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 811-5034
SALOMON FUNDS TRUST
(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.
Salomon Brothers Asset Management Inc
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 725-6666
Date of fiscal year end: DECEMBER 31
Date of reporting period: JUNE 30, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
June 30, 2004
SEMI-ANNUAL
REPORT
[GRAPHIC OMITTED]
Salomon Brothers Asset Management
o National Tax Free Bond Fund
Salomon Brothers o California Tax Free Bond Fund
o New York Tax Free Bond Fund
o Mid Cap Fund
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SALOMON
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BROTHERS
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ASSET MANAGEMENT NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
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Table of Contents
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Letter from the Chairman ................................................ 1
Schedules of Investments ................................................ 5
Statements of Assets and Liabilities .................................... 16
Statements of Operations ................................................ 17
Statements of Changes in Net Assets ..................................... 18
Notes to Financial Statements ........................................... 20
Financial Highlights .................................................... 27
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Letter from the Chairman
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[PHOTO OMITTED]
R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
DEAR SHAREHOLDER,
Both the stock and bond markets changed gears during the first half of this
year, due largely to shifting tides of investor sentiment.
After a torrid second half of 2003, the equity markets took a breather this
year. Markets typically abhor uncertainty, so as the year progressed, investors
grew increasingly lethargic amid questions over Iraq, global terrorism, a rise
in oil prices, interest rates and inflation, and the presidential election. The
good news -- solid corporate earnings, the improving economy and renewed job
growth, and the still low level of interest rates -- was largely ignored. As a
result, stock market returns for the first six months of 2004 were generally
modest, as opposed to the strong, double-digit gains late last year.
As was the case in 2003, small- and mid-capitalization stocks generally
outperformed their larger brethren in the first half of this year. Value- and
growth-oriented stocks frequently traded short-term performance leadership
during the past six months, but value stocks slightly outperformed growth stocks
over the full six-month period. The performance of foreign stock markets in the
first half was largely in line with that of the broad U.S. market.
Although the bond market got off to a formidable start, it experienced a
pullback in the spring due to heightened worries about resurgent inflation,
rising rates, and anticipation that the Federal Reserve Bank ("Fed") would begin
to raise key short-term rates after a long accommodative stance on monetary
policy. Higher interest rates can act as a brake on robust economic growth,
helping maintain a balance between steady growth and the inflation that
generally accompanies it. Given that the economy appeared to be humming along at
a healthy pace, as was widely expected the central bank edged up its federal
funds rate(i) target from a four-decade low to 1.25% at the end of June.
Over the six-month period, intermediate-term municipal bonds, particularly those
of seven- to 10-year maturities, succumbed to more pricing pressure than 15- to
20-year issues and short-term notes, but all these maturity classes held up
better than bonds with longer maturities in excess of 22 years.(ii) The
California index component of the broader Lehman Brothers Municipal Bond Index
held up better than the broader market, returning -0.24% versus -0.68% for the
broader index. However, the New York index component of the Lehman Brothers
Municipal Bond Index performed essentially in line with the broader market with
a return of -0.73%.
Although investor sentiment was shaky this past spring, by the end of the period
the U.S. Consumer Confidence Index(iii) rose to levels not seen since June of
2002. The domestic unemployment rate held steady, job growth slowed following a
strong increase in March through the early spring, and inflation picked up
during the period.
PERFORMANCE REVIEW
NATIONAL TAX FREE BOND FUND
Within this environment, the fund performed as follows: For the six months ended
June 30, 2004, Class A shares of the Salomon Brothers National Tax Free Bond
Fund, excluding sales charges, returned -1.43%. These shares underperformed the
fund's unmanaged benchmark, the Lehman Brothers Municipal 4 Years Plus Bond
Index,(iv) which returned -0.77% for the same period. They also underperformed
the fund's Lipper general municipal debt funds category average, which returned
- -0.99% for the same period.(1)
(1) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended June 30, 2004, calculated
among the 302 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any, and excluding sales
charges.
1
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.
CALIFORNIA TAX FREE BOND FUND
For the six months ended June 30, 2004, Class A shares of the Salomon Brothers
California Tax Free Bond Fund, excluding sales charges, returned -1.31%. These
shares underperformed the fund's unmanaged benchmark, the Lehman Brothers
California 4 Years Plus Bond Index,(v) which returned -0.28% for the same
period. They also underperformed the fund's Lipper California municipal debt
funds category average, which returned -0.96 % for the same period.(2)
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.
NEW YORK TAX FREE BOND FUND
SPECIAL SHAREHOLDER NOTICE
Effective June 30, 2004, the fund compares its performance to the Lehman
Brothers Municipal Bond Index, a broad based unmanaged index of municipal bonds,
and to an additional index, the Lehman Brothers NY 4+ Year Municipal Bond
Index.(vi)
For the six months ended June 30, 2004, Class A shares of the Salomon Brothers
New York Tax Free Bond Fund, excluding sales charges, returned -1.48%. These
shares underperformed the fund's unmanaged benchmark, the Lehman Brothers
Municipal Bond Index,(vii) which returned -0.68%, and its subcomponent Lehman
Brothers New York municipal bond index, which returned -0.73% for the same
period.(viii) In addition, the fund underperformed the Lehman Brothers NY 4+
Year Municipal Bond Index, which returned -0.77%. They also underperformed the
fund's Lipper New York municipal debt funds category average, which returned
- -1.21%.(3)
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.
MID CAP FUND
For the six months ended June 30, 2004, Class A shares of the Mid Cap Fund,
excluding sales charges, returned 7.87%. These shares outperformed the fund's
unmanaged benchmark, the S&P Midcap 400 Index, which returned 6.08% for the same
period. They also outperformed the fund's Lipper mid-cap core funds category
average, which returned 5.55% for the same period.(4)
SPECIAL SHAREHOLDER NOTICE
On February 2, 2004, the initial sales charges on Class 2 shares were
eliminated. Effective April 29, 2004, Class 2 shares were renamed Class C
shares.
(2) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended June 30, 2004, calculated
among the 128 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any, and excluding sales
charges.
(3) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended June 30, 2004, calculated
among the 108 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any, and excluding sales
charges.
(4) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended June 30, 2004, calculated
among the 335 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any, and excluding sales
charges.
2
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PERFORMANCE SNAPSHOT
AS OF JUNE 30, 2004
(EXCLUDING SALES CHARGES)
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6 MONTHS
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National Tax Free Bond Fund -- Class A Shares -1.43%
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Lehman Brothers Municipal 4 Years Plus Bond Index -0.77%
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Lipper General Municipal Debt Funds Category Average -0.99%
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SEC Yield 3.56%
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California Tax Free Bond Fund -- Class A Shares -1.31%
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Lehman Brothers California 4 Years Plus Bond Index -0.28%
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Lipper California Municipal Debt Funds Category Average -0.96%
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SEC Yield 3.25%
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New York Tax Free Bond Fund -- Class A Shares -1.48%
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Lehman Brothers Municipal Bond Index -0.68%
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Lehman Brothers NY 4+ Year Municipal Bond Index -0.77%
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Lipper New York Municipal Debt Funds Category Average -1.21%
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SEC Yield 3.50%
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Mid Cap Fund -- Class A Shares 7.87%
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S&P Midcap 400 Index 6.08%
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Lipper Mid-Cap Core Funds Category Average 5.55%
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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.sbam.com.
THE FUND YIELDS REFLECT VOLUNTARY FEE WAIVERS AND REIMBURSEMENTS, WHICH MAY BE
REDUCED OR TERMINATED AT ANY TIME. WITHOUT THESE FEE WAIVERS AND REIMBURSEMENTS
THE YIELD ON THE NATIONAL TAX FREE BOND FUND, THE CALIFORNIA TAX FREE BOND FUND
AND THE NEW YORK TAX FREE BOND FUND WOULD HAVE BEEN 3.04%, 2.21% AND 3.31%,
RESPECTIVELY. IN THE ABSENCE OF FEE WAIVERS AND/OR EXPENSE REIMBURSEMENTS, IF
ANY, THE TOTAL RETURN OF THE MID CAP FUND WOULD BE REDUCED.
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.
National Tax Free Bond Fund: Excluding sales charges, Class B shares returned
- -1.80%, Class C shares returned -1.68% and Class O shares returned -1.30% over
the six months ended June 30, 2004.
California Tax Free Bond Fund: Excluding sales charges, Class B shares returned
- -1.67%, Class C shares returned -1.55% and Class O shares returned -1.15% over
the six months ended June 30, 2004.
New York Tax Free Bond Fund: Excluding sales charges, Class B shares returned
- -1.85%, Class C shares returned -1.73% and Class O shares returned -1.36% over
the six months ended June 30, 2004.
Mid Cap Fund: Excluding sales charges, Class B shares returned 7.50%, Class C
shares returned 7.54% and Class O shares returned 8.11% over the six months
ended June 30, 2004.
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3
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
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.
In November 2003, Citigroup Asset Management disclosed an investigation by the
Securities and Exchange Commission ("SEC") and the U.S. Attorney relating to
Citigroup Asset Management's entry into the transfer agency business during
1997-1999. On July 20, 2004, Citigroup disclosed that it had been notified by
the Staff of the SEC that the Staff is considering recommending a civil
injunctive action and/or an administrative proceeding against certain advisory
and transfer agent entities affiliated with Citigroup relating to the creation
and operation of its internal transfer agent unit to serve primarily with the
Smith Barney family of mutual funds. This internal transfer agent did not
provide services to the fund. Citigroup is cooperating with the SEC and will
seek to resolve this matter in discussion with the SEC Staff. Although there can
be no assurance, Citigroup does not believe that this matter will have a
material adverse effect on the fund.
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
JULY 20, 2004
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
RISKS:
SALOMON BROTHERS NATIONAL TAX FREE BOND FUND: 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. Interest rate
increases, causing the prices of fixed income securities to decline, would
reduce the value of the fund's share price.
SALOMON BROTHERS CALIFORNIA TAX FREE BOND FUND: 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.
Interest rate increases, causing the prices of fixed income securities to
decline, would reduce the value of the fund's share price.
SALOMON BROTHERS NEW YORK TAX FREE BOND FUND: 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. Interest rate
increases, causing the prices of fixed income securities to decline, would
reduce the value of the fund's share price.
SALOMON BROTHERS MID CAP FUND: Investments in mid-capitalization companies may
involve a higher degree of risk and volatility than investments in larger, more
established companies. Foreign securities are subject to certain risks of
overseas investing including currency fluctuations and changes in political and
economic conditions, which could result in significant market fluctuations. 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) 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.
(ii) Source: Based upon Lehman Brothers index performance data for each
respective maturity category of municipal bonds.
(iii) Source: June 2004 Consumer Confidence Index, The Conference Board.
(iv) The Lehman Brothers Municipal 4 Years Plus Bond Index is a broad measure
of the municipal bond market with maturities of at least four years.
(v) The Lehman Brothers California Municipal 4 Years Plus Bond Index is a
broad measure of the California municipal bond market with maturities of
at least four years.
(vi) The Lehman Brothers NY 4+ Year Index is a market value-weighted index of
New York fixed-rate investment grade municipal bonds with maturities of at
least four years.
(vii) The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year.
(viii) Source: Lehman Brothers. This subindex is a broad measure of the market
for New York municipal bonds with maturities of at least one year.
4
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Schedules of Investments
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June 30, 2004 (unaudited)
SALOMON BROTHERS NATIONAL TAX FREE BOND FUND
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FACE
AMOUNT RATING(a) SECURITY VALUE
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MUNICIPAL BONDS & NOTES -- 98.4%
AVIATION -- 0.8%
$ 60,000 Aaa Austin, TX, Airport System Revenue, Series A, MBIA-Insured, Pre-Refunded -- Escrowed to
maturity with state and local government securities, 6.500% due 11/15/05 .............. $ 63,598
250,000 Aaa Miami, Dade County, FL Aviation Revenue, Miami International Airport,
Series A, FGIC-Insured, 5.550% due 10/1/13 ............................................ 267,700
-----------
331,298
-----------
EDUCATION -- 6.6%
1,000,000 Aaa Larimer, CO County School District No. R-001 Poudre, MBIA-Insured, 5.750% due 12/15/17 .. 1,127,240
105,000 A++ Mississippi Higher Education Student Loan, Sub-Series C, 6.050% due 9/1/07 .............. 105,781
250,000 A1 New York State Dormitory Authority Lease Revenue, State University Dorm Facilities,
Series A, 6.000% due 7/1/14 ........................................................... 282,485
1,150,000 Aaa Northside, TX ISD, Refunding, PSFG, 6.000% due 8/15/16 .................................. 1,296,050
-----------
2,811,556
-----------
GENERAL OBLIGATION -- 37.5%
1,000,000 Aa1 Boulder, CO Open Space Acquisition, 5.500% due 8/15/17 .................................. 1,076,610
1,000,000 Aa3 California State Economic Recovery, Series A, 5.000% due 7/1/17 ......................... 1,034,530
500,000 Aa3 Connecticut State, Series B, 5.500% due 6/15/15 ......................................... 561,065
250,000 Aaa Cook County, IL Refunding, Series A, MBIA-Insured, 5.625% due 11/15/16 .................. 271,895
1,605,000 Aaa Georgia State, Series D, 5.800% due 11/1/16 ............................................. 1,800,184
1,100,000 Aaa Hidalgo County , TX Certificates of Obligation, FGIC-Insured, 5.500% due 8/15/16 ........ 1,197,361
915,000 Aaa Houston, TX Pre-Refunded, Public Improvement, FSA-Insured, 5.750% due 3/1/17 ............ 1,035,057
85,000 Aaa Houston, TX Unrefunded Balance, Public Improvement, FSA-Insured, 5.750% due 3/1/17 ...... 93,328
1,500,000 Aaa Illinois State, First Series, FGIC-Insured, 6.100% due 1/1/20 ........................... 1,670,175
Massachusetts State, Construction Loan:
3,900,000 Aa2 Series A, 6.000% due 2/1/14 ........................................................... 4,459,845
2,000,000 Aa2 Series B, 6.000% due 6/1/15 ........................................................... 2,273,620
500,000 Aaa Snohomish County, WA School District No. 2, FSA-Insured, 5.500% due 12/1/16 ............. 545,765
-----------
16,019,435
-----------
HEALTHCARE -- 1.2%
500,000 BBB+* Indiana Health Facility Finance Authority, Hospital Revenue, Refunding, Hancock Memorial
Hospital Health Services, 5.800% due 8/15/06 .......................................... 523,885
-----------
HOUSING -- 1.2%
50,000 Aaa Florida Housing Finance Agency, SFM, Series A, FNMA/GNMA-Collateralized,
6.150% due 7/1/06 ..................................................................... 51,264
90,000 Aaa Iowa Finance Authority Single Family Revenue, Mortgage Backed Securities Program,
Series A, FNMA/GNMA-Collateralized, 6.000% due 7/1/13 ................................. 93,590
250,000 Aa1 Maine State Housing Authority Mortgage Purchase Revenue, Series A, 5.950% due 11/15/11 .. 258,180
125,000 Aa2 North Dakota State Housing Finance Agency Revenue, Refunding, Housing Finance Program,
Home Mortgage, Series A, 6.100% due 7/1/13 ............................................ 126,119
-----------
529,153
-----------
MISCELLANEOUS -- 4.4%
165,000 Aa2 Missouri State Regional Convention & Sports Complex Authority,
(Convention & Sports Facilities Project A-1), 5.000% due 8/15/05 ...................... 171,024
1,500,000 Aaa New Jersey Sports & Exposition Authority Contract, Series A, MBIA-Insured, 6.000%
due 3/1/15 ............................................................................ 1,680,945
-----------
1,851,969
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SEE NOTES TO FINANCIAL STATEMENTS.
5
Schedules of Investments
(unaudited) (continued)
SALOMON BROTHERS NATIONAL TAX FREE BOND FUND
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FACE
AMOUNT RATING(a) SECURITY VALUE
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POWER -- 3.2%
$ 750,000 Aaa Energy Northwest WA Electric Revenue, Colombia Generating, Series A, FSA-Insured,
5.500% due 7/1/16 ..................................................................... $ 803,752
500,000 Aaa Tacoma, WA Electric System Revenue, Refunding, Series A, FSA-Insured, 5.750% due 1/1/16 . 548,615
-----------
1,352,367
-----------
SALES TAX -- 4.1%
1,300,000 Aaa Hamilton County, OH Sales Tax, Sub-Series B, AMBAC-Insured, 5.750% due 12/1/17 .......... 1,438,931
265,000 Aa2 New York City, NY Transitional Finance Authority Revenue, Future Tax Secured,
Unrefunded, Series B, 6.125% due 11/15/14 ............................................. 301,141
-----------
1,740,072
-----------
TRANSPORTATION -- 28.3%
1,000,000 Aaa Chicago, IL O'Hare International Airport Revenue, Series A-2, 5.750% due 1/1/19 ......... 1,062,310
2,500,000 Aaa Massachusetts Bay Transportation Authority, General Transportation System, Series A,
5.500% due 3/1/15 ..................................................................... 2,772,150
2,750,000 Aaa Metropolitan Transit Authority, NY Transit Revenue, Series A, AMBAC-Insured,
5.500% due 11/15/15 ................................................................... 3,019,995
1,500,000 Aaa Miami, Dade County, FL County Expressway Authority Toll System Revenue, FGIC-Insured,
6.000% due 7/1/13 ..................................................................... 1,704,420
1,500,000 Aaa New Jersey EDA Revenue (Transportation Project), Series A, FSA-Insured,
5.750% due 5/1/13 ..................................................................... 1,670,205
1,750,000 Aa1 New York State Thruway Authority, State Personal Income Tax Revenue, Series A, 5.500%
due 3/15/20 ........................................................................... 1,866,113
-----------
12,095,193
-----------
WATER & SEWER -- 11.1%
500,000 Aaa California State Department of Water & Residential Power Supply Revenue, Series A,
MBIA-Insured, 6.000% due 5/1/15 ....................................................... 564,465
2,280,000 Aaa Kansas State, Development Finance Authority Revenue, Public Water Supply, Revolving
Loan-2, AMBAC-Insured, 5.750% due 4/1/14 .............................................. 2,535,337
280,000 Aaa Passaic Valley, NJ Sewer Commissioners, Pre-Refunded, Sewer System, Series D,
AMBAC-Insured, 5.750% due 12/1/07 ..................................................... 307,387
1,165,000 Aaa Pueblo, CO Board of Waterworks Revenue, Improvement, Series A, FSA-Insured,
6.000% due 11/1/15 .................................................................... 1,316,788
-----------
4,723,977
-----------
TOTAL MUNICIPAL BONDS & NOTES
(Cost -- $39,600,070) ................................................................... 41,978,905
-----------
VARIABLE RATE DEMAND NOTE (b) -- 1.6%
TRANSPORTATION -- 1.6%
700,000 VMIG 1 Kansas State Department, Transportation Highway Revenue, Series B-1,
1.020% due 9/1/20 (Cost -- $700,000) .................................................. 700,000
-----------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $40,300,070**) ................................................................. $42,678,905
===========
- ----------
(a) All ratings are by Moody's Investors Service, except for those which are
identified by an asterisk (*), are rated by Standard & Poor's Ratings
Service and those identified by a double dagger (++), which are rated by
Fitch Ratings.
(b) Variable rate demand notes have a demand feature under which the Fund
could tender them back to the issuer on no more than seven days notice.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 14 and 15 for definitions of ratings and certain abbreviations.
SEE NOTES TO FINANCIAL STATEMENTS.
6
Schedules of Investments
(unaudited) (continued)
SALOMON BROTHERS CALIFORNIA TAX FREE BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 95.5%
GENERAL OBLIGATION -- 24.4%
$ 1,000,000 Aaa Glendale, CA Unified School District, Series C, FSA-Insured, 5.750% due 9/1/13 .......... $ 1,114,560
250,000 Aaa Placer, CA Union High School District, Series A, FGIC-Insured, 6.000% due 8/1/14 ........ 278,122
575,000 Aaa Pomona, CA Unified School District, Refunding, Series A, MBIA-Insured, 6.500% due 8/1/19 662,630
625,000 Aaa San Bernardino, CA City University School District, Series A, FGIC-Insured, 5.625%
due 8/1/15 ............................................................................ 689,281
-----------
2,744,593
-----------
HOUSING -- 11.7%
California Housing Finance Agency:
1,000,000 Aaa Revenue, MFH III, Series A, 5.850% due 8/1/17 ......................................... 1,037,190
265,000 Aa3 SFM Purchase, AMT, Series A-2, Class III, 4.800% due 8/1/12 ........................... 269,195
-----------
1,306,385
-----------
MISCELLANEOUS -- 2.5%
250,000 Aa3 Sacramento County, CA Sanitation District Finance Authority Revenue,
Series A, 6.000% due 12/1/14 .......................................................... 278,428
-----------
TRANSPORTATION -- 25.0%
2,000,000 Aaa Intermodal Container Transfer Facility, Joint Powers Authority Revenue,
Series A, AMBAC-Insured, 5.750% due 11/1/14 ........................................... 2,289,780
500,000 Aaa Long Beach, CA Highway and Bridge Revenue, AMT, Series B, MBIA-Insured,
4.000% due 5/15/07 .................................................................... 516,775
-----------
2,806,555
-----------
WATER & SEWER -- 31.9%
1,000,000 Aaa Fresno, CA Sewer Revenue, Series A-1, AMBAC-Insured, 6.250% due 9/1/14 .................. 1,175,210
1,500,000 Aaa Puerto Rico Commonwealth Aqueduct & Sewer Authority Revenue, MBIA-Insured, 6.250%
due 7/1/13 ............................................................................ 1,768,785
560,000 Aa3 San Diego County, CA Water Authority Revenue, COP, Series A, 5.750% due 5/1/12 .......... 631,624
-----------
3,575,619
-----------
TOTAL MUNICIPAL BONDS & NOTES
(Cost -- $9,918,740) .................................................................... 10,711,580
-----------
VARIABLE RATE DEMAND NOTE (b) -- 4.5%
WATER & SEWER -- 4.5%
500,000 VMIG 1 California Health Facilities Finance Authority Revenue, Adventist Hospital,
Series A-1, MBIA-Insured, 1.200% due 5/1/33 (Cost -- $500,000) 500,000
-----------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $10,418,740*) .................................................................. $11,211,580
===========
- ----------
(a) All securities are rated by Moody's Investors Service.
(b) Variable rate demand notes have a demand feature under which the Fund
could tender them back to the issuer on no more than seven days notice.
* Aggregate cost for Federal income tax purposes is substantially the same.
See pages 14 and 15 for definitions of ratings and certain abbreviations.
SEE NOTES TO FINANCIAL STATEMENTS.
7
Schedules of Investments
(unaudited) (continued)
SALOMON BROTHERS NEW YORK TAX FREE BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS & NOTES -- 98.7%
EDUCATION -- 27.2%
New York State Dormitory Authority Revenue:
$ 3,000,000 Aaa AMBAC-Insured, 5.750% due 7/1/18 ...................................................... $ 3,416,280
1,000,000 Aaa Columbia University, Series B, 5.375% due 7/1/15 ...................................... 1,093,920
2,000,000 A3 Court Facilities, Series A, 5.000% due 5/15/08 ........................................ 2,123,640
2,000,000 AA-* Mental Health Services Facilities, Series C-1, 5.000% due 2/15/07 ..................... 2,108,320
825,000 AAA Municipal Health Facilities Program, Series 1, FSA-insured, 5.500% due 1/15/14 ........ 895,397
New York University, Series A, MBIA-Insured:
1,000,000 Aaa 5.750% due 7/1/15 ................................................................... 1,135,280
6,300,000 Aaa 5.750% due 7/1/27 ................................................................... 7,033,635
2,500,000 Aaa North Shore University Hospital, 5.500% due 11/1/14 ................................... 2,800,875
1,500,000 Aaa School District Financing Program, Series A, 5.750% due 10/1/17 ....................... 1,659,270
State University:
1,070,000 Aaa Adult Facilities, Series C, 5.750% due 5/15/17 ...................................... 1,219,682
Dorm Facilities:
1,160,000 A1 Series A, 6.000% due 7/1/15 ....................................................... 1,308,062
1,515,000 Aaa Series C, MBIA-Insured, 5.750% due 7/1/13 ......................................... 1,680,256
2,030,000 A3 Education Facilities, Series B, 5.250% due 5/15/13 .................................. 2,198,693
------------
28,673,310
------------
GENERAL OBLIGATION -- 5.9%
New York City, NY:
2,000,000 Aaa Series A, 5.000% due 8/1/09 ........................................................... 2,147,520
2,450,000 A2 Series B, 5.750% due 8/1/14 ........................................................... 2,656,854
1,250,000 Aaa Puerto Rico Commonwealth, Refunding, Public Improvement,
Series A, MBIA Insured, 5.500% due 7/1/16 ............................................. 1,400,550
------------
6,204,924
------------
HIGHWAY/TOLLS -- 21.3%
New York State Thruway Authority:
1,000,000 Aaa Highway & Bridge Transportation Fund, Refunded, Series C, AMBAC-Insured,
5.500% due 4/1/15 ................................................................... 1,091,940
5,275,000 Aa3 Refunded, Series E, 5.250% due 1/1/13 ................................................. 5,661,763
Service Contract Revenue, Local Highway & Bridge:
1,100,000 A3 5.500% due 4/1/14 ................................................................... 1,201,134
4,370,000 Aaa Series B, 5.375% due 4/1/13 ......................................................... 4,719,906
2,995,000 A3 Unrefunded, 6.000% due 4/1/11 ....................................................... 3,281,891
Puerto Rico Commonwealth Highway & Transportation Authority, Highway Revenue:
Refunded:
MBIA-Insured:
1,000,000 Aaa Series X, 5.500% due 7/1/15 ....................................................... 1,120,010
2,000,000 Aaa Series Z, 6.250% due 7/1/14 ....................................................... 2,369,280
1,250,000 Aaa Series W, FSA-Insured, 5.500% due 7/1/13 ............................................ 1,403,400
1,500,000 Aaa Series G, FGIC-Insured, 5.250% due 7/1/16 ............................................. 1,615,710
------------
22,465,034
------------
HOUSING -- 10.9%
New York City Housing Development Corp., MFH Revenue:
1,310,000 Aa2 Series A, 5.625% due 5/1/12 ........................................................... 1,314,651
1,645,000 Aa2 Series E, SONYMA-Insured, 6.100% due 11/1/19 .......................................... 1,741,907
3,155,000 Aaa New York State HFA, Refunded, State University Construction, Series A, 7.900%
due 11/1/06 ........................................................................... 3,353,860
3,200,000 Aa1 New York State Mortgage Agency Revenue, AMT, Home Owner Mortgage,
Series 71, 5.350% due 10/1/18 ......................................................... 3,230,944
1,640,000 Aaa Schenectady New York Industrial Development Agency, Civic Facility Revenue,
(Union College Project) Series A, 5.500% due 7/1/16 ................................... 1,788,272
------------
11,429,634
------------
SEE NOTES TO FINANCIAL STATEMENTS.
8
Schedules of Investments
(unaudited) (continued)
SALOMON BROTHERS NEW YORK TAX FREE BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS -- 2.2%
$ 1,000,000 A+* Municipal Building Bank Agency, Series C, 5.500% due 6/1/16 ............................ $ 1,071,890
1,100,000 Aaa Puerto Rico Public Finance Corp., Commonwealth Appropriation, Series A,
MBIA-Insured, 5.500% due 8/1/17 ...................................................... 1,239,634
------------
2,311,524
------------
POWER -- 1.5%
1,500,000 Aaa Long Island Power Authority, NY Electric System Revenue,
Series C, MBIA/IBC-Insured, 5.500% due 9/1/21 ........................................ 1,606,770
------------
SALES TAX -- 9.8%
New York City, NY, Transitional Finance Authority, Future Tax Secured:
Series A:
5,000,000 Aa2 5.750% due 2/15/16 ................................................................. 5,486,050
1,685,000 Aa2 5.500% due 11/15/17 ................................................................ 1,834,257
580,000 Aa2 Unrefunded, 5.750% due 2/15/14 ..................................................... 640,697
1,155,000 Aa2 Series B, 5.375% due 2/1/15 .......................................................... 1,247,862
1,000,000 Aa2 Series C, 5.875% due 11/1/14 ......................................................... 1,114,290
------------
10,323,156
------------
STATE AGENCIES -- 5.6%
New York State Local Assistance Corp., Refunded:
3,000,000 A1 Series C, 5.500% due 4/1/17 .......................................................... 3,309,660
2,255,000 A1 Series E, 6.000% due 4/1/14 .......................................................... 2,562,943
------------
5,872,603
------------
TRANSPORTATION -- 14.0%
Metropolitan Transportation Authority, NY:
2,300,000 AAA* Commuter Facilities Revenue, Series A, FSA-Insured, 5.125% due 7/1/17 ................ 2,535,842
2,500,000 Aaa Refunded, Series A, AMBAC-Insured, 5.500% due 11/15/15 ............................... 2,745,450
Service Contract, Series O:
1,000,000 A3 Commuter Facilities Revenue, 5.750% due 7/1/13 ..................................... 1,117,500
Transportation Facilities Revenue:
1,000,000 Aaa 5.500% due 7/1/17, MBIA/IBC-Insured .............................................. 1,109,550
3,000,000 A3 5.750% DUE 7/1/13 ................................................................ 3,352,500
New York City Transportation Authority, Triborough Bridge Revenue, Series A,
AMBAC-Insured:
2,500,000 Aaa 5.625% due 1/1/14 .................................................................... 2,736,550
1,000,000 Aaa 5.625% due 1/1/15 .................................................................... 1,088,410
------------
14,685,802
------------
WATER & SEWER -- 0.3%
290,000 Aaa New York State Environmental Facilities Corp., Pollution Control Revenue,
State Water Revolving Fund, Series A, 7.500% due 6/15/12 ............................. 291,508
------------
TOTAL MUNICIPAL BONDS & NOTES
(Cost -- $99,666,716) .................................................................. 103,864,265
------------
VARIABLE RATE DEMAND NOTE (b) -- 1.3%
1,350,000 VMIG 1 New York, NY Sub-Series B-2, Morgan Guaranty Insured, 1.040% due 8/15/20
(Cost -- $1,350,000) ................................................................... 1,350,000
------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $101,016,716**) ............................................................... $105,214,265
============
- ----------
(a) All ratings are by Moody's Investors Service, except for those identified
by an asterisk (*), which are rated by Standard & Poor's Rating Service.
(b) Variable rate demand notes have a demand feature under which the Fund
could tender them back to the issuer on no more than seven days notice.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 14 and 15 for definitions of ratings and certain abbreviations.
SEE NOTES TO FINANCIAL STATEMENTS.
9
Schedules of Investments
(unaudited) (continued)
SALOMON BROTHERS MID CAP FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK -- 99.3%
CONSUMER DISCRETIONARY -- 18.5%
AUTO COMPONENTS -- 2.1%
7,000 American Axle & MFG Holdings .......................................................................... $ 254,520
4,200 Borg Warner Inc. ...................................................................................... 183,834
-----------
438,354
-----------
HOTELS, RESTAURANTS & LEISURE -- 6.8%
3,690 GTECH Holdings Corp. .................................................................................. 170,884
4,200 Landry's Restaurants, Inc. ............................................................................ 125,538
6,400 Mandalay Resort Group ................................................................................. 439,296
12,055 Outback Steakhouse, Inc. .............................................................................. 498,595
4,400 Station Casions Inc ................................................................................... 212,960
-----------
1,447,273
-----------
HOUSEHOLD DURABLES -- 0.6%
1,933 Mohawk Industries, Inc.* .............................................................................. 141,747
-----------
MEDIA -- 3.6%
6,900 Cox Radio, Inc., Class A Shares* ...................................................................... 119,922
1,600 The E.W. Scripps Co. .................................................................................. 168,000
6,700 Lamar Advertising Co., Class A Shares ................................................................. 290,445
200 The Washington Post Co., Class B Shares ............................................................... 186,002
-----------
764,369
-----------
MULTI-LINE RETAIL -- 0.7%
2,550 The Neiman Marcus Group, Inc., Class A Shares* ........................................................ 141,907
-----------
SPECIALTY RETAIL -- 4.7%
2,900 Chico's FAS, Inc.* .................................................................................... 130,964
3,800 O' Reilly Automotive, Inc. ............................................................................ 171,760
7,400 PETsMART, Inc. ........................................................................................ 240,130
7,600 Tiffany & Co. ......................................................................................... 280,060
5,400 Williams-Sonoma, Inc.* ................................................................................ 177,984
-----------
1,000,898
-----------
TOTAL CONSUMER DISCRETIONARY .......................................................................... 3,934,548
-----------
CONSUMER STAPLES -- 5.3%
BEVERAGES -- 0.9%
7,000 Coca-Cola Enterprises Inc. ............................................................................ 202,930
-----------
FOOD PRODUCTS -- 2.9%
14,710 Hormel Foods Corp. .................................................................................... 457,481
3,300 The J.M. Smucker Co. .................................................................................. 151,503
-----------
608,984
-----------
HOUSEHOLD PRODUCTS -- 1.5%
7,000 Church & Dwight Co., Inc. ............................................................................. 320,460
-----------
TOTAL CONSUMER STAPLES ................................................................................ 1,132,374
-----------
ENERGY -- 6.9%
ENERGY EQUIPMENT & SERVICES -- 4.8%
10,500 Core Laboratories N.V.* ............................................................................... 241,500
5,300 Patterson-UTI Energy, Inc.* ........................................................................... 177,073
3,500 Precision Drilling Corp. .............................................................................. 168,035
10,400 Rowan Cos., Inc.* ..................................................................................... 253,032
3,200 Smith International Inc.* ............................................................................. 178,432
-----------
1,018,072
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
10
Schedules of Investments
(unaudited) (continued)
SALOMON BROTHERS MID CAP FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS -- 2.1%
3,600 Murphy Oil Corp. ...................................................................................... $ 265,320
2,400 Valero Energy Corp. ................................................................................... 177,024
-----------
442,344
-----------
TOTAL ENERGY .......................................................................................... 1,460,416
-----------
FINANCIALS -- 17.2%
BANKS -- 6.9%
3,800 Banknorth Group, Inc. ................................................................................. 123,424
3,240 Commerce Bancshares, Inc. ............................................................................. 148,862
6,485 Compass Bancshares, Inc. .............................................................................. 278,855
7,800 CVB Financial Corp. ................................................................................... 169,883
2,700 Independence Community Bank ........................................................................... 98,280
11,200 Sovereign Bancorp Inc. ................................................................................ 247,520
6,900 UnionBanCal Corp. ..................................................................................... 389,160
-----------
1,455,984
-----------
DIVERSIFIED FINANCIALS -- 3.0%
4,800 Legg Mason, Inc. ...................................................................................... 436,848
6,900 SEI Investments Co. ................................................................................... 200,376
-----------
637,224
-----------
INSURANCE -- 7.3%
3,800 Philadelphia Consolidated Holding Corp.* .............................................................. 228,266
9,900 Platinum Underwriters Holdings, Ltd. .................................................................. 301,258
1,900 RenaissanceRE Holdings Ltd. ........................................................................... 102,504
7,600 Scottish Re Group Ltd. ................................................................................ 176,700
5,700 StanCorp Financial Group, Inc. ........................................................................ 381,900
200 White Mountains Insurance Group Ltd. .................................................................. 102,000
7,200 Willis Group Holdings Ltd. ............................................................................ 269,640
-----------
1,562,268
-----------
TOTAL FINANCIALS ...................................................................................... 3,655,476
-----------
HEALTHCARE -- 14.8%
HEALTHCARE EQUIPMENT & SUPPLIES -- 6.0%
6,700 DENTSPLY International Inc. ........................................................................... 349,070
4,600 Edwards Lifesciences Corp.* ........................................................................... 160,310
7,000 Respironics, Inc.* .................................................................................... 411,250
2,100 St. Jude Medical, Inc.* ............................................................................... 158,865
5,700 STERIS Corp.* ......................................................................................... 128,592
1,000 Varian Medical Systems, Inc.* ......................................................................... 79,350
-----------
1,287,437
-----------
HEALTHCARE PROVIDERS & SERVICES -- 3.8%
3,500 Apria Healthcare Group Inc. ........................................................................... 100,450
12,400 Omnicare, Inc. ........................................................................................ 530,844
3,700 Universal Health Services, Inc., Class B Shares ....................................................... 169,793
-----------
801,087
-----------
BIOTECHNOLOGY -- 2.4%
3,625 Biogen Idec Inc.* ..................................................................................... 229,281
3,700 Gilead Sciences, Inc.* ................................................................................ 247,900
2,000 Millennium Pharmaceuticals ............................................................................ 27,600
-----------
504,781
-----------
PHARMACEUTICALS -- 2.6%
2,778 Barr Pharmaceuticals Inc.* ............................................................................ 93,618
10,200 Medicis Pharmaceutical Corp., Class A Shares .......................................................... 407,490
1,000 Sepracor Inc. ......................................................................................... 52,900
-----------
554,008
-----------
TOTAL HEALTHCARE ...................................................................................... 3,147,313
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
11
Schedules of Investments
(unaudited) (continued)
SALOMON BROTHERS MID CAP FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS -- 17.7%
Aerospace & Defense -- 1.1%
3,708 Alliant Techsystems Inc.* ............................................................................. $ 234,864
-----------
AIRLINES -- 1.3%
9,525 JetBlue Airways Corp.* ................................................................................ 279,845
-----------
COMMERCIAL SERVICES & SUPPLIES -- 6.9%
5,600 ARAMARK Corp., Class B Shares ......................................................................... 161,056
2,600 CheckFree Corp.* ...................................................................................... 78,000
2,300 Choicepoint Inc. ...................................................................................... 105,019
11,500 DST Systems, Inc.* .................................................................................... 553,035
2,300 Education Management Corp. ............................................................................ 75,579
4,200 Equifax ............................................................................................... 103,950
3,000 R.R. Donnelley & Sons Co. ............................................................................. 99,060
10,000 Robert Half Internationall Inc. ....................................................................... 297,700
-----------
1,473,399
-----------
CONSTRUCTION & ENGINEERING -- 0.7%
3,800 Jacobs Engineering Group Inc.* ........................................................................ 149,644
-----------
INDUSTRIAL CONGLOMERATES -- 3.1%
5,945 Carlisle Cos. Inc. .................................................................................... 370,076
4,800 Textron Inc. .......................................................................................... 284,880
-----------
654,956
-----------
MACHINERY -- 3.0%
2,900 Agco Corp. ............................................................................................ 59,073
3,500 Actuant Corp., Class A Shares* ........................................................................ 136,465
9,450 IDEX Corp. ............................................................................................ 324,607
4,500 Timken Co. ............................................................................................ 119,205
-----------
639,350
-----------
ROAD & RAIL -- 1.6%
16,400 Werner Enterprises, Inc. .............................................................................. 346,040
-----------
TOTAL INDUSTRIALS ..................................................................................... 3,778,098
-----------
INFORMATION TECHNOLOGY -- 12.6%
COMMUNICATIONS EQUIPMENT -- 2.5%
6,900 Avaya Inc.* ........................................................................................... 108,951
10,022 Juniper Networks Inc. ................................................................................. 246,241
4,300 Plantronics, Inc.* .................................................................................... 181,030
-----------
536,222
-----------
COMPUTERS & PERIPHERALS -- 0.9%
6,500 Electronics for Imaging, Inc.* ........................................................................ 183,690
-----------
ELECTRICAL EQUIPMENT & INSTRUMENTS -- 0.9%
3,700 Diebold, Inc. ......................................................................................... 195,619
-----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -- 3.2%
11,100 Applied Micro Circuits Corp.* ......................................................................... 59,052
4,600 Cymer Inc. ............................................................................................ 172,224
4,500 LSI Logic Corp ........................................................................................ 34,290
4,300 Micrel, Inc.* ......................................................................................... 52,245
2,600 Novellus Systems, Inc.* ............................................................................... 81,744
4,300 Silicon Laboratories Inc.* ............................................................................ 199,306
3,930 Teradyne, Inc.* ....................................................................................... 89,211
-----------
688,072
-----------
SEE NOTES TO FINANCIAL STATEMENTS.
12
Schedules of Investments
(unaudited) (continued)
SALOMON BROTHERS MID CAP FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SOFTWARE -- 5.1%
3,040 Mercury Interactive Corp.* ............................................................................ $ 151,483
19,700 Quest Software, Inc.* ................................................................................. 254,130
5,960 Synopsys, Inc.* ....................................................................................... 169,442
33,600 TIBCO Software Inc.* .................................................................................. 283,920
8,000 VERITAS Software Corp.* ............................................................................... 221,600
-----------
1,080,575
-----------
TOTAL INFORMATION TECHNOLOGY .......................................................................... 2,684,178
-----------
MATERIALS -- 3.8%
CHEMICALS -- 1.1%
2,000 Lubrizol Corp. ........................................................................................ 73,240
4,200 Monsanto .............................................................................................. 161,700
-----------
234,940
-----------
CONSTRUCTION MATERIALS -- 0.6%
2,700 Vulcan Materials Co. .................................................................................. 128,385
-----------
CONTAINERS & PACKAGING -- 1.7%
4,700 AptarGroup, Inc. ...................................................................................... 205,343
7,600 Smurfit-Stone Container Corp.* ........................................................................ 151,620
-----------
356,963
-----------
PAPER & FOREST PRODUCTS -- 0.4%
1,900 Bowater Inc. .......................................................................................... 79,021
-----------
TOTAL MATERIALS ....................................................................................... 799,309
-----------
TELECOMMUNICATION SERVICES -- 0.5%
WIRELESS TELECOMMUNICATIONS SERVICES -- 0.5%
1,500 Telephone and Data Systems, Inc. ...................................................................... 106,800
-----------
UTILITIES -- 2.0%
ELECTRIC UTILITIES -- 0.7%
4,600 Wisconsin Energy Corp. ................................................................................ 150,006
-----------
GAS UTILITIES -- 0.8%
4,700 Sempra Energy. ........................................................................................ 161,821
-----------
MULTI-UTILITIES -- 0.5%
3,000 SCANA Corp. ........................................................................................... 109,110
-----------
TOTAL UTILITIES ....................................................................................... 420,937
-----------
TOTAL COMMON STOCK
(Cost -- $16,639,780) ................................................................................. 21,119,449
-----------
FACE
AMOUNT
- -------------
SHORT-TERM INVESTMENT -- 0.7%
$ 140,000 State Steet Bank & Trust Euro Time Deposit 0.50% due 7/1/04; Proceeds at maturity -- $140,002
(Cost -- $140,000) .................................................................................... 140,000
-----------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $16,779,780**) ............................................................................... $21,259,449
===========
- ----------
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
SEE NOTES TO FINANCIAL STATEMENTS.
13
- --------------------------------------------------------------------------------
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
"BBB" 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 issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB -- Bonds rated "BBB" have 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.
MOODY'S INVESTORS SERVICE ("MOODY'S") -- Numerical modifiers 1, 2 and 3 may be
applied to each generic rating from "Aa" to "Baa," where 1 is the highest and 3
the lowest ranking within its generic category.
Aaa -- Bonds 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 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" are judged to 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 judged 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.
FITCH RATINGS ("FITCH") -- Ratings from "AA" to "A" 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 lowest expectation of credit risk. They
are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA -- Bonds rated "AA" have a very low expectation of credit risk. They
indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to
foreseeable events.
A -- Bonds rated "A" have a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered strong.
This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher
ratings.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's or
Fitch.
14
- --------------------------------------------------------------------------------
Short-Term Security Ratings
- --------------------------------------------------------------------------------
(unaudited)
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
- --------------------------------------------------------------------------------
Abbreviations*
- --------------------------------------------------------------------------------
(unaudited)
ABAG -- Association of Bay Area Governments
ACA -- American Capital Insurance
AIG -- American International Guaranty
AMBAC -- Ambac Assurance Corporation
AMT -- Alternative Minimum Tax
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CDA -- Community Development Authority
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE -- College Construction Loan Insurance Association
LEE
COP -- Certificate of Participation
CSD -- Central School District
CTFS -- Certificates
DFA -- Development Finance Agency
EDA -- Economic Development Authority
EFA -- Educational Facilities Authority
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HEFA -- Health & Educational Facilities Authority
HFA -- Housing Finance Authority
IBC -- Insured Bond Certificates
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
IFA -- Infrastructure Finance Agency
INFLOS -- Inverse Floaters
ISD -- Independent School District
ISO -- Independent System Operator
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MERLOT -- Municipal Exempt Receipts Liquidity Optional Tender
MFH -- Multi-Family Housing
MSTC -- Municipal Securities Trust Certificates
MUD -- Municipal Utilities District
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PART -- Partnership Structure
PCFA -- Pollution Control Finance Authority
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PFC -- Public Finance Corporation
PSFG -- Permanent School Fund Guaranty
Q-SBLF -- Qualified School Board Loan Fund
Radian -- Radian Asset Assurance
RAN -- Revenue Anticipation Notes
RAW -- Revenue Anticipation Warrants
RDA -- Redevelopment Agency
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
SFH -- Single-Family Housing
SFM -- Single Family Mortgage
SPA -- Standby Bond Purchase Agreements
SWAP -- Swap Structure
SYCC -- Structural Yield Curve Certificate
TAN -- Tax Anticipation Notes
TCRS -- Transferable Custodial Receipts
TECP -- Tax Exempt Commercial Paper
TFA -- Transitional Finance Authority
TOB -- Tender Option Bond Structure
TRAN -- Tax and Revenue Anticipation Notes
UFSD -- Unified Free School District
UHSD -- Unified High School District
USD -- Unified School District
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRDO -- Variable Rate Demand Obligation
VRWE -- Variable Rate Wednesday Demand
XLCA -- XL Capital Assurance
- ----------
* Abbreviations may or may not appear in the Schedules of Investments.
15
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
June 30, 2004 (unaudited)
SALOMON BROTHERS
------------------------------------------------------------
NATIONAL CALIFORNIA NEW YORK MID
TAX FREE TAX FREE TAX FREE CAP
BOND FUND BOND FUND BOND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at cost ............................................ $40,300,070 $10,418,740 $101,016,716 $16,779,780
=========== =========== ============ ===========
Investments, at value ........................................... $42,678,905 $11,211,580 $105,214,265 $21,259,449
Cash ............................................................ 136,223 -- 124,827 687
Dividends and interest receivable ............................... 617,369 181,769 1,887,305 13,698
Receivable for securities sold .................................. 35,000 -- -- --
Receivable for Fund shares sold ................................. 5,760 -- 384 38,179
Receivable from manager ......................................... 17,626 -- -- --
Prepaid assets .................................................. 25,404 24,780 15,656 9,441
----------- ----------- ------------ -----------
TOTAL ASSETS .................................................... 43,516,287 11,418,129 107,242,437 21,321,454
----------- ----------- ------------ -----------
LIABILITIES:
Dividends payable ............................................... 140,066 37,077 339,732 --
Distribution and service fees payable ........................... 5,009 1,034 9,636 405
Payable for Fund shares purchased ............................... 3,100 89,599 27,395 --
Management fees payable ......................................... -- -- 26,563 8,113
Bank overdraft .................................................. -- 18,680 -- --
Accrued expenses ................................................ 72,116 32,165 88,888 16,013
----------- ----------- ------------ -----------
TOTAL LIABILITIES ............................................... 220,291 178,555 492,214 24,531
----------- ----------- ------------ -----------
TOTAL NET ASSETS .................................................. $43,295,996 $11,239,574 $106,750,223 $21,296,923
=========== =========== ============ ===========
NET ASSETS:
Par value of shares of beneficial interest ...................... $ -- $ -- $ -- $ 1,158
Capital paid in excess of par value ............................. 47,836,804 13,387,180 108,904,511 17,359,517
Accumulated net investment loss ................................. -- -- -- (34,596)
Accumulated net realized loss from investment transactions ...... (6,919,643) (2,940,446) (6,351,837) (508,825)
Net unrealized appreciation on investments ...................... 2,378,835 792,840 4,197,549 4,479,669
----------- ----------- ------------ -----------
TOTAL NET ASSETS .................................................. $43,295,996 $11,239,574 $106,750,223 $21,296,923
=========== =========== ============ ===========
SHARES OUTSTANDING:
Class A ......................................................... 3,315,942 1,070,457 9,129,968 21,608
=========== =========== ============ ===========
Class B ......................................................... 294,269 11,576 25,749 10,872
=========== =========== ============ ===========
Class C ......................................................... 133,879 2,526 48,494 9,729
=========== =========== ============ ===========
Class O ......................................................... 13,303 196 7,774 1,115,888
=========== =========== ============ ===========
NET ASSET VALUE:
CLASS A SHARES
Net asset value and redemption price, per share ................. $ 11.52 $ 10.36 $ 11.59 $ 18.22
=========== =========== ============ ===========
Maximum offering price, per share (based on maximum sales charges
of 4.00%, 4.00%, 4.00% and 5.75%, respectively) ............... $ 12.00 $ 10.79 $ 12.07 $ 19.33
=========== =========== ============ ===========
CLASS B SHARES
Net asset value and offering price, per share* .................. $ 11.54 $ 10.37 $ 11.59 $ 17.91
=========== =========== ============ ===========
CLASS C SHARES
Net asset value and offering price, per share* .................. $ 11.53 $ 10.36 $ 11.60 $ 17.98
=========== =========== ============ ===========
CLASS O SHARES
Net asset value, offering price and redemption price per share .. $ 11.54 $ 10.37 $ 11.58 $ 18.40
=========== =========== ============ ===========
- ----------
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
SEE NOTES TO FINANCIAL STATEMENTS.
16
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 2004 (unaudited)
SALOMON BROTHERS
---------------------------------------------------------------
NATIONAL CALIFORNIA NEW YORK MID
TAX FREE TAX FREE TAX FREE CAP
BOND FUND BOND FUND BOND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ............................................ $ 1,051,279 $ 288,070 $ 2,597,678 $ 339
Dividends ........................................... -- -- -- 80,753
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME ............................. 1,051,279 288,070 2,597,678 81,092
------------ ------------ ------------ ------------
EXPENSES:
Management fees (Note 2) ............................ 116,184 31,078 282,359 78,555
Distribution and service plan fees (Note 4) ......... 76,324 16,101 143,782 1,733
Custody ............................................. 25,115 8,000 29,088 21,362
Transfer agency services (Note 4) ................... 24,691 3,989 20,405 3,136
Audit and legal ..................................... 23,259 11,296 23,950 11,628
Registration fees ................................... 22,163 9,283 14,037 12,365
Shareholder communications (Note 4) ................. 11,450 4,560 15,202 5,578
Trustees' fees ...................................... 596 375 1,246 888
Other ............................................... 1,008 831 1,525 1,602
------------ ------------ ------------ ------------
TOTAL EXPENSES ...................................... 300,790 85,513 531,594 136,847
Less: Management fee waivers (Note 2) ............... (108,163) (31,078) (77,215) (21,159)
Expense reimbursement ( Note 2) ............... -- (4,145) -- --
------------ ------------ ------------ ------------
NET EXPENSES ........................................ 192,627 50,290 454,379 115,688
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) .......................... 858,652 237,780 2,143,299 (34,596)
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3):
Realized Gain From Investment Transactions
(excluding short-term investments):
Proceeds from sales ............................... 5,930,340 2,230,325 25,171,905 7,413,086
Cost of securities sold ........................... 5,466,223 2,052,383 22,426,621 6,027,025
------------ ------------ ------------ ------------
NET REALIZED GAIN ................................... 464,117 177,942 2,745,284 1,386,061
------------ ------------ ------------ ------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period ............................... 4,370,645 1,372,513 10,748,143 4,214,049
End of period ..................................... 2,378,835 792,840 4,197,549 4,479,669
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET UNREALIZED APPRECIATION .. (1,991,810) (579,673) (6,550,594) 265,620
------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS ........................ (1,527,693) (401,731) (3,805,310) 1,651,681
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ..... $ (669,041) $ (163,951) $ (1,662,011) $ 1,617,085
============ ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS.
17
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 2004 (unaudited)
and the Year Ended December 31, 2003
NATIONAL TAX FREE CALIFORNIA TAX FREE
BOND FUND BOND FUND
------------------------------ ------------------------------
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) ................................. $ 858,652 $ 2,129,499 $ 237,780 $ 527,320
Net realized gain ............................................ 464,117 2,211,803 177,942 46,041
Change in net unrealized appreciation (depreciation) ......... (1,991,810) (1,637,934) (579,673) 8,391
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............ (669,041) 2,703,368 (163,951) 581,752
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 5):
Net investment income ........................................ (858,652) (2,155,254) (237,780) (527,320)
------------- ------------- ------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS .... (858,652) (2,155,254) (237,780) (527,320)
------------- ------------- ------------- -------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares ............................. 3,116,219 34,834,712 81,985 501,662
Net asset value of shares issued for reinvestment of dividends 658,779 1,905,712 199,790 515,095
Cost of shares reacquired .................................... (7,571,271) (45,811,300) (1,856,056) (3,411,036)
------------- ------------- ------------- -------------
DECREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS .......... (3,796,273) (9,070,876) (1,574,281) (2,394,279)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS .............................. (5,323,966) (8,522,762) (1,976,012) (2,339,847)
NET ASSETS:
Beginning of period .......................................... 48,619,962 57,142,724 13,215,586 15,555,433
------------- ------------- ------------- -------------
END OF PERIOD* ............................................... $ 43,295,996 $ 48,619,962 $ 11,239,574 $ 13,215,586
============= ============= ============= =============
*Accumulated net investment loss of: ........................... -- -- -- --
============= ============= ============= =============
NEW YORK TAX FREE MID CAP
BOND FUND FUND
------------------------------ ------------------------------
2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) ................................. $ 2,143,299 $ 4,918,064 $ (34,596) $ (26,415)
Net realized gain ............................................ 2,745,284 1,075,223 1,386,061 174,033
Change in net unrealized appreciation (depreciation) ......... (6,550,594) (399,912) 265,620 4,553,721
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............ (1,662,011) 5,593,375 1,617,085 4,701,339
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 5):
Net investment income ........................................ (2,143,299) (4,982,340) -- --
------------- ------------- ------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS .... (2,143,299) (4,982,340) -- --
------------- ------------- ------------- -------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares ............................. 583,005 25,703,716 483,201 523,233
Net asset value of shares issued for reinvestment of dividends 1,783,538 4,784,677 -- --
Cost of shares reacquired .................................... (9,885,255) (40,854,259) (1,684,412) (1,205,654)
------------- ------------- ------------- -------------
DECREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS .......... (7,518,712) (10,365,866) (1,201,211) (682,421)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS .............................. (11,324,022) (9,754,831) 415,874 4,018,918
NET ASSETS:
Beginning of period .......................................... 118,074,245 127,829,076 20,881,049 16,862,131
------------- ------------- ------------- -------------
END OF PERIOD* ............................................... $ 106,750,223 $ 118,074,245 $ 21,296,923 $ 20,881,049
============= ============= ============= =============
*Accumulated net investment loss of: ........................... -- -- $ (34,596) --
============= ============= ============= =============
SEE NOTES TO FINANCIAL STATEMENTS.
18 & 19
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
(unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Salomon Brothers National Tax Free Bond Fund ("National Tax Free Bond Fund"),
Salomon Brothers California Tax Free Bond Fund ("California Tax Free Bond Fund")
and Salomon Brothers New York Tax Free Bond Fund ("New York Tax Free Bond Fund")
are separate non-diversified series of Salomon Funds Trust ("Trust"), a
Massachusetts business trust. Salomon Brothers Mid Cap Fund ("Mid Cap Fund") is
a separate diversified series of the Trust. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
National Tax Free Bond Fund, California Tax Free Bond Fund, New York Tax Free
Bond Fund and Mid Cap Fund ("Fund(s)"), as of June 30, 2004 offer Class A
shares, Class B shares, Class C shares and Class O shares. Expenses of each Fund
are borne pro rata by the holders of each class of shares, except that each
class bears expenses unique to that class (including the Rule 12b-1 distribution
and service plan fees applicable to such class), and votes as a class only with
respect to its own Rule 12b-1 plan.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
The following are significant accounting policies consistently followed by the
Funds and are in conformity with U.S. generally accepted accounting policies
("GAAP"):
(a) INVESTMENT SECURITY VALUATIONS. Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at closing prices.
Unlisted securities or listed securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in 60 days or less) are valued on the basis of
valuations furnished by a pricing service which takes into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, and other market data,
without exclusive reliance upon quoted prices or exchange or over-the-counter
prices, since such valuations are believed to reflect more accurately the fair
value of the securities. Short-term obligations (maturing in 60 days or less)
are valued at amortized cost, which approximates market value. Securities, if
any, for which there are no such valuations or quotations are valued at fair
value as determined in good faith by or under guidelines established by the
Trustees.
(b) INCOME. Interest income, adjusted for amortization of premium and
accretion of discount, is recorded on an accrual basis. Dividend income is
recorded on the ex-dividend date.
(c) FEDERAL INCOME TAXES. Each Fund has complied with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
distributed all of its income, including any net realized gains, to
shareholders. Therefore, no Federal income tax or excise tax provision is
required for such Funds.
(d) OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis. Distributions to shareholders and shares issuable to
shareholders electing to receive distributions in shares are recorded on the
ex-dividend date.
(e) EXPENSES. The Funds bear all their costs of its operations other than
expenses specifically assumed by the Manager. Expenses incurred by the Trust
with respect to any two or more funds or series are allocated in proportion to
the average net assets of each fund, except when allocations of direct expenses
to each fund can otherwise be made fairly. Expenses directly attributable to a
fund are charged to that fund.
20
Notes to Financial Statements
(unaudited) (continued)
(f) REPURCHASE AGREEMENTS. When entering into repurchase agreements, it is
the Fund's policy that a custodian takes possession of the underlying collateral
securities, the value of which at least equals the principal amount of the
repurchase transaction, including accrued interest. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market to ensure the adequacy of the collateral. If the seller
defaults and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
2. MANAGEMENT AGREEMENT AND AFFILIATED TRANSACTIONS
Salomon Brothers Asset Management Inc ("Manager"), an indirect wholly-owned
subsidiary of Citigroup Inc. ("Citigroup"), acts as investment manager to the
Funds. The Manager is responsible for overall management of the Funds' business
affairs, and has a separate Management Agreement with each Fund. The Manager or
an affiliate also provides certain administrative services to each Fund. These
administrative services include providing general office facilities and
supervising the overall administration of each Fund.
The management fees paid to the Manager are accrued daily and payable monthly.
The management fee is computed at the annual rate of 0.50%, 0.50%, 0.50% and
0.75% of the average daily net assets of National Tax Free Bond Fund, California
Tax Free Bond Fund, New York Tax Free Bond Fund and Mid Cap Fund, respectively.
For the six months ended June 30, 2004, the Funds had the following class level
voluntary expense limitations, which resulted in management fee waivers and
expense reimbursements.
CLASS A CLASS B CLASS C CLASS O
------- ------- ------- -------
National Tax Free Bond Fund ...... 0.75% 1.50% 1.25% 0.50%
California Tax Free Bond Fund .... 0.80 1.55 1.30 0.55
New York Tax Free Bond Fund ...... 0.80 1.55 1.30 0.55
Mid Cap Fund ..................... 1.50 2.25 2.25 1.08
For the six months ended June 30, 2004, the Manager waived management fees of
$108,163, $31,078, $77,215 and $21,159 for National Tax Free Bond Fund,
California Tax Free Bond Fund, New York Tax Free Bond Fund and Mid Cap Fund,
respectively. In addition, for the six months ended June 30, 2004, the Manager
has agreed to reimburse expenses totaling $4,145, for the California Tax Free
Bond Fund. These expense limitations can be terminated at any time by the
Manager.
Citigroup Global Markets Inc. ("CGM"), another indirect wholly-owned subsidiary
of Citigroup, acts as the Funds' distributor.
On February 2, 2004, the initial sales charges on Salomon Brothers Class 2 were
eliminated. On April 29, 2004, Salomon Brothers Class 2 shares were renamed as
Class C shares.
There is a maximum initial sales charge of 4.00% for Class A shares of National
Tax Free Bond Fund, California Tax Free Bond Fund and New York Tax Free Bond
Fund. There is also a maximum initial sales charge of 5.75% for Class A Shares
of Mid Cap Fund. There is a contingent deferred sales charge ("CDSC") of 5.00%
on Class B shares of the Funds, which applies if redemption occurs within one
year from purchase payment and declines thereafter by 1.00% per year until no
CDSC is incurred. Class C shares of the Funds have a 1.00% CDSC, which applies
if redemption occurs within one year from purchase payment. In certain cases,
Class A shares of the Funds 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 $1,000,000 in the aggregate. These purchases do not
incur an initial sales charge. Class O shares of the Funds have no initial or
contingent deferred sales charges.
21
Notes to Financial Statements
(unaudited) (continued)
For the six months ended June 30, 2004, sales charges received by CGM and
contingent deferred sales charges ("CDSCs") paid to CGM were as follows:
SALES CHARGES CDSCs
----------------- ---------------------------
CLASS A CLASS C CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
National Tax Free Bond Fund ... $19,229 -- -- $4,449 --
California Tax Free Bond Fund . 42 -- -- 756 --
New York Tax Free Bond Fund ... 14,775 -- -- 24 --
Mid Cap Fund .................. 5,944 $ 2 -- -- --
For the six months ended June 30, 2004, there were no brokerage commissions paid
to CGM and its affiliates for the Mid Cap Fund.
3. INVESTMENTS
For the six months ended June 30, 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 SALES
- --------------------------------------------------------------------------------
National Tax Free Bond Fund .............. $ 2,126,222 $ 5,930,340
=========== ===========
California Tax Free Bond Fund ............ $ 521,565 $ 2,230,325
=========== ===========
New York Tax Free Bond Fund .............. $17,129,307 $25,171,905
=========== ===========
Mid Cap Fund ............................. $ 6,020,274 $ 7,413,086
=========== ===========
For the six months ended June 30, 2004, the aggregate gross unrealized
appreciation and depreciation of investments for Federal income tax purposes
were substantially as follows:
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
- --------------------------------------------------------------------------------
National Tax Free Bond Fund ...... $2,532,728 $ (153,893) $2,378,835
California Tax Free Bond Fund .... 796,722 (3,882) 792,840
New York Tax Free Bond Fund ...... 4,871,223 (673,674) 4,197,549
Mid Cap Fund ..................... 4,736,908 (257,239) 4,479,669
4. CLASS SPECIFIC EXPENSES
Pursuant to a Rule 12b-1 Distribution and Service Plan, each Fund pays a service
fee with respect to its Class A, B and C shares calculated at the annual rate of
0.25% of the average daily net assets of each respective class. Each Fund also
pays a distribution fee with respect to Class B shares calculated at the annual
rate of 0.75% of the average daily net assets of that class. National Tax Free
Bond Fund, California Tax Free Bond Fund and New York Tax Free Bond Fund each
pay a distribution fee with respect to Class C shares calculated at the annual
rate of 0.50% of the average daily net assets of that class. Mid Cap Fund pays a
distribution fee with respect to Class C shares calculated at the annual rate of
0.75% of the average daily net assets of that class. For the six months ended
June 30, 2004, total Rule 12b-1 Distribution and Service Plan fees, which are
accrued daily and paid monthly, were as follows:
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
National Tax Free Bond Fund .......... $ 51,069 $ 19,071 $ 6,184
California Tax Free Bond Fund ........ 15,337 665 99
New York Tax Free Bond Fund .......... 139,908 1,624 2,250
Mid Cap Fund ......................... 392 741 600
22
Notes to Financial Statements
(unaudited) (continued)
For the six months ended June 30, 2004, total Transfer Agency Service expenses
were as follows:
CLASS A CLASS B CLASS C CLASS O
- --------------------------------------------------------------------------------
National Tax Free Bond Fund ....... $21,710 $ 2,023 $ 875 $ 83
California Tax Free Bond Fund ..... 3,940 40 9 0*
New York Tax Free Bond Fund ....... 20,221 58 109 17
Mid Cap Fund ...................... 48 22 18 3,048
For the six months ended June 30, 2004, total Shareholder Communication expenses
were as follows:
CLASS A CLASS B CLASS C CLASS O
- --------------------------------------------------------------------------------
National Tax Free Bond Fund ....... $10,068 $ 938 $ 406 $ 38
California Tax Free Bond Fund ..... 4,503 47 10 0*
New York Tax Free Bond Fund ....... 15,066 43 81 12
Mid Cap Fund ...................... 85 39 32 5,422
- ----------
* Amount represents less than $1.00.
5. DISTRIBUTIONS PAID TO SHAREHOLDERS BY CLASS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
---------------- -----------------
NATIONAL TAX FREE BOND FUND:
NET INVESTMENT INCOME
Class A .............................. $ 771,024 $1,924,384
Class B .............................. 57,530 156,063
Class C+ ............................. 26,974 67,487
Class O .............................. 3,124 7,320
---------- ----------
Total ................................ $ 858,652 $2,155,254
========== ==========
CALIFORNIA TAX FREE BOND FUND:
NET INVESTMENT INCOME
Class A .............................. $ 235,251 $ 518,620
Class B .............................. 2,047 7,804
Class C+ ............................. 440 817
Class O .............................. 42 79
---------- ----------
Total ................................ $ 237,780 $ 527,320
========== ==========
NEW YORK TAX FREE BOND FUND:
NET INVESTMENT INCOME
Class A .............................. $2,126,612 $4,954,495
Class B .............................. 4,933 10,014
Class C+ ............................. 9,901 13,942
Class O .............................. 1,853 3,889
---------- ----------
Total ................................ $2,143,299 $4,982,340
========== ==========
- ----------
+ On April 29, 2004, Salomon Brothers Class 2 shares were renamed as Salomon
Brothers Class C shares.
23
Notes to Financial Statements
(unaudited) (continued)
6. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest without par value for National
Tax Free Bond Fund, California Tax Free Bond Fund and New York Tax Free Bond
Fund and with a par value of $0.001 per share for Mid Cap Fund. Effective April
29, 2004, the Funds renamed Salomon Brothers Class 2 shares as Salomon Brothers
Class C shares.
Transactions in Fund shares for the periods indicated were as follows:
SIX MONTHS YEAR ENDED
ENDED JUNE 30, 2004 DECEMBER 31, 2003
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
NATIONAL TAX FREE BOND FUND:
CLASS A
Shares sold ................. 249,601 $ 2,939,687 2,669,098 $ 31,580,892
Shares issued on reinvestment 51,573 609,822 149,110 1,756,036
Shares reacquired ........... (528,641) (6,203,754) (3,541,350) (41,937,070)
------------ ------------ ------------ ------------
Net Decrease ................ (227,467) $ (2,654,245) (723,142) $ (8,600,142)
============ ============ ============ ============
CLASS B
Shares sold ................. 14,768 $ 174,524 92,971 $ 1,099,090
Shares issued on reinvestment 2,490 29,498 7,710 91,334
Shares reacquired ........... (85,992) (1,016,756) (147,741) (1,744,911)
------------ ------------ ------------ ------------
Net Decrease ................ (68,734) $ (812,734) (47,060) $ (554,487)
============ ============ ============ ============
CLASS C+
Shares sold ................. 166 $ 1,968 177,425 $ 2,090,992
Shares issued on reinvestment 1,510 17,875 4,353 52,612
Shares reacquired ........... (29,046) (350,761) (169,952) (1,997,513)
------------ ------------ ------------ ------------
Net Increase (Decrease) ..... (27,370) $ (330,918) 11,826 $ 146,091
============ ============ ============ ============
CLASS O
Shares sold ................. 4 $ 40 5,209 $ 63,738
Shares issued on reinvestment 134 1,584 480 5,730
Shares reacquired ........... -- -- (10,875) (131,806)
------------ ------------ ------------ ------------
Net Increase (Decrease) ..... 138 $ 1,624 (5,186) $ (62,338)
============ ============ ============ ============
CALIFORNIA TAX FREE BOND FUND:
CLASS A
Shares sold ................. 3,204 $ 34,256 39,568 $ 423,299
Shares issued on reinvestment 18,733 198,645 48,181 510,920
Shares reacquired ........... (167,385) (1,752,241) (309,140) (3,259,851)
------------ ------------ ------------ ------------
Net Decrease ................ (145,448) $ (1,519,340) (221,391) $ (2,325,632)
============ ============ ============ ============
CLASS B
Shares sold ................. 4,627 $ 47,729 7,328 $ 78,363
Shares issued on reinvestment 54 744 292 3,279
Shares reacquired ........... (9,728) (103,815) (14,277) (151,185)
------------ ------------ ------------ ------------
Net Decrease ................ (5,047) $ (55,342) (6,657) $ (69,543)
============ ============ ============ ============
CLASS C+
Shares sold ................. -- $ -- -- $ --
Shares issued on reinvestment 35 366 77 817
------------ ------------ ------------ ------------
Net Increase ................ 35 $ 366 77 $ 817
============ ============ ============ ============
CLASS O
Shares sold ................. -- $ -- -- $ --
Shares issued on reinvestment 3 35 7 79
------------ ------------ ------------ ------------
Net Increase ................ 3 $ 35 7 $ 79
============ ============ ============ ============
24
Notes to Financial Statements
(unaudited) (continued)
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
NEW YORK TAX FREE BOND FUND:
CLASS A
Shares sold ................. 49,667 $ 578,983 2,079,678 $ 24,813,975
Shares issued on reinvestment 149,856 1,781,040 400,250 4,775,651
Shares reacquired ........... (827,903) (9,769,575) (3,421,134) (40,703,268)
------------ ------------ ------------ ------------
Net Decrease ................ (628,380) $ (7,409,552) (941,206) $(11,113,642)
============ ============ ============ ============
CLASS B
Shares sold ................. 103 $ 1,227 17,162 $ 204,341
Shares issued on reinvestment 156 1,856 583 6,965
Shares reacquired ........... (4,823) (57,464) (5,713) (67,523)
------------ ------------ ------------ ------------
Net Increase (Decrease) ..... (4,564) $ (54,381) 12,032 $ 143,783
============ ============ ============ ============
CLASS C+
Shares sold ................. 235 $ 2,795 56,881 $ 685,400
Shares issued on reinvestment 52 623 167 2,015
Shares reacquired ........... (4,827) (58,216) (7,113) (83,468)
------------ ------------ ------------ ------------
Net Increase (Decrease) ..... (4,540) $ (54,798) 49,935 $ 603,947
============ ============ ============ ============
CLASS O
Shares issued on reinvestment 2 $ 19 4 $ 46
------------ ------------ ------------ ------------
Net Increase ................ 2 $ 19 4 $ 46
============ ============ ============ ============
MID CAP FUND:
CLASS A
Shares sold ................. 8,166 $ 143,316 9,557 $ 142,992
Shares reacquired ........... (2,524) (43,620) (2,357) (34,706)
------------ ------------ ------------ ------------
Net Increase ................ 5,642 $ 99,696 7,200 $ 108,286
============ ============ ============ ============
CLASS B
Shares sold ................. 3,889 $ 67,940 9,105 $ 124,779
Shares reacquired ........... (2,169) (38,092) (8,216) (118,848)
------------ ------------ ------------ ------------
Net Increase ................ 1,720 $ 29,848 889 $ 5,931
============ ============ ============ ============
CLASS C+
Shares sold ................. 3,390 $ 60,098 4,513 $ 59,285
Shares reacquired ........... (148) (2,578) -- --
------------ ------------ ------------ ------------
Net Increase ................ 3,242 $ 57,520 4,513 $ 59,285
============ ============ ============ ============
CLASS O
Shares sold ................. 11,910 $ 211,847 12,492 $ 196,177
Shares reacquired ........... (91,790) (1,600,122) (72,561) (1,052,100)
------------ ------------ ------------ ------------
Net Decrease ................ (79,880) $ (1,388,275) (60,069) $ (855,923)
============ ============ ============ ============
- ----------
+ On April 29, 2004, Salomon Brothers Class 2 shares were renamed as Salomon
Brothers Class C shares.
25
Notes to Financial Statements
(unaudited) (continued)
7. ADDITIONAL INFORMATION
Citigroup has been notified by the Staff of the Securities and Exchange
Commission ("SEC") that the Staff is considering recommending a civil injunctive
action and/or an administrative proceeding against Citigroup Asset Management
("CAM"), including its applicable investment advisory companies and Citigroup
Trust Bank ("CTB"), an internal transfer agent, relating to the creation and
operation of the internal transfer agent unit to serve certain CAM-managed
funds. CTB did not provide services to the Funds. This notification arises out
of a previously disclosed investigation by the SEC and the U.S. Attorney and
relates to CTB's entry in 1999 into the transfer agency business, CAM's
retention of, and agreements with an unaffiliated sub-transfer agent, the
adequacy of the disclosures made to the fund boards that approved the transfer
agency arrangements, (including CAM's failure to disclose a related revenue
guarantee agreement benefiting CAM and its affiliates), and CAM's operation of
and compensation for the transfer agency business. The revenue guarantee
described above was terminated in 1999 and CAM will be paying the applicable
funds, primarily through fee waivers, a total of approximately $17 million (plus
interest) that is the amount of the revenue received by Citigroup relating to
the revenue guarantee. The Funds did not implement the contractual arrangement
described above and therefore will not receive any portion of the payment.
Citigroup is cooperating fully in the investigation and will seek to resolve the
matter in discussions with the SEC Staff. Although there can be no assurance,
Citigroup does not believe that this matter will have a material adverse effect
on the Funds.
8. LEGAL MATTERS
Class action lawsuits have been filed against Citigroup Global Markets Inc. (the
"Distributor") and a number of its affiliates, including Smith Barney Fund
Management LLC and Salomon Brothers Asset Management Inc (the "Advisers"),
substantially all of the mutual funds managed by the Advisers (the "Funds"), and
directors or trustees of the Funds. The complaints allege, among other things,
that the Distributor created various undisclosed incentives for its brokers to
sell Smith Barney and Salomon Brothers funds. In addition, according to the
complaints, the Advisers caused the Funds to pay excessive brokerage commissions
to the Distributor for steering clients towards proprietary funds. The
complaints also allege that the defendants breached their fiduciary duty to the
Funds by improperly charging Rule 12b-1 fees and by drawing on Fund assets to
make undisclosed payments of soft dollars and excessive brokerage commissions.
The complaints seek injunctive relief and compensatory and punitive damages,
rescission of the Funds' contracts with the Advisers, recovery of all fees paid
to the Advisers pursuant to such contracts and an award of attorneys' fees and
litigation expenses. Citigroup Asset Management believes that the suits are
without merit and intends to defend the cases vigorously.
Additional lawsuits arising out of these circumstances and presenting similar
allegations and requests for relief may be filed against the defendants in the
future. Neither Citigroup Asset Management nor the Funds believe that any of the
pending actions will have a material adverse effect on the Funds or the ability
of the Distributor or the Advisers to perform under their respective contracts
with the Funds.
26
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, unless otherwise noted:
SALOMON BROTHERS NATIONAL TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS A SHARES
----------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 11.91 $ 11.79 $ 11.13 $ 11.26 $ 10.54 $ 11.43
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ..................................... 0.22* 0.46* 0.48* 0.50 0.51 0.47
Net realized and unrealized gain (loss) ................... (0.39) 0.13 0.66 (0.12) 0.73 (0.90)
------- ------- ------- ------- ------- -------
Total Income (Loss) From Operations .......................... (0.17) 0.59 1.14 0.38 1.24 (0.43)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income ..................................... (0.22) (0.47) (0.48) (0.51) (0.52) (0.45)
Net realized gains ........................................ -- -- -- -- -- (0.01)
------- ------- ------- ------- ------- -------
Total Distributions .......................................... (0.22) (0.47) (0.48) (0.51) (0.52) (0.46)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ............................... $ 11.52 $ 11.91 $ 11.79 $ 11.13 $ 11.26 $ 10.54
======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ............................. $38,204 $42,210 $50,325 $62,440 $72,875 $106,449
Ratio of expenses to average net assets (2)(3) ............ 0.75%+ 0.75% 0.76% 0.80% 0.80% 0.80%
Ratio of expenses to average net assets after fees paid
indirectly (2) .......................................... N/A N/A N/A 0.80 0.80 0.81
Ratio of net investment income to average net assets ...... 3.77+ 3.92 4.22 4.28 4.67 4.14
PORTFOLIO TURNOVER RATE ...................................... 5% 42% 12% 15% 46% 112%
TOTAL RETURN (4) ............................................. (1.43)%++ 5.07% 10.41% 3.39% 12.10% (3.86)%
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment income per
share and the ratios would have been as follows:
Net investment income per share ........................... $ 0.19* $ 0.42* $ 0.44* $ 0.43 $ 0.46 $ 0.42
Ratio of expenses to average net assets ................... 1.22%+ 1.10% 1.18% 1.52% 1.32% 1.20%
Ratio of net investment income to average net assets ...... 3.30+ 3.57 3.80 3.56 4.15 3.74
SALOMON BROTHERS NATIONAL TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS B SHARES
---------------------------------------------------
2004(1) 2003 2002 2001(5)
---------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 11.93 $ 11.80 $ 11.14 $ 11.46
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ................................................ 0.18* 0.37* 0.40* 0.07*
Net realized and unrealized gain (loss) .............................. (0.39) 0.13 0.65 (0.31)
------- ------- ------- -------
Total Income (Loss) From Operations ..................................... (0.21) 0.50 1.05 (0.24)
------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income ................................................ (0.18) (0.37) (0.39) (0.08)
------- ------- ------- -------
Total Distributions ..................................................... (0.18) (0.37) (0.39) (0.08)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................................... $ 11.54 $ 11.93 $ 11.80 $ 11.14
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ........................................ $ 3,395 $ 4,330 $ 4,839 $ 4,599
Ratio of expenses to average net assets (2)(6) ....................... 1.50%+ 1.50% 1.49% 1.53%+
Ratio of expenses to average net assets after fees paid indirectly (2) N/A N/A N/A 1.53+
Ratio of net investment income to average net assets ................. 3.02+ 3.16 3.43 3.55+
PORTFOLIO TURNOVER RATE ................................................. 5% 42% 12% 15%
TOTAL RETURN (4) ........................................................ (1.80)%++ 4.35% 9.59% (2.09)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment income per
share and the ratios would have been as follows:
Net investment income per share ....................................... $ 0.15* $ 0.33* $ 0.35* $ 0.06*
Ratio of expenses to average net assets ............................... 1.96%+ 1.85% 1.91% 2.22%+
Ratio of net investment income to average net assets .................. 2.57+ 2.81 3.02 2.86+
- ----------
(1) For the six months ended June 30, 2004 (unaudited).
(2) The expense ratios for 2001, 2000 and 1999 reflect the effects of expense
offset arrangements with its service providers.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.75% for Class A shares. Prior to
January 30, 2002, the expense limitation was 0.80%.
(4) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(5) For the period October 12, 2001 (inception date) to December 31, 2001.
(6) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.50% for Class B shares.
* Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
27
Financial Highlights
(continued)
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, unless otherwise noted:
SALOMON BROTHERS NATIONAL TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS C SHARES (1)
---------------------------------------------------
2004(2) 2003 2002 2001(3)
---------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 11.92 $ 11.80 $ 11.13 $ 11.42
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ................................................ 0.19* 0.40* 0.43* 0.05*
Net realized and unrealized gain (loss) .............................. (0.39) 0.12 0.66 (0.28)
------- ------- ------- -------
Total Income (Loss) From Operations ..................................... (0.20) 0.52 1.09 (0.23)
------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income ................................................ (0.19) (0.40) (0.42) (0.06)
------- ------- ------- -------
Total Distributions ..................................................... (0.19) (0.40) (0.42) (0.06)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................................... $ 11.53 $ 11.92 $ 11.80 $ 11.13
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ........................................ $ 1,544 $ 1,923 $ 1,763 $ 1,314
Ratio of expenses to average net assets (4)(5) ....................... 1.25%+ 1.25% 1.25% 1.25%+
Ratio of expenses to average net assets after fees paid indirectly (4) N/A N/A N/A 1.25+
Ratio of net investment income to average net assets ................. 3.27%+ 3.41 3.69 3.73+
PORTFOLIO TURNOVER RATE ................................................. 5% 42% 12% 15%
TOTAL RETURN (6) ........................................................ (1.68)%++ 4.53% 9.96% (2.10)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment income per
share and the ratios would have been as follows:
Net investment income per share ...................................... $ 0.16* $ 0.36* $ 0.38* $ 0.04*
Ratio of expenses to average net assets .............................. 1.72%+ 1.60% 1.67% 1.94%+
Ratio of net investment income to average net assets ................. 2.80+ 3.06 3.27 3.04+
SALOMON BROTHERS NATIONAL TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS O SHARES
---------------------------------------------------
2004(2) 2003 2002 2001(3)
---------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 11.93 $ 11.79 $ 11.13 $ 11.42
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ................................................ 0.24* 0.49* 0.50* 0.06*
Net realized and unrealized gain (loss) .............................. (0.39) 0.14 0.67 (0.29)
------- ------- ------- -------
Total Income (Loss) From Operations ..................................... (0.15) 0.63 1.17 (0.23)
------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income ................................................ (0.24) (0.49) (0.51) (0.06)
------- ------- ------- -------
Total Distributions ..................................................... (0.24) (0.49) (0.51) (0.06)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................................... $ 11.54 $ 11.93 $ 11.79 $ 11.13
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ........................................ $ 153 $ 157 $ 216 $ 362
Ratio of expenses to average net assets (4)(7) ....................... 0.50%+ 0.50% 0.50% 0.50%+
Ratio of expenses to average net assets after fees paid indirectly (4) N/A N/A N/A 0.50+
Ratio of net investment income to average net assets ................. 4.02+ 4.18 4.39 4.48+
PORTFOLIO TURNOVER RATE ................................................. 5% 42% 12% 15%
TOTAL RETURN (6) ........................................................ (1.30)%++ 5.48% 10.69% (2.01)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment income per
share and the ratios would have been as follows:
Net investment income per share ...................................... $ 0.21* $ 0.45* $ 0.46* $ 0.05*
Ratio of expenses to average net assets .............................. 0.97%+ 0.85% 0.91% 1.19%+
Ratio of net investment income to average net assets ................. 3.55+ 3.83 3.98 3.79+
- ----------
(1) On April 29, 2004, Class 2 shares were renamed as Class C shares.
(2) For the six months ended June 30, 2004 (unaudited).
(3) For the period November 19, 2001 (inception date) to December 31, 2001.
(4) The expense ratios for 2001 reflect the effects of expense offset
arrangements with its service providers.
(5) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.25% for Class C shares.
(6) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(7) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.50% for Class O shares.
* Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
28
Financial Highlights
(continued)
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, unless otherwise noted:
SALOMON BROTHERS CALIFORNIA TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS A SHARES
----------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 10.70 $ 10.63 $ 10.17 $ 10.31 $ 9.43 $ 10.08
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ..................................... 0.20* 0.39* 0.39* 0.43 0.44 0.40
Net realized and unrealized gain (loss) ................... (0.34) 0.07 0.46 (0.14) 0.88 (0.65)
------- ------- ------- ------- ------- -------
Total Income (Loss) From Operations .......................... (0.14) 0.46 0.85 0.29 1.32 (0.25)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income ..................................... (0.20) (0.39) (0.39) (0.43) (0.44) (0.40)
------- ------- ------- ------- ------- -------
Total Distributions .......................................... (0.20) (0.39) (0.39) (0.43) (0.44) (0.40)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ............................... $ 10.36 $ 10.70 $ 10.63 $ 10.17 $ 10.31 $ 9.43
======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ............................. $11,092 $13,009 $15,280 $16,332 $20,748 $34,396
Ratio of expenses to average net assets (2)(3) ............ 0.80%+ 0.80% 0.80% 0.80% 0.80% 0.70%
Ratio of expenses to average net assets after fees paid
indirectly (2) .......................................... N/A N/A N/A 0.81 0.81 0.70
Ratio of net investment income to average net assets ...... 3.83+ 3.64 3.71 4.04 4.52 4.06
PORTFOLIO TURNOVER RATE ...................................... 4% 0% 9% 8% 58% 116%
TOTAL RETURN (4) ............................................. (1.31)%++ 4.40% 8.47% 2.83% 14.33% (2.54)%
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment income per
share and the ratios would have been as follows:
Net investment income per share ........................... $ 0.17* $ 0.32* $ 0.26* $ 0.24 $ 0.34 $ 0.33
Ratio of expenses to average net assets ................... 1.37%+ 1.40% 2.05% 2.43% 1.82% 1.41%
Ratio of net investment income to average net assets ...... 3.26+ 3.04 2.46 2.41 3.52 3.35
SALOMON BROTHERS CALIFORNIA TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS B SHARES
---------------------------------------------------
2004(1) 2003 2002 2001(5)
---------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 10.71 $ 10.63 $ 10.18 $ 10.51
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ................................................ 0.16* 0.31* 0.30* 0.07*
Net realized and unrealized gain (loss) .............................. (0.34) 0.08 0.46 (0.32)
------- ------- ------- -------
Total Income (Loss) From Operations ..................................... (0.18) 0.39 0.76 (0.25)
------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income ................................................ (0.16) (0.31) (0.31) (0.08)
------- ------- ------- -------
Total Distributions ..................................................... (0.16) (0.31) (0.31) (0.08)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................................... $ 10.37 $ 10.71 $ 10.63 $ 10.18
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ........................................ $ 120 $ 178 $ 247 $ 52
Ratio of expenses to average net assets (2)(6) ....................... 1.55%+ 1.55% 1.53% 1.56%+
Ratio of expenses to average net assets after fees paid indirectly (2) N/A N/A N/A 1.57%+
Ratio of net investment income to average net assets ................. 3.08+ 2.86 2.88 3.23+
PORTFOLIO TURNOVER RATE ................................................. 4% 0% 9% 8%
TOTAL RETURN (4) ........................................................ (1.67)%++ 3.70% 7.66% (2.39)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment income per
share and the ratios would have been as follows:
Net investment income per share ...................................... $ 0.14* $ 0.25* $ 0.17* $ 0.03*
Ratio of expenses to average net assets .............................. 2.07%+ 2.11% 2.76% 3.19%+
Ratio of net investment income to average net assets ................. 2.56+ 2.31 1.66 1.60+
- ----------
(1) For the six months ended June 30, 2004 (unaudited).
(2) The expense ratios for 2001, 2000 and 1999 reflect the effects of expense
offset arrangements with its service providers.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.80% for Class A shares.
(4) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(5) For the period October 5, 2001 (inception date) to December 31, 2001.
(6) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.55% for Class B shares.
* Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
29
Financial Highlights
(continued)
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, unless otherwise noted:
SALOMON BROTHERS CALIFORNIA TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS C SHARES (1)
---------------------------------
2004(2) 2003 2002(3)
---------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD ........................................... $10.70 $10.63 $10.76
------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ....................................................... 0.18* 0.33* 0.10*
Net realized and unrealized gain (loss) ..................................... (0.34) 0.07 (0.13)
------ ------ ------
Total Income (Loss) From Operations ............................................ (0.16) 0.40 (0.03)
------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income ....................................................... (0.18) (0.33) (0.10)
------ ------ ------
Total Distributions ............................................................ (0.18) (0.33) (0.10)
------ ------ ------
NET ASSET VALUE, END OF PERIOD ................................................. $10.36 $10.70 $10.63
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ............................................... $ 26 $ 27 $ 26
Ratio of expenses to average net assets (4) ................................. 1.30%+ 1.30% 1.30%+
Ratio of net investment income to average net assets ........................ 3.33+ 3.14 3.07+
PORTFOLIO TURNOVER RATE ........................................................ 4% 0% 9%
TOTAL RETURN (5) ............................................................... (1.55)%++ 3.87% (0.28)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period and the Manager had
not voluntarily assumed expenses, the net investment income per share and the ratios would have been as follows:
Net investment income per share ............................................. $ 0.14* $ 0.27* $ 0.06*
Ratio of expenses to average net assets ..................................... 1.88%+ 1.89% 2.51%+
Ratio of net investment income to average net assets ........................ 2.75+ 2.55 1.86+
SALOMON BROTHERS CALIFORNIA TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS O SHARES
---------------------------------
2004(2) 2003 2002(6)
---------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD ........................................... $10.71 $10.63 $10.81
------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ....................................................... 0.22* 0.42* 0.09*
Net realized and unrealized gain (loss) ..................................... (0.34) 0.08 (0.18)
------ ------ ------
Total Income (Loss) From Operations ............................................ (0.12) 0.50 (0.09)
------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income ....................................................... (0.22) (0.42) (0.09)
------ ------ ------
Total Distributions ............................................................ (0.22) (0.42) (0.09)
------ ------ ------
NET ASSET VALUE, END OF PERIOD ................................................. $10.37 $10.71 $10.63
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ............................................... $ 2 $ 2 $ 2
Ratio of expenses to average net assets (7) ................................. 0.44%+ 0.45% 0.47%+
Ratio of net investment income to average net assets ........................ 4.13+ 3.94 3.94+
PORTFOLIO TURNOVER RATE ........................................................ 4% 0% 9%
TOTAL RETURN (5) ............................................................... (1.15)%++ 4.76% (0.79)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period and the Manager
had not voluntarily assumed expenses, the net investment income per share and the ratios would have been as follows:
Net investment income per share ............................................. $ 0.19* $ 0.35* $ 0.06*
Ratio of expenses to average net assets ..................................... 1.03%+ 1.06% 1.70%+
Ratio of net investment income to average net assets ........................ 3.54+ 3.33 2.72+
- ----------
(1) On April 29, 2004, Class 2 shares were renamed as Class C shares.
(2) For the six months ended June 30, 2004 (unaudited).
(3) For the period September 9, 2002 (inception date) to December 31, 2002.
(4) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.30% for Class C shares.
(5) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(6) For the period October 8, 2002 (inception date) to December 31, 2002.
(7) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.55% for Class O shares.
* Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
30
Financial Highlights
(continued)
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, unless otherwise noted:
SALOMON BROTHERS NEW YORK TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS A SHARES
----------------------------------------------------------------
2004(1) 2003 2002 2001 2000 1999
----------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 11.99 $ 11.91 $ 11.26 $ 11.44 $ 10.79 $ 11.69
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ..................................... 0.22* 0.47* 0.49* 0.54 0.60 0.51
Net realized and unrealized gain (loss) ................... (0.40) 0.08 0.65 (0.16) 0.61 (0.94)
-------- -------- -------- -------- -------- --------
Total Income (Loss) From Operations .......................... (0.18) 0.55 1.14 0.38 1.21 (0.43)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS FROM:
Net investment income ..................................... (0.22) (0.47) (0.49) (0.56) (0.56) (0.47)
-------- -------- -------- -------- -------- --------
Total Distributions .......................................... (0.22) (0.47) (0.49) (0.56) (0.56) (0.47)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ............................... $ 11.59 $ 11.99 $ 11.91 $ 11.26 $ 11.44 $ 10.79
======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ............................. $105,800 $116,982 $127,482 $140,416 $172,420 $224,144
Ratio of expenses to average net assets (2) ............... 0.80%+ 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of net investment income to average net assets ...... 3.80+ 3.95 4.19 4.53 4.81 4.40
PORTFOLIO TURNOVER RATE ...................................... 15% 12% 13% 16% 15% 30%
TOTAL RETURN (3) ............................................. (1.48)%++ 4.77% 10.25% 3.32% 11.54% (3.73)%
Note: If Agents of the Fund, had not voluntarily agreed to waive all or a portion of their fees for the period indicated and
the expenses were not reduced for fees paid indirectly, the net investment income per share and the ratios would have been as
follows:
Net investment income per share ........................... $ 0.22* $ 0.45* $ 0.46* $ 0.51 $ 0.55 $ 0.47
Ratio of expenses to average net assets ................... 0.94%+ 0.96% 1.00% 1.21% 1.16% 1.13%
Ratio of net investment income to average net assets ...... 3.66+ 3.79 3.99 4.12 4.45 4.07
SALOMON BROTHERS NEW YORK TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS B SHARES
---------------------------------------------------
2004(1) 2003 2002 2001(4)
---------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 11.99 $ 11.91 $ 11.26 $ 11.53
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ................................................ 0.18* 0.38* 0.32* 0.04*
Net realized and unrealized gain (loss) .............................. (0.40) 0.08 0.73 (0.26)
------- ------- ------- -------
Total Income (Loss) From Operations ..................................... (0.22) 0.46 1.05 (0.22)
------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income ................................................ (0.18) (0.38) (0.40) (0.05)
------- ------- ------- -------
Total Distributions ..................................................... (0.18) (0.38) (0.40) (0.05)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................................... $ 11.59 $ 11.99 $ 11.91 $ 11.26
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ........................................ $ 298 $ 363 $ 218 $ 14
Ratio of expenses to average net assets (5) .......................... 1.55%+ 1.55% 1.55% 1.55%+
Ratio of net investment income to average net assets ................. 3.04+ 3.18 3.32 3.50+
PORTFOLIO TURNOVER RATE ................................................. 15% 12% 13% 16%
TOTAL RETURN (3) ........................................................ (1.85)%++ 3.94% 9.43% (1.88)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses were not
reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment income per share and the
ratios would have been as follows:
Net investment income per share ...................................... $ 0.17* $ 0.36* $ 0.31* $ 0.04*
Ratio of expenses to average net assets .............................. 1.69%+ 1.71% 1.74% 1.96%+
Ratio of net investment income to average net assets ................. 2.90+ 3.01 3.13 3.09+
- ---------------
(1) For the six months ended June 30, 2004 (unaudited).
(2) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.80% for Class A shares.
(3) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(4) For the period November 19, 2001 (inception date) to December 31, 2001.
(5) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.55% for Class B shares.
* Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
31
Financial Highlights
(continued)
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, unless otherwise noted:
SALOMON BROTHERS NEW YORK TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS C SHARES (1)
---------------------------------
2004(2) 2003 2002(3)
---------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD ........................................... $12.00 $11.92 $11.72
------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ....................................................... 0.20* 0.41* 0.18*
Net realized and unrealized gain (loss) ..................................... (0.41) 0.08 0.21
------ ------ ------
Total Income (Loss) From Operations ............................................ (0.21) 0.49 0.39
------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income ....................................................... (0.19) (0.41) (0.19)
------ ------ ------
Total Distributions ............................................................ (0.19) (0.41) (0.19)
------ ------ ------
NET ASSET VALUE, END OF PERIOD ................................................. $11.60 $12.00 $11.92
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ............................................... $ 562 $ 636 $ 37
Ratio of expenses to average net assets (4) ................................. 1.30%+ 1.30% 1.30%+
Ratio of net investment income to average net assets ........................ 3.30+ 3.38 3.63+
PORTFOLIO TURNOVER RATE ........................................................ 15% 12% 13%
TOTAL RETURN (5) ............................................................... (1.73)%++ 4.18% 3.30%++
Note: If Agents of the Fund, had not voluntarily agreed to waive all or a portion of their fees for the period indicated and
the expenses were not reduced for fees paid indirectly, the net investment income per share and the ratios would have been as
follows:
Net investment income per share ............................................. $ 0.19* $ 0.40* $ 0.17*
Ratio of expenses to average net assets ..................................... 1.44%+ 1.47% 1.50%+
Ratio of net investment income to average net assets ........................ 3.16+ 3.20 3.45+
SALOMON BROTHERS NEW YORK TAX FREE BOND FUND
- --------------------------------------------------------------------------------
CLASS O SHARES
---------------------------------------------------
2004(2) 2003 2002 2001(6)
---------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 11.98 $ 11.90 $ 11.25 $ 11.59
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ................................................ 0.24* 0.50* 0.52* 0.09*
Net realized and unrealized gain (loss) .............................. (0.40) 0.08 0.64 (0.33)
------- ------- ------- -------
Total Income (Loss) From Operations ..................................... (0.16) 0.58 1.16 (0.24)
------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income ................................................ (0.24) (0.50) (0.51) (0.10)
------- ------- ------- -------
Total Distributions ..................................................... (0.24) (0.50) (0.51) (0.10)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................................... $ 11.58 $ 11.98 $ 11.90 $ 11.25
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ........................................ $ 90 $ 93 $ 92 $ 1
Ratio of expenses to average net assets (7) .......................... 0.55%+ 0.55% 0.56% 0.53%+
Ratio of net investment income to average net assets ................. 4.05+ 4.20 4.40 4.76+
PORTFOLIO TURNOVER RATE ................................................. 15% 12% 13% 16%
TOTAL RETURN (5) ........................................................ (1.36)%++ 4.99% 10.54% (2.04)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment income per
share and the ratios would have been as follows:
Net investment income per share ...................................... $ 0.23* $ 0.48* $ 0.50* $ 0.09*
Ratio of expenses to average net assets .............................. 0.69%+ 0.71% 0.75% 0.94%+
Ratio of net investment income to average net assets ................. 3.91+ 4.03 4.21 4.35+
- ---------------
(1) On April 29, 2004, Class 2 shares were renamed as Class C shares.
(2) For the six months ended June 30, 2004 (unaudited).
(3) For the period July 19, 2002 (inception date) to December 31, 2002.
(4) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.30% for Class C shares.
(5) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(6) For the period October 29, 2001 (inception date) to December 31, 2001.
(7) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.55% for Class O shares.
* Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
32
Financial Highlights
(continued)
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, unless otherwise noted:
SALOMON BROTHERS MID CAP FUND
- --------------------------------------------------------------------------------
CLASS A SHARES
---------------------------------------------------
2004(1) 2003 2002 2001(2)
---------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 16.89 $ 13.18 $ 16.47 $ 13.71
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss .................................................. (0.06)* (0.08)* (0.06)* (0.01)*
Net realized and unrealized gain (loss) .............................. 1.39 3.79 (3.23) 2.77
------- ------- ------- -------
Total Income (Loss) From Operations ..................................... 1.33 3.71 (3.29) 2.76
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................................... $ 18.22 $ 16.89 $ 13.18 $ 16.47
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ........................................ $ 394 $ 270 $ 116 $ 47
Ratio of expenses to average net assets (3) .......................... 1.50%+ 1.50% 1.42% 1.36%+
Ratio of net investment loss to average net assets ................... (0.72)+ (0.56) (0.44) (0.69)+
PORTFOLIO TURNOVER RATE ................................................. 29% 78% 71% 26%
TOTAL RETURN (4) ........................................................ 7.87%++ 28.15% (19.98)% 3.65%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment loss per
share and the ratios would have been as follows:
Net investment loss per share ........................................ $ (0.07)* $ (0.10)* $ (0.13)* $ (0.04)*
Ratio of expenses to average net assets .............................. 1.56%+ 1.60% 1.91% 1.93%+
Ratio of net investment loss to average net assets ................... (0.78)+ (0.66) (0.93) (1.26)+
SALOMON BROTHERS MID CAP FUND
- --------------------------------------------------------------------------------
CLASS B SHARES
---------------------------------------------------
2004(1) 2003 2002 2001(5)
---------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 16.66 $ 13.10 $ 16.47 $ 16.31
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss .................................................. (0.12)* (0.19)* (0.16)* (0.01)*
Net realized and unrealized gain (loss) .............................. 1.37 3.75 (3.21) 0.17
------- ------- ------- -------
Total Income (Loss) From Operations ..................................... 1.25 3.56 (3.37) 0.16
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................................... $ 17.91 $ 16.66 $ 13.10 $ 16.47
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ........................................ $ 195 $ 152 $ 108 $ 12
Ratio of expenses to average net assets (6) .......................... 2.25%+ 2.25% 1.95% 2.15%+
Ratio of net investment loss to average net assets ................... (1.48)+ (1.31) (0.99) (1.50)+
PORTFOLIO TURNOVER RATE ................................................. 29% 78% 71% 26%
TOTAL RETURN (4) ........................................................ 7.50%++ 27.18% (20.46)% 0.98%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment loss per
share and the ratios would have been as follows:
Net investment loss per share ........................................ $ (0.13)* $ (0.20)* $ (0.23)* $ (0.01)*
Ratio of expenses to average net assets .............................. 2.38%+ 2.33% 2.42% 2.73%+
Ratio of net investment loss to average net assets ................... (1.61)+ (1.39) (1.46) (2.09)+
- ---------------
(1) For the six months ended June 30, 2004 (unaudited).
(2) For the period November 30, 2001 (inception date) to December 31, 2001.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.50% for Class A shares.
(4) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(5) For the period December 18, 2001 (inception date) to December 31, 2001.
(6) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 2.25% for Class B shares.
* Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
33
Financial Highlights
(continued)
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, unless otherwise noted:
SALOMON BROTHERS MID CAP FUND
- --------------------------------------------------------------------------------
CLASS C SHARES (1)
---------------------------------
2004(2) 2003 2002(3)
---------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD ........................................... $16.72 $13.15 $16.43
------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss ......................................................... (0.12)* (0.19)* (0.04)*
Net realized and unrealized gain (loss) ..................................... 1.38 3.76 (3.24)
------ ------ ------
Total Income (Loss) From Operations ............................................ 1.26 3.57 (3.28)
------ ------ ------
NET ASSET VALUE, END OF PERIOD ................................................. $17.98 $16.72 $13.15
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ............................................... $ 175 $ 109 $ 26
Ratio of expenses to average net assets (4) ................................. 2.25%+ 2.25% 1.68%+
Ratio of net investment loss to average net assets .......................... (1.48)+ (1.31) (0.51)+
PORTFOLIO TURNOVER RATE ........................................................ 29% 78% 71%
TOTAL RETURN (5) ............................................................... 7.54%++ 27.15% (19.96)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment loss per
share and the ratios would have been as follows:
Net investment loss per share ............................................... $(0.13)* $(0.21)* $(0.09)*
Ratio of expenses to average net assets ..................................... 2.38%+ 2.35% 2.27%+
Ratio of net investment loss to average net assets .......................... (1.61)+ (1.41) (1.09)+
SALOMON BROTHERS MID CAP FUND
- --------------------------------------------------------------------------------
CLASS O SHARES
---------------------------------------------------
2004(2) 2003 2002 2001(6)
---------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD .................................... $ 17.02 $ 13.23 $ 16.48 $ 15.07
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss .................................................. (0.03)* (0.02)* (0.02)* (0.01)*
Net realized and unrealized gain (loss) .............................. 1.41 3.81 (3.23) 1.42
------- ------- ------- -------
Total Income (Loss) From Operations ..................................... 1.38 3.79 (3.25) 1.41
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .......................................... $ 18.40 $ 17.02 $ 13.23 $ 16.48
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (000s) ........................................ $20,533 $20,350 $16,612 $22,935
Ratio of expenses to average net assets (7) .......................... 1.08%+ 1.08% 1.07% 1.08%+
Ratio of net investment loss to average net assets ................... (0.31)+ (0.13) (0.13) (0.17)+
PORTFOLIO TURNOVER RATE ................................................. 29% 78% 71% 26%
TOTAL RETURN (5) ........................................................ 8.11%++ 28.65% (19.72)% (6.48)%++
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the period, the expenses
were not reduced for fees paid indirectly and the Manager had not voluntarily assumed expenses, the net investment loss per
share and the ratios would have been as follows:
Net investment loss per share ........................................ $ (0.05)* $ (0.06)* $ (0.09)* $ (0.10)*
Ratio of expenses to average net assets .............................. 1.29%+ 1.33% 1.54% 2.97%+
Ratio of net investment loss to average net assets ................... (0.52)+ (0.38) (0.60) (2.05)+
- ----------
(1) On April 29, 2004, Class 2 shares were renamed as Class C shares.
(2) For the six months ended June 30, 2004 (unaudited).
(3) For the period May 7, 2002 (inception date) to December 31, 2002.
(4) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 2.25% for Class C shares.
(5) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(6) For the period September 10, 2001 (inception date) to December 31, 2001.
(7) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.08% for Class O shares.
* Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
34
(This page intentionally left blank.)
(This page intentionally left blank.)
- --------------------------------------------------------------------------------
Salomon Funds Trust
- --------------------------------------------------------------------------------
TRUSTEES INVESTMENT MANAGER
ELLIOTT J. BERV Salomon Brothers Asset Management Inc
MARK T. FINN 399 Park Avenue
R. JAY GERKEN, CFA New York, NY 10022
STEPHEN RANDOLPH GROSS
DIANA R. HARRINGTON
SUSAN B. KERLEY
OFFICERS DISTRIBUTOR
R. JAY GERKEN, CFA Citigroup Global Markets Inc.
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER TRANSFER AGENT
ANDREW B. SHOUP
SENIOR VICE PRESIDENT AND PFPC Inc.
CHIEF ADMINISTRATIVE OFFICER P.O. Box 9764
FRANCES M. GUGGINO Providence, RI 02940-9764
CHIEF FINANCIAL OFFICER
AND TREASURER CUSTODIAN
ANDREW BEAGLEY
VICE PRESIDENT, CHIEF State Street Bank and Trust Company
ANTI-MONEY LAUNDERING 225 Franklin Street
COMPLIANCE OFFICER AND Boston, MA 02110
CHIEF COMPLIANCE OFFICER*
JOSEPH T. VOLPE LEGAL COUNSEL
CONTROLLER
ROBERT I. FRENKEL Bingham McCutchen LLP
SECRETARY AND 150 Federal Street
CHIEF LEGAL OFFICER Boston, MA 02110
- ----------
*AS OF JULY 29, 2004.
Salomon Funds Trust
Salomon Brothers National Tax Free Bond Fund
Salomon Brothers California Tax Free Bond Fund
Salomon Brothers New York Tax Free Bond Fund
Salomon Brothers Mid Cap Fund
The Funds are separate investment funds of the Salomon Funds Trust, a
Massachusetts business trust.
This report is submitted for the general information of the shareholders of
Salomon Funds Trust, but it may also be used as sales literature when preceded
or accompanied by the current Prospectus.
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.
Beginning August 31, 2004, information on how the Fund voted proxies relating to
portfolio securities during the 12 month period ended June 30, 2004 will be
available (1) without charge, upon request, by calling 1-800-446-1013 and (2) on
the SEC's website at www.sec.gov.
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 1-800-446-1013 and by
visiting the SEC's website at www.sec.gov.
SALOMON BROTHERS ASSET MANAGEMENT
399 Park Avenue
New York, New York 10022 ========
1-800-SALOMON SALOMON
www.sbam.com --------
BROTHERS
(C)Citigroup Global Markets Inc. ========
Member NASD, SIPC ASSET MANAGEMENT
SBTAXANN 6/04 04-7066
ITEM 2. CODE OF ETHICS.
Not Applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. 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 11. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to
section 302 of the Sarbanes-Oxley
Act of 2002
Exhibit 99.906CERT Certifications pursuant to
Section 906 of the Sarbanes-Oxley
Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, there unto duly authorized.
Salomon Funds Trust
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Salomon Funds Trust
Date: September 9, 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
Salomon Funds Trust
Date: September 9, 2004
By: /s/ Frances M. Guggino
Frances M. Guggino
Chief Financial Officer of
Salomon Funds Trust
Date: September 9, 2004