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.
Smith Barney Fund Management LLC
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: March 31, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The ANNUAL Report to Stockholders is filed herewith.
SMITH BARNEY
MUNI FUNDS
FLORIDA PORTFOLIO
CLASSIC SERIES | ANNUAL REPORT | MARCH 31, 2004
LOGO: SBMF
SMITH BARNEY MUTUAL FUNDS
Your Serious Money. Professionally Managed.(R)
YOUR SERIOUS MONEY. PROFESSIONALLY MANAGED.(R)IS A REGISTERED SERVICE MARK OF
CITIGROUP GLOBAL MARKETS INC.
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NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
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WHAT'S INSIDE
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LETTER FROM THE CHAIRMAN ................................................ 1
MANAGER OVERVIEW ........................................................ 3
FUND PERFORMANCE ........................................................ 8
HISTORICAL PERFORMANCE .................................................. 9
SCHEDULE OF INVESTMENTS ................................................. 10
STATEMENT OF ASSETS AND LIABILITIES ..................................... 19
STATEMENT OF OPERATIONS ................................................. 20
STATEMENTS OF CHANGES IN NET ASSETS ..................................... 21
NOTES TO FINANCIAL STATEMENTS ........................................... 22
FINANCIAL HIGHLIGHTS .................................................... 30
INDEPENDENT AUDITORS' REPORT ............................................ 33
ADDITIONAL INFORMATION .................................................. 34
TAX INFORMATION ......................................................... 38
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LETTER FROM THE CHAIRMAN
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Photo of: R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
DEAR SHAREHOLDER,
The U.S. economy's quarterly pace of growth picked up considerably during the
year ending March 31, 2004.i Stronger-than-expected economic growth exacerbated
bond investors' concerns that inflation might pick up and lead to rising
interest rates sooner than previously anticipated, which caused bond prices to
decline over the summer. However, as the period advanced, many of these concerns
were tempered somewhat by tepid employment results and comments from the Fed,
which maintained its interest rate targets at four-decade lows. Municipal bonds
returned 5.86% over the past year, as measured by the Lehman Brothers Municipal
Bond Index.ii
As discussed in the Manager Overview, Florida's revenue base has continued to
perform well versus many other states, and U.S. job growth for March
significantly exceeded estimates.iii Given that the fund's manager had
anticipated that the economies on a national and state level could begin to pick
up, the manager maintained a defensive posture in managing the portfolio's
exposure to inflation and interest rate risk. Although this strategy detracted
from the fund's performance during times when bond prices rose, it diminished
the negative impact on the portfolio when bond prices declined.
Please read on for a more detailed look at prevailing economic and market
conditions during the fund's fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected fund
performance.
INFORMATION ABOUT YOUR FUND
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser 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
1 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
shareholder exchange activity, including compliance with prospectus disclosure
related to these subjects. The fund has been informed that the Adviser and its
affiliates are responding to those information requests, but are not in a
position to predict the outcome of these requests and investigations.
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,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
April 12, 2004
2 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
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MANAGER OVERVIEW
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Photo of: PETER M. COFFEY
PETER M. COFFEY
Vice President and
Investment Officer
SPECIAL SHAREHOLDER NOTICE
Effective April 29, 2004, Smith Barney Class L shares were renamed Class C
Shares. The current expenses, management fees, and sales charges have not
changed.
PERFORMANCE REVIEW
For the 12 months ended March 31, 2004, Class A shares of the Smith Barney Muni
Funds -- Florida Portfolio, excluding sales charges, returned 3.69%. In
comparison, the broad-based Lehman Brothers Municipal Bond Index returned 5.86%
for the same period and its Florida municipal bond component subindex returned
5.74% for the same period.iv The fund's Lipper Florida municipal debt funds
category average, returned 4.62% during the same time frame.1
Given our concerns early in the period that U.S. economic growth could pick up
and interest rates could potentially rise sooner than anticipated, we structured
the fund defensively to help mitigate the effects of a possible rise in interest
rates. Our strategy entailed focusing on bonds with higher coupons, maintaining
a lower average life than in recent years, and maintaining a short position in
U.S. Treasury futures.v Although this conservative strategy at times limited the
fund's full participation in market rallies, it helped reduce the impact on the
fund during times when bond prices declined, particularly early in the summer
and after the reporting period ended. The fund's performance benefited from its
exposure to hospitals issues, toll road and airport special facilities for
airline issues in the transportation sector, while airport terminal issues in
the transportation sector detracted from its performance.
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 adviser.
BOND MARKET REVIEW
In order to help boost a relatively sluggish economy, early last year the Fed
reduced its target for the federal funds rate,vi which dropped to four-decade
lows in June. However, the prices of U.S. Treasury bonds plunged through the
early summer as stronger-than-expected economic growth data for the second
1 Lipper, Inc. is a major independent mutual-fund tracking organization. Average
annual returns are based on the 12-month period ended March 31, 2004,
calculated among the 62 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any, and excluding sales
charges.
3 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
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PERFORMANCE SNAPSHOT
AS OF MARCH 31, 2004
(EXCLUDING SALES CHARGES)
6 MONTHS 12 MONTHS
Class A Shares 1.71% 3.69%
Lehman Brothers Municipal Bond Index 3.12% 5.86%
Lipper Florida Municipal Debt Funds
Category Average 2.59% 4.62%
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.SMITHBARNEYMUTUALFUNDS.COM.
CLASS A SHARE RETURNS ASSUME THE REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL
GAINS DISTRIBUTIONS 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 1.45% AND
CLASS L SHARES RETURNED 1.40% OVER THE SIX MONTHS ENDED MARCH 31, 2004.
EXCLUDING SALES CHARGES, CLASS B SHARES RETURNED 3.19% AND CLASS L SHARES
RETURNED 3.12% OVER THE 12 MONTHS ENDED MARCH 31, 2004.
Effective February 2, 2004, initial sales charges on Smith Barney Class L shares
were suspended.
All index performance reflects no deduction for fees, expenses or taxes. The
Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond
market with maturities of at least one year. Please note that an investor cannot
invest directly in an index.
Lipper, Inc. is a major independent mutual-fund tracking organization. Returns
are based on the period ended March 31, 2004, calculated among the 62 funds for
the six-month period and among the 62 funds for the 12-month period, in the
fund's Lipper category including the reinvestment of dividends and capital
gains, if any, and excluding sales charges.
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 adviser.
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calendar quarter generated concerns that inflation could become more pronounced
and interest rates rise, (bond prices move inversely to the direction of
interest rate movements). During this tumultuous time, however, municipal bonds
collectively held up better than U.S. Treasury bonds. As the summer came to a
close, the broader bond markets stabilized in response to the Fed's concerns
about the lack of growth in employment and lingering disinflation.
Stronger-than-anticipated economic growth consensus estimates for the third
calendar quarter rekindled concerns about interest rates and inflation. Despite
the 8.2% annual growth in gross domestic product ("GDP")vii over the third
quarter of 2003, investors' concerns about the prospects of inflation and rising
rates were contained because some of this growth was attributable to one-time
factors, such as the tax cuts and the end of major combat operations in Iraq.
4 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
Furthermore, many investors felt that the Fed appeared to be in a holding
pattern from adjusting its rate targets.
INVESTORS QUESTION THE FED'S PATIENCE
Bond investors spent the first quarter of 2004 dissecting language from the Fed,
which stated in late January that it "believes that it can be patient in
removing its policy accommodation."viii However, the fact that the Fed did not
include the phrase "considerable period" in this statement as it had before led
many investors to question when the Fed's patience would run out.
Estimates of fourth calendar-quarter 2003 GDP annual growth released during the
period registered at 4.1%.vii This rate was below third-quarter 2003 results but
exceeded levels early last year. Furthermore, in recent testimony to Congress,
Fed Chairman, Alan Greenspan revealed that the Fed raised its expectations for
economic growth. On a state level, revenues have continued to rise amid the
improvement in the national economy. Despite the momentum behind the U.S.
economy, over the first calendar quarter of this year, the Lehman Brothers
Municipal Bond Index returned 1.73% amid lackluster employment data.
Although the economy has shown significant signs of improvement since early last
year, the job market has remained the weak link to a sustainable recovery.
Employment dataiii released after the first quarter of 2004 ended showed that
the unemployment rose to 5.7% in March, versus 5.6% in February. However, the
U.S. economy added 308,000 non-farm payroll jobs in March,iii marking the
largest number since April 2000.ix This result raised expectations that the
strength of the economy may be improving, raising concerns that inflation could
pick up and interest rates rise sooner than previously anticipated.
THE ECONOMIC STATE OF FLORIDAX
In contrast to trends of many other states, Florida's revenue base, which is led
by the sales tax, has continued to perform well. The state recently estimated
that fiscal year end 2004 will have a $2.2 billion general revenue and working
capital reserve, which is in addition to the State's fully funded $966.4 million
budget stabilization fund. These reserves are the highest in actual dollar
amounts and on a percentage basis for all the states. Standard & Poor's recent
rating on the state's bond obligations was AA+ with a stable outlook.
EMPHASIS ON REVENUE BONDS
The fund held only a modest percentage of general obligation ("GO") bonds backed
by the state of Florida during the past year. The fund continued to
5 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
concentrate most of its assets in higher-yielding revenue bonds, which are
backed by revenue streams of specific public works. The portfolio's heaviest
revenue bond exposure in terms of industry sectors was hospitals, education,
utilities, miscellaneous, and water & sewer. Over the period, the hospitals
sector in particular was among the leading performers returning 7.80%, while
housing was the worst performer returning 4.36%.xi The fund had more exposure to
these sectors not because we targeted specific industries but, rather, because
we felt many of these issues had more appealing yields and offered better
relative values on a risk/reward basis when we invested in them.
WHY HIGHER-COUPON CALLABLE BONDS?
In rising-rate environments, the prices of shorter-term fixed-income obligations
have typically held up better than those on longer-term bonds. Rather than
commit a substantial portion of the fund's assets to low-yielding, short-term
instruments, the fund maintained an emphasis on longer-term, premium-priced
higher-coupon callable bonds for their favorable income streams and the reduced
market-sensitivity provided by their above-market level coupons and shorter
effective maturities. The fund also continued to hold a short position in U.S.
Treasury bond futures to help hedge the portfolio against interest rate risk. As
of the period's close, the fund's average maturity was approximately 17.75
years, while its average life call-adjusted effective maturity, which is
adjusted to account for the shorter call dates on our premium bonds (rather than
the longer final maturity dates on these callable issues), was 8.36 years.xii
While no one can say for sure where interest rates will head, given the recent
economic picture, at the end of the period we continued to maintain a defensive
posture with regard to interest rate risk.
Thank you for your investment in the Smith Barney Muni Funds -- Florida
Portfolio. We appreciate that you have entrusted us to manage your money and
value our relationship with you.
Sincerely,
/s/ Peter M. Coffey
Peter M. Coffey
Vice President and Investment Officer
April 12, 2004
6 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
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.
Portfolio holdings and breakdowns are as of March 31, 2004 and are subject to
change. Please refer to pages 10 through 16 for a list and percentage breakdown
of the fund's holdings.
The mention of sector breakdowns is for informational purposes only and should
not be construed as a recommendation to purchase or sell any securities. The
information provided regarding such sectors is not a sufficient basis upon which
to make an investment decision. Investors seeking financial advice regarding the
appropriateness of investing in any securities or investment strategies
discussed should consult their financial professional. Portfolio holdings are
subject to change at any time and may not be representative of the portfolio
manager's current or future investments. The fund's top five sector holdings as
of March 31, 2004 were: Hospital (25.2%); Miscellaneous (12.5%); Utilities
(11.0%); Education (10.3%); Water & Sewer (7.3%). The fund's portfolio
composition is subject to change at any time.
RISKS: Keep in mind that the fund's investments are subject to interest rate and
credit risks. As a non-diversified fund, it can invest a larger percentage of
its assets in fewer issues than a diversified fund. This may magnify the fund's
losses from events affecting a particular issuer. 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.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
i Source: Based upon gross domestic product data from the Bureau of Economic
Analysis (January 30, 2004). Gross domestic product is a market value of
goods and services produced by labor and property in a given country.
ii The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year.
iii Based upon data released on April 1, 2004 from the U.S. Department of
Labor.
iv Source: Lehman Brothers. This subindex is a broad measure of the market for
Florida municipal bonds with maturities of at least one year.
v Derivatives, such as options and futures, can be illiquid and harder to
value, especially in declining markets. A small investment in certain
derivatives may have a potentially large impact on the fund's performance.
Derivatives can disproportionately increase losses as stated in the
prospectus.
vi 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.
vii Source for GDP (gross domestic product) growth: Bureau of Labor Statistics.
Gross domestic product is a market value of goods and services produced by
labor and property in a given country.
viii Source: Federal Reserve (January 28, 2004).
ix Source: Lehman Brothers.
x Source: Standard & Poor's (Public Finance Report Card, April 2004).
xi Based upon the performance of subindices of the Lehman Brothers Municipal
Bond Index reflective of the performance of municipal bonds in each
respective sector category over 12-month reporting period.
xii There are no assurances that callable bonds will be called/redeemed on
their call dates prior to maturity.
7 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
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AVERAGE ANNUAL TOTAL RETURNS+ (UNAUDITED)
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WITHOUT SALES CHARGES(1)
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CLASS A CLASS B CLASS L
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Twelve Months Ended 3/31/04 3.69% 3.19% 3.12%
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Five Years Ended 3/31/04 4.54 4.01 3.95
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Ten Years Ended 3/31/04 6.01 N/A 5.39
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Inception* through 3/31/04 6.57 6.32 5.35
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WITH SALES CHARGES(2)
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CLASS A CLASS B CLASS L
================================================================================
Twelve Months Ended 3/31/04 (0.48)% (1.24)% 2.13%
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Five Years Ended 3/31/04 3.69 3.84 3.95
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Ten Years Ended 3/31/04 5.58 N/A 5.39
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Inception* through 3/31/04 6.23 6.32 5.35
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CUMULATIVE TOTAL RETURNS+ (UNAUDITED)
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WITHOUT SALES CHARGES(1)
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Class A (3/31/94 through 3/31/04) 79.20%
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Class B (Inception* through 3/31/04) 77.54
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Class L (3/31/94 through 3/31/04) 69.07
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(1) Assumes reinvestment of all dividends and capital gain distributions, 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 L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00%; Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from purchase payment. This CDSC declines by 0.50% the first year
after purchase payment and thereafter by 1.00% per year until no CDSC is
incurred. Class L shares also reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within one year from purchase payment. The
1.00% initial sales charge on Class L shares is no longer imposed effective
February 2, 2004.
* Inception dates for Class A, B and L shares are April 2, 1991, November 16,
1994 and January 5, 1993, respectively.
+ All figures represent past performance and are not a guarantee of future
results. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares.
8 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
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HISTORICAL PERFORMANCE (UNAUDITED)
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VALUE OF $10,000 INVESTED IN CLASS A SHARES OF
THE FLORIDA PORTFOLIO VS.
LEHMAN BROTHERS MUNICIPAL BOND INDEX AND
LIPPER FLORIDA MUNICIPAL DEBT FUNDS AVERAGE+
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March 1994 -- March 2004
LINE CHART:
LIPPER FLORIDA MUNICIPAL LEHMAN BROTHERS MUNICIPAL FLORIDA PORTFOLIO -
DEBT FUNDS AVERAGE BOND INDEX CLASS A SHARES
3/94 10000 10000 9603
3/95 10695 10744 10253
3/96 11489 11645 11139
3/97 12038 12278 11746
3/98 13269 13594 13056
3/99 13922 14437 13782
3/00 13605 14424 13471
3/01 14931 16000 14930
3/02 15399 16612 15401
3/03 16685 18253 16596
3/04 17456 19323 17209
+ Hypothetical illustration of $10,000 invested in Class A shares on March 31,
1994, assuming deduction of the 4.00% maximum initial sales charge at the time
of investment and reinvestment of dividends (after deduction of applicable
sales charges through November 6, 1994, and thereafter at net asset value) and
capital gains, if any, at net asset value through March 31, 2004. The Lehman
Brothers Municipal Bond Index is a broad-based, total return index comprised
of investment-grade, fixed rate municipal bonds selected from issues larger
than $50 million issued since January 1984. The Index is unmanaged and is not
subject to the same management and trading expenses as a mutual fund. The
Lipper Florida Municipal Debt Funds Average is composed of the Fund's peer
group of mutual funds (62 funds as of March 31, 2004). The performance of the
Fund's other classes may be greater or less than the Class A shares'
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares.
9 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
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SCHEDULE OF INVESTMENTS MARCH 31, 2004
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FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================
COGENERATION FACILITIES -- 0.7%
$ 1,500,000 BBB- Martin County IDA, Indiantown, (Cogeneration Project),
7.875% due 12/15/25 (b) $ 1,546,815
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EDUCATION -- 10.5%
3,000,000 NR Capital Projects Finance Authority, Student Housing Revenue,
Cafra Capital Corp., (Capital Projects Loan Program),
Series A, 7.850% due 8/15/31 3,009,390
1,895,000 Aaa* Collier County School Board COP, FSA-Insured,
5.375% due 2/15/20 2,090,678
3,000,000 AAA Florida State Board of Education Cap Outlay, Public Education,
Series B, FGIC-Insured, 5.000% due 6/1/19 3,223,170 Florida
State Board of Education Lottery Revenue:
4,000,000 AAA Series B, 5.250% due 7/1/15 4,477,840
5,000,000 AAA Series C, 5.000% due 7/1/16 5,427,600
2,790,000 A Virgin Islands University Refunding & Improvement, Series A,
ACA-Insured, 6.250% due 12/1/29 (c) 3,054,046
2,875,000 Baa3* Volusia County Educational Facilities Authority Revenue,
Embry-Riddle Aeronautical University, Series A,
6.125% due 10/15/16 (c) 3,081,856
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24,364,580
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FINANCE -- 0.4%
1,000,000 NR Virgin Islands Public Finance Authority Revenue, Series E,
5.750% due 10/1/13 1,036,200
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GENERAL OBLIGATION -- 2.7%
3,220,000 AA+ Florida State Board of Education GO, Public Education,
Series C, 5.250% due 6/1/19 3,539,778
2,000,000 AAA Puerto Rico Commonwealth GO, XLCA-Insured, 9.032% due 7/1/17 2,670,240
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6,210,018
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GOVERNMENT FACILITIES -- 1.6%
750,000 AAA Florida State Department of Corrections COP, Okeechobee
Correctional, AMBAC-Insured, 6.250% due 3/1/15 798,127
2,210,000 AAA Lee County Justice Center Complex Inc., Improvement Revenue,
Series A, MBIA-Insured, 11.125% due 1/1/11 (d)(e) 2,946,372
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3,744,499
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HOSPITAL -- 25.7%
1,190,000 Aaa* Bay County Hospital Revenue, (Bay Medical Center Project),
(Call 10/1/04 @ 102), 8.000% due 10/1/12 (f) 1,236,148
860,000 AAA Bradford County Health Facilities Authority Revenue, (Santa Fe
Health Care Facilities Project), 6.050% due 11/15/16 (d) 1,036,266
600,000 AAA Cape Coral Health Facilities Authority, Hospital Revenue,
(Cape Coral Medical Center Project), 8.125% due 11/1/08 (d) 694,362
640,000 Aaa* Collier County Health Facilities Authority Revenue,
11.000% due 12/1/10 (d) 843,750
See Notes to Financial Statements.
10 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
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SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
- ----------------------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================
HOSPITAL -- 25.7% (CONTINUED) Dade County IDR:
$3,030,000 NR Miami Cerebral Palsy Services Project, 8.000% due 6/1/22 $ 3,109,780
2,355,000 AAA Susanna Wesley Health Center, Series A, FHA-Insured,
6.625% due 7/1/30 2,428,099
995,000 AAA Dunedin Health Facilities Authority Revenue, Mease Hospital
Inc., 7.600% due 10/1/08 (d) 1,132,519
2,000,000 Aaa* Escambia County Health Facilities Authority Revenue, Florida
Health Care Facility Loan, VHA Program, AMBAC-Insured,
5.950% due 7/1/20 2,111,080
3,000,000 A Highlands County Health Facilities Authority Revenue,
Hospital-Adventis, (Sunbelt-Inc. Project), Series A,
6.000% due 11/15/31 3,206,430
1,775,000 NR Homestead IDR, Community Rehabilitation Providers Program,
Series A, 7.950% due 11/1/18 1,812,879
3,000,000 AA Jacksonville Economic Development Health Care Facilities Revenue,
Mayo Clinic Jacksonville, Series A, 5.500% due 11/15/36 3,170,370
2,490,000 NR Lee Memorial Health System Board of Directors, Florida Hospital
Revenue, FSA-Insured, 9.985% due 4/1/10 (g) 3,340,684
45,000 AAA Martin Memorial Hospital Association Inc., Stuart Revenue,
8.000% due 10/1/08 (d) 51,648
1,000,000 BB Miami Beach Health Facilities Authority Hospital Revenue,
(Mt. Sinai Medical Center Project), Series A, 6.800%
due 11/15/31 (c) 1,011,580
Orange County Florida Health Facilities Authority Revenue Bonds:
3,000,000 A Adventist Health Systems, 6.500% due 11/15/30 (c) 3,295,200
2,000,000 NR First Mortgage Healthcare Facilities, 9.000% due 7/1/31 (c) 2,052,380
Orlando Regional Healthcare System:
2,000,000 A2* 5.750% due 12/1/32 (c) 2,095,600
1,000,000 A2* Series E, 6.000% due 10/1/26 (c) 1,049,220
3,550,000 AAA Orange County Health Facility Authority Revenue, Southern
Adventist Hospital, 8.750% due 10/1/09 (c)(d) 4,248,285
2,990,000 AAA Palm Beach County Health Facilities Authority Revenue, (John F.
Kennedy Memorial Hospital Inc. Project), Series C,
9.500% due 8/1/13 (c)(d) 3,992,607
2,000,000 A1* Pinellas County Health Facilities Authority Revenue,
Baycare Health System, 5.500% due 11/15/33 2,084,240
Sarasota County Public Hospital Board Revenue, Sarasota
Memorial Hospital, Series B, MBIA-Insured:
5,000,000 AAA 5.250% due 7/1/24 (c) 5,508,450
3,485,000 AAA 5.500% due 7/1/28 (c) 3,967,846
2,000,000 A2* South Lake County Hospital District Revenue, South Lake Hospital
Inc., Orlando Regional Healthcare, 6.000% due 10/1/22 (c) 2,097,240
West Orange Healthcare District Revenue, Series A:
2,000,000 A- 5.650% due 2/1/22 (c) 2,063,560
2,000,000 A- 5.800% due 2/1/31 (c) 2,047,760
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59,687,983
- ----------------------------------------------------------------------------------------------
See Notes to Financial Statements.
11 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- ----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
- ----------------------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================
HOUSING: MULTI-FAMILY -- 6.8%
$ 350,000 AAA Clearwater MFH Revenue, (Drew Gardens Project), Series A,
FHA-Insured, 6.500% due 10/1/25 $ 352,720
Florida HFA:
1,085,000 AAA Antigue Club Apartments, Series A-1, AMBAC-Insured,
6.750% due 8/1/14 1,125,590
2,900,000 BBB+ Sr. Lien, Series I-1, 6.625% due 7/1/28 (b) 2,862,764
2,400,000 A Sunset Place, Series K-1, 6.000% due 10/1/19 2,501,208
1,000,000 BBB The Vineyards Project, Series H, 6.500% due 11/1/25 1,028,400
Florida Housing Finance Corporate Revenue:
1,500,000 Aaa* Augustine Club Apartment, Series D, MBIA-Insured,
5.750% due 10/1/30 1,600,005
980,000 Ba2* Series D-2, 8.250% due 10/1/30 940,251
1,485,000 AAA Lee County HFA, MFH Revenue, (Brittany Phase II Project),
Series A, FNMA-Collateralized, 6.100% due 12/1/32 1,587,168
1,000,000 AAA Oceanside Housing Development Corp., MFH Mortgage Revenue,
FHA-Insured, 6.875% due 2/1/20 (c) 1,001,740
2,065,000 Aaa* Orange County HFA, MFH Revenue, RHA/Affordable Housing III,
Series A, MBIA-Insured, 6.200% due 7/1/20 (c) 2,247,401
500,000 A Pasco County HFA, Multi-Family Revenue, (Pasco Woods
Apartments Project), Series A, 5.700% due 8/1/19 (b) 522,035
- ----------------------------------------------------------------------------------------------
15,769,282
- ----------------------------------------------------------------------------------------------
HOUSING: SINGLE-FAMILY -- 1.7%
855,000 Aaa* Brevard County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 6.400% due 9/1/23 (b) 879,846
Dade County HFA, Series A, GNMA/FNMA-Collateralized:
485,000 Aaa* Home Ownership Mortgage Revenue, 6.375% due 4/1/33 (b) 503,852
995,000 AAA Single-Family Mortgage Revenue, 6.700% due 4/1/28 (b) 1,027,527
155,000 Aaa* Duval County HFA, Single-Family Mortgage Revenue,
GNMA-Collateralized, 6.700% due 10/1/26 (b) 159,007
410,000 AAA Florida HFA, Single-Family Mortgage, Series B,
GNMA/FNMA-Collateralized, 6.650% due 7/1/26 (b) 419,315
145,000 AAA Leon County HFA, Single-Family Mortgage Revenue, Multi-County
Program, Series B, GNMA/FHLMC-Collateralized,
7.300% due 1/1/28 (b) 151,460
610,000 Aaa* Pinnellas County HFA, Single-Family Mortgage Revenue,
GNMA/FNMA-Collateralized, 6.550% due 8/1/27 (b) 624,469
285,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue, Series A,
GNMA-Collateralized, 6.500% due 3/1/25 (b) 293,302
- ----------------------------------------------------------------------------------------------
4,058,778
- ----------------------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT -- 2.3%
4,000,000 NR Hillsborough County IDA, Exempt Facility Revenue, National
Gypsum, Series A, 7.125% due 4/1/30 (b) 4,175,880
See Notes to Financial Statements.
12 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- ----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
- ----------------------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================
INDUSTRIAL DEVELOPMENT -- 2.3% (CONTINUED)
$1,000,000 NR Orlando Florida Urban Community Development District,
Series A, 6.950% due 5/1/33 (c) $ 1,058,650
- ----------------------------------------------------------------------------------------------
5,234,530
- ----------------------------------------------------------------------------------------------
MISCELLANEOUS -- 12.7%
3,730,000 NR Bonita Springs Vasari Capital Improvement, Series A,
6.950% due 5/1/32 3,975,956
2,000,000 NR Bonnet Creek Resort Community Development District,
Florida Special Assessment, 7.375% due 5/1/34 2,112,780
Capital Region Community Development District Revenue,
Capital Improvement, Series A-2:
980,000 NR 6.850% due 5/1/31 1,051,373
990,000 NR 6.700% due 5/1/32 1,042,836
1,995,000 NR Century Parc Community Development District, Florida Special
Assessment, 7.000% due 11/1/31 2,094,391
550,000 AAA Escambia County, Capital Improvement Revenue, MBIA-Insured,
11.000% due 1/1/07 (d) 637,533
235,000 AAA Fort Myers Improvement Revenue, AMBAC-Insured,
10.375% due 10/1/13 (d) 323,435
Lee County Capital Bonds, MBIA-Insured:
400,000 AAA 9.500% due 10/1/05 (d) 430,508
70,000 AAA 7.400% due 10/1/09 (d) 81,284
3,615,000 NR Mediterra North Community Development District, Capital
Improvement Revenue, 6.800% due 5/1/31 (c) 3,809,487
1,200,000 AAA North Springs Improvement District, MBIA-Insured,
7.000% due 10/1/09 (c) 1,474,668
463,000 AAA Osceola County IDA Revenue, (Community Provider Pooled
Loan Program), Series A, FSA-Insured, 7.750% due 7/1/10 (c) 465,046
2,490,000 NR Panther Trace Florida Community Development District, Special
Assessment, Series A, 7.250% due 5/1/33 2,672,417
2,500,000 AAA Port Palm Beach District Revenue, Capital Appreciation, Series A,
MBIA-Insured, zero coupon due 9/1/21 952,675
1,200,000 BBB+ Puerto Rico Housing Bank & Finance Agency, 7.500% due 12/1/06 1,299,660
1,000,000 NR Renaissance Community Development District, Florida Capital
Improvement Revenue, Series A, 7.000% due 5/1/33 1,065,160
2,455,000 NR Reunion East Community Development District, Florida Special
Assessment, Series A, 7.375% due 5/1/33 2,647,644
40,000 AAA Tallahassee Capital Improvement Revenue, AMBAC-Insured,
9.250% due 11/15/07 (d) 46,176
2,000,000 A Virgin Islands Public Finance Authority Revenue, Series A,
ACA-Insured, 5.500% due 10/1/18 (c) 2,144,000
1,130,000 NR Waterchase Community Development District, Capital Improvement
Revenue, 6.700% due 5/1/32 1,196,252
- ----------------------------------------------------------------------------------------------
29,523,281
- ----------------------------------------------------------------------------------------------
See Notes to Financial Statements.
13 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- ----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
- ----------------------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================
POLLUTION CONTROL -- 2.7%
$3,500,000 BBB Escambia County PCR, (Champion International Corp. Project),
6.900% due 8/1/22 (b) $ 3,616,690
Putnam County Development Authority PCR:
1,390,000 BB+ Georgia Pacific Corp. 1984, 7.000% due 12/1/05 1,406,875
1,300,000 Aa3* Florida Power & Lighting Corp. Project, 1.100% due 9/1/24 (g) 1,300,000
- ----------------------------------------------------------------------------------------------
6,323,565
- ----------------------------------------------------------------------------------------------
PUBLIC FACILITIES -- 2.5%
80,000 AAA Dade County Special Obligation, (Miami Beach Convention
Center Project), FGIC-Insured, 8.625% due 12/1/07 (d) 91,660
Florida Municipal Loan Council Revenue, MBIA-Insured:
1,625,000 AAA 5.250% due 11/1/18 1,811,518
1,805,000 AAA Series C, 5.250% due 11/1/20 1,977,414
Tampa Sports Authority Revenue, (Tampa Bay Arena Project),
MBIA-Insured:
500,000 AAA 6.050% due 10/1/20 613,980
1,000,000 AAA 6.100% due 10/1/26 1,236,240
- ----------------------------------------------------------------------------------------------
5,730,812
- ----------------------------------------------------------------------------------------------
TAX ALLOCATION -- 4.0%
15,000 AAA Lauderhill Florida Sales Tax Revenue, AMBAC-Insured,
9.500% due 10/1/04 (d) 15,620
1,000,000 A- Miami Beach Redevelopment Agency Tax Increment Revenue, City
Center-Historic Convention, Series B, 6.350% due 12/1/22 (c) 1,071,600
1,000,000 AAA Orlando Florida Community Redevelopment Agency, Tax Increment
Revenue, AMBAC-Insured, 5.125% due 4/1/21 (c) 1,069,930
1,505,000 NR Rivercrest Community Development District, Special Assessment
Revenue, 7.000% due 5/1/32 1,597,422
1,000,000 NR Sumter Landing Community Development District, Florida Special
Assessment Revenue, 6.875% due 5/1/23 1,047,660
Tampa Florida Utility and Tax & Special Revenue, Series A,
AMBAC-Insured:
2,990,000 AAA 5.250% due 10/1/19 (c) 3,296,296
1,000,000 AAA 5.250% due 10/1/21 1,088,080
- ----------------------------------------------------------------------------------------------
9,186,608
- ----------------------------------------------------------------------------------------------
TOBACCO -- 1.3%
2,435,000 AAA Tampa Guaranteed Entitlement Revenue, MBIA-Insured,
9.750% due 10/1/08 (c)(d) 2,912,236
- ----------------------------------------------------------------------------------------------
TRANSPORTATION -- 5.7%
2,000,000 NR Capital Travel Agency Revenue, Seminole Tribe Convention,
Series A, 8.950% due 10/1/33 2,344,820
1,050,000 AAA Florida State Broward County, 10.000% due 7/1/14 (d) 1,536,475
See Notes to Financial Statements.
14 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- ----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
- ----------------------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================
TRANSPORTATION -- 5.7% (CONTINUED)
$ 500,000 CCC Hillsborough County Aviation Authority Revenue, Special Purpose,
(Delta Airlines Project), 6.800% due 1/1/24 $ 368,965
Lee County Southwest Regional Airport Revenue, MBIA-Insured:
1,145,000 AAA 8.625% due 10/1/09 (d) 1,367,004
1,165,000 AAA 9.625% due 10/1/09 (d) 1,428,838
1,000,000 Aaa* Polk County Transportation Improvement Revenue, FSA-Insured,
5.250% due 12/1/22 1,069,750
Sanford Airport Authority IDR, (Central Florida Terminals
Inc. Project):
Series A:
1,000,000 NR 7.500% due 5/1/15 (b) 768,940
2,000,000 NR 7.750% due 5/1/21 (b) 1,496,220
645,000 NR Series C, 7.500% due 5/1/21 (b) 482,473
Santa Rosa Bay Bridge Authority Revenue:
1,085,000 B1* 6.250% due 7/1/28 904,293
5,000,000 B1* Capital Appreciation, zero coupon due 7/1/17 1,111,100
250,000 AAA West Palm Beach IDR, AMBAC-Insured, 11.375% due 6/1/11 (d) 334,643
- ----------------------------------------------------------------------------------------------
13,213,521
- ----------------------------------------------------------------------------------------------
UTILITIES -- 11.2%
3,000,000 AAA Escambia County Utility System Authority, Revenue Bonds,
Series B, FGIC-Insured, 6.250% due 1/1/15 3,690,660
2,025,000 AAA Gainesville Utilities System Revenue, 8.125% due 10/1/14 (d) 2,550,488
1,350,000 AAA Guam Power Authority Revenue, Series A, (Call 10/1/04 @ 102),
6.750% due 10/1/24 (f) 1,415,312
1,285,000 AAA Hillsborough County Utility Revenue, MBIA-Insured,
9.875% due 12/1/11 (d) 1,650,968
285,000 AAA Key West Utility Board Electric Revenue, AMBAC-Insured,
9.750% due 10/1/13 (d) 382,302
1,500,000 AAA Marco Island Utilities System Revenue, MBIA-Insured,
5.000% due 10/1/33 1,564,470
2,500,000 Aa1* Orlando Florida Utilities Community Water & Electricity Revenue,
5.250% due 10/1/19 (c) 2,732,675
2,025,000 Aaa* Polk County Utilities System Revenue, FGIC-Insured,
5.000% due 10/1/24 2,129,652
3,000,000 AAA Puerto Rico Electric Power Authority Revenue, MBIA-Insured,
5.375% due 7/1/19 3,360,150
Sunrise Utility System Revenue Refunding, AMBAC-Insured:
3,000,000 AAA 5.200% due 10/1/22 (c) 3,275,340
2,000,000 AAA 5.000% due 10/1/28 (c) 2,116,540
1,000,000 AAA Village Center Community Development, Utility Revenue Bonds,
MBIA-Insured, 5.250% due 10/1/23 1,073,410
- ----------------------------------------------------------------------------------------------
25,941,967
- ----------------------------------------------------------------------------------------------
See Notes to Financial Statements.
15 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- ----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
- ----------------------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
==============================================================================================
WATER AND SEWER -- 7.5%
$ 130,000 AAA Collier County Water Revenue, AMBAC-Insured,
8.875% due 5/1/12 (d) $ 164,910
640,000 AAA Miramar Wastewater Improvement Authority, FGIC-Insured,
(Call 10/1/04 @ 101), 6.750% due 10/1/16 (c)(f) 664,595
670,000 AAA Palm Beach County Solid Waste Authority Revenue, MBIA-Insured,
10.000% due 12/1/04 (d)(e) 709,282
2,320,000 NR Port St. Lucia Special Assessment Revenue, South Lennard,
Series A, 7.125% due 9/1/21 2,408,020
1,300,000 AAA Puerto Rico Commonwealth Aqueduct & Sewer Authority
Revenue, 10.250% due 7/1/09 (d) 1,614,483
285,000 AAA Tamarac Water & Sewer Utility Revenue, AMBAC-Insured,
9.250% due 10/1/10 (d) 347,577
2,450,000 AAA Tampa Water & Sewer System Revenue Refunding,
6.900% due 10/1/16 (c)(d) 3,047,874
Tohopekaliga Water Utility Authority Revenue, Series A,
FSA-Insured:
2,000,000 AAA 5.000% due 10/2/23 (c) 2,112,920
2,000,000 AAA 5.000% due 10/2/28 (c) 2,092,260
3,085,000 AAA West Coast Regional Water Supply Authority, Capital Improvement
Revenue, AMBAC-Insured, (Call 10/1/10 @ 100),
10.400% due 10/1/13 (c)(f) 4,176,690
- ----------------------------------------------------------------------------------------------
17,338,611
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost-- $220,136,045**) $231,823,286
==============================================================================================
(a) All ratings are by Standard & Poor's Ratings Service, except for those
which are identified by an asterisk (*), are rated by Moody's Investors
Service.
(b) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) All or a portion of this security is segregated for open futures contracts.
(d) Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(e) All or a portion of this security is held as collateral for open futures
contracts.
(f) Pre-Refunded bonds are escrowed with U.S. government securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(g) Residual interest bonds -- coupon varies inversely with level of short-term
tax-exempt interest rates.
** Aggregate cost for Federal income tax purposes is $220,207,070.
See pages 17 and 18 for definitions of ratings and certain abbreviations.
See Notes to Financial Statements.
16 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
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 bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
BB, B and -- Bonds rated "BB", "B" and "CCC" are regarded, on balance, as
CCC predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with
the terms of the obligation. "BB" indicates the lowest degree of
speculation than "B" and "CCC" the highest degree of speculation.
While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
Moody's Investors Service ("Moody's")-- Numerical modifiers 1, 2, and 3 may be
applied to each generic rating from "Aa" to "B", where 1 is the highest and 3
the lowest-rating within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of 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
thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payment or of
maintenance of other terms of the contract over any long period
of time may be small.
17 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
BOND RATINGS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
Fitch Ratings ("Fitch") -- Ratings from "AA" to "BBB" may be modified by the
addition of a plus (+) sign or minus (-) sign to show relative standings within
the major ratings categories.
AA -- Bonds rated "AA" are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest
and/or dividends and repay principal is very strong.
A -- Bonds rated "A" are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and/or
dividends and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and
circumstances than debt or preferred securities with higher
ratings.
BBB -- Bonds rated "BBB" are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest or dividends and repay principal is considered to be
adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on
these securities and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below
investment grade is higher than for securities with higher
ratings.
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
safely regarding timely payment is either overwhelming or very
strong; those issues determined to possess overwhelming safety
characteristics are denoted with a (+) sign.
VMIG 1 -- Moody's highest rating for issues having demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
- --------------------------------------------------------------------------------
ABBREVIATIONS* (UNAUDITED)
- --------------------------------------------------------------------------------
ACA -- American Capital Assurance
AIG -- American International Guaranty
AMBAC -- Ambac Assurance Corporation
CONNIE -- College Construction Loan
LEE Insurance Association
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance
Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage
Corporation
FNMA -- Federal National Mortgage
Association
FSA -- Financial Security Assurance
GEMICO -- General Electric Mortgage
Insurance Company
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage
Association
GO -- General Obligation
HFA -- Housing Finance Authority
IDA -- Industrial Development Agency
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors
Assurance Corporation
MFH -- Multi-Family Housing
PCFA -- Pollution Control Financing
Authority
PCR -- Pollution Control Revenue
RIBS -- Residual Interest Bonds
VRDD -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday
Demand
XLCA -- XLCapital Assurance
- ---------------
* Abbreviations may or may not appear in the schedule of investments.
18 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $220,136,045) $ 231,823,286
Cash 123,820
Interest receivable 5,191,184
Receivable for securities sold 385,000
Receivable for Fund shares sold 95,387
Prepaid expenses 4,300
- --------------------------------------------------------------------------------
TOTAL ASSETS 237,622,977
- --------------------------------------------------------------------------------
LIABILITIES:
Payable to broker-- variation margin 481,250
Management fee payable 101,592
Payable for Fund shares reacquired 29,459
Distribution plan fees payable 24,383
Accrued expenses 74,478
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 711,162
- --------------------------------------------------------------------------------
TOTAL NET ASSETS $236,911,815
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 18,014
Capital paid in excess of par value 233,210,668
Undistributed net investment income 172,703
Accumulated net realized loss from investment transactions and
futures contracts (6,320,561)
Net unrealized appreciation of investments and futures contracts 9,830,991
- --------------------------------------------------------------------------------
TOTAL NET ASSETS $236,911,815
================================================================================
SHARES OUTSTANDING:
Class A 13,213,717
------------------------------------------------------------------------------
Class B 3,266,727
------------------------------------------------------------------------------
Class L 1,533,106
------------------------------------------------------------------------------
NET ASSET VALUE:
Class A (and redemption price) $13.16
------------------------------------------------------------------------------
Class B * $13.13
------------------------------------------------------------------------------
Class L * $13.13
------------------------------------------------------------------------------
MAXIMUM PUBLIC OFFERING PRICE PER SHARE:
Class A (net asset value plus 4.17% of net asset value per share) $13.71
================================================================================
* Redemption price is NAV of Class B and L shares reduced by a 4.50% and
1.00% CDSC, respectively, if shares are redeemed within one year from
purchase payment (See Note 4).
See Notes to Financial Statements.
19 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $13,859,101
- --------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 4) 1,197,817
Distribution plan fees (Note 7) 713,220
Transfer agency services (Note 7) 49,921
Shareholder communications (Note 7) 37,004
Audit and legal 27,281
Custody 20,657
Registration fees 14,174
Trustees' fees 1,830
Other 4,771
- --------------------------------------------------------------------------------
TOTAL EXPENSES 2,066,675
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 11,792,426
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 5 AND 6):
Realized Loss From:
Investment transactions (878,801)
Futures contracts (2,128,035)
- --------------------------------------------------------------------------------
NET REALIZED LOSS (3,006,836)
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and
Futures Contracts:
Beginning of year 10,292,876
End of year 9,830,991
- --------------------------------------------------------------------------------
DECREASE IN NET UNREALIZED APPRECIATION (461,885)
- --------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS AND FUTURES CONTRACTS (3,468,721)
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 8,323,705
================================================================================
See Notes to Financial Statements.
20 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED MARCH 31,
- --------------------------------------------------------------------------------
2004 2003
================================================================================
OPERATIONS:
Net investment income $ 11,792,426 $ 12,294,800
Net realized loss (3,006,836) (2,274,196)
Increase (decrease) in net unrealized
appreciation (461,885) 7,248,193
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 8,323,705 17,268,797
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTES 3 AND 8):
Net investment income (11,957,571) (12,093,772)
- --------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (11,957,571) (12,093,772)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 43,530,522 45,972,267
Net asset value of shares issued for
reinvestment of dividends 4,379,778 4,953,617
Cost of shares reacquired (47,334,136) (49,610,782)
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 576,164 1,315,102
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS (3,057,702) 6,490,127
NET ASSETS:
Beginning of year 239,969,517 233,479,390
- --------------------------------------------------------------------------------
END OF YEAR* $236,911,815 $239,969,517
================================================================================
* Includes undistributed net investment income of: $172,703 $342,421
================================================================================
See Notes to Financial Statements.
21 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Florida Portfolio ("Fund"), a separate investment fund of the Smith Barney
Muni Funds ("Trust"), a Massachusetts business trust, is registered under the
Investment Company Act of 1940, as amended, as an open-end, non-diversified
management investment company. The Trust consists of this Fund and eight other
separate investment funds: Georgia, Limited Term, National, New York,
Pennsylvania, New York Money Market, California Money Market and Massachusetts
Money Market Portfolios. The financial statements and financial highlights for
the other funds are presented in separate shareholder reports.
The following are significant accounting policies consistently followed by the
Fund and are in conformity with generally accepted accounting principles
("GAAP"): (a) security transactions are accounted for on trade date; (b)
securities are valued at the mean between the quoted 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; (c) securities for which market quotations are not available will be
valued in good faith at fair value by or under the direction of the Board of
Trustees; (d) securities maturing within 60 days are valued at cost plus
accreted discount, or minus amortized premium, which approximates value; (e)
gains or losses on the sale of securities are calculated by using the specific
identification method; (f) interest income, adjusted for amortization of premium
and accretion of discount, is recorded on an accrual basis; (g) class specific
expenses are charged to each class; management fees and general fund expenses
are allocated on the basis of relative net assets of each class or on another
reasonable basis; (h) dividends and distributions to shareholders are recorded
on the ex-dividend date; (i) the Fund intends to comply with the applicable
provisions of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes;
(j) the character of income and gains to be distributed is determined in
accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. At March 31,
2004, reclassifications were made to the Fund's capital accounts to reflect
permanent book/tax differences and income and gains available for distributions
under income tax
22 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
regulations. Net investment income, net realized gains and net assets were not
affected by this change; and (k) estimates and assumptions are required to be
made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
2. Fund Concentration
Since the Fund invests primarily in obligations of issuers within Florida, it is
subject to possible concentration risks associated with economic, political, or
legal developments or industrial or regional matters specifically affecting
Florida.
3. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax and from designated
state income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
It is the Fund's policy to distribute dividends monthly. Capital gain
distributions, if any, are taxable to shareholders, and are declared and paid at
least annually.
4. Management Agreement and Other Transactions
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.
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
year ended March 31, 2004, the Fund paid transfer agent fees of $40,594 to CTB.
Citigroup Global Markets Inc. ("CGM"), another indirect wholly-owned subsidiary
of Citigroup, acts as the Fund's distributor.
23 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
There is a maximum initial sales charge of 4.00% for Class A shares. There is a
contingent deferred sales charge ("CDSC") of 4.50% on Class B shares, which
applies if redemption occurs within one year from purchase payment. This CDSC
declines by 0.50% the first year after purchase payment and thereafter by 1.00%
per year until no CDSC is incurred. Class L shares also have a 1.00% CDSC, which
applies if redemption occurs within one year from purchase payment. In addition,
Class A shares also have a 1.00% CDSC, which applies if redemption occurs within
one year from purchase payment. This CDSC only applies to 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.
For the year ended March 31, 2004, CGM received sales charges of approximately
$236,000 and $11,000 on sales of the Fund's Class A and L shares, respectively.
In addition, for the year ended March 31, 2004, CDSCs paid to CGM were
approximately:
CLASS B CLASS L
================================================================================
CDSCs $59,000 $1,000
================================================================================
All officers and one Trustee of the Trust are employees of Citigroup or its
affiliates.
5. Investments
During the year ended March 31, 2004, the aggregate cost of purchases and
proceeds from sales of investments (including maturities of long-term
investments, but excluding short-term investments) were as follows:
================================================================================
Purchases $68,034,911
- --------------------------------------------------------------------------------
Sales 71,765,514
================================================================================
At March 31, 2004, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
================================================================================
Gross unrealized appreciation $13,795,335
Gross unrealized depreciation (2,179,119)
- --------------------------------------------------------------------------------
Net unrealized appreciation $11,616,216
================================================================================
24 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
6. Futures Contracts
Securities or cash equal to the initial margin amount are either deposited with
the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the current market
value of the futures contracts. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts typically
to hedge a portion of its portfolio. The Fund bears the market risk that arises
from changes in the value of the financial instruments and securities indices.
At March 31, 2004, the Fund had the following open futures contracts:
NUMBER OF BASIS MARKET UNREALIZED
CONTRACTS EXPIRATION VALUE VALUE LOSS
======================================================================================
CONTRACTS TO SELL:
20 Year, 6.000%
U.S. Treasury Bond 700 6/04 $77,987,500 $79,843,750 $(1,856,250)
======================================================================================
7. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, the Fund pays a service fee with
respect to its Class A, B and L 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 and L shares calculated at the
annual rates of 0.50% and 0.55% of the average daily net assets of each class,
respectively. For the year ended March 31, 2004, total Rule 12b-1 Distribution
Plan fees, which are accrued daily and paid monthly, were as follows:
CLASS A CLASS B CLASS L
================================================================================
Rule 12b-1 Distribution Plan Fees $256,184 $316,976 $140,060
================================================================================
25 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
For the year ended March 31, 2004, total Transfer Agency Service expenses were
as follows:
CLASS A CLASS B CLASS L
================================================================================
Transfer Agency Service Expenses $32,417 $12,234 $5,270
================================================================================
For the year ended March 31, 2004, total Shareholder Communication expenses were
as follows:
CLASS A CLASS B CLASS L
================================================================================
Shareholder Communication Expenses $23,462 $9,516 $4,026
================================================================================
8. Distributions Paid to Shareholders by Class
YEAR ENDED YEAR ENDED
MARCH 31, 2004 MARCH 31, 2003
================================================================================
NET INVESTMENT INCOME
Class A $ 8,774,091 $ 8,689,550
Class B 2,265,799 2,512,386
Class L 917,681 891,836
- --------------------------------------------------------------------------------
Total $11,957,571 $12,093,772
================================================================================
9. Shares of Beneficial Interest
At March 31, 2004, the Trust had an unlimited amount 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 expenses related to the distribution of its shares.
Transactions in shares of each class were as follows:
YEAR ENDED YEAR ENDED
MARCH 31, 2004 MARCH 31, 2003
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
================================================================================
CLASS A
Shares sold 2,639,562 $ 35,169,828 2,349,032 $ 31,446,574
Shares issued
on reinvestment 231,933 3,082,080 259,757 3,468,197
Shares reacquired (2,177,397) (29,002,185) (2,646,431) (35,343,749)
- --------------------------------------------------------------------------------
Net Increase (Decrease) 694,098 $ 9,249,723 (37,642) $ (428,978)
================================================================================
26 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, 2004 MARCH 31, 2003
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
================================================================================
CLASS B
Shares sold 431,845 $ 5,756,592 750,719 $ 10,037,350
Shares issued
on reinvestment 63,184 838,064 78,035 1,039,809
Shares reacquired (1,204,568) (15,992,117) (856,835) (11,407,392)
- --------------------------------------------------------------------------------
Net Decrease (709,539) $ (9,397,461) (28,081) $ (330,233)
================================================================================
CLASS L
Shares sold 196,005 $2,604,102 334,559 $ 4,488,343
Shares issued
on reinvestment 34,674 459,634 33,436 445,611
Shares reacquired (176,549) (2,339,834) (214,363) (2,859,641)
- --------------------------------------------------------------------------------
Net Increase 54,130 $ 723,902 153,632 $ 2,074,313
================================================================================
10. Capital Loss Carryforward
At March 31, 2004, the Fund had, for Federal income tax purposes, approximately
$2,227,000 of unused capital loss carryforwards available to offset future
capital gains. To the extent that these carryforward losses are used to offset
capital gains, it is probable that the gains so offset will not be distributed.
The amount and year of expiration for each carryforward loss is indicated below.
Expiration occurs on March 31 of the year indicated:
2009 2012
================================================================================
Carryforward Amounts $769,000 $1,458,000
================================================================================
In addition, the Fund had $5,787,290 of capital losses realized after October
31, 2003, which were deferred for tax purposes to the first day of the following
fiscal year.
11. Income Tax Information and Distributions to Shareholders
At March 31, 2004, the tax basis components of distributable earnings were:
================================================================================
Undistributed tax-exempt income $ 92,151
- --------------------------------------------------------------------------------
Accumulated capital losses (2,226,975)
- --------------------------------------------------------------------------------
Unrealized appreciation 11,616,216
================================================================================
At March 31, 2004, the difference between book basis and tax basis unrealized
appreciation and depreciation was attributable primarily to wash sale loss
deferrals, mark to market of derivative contracts and the treatment of
amortization of premiums and accretion of discounts.
27 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The tax character of distributions paid during the years ended March 31, 2004
and 2003 was:
2004 2003
================================================================================
Tax-exempt income $11,957,571 $12,093,772
================================================================================
12. Additional Information
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue guarantee
agreement with this sub-contractor providing that the sub-contractor would
guarantee certain benefits to CAM or its affiliates (the "Revenue Guarantee
Agreement"). In connection with the subsequent purchase of the sub-contractor's
business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by
CAM on many of the funds it manages, this Revenue Guarantee Agreement was
amended eliminating those benefits in exchange for arrangements that included a
one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. CAM also plans an
independent review to verify that the transfer agency fees charged by CAM were
fairly priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
28 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
13. Subsequent Event
Effective April 29, 2004, Class L shares were renamed as Class C shares.
29 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, unless otherwise noted:
CLASS A SHARES 2004(1) 2003(1) 2002(1) 2001(1) 2000(1)
========================================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $13.36 $13.06 $13.34 $12.70 $13.70
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(2) 0.68 0.71 0.71 0.69 0.69
Net realized and unrealized gain (loss)(2) (0.20) 0.29 (0.29) 0.65 (1.01)
- --------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.48 1.00 0.42 1.34 (0.32)
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.68) (0.70) (0.70) (0.70) (0.68)
Total Distributions (0.68) (0.70) (0.70) (0.70) (0.68)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $13.16 $13.36 $13.06 $13.34 $12.70
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.69% 7.76% 3.15% 10.83% (2.25)%
- --------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (MILLIONS) $174 $167 $164 $162 $151
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3) 0.71% 0.72% 0.72% 0.73% 0.74%
Net investment income(2) 5.07 5.30 5.27 5.36 5.32
- --------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 29% 45% 41% 27% 56%
========================================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) 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
change to net investment income, net realized and unrealized loss and the
ratio of net investment income to average net assets was less than $0.01,
$0.01 and 0.01%, respectively. Per share information, ratios and
supplemental data for periods prior to April 1, 2001 have not been restated
to reflect this change in presentation.
(3) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.85%.
30 SMITH BARNEY MUNI FUNDS | 2004 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 B SHARES 2004(1) 2003(1) 2002(1) 2001(1) 2000(1)
========================================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $13.33 $13.04 $13.32 $12.70 $13.69
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(2) 0.60 0.64 0.64 0.62 0.62
Net realized and unrealized gain (loss)(2) (0.18) 0.28 (0.29) 0.63 (1.00)
- --------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.42 0.92 0.35 1.25 (0.38)
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.62) (0.63) (0.63) (0.63) (0.61)
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.62) (0.63) (0.63) (0.63) (0.61)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $13.13 $13.33 $13.04 $13.32 $12.70
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.19% 7.19% 2.67% 10.14% (2.70)%
- --------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (MILLIONS) $43 $53 $52 $53 $59
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3) 1.23% 1.24% 1.22% 1.25% 1.26%
Net investment income(2) 4.56 4.79 4.76 4.84 4.80
- --------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 29% 45% 41% 27% 56%
========================================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) 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 4.77%.
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. In addition, the impact of this change to net investment
income and net realized and unrealized loss was less than $0.01 per share.
(3) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.35%.
31 SMITH BARNEY MUNI FUNDS | 2004 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 L SHARES 2004(1) 2003(1) 2002(1) 2001(1) 2000(1)
========================================================================================================
NET ASSET VALUE, BEGINNING OF YEAR $13.33 $13.04 $13.33 $12.70 $13.69
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(2) 0.60 0.63 0.63 0.61 0.61
Net realized and unrealized gain (loss)(2) (0.19) 0.29 (0.29) 0.65 (1.00)
- --------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.41 0.92 0.34 1.26 (0.39)
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.61) (0.63) (0.63) (0.63) (0.60)
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.61) (0.63) (0.63) (0.63) (0.60)
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $13.13 $13.33 $13.04 $13.33 $12.70
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.12% 7.14% 2.55% 10.16% (2.78)%
- --------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (MILLIONS) $20 $20 $17 $14 $13
- --------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(3) 1.27% 1.30% 1.28% 1.31% 1.32%
Net investment income(2) 4.51 4.73 4.72 4.78 4.74
- --------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 29% 45% 41% 27% 56%
========================================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) 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
change to net investment income, net realized and unrealized loss and the
ratio of net investment income to average net assets was less than $0.01,
$0.01 and 0.01%, 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.
(3) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.40%.
32 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF SMITH BARNEY MUNI FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Florida Portfolio ("Fund") of Smith Barney
Muni Funds ("Trust") as of March 31, 2004, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended and financial highlights for
each of the years the five-year period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at March 31, 2004, by correspondence with the custodian. As to
securities sold but not yet delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund of the Trust as of March 31, 2004, and the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended and financial highlights for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
New York, New York
May 12, 2004
33 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
INFORMATION ABOUT TRUSTEES AND OFFICERS
The business and affairs of the Florida Portfolio ("Fund") are managed under the
direction of the Smith Barney Muni Funds' ("Trust") Board of Trustees.
Information pertaining to the Trustees and Officers of the Trust is set forth
below. The Statement of Additional Information includes additional information
about Trustees and is available, without charge, upon request by calling the
Trust's transfer agent (Citigroup Trust Bank, fsb. at 1-800-451-2010).
NUMBER OF
TERM OF PORTFOLIOS
OFFICE* AND PRINCIPAL IN FUND
POSITION(S) LENGTH OCCUPATION(S) COMPLEX OTHER BOARD
NAME, ADDRESS HELD WITH OF TIME DURING PAST OVERSEEN MEMBERSHIPS
AND AGE FUND SERVED FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
==========================================================================================================================
NON-INTERESTED TRUSTEES:
Lee Abraham Trustee Since Retired; Former Director 27 None
13732 LeHavre Drive 1999 of Signet Group PLC
Frenchman's Creek
Palm Beach Gardens, FL
33410
Age 76
Allan J. Bloostein Trustee Since President of Allan J. 34 Taubman Realty
27 West 67th Street 1999 Bloostein Associates, a Corp.
New York, NY 10023 consulting firm; Former
Age 74 Director of CVS Corp.
Jane F. Dasher Trustee Since Controller of PBK 27 None
Korsant Partners 1999 Holdings Inc., a family
283 Greenwich Avenue investment company
3rd Floor
Greenwich, CT 06830
Age 54
Donald R. Foley Trustee Since Retired 19 None
3668 Freshwater Drive 1985
Jupiter, FL 33477
Age 81
Richard E. Hanson, Jr. Trustee Since Retired; Former Head of 27 None
2751 Vermont Route 140 1999 the New Atlanta Jewish
Poultney, VT 05764 Community High School
Age 62
Paul Hardin Trustee Since Professor of Law and 34 None
12083 Morehead 1994 Chancellor Emeritus
Chapel Hill, NC at the University of
27514-8426 North Carolina
Age 72
Roderick C. Rasmussen Trustee Since Investment Counselor 27 None
9 Cadence Court 1985
Morristown, NJ 07960
Age 77
34 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
NUMBER OF
TERM OF PORTFOLIOS
OFFICE* AND PRINCIPAL IN FUND
POSITION(S) LENGTH OCCUPATION(S) COMPLEX OTHER BOARD
NAME, ADDRESS HELD WITH OF TIME DURING PAST OVERSEEN MEMBERSHIPS
AND AGE FUND SERVED FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
==========================================================================================================================
John P. Toolan Trustee Since Retired 27 John Hancock
13 Chadwell Place 1985 Funds
Morristown, NJ 07960
Age 73
INTERESTED TRUSTEE:
R. Jay Gerken, CFA** Chairman, Since Managing Director of 221 None
Citigroup Asset President 2002 Citigroup Global Markets
Management and Chief Inc. ("CGM"); Chairman,
("CAM") Executive President and Chief
399 Park Avenue Officer Executive Officer of Smith
4th Floor Barney Fund Management
New York, NY10022 LLC ("SBFM"),Travelers
Age 52 Investment Adviser, Inc.
("TIA") and Citi Fund
Management Inc. ("CFM");
President and Chief
Executive Officer of certain
mutual funds associated
with Citigroup Inc.
("Citigroup); Formerly,
Portfolio Manager of
Smith Barney Allocation
Series Inc. (from 1996 to
2001) and Smith Barney
Growth and Income Fund
(from 1996 to 2000)
OFFICERS:
Andrew B. Shoup Senior Vice Since Director of CAM; Senior N/A N/A
CAM President 2003 Vice President and Chief
125 Broad Street and Chief Administrative Officer of
11th Floor Administrative mutual funds associated
New York, NY 10004 Officer with Citigroup; Treasurer
Age 47 of certain mutual funds
associated with Citigroup;
Head of International
Funds Administration of
CAM (from 2001 to 2003);
Director of Global Funds
Administration of CAM
(from 2000 to 2001);
Head of U.S. Citibank
Funds Administration of
CAM (from 1998 to 2000)
35 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
NUMBER OF
TERM OF PORTFOLIOS
OFFICE* AND PRINCIPAL IN FUND
POSITION(S) LENGTH OCCUPATION(S) COMPLEX OTHER BOARD
NAME, ADDRESS HELD WITH OF TIME DURING PAST OVERSEEN MEMBERSHIPS
AND AGE FUND SERVED FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
==========================================================================================================================
Richard L. Peteka Chief Since Director of CGM; Chief N/A N/A
CAM Financial 2002 Financial Officer and
125 Broad Street Officer and Treasurer of certain
11th Floor Treasurer mutual funds associated
New York, NY 10004 with Citigroup; Director
Age 42 and Head of Internal
Control for CAM U.S.
Mutual Fund
Administration (from
1999 to 2002); Vice
President, Head of Mutual
Fund Administration and
Treasurer at Oppenheimer
Capital (from 1996
to 1999)
Peter M. Coffey Vice Since Managing Director of N/A N/A
CAM President 1987 CGM; Investment Officer
399 Park Avenue and of SBFM
4th Floor Investment
New York, NY 10022 Officer
Age 58
Andrew Beagley Chief Since Director of CGM(since N/A N/A
CAM Anti-Money 2002 2000); Director of
399 Park Avenue Laundering Compliance, North
4th Floor Compliance America, CAM (since
New York, NY 10022 Officer 2000); Chief Anti-Money
Age 40 Laundering Compliance
Officer and Vice President
of certain mutual funds
associated with Citigroup;
Director of Compliance,
Europe, the Middle East
and Africa, CAM (from
1999 to 2000);
Compliance Officer,
Salomon Brothers Asset
Management Limited,
Smith Barney Global
Capital Management
Inc., Salomon Brothers
Asset Management Asia
Pacific Limited (from
1997 to 1999)
36 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
NUMBER OF
TERM OF PORTFOLIOS
OFFICE* AND PRINCIPAL IN FUND
POSITION(S) LENGTH OCCUPATION(S) COMPLEX OTHER BOARD
NAME, ADDRESS HELD WITH OF TIME DURING PAST OVERSEEN MEMBERSHIPS
AND AGE FUND SERVED FIVE YEARS BY TRUSTEE HELD BY TRUSTEE
===========================================================================================================================
Kaprel Ozsolak Controller Since Vice President of CGM; N/A N/A
CAM 2002 Controller of certain
125 Broad Street mutual funds associated
11th Floor with Citigroup
New York, NY 10004
Age 38
Robert I. Frenkel Secretary Since Managing Director and N/A N/A
CAM and Chief 2003 General Counsel of
300 First Stamford Place Legal Global Mutual Funds for
4th Floor Officer CAM and its predecessor
Stamford, CT 06902 (since 1994); Secretary
Age 48 of CFM (from 2001 to
2004); Secretary and
Chief Legal Officer of
mutual funds associated
with Citigroup
- ---------------
* Each Trustee and Officer serves until his or her successor has been duly
elected and qualified.
** Mr. Gerken is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is an
officer of SBFM and certain of its affiliates.
37 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
For the year ended March 31, 2004, 100% of the dividends paid by the Fund from
net investment income were tax-exempt for regular Federal income tax and Florida
state income tax purposes.
38 SMITH BARNEY MUNI FUNDS | 2004 Annual Report
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SMITH BARNEY
MUNI FUNDS
TRUSTEES
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
R. Jay Gerken, CFA
Chairman
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
Richard L. Peteka
Chief Financial Officer
and Treasurer
Peter M. Coffey
Vice President and Investment Officer
Andrew Beagley
Chief Anti-Money Laundering Compliance Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer
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
SMITH BARNEY MUNI FUNDS
- --------------------------------------------------------------------------------
FLORIDA PORTFOLIO
The Fund is a separate investment fund of the Smith Barney Muni Funds, a
Massachusetts business trust.
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds -- Florida Portfolio, but it may also be used as sales
literature when preceded or accompanied by the current Prospectus.
SMITH BARNEY MUNI FUNDS
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
THIS DOCUMENT 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 YOU
INVEST OR SEND MONEY.
WWW.SMITHBARNEYMUTUALFUNDS.COM
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the Fund (toll-free) at 1-800-451-2010 and by
visiting the SEC's website at www.sec.gov.
(C)2004 Citigroup Global Markets Inc.
Member NASD, SIPC
FD2298 5/04 04-6644
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that Jane F.
Dasher, the Chairman of the Board's Audit Committee, possesses the
technical attributes identified in Instruction 2(b) of Item 3 to Form
N-CSR to qualify as an "audit committee financial expert," and has
designated Ms. Dasher as the Audit Committee's financial expert. Ms.
Dasher is an "independent" Trustee pursuant to paragraph (a)(2) of
Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees for Smith Barney Muni Funds were $170,500 and $162,500
for the years ended 3/31/04 and 3/31/03.
(b) Audit-Related Fees for Smith Barney Muni Funds were $0 and $0 for
the years ended 3/31/04 and 3/31/03.
(c) Tax Fees for Smith Barney Muni Funds were $18,500 and $18,400 for
the years ended 3/31/04 and 3/31/03. These amounts represent
aggregate fees paid for tax compliance, tax advice and tax
planning services, which include (the filing and amendment of
federal, state and local income tax returns, timely RIC
qualification review and tax distribution and analysis planning)
rendered by the Accountant to Smith Barney Muni Funds.
(d) There were no all other fees for Smith Barney Muni Funds for the
years ended 3/31/04 and 3/31/03.
(e) (1) Audit Committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
The Charter for the Audit Committee (the "Committee") of the
Board of each registered investment company (the "Fund") advised
by Smith Barney Fund Management LLC or Salomon Brothers Asset
Management Inc or one of their affiliates (each, an "Adviser")
requires that the Committee shall approve (a) all audit and
permissible non-audit services to be provided to the Fund and (b)
all permissible non-audit services to be provided by the Fund's
independent auditors to the Adviser and any Covered Service
Providers if the engagement relates directly to the operations
and financial reporting of the Fund. The Committee may implement
policies and procedures by which such services are approved other
than by the full Committee.
The Committee shall not approve non-audit services that the
Committee believes may impair the independence of the auditors.
As of the date of the approval of this Audit
Committee Charter, permissible non-audit services include any
professional services (including tax services), that are not
prohibited services as described below, provided to the Fund by
the independent auditors, other than those provided to the Fund
in connection with an audit or a review of the financial
statements of the Fund. Permissible non-audit services may not
include: (i) bookkeeping or other services related to the
accounting records or financial statements of the Fund; (ii)
financial information systems design and implementation; (iii)
appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (iv) actuarial services; (v)
internal audit outsourcing services; (vi) management functions or
human resources; (vii) broker or dealer, investment adviser or
investment banking services; (viii) legal services and expert
services unrelated to the audit; and (ix) any other service the
Public Company Accounting Oversight Board determines, by
regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount of
all such permissible non-audit services provided to the Fund, the
Adviser and any service providers controlling, controlled by or
under common control with the Adviser that provide ongoing
services to the Fund ("Covered Service Providers") constitutes
not more than 5% of the total amount of revenues paid to the
independent auditors during the fiscal year in which the
permissible non-audit services are provided to (a) the Fund, (b)
the Adviser and (c) any entity controlling, controlled by or
under common control with the Adviser that provides ongoing
services to the Fund during the fiscal year in which the services
are provided that would have to be approved by the Committee;
(ii) the permissible non-audit services were not recognized by
the Fund at the time of the engagement to be non-audit services;
and (iii) such services are promptly brought to the attention of
the Committee and approved by the Committee (or its delegate(s))
prior to the completion of the audit.
(f) N/A
(g) Non-audit fees billed - $100,000 and $1.2 million for the years
ended 12/31/2003 and 12/31/2002.
(h) Yes. The Smith Barney Muni Funds' Audit Committee has considered
whether the provision of non-audit services that were rendered to
Service Affiliates which were not pre-approved (not requiring
pre-approval) is compatible with maintaining the Accountant's
independence. All services provided by the Accountant to the
Smith Barney Muni Funds or to Service Affiliates which were
required to be pre-approved were pre-approved as required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. 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 10. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(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: June 7, 2004
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: June 7, 2004
By: /s/ Richard L. Peteka
Richard L. Peteka
Chief Financial Officer of
Smith Barney Muni Funds
Date: June 7, 2004