1,594,905 | ||||||
3,320,000 | Aa2(g) | Multnomah County, OR, GO, Series A, Call 4/1/10 @ 100, | 3,596,689 | ||||||
Oregon State Department Administrative Services Lottery Revenue: | |||||||||
1,375,000 | AAA | Series A, FSA-Insured, Call 4/1/12 @ 100, | 1,535,077 | ||||||
3,500,000 | AAA | Series B, 5.250% due 4/1/15 | 3,748,395 | ||||||
2,335,000 | NR | Wasco County, OR, Solid Waste Disposal Revenue, Waste Connections Inc. Project, 7.000% due 3/1/12 (c) | 2,494,831 | ||||||
Total Oregon | 14,066,097 | ||||||||
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 19
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Pennsylvania — 7.4% | |||||||||
$ | 3,000,000 | AAA | Allegheny County, PA, Port Authority Special Revenue, FGIC-Insured, 5.500% due 3/1/16 | $ | 3,277,620 | ||||
1,195,000 | NR | Berks County Municipal Authority, Phoebe Berks Village Inc. Project, Call 5/15/06 @ 102, 7.500% due 5/15/13 (d) | 1,251,034 | ||||||
2,175,000 | BBB- | Carbon County, PA, IDA, Panther Creek Partners Project, | 2,319,202 | ||||||
2,500,000 | Aaa(g) | Central Bucks, PA, School District, GO, FGIC-Insured, | 2,744,750 | ||||||
1,070,000 | A | Chester County, PA, School Authority, School Lease Revenue, 5.375% due 6/1/17 | 1,169,029 | ||||||
1,920,000 | NR | Dauphin County, PA, General Authority Revenue, Office and Packaging, 5.500% due 1/1/08 | 1,908,672 | ||||||
1,750,000 | AAA | Greater Johnstown, PA, GO, School District, Series B, MBIA-Insured, 5.375% due 8/1/14 | 1,913,800 | ||||||
2,000,000 | AAA | Pennsylvania State Department of General Services, COP, FSA-Insured, 5.250% due 5/1/16 | 2,144,680 | ||||||
Pennsylvania State Higher EFA, Health Services Revenue, Series A: | |||||||||
1,000,000 | A+ | Allegheny Delaware Valley Obligation Group, MBIA-Insured, 6.250% due 1/15/18 | 1,117,680 | ||||||
3,330,000 | AAA | University of Pittsburg Medical Center Health System, | 3,542,953 | ||||||
Pennsylvania State, GO, Second Series: | |||||||||
4,000,000 | AAA | Call 5/1/12 @ 100, 5.500% due 5/1/15 (a)(d) | 4,470,920 | ||||||
5,000,000 | AAA | Call 10/1/09 @ 101, 5.750% due 10/1/17 (a)(d) | 5,527,850 | ||||||
Philadelphia, PA: | |||||||||
2,000,000 | AAA | GO, FSA-Insured, 5.250% due 9/15/18 | 2,128,220 | ||||||
School District: | |||||||||
Series A, FSA-Insured: | |||||||||
2,000,000 | AAA | Call 2/1/12 @ 100, 5.500% due 2/1/20 (d) | 2,221,400 | ||||||
1,865,000 | AAA | Call 2/1/12 @ 100, 5.500% due 2/1/21 (d) | 2,071,455 | ||||||
2,000,000 | AAA | Series B, Call 8/1/12 @ 100, 5.625% due 8/1/18 (d) | 2,246,800 | ||||||
Philadelphia, PA, Authority for Industrial Development, Series B: | |||||||||
2,000,000 | AAA | 5.500% due 10/1/15 | 2,190,920 | ||||||
1,000,000 | AAA | FSA-Insured, 5.500% due 10/1/19 | 1,086,510 | ||||||
Philadelphia, PA, Gas Works Revenue, Third Series: | |||||||||
1,675,000 | AAA | 5.500% due 8/1/17 | 1,815,097 | ||||||
3,240,000 | AAA | FSA-Insured, 5.500% due 8/1/19 | 3,495,247 | ||||||
Philadelphia, PA, Parking Authority Revenue, Parking Revenue, FSA-Insured: | |||||||||
2,000,000 | AAA | 5.625% due 9/1/15 | 2,171,280 | ||||||
1,500,000 | AAA | 5.625% due 9/1/19 | 1,617,045 | ||||||
1,140,000 | NR | Pittsburgh, PA, Public Parking Authority, Parking Revenue, St, Francis General Hospital, 6.625% due 10/1/12 (b) | 1,261,057 | ||||||
1,445,000 | AA | Southcentral, PA, General Authority Revenue, Hanover Hospital Inc., Radian-Insured, 5.500% due 12/1/18 | 1,567,839 | ||||||
1,000,000 | AAA | West View, PA, Municipal Authority, 9.500% due 11/15/14 (b) | 1,305,980 |
See Notes to Financial Statements.
20 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Pennsylvania — 7.4% (continued) | |||||||||
$ | 570,000 | AAA | Westmoreland County, PA, Municipal Authority, | $ | 626,892 | ||||
Total Pennsylvania | 57,193,932 | ||||||||
Puerto Rico — 0.3% | |||||||||
2,100,000 | AAA | Puerto Rico Highway and Transportation Authority Highway Revenue, Refunding, Series AA, 5.000% due 7/1/10 (i) | 2,253,426 | ||||||
Rhode Island — 0.6% | |||||||||
1,000,000 | AAA | Cranston, RI, GO, FGIC-Insured, Call 11/15/09 @ 101, | 1,130,550 | ||||||
1,000,000 | AAA | Providence, RI, Public Building Authority, General Revenue, Series A, MBIA-Insured, 5.375% due 12/15/21 | 1,082,700 | ||||||
2,000,000 | Aaa(g) | Woonsocket, RI, GO, FGIC-Insured, 5.375% due 10/1/20 | 2,154,720 | ||||||
Total Rhode Island | 4,367,970 | ||||||||
South Carolina — 1.4% | |||||||||
1,080,000 | AAA | Charleston, SC, Waterworks & Sewer Revenue, | 1,247,821 | ||||||
Greenville County, SC, School District Installment Purchase Revenue, Building Equity Sooner for Tomorrow: | |||||||||
1,350,000 | AA- | 6.000% due 12/1/21 | 1,500,822 | ||||||
Call 12/1/12 @ 101: | |||||||||
1,000,000 | AA- | 5.875% due 12/1/19 (d) | 1,150,770 | ||||||
1,650,000 | AA- | 6.000% due 12/1/21 (d) | 1,911,673 | ||||||
4,530,000 | AAA | South Carolina Transportation Infrastructure Bank Revenue, Series A, Call 10/1/08 @ 101, 5.000% due 10/1/15 (a)(d) | 4,815,209 | ||||||
Total South Carolina | 10,626,295 | ||||||||
South Dakota — 0.4% | |||||||||
2,635,000 | Aa2(g) | Minnehaha County, SD, GO, Limited Tax Certificates, | 2,882,611 | ||||||
Tennessee — 1.5% | |||||||||
5,000,000 | AAA | Elizabethton, TN, Health & Educational Facilities Board Revenue, Series B, 5.750% due 7/1/23 (a) | 5,474,350 | ||||||
255,000 | Aaa(g) | Greeneville, TN, Health & Educational Facilities Board, Hospital Revenue, Southern Adventist Health System, 8.700% due 10/1/09 (b) | 281,194 | ||||||
2,000,000 | AA | Memphis, TN, GO, General Improvement, Call 4/1/08 @ 101, | 2,122,240 | ||||||
- | Memphis-Shelby County, TN: | ||||||||
1,000,000 | AAA | Airport Authority, Airport Revenue, Series D, AMBAC-Insured, | 1,109,100 | ||||||
2,000,000 | AAA | Sports Authority Inc. Revenue, Memphis Arena Project, Series A, | 2,215,600 | ||||||
Total Tennessee | 11,202,484 | ||||||||
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 21
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Texas — 9.7% | |||||||||
Austin, TX: | |||||||||
$ | 1,000,000 | BBB- | Convention Enterprises Inc., Convention Center, First Tier, Series A, | $ | 1,074,280 | ||||
2,620,000 | AA+ | Public Improvement, Call 9/1/09 @ 100, 5.500% due 9/1/19 (d) | 2,844,508 | ||||||
Bexar County, TX, Housing Finance Corp. MFH Revenue: | |||||||||
440,000 | Baa3(g) | Series A, American Opportunity For Housing-Nob Hill Apartments LLC, 6.000% due 6/1/21 | 431,851 | ||||||
700,000 | Aaa(g) | Series A, The Waters At Northern Hill Apartments, MBIA-Insured, | 711,130 | ||||||
2,000,000 | AAA | Bexar County, TX, Metropolitan Water District Waterworks, AMBAC-Insured, Call 5/1/15 @ 100, 5.000% due 5/1/19 (d) | 2,177,620 | ||||||
40,000 | AAA | Brownsville, TX, Utilities Systems Revenue, AMBAC-Insured, | 48,806 | ||||||
3,000,000 | CCC | Dallas-Fort Worth, TX, International Airport Facility, Improvement Corp. Revenue, Refunding, American Airlines, Series C, 11/1/07 mandatory tender, 6.150% due 5/1/29 (c)(i) | 2,838,120 | ||||||
2,855,000 | AAA | Duncanville, TX, Hospital Authority, Methodist Hospitals of Dallas Project, 9.000% due 1/1/10 (b) | 3,208,478 | ||||||
El Paso County, TX, Housing Finance Corp., MFH Revenue, Series A: | |||||||||
American Village Communities: | |||||||||
1,250,000 | A3(g) | 6.250% due 12/1/20 | 1,297,250 | ||||||
1,000,000 | A3(g) | 6.250% due 12/1/24 | 1,030,080 | ||||||
415,000 | A3(g) | La Plaza Apartments, 6.700% due 7/1/20 | 434,132 | ||||||
Fort Bend, TX, ISD, PSFG: | |||||||||
390,000 | AAA | 5.500% due 2/15/16 | 415,787 | ||||||
610,000 | AAA | Call 2/15/09 @ 100, 5.500% due 2/15/16 (d) | 655,957 | ||||||
2,000,000 | AA | Fort Worth, TX, Water & Sewer Revenue, Call 2/15/12 @ 100, | 2,236,760 | ||||||
1,000,000 | AAA | Grand Prairie, TX, Housing Finance Corp., MFH Revenue, Landings of Carrier Project, Series A, GNMA-Collateralized, | 1,117,020 | ||||||
5,000,000 | BB | Gulf Coast of Texas, IDA, Solid Waste Disposal Revenue, CITGO Petroleum Corp. Project, 7.500% due 10/1/12 (a)(c)(i) | 5,629,050 | ||||||
Harlandale, TX: | |||||||||
990,000 | AAA | GO, ISD, Refunding, PSFG-Insured, Call 8/15/10 @ 100, | 1,107,681 | ||||||
10,000 | AAA | GO, ISD, Refunding, PSFG-Insured, Unrefunded Balance, | 11,113 | ||||||
Harris County, TX, Houston Sports Authority Revenue, Series G: | |||||||||
1,125,000 | AAA | 5.250% due 11/15/16 | 1,209,994 | ||||||
3,000,000 | AAA | MBIA-Insured, 5.750% due 11/15/19 | 3,300,780 | ||||||
3,410,000 | AAA | Houston, TX, Airport Systems Revenue, 9.500% due 7/1/10 (b) | 3,972,820 | ||||||
Houston, TX, FSA-Insured: | |||||||||
910,000 | AAA | GO, Call 9/1/10 @ 100, 5.750% due 3/1/18 (d) | 1,004,549 | ||||||
90,000 | AAA | GO, Unrefunded Balance, 5.750% due 3/1/18 | 98,712 |
See Notes to Financial Statements.
22 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Texas — 9.7% (continued) | |||||||||
$ | 4,000,000 | AAA | Houston, TX, ISD, Refunding, Series A, Call 2/15/09 @ 100, | $ | 4,269,720 | ||||
Houston, TX, Water & Sewer Systems Revenue, Refunding, Jr. Lien: | |||||||||
1,000,000 | AAA | Series A, FSA-Insured, 5.500% due 12/1/17 | 1,096,500 | ||||||
4,545,000 | AAA | Series B, Call 12/1/10 @ 100, 5.750% due 12/1/16 (a)(d) | 5,043,677 | ||||||
2,850,000 | NR | Midlothian, TX, Development Authority Tax, Increment Contact Revenue, 7.875% due 11/15/21 | 3,103,621 | ||||||
3,515,000 | Aaa(g) | Midlothian, TX, ISD, Capital Appreciation Bonds, PSFG, zero coupon bond to yield 6.166% due 2/15/17 | 1,828,257 | ||||||
1,800,000 | AAA | Montgomery, TX, GO, ISD, PSFG, 5.500% due 2/15/17 | 1,957,068 | ||||||
1,230,000 | A | North Forest ISD, ACA-Insured, 6.500% due 8/15/17 | 1,447,895 | ||||||
755,000 | Aaa(g) | Panhandle, TX, Regional Housing Finance, Series A, GNMA-Collateralized, 6.500% due 7/20/21 | 842,240 | ||||||
675,000 | AAA | Southeast Texas HFA, Memorial Hospital System Project, | 732,524 | ||||||
Tarrant County, TX, Health Facilities Development Corp., Hospital Revenue: | |||||||||
4,000,000 | AA- | Baylor Health Care Systems Project, 5.750% due 11/15/19 (a) | 4,382,680 | ||||||
2,000,000 | A+ | Call 11/15/10 @ 101, 6.625% due 11/15/20 (d) | 2,321,100 | ||||||
130,000 | AAA | Tarrant County, TX, Hospital Authority Revenue, St. Joseph Hospital Project, 8.750% due 2/1/10 (b) | 145,951 | ||||||
1,000,000 | Baa3(g) | Texas State Student Housing Corp., Student Housing Revenue, Midwestern State University Project, 6.500% due 9/1/22 | 1,054,480 | ||||||
2,000,000 | AAA | Texas Technical University Revenue Financing System, Seventh Series, MBIA-Insured, 5.500% due 8/15/18 | 2,185,700 | ||||||
3,500,000 | AAA | Texas Water Development Board Revenue, Revolving Fund, Senior Lien, Series B, 5.250% due 7/15/17 | 3,728,305 | ||||||
2,000,000 | AAA | University of Texas Revenue Financing System, Series B, Call 8/15/11 @ 100, 5.375% due 8/15/18 (d) | 2,210,460 | ||||||
1,000,000 | AAA | Wichita Falls, TX, Water & Sewer Revenue, Priority Lien, AMBAC-Insured, 5.375% due 8/1/19 | 1,077,730 | ||||||
Total Texas | 74,284,386 | ||||||||
Utah — 1.5% | |||||||||
2,000,000 | Aaa(g) | Davis County, UT, School District, School Board Guarantee Program, Refunding, Series B, 5.000% due 6/1/16 | 2,195,700 | ||||||
2,500,000 | AAA | Intermountain Power Agency, UT, Power Supply Revenue, Refunding, Series B, MBIA-Insured, 5.750% due 7/1/19 | 2,652,850 | ||||||
Provo, UT, Electric Revenue: | |||||||||
955,000 | AAA | 10.125% due 4/1/15 (b) | 1,256,484 | ||||||
1,045,000 | AAA | MBIA-Insured, 10.125% due 4/1/15 (b) | 1,374,896 | ||||||
10,000 | AAA | Series A, AMBAC-Insured, 10.375% due 9/15/15 (b) | 13,503 | ||||||
1,500,000 | AAA | Salt Lake County, UT, Hospital Revenue, IHC Health Services, Inc., AMBAC-Insured, 5.500% due 5/15/13 | 1,639,050 | ||||||
Spanish Fork City, UT, Water Revenue: | |||||||||
240,000 | Aaa(g) | FSA-Insured, Call 6/1/12 @ 100, 5.500% due 6/1/17 (d) | 267,965 |
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 23
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Utah — 1.5% (continued) | |||||||||
$ | 760,000 | Aaa(g) | Unrefunded Balance, FSA-Insured, 5.500% due 6/1/17 | $ | 835,308 | ||||
1,000,000 | AAA | Utah State Board Regents, Utah State University Hospital, MBIA-Insured, Call 8/1/11 @ 100, 5.500% due 8/1/18 (d) | 1,111,140 | ||||||
Total Utah | 11,346,896 | ||||||||
Vermont — 0.2% | |||||||||
1,415,000 | BBB+ | Vermont Educational & Health Buildings Financing Agency Revenue, Developmental & Mental Health, Series A, 5.500% due 6/15/12 | 1,460,407 | ||||||
Virginia — 2.0% | |||||||||
1,445,000 | AA | Chesapeake, VA, GO, Public Improvement, 5.500% due 12/1/17 | 1,579,457 | ||||||
1,305,000 | AA | Fauquier County, VA, IDA, Hospital Revenue, Fauquier Hospital Foundation Inc., Radian-Insured, 5.500% due 10/1/15 | 1,457,541 | ||||||
1,000,000 | AAA | Harrisonburg, VA, Redevelopment & Housing Authority, MFH Revenue, Greens of Salem Run Project, FSA-Insured, | 1,046,740 | ||||||
750,000 | A | Norton, VA, IDA Hospital Revenue, Norton Community Hospital, | 805,508 | ||||||
1,750,000 | AA+ | Virginia State Public Building Authority, Public Facilities Revenue, Series A, Call 8/1/10 @ 100, 5.750% due 8/1/20 (d) | 1,928,938 | ||||||
5,035,000 | AAA | Virginia State Resources Authority, Clean Water Reserve, Revolving Fund, Call 10/1/10 @ 100, 5.400% due 10/1/18 (a)(d) | 5,522,539 | ||||||
3,000,000 | BBB+ | York County, VA, IDA, PCR, Virginia Electrical & Power Co., | 3,104,970 | ||||||
Total Virginia | 15,445,693 | ||||||||
Washington — 1.2% | |||||||||
4,000,000 | AAA | Energy Northwest Washington Electric Revenue, Refunding, Project No. 1, Series A, 5.500% due 7/1/14 (a) | 4,388,240 | ||||||
2,000,000 | AAA | Pierce County, WA, GO, School District North 10 Tacoma, FGIC-Insured, Call 12/1/11 @ 100, 5.375% due 12/1/14 (d) | 2,212,940 | ||||||
Radford Court Properties, WA, Student Housing Revenue, MBIA-Insured: | |||||||||
1,695,000 | AAA | 6.000% due 6/1/17 | 1,888,382 | ||||||
1,000,000 | AAA | 5.375% due 6/1/19 | 1,071,870 | ||||||
Total Washington | 9,561,432 | ||||||||
Wisconsin — 0.7% | |||||||||
115,000 | AAA | Oshkosh, WI, Hospital Facility Revenue, Mercy Medical Center, Call 7/1/07 @ 100, 7.375% due 7/1/09 (d) | 121,608 | ||||||
Wisconsin State HEFA Revenue: | |||||||||
1,000,000 | A- | Agnesian Health Care, Inc., 6.000% due 7/1/17 | 1,077,140 | ||||||
1,500,000 | A | Wheaton Franciscan Services, Inc., 6.000% due 8/15/15 | 1,664,325 |
See Notes to Financial Statements.
24 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Wisconsin — 0.7% (continued) | |||||||||
$ | 2,000,000 | AA- | Wisconsin State, GO, Series B, Call 5/1/11 @ 100, | $ | 2,212,580 | ||||
Total Wisconsin | 5,075,653 | ||||||||
TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $717,512,838) | 741,133,294 | ||||||||
SHORT-TERM INVESTMENTS(l) — 2.4% | |||||||||
Colorado — 0.1% | |||||||||
600,000 | VMIG1(g) | Colorado Educational & Cultural Facilities Authority Revenue, National Jewish Federal Bond Program, LOC-Bank of America NA, 2.810%, 10/3/05 | 600,000 | ||||||
Florida — 0.6% | |||||||||
1,200,000 | A-1 | Jacksonville, Florida Electric Authority Revenue, Electric Systems, Series B, 2.810%, 10/3/05 | 1,200,000 | ||||||
1,300,000 | VMIG1(g) | Palm Beach County, FL, HFA, Health Facility Revenue, Bethesda Healthcare System Project, 2.820%, 10/3/05 | 1,300,000 | ||||||
2,500,000 | VMIG1(g) | Sarasota County Public Hospital Board Revenue, Sarasota Memorial Hospital, Series A, AMBAC-Insured, 2.950%, 10/3/05 | 2,500,000 | ||||||
Total Florida | 5,000,000 | ||||||||
Georgia — 0.3% | |||||||||
2,000,000 | A-1+ | Fulton County, GA, Development Authority, Residential Care Facilities, Lenbrook Square Foundation, 2.850%, 10/3/05 | 2,000,000 | ||||||
Illinois — 0.0% | |||||||||
200,000 | A-1+ | Illinois Finance Authority Revenue, Northwestern Memorial Hospital, Series B-2, SPA-UBS AG, 2.780%, 10/3/05 | 200,000 | ||||||
100,000 | A-1+ | Illinois Health Facilities Authority, University of Chicago Hospital Project, Series C, MBIA-Insured, 2.820%, 10/3/05 | 100,000 | ||||||
Total Illinois | 300,000 | ||||||||
Massachusetts — 0.1% | |||||||||
550,000 | A-1+ | Massachusetts State HEFA Revenue, Amherst College, Series J-2, 2.870%, 10/3/05 | 550,000 | ||||||
New Jersey — 0.1% | |||||||||
500,000 | A-1+ | New Jersey State EFA Revenue, Princeton University, Series B, 2.680%, 10/3/05 | 500,000 | ||||||
Pennsylvania — 0.3% | |||||||||
2,000,000 | A-1+ | Philadelphia, PA, Hospitals & Higher Education Facilities Authority, Hospital Revenue, Children’s Hospital Project, Series A, SPA-JPMorgan Chase Bank, 2.810%, 10/3/05 | 2,000,000 | ||||||
Tennessee — 0.0% | |||||||||
300,000 | VMIG1(g) | Sevier County, TN, Public Building Authority, Local Government Public Improvement Revenue, Series VI-C-5, AMBAC-Insured, 2.830%, 10/3/05 | 300,000 | ||||||
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 25
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Face Amount | Rating‡ | Security | Value | ||||||
Texas — 0.6% | |||||||||
Bell County, TX, Health Facilities Development Corp. Revenue, Scott & White Memorial Hospital: | |||||||||
$ | 1,665,000 | A-1+ | Series 2001-2, MBIA-Insured, 2.810%, 10/3/05 | $ | 1,665,000 | ||||
985,000 | A-1+ | Series B-2, MBIA-Insured, 2.810%, 10/3/05 | 985,000 | ||||||
2,100,000 | A-1+ | Harris County, TX, Health Facilities Development Corp. Revenue, The Methodist Systems, Series B, 2.810%, 10/3/05 | 2,100,000 | ||||||
Total Texas | 4,750,000 | ||||||||
Utah — 0.3% | |||||||||
2,500,000 | A-1+ | County of Weber, UT, Hospital Revenue, IHC Health Services, Series C, 2.810%, 10/3/05 | 2,500,000 | ||||||
TOTAL SHORT-TERM INVESTMENTS (Cost — $18,500,000) | 18,500,000 | ||||||||
TOTAL INVESTMENTS — 98.8% (Cost — $736,012,838#) | 759,633,294 | ||||||||
Other Assets in Excess of Liabilities — 1.2% | 8,946,042 | ||||||||
TOTAL NET ASSETS — 100.0% | $ | 768,579,336 | |||||||
‡ | All ratings are by Standard & Poor’s Ratings Service, unless otherwise footnoted. |
(a) | All or a portion of this security is segregated for open futures contracts and extended settlements. |
(b) | Bonds are escrowed to maturity by government securities and/or U.S. government agency securities and are considered by the manager to be triple-A rated even if issuer has not applied for new ratings. |
(c) | Income from this issue is considered a preference item for purposes of calculating the alternative minimum tax (AMT). |
(d) | Pre-Refunded bonds are escrowed with government securities and/or U.S. government agency securities and are considered by the manager to be triple-A rated even if issuer has not applied for new ratings. |
(e) | Securities are fair valued at September 30, 2005 in accordance with the policies adopted by the Board of Trustees (note 1). |
(f) | Security is currently in default. |
(g) | Rating by Moody’s Investors Service. |
(h) | Residual interest tax-exempt securities — coupon varies inversely with level of short-term tax-exempt interest rates. |
(i) | Variable rate securities. Coupon rates disclosed are those which are in effect at September 30, 2005. |
(j) | All or a portion of this security is held at the broker as collateral for open futures contracts. |
(k) | Rating by Fitch Rating Service. |
(l) | Variable rate demand obligations have a demand feature under which the fund could tender them back to the issuer on no more than 7 days notice. Date shown is the date of the next interest rate change. |
# | Aggregate cost for federal income tax purposes is substantially the same. |
See pages 27 through 29 for certain abbreviations and definitions of ratings .
See Notes to Financial Statements.
26 Smith Barney Muni Funds 2005 Semi-Annual Report
Schedule of Investments (September 30, 2005) (unaudited) (continued)
Abbreviations used in this schedule: | ||
ACA | — American Capital Assurance | |
AMBAC | — Ambac Assurance Corporation | |
CBI | — Certificate of Bond Insurance | |
CONNIE LEE | — College Construction Loan Insurance Association | |
COP | — Certificate of Participation | |
DFA | — Development Finance Agency | |
EDA | — Economic Development Authority | |
EFA | — Educational Facilities Authority | |
FGIC | — Financial Guaranty Insurance Company | |
FHA | — Federal Housing Administration | |
FNMA | — Federal National Mortgage Association | |
FSA | — Financial Security Assurance | |
GAN | — Grant Anticipation Notes | |
GNMA | — Government National Mortgage Association | |
GO | — General Obligation | |
HDC | — Housing Development Corporation | |
HEFA | — Health & Educational Facilities Authority | |
HFA | — Housing Finance Authority | |
IBC | — Insured Bond Certificates | |
IDA | — Industrial Development Authority | |
IFA | — Industrial Finance Agency | |
ISD | — Independent School District | |
LOC | — Letter of Credit | |
MBIA | — Municipal Bond Investors Assurance Corporation | |
MFH | — Multi-Family Housing | |
PCR | — Pollution Control Revenue | |
PSFG | — Permanent School Fund Guaranty | |
Q-SBLF | — Qualified School Bond Fund | |
RITES | — Residual Interest Tax-Exempt Securities | |
Radian | — Radian Assets Assurance | |
SPA | — Standby Bond Purchase Agreement | |
USD | — Unified School District | |
VA | — Veterans Administration |
Summary of Investments by Industry* (unaudited) | |||
Pre-Refunded | 21.6 | % | |
Hospitals | 13.2 | ||
Escrowed to Maturity | 9.7 | ||
Education | 8.9 | ||
Transportation | 8.1 | ||
General Obligations | 7.4 | ||
Water & Sewer | 5.4 | ||
Utilities | 5.3 | ||
Public Facilities | 4.6 | ||
Miscellaneous | 4.5 | ||
Other | 11.3 | ||
100.0 | % | ||
* | As a percent of total investments. Please note that Fund holdings are as of September 30, 2005 and are subject to change. |
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 27
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 “CCC” may be modified by the addition of a plus (+) or minus (–) sign to show relative standings within the major rating categories.
AAA | — Bonds rated “AAA” have the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong. |
AA | — Bonds rated “AA” have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a 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 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 bonds in this category than in higher rated categories. |
BB, B,
CCC,
CC and C | — Bonds rated “BB”, “B”, “CCC”, “CC” and “C” are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents the lowest degree of speculation and “C” 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. |
D | — Bonds rated “D” are in default and payment of interest and/or repayment of principal is in arrears. |
Moody’s Investors Service (“Moody’s”) — Numerical modifiers 1, 2 and 3 may be applied to each generic rating from “Aa” to “Caa”, where 1 is the highest and 3 the lowest ranking 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 such issues. |
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 which 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 which suggest a susceptibility to impairment some time in the future. |
Baa | — Bonds rated “Baa” are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. |
Ba | — Bonds 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 therefore not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. |
B | — Bonds rated “B” are 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. |
Caa | — Bonds rated “Caa” are of poor standing. These may be in default, or present elements of danger may exist with respect to principal or interest. |
Ca | — Bonds rated “Ca” represent obligations which are speculative in a high degree. Such issues are often in default or have other marked short-comings. |
28 Smith Barney Muni Funds 2005 Semi-Annual Report
Bond Ratings (unaudited) (continued)
C | — Bonds rated “C” are the lowest class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. |
Fitch Rating Service (“Fitch”) — Ratings from “AAA” to “CC” may be modified by the addition of a plus (+) or minus (–) sign to show relative standings within the major rating categories.
AAA | — Bonds rated “AAA” have the highest rating assigned by Fitch. 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 a 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 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 bonds in this category than in higher rated categories. |
BB, B,
CCC
and CC | — Bonds rated “BB”, “B”, “CCC” and “CC” are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents a lower degree of speculation than “B”, 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. |
NR | — Indicates that the bond is not rated by Standard & Poor’s, Moody’s, or Fitch. |
Short-Term Security Ratings (unaudited)
SP-1 | — Standard & Poor’s highest rating indicating very strong or strong capacity to pay principal and interest; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign. |
A-1 | — Standard & Poor’s highest commercial paper and variable-rate demand obligation (VRDO) rating indicating that the degree of safety regarding timely payment is either overwhelming or very strong; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign. |
VMIG 1 | — Moody’s highest rating for issues having a demand feature — VRDO. |
P-1 | — Moody’s highest rating for commercial paper and for VRDO prior to the advent of the VMIG 1 rating. |
F-1 | — Fitch’s highest rating indicating the strongest capacity for timely payment of financial commitments; those issues determined to possess overwhelming strong credit feature are denoted with a plus (+) sign. |
Smith Barney Muni Funds 2005 Semi-Annual Report 29
Statement of Assets and Liabilities (September 30, 2005) (unaudited)
ASSETS: | ||||
Investments, at value (Cost — $736,012,838) | $ | 759,633,294 | ||
Interest receivable | 12,546,317 | |||
Receivable for Fund shares sold | 3,085,102 | |||
Receivable from broker — variation margin on open futures contracts | 806,250 | |||
Receivable for securities sold | 550,000 | |||
Prepaid expenses | 61,180 | |||
Total Assets | 776,682,143 | |||
LIABILITIES: | ||||
Payable for securities purchased | 3,380,000 | |||
Payable for Fund shares repurchased | 1,648,419 | |||
Due to custodian | 1,612,835 | |||
Distributions payable | 880,173 | |||
Management fee payable | 319,281 | |||
Distribution fees payable | 120,273 | |||
Transfer agent fees payable | 47,103 | |||
Deferred compensation payable | 11,233 | |||
Trustees’ fees payable | 2,797 | |||
Accrued expenses | 80,693 | |||
Total Liabilities | 8,102,807 | |||
Total Net Assets | $ | 768,579,336 | ||
NET ASSETS: | ||||
Par value (Note 6) | $ | 120,826 | ||
Paid-in capital in excess of par value | 799,313,879 | |||
Undistributed net investment income | 233,129 | |||
Accumulated net realized loss on investments and futures contracts | (60,375,673 | ) | ||
Net unrealized appreciation on investments and futures contracts | 29,287,175 | |||
Total Net Assets | $ | 768,579,336 | ||
Shares Outstanding: | ||||
Class A | 70,219,806 | |||
Class B | 950,275 | |||
Class C | 45,962,031 | |||
Class O | 3,694,222 | |||
Net Asset Value: | ||||
Class A (and redemption price) | $6.36 | |||
Class B * | $6.35 | |||
Class C (and redemption price) | $6.37 | |||
Class O * | $6.37 | |||
Maximum Public Offering Price Per Share: | ||||
Class A (based on maximum sales charge of 2.00%) | $6.49 | |||
* | Redemption price is NAV of Class B and O shares reduced by 5.00% and 1.00% CDSC, respectively if shares are redeemed within one year from purchase payment (See Note 2). |
See Notes to Financial Statements.
30 Smith Barney Muni Funds 2005 Semi-Annual Report
Statement of Operations (For the six months ended September 30, 2005) (unaudited)
INVESTMENT INCOME: | ||||
Interest | $ | 18,416,467 | ||
EXPENSES: | ||||
Management fee (Note 2) | 1,962,257 | |||
Distribution fees (Notes 2 and 4) | 1,577,922 | |||
Transfer agent fees (Notes 2 and 4) | 84,601 | |||
Custody fees | 47,206 | |||
Registration fees | 38,936 | |||
Shareholder reports (Note 4) | 31,098 | |||
Insurance | 15,034 | |||
Legal fees | 12,579 | |||
Audit and tax | 10,710 | |||
Trustees’ fees | 6,177 | |||
Miscellaneous expenses | 5,877 | |||
Total Expenses | 3,792,397 | |||
Net Investment Income | 14,624,070 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS (NOTES 1 AND 3): | ||||
Net Realized Loss From: | ||||
Investments | (1,137,003 | ) | ||
Futures contracts | (12,942,699 | ) | ||
Net Realized Loss | (14,079,702 | ) | ||
Change in Net Unrealized Appreciation/Depreciation From: | ||||
Investments | 2,820,533 | |||
Futures contracts | 4,687,886 | |||
Change in Net Unrealized Appreciation/Depreciation | 7,508,419 | |||
Net Loss on Investments and Futures Contracts | (6,571,283 | ) | ||
Increase in Net Assets From Operations | $ | 8,052,787 | ||
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 31
Statements of Changes in Net Assets
For the six months ended September 30, 2005 (unaudited) and the year ended March 31, 2005 | ||||||||
September 30 | March 31 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 14,624,070 | $ | 29,983,145 | ||||
Net realized loss | (14,079,702 | ) | (11,889,662 | ) | ||||
Change in net unrealized appreciation/depreciation | 7,508,419 | (8,389,733 | ) | |||||
Increase in Net Assets From Operations | 8,052,787 | 9,703,750 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 1 AND 5): | ||||||||
Net investment income | (15,383,605 | ) | (29,762,364 | ) | ||||
Decrease in Net Assets From | (15,383,605 | ) | (29,762,364 | ) | ||||
FUND SHARE TRANSACTIONS (NOTE 6): | ||||||||
Net proceeds from sale of shares | 179,518,013 | 322,569,099 | ||||||
Reinvestment of distributions | 9,898,960 | 18,426,303 | ||||||
Cost of shares repurchased | (183,237,086 | ) | (324,434,811 | ) | ||||
Increase in Net Assets From Fund Share Transactions | 6,179,887 | 16,560,591 | ||||||
Decrease in Net Assets | (1,150,931 | ) | (3,498,023 | ) | ||||
NET ASSETS: | ||||||||
Beginning of period | 769,730,267 | 773,228,290 | ||||||
End of period* | $ | 768,579,336 | $ | 769,730,267 | ||||
* Includes undistributed net investment income of: | $233,129 | $992,664 | ||||||
See Notes to Financial Statements.
32 Smith Barney Muni Funds 2005 Semi-Annual Report
For a share of each class of beneficial interest outstanding throughout each year ended March 31, unless otherwise noted:
Class A Shares(1) | 2005(2) | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||
Net Asset Value, Beginning of Period | $6.42 | $6.59 | $6.57 | $6.40 | $6.51 | $6.3 | 6 | |||||||||||
Income (Loss) From Operations: | ||||||||||||||||||
Net investment income | 0.13 | 0.28 | 0.29 | 0.31 | 0.34 | (3) | 0.34 | |||||||||||
Net realized and unrealized gain (loss) | (0.06 | ) | (0.17 | ) | 0.01 | 0.17 | (0.10 | )(3) | 0.16 | |||||||||
Total Income From Operations | 0.07 | 0.11 | 0.30 | 0.48 | 0.24 | 0.50 | ||||||||||||
Less Distributions From: | ||||||||||||||||||
Net investment income | (0.13 | ) | (0.28 | ) | (0.28 | ) | (0.30 | ) | (0.35 | ) | (0.35 | ) | ||||||
In excess of net investment income | — | — | — | (0.01 | ) | (0.00 | )* | — | ||||||||||
Total Distributions | (0.13 | ) | (0.28 | ) | (0.28 | ) | (0.31 | ) | (0.35 | ) | (0.35 | ) | ||||||
Net Asset Value, End of Period | $6.36 | $6.42 | $6.59 | $6.57 | $6.40 | $6.51 | ||||||||||||
Total Return(4) | 1.16 | % | 1.68 | % | 4.67 | % | 7.64 | % | 3.70 | % | 8.06 | % | ||||||
Net Assets, End of Period (millions) | $446 | $403 | $376 | $364 | $284 | $222 | ||||||||||||
Ratios to Average Net Assets: | ||||||||||||||||||
Gross expenses | 0.70 | %(5) | 0.70 | % | 0.70 | % | 0.75 | % | 0.72 | % | 0.72 | % | ||||||
Net expenses(6) | 0.70 | (5) | 0.69 | (7) | 0.70 | 0.75 | 0.72 | 0.72 | ||||||||||
Net investment income | 3.99 | (5) | 4.31 | 4.36 | 4.64 | 5.26 | (3) | 5.41 | ||||||||||
Portfolio Turnover Rate | 7 | % | 19 | % | 27 | % | 57 | % | 53 | % | 49 | % | ||||||
(1) | Per share amounts have been calculated using the average shares method. |
(2) | For the six months ended September 30, 2005 (unaudited). |
(3) | Effective April 1, 2001, the Fund adopted a change in the accounting method that requires the Fund to amortize premiums and accrete all discounts. Without the adoption of this change, for the year ended March 31, 2002, the ratio of net investment income to average net assets would have been 5.24%. In addition, the impact of this change to net investment income and net realized and unrealized loss was less than $0.01 per share. Per share information, ratios and supplemental data for the periods prior to April 1, 2001 have not been restated to reflect this change in presentation. |
(4) | Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns for periods of less than one year are not annualized. |
(5) | Annualized. |
(6) | As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 0.85%. |
(7) | The investment manager voluntarily waived a portion of its management fee and reimbursed the Fund for expenses. |
* | Amount represents less than $0.01 per share. |
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 33
Financial Highlights (continued)
For a share of each class of beneficial interest outstanding throughout each year ended March 31, unless otherwise noted:
Class B Shares(1) | 2005(2) | 2005 | 2004 | 2003(3) | ||||||||||||
Net Asset Value, Beginning of Period | $ | 6.41 | $ | 6.59 | $ | 6.57 | $ | 6.57 | ||||||||
Income (Loss) From Operations: | ||||||||||||||||
Net investment income | 0.11 | 0.25 | 0.26 | 0.05 | ||||||||||||
Net realized and unrealized gain (loss) | (0.05 | ) | (0.18 | ) | 0.01 | 0.02 | ||||||||||
Total Income From Operations | 0.06 | 0.07 | 0.27 | 0.07 | ||||||||||||
Less Distributions From: | ||||||||||||||||
Net investment income | (0.12 | ) | (0.25 | ) | (0.25 | ) | (0.07 | ) | ||||||||
In excess of net investment income | — | — | — | (0.00 | )* | |||||||||||
Total Distributions | (0.12 | ) | (0.25 | ) | (0.25 | ) | (0.07 | ) | ||||||||
Net Asset Value, End of Period | $ | 6.35 | $ | 6.41 | $ | 6.59 | $ | 6.57 | ||||||||
Total Return(4) | 0.90 | % | 1.03 | % | 4.18 | % | 1.07 | % | ||||||||
Net Assets, End of Period (000s) | $6,038 | $6,925 | $6,401 | $4,084 | ||||||||||||
Ratios to Average Net Assets: | ||||||||||||||||
Gross expenses | 1.23 | %(5) | 1.22 | % | 1.18 | % | 1.31 | %(5) | ||||||||
Net expenses(6) | 1.23 | (5) | 1.21 | (7) | 1.18 | 1.31 | (5) | |||||||||
Net investment income | 3.46 | (5) | 3.79 | 3.87 | 4.14 | (5) | ||||||||||
Portfolio Turnover Rate | 7 | % | 19 | % | 27 | % | 57 | % | ||||||||
(1) | Per share amounts have been calculated using the average shares method. |
(2) | For the six months ended September 30, 2005 (unaudited). |
(3) | For the period January 13, 2003 (inception date) to March 31, 2003. |
(4) | Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns for periods of less than one year are not annualized. |
(5) | Annualized. |
(6) | As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.35%. |
(7) | The investment manager voluntarily waived a portion of its management fee. |
* | Amount represents less than $0.01 per share. |
See Notes to Financial Statements.
34 Smith Barney Muni Funds 2005 Semi-Annual Report
Financial Highlights (continued)
For a share of each class of beneficial interest outstanding throughout each year ended March 31, unless otherwise noted:
Class C Shares(1)(2) | 2005(3) | 2005 | 2004 | 2003 | 2002(4) | |||||||||||||||
Net Asset Value, Beginning of Period | $6.43 | $6.60 | $6.58 | $6.41 | $6.46 | |||||||||||||||
Income (Loss) From Operations: | ||||||||||||||||||||
Net investment income | 0.11 | 0.24 | 0.25 | 0.27 | 0.08 | (5) | ||||||||||||||
Net realized and unrealized gain (loss) | (0.06 | ) | (0.17 | ) | 0.01 | 0.17 | (0.04 | )(5) | ||||||||||||
Total Income From Operations | 0.05 | 0.07 | 0.26 | 0.44 | 0.04 | |||||||||||||||
Less Distributions From: | ||||||||||||||||||||
Net investment income | (0.11 | ) | (0.24 | ) | (0.24 | ) | (0.26 | ) | (0.09 | ) | ||||||||||
In excess of net investment income | — | — | — | (0.01 | ) | — | ||||||||||||||
Total Distributions | (0.11 | ) | (0.24 | ) | (0.24 | ) | (0.27 | ) | (0.09 | ) | ||||||||||
Net Asset Value, End of Period | $ | 6.37 | $ | 6.43 | $ | 6.60 | $ | 6.58 | $ | 6.41 | ||||||||||
Total Return(6) | 0.84 | % | 1.05 | % | 4.02 | % | 6.99 | % | 0.58 | % | ||||||||||
Net Assets, End of Period (millions) | $293 | $327 | $351 | $322 | $184 | |||||||||||||||
Ratios to Average Net Assets: | ||||||||||||||||||||
Gross expenses | 1.33 | %(7) | 1.33 | % | 1.30 | % | 1.35 | % | 1.32 | %(7) | ||||||||||
Net expenses(8) | 1.33 | (7) | 1.32 | (9) | 1.30 | 1.35 | 1.32 | (7) | ||||||||||||
Net investment income | 3.36 | (7) | 3.68 | 3.75 | 4.02 | 4.68 | (5)(7) | |||||||||||||
Portfolio Turnover Rate | 7 | % | 19 | % | 27 | % | 57 | % | 53 | % | ||||||||||
(1) | Per share amounts have been calculated using the average shares method. |
(2) | On April 29, 2004, Class L shares were renamed as Class C shares. |
(3) | For the six months ended September 30, 2005 (unaudited). |
(4) | For the period December 19, 2001 (inception date) to March 31, 2002. |
(5) | Effective April 1, 2001, the Fund adopted a change in the accounting method that requires the Fund to amortize premiums and accrete all discounts. Without the adoption of this change, for the year ended March 31, 2002, the ratio of net investment income to average net assets would have been 4.65%. In addition, the impact of this change to net investment income and net realized and unrealized loss was less than $0.01 per share. |
(6) | Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns for periods of less than one year are not annualized. |
(7) | Annualized. |
(8) | As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.45%. |
(9) | The investment manager voluntarily waived a portion of its management fee. |
See Notes to Financial Statements.
Smith Barney Muni Funds 2005 Semi-Annual Report 35
Financial Highlights (continued)
For a share of each class of beneficial interest outstanding throughout each year ended March 31, unless otherwise noted:
Class O Shares(1) | 2005(2) | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.42 | $ | 6.60 | $ | 6.58 | $ | 6.41 | $ | 6.52 | $ | 6.37 | ||||||||||||
Income (Loss) From Operations: | ||||||||||||||||||||||||
Net investment income | 0.12 | 0.26 | 0.27 | 0.29 | 0.33 | (3) | 0.33 | |||||||||||||||||
Net realized and unrealized gain (loss) | (0.04 | ) | (0.18 | ) | 0.02 | 0.18 | (0.11 | )(3) | 0.15 | |||||||||||||||
Total Income From Operations | 0.08 | 0.08 | 0.29 | 0.47 | 0.22 | 0.48 | ||||||||||||||||||
Less Distributions From: | ||||||||||||||||||||||||
Net investment income | (0.13 | ) | (0.26 | ) | (0.27 | ) | (0.29 | ) | (0.33 | ) | (0.33 | ) | ||||||||||||
In excess of net investment income | — | — | — | (0.01 | ) | (0.00 | )* | — | ||||||||||||||||
Total Distributions | (0.13 | ) | (0.26 | ) | (0.27 | ) | (0.30 | ) | (0.33 | ) | (0.33 | ) | ||||||||||||
Net Asset Value, End of Period | $ | 6.37 | $ | 6.42 | $ | 6.60 | $ | 6.58 | $ | 6.41 | $ | 6.52 | ||||||||||||
Total Return(4) | 1.19 | % | 1.27 | % | 4.42 | % | 7.38 | % | 3.48 | % | 7.82 | % | ||||||||||||
Net Assets, End of Period (000s) | $23,520 | $26,308 | $31,414 | $35,079 | $39,009 | $32,157 | ||||||||||||||||||
Ratios to Average Net Assets: | ||||||||||||||||||||||||
Gross expenses | 0.93 | %(5) | 0.93 | % | 0.93 | % | 0.98 | % | 0.95 | % | 0.95 | % | ||||||||||||
Net expenses(6) | 0.93 | (5) | 0.93 | (7) | 0.93 | 0.98 | 0.95 | 0.95 | ||||||||||||||||
Net investment income | 3.76 | (5) | 4.08 | 4.13 | 4.42 | 5.04 | (3) | 5.18 | ||||||||||||||||
Portfolio Turnover Rate | 7 | % | 19 | % | 27 | % | 57 | % | 53 | % | 49 | % | ||||||||||||
(1) | Per share amounts have been calculated using the average shares method. |
(2) | For the six months ended September 30, 2005 (unaudited). |
(3) | Effective April 1, 2001, the Fund adopted a change in the accounting method that requires the Fund to amortize premiums and accrete all discounts. Without the adoption of this change, for the year ended March 31, 2002, those amounts would have been $0.32, $(0.10), and 5.01% for net investment income, net realized and unrealized loss and the ratio of net investment income to average net assets, respectively. Per share information, ratios and supplemental data for the periods prior to April 1, 2001 have not been restated to reflect this change in presentation. |
(4) | Performance figures may reflect voluntary fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of voluntary fee waivers and/or expense reimbursements, the total return would be lower. Total returns for periods of less than one year are not annualized. |
(5) | Annualized. |
(6) | As a result of a voluntary expense limitation, the ratio of expenses to average net assets will not exceed 1.05%. |
(7) | The investment manager voluntarily waived a portion of its management fee. |
* | Amount represents less than $0.01 per share. |
See Notes to Financial Statements.
36 Smith Barney Muni Funds 2005 Semi-Annual Report
Notes to Financial Statements (unaudited)
1. | Organization and Significant Accounting Policies |
The Limited Term Portfolio (the “Fund”), is a separate diversified investment fund of Smith Barney Muni Funds (“Trust”), a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940 (“1940 Act”), as amended, as an open-end management investment company.
The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). 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.
(a) Investment Valuation. Securities are valued at the mean between the bid and asked prices provided by an independent pricing service that are based on transactions in municipal obligations, quotations from municipal bond dealers, market transactions in comparable securities and various relationships between securities. Securities for which market quotations are not readily available or are determined not to reflect fair value, will be valued in good faith by or under the direction of the Fund’s Board of Trustees. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates value.
(b) Financial Futures Contracts. The Fund may enter into financial futures contracts to hedge against the economic impact of adverse changes in the market value of portfolio securities due to changes in interest rates, as a substitute for buying or selling securities or as a cash flow management technique. Upon entering into a financial futures contract, the Fund is required to deposit cash or securities as initial margin. Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received by the Fund each day, depending on the daily fluctuation in the value of the underlying financial instruments. The Fund recognizes an unrealized gain or loss equal to the daily variation margin. When the financial futures contracts are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Fund’s basis in the contracts.
The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Fund could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
(c) Security Transactions and Investment Income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults on an expected interest payment, the Fund’s policy is to generally halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default.
Smith Barney Muni Funds 2005 Semi-Annual Report 37
Notes to Financial Statements (unaudited) (continued)
(d) Distributions to Shareholders. Distributions from net investment income, if any, are declared and paid on a monthly basis. The Fund intends to satisfy conditions that will enable interest from municipals securities, which is exempt from federal and certain state income taxes, to retain such tax-exempt status when distributed to the shareholders of the Fund. Distributions of net realized gains, if any, are taxable and are declared at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(e) Class Accounting. Investment income, common expenses and realized/unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that class.
(f) Federal and Other Taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute substantially all of its taxable income and net realized gains on investments, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Fund’s financial statements.
(g) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share.
2. | Management Agreement and Other Transactions with Affiliates |
Smith Barney Fund Management LLC (“SBFM”), an indirect wholly-owned subsidiary of Citigroup Inc. (“Citigroup”), acts as investment manager to the Fund. The Fund pays SBFM a management fee calculated at an annual rate of 0.50% of the Fund’s average daily net assets. This fee is calculated daily and paid monthly.
During the six months ended September 30, 2005, the Fund’s Class A, B, C, O and Y shares had voluntary expense limitations in place of 0.85%, 1.35%, 1.45%, 1.05% and 0.70%, respectively. These expense limitations can be terminated at any time by SBFM. On June 28, 2005 Class Y shares were redeemed.
Citicorp Trust Bank, fsb. (“CTB”), another subsidiary of Citigroup, acts as the Fund’s transfer agent. PFPC Inc. (“PFPC”) acts as the Fund’s sub-transfer agent. CTB receives account fees and asset-based fees that vary according to the size and type of account. PFPC is responsible for shareholder recordkeeping and financial processing for all shareholder accounts and is paid by CTB. For the six months ended September 30, 2005, the Fund paid transfer agent fees of $59,526 to CTB.
Citigroup Global Markets Inc. (“CGM”), another indirect wholly-owned subsidiary of Citigroup, acts as the Fund’s distributor.
There is a maximum sales charge of 2.00% for Class A shares. There is a contingent deferred sales charge (“CDSC”) of 5.00% on Class B shares, which applies if redemption occurs within one year from purchase payment and declines thereafter by 1.00% per year until no CDSC is incurred. There is a CDSC of 1.00% on Class A shares, which applies if redemption occurs within one year from purchase payment. This CDSC only applies to
38 Smith Barney Muni Funds 2005 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
those purchases of Class A shares, which, when combined with current holdings of Class A shares, equal or exceed $500,000 in the aggregate. These purchases do not incur an initial sales charge. Class O shares also have a 1.00% CDSC, which applies if redemption occurs within one year from purchase payment.
For the six months ended September 30, 2005, CGM received sales charges of approximately $120,000 on sales of the Fund’s Class A shares. In addition, for the six months ended September 30, 2005, CDSCs paid to CGM were approximately:
Class A | Class B | Class O | ||||||||
CDSCs | $ | 8,000 | $ | 5,000 | $ | 0 | † | |||
† | Amount represents less than $1,000. |
The Fund has adopted an unfunded, non-qualified deferred compensation Plan (the “Plan”) which allows non-interested trustees (“Trustee”) to defer the receipt of all or a portion of the trustees’ fees earned until a later date specified by the Trustee. The deferred fees earn a return based on notional investments selected by the Trustee. The balance of the deferred fees payable may change depending upon the investment performance. Any gains earned or losses incurred in the deferred balances are reported in the statement of operations under trustee’s fees. Under the Plan, deferred fees are considered a general obligation of the Fund and any payments made pursuant to the Plan will be made from the Fund’s general assets.
As of September 30, 2005, the Fund has accrued $11,233 as deferred compensation payable.
Certain officers and one Trustee of the Trust are employees of Citigroup or its affiliates and do not receive compensation from the Trust.
3. | Investments |
During the six months ended September 30, 2005, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:
Purchases | $ | 68,630,547 | |
Sales | 48,839,668 | ||
At September 30, 2005, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:
Gross unrealized appreciation | $ | 28,348,212 | ||
Gross unrealized depreciation | (4,727,756 | ) | ||
Net unrealized appreciation | $ | 23,620,456 | ||
Smith Barney Muni Funds 2005 Semi-Annual Report 39
Notes to Financial Statements (unaudited) (continued)
At September 30, 2005, the Fund had the following open futures contracts:
Number of Contracts | Expiration Date | Basis Value | Market Value | Unrealized Gain | |||||||||
Contracts to Sell: | |||||||||||||
U.S. Treasury Bonds | 2,150 | 12/05 | $ | 251,640,156 | $ | 245,973,437 | $ | 5,666,719 | |||||
4. | Class Specific Expenses |
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its Class A, B, C and O shares calculated at the annual rate of 0.15% of the average daily net assets of each respective class. The Fund also pays a distribution fee with respect to its Class B, C and O shares calculated at the annual rate of 0.50%, 0.60% and 0.20% of the average daily net assets of each class, respectively. For the six months ended September 30, 2005, total Distribution fees, which are accrued daily and paid monthly, were as follows:
Class A | Class B | Class C | Class O | |||||||||
Distribution Fees | $ | 324,898 | $ | 21,983 | $ | 1,187,371 | $ | 43,670 | ||||
CGM has agreed to reimburse the Fund for any amount which exceeds the payments made by the Fund with respect to the Distribution Plan for Class A shares over the cumulative unreimbursed amounts spent by CGM in performing its services under the Distribution Plan. During the six months ended September 30, 2005, no reimbursement was required.
For the six months ended September 30, 2005, total Transfer Agent fees were as follows:
Class A | Class B | Class C | Class O | Class Y† | |||||||||||
Transfer Agent Fees | $ | 26,460 | $ | 1,074 | $ | 52,587 | $ | 4,472 | $ | 8 | |||||
For the six months ended September 30, 2005, total Shareholder Reports expenses were as follows:
Class A | Class B | Class C | Class O | Class Y† | |||||||||||
Shareholder Reports Expenses | $ | 10,785 | $ | 601 | $ | 18,617 | $ | 1,016 | $ | 79 | |||||
† | On June 28, 2005 Class Y shares were redeemed. |
40 Smith Barney Muni Funds 2005 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
5. | Distributions to Shareholders by Class |
Net Investment Income | Six Months Ended September 30, 2005 | Year Ended March 31, 2005 | ||||
Class A | $ | 9,114,908 | $ | 16,345,165 | ||
Class B | 122,542 | 259,591 | ||||
Class C(1) | 5,587,063 | 11,653,002 | ||||
Class O | 484,553 | 1,174,477 | ||||
Class Y(2) | 74,539 | 330,129 | ||||
Total | $ | 15,383,605 | $ | 29,762,364 | ||
(1) | On April 29, 2004, Class L shares were renamed as Class C shares. |
(2) | On June 28, 2005 Class Y shares were redeemed. |
6. | Shares of Beneficial Interest |
At September 30, 2005, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.001 per share. The Fund has the ability to issue multiple classes of shares. Each share of a class represents an identical interest in the Fund and has the same rights, except that each class bears certain direct expenses, including those specifically related to the distribution of its shares. Class O shares are available for purchase only by former Class C shareholders.
Transactions in shares of each class of beneficial interest of the Fund were as follows:
Six Months Ended September 30, 2005 | Year Ended March 31, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class A | ||||||||||||||
Shares sold | 16,700,796 | $ | 106,808,119 | 21,929,497 | $ | 142,972,758 | ||||||||
Shares issued on reinvestment | 869,077 | 5,542,484 | 1,421,780 | 9,258,193 | ||||||||||
Shares repurchased | (10,073,704 | ) | (64,316,603 | ) | (17,717,389 | ) | (115,577,469 | ) | ||||||
Net Increase | 7,496,169 | $ | 48,034,000 | 5,633,888 | $ | 36,653,482 | ||||||||
Class B | ||||||||||||||
Shares sold | 76,864 | $ | 492,349 | 391,201 | $ | 2,558,417 | ||||||||
Shares issued on reinvestment | 7,442 | 47,450 | 19,206 | 125,173 | ||||||||||
Shares repurchased | (213,722 | ) | (1,363,122 | ) | (302,537 | ) | (1,974,825 | ) | ||||||
Net Increase (Decrease) | (129,416 | ) | $ | (823,323 | ) | 107,870 | $ | 708,765 | ||||||
Class C(1) | ||||||||||||||
Shares sold | 11,266,346 | $ | 72,211,176 | 27,059,844 | $ | 176,727,000 | ||||||||
Shares issued on reinvestment | 628,951 | 4,018,331 | 1,276,530 | 8,327,627 | ||||||||||
Shares repurchased | (16,862,961 | ) | (107,931,194 | ) | (30,584,237 | ) | (199,996,660 | ) | ||||||
Net Decrease | (4,967,664 | ) | $ | (31,701,687 | ) | (2,247,863 | ) | $ | (14,942,033 | ) | ||||
Smith Barney Muni Funds 2005 Semi-Annual Report 41
Notes to Financial Statements (unaudited) (continued)
Six Months Ended September 30, 2005 | Year Ended March 31, 2005 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
Class O | ||||||||||||||
Shares sold | 994 | $ | 6,369 | 47,479 | $ | 310,849 | ||||||||
Shares issued on reinvestment | 45,513 | 290,695 | 106,214 | 692,892 | ||||||||||
Shares repurchased | (447,032 | ) | (2,862,476 | ) | (822,147 | ) | (5,362,591 | ) | ||||||
Net Decrease | (400,525 | ) | $ | (2,565,412 | ) | (668,454 | ) | $ | (4,358,850 | ) | ||||
Class Y(2) | ||||||||||||||
Shares sold | — | — | 11 | $ | 75 | |||||||||
Shares issued on reinvestment | — | — | 3,432 | 22,418 | ||||||||||
Shares repurchased | (1,061,804 | ) | $ | (6,763,691 | ) | (231,852 | ) | (1,523,266 | ) | |||||
Net Decrease | (1,061,804 | ) | $ | (6,763,691 | ) | (228,409 | ) | $ | (1,500,773 | ) | ||||
(1) | On April 29, 2004, Class L shares were renamed as Class C shares. |
(2) | On June 28, 2005 Class Y shares were redeemed. |
7. | Capital Loss Carryforward |
As of March 31, 2005, the Fund had the following net capital loss carryforwards remaining:
Year of Expiration | Amount | |||
3/31/2008 | $ | (9,495,115 | ) | |
3/31/2009 | (5,514,817 | ) | ||
3/31/2010 | (214,462 | ) | ||
3/31/2011 | (5,537,751 | ) | ||
3/31/2012 | (2,616,935 | ) | ||
3/31/2013 | (21,747,281 | ) | ||
$ | (45,126,361 | ) | ||
These amounts will be available to offset any future taxable capital gains.
8. | Regulatory Matters |
On May 31, 2005, the U.S. Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against SBFM and CGM relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds (the “Funds”).
The SEC order finds that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940 (“Advisers Act”). Specifically, the order finds that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit
42 Smith Barney Muni Funds 2005 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
that includes the fund’s investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange, among other things, for a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also finds that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all of the transfer agent functions, and the suggestion that the proposed arrangement was in the Funds’ best interests and that no viable alternatives existed. SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.
The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order requires Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan prepared by Citigroup and submitted for approval by the SEC. The order also requires that transfer agency fees received from the Funds since December 1, 2004 less certain expenses be placed in escrow and provides that a portion of such fees may be subsequently distributed in accordance with the terms of the order.
The order requires SBFM to recommend a new transfer agent contract to the Fund boards within 180 days of the entry of the order; if a Citigroup affiliate submits a proposal to serve as transfer agent or sub-transfer agent, an independent monitor must be engaged at the expense of SBFM and CGM to oversee a competitive bidding process. Under the order, Citigroup also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004. That policy, as amended, among other things, requires that when requested by a Fund board, CAM will retain at its own expense an independent consulting expert to advise and assist the board on the selection of certain service providers affiliated with Citigroup.
At this time, there is no certainty as to how the proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. Although there can be no assurance, Citigroup does not believe that this matter will have a material adverse effect on the Funds.
9. | Legal Matters |
Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC described in Note 8. The complaints seek injunctive relief and compensatory and punitive
Smith Barney Muni Funds 2005 Semi-Annual Report 43
Notes to Financial Statements (unaudited) (continued)
damages, removal of SBFM as the advisor for the Smith Barney family of funds, rescission of the Funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses.
On October 5, 2005, a motion to consolidate the five actions and any subsequently-filed, related action was filed. That motion contemplates that a consolidated amended complaint alleging substantially similar causes of action will be filed in the future.
As of the date of this report, CAM believes that resolution of the pending lawsuit will not have a material effect on the financial position or results of operations of the Funds or the ability of the Advisers and their affiliates to continue to render services to the Funds under their respective contracts.
* * *
Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against Citigroup Global Markets Inc. (the “Distributor”) and a number of its affiliates, including SBFM and Salomon Brothers Asset Management Inc (the “Advisers”), substantially all of the mutual funds managed by the Advisers, including the Fund (the “Funds”), and directors or trustees of the Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGM created various undisclosed incentives for its brokers to sell Smith Barney and Salomon Brothers funds. In addition, according to the complaints, the Advisers caused the Funds to pay excessive brokerage commissions to CGM for steering clients towards proprietary funds. The complaints also alleged that the defendants breached their fiduciary duty to the Funds by improperly charging Rule l2b-1 fees and by drawing on fund assets to make undisclosed payments of soft dollars and excessive brokerage commissions. The complaints also alleged that the Funds failed to adequately disclose certain of the allegedly wrongful conduct. The complaints sought injunctive relief and compensatory and punitive damages, rescission of the Funds’ contracts with the Advisers, recovery of all fees paid to the Advisers pursuant to such contracts and an award of attorneys’ fees and litigation expenses.
On December 15, 2004, a consolidated amended complaint (the “Complaint”) was filed alleging substantially similar causes of action. While the lawsuit is in its earliest stages, to the extent that the Complaint purports to state causes of action against the Funds, CAM believes the Funds have significant defenses to such allegations, which the Funds intend to vigorously assert in responding to the Complaint.
Additional lawsuits arising out of theses circumstances and presenting similar allegations and requests for relief may be filed against the Defendants in the future.
As of the date of this report, CAM and the Funds believe that the resolution of the pending lawsuit will not have a material effect on the financial position or results of operations of the Funds or the ability of the Advisers and their affiliates to continue to render services to the Funds under their respective contracts.
The Defendants have moved to dismiss the Complaint. Those motions are pending before the court.
44 Smith Barney Muni Funds 2005 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
10. | Other Matters |
On June 24, 2005, Citigroup announced that it has signed a definitive agreement under which Citigroup will sell substantially all of its worldwide asset management business to Legg Mason, Inc. (“Legg Mason”).
As part of this transaction, SBFM (the “Manager”), currently an indirect wholly owned subsidiary of Citigroup, would become an indirect wholly owned subsidiary of Legg Mason. The Manager is the investment manager to the Fund.
The transaction is subject to certain regulatory approvals, as well as other customary conditions to closing. Subject to such approvals and the satisfaction of the other conditions, Citigroup expects the transaction to be completed later this year.
Under the Investment Company Act of 1940, consummation of the transaction will result in the automatic termination of the investment management contract between the Fund and the Manager. Therefore, the Fund’s Board of Trustees has approved a new investment management contract between the Fund and the Manager to become effective upon the closing of the sale to Legg Mason. The new investment management contract has been presented to the shareholders of the Fund for their approval.
The Fund has received information from CAM concerning SBFM, an investment advisory company that is part of CAM. The information received from CAM is as follows:
On September 16, 2005, the staff of the Securities and Exchange Commission (the “Commission”) informed SBFM that the staff is considering recommending that the Commission institute administrative proceedings against SBFM for alleged violations of Sections 19(a) and 34(b) of the Investment Company Act (and related Rule 19a-1). The notification is a result of an industry wide inspection undertaken by the Commission and is based upon alleged deficiencies in disclosures regarding dividends and distributions paid to shareholders of certain funds. In connection with the contemplated proceedings, the staff may seek a cease and desist order and/or monetary damages from SBFM.
Although there can be no assurance, SBFM believes that this matter is not likely to have a material adverse effect on the Fund or SBFM’s ability to perform investment advisory services relating to the Fund.
The Commission staff’s recent notification will not affect the sale by Citigroup of substantially all of CAM’s worldwide business to Legg Mason, Inc., which Citigroup continues to expect will occur in the fourth quarter of this year.
Smith Barney Muni Funds 2005 Semi-Annual Report 45
Board Approval of Management Agreement (unaudited)
Background
The members of the Board of Smith Barney Muni Funds — Limited Term Portfolio (the “Fund”), including the Fund’s independent, or non-interested, Board members (the “Independent Board Members”), received information from the Fund’s manager (the “Manager”) to assist them in their consideration of the Fund’s management agreement (the “Management Agreement”). The Board received and considered a variety of information about the Manager and the Fund’s distributor(s), as well as the advisory and distribution arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below.
The presentation made to the Board encompassed the Fund and all the funds for which the Board has responsibility. Some funds overseen by the Board have an investment advisory agreement and an administration agreement and some funds have an investment management agreement that encompasses both functions. The discussion below covers both advisory and administrative functions being rendered by the Manager whether a fund has a single agreement in place or both an advisory and administration agreement. The terms “Management Agreement”, “Contractual Management Fee” and “Actual Management Fee” are used in a similar manner to refer to both advisory and administration agreements and their related fees whether a fund has a single agreement or separate agreements in place.
Board Approval of Management Agreement
In approving the Management Agreement the Fund’s Board, including the Independent Board Members, considered the following factors:
Nature, Extent and Quality of the Services under the Management Agreement
The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager under the Management Agreement during the past year. The Board also received a description of the administrative and other services rendered to the Fund and its shareholders by the Manager. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager about the management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager took into account the Board’s knowledge and familiarity gained as Board members of funds in the Citigroup Asset Management (“CAM”) fund complex, including the scope and quality of the Manager’s investment management and other capabilities and the quality of its administrative and other services. The Board observed that the scope of services provided by the Manager had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Fund’s expanded compliance programs. The Board also considered the Manager’s response to recent regulatory compliance issues affecting it and the CAM fund complex. The Board reviewed information received from the Manager regarding the implementation to date of the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of 1940.
46 Smith Barney Muni Funds 2005 Semi-Annual Report
Board Approval of Management Agreement
(unaudited) (continued)
The Board reviewed the qualifications, backgrounds and responsibilities of the Fund’s senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the degree to which the Manager implemented organizational changes to improve investment results and the services provided to the CAM fund complex. The Board noted that the Manager’s Office of the Chief Investment Officer, composed of the senior officers of the investment teams managing the funds in the CAM complex, participates in reporting to the Board on investment matters. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources available to CAM and its parent organization, Citigroup Inc.
The Board also considered the Manager’s brokerage policies and practices, the standards applied in seeking best execution, the Manager’s policies and practices regarding soft dollars, the use of a broker affiliated with the Manager and the existence of quality controls applicable to brokerage allocation procedures. In addition, management also reported to the Board on, among other things, its business plans, recent organizational changes and portfolio manager compensation plan.
At the Board’s request following the conclusion of the 2004 contract continuance discussions, the Manager prepared and provided to the Board in connection with the 2005 discussions an analysis of complex-wide management fees, which, among other things, set out a proposed framework of fees based on asset classes. The Board engaged the services of independent consultants to assist it in evaluating the Fund’s fees generally and within the context of the framework.
The Board concluded that, overall, the nature, extent and quality of services provided (and expected to be provided) under the Management Agreement was acceptable.
Fund Performance
The Board received and considered performance information for the Fund as well as for a group of funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in the Performance Universe. The Board also noted that it had received and discussed with management information throughout the year at periodic intervals comparing the Fund’s performance against its benchmark(s).
The information comparing the Fund’s performance to that of its Performance Universe, consisting of all retail and institutional funds classified as “intermediate municipal debt funds” by Lipper, showed that the Fund’s performance for the 10-year period was below the median, while the Fund’s performance for the 1-year period was better than the median and the Fund’s performance for the 3- and 5-year periods was within the median range. Based on their review, the Board concluded that the Fund’s relative investment performance was acceptable.
Smith Barney Muni Funds 2005 Semi-Annual Report 47
Board Approval of Management Agreement (unaudited) (continued)
Management Fees and Expense Ratios
The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management services provided by the Manager. The Board also reviewed and considered whether fee waiver and/or expense reimbursement arrangements are currently in place for the Fund and considered the actual fee rate (after taking any waivers and reimbursements into account) (the “Actual Management Fee”) and whether any fee waivers and reimbursements could be discontinued.
Additionally, the Board received and considered information comparing the Fund’s Contractual Management Fees and Actual Management Fee and the Fund’s overall expenses with those of funds in both the relevant expense group and a broader group of funds, each selected and provided by Lipper. The Board also reviewed information regarding fees charged by the Manager to other U.S. clients investing primarily in an asset class similar to that of the Fund including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in scope of services provided to the Fund and to these other clients, noting that the Fund is provided with administrative services, office facilities, Fund officers (including the Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other Fund providers. The Board considered the fee comparisons in light of the differences required to manage these different types of accounts. The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a proposed framework of fees based on asset classes.
Management also discussed with the Board the Fund’s distribution arrangements. The Board was provided with information concerning revenues received by and certain expenses incurred by the Fund’s affiliated distributors and how the amounts received by the distributors are paid.
The information comparing the Fund’s Class A shares’ Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of 9 retail front-end load funds (including the Fund) classified as “intermediate municipal debt funds” by Lipper, showed that the Fund’s Contractual and Actual Management Fees were within the range of management fees paid by other funds in the Expense Group and, indeed, were better than the median. The Board noted that the Fund’s actual total expense ratio was better than the median and concluded that it was acceptable.
Taking all of the above into consideration, the Board determined that the Management Fee was reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement.
Manager Profitability
The Board received and considered a profitability analysis of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the CAM fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability
48 Smith Barney Muni Funds 2005 Semi-Annual Report
Board Approval of Management Agreement
(unaudited) (continued)
data as well as a report from an outside consultant that had reviewed the Manager’s methodology. The Manager’s profitability was considered not excessive in light of the nature, extent and quality of the services provided to the Fund.
Economies of Scale
The Board received and discussed information concerning whether the Manager realizes economies of scale as the Fund’s assets grow beyond current levels. However, because of the nature of the Manager’s business, the Board could not reach definitive conclusions as to whether the Manager might realize economies of scale or how great they may be.
Other Benefits to the Manager
The Board considered other benefits received by the Manager and their affiliates as a result of their relationship with the Fund, including soft dollar arrangements, receipt of brokerage and the opportunity to offer additional products and services to Fund shareholders.
In light of the costs of providing investment management and other services to the Fund and the Manager’s ongoing commitment to the Fund, the profits and other ancillary benefits that the Manager and its affiliates received were considered reasonable.
In light of all of the foregoing, the Board approved the Management Agreement to continue for another year.
No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement. The Independent Board Members were advised by separate independent legal counsel throughout the process. The Board discussed the proposed continuance of the Management Agreement in a private session with their independent legal counsel at which no representatives of the Manager were present.
Smith Barney Muni Funds 2005 Semi-Annual Report 49
Smith Barney Muni Funds
Limited Term Portfolio
TRUSTEES Lee Abraham Jane F. Dasher Donald R. Foley R. Jay Gerken, CFA Richard E. Hanson, Jr. Paul Hardin Roderick C. Rasmussen John P. Toolan
OFFICERS R. Jay Gerken, CFA President and Chief Executive Officer
Andrew B. Shoup Senior Vice President and Chief Administrative Officer
Robert J. Brault Chief Financial Officer and Treasurer
Peter M. Coffey Vice President and Investment Officer
Andrew Beagley | OFFICERS (continued) Robert I. Frenkel Secretary and
INVESTMENT MANAGER Smith Barney Fund Management LLC
DISTRIBUTOR Citigroup Global Markets Inc.
CUSTODIAN State Street Bank and Trust Company
TRANSFER AGENT Citicorp Trust Bank, fsb. 125 Broad Street, 11th Floor New York, New York 10004
SUB-TRANSFER AGENT PFPC Inc. P.O. Box 9699 Providence, Rhode Island 02940-9699
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 345 Park Avenue New York, New York 10154 |
This report is submitted for the general information of the shareholders of Smith Barney Muni Funds — Limited Term Portfolio, but it may also be used as sales literature when preceded or accompanied by a current Prospectus.
This report must be preceded or accompanied by a free prospectus. Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Fund. Please read the prospectus carefully before investing.
www.citigroupam.com
©2005 Citigroup Global Markets Inc. Member NASD, SIPC
FD0804 11/05 | 05-9289 |
Smith Barney Muni Funds
Limited Term Portfolio
The Fund is a separate investment fund of the Smith Barney Muni Funds, a Massachusetts business trust.
SMITH BARNEY MUNI FUNDS
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at http://www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and how information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. To obtain information on Form N-Q from the Fund, shareholders can call 800-451-2010.
Information on how the Fund voted-proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the Fund’s website at www.citigroupam.com and (3) on the SEC’s website at www.sec.gov.
ITEM 2. | CODE OF ETHICS. | |||
Not Applicable. | ||||
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. | |||
Not Applicable. | ||||
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. | |||
Not applicable. | ||||
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. | |||
Not applicable. | ||||
ITEM 6. | SCHEDULE OF INVESTMENTS. | |||
Not applicable. | ||||
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. | |||
Not applicable. | ||||
ITEM 8. | [RESERVED] | |||
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. | |||
Not applicable. | ||||
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. | |||
Not applicable. | ||||
ITEM 11. | CONTROLS AND PROCEDURES. | |||
(a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934. | |||
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting. | |||
ITEM 12. | EXHIBITS. | |||
(a) | Not applicable. | |||
(b) | Attached hereto. |
Exhibit 99.CERT | Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 | |||
Exhibit 99.906CERT | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized.
Smith Barney Muni Funds | ||
By: | /s/ R. Jay Gerken | |
R. Jay Gerken | ||
Chief Executive Officer of | ||
Smith Barney Muni Funds | ||
Date: December 8, 2005 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | ||
By: | /s/ R. Jay Gerken | |
R. Jay Gerken | ||
Chief Executive Officer of | ||
Smith Barney Muni Funds | ||
Date: December 8, 2005 | ||
By: | /s/ Robert J. Brault | |
Robert J. Brault | ||
Chief Financial Officer of | ||
Smith Barney Muni Funds | ||
Date: December 8, 2005 |