UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4395
Smith Barney Muni Funds
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: March 31
Date of reporting period: March 31, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Annual Report to Stockholders is filed herewith.
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SMITH BARNEY
MUNI FUNDS
CALIFORNIA MONEY
MARKET PORTFOLIO
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ANNUAL REPORT | MARCH 31, 2004
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed.(R)is a registered
service mark of Citigroup Global Markets Inc.
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NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
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WHAT'S INSIDE
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Letter from the Chairman ................................................... 1
Manager Overview ........................................................... 3
Schedule of Investments .................................................... 7
Statement of Assets and Liabilities ........................................ 18
Statement of Operations .................................................... 19
Statements of Changes in Net Assets ........................................ 20
Notes to Financial Statements .............................................. 21
Financial Highlights ....................................................... 26
Independent Auditors' Report ............................................... 27
Additional Information ..................................................... 28
Tax Information ............................................................ 32
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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,
Amid uneven prospects about the economy, stock market volatility and
geopolitical concerns during the past year, many investors shifted their
hard-earned dollars into shorter-term fixed-income funds to complement their
higher-risk investments. During much of the year, interest rate concerns
remained contained due to lackluster employment data, subdued inflation and
comments from the Fed, which led many investors to believe that it would refrain
from raising its interest rate targets. However, the economy picked up over the
period, the State of California is taking measures to address budgetary
challenges, and U.S. job growth for March significantly exceeded estimates.(i)
Throughout the year the fund's manager anticipated that economic growth could
improve, and a pick-up in activity could potentially lead to higher inflation
and interest rates. Therefore, the manager maintained a relatively defensive
posture in managing the portfolio's exposure to inflation and interest rate risk
by maintaining a relatively neutral average maturity.
Municipal money market securities provide income that is exempt from federal,
and sometimes state and local, income taxes. Your financial adviser can help you
implement a suitable asset allocation based on your investment profile to help
you pursue your long-term financial goals.
Please read on for a more detailed look at prevailing economic and market
conditions during the fund's fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected fund
performance.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under
the scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The regulators appear to be
examining, among other things, the fund's response to market timing and
1 Smith Barney Muni Funds | 2004 Annual Report
shareholder exchange activity, including compliance with prospectus disclosure
related to these subjects. The fund has been informed that the Adviser and its
affiliates are responding to those information requests, but are not in a
position to predict the outcome of these requests and investigations.
As always thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
April 22, 2004
2 Smith Barney Muni Funds | 2004 Annual Report
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MANAGER OVERVIEW
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[PHOTO OMITTED] [PHOTO OMITTED]
JOSEPH P. DEANE JULIE P. CALLAHAN, CFA
Vice President and Vice President and
Investment Officer Investment Officer
Performance Review
As of March 31, 2004, the seven-day current yield and seven-day effective yield,
which reflects compounding, of Class A shares of the fund, were both 0.47%.
These numbers are the same due to rounding.
The seven-day effective yield is calculated similarly to the seven-day current
yield but, when annualized, the income earned by an investment in the fund is
assumed to be reinvested. The effective yield typically will be slightly higher
than
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SMITH BARNEY MUNI FUNDS -- CALIFORNIA MONEY MARKET PORTFOLIO CLASS A SHARES
YIELDS AS OF MARCH 31, 2004
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Seven-day current yield 0.47%
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Seven-day effective yield 0.47%
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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.
The fund's yields will vary and performance of other share classes may differ.
Please note that your investment is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation ("FDIC") or any other government agency.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
In the cases where the current yield and effective yield are the same, it is due
to rounding. The seven-day current yield reflects the amount of income generated
by the investment during that seven-day period and assumes that the income is
generated each week over a 365-day period. The yield is shown as a percentage of
the investment. The seven-day effective yield is calculated similarly to the
seven-day current yield but, when annualized, the income earned by an investment
in the fund is assumed to be reinvested. The effective yield typically will be
slightly higher than the current yield because of the compounding effect of the
assumed reinvestment. The seven-day current and seven-day effective yields for
Class Y shares as of this same date were 0.58% and 0.58%, respectively.
Certain investors may be subject to the federal Alternative Minimum Tax, and
state and local taxes may apply. Capital gains, if any, are fully taxable.
Please consult your personal tax adviser.
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3 Smith Barney Muni Funds | 2004 Annual Report
the current yield because of the compounding effect of the assumed reinvestment.
Please note that your investment is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation ("FDIC") or any other government agency.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
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.
Market Overview
In order to help boost economic activity, last June the Fed reduced its target
for the federal funds rate,(ii) which dropped to four-decade lows. As a result,
the yields on tax-exempt money market instruments continued to fall. By August,
evidence of an improvement in the national economy emerged, and as a result
longer-term bond yields started to rise. However, many investors believed the
Fed would likely leave short-term interest rates at prevailing low levels over
the foreseeable future, and tax-exempt money market yields generally remained
near their lows.
Stronger than anticipated economic growth consensus estimates for the third
calendar quarter rekindled concerns about interest rates and inflation. Despite
the 8.2% annual growth in gross domestic product ("GDP")(iii) over the third
quarter of 2003, investors' concerns about the prospects of inflation and rising
rates were contained because some of this growth was attributable to one-time
factors, such as the tax cuts and the end of major combat operations in Iraq.
Furthermore, many investors felt the Fed appeared to be in a holding pattern
from adjusting its rate targets.
Investment Approach
The fund included a significant amount of municipal obligations backed by school
districts and revenue bonds. Revenue bonds are issued to finance public works
such as tunnels, sewer systems and bridges, and are supported directly by the
revenues derived from the operations of these systems. The fund maintained a
diversified mix of securities that included tax-exempt commercial paper,
fixed-rate notes and variable-rate demand obligations. During the year we
reduced the average maturity of the fund to just 29 days. This was a reflection
of the belief that the short-term municipal yield curve was very flat and there
was no added benefit from purchasing securities with longer maturities.
4 Smith Barney Muni Funds | 2004 Annual Report
Investors Question the Fed's Patience
Investors spent the first quarter of 2004 dissecting language from the Fed,
which stated in late January that it "believes that it can be patient in
removing its policy accommodation."(iv) However, the fact that the Fed did not
include the phrase "considerable period" in this statement as it had before led
many investors to question when its patience would run out.
Estimates of calendar fourth-quarter 2003 GDP annual growth released during the
period registered at 4.1%.(iii) This rate was below third-quarter 2003 results
but exceeded levels from early last year. Furthermore, in recent testimony to
Congress, Fed Chairman, Alan Greenspan revealed that the Fed raised its
expectations for economic growth.
Although the economy has shown significant signs of improvement since early last
year, the job market has remained the weak link to a sustainable recovery.
Employment data(i) released after the first quarter of 2004 ended showed that
the unemployment rose to 5.7% in March, versus 5.6% in February. However, the
U.S. economy added 308,000 non-farm payroll jobs in March,(i) marking the
largest number since April 2000.(v) This result raised expectations that the
strength of the economy may be improving, raising concerns that inflation could
pick up and interest rates rise sooner than previously anticipated.
The Economic State of California
The State of California's spending has exceeded its revenues over recent years,
saddling the state with a mountain of debt. As a result, the Governor's office
increased its budget deficit projection for California to $38 billion last
June.(v) Given California's fiscal woes, major ratings agencies downgraded their
credit ratings on the state's general obligation bonds last year. Furthermore,
following a recall election based largely on voters' dissatisfaction with the
state government's fiscal-management performance, Governor Arnold Schwarzenegger
was sworn into office last November to replace the State's former Governor, Gray
Davis.(v)
On March 2nd of this year, voters approved passage of Proposition 57 and
Proposition 58. Dubbed the "California Economic Recovery Bond Act," Proposition
57 enables the State to raise up to $15 billion via a bond offering to pay off
California's accumulated General Fund deficit as of June 30, 2004.(vi) The
offering date for the bonds is scheduled to occur shortly. A quarter cent of the
state sales tax would be dedicated to repay this deficit-reduction bond.(vii)
The proposed bond issuance was conditional upon voter approval of Proposition
58,(vi) which requires California politicians to balance the budget every year
in the future; it also mandates a "rainy day" account for the State to address
certain financing needs.
Standard & Poor's credit rating on California's long-term debt was recently BBB
with a positive outlook.(viii) Recent reports note that Standard & Poor's said
it would review the state's bond rating with an eye toward potentially upgrading
it.(v)
5 Smith Barney Muni Funds | 2004 Annual Report
Thank you for your investment in the Smith Barney Muni Funds -- California Money
Market Portfolio. We appreciate that you have entrusted us to manage your money
and value our relationship with you.
Sincerely,
/s/ Joseph P. Deane /s/ Julie P. Callahan
Joseph P. Deane Julie P. Callahan, CFA
Vice President and Vice President and
Investment Officer Investment Officer
April 22, 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.
Please refer to pages 7 through 15 for a list of the fund's holdings.
i Based upon data released on April 1, 2004 from the U.S. Department of
Labor.
ii 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.
iii Source for GDP (gross domestic product) growth: Bureau of Labor
Statistics. Gross domestic product is a market value of goods and services
produced by labor and property in a given country.
iv Source: Federal Reserve (January 28, 2004).
v Source: Lehman Brothers.
vi Source: State of California.
vii Source: Small School Districts Association.
viii Source: Standard & Poor's (Public Finance Report Card, April 2004).
6 Smith Barney Muni Funds | 2004 Annual Report
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Schedule of Investments March 31, 2004
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FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
ABAG Finance Authority for Nonprofit Corp.:
$ 7,000,000 A-1+ Lease Pass-Through Obligation Series A 1.05% VRDO $ 7,000,000
12,550,000 A-1+ Lucile Salter Packard Children's Hospital Project
AMBAC-Insured 1.00% VRDO 12,550,000
2,300,000 A-1+ MFH Amber Court Apartments Series A 1.01% VRDO 2,300,000
2,660,000 A-1+ Series D 1.12% VRDO 2,660,000
Alameda Contra Costa Schools Finance Authority Capital
Improvements Financing Project COP:
975,000 A-1 Series A 1.03% VRDO 975,000
5,350,000 A-1 Series D 1.03% VRDO 5,350,000
1,600,000 A-1 Series E 1.03% VRDO 1,600,000
14,010,000 A-1 Series L 1.03% VRDO 14,010,000
2,245,000 VMIG 1* Alvord USD Finance Corp. COP 1.05% VRDO 2,245,000
6,180,000 A-1+ Anaheim Housing Authority MFH Park Vista Apartments
1.06% VRDO AMT 6,180,000
1,400,000 A-1 Anaheim UHSD COP FSA-Insured 1.00% VRDO 1,400,000
10,500,000 A-1+ Antelope Valley Health Care District Series A 1.00% VRDO 10,500,000
Bay Area Toll Authority Toll Bridge Revenue San Francisco
Bay Area AMBAC-Insured:
10,000,000 A-1+ Series A 0.99% VRDO 10,000,000
17,050,000 A-1+ Series C 1.01% VRDO 17,050,000
California Cities Home Ownership Authority Lease
Purchase Program:
35,000,000 A-1+ Series A 1.05% VRDO 35,000,000
5,650,000 A-1+ Series B 1.05% VRDO 5,650,000
11,250,000 SP-1+ California Community College Finance Authority TRAN
Series A 2.00% due 6/30/04 11,277,860
2,900,000 VMIG 1* California EFA St. Mary's College of California Series B
1.00% VRDO 2,900,000
California Health Facilities Finance Authority:
Catholic Healthcare MBIA-Insured:
1,900,000 A-1+ Series B 1.05% VRDO 1,900,000
2,300,000 A-1+ Series C 1.05% VRDO 2,300,000
8,845,000 A-1 Memorial Health Services 1.00% VRDO 8,845,000
6,300,000 A-1 Scripps Health Care Series A 1.03% VRDO 6,300,000
10,500,000 A-1+ Sisters Charity Health Systems 1.03% VRDO 10,500,000
16,035,000 A-1+ Southern California Presbyterian Homes MBIA-Insured
1.05% VRDO 16,035,000
California HFA:
Home Mortgage:
1,700,000 A-1+ Series F 1.08% VRDO AMT 1,700,000
1,570,000 A-1+ Series J-2 MBIA-Insured 0.98% VRDO AMT 1,570,000
19,900,000 A-1 Series U MBIA-Insured 1.10% VRDO AMT 19,900,000
MFH:
3,000,000 A-1+ Series C 1.08% VRDO AMT 3,000,000
10,000,000 A-1+ Series E 1.00% VRDO AMT 10,000,000
See Notes to Financial Statements.
7 Smith Barney Muni Funds | 2004 Annual Report
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Schedule of Investments (continued) March 31, 2004
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FACE
AMOUNT RATING(a) SECURITY VALUE
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$ 1,200,000 A-1+ Series F 1.06% VRDO $ 1,200,000
6,705,000 A-1+ Series G 1.08% VRDO AMT 6,705,000
45,685,000 A-1+ Series D FSA-Insured 1.10% VRDO AMT 45,685,000
California Infrastructure & Economic Development Bank:
10,000,000 A-1+ Academy of Motion Pictures AMBAC-Insured 1.05% VRDO 10,000,000
4,000,000 NR+ IDR River Ranch 1.05% VRDO AMT 4,000,000
ISO MBIA-Insured:
12,800,000 A-1+ Series A 1.05% VRDO 12,800,000
28,685,000 A-1+ Series C 1.05% VRDO 28,685,000
2,400,000 A-1 Roller Bearing of America 1.20% VRDO AMT 2,400,000
California PCFA:
PCR:
110,000 A-1+ Santa Clara Valley Disposal Co. Series A
1.05% VRDO AMT 110,000
7,400,000 P-1 Sierra Pacific Industries Project 1.02% VRDO 7,400,000
Solid Waste:
4,270,000 NR+ Alameda County Industrial Project Series A
1.09% VRDO AMT 4,270,000
4,360,000 NR+ Athens Disposal Inc. Project Series A 1.09% VRDO AMT 4,360,000
5,185,000 NR+ Athens Services Project 1.09% VRDO AMT 5,185,000
7,000,000 A-1+ Atlantic Richfield Co. Project Series A 1.14% VRDO AMT 7,000,000
1,660,000 NR+ BLT Enterprises Series 1999-A 1.09% VRDO AMT 1,660,000
7,155,000 NR+ Blue Line Transfer Project 1.09% VRDO AMT 7,155,000
14,470,000 NR+ Edco Disposal Corp. Project 1.09% VRDO AMT 14,470,000
2,365,000 NR+ Garaventa Enterprises Inc. 1.09% VRDO AMT 2,365,000
10,735,000 A-1+ Norcal Waste System Inc. 1.09% VRDO AMT 10,735,000
8,675,000 P-1 Sierra Pacific Industries Inc. Project 1.07% VRDO AMT 8,675,000
595,000 NR+ Sonoma Compost Co. Project Series A 1.09% VRDO AMT 595,000
1,300,000 NR+ South County Sanitary Services Series 1999-A
1.09% VRDO AMT 1,300,000
5,000,000 A-1+ Waste Management Inc. Project Series A
1.09% VRDO AMT 5,000,000
3,100,000 NR+ Willits Project Series A 1.09% VRDO AMT 3,100,000
60,000,000 SP-1+ California School Cash Reserve Program Series A
2.00% due 7/6/04 60,171,863
5,750,000 A-1 California School Facilities Finance Corp. COP Series C
1.00% VRDO 5,750,000
California State Department of Veteran Affairs:
Home Purchase Revenue Series A:
20,000,000 VMIG 1* Sub-Series A-1 1.02% VRDO 20,000,000
20,000,000 VMIG 1* Sub-Series A-2 1.00% VRDO 20,000,000
4,560,000 A-1 MSTC Series 1998-47 Class A AMBAC-Insured PART
1.06% VRDO AMT 4,560,000
California State Department of Water Resources:
10,000,000 A-1+ Series C-1 1.00% VRDO 10,000,000
15,500,000 A-1+ Series C-2 AMBAC-Insured 1.00% VRDO 15,500,000
See Notes to Financial Statements.
8 Smith Barney Muni Funds | 2004 Annual Report
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Schedule of Investments (continued) March 31, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
$ 12,700,000 A-1+ Series C-3 AMBAC-Insured 1.00% VRDO $12,700,000
2,000,000 A-1+ Series C-7 FSA-Insured 1.05% VRDO 2,000,000
35,000,000 A-1 Series C-11 1.02% VRDO 35,000,000
8,200,000 A-1+ Series C-14 1.02% VRDO 8,200,000
13,000,000 A-1 Series C-15 1.01% VRDO 13,000,000
California State GO:
MSTC PART:
14,495,000 A-1 Series 2000-96 Class A AMBAC-Insured 1.06% VRDO 14,495,000
3,700,000 A-1+ Series SGA-7 FSA-Insured 1.06% VRDO 3,700,000
31,155,000 A-1+ Series SGA-136 XLCA-Insured 1.15% VRDO 31,155,000
20,000,000 A-1 Series C-2 1.02% VRDO 20,000,000
12,500,000 SP-1+ California State RANS Sub-Series A-5 2.00% due 6/23/04 12,526,262
25,000,000 SP-1 California State Revenue Anticipation Warrants Series B
2.00% due 6/16/04 25,045,256
California Statewide Communities Development Authority:
8,850,000 VMIG 1* Concordia University Project Series A 1.13% VRDO 8,850,000
2,600,000 A-1+ IDR A&B Die Casting Corp. Series A 1.10% VRDO AMT 2,600,000
4,400,000 A-1 Kaiser Permanente 1.02% due 5/20/04 4,400,000
5,000,000 VMIG 1* MERLOT Series E FSA-Insured PART 1.05% VRDO 5,000,000
MFH:
4,000,000 A-1+ Aegis Assisted Living Properties Series Y
1.04% VRDO AMT 4,000,000
3,415,000 A-1+ Breezewood Apartments Series F-1 FNMA-Insured
1.04% VRDO AMT 3,415,000
4,165,000 A-1+ Oakmont of Danville-Sunrise Project Series A
1.04% VRDO AMT 4,165,000
2,900,000 A-1+ Motion Picture & TV Fund Series A 1.02% VRDO 2,900,000
1,625,000 VMIG 1* Nonprofit's Insurance Alliance Series A 1.05% VRDO 1,625,000
2,350,000 A-1 Carlsbad USD School Facility Bridge Funding Program
FSA-Insured 1.00% VRDO 2,350,000
2,736,000 VMIG 1* Clipper Tax Exempt Trust COP Series 1998-9 AMBAC-Insured
PART 1.12% VRDO AMT 2,736,000
3,500,000 VMIG 1* Contra Costa Water District Munitops Series 1999-8
FGIC-Insured PART 1.12% due 7/21/04 3,500,000
3,955,000 A-1+ Corona MFH Country Hills Project Series B 1.00% VRDO 3,955,000
East Bay MUD Waste Water:
11,900,000 A-1+ 0.95% due 4/1/04 TECP 11,900,000
29,000,000 A-1+ 0.96% due 5/12/04 TECP 29,000,000
18,550,000 A-1+ Sub-Series B XLCA-Insured 1.00% VRDO 18,550,000
4,085,000 A-1+ Eastern Municipal Water District Water and Sewer Revenue
Series B FGIC-Insured 1.01% VRDO 4,085,000
15,200,000 VMIG 1* Elsinore Valley Municipal Water District COP Series A
FGIC-Insured 1.03% VRDO 15,200,000
3,600,000 VMIG 1* Escondido CDA COP 1.05% VRDO AMT 3,600,000
9,500,000 A-1+ Escondido MFH Via Roble Apartments Series A
1.04% VRDO AMT 9,500,000
See Notes to Financial Statements.
9 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Schedule of Investments (continued) March 31, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
$ 10,900,000 VMIG 1* Fontana USD COP School Finance Bridge Funding Program
Series A FSA-Insured 1.00% VRDO $ 10,900,000
Fremont COP:
22,900,000 A-1+ Maintenance Center & Fire Project AMBAC-Insured
1.00% VRDO 22,900,000
3,650,000 VMIG 1* Office Building Improvement & Fire Project 1.00% VRDO 3,650,000
2,650,000 A-1+ Fresno Sewer Revenue Series A FGIC-Insured 1.03% VRDO 2,650,000
10,000,000 A-1+ Fresno Trinity Health Credit Group Series C 0.99% VRDO 10,000,000
Golden Empire School Finance Authority Kern High School
District:
10,400,000 A-1+ 1.03% VRDO 10,400,000
3,550,000 A-1+ Series A 1.00% VRDO 3,550,000
9,100,000 A-1+ Series B 1.00% VRDO 9,100,000
1,350,000 VMIG 1* Hayward MFH Tennyson Gardens Apartments
Series A 1.15% VRDO AMT 1,350,000
Hillsborough COP:
3,100,000 NR+ Series A 1.00% VRDO 3,100,000
Water & Sewer Systems Projects:
15,000,000 A-1+ Series A 1.00% VRDO 15,000,000
4,100,000 NR+ Series B 1.00% VRDO 4,100,000
300,000 VMIG 1* Irvine Improvement Board Assessment District 00-18
Series A 1.10% VRDO 300,000
5,740,000 VMIG 1* Irvine Public Facilities & Infrastructure Authority Lease
Revenue Capital Improvement Project Series 85 1.10% VRDO 5,740,000
1,800,000 A-1+ Irvine Ranch Water District Nos. 140-240-105-250 1.10% VRDO 1,800,000
4,900,000 VMIG 1* Kern Community COP Kern Public Facilities Project
Series D 1.03% VRDO 4,900,000
1,750,000 A-1+ Livermore MFH Diablo Vista Apartments FNMA-Insured
1.02% VRDO 1,750,000
2,215,000 VMIG 1* Long Beach USD Capital Improvement Project
AMBAC-Insured 1.00% VRDO 2,215,000
Los Angeles Capital Asset Lease Corp. TECP:
14,500,000 A-1+ 0.95% due 4/1/04 14,500,000
18,600,000 A-1+ 0.93% due 5/17/04 18,600,000
5,300,000 A-1+ 0.93% due 5/18/04 5,300,000
9,300,000 A-1+ 0.92% due 6/7/04 9,300,000
Los Angeles City Harbor Department TECP:
5,510,000 A-1 1.00% due 5/10/04 AMT 5,510,000
5,810,000 A-1 0.98% due 5/17/04 AMT 5,810,000
3,100,000 A-1+ Los Angeles Community College District Putters Series 216Z
MBIA-Insured PART 1.03% VRDO 3,100,000
Los Angeles Community RDA MFH:
3,900,000 A-1+ Security Building Project Series A 1.05% VRDO AMT 3,900,000
5,400,000 VMIG 1* Skyline at Southpart 1.06% VRDO 5,400,000
See Notes to Financial Statements.
10 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Schedule of Investments (continued) March 31, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
$ 16,000,000 A-1+ Los Angeles Convention & Exhibition Center Authority Lease
Revenue Series B-1 AMBAC-Insured 0.97% due 6/16/04 $ 16,000,000
9,285,000 A-1 Los Angeles County GO MSTC Series 9004 Class A
FGIC-Insured PART 1.07% VRDO 9,285,000
Los Angeles County Housing Authority MFH:
3,000,000 VMIG 1* Canyon Country Villas Project Series H 1.00% VRDO 3,000,000
200,000 A-1+ Fountain Park Project 1.01% VRDO AMT 200,000
4,300,000 A-1+ Sand Canyon Series F 1.00% VRDO 4,300,000
2,465,000 A-1+ Series K 1.00% VRDO 2,465,000
6,198,000 VMIG 1* Studio Colony Series C 1.05% VRDO 6,198,000
2,875,000 VMIG 1* Los Angeles County Metropolitan Transportation Authority
Sales Tax Revenue Series 837 PART 1.05% VRDO 2,875,000
Los Angeles County MFH Mortgage Revenue:
10,700,000 A-1+ Crescent Gardens No. 1984 Series A 1.04% VRDO 10,700,000
2,500,000 A-1+ Valencia Housing Project Series C 1.00% VRDO 2,500,000
15,945,000 VMIG 1* Los Angeles County Sanitation District Finance Authority
Series 826 FSA-Insured PART 1.05% VRDO 15,945,000
38,000,000 SP-1+ Los Angeles County TRAN Series A 2.00% due 6/30/04 38,101,850
Los Angeles Department of Water & Power:
10,000,000 A-1+ Series B-1 1.02% VRDO 10,000,000
38,500,000 A-1+ Series B-2 1.01% VRDO 38,500,000
20,000,000 A-1+ Series B-4 1.00% VRDO 20,000,000
28,000,000 A-1+ Series B-5 1.00% VRDO 28,000,000
8,400,000 A-1+ Series B-8 1.00% VRDO 8,400,000
3,000,000 A-1+ Los Angeles International Airport Series A
0.95% due 5/6/04 TECP 3,000,000
25,000,000 SP-1+ Los Angeles USD GO TRAN Series A 2.00% due 7/1/04 25,065,888
3,600,000 A-1+ Los Angeles USD Putters Series 261Z FGIC-Insured PART
1.03% VRDO 3,600,000
Los Angeles Waste Water System:
9,897,500 VMIG 1* Series 318 FGIC-Insured PART 1.02% VRDO 9,897,500
20,000,000 A-1+ Sub-Series B FGIC-Insured 1.15% due 12/9/04 20,000,000
8,000,000 A-1+ Manteca Finance Authority Water Revenue MSTC SGA 147
MBIA-Insured PART 1.06% VRDO 8,000,000
Metropolitan Water District of Southern California:
6,900,000 A-1 Series 2001-113 Class A FGIC-Insured PART 1.06% VRDO 6,900,000
5,000,000 A-1+ Series B-1 1.00% VRDO 5,000,000
25,000,000 A-1+ Series B-2 1.00% VRDO 25,000,000
20,500,000 A-1+ Milpitas MFH Crossing at Montague Series A FNMA-Insured
1.04% VRDO AMT 20,500,000
MSR Public Power Agency San Juan Project:
5,700,000 A-1 Series B AMBAC-Insured 1.00% VRDO 5,700,000
10,900,000 A-1+ Series D MBIA-Insured 1.00% VRDO 10,900,000
17,000,000 A-1+ Series E MBIA-Insured 1.00% VRDO 17,000,000
See Notes to Financial Statements.
11 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Schedule of Investments (continued) March 31, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
$ 4,900,000 A-1+ Northern California Transmission Agency Revenue
California/Oregon Transmission Series A FSA-Insured
1.00% VRDO $ 4,900,000
33,800,000 A-1+ Oakland Alameda County Coliseum Project Series C-2
1.03% VRDO 33,800,000
19,510,000 A-1+ Oakland COP Capital Equipment Project 1.03% VRDO 19,510,000
3,000,000 VMIG 1* Oakland MERLOT Series M AMBAC-Insured PART
1.05% VRDO 3,000,000
9,500,000 MIG 1* Oakland TRAN 2.00% due 7/29/04 9,527,862
Orange County Apartment Development:
5,275,000 A-1+ Alicia Apartments Series A Remarketed 12/15/98
1.10% VRDO AMT 5,275,000
13,200,000 VMIG 1* Capistrano Pointe Series A 1.01% VRDO 13,200,000
16,500,000 VMIG 1* Foothill Oaks Apartments 1.04% VRDO AMT 16,500,000
23,500,000 A-1+ Ladera Apartments Series 2-B 1.04% VRDO AMT 23,500,000
4,490,000 VMIG 1* Niguel Summit 2 Series B 1.00% VRDO 4,490,000
13,100,000 A-1+ Orange County Housing Authority Oasis Martinique Project
1.02% VRDO 13,100,000
5,800,000 VMIG 1* Orange County Improvement Bond Act 1915 Assessment
District No. 01-1-Series A 1.10% VRDO 5,800,000
Orange County Sanitation District COP:
2,400,000 A-1+ No. 1-3 5-7 & 11 AMBAC-Insured 1.00% VRDO 2,400,000
6,650,000 A-1+ Series A 1.10% VRDO 6,650,000
12,470,000 VMIG 1* Palo Alto USD MERLOT Series R FGIC-Insured PART
1.05% VRDO 12,470,000
16,800,000 A-1+ Paramount HFA MFH Century Plaza Apartment Project
1.06% VRDO AMT 16,800,000
5,980,000 VMIG 1* Pasadena COP Rose Bowl Improvement Project Series 1996
1.02% VRDO 5,980,000
19,675,000 A-1+ Port of Oakland Munitops Series 2000-5 FGIC-Insured PART
1.12% VRDO AMT 19,675,000
Puerto Rico Commonwealth GO:
4,000,000 VMIG 1* MERLOT Series A44 FGIC-Insured PART 1.05% VRDO 4,000,000
2,220,000 A-1 PA 650 PART 1.05% VRDO 2,220,000
20,000,000 SP-1+ TRAN 2.00% due 7/30/04 20,065,190
3,480,000 VMIG 1* Puerto Rico Highway Transportation Authority MERLOT
Series FFF MBIA-Insured PART 1.05% VRDO 3,480,000
Puerto Rico Industrial Tourist Educational Medical &
Environmental Control Authority:
33,630,000 AA Abbot Laboratories Project 1.30% due 3/1/05 33,630,000
16,380,000 A-1+ Putters Series 235 MBIA-Insured PART 1.07% due 6/3/04 16,380,000
2,800,000 A-1 Puerto Rico Municipal Finance Agency Series PA-610R
FSA-Insured PART 1.01% VRDO 2,800,000
1,475,000 VMIG 1* Rancho Mirage Joint Powers Financing Authority COP
Eisenhower Medical Center Series B MBIA-Insured
0.95% VRDO 1,475,000
See Notes to Financial Statements.
12 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Schedule of Investments (continued) March 31, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
$ 6,900,000 VMIG 1* Rancho Water District Finance Authority Revenue Series B
FGIC-Insured 1.03% VRDO $ 6,900,000
2,300,000 A-1 Redwood City PFA COP City Hall Project 1.05% VRDO 2,300,000
15,580,000 VMIG 1* Richmond RDA MFH Summit Hilltop Series A FNMA-Insured
1.01% VRDO 15,580,000
Riverside County Community Facilities District Special Tax:
11,650,000 VMIG 1* No. 88-4 1.08% VRDO 11,650,000
2,400,000 VMIG 1* No. 89-1 1.05% VRDO 2,400,000
7,600,000 A-1 No. 89-5 1.03% VRDO 7,600,000
7,700,000 A-1+ Riverside County COP Series B 1.00% VRDO 7,700,000
2,500,000 A-1+ Riverside County Housing Authority MFH Countrywood
Apartments Series C 1.00% VRDO 2,500,000
Riverside County IDA:
3,300,000 A-1+ Aluminum Body Corp. Project 1.05% VRDO AMT 3,300,000
1,900,000 NR+ Rockwin Corp. Series II 1.07% VRDO AMT 1,900,000
2,600,000 A-1 Riverside USD COP School Facility Bridge Refinancing Program
FSA-Insured 1.00% VRDO 2,600,000
17,175,000 A-1+ Riverside-San Bernardino HFA Lease Pass-Through Obligation
Series A 1.05% VRDO 17,175,000
21,300,000 A-1+ Sacramento County COP Administration Center & Courthouse
Project 1.00% VRDO 21,300,000
Sacramento County Housing Authority MFH:
6,000,000 A-1+ Series C Remarketed 7/21/99 FNMA-Insured 1.01% VRDO 6,000,000
6,000,000 A-1+ Series D Remarketed 7/21/99 FNMA-Insured 1.01% VRDO 6,000,000
5,000,000 A-1+ Stone Creek Apartments FNMA-Insured 1.01% VRDO 5,000,000
7,000,000 A-1+ Sacramento County Sanitation District Finance Authority
Series C 1.03% VRDO 7,000,000
16,940,000 A-1 Sacramento Finance Authority MSTC Series 2025
AMBAC-Insured PART 1.07% VRDO 16,940,000
Sacramento MUD:
11,835,000 VMIG 1* Munitops Series 2003-17 MBIA-Insured PART 1.08% VRDO 11,835,000
13,000,000 A-1+ Series I 0.95% due 5/6/04 TECP 13,000,000
5,300,000 VMIG 1* Sacramento USD COP FSA-Insured 1.00% VRDO 5,300,000
San Bernardino County COP:
7,400,000 A-1+ Capital Improvement Project 1.00% VRDO 7,400,000
3,540,000 A-1+ Medical Center Project MBIA-Insured 0.95% VRDO 3,540,000
3,500,000 VMIG 1* San Bernardino SFH XLCA-Insured Series C
1.10% due 9/1/04 AMT 3,500,000
15,160,000 SP-1+ San Diego County School District RAN 1.75% due 6/30/04 15,190,653
San Diego County Water Authority Series 1 TECP:
10,500,000 A-1+ 0.94% due 4/1/04 10,500,000
5,000,000 A-1+ 0.96% due 5/6/04 5,000,000
11,500,000 A-1+ 0.95% due 5/10/04 11,500,000
5,000,000 A-1+ 0.95% due 5/12/04 5,000,000
56,445,000 A-1+ San Diego HFA 1.05% VRDO 56,445,000
See Notes to Financial Statements.
13 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Schedule of Investments (continued) March 31, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
$ 12,000,000 A-1+ San Diego USD MSTC SGA-120 MBIA-Insured PART
1.06% VRDO $ 12,000,000
11,000,000 VMIG 1* San Diego Water Munitops Series 1998-10 FGIC-Insured PART
1.08% VRDO 11,000,000
41,340,000 VMIG 1* San Francisco Airport Munitops Series 2000-9 FGIC-Insured PART
1.13% VRDO AMT 41,340,000
9,865,000 A-1 San Francisco Building Authority Civic Center MSTC 9006
Class A AMBAC-Insured PART 1.07% VRDO AMT 9,865,000
San Francisco City & County RDA MFH:
2,100,000 VMIG 1* Bayside Village Project Series B 1.02% VRDO 2,100,000
Fillmore Center:
10,600,000 A-1 Series A-1 1.01% VRDO 10,600,000
9,600,000 A-1 Series B-1 1.01% VRDO 9,600,000
5,750,000 A-1 Series B-2 1.02% VRDO 5,750,000
18,630,000 VMIG 1* St. Francis Housing Project Program Series 89A
1.03% VRDO 18,630,000
3,200,000 A-1 San Gabriel USD COP School Facilities Funding Program
FSA-Insured 1.00% VRDO 3,200,000
San Gabriel Valley Alameda Corridor TECP:
6,100,000 A-1+ 0.96% due 5/6/04 6,100,000
10,000,000 A-1+ 0.96% due 5/11/04 10,000,000
San Jose MFH:
3,000,000 A-1+ Almaden Lake Village Apartment Project 1.05% VRDO AMT 3,000,000
7,000,000 A-1+ Cinnabar Commons Series C 1.05% VRDO AMT 7,000,000
9,580,000 VMIG 1* Fairway Glen Series A FGIC-Insured 1.05% VRDO 9,580,000
4,900,000 VMIG 1* Foxchase Series B Remarketed 3/17/94 FNMA-Insured
1.05% VRDO 4,900,000
16,050,000 VMIG 1* Kimberly Woods Apartments Series A 1.01% VRDO 16,050,000
1,800,000 A-1+ San Leandro MFH Parkside Series A 1.03% VRDO 1,800,000
6,280,000 VMIG 1* Santa Ana USD COP 1.05% VRDO 6,280,000
3,000,000 A-1+ Santa Clara County Financing Authority Lease VMC Facility
Replacement Project B 1.00% VRDO 3,000,000
1,500,000 AA Santa Clara Valley Transportation Authority Sales Tax Revenue
5.00% due 6/1/04 1,509,820
5,200,000 A-1+ Santa Cruz County Housing Authority MFH Paloma Apartments
Series A 1.05% VRDO 5,200,000
7,800,000 VMIG 1* Simi Valley MFH Shadowridge Apartments 1.06% VRDO 7,800,000
11,090,000 A-1 South Orange County PFA MSTC Series 2030 FSA-Insured PART
1.07% VRDO 11,090,000
2,400,000 VMIG 1* South Placer Waste Water Authority Wastewater Revenue
FGIC-Insured Series B 0.98% VRDO 2,400,000
Southern California Public Power Authority Transmission
Project FSA-Insured:
46,250,000 A-1+ Series A 1.00% VRDO 46,250,000
45,900,000 A-1+ Series B 1.03% VRDO 45,900,000
See Notes to Financial Statements.
14 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Schedule of Investments (continued) March 31, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
$ 13,400,000 NR+ Stanislaus County Capital Improvements Financing Authority
Central Valley Center For the Arts 1.00% VRDO $ 13,400,000
800,000 A-1 Stockton MFH Mariners Pointe Association Series A
1.02% VRDO 800,000
5,000,000 A-1+ Temecula PFA Community Facilities District Harveston
Series A 1.05% VRDO 5,000,000
13,800,000 A-1+ Torrance Hospital Authority Little Co. of Mary Hospital
1.04% VRDO 13,800,000
University of California Board of Regents Series A TECP:
30,000,000 NR+ 0.97% due 6/4/04 30,000,000
6,000,000 NR+ 0.95% due 6/7/04 6,000,000
2,300,000 A-1+ Upland Apartment Development Revenue Mountain Springs
Series 1998A 1.01% VRDO 2,300,000
10,635,000 A-1 Vallejo Capital Improvements Project COP 1.08% VRDO 10,635,000
2,335,000 A-1 Westminster COP Civic Center Refinance Program Series B
AMBAC-Insured 1.05% VRDO 2,335,000
8,740,000 A-1+ Westminster RDA AMBAC-Insured 1.05% VRDO 8,740,000
==========================================================================================================
TOTAL INVESTMENTS -- 100.0%
(Cost -- $2,440,184,004**) $2,440,184,004
==========================================================================================================
(a) All ratings are by Standard & Poor's Ratings Service ("Standard &
Poor's"), except for those which are identified by an asterisk (*), are
rated by Moody's Investors Service ("Moody's").
+ Security has not been rated by either Standard & Poor's or Moody's.
However, the Board of Trustees has determined this security to be
considered a first tier quality issue due to enhancement features; such as
insurance and/or irrevocable letters of credit.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 16 and 17 or definitions of ratings and certain abbreviations.
================================================================================
Summary of Investments by Industry*
================================================================================
Housing 24.1%
Water and Sewer 13.2
Utilities 10.6
General Obligation 10.2
Education 9.4
Public Facilities 6.2
Finance 6.1
Transportation 5.3
Hospital 5.2
Other 9.7
- --------------------------------------------------------------------------------
100.0%
================================================================================
* As a percentage of total investments. Please note that Fund holdings are
as of March 31, 2004 and are subject to change.
See Notes to Financial Statements.
15 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Bond Ratings (unaudited)
================================================================================
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Rating "AA" 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.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each "Aa" rating, where 1 is the highest and 3 the lowest ranking
within its generic category.
Aaa -- Bonds rated "Aaa" by Moody's 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
bonds.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in "Aaa"
securities.
================================================================================
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.
SP-2 -- Standard & Poor's rating indicating satisfactory capacity to pay
principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
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.
MIG 1 -- Moody's highest rate for short-term municipal obligations.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
16 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
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 LEE -- College Construction Loan Insurance Association
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 Financing 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
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 schedule of investments.
17 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Statement of Assets and Liabilities March 31, 2004
================================================================================
ASSETS:
Investments, at amortized cost $2,440,184,004
Cash 128,625
Receivable for securities sold 35,326,149
Receivable for Fund shares sold 23,568,776
Interest receivable 5,972,718
Prepaid expenses 14,527
Other assets 29,260
- --------------------------------------------------------------------------------
Total Assets 2,505,224,059
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares reacquired 36,002,337
Payable for securities purchased 22,936,615
Management fee payable 977,123
Dividends payable 512,037
Distribution plan fees payable 74,489
Deferred compensation payable 29,260
Accrued expenses 131,696
- --------------------------------------------------------------------------------
Total Liabilities 60,663,557
- --------------------------------------------------------------------------------
Total Net Assets $2,444,560,502
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 2,444,480
Capital paid in excess of par value 2,442,115,029
Accumulated net realized gain from investment transactions 993
- --------------------------------------------------------------------------------
Total Net Assets $2,444,560,502
================================================================================
Shares Outstanding:
Class A 2,397,627,700
-----------------------------------------------------------------------------
Class Y 46,852,168
-----------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 1.00
-----------------------------------------------------------------------------
Class Y (and redemption price) $ 1.00
================================================================================
See Notes to Financial Statements.
18 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Statement of Operations For the Year Ended March 31, 2004
================================================================================
INVESTMENT INCOME:
Interest $24,605,685
- --------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 4) 11,209,622
Distribution plan fees (Note 5) 2,384,792
Transfer agency services (Note 5) 213,576
Custody 80,654
Audit and legal 33,990
Shareholder communications (Note 5) 27,396
Registration fees 23,482
Trustees' fees 14,858
Other 20,056
- --------------------------------------------------------------------------------
Total Expenses 14,008,426
- --------------------------------------------------------------------------------
Net Investment Income 10,597,259
- --------------------------------------------------------------------------------
Net Realized Gain From Investment Transactions 993
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $10,598,252
================================================================================
See Notes to Financial Statements.
19 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Statements of Changes in Net Assets For the Years Ended March 31,
================================================================================
2004 2003
=====================================================================================================================
OPERATIONS:
Net investment income $ 10,597,259 $ 19,311,248
Net realized gain 993 177,578
- ---------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 10,598,252 19,488,826
- ---------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTES 3 AND 6):
Net investment income (10,597,263) (19,311,248)
- ---------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (10,597,263) (19,311,248)
- ---------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 8,720,404,004 7,983,425,382
Net asset value of shares issued for reinvestment of dividends 10,444,598 19,660,893
Cost of shares reacquired (8,674,429,374) (8,233,462,785)
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions 56,419,228 (230,376,510)
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 56,420,217 (230,198,932)
NET ASSETS:
Beginning of year 2,388,140,285 2,618,339,217
- ---------------------------------------------------------------------------------------------------------------------
End of year $ 2,444,560,502 $ 2,388,140,285
=====================================================================================================================
See Notes to Financial Statements.
20 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
The California Money Market Portfolio ("Fund"), a separate investment fund of
the Smith Barney Muni Funds ("Trust"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Trust consists of this Fund and eight other
separate investment funds: Florida, Georgia, Limited Term, New York, National,
Pennsylvania, Massachusetts Money Market and New York Money Market Portfolios.
The financial statements and financial highlights for the other funds are
presented in separate shareholder reports.
The following are significant accounting policies consistently followed by the
Fund and are in conformity with generally accepted accounting principles
("GAAP"): (a) security transactions are accounted for on trade date; (b) the
Fund uses the amortized cost method for valuing investments; accordingly, the
cost of securities plus accreted discount, or minus amortized premium,
approximates value; (c) interest income, adjusted for amortization of premium
and accretion of discount, is recorded on an accrual basis; (d) gains or losses
on the sale of securities are calculated by using the specific identification
method; (e) dividends and distributions to shareholders are recorded on the
ex-dividend date; (f) class specific expenses are charged to each class;
management fees and general fund expenses are allocated on the basis of relative
net assets of each class or on another reasonable basis; (g) the character of
income and gains to be distributed is determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States of America; (h) the Fund intends to comply with the applicable
provisions of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes;
and (i) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
21 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
2. Fund Concentration
Since the Fund invests primarily in obligations of issuers within California, it
is subject to possible concentration risks associated with economic, political,
or legal developments or industrial or regional matters specifically affecting
California.
3. Exempt-Interest Dividends and Other Distributions
The Fund declares and records a dividend of substantially all its net investment
income on each business day. Such dividends are paid or reinvested monthly in
Fund shares on the payable date. Furthermore, the Fund intends to satisfy
conditions that will enable interest from municipal securities, which is exempt
from regular Federal income tax and from designated state income taxes, to
retain such tax-exempt status when distributed to the shareholders of the Fund.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. Management Agreement and Other Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund.
Effective July 1, 2003, the Fund pays SBFM a management fee calculated at an
annual rate of 0.475% on the first $1 billion of the Fund's average daily net
assets; 0.450% on the next $1 billion; 0.425% on the next $3 billion; 0.400% on
the next $5 billion and 0.375% on the Fund's average daily net assets in excess
of $10 billion. This fee is calculated daily and paid monthly.
Prior to July 1, 2003, the Fund paid SBFM a management fee calculated at an
annual rate of 0.500% on the first $2.5 billion of the Fund's average daily net
assets; 0.475% on the next $2.5 billion and 0.450% on the Fund's average daily
net assets in excess of $5 billion. This fee was calculated daily and paid
monthly.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Fund's transfer agent. PFPC Inc. ("PFPC") acts as the Fund's sub-transfer agent.
CTB receives account fees and asset-based fees that vary according to the size
and type of account. PFPC is responsible for shareholder recordkeeping and
financial processing for all shareholder accounts and is paid by CTB. For the
year ended March 31, 2004, the Fund paid transfer agent fees of $392,652 to CTB.
22 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
Citigroup Global Markets Inc. ("CGM"), another indirect wholly-owned subsidiary
of Citigroup, acts as the Fund's distributor.
All officers and one Trustee of the Trust are employees of Citigroup or its
affiliates.
5. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, the Fund pays a service fee with
respect to Class A shares calculated at an annual rate of 0.10% of the average
daily net assets of that class. For the year ended March 31, 2004, total Rule
12b-1 Distribution Plan fees, which are accrued daily and paid monthly, were
$2,384,792.
For the year ended March 31, 2004, total Transfer Agency Service expenses were
as follows:
Class A Class Y
================================================================================
Transfer Agency Service Expenses $212,205 $1,371
================================================================================
For the year ended March 31, 2004, total Shareholder Communication expenses were
as follows:
Class A Class Y
================================================================================
Shareholder Communication Expenses $27,220 $176
================================================================================
6. Distributions Paid to Shareholders by Class
Year Ended Year Ended
March 31, 2004 March 31, 2003
================================================================================
Net Investment Income
Class A $10,514,312 $19,311,225
Class Y 82,951 23
- --------------------------------------------------------------------------------
Total $10,597,263 $19,311,248
================================================================================
7. Shares of Beneficial Interest
At March 31, 2004, the Trust had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest in the Fund and has the same rights, except that each class
bears certain expenses specifically related to the distribution of its shares.
23 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
Transactions in shares of the Fund were as follows:
Year Ended Year Ended
March 31, 2004 March 31, 2003
================================================================================
Class A
Shares sold 8,640,554,636 7,983,425,382
Shares issued on reinvestment 10,381,572 19,660,865
Shares reacquired (8,641,366,497) (8,233,462,785)
- --------------------------------------------------------------------------------
Net Increase (Decrease) 9,569,711 (230,376,538)
================================================================================
Class Y
Shares sold 79,849,368 --
Shares issued on reinvestment 63,026 28
Shares reacquired (33,062,877) --
- --------------------------------------------------------------------------------
Net Increase 46,849,517 28
================================================================================
8. Income Tax Information and Distributions to Shareholders
At March 31, 2004, the tax basis components of distributable earnings were:
================================================================================
Tax-exempt income $574,857
- --------------------------------------------------------------------------------
Accumulated capital gains 993
================================================================================
The tax character of distributions paid during the years ended March 31 was:
2004 2003
================================================================================
Tax-exempt income $10,597,263 $19,311,248
================================================================================
9. Additional Information
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue guarantee
agreement with this sub-contractor providing that the sub-contractor would
guarantee certain benefits to CAM or its affiliates (the "Revenue Guarantee
Agreement"). In connection with the subsequent purchase of the sub-contractor's
business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by
CAM on many of the funds it manages, this Revenue Guarantee Agreement was
amended
24 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
eliminating those benefits in exchange for arrangements that included a one-time
payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. CAM also plans an
independent review to verify that the transfer agency fees charged by CAM were
fairly priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
25 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Financial Highlights
================================================================================
For a share of beneficial interest outstanding throughout each year ended March
31, unless otherwise noted:
Class A Shares 2004 2003 2002 2001 2000
=============================================================================================================
Net Asset Value,
Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------
Net investment income 0.004 0.008 0.016 0.030 0.025
Dividends from net
investment income (0.004) (0.008) (0.016) (0.030) (0.025)
- -------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------
Total Return 0.44% 0.76% 1.66% 3.03% 2.49%
- -------------------------------------------------------------------------------------------------------------
Net Assets,
End of Year (millions) $ 2,398 $ 2,388 $ 2,618 $ 3,355 $ 3,095
- -------------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(1) 0.58% 0.64% 0.63% 0.63% 0.66%
Net investment income 0.44 0.76 1.67 2.97 2.46
=============================================================================================================
Class Y Shares 2004 2003 2002 2001 2000
=============================================================================================================
Net Asset Value,
Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------
Net investment income 0.006 0.010 0.018 0.031 0.025
Dividends from net
investment income (0.006) (0.010) (0.018) (0.031) (0.025)
- -------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------
Total Return 0.62% 1.02% 1.78% 3.12% 2.57%
- -------------------------------------------------------------------------------------------------------------
Net Assets,
End of Year (millions) $ 47 $ 0* $ 0* $ 0* $ 0*
- -------------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(2) 0.45% 0.53% 0.54% 0.54% 0.55%
Net investment income 0.54 0.87 1.72 3.06 2.58
=============================================================================================================
(1) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.80%.
(2) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.70%.
* Amount represents less than $0.5 million.
26 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Independent Auditors' Report
================================================================================
To the Shareholders and Board of Trustees of
Smith Barney Muni Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the California Money Market Portfolio ("Fund")
of Smith Barney Muni Funds ("Trust") as of March 31, 2004, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended and the
financial highlights for each of the years in the five-year period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2004, by correspondence with the custodian. As
to securities purchased or sold but not yet received or delivered, we performed
other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of March 31, 2004, and the results of its operations for the year then
ended, the changes in its net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
New York, New York
May 12, 2004
27 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Additional Information (unaudited)
================================================================================
Information about Trustees and Officers
The business and affairs of the California Money Market Portfolio ("Fund") are
managed under the direction of the Smith Barney Muni Funds' ("Trust") Board of
Trustees. Information pertaining to the Trustees and Officers of the Trust is
set forth below. The Statement of Additional Information includes additional
information about the Trustees and is available, without charge, upon request by
calling the Trust's transfer agent (Citicorp Trust Bank, fsb. at
1-800-451-2010).
Number of
Term of Portfolios
Office* and Principal in Fund Other Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen Held by
and Age Fund Served Five Years by Trustee Trustee
====================================================================================================================
Non-Interested Trustees:
Lee Abraham Trustee Since Retired; Former Director 27 None
13732 LeHavre Drive 1999 of Signet Group PLC
Frenchman's Creek
Palm Beach Gardens,
FL 33410
Age 76
Allan J. Bloostein Trustee Since President of Allan 34 Taubman Realty
27 West 67th Street 1999 Bloostein Associates, a Corp.
New York, NY 10023 consulting firm; Former
Age 74 Director of CVS Corp.
Jane F. Dasher Trustee Since Controller of PBK 27 None
Korsant Partners 1999 Holdings Inc., a family
283 Greenwich Avenue investment company
3rd Floor
Greenwich, CT 06830
Age 54
Donald R. Foley Trustee Since Retired 19 None
3668 Freshwater Drive 1985
Jupiter, FL 33477
Age 81
Richard E. Hanson, Jr. Trustee Since Retired; Former Head of 27 None
2751 Vermont Route 140 1999 the New Atlanta Jewish
Poultney, VT 05764 Community High School
Age 62
Paul Hardin Trustee Since Professor of Law & 34 None
12083 Morehead 1994 Chancellor Emeritus at
Chapel Hill, NC 27514-8426 the University of North
Age 72 Carolina
Roderick C. Rasmussen Trustee Since Investment Counselor 27 None
9 Cadence Court 1989
Morristown, NJ 07960
Age 77
28 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios
Office* and Principal in Fund Other Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen Held by
and Age Fund Served Five Years by Trustee Trustee
====================================================================================================================
John P. Toolan Trustee Since Retired 27 John Hancock
13 Chadwell Place 1989 Funds
Morristown, NJ 07960
Age 73
Interested Trustee:
R. Jay Gerken** Chairman, Since Managing Director of 221 None
Citigroup Asset President 2002 Citigroup Global Markets
Management ("CAM") and Chief Inc. ("CGM"); Chairman,
399 Park Avenue Executive President and Chief
4th Floor Officer Executive Officer of Smith
New York, NY 10022 Barney Fund Management LLC
Age 52 ("SBFM"), Travelers
Investment Adviser, Inc.
("TIA") and Citi Fund
Management Inc. ("CFM");
President and Chief Executive
Officer of certain mutual
funds associated with Citigroup
Inc. ("Citigroup"); Formerly
Portfolio Manager of Smith
Barney Allocation Series Inc.
(from 1996 to 2001) and Smith
Barney Growth and Income Fund
(from 1996 to 2000)
Officers:
Andrew B. Shoup Senior Vice Since Director of CAM; Senior Vice N/A N/A
CAM President 2003 President and Chief
125 Broad Street and Chief Administrative Officer
11th Floor Administrative of mutual funds associated
New York, NY 10004 Officer with Citigroup; Treasurer
Age 47 of certain mutual funds
associated with Citigroup;
Head of International Funds
Administration of CAM (from
2001 to 2003); Director of
Global Funds Administration
of CAM (from 2000 to 2001);
Head of U.S. Citibank Funds
Administration of CAM (from
1998 to 2000)
29 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios
Office* and Principal in Fund Other Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen Held by
and Age Fund Served Five Years by Trustee Trustee
====================================================================================================================
Richard L. Peteka Chief Since Director of CGM; Chief N/A N/A
CAM Financial 2002 Financial Officer and
125 Broad Street Officer and Treasurer of certain mutual
11th Floor Treasurer funds affiliated with
New York, NY 10004 Citigroup; Director and
Age 42 Head of Internal Control
for CAM U.S. Mutual Fund
Administration (from 1999
to 2002); Vice President,
Head of Mutual Fund
Administration and Treasurer
at Oppenheimer Capital (from
1996 to 1999)
Julie P. Callahan, CFA Vice Since Vice President N/A N/A
CAM President 2002 of CGM
399 Park Avenue and
4th Floor Investment
New York, NY 10022 Officer
Age 31
Joseph P. Deane Vice Since Managing Director N/A N/A
CAM President 1987 of CGM
399 Park Avenue and
4th Floor Investment
New York, NY 10002 Officer
Age 56
30 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios
Office* and Principal in Fund Other Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen Held by
and Age Fund Served Five Years by Trustee Trustee
====================================================================================================================
Andrew Beagley Chief Since Director of CGM (since N/A N/A
CAM Anti-Money 2002 2000); Director of
399 Park Avenue Laundering Compliance, North
4th Floor Compliance America, CAM (since 2000);
New York, NY 10022 Officer Chief Anti-Money
Age 40 Laundering Compliance
Officer and Vice President
of certain mutual funds
associated with Citigroup;
Director of Compliance,
Europe, the Middle East
and Africa, CAM (from 1999
to 2000); Compliance
Officer, Salomon Brothers
Asset Management Limited,
Smith Barney Global Capital
Management Inc., Salomon
Brothers Asset Management
Asia Pacific Limited
(from 1997 to 1999)
Kaprel Ozsolak Controller Since Vice President of CGM; N/A N/A
CAM 2002 Controller of certain
125 Broad Street mutual funds
11th Floor associated with
New York, NY 10004 Citigroup
Age 38
Robert I. Frenkel Secretary Since Managing Director and N/A N/A
CAM and Chief 2003 General Counsel of Global
300 First Stamford Place Legal Officer Mutual Funds for CAM and
4th Floor its predecessor (since
Stamford, CT 06902 1994); Secretary of CFM
Age 48 (from 2001 to 2004);
Secretary and Chief Legal
Officer of mutual funds
associated with Citigroup
- ----------
* Each Trustee and Officer serves until his or her successor has been duly
elected and qualified.
** Mr. Gerken is an "interested person" of the Fund as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is an
officer of SBFM and certain of its affiliates.
31 Smith Barney Muni Funds | 2004 Annual Report
================================================================================
Tax Information (unaudited)
================================================================================
For the year ended March 31, 2004, 100.00% of the dividends paid by the Fund
from net investment income were tax-exempt for regular Federal income tax and
California state income tax purposes.
32 Smith Barney Muni Funds | 2004 Annual Report
- --------------------------------------------------------------------------------
SMITH BARNEY
MUNI FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
R. Jay Gerken, CFA
Chairman
Richard E. Hanson, Jr.
Paul Hardin
Roderick C. Rasmussen
John P. Toolan
OFFICERS
R. Jay Gerken, CFA
President and Chief
Executive Officer
Andrew B. Shoup
Senior Vice President and
Chief Administrative Officer
Richard L. Peteka
Chief Financial Officer
and Treasurer
Julie P. Callahan, CFA
Vice President and
Investment Officer
Joseph P. Deane
Vice President and
Investment Officer
Andrew Beagley
Chief Anti-Money
Laundering Compliance
Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer
INVESTMENT
MANAGER
Smith Barney Fund
Management LLC
DISTRIBUTOR
Citigroup Global Markets Inc.
CUSTODIAN
State Street Bank and
Trust Company
TRANSFER AGENT
Citicorp Trust Bank, fsb.
125 Broad Street, 11th Floor
New York, New York 10004
SUB-TRANSFER AGENT
PFPC Inc.
P.O. Box 9699
Providence, Rhode Island
02940-9699
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Smith Barney Muni Funds
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
California Money Market Portfolio
The Fund is a separate investment fund of the Smith Barney Muni Funds, a
Massachusetts business trust.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the Fund (toll-free) at 1-800-451-2010 and by
visiting the SEC's web site at www.sec.gov.
This report is submitted for general information of the shareholders of Smith
Barney Muni Funds -- California Money Market Portfolio.
SMITH BARNEY MUNI FUNDS
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
(C)2004 Citigroup Global Markets Inc.
Member NASD, SIPC
FD2309 5/04 04-6639
- --------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that Jane F.
Dasher, the Chairman of the Board's Audit Committee, possesses the
technical attributes identified in Instruction 2(b) of Item 3 to Form
N-CSR to qualify as an "audit committee financial expert," and has
designated Ms. Dasher as the Audit Committee's financial expert. Ms.
Dasher is an "independent" Trustee pursuant to paragraph (a)(2) of Item
3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees for Smith Barney Muni Funds were $170,500 and $162,500
for the years ended 3/31/04 and 3/31/03.
(b) Audit-Related Fees for Smith Barney Muni Funds were $0 and $0 for
the years ended 3/31/04 and 3/31/03.
(c) Tax Fees for Smith Barney Muni Funds were $18,500 and $18,400 for
the years ended 3/31/04 and 3/31/03. These amounts represent
aggregate fees paid for tax compliance, tax advice and tax
planning services, which include (the filing and amendment of
federal, state and local income tax returns, timely RIC
qualification review and tax distribution and analysis planning)
rendered by the Accountant to Smith Barney Muni Funds.
(d) There were no all other fees for Smith Barney Muni Funds for the
years ended 3/31/04 and 3/31/03.
(e) (1) Audit Committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
The Charter for the Audit Committee (the "Committee") of the
Board of each registered investment company (the "Fund") advised
by Smith Barney Fund Management LLC or Salomon Brothers Asset
Management Inc or one of their affiliates (each, an "Adviser")
requires that the Committee shall approve (a) all audit and
permissible non-audit services to be provided to the Fund and (b)
all permissible non-audit services to be provided by the Fund's
independent auditors to the Adviser and any Covered Service
Providers if the engagement relates directly to the operations
and financial reporting of the Fund. The Committee may implement
policies and procedures by which such services are approved other
than by the full Committee.
The Committee shall not approve non-audit services that the
Committee believes may impair the independence of the auditors.
As of the date of the approval of this Audit
Committee Charter, permissible non-audit services include any
professional services (including tax services), that are not
prohibited services as described below, provided to the Fund by
the independent auditors, other than those provided to the Fund
in connection with an audit or a review of the financial
statements of the Fund. Permissible non-audit services may not
include: (i) bookkeeping or other services related to the
accounting records or financial statements of the Fund; (ii)
financial information systems design and implementation; (iii)
appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (iv) actuarial services; (v)
internal audit outsourcing services; (vi) management functions or
human resources; (vii) broker or dealer, investment adviser or
investment banking services; (viii) legal services and expert
services unrelated to the audit; and (ix) any other service the
Public Company Accounting Oversight Board determines, by
regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount of
all such permissible non-audit services provided to the Fund, the
Adviser and any service providers controlling, controlled by or
under common control with the Adviser that provide ongoing
services to the Fund ("Covered Service Providers") constitutes
not more than 5% of the total amount of revenues paid to the
independent auditors during the fiscal year in which the
permissible non-audit services are provided to (a) the Fund, (b)
the Adviser and (c) any entity controlling, controlled by or
under common control with the Adviser that provides ongoing
services to the Fund during the fiscal year in which the services
are provided that would have to be approved by the Committee;
(ii) the permissible non-audit services were not recognized by
the Fund at the time of the engagement to be non-audit services;
and (iii) such services are promptly brought to the attention of
the Committee and approved by the Committee (or its delegate(s))
prior to the completion of the audit.
(f) N/A
(g) Non-audit fees billed - $100,000 and $1.2 million for the years
ended 12/31/2003 and 12/31/2002.
(h) Yes. The Smith Barney Muni Funds' Audit Committee has considered
whether the provision of non-audit services that were rendered to
Service Affiliates which were not pre-approved (not requiring
pre-approval) is compatible with maintaining the Accountant's
independence. All services provided by the Accountant to the
Smith Barney Muni Funds or to Service Affiliates which were
required to be pre-approved were pre-approved as required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an
annual report) that have materially affected, or are likely to
materially affect the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, there unto duly authorized.
Smith Barney Muni Funds
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Muni Funds
Date: June 4, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Muni Funds
Date: June 4, 2004
By: /s/ Richard L. Peteka
Richard L. Peteka
Chief Financial Officer of
Smith Barney Muni Funds
Date: June 4, 2004