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: September 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
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SMITH BARNEY
MUNI FUNDS
NATIONAL PORTFOLIO
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CLASSIC SERIES | SEMI-ANNUAL REPORT | SEPTEMBER 30, 2003
[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.
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed./SM/
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NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
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[PHOTO] PETER M. COFFEY
PORTFOLIO MANAGER
[GRAPHIC][LOGO]
Classic Series
Semi-Annual Report . September 30, 2003
SMITH BARNEY NATIONAL PORTFOLIO
PETER M. COFFEY
Peter M. Coffey has more than 34 years of securities business experience
and has been managing the Fund since 1987.
FUND OBJECTIVE
The Fund seeks as high a level of income exempt from federal income
taxes* as is consistent with prudent investing. The Fund invests at least
80% of its net assets in "municipal securities," which are debt
obligations issued by any of the 50 states and their political
subdivisions, agencies and public authorities.
FUND FACTS
FUND INCEPTION
-----------------
August 20, 1986
MANAGER INVESTMENT
INDUSTRY EXPERIENCE
-----------------
34 Years
* Certain investors may be subject to the federal Alternative Minimum
Tax, and state and local taxes will apply. Capital gains, if any, are
fully taxable. Please consult your personal tax adviser.
What's Inside
Letter from the Chairman.............................................. 1
Schedule of Investments............................................... 3
Statement of Assets and Liabilities................................... 15
Statement of Operations............................................... 16
Statements of Changes in Net Assets................................... 17
Notes to Financial Statements......................................... 18
Financial Highlights.................................................. 22
LETTER FROM THE CHAIRMAN
[PHOTO]
R. Jay Gerken, CFA
R. JAY GERKEN, CFA
Chairman, President and Chief Executive Officer
Dear Shareholder,
In an effort to jump-start a weak economy, the Federal Reserve reduced
short-term interest rates again in late June, driving the federal funds rate/1/
to just 1%, its lowest level since the Eisenhower Administration. During this
declining-rate environment, bond yields continued to drop. Meanwhile, many
states have been grappling with budget deficits brought on by the faltering
economy, layoffs and declining incomes -- all leading to lower tax revenues.
Shortly after the Fed eased rates in June, the fixed-income markets experienced
a sharp reversal over the summer as signs emerged that economic growth was more
robust than previously thought. Interest rates moved up sharply as a result. If
rates were to continue rising, that would lead to higher levels of income from
fixed-income securities. However, rising rates would also lead to declining
prices on outstanding bonds because prices move in the opposite direction of
interest rates.
In this environment, the fund performed as follows:
Smith Barney Muni Funds: National Portfolio's Performance
For the six months ended September 30, 2003, Class A shares of the fund,
without sales charges, returned 2.91%./2/ This compared with a return of 2.66%
of the broad based Lehman Brothers Municipal Bond Index and 2.57% of the fund's
Lipper peer group of general municipal debt funds, over the same period./3/
PERFORMANCE SNAPSHOT
AS OF SEPTEMBER 30, 2003
(not including sales charges)
6 Months
Class A Shares 2.91%
Lehman Brothers Municipal Bond Index 2.66%
Average of Lipper general municipal debt funds 2.57%
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. All figures represent past performance and
are not a guarantee of future results. Principal value and investment returns
will fluctuate and investors' shares, when redeemed may be worth more or less
than their original cost.
The Lehman Brothers Municipal Bond Index is a broad measure of the municipal
bond market with maturities of at least one year. Please note that an
investor cannot invest directly in an index.
Lipper is a major independent mutual-fund tracking organization. Returns are
based on the six-month period ended September 30, 2003, calculated among 304
funds in the Lipper general municipal debt funds category with reinvestment
of dividends and capital gains excluding sales charges.
Certain investors may be subject to the federal Alternative Minimum Tax and
state and local taxes will apply. Capital gains, if any, are fully taxable.
Please consult your personal tax adviser.
/1/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.
/2/Performance for the fund's other share classes can be found in the Financial
Highlights section in this report. Performance for the other share classes
may vary.
/3/Lipper is a major independent mutual-fund tracking organization. Returns are
based on the six-month period ended September 30, 2003, calculated among 304
funds in the Lipper general municipal debt funds category with reinvestment
of dividends and capital gains excluding sales charges.
1 Smith Barney Muni Funds | 2003 Semi-Annual Report
At times of uncertainty such as these, it is more important than ever to
develop and stick with a long-range plan. In addition to their income-producing
capabilities, we believe that bonds can be an effective means of
diversification in an overall investment portfolio. And municipal securities
can provide income free from federal, and sometimes state and local, income
taxes. Certain investors may be subject to the federal Alternative Minimum Tax
and state and local income taxes will apply. Capital gains, if any, are fully
taxable. Consult your personal tax adviser for more details. Please work
closely with your financial adviser to determine your proper allocation to
fixed-income securities based on your risk/reward profile and to explore the
role they can play in achieving your long-term financial goals.
As always, thank you for your entrusting your assets to us. 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
October 9, 2003
The information provided in this letter by the Investment Adviser is not
intended to be a forecast of future events, a guarantee of future results or
investment advice. Views expressed may differ from those of the firm as a whole.
Portfolio holdings and breakdowns are as of September 30, 2003 and are subject
to change. Please refer to pages 3 through 11 for a list and percentage
breakdown of the fund's holdings.
2 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
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Education -- 5.5%
$ 1,250,000 BBB+ Brookhaven, NY IDA, Civic Facility Revenue, St. Joseph's College,
6.000% due 12/1/20 (b) $ 1,356,988
1,000,000 Aaa* Bulloch County, GA Development Authority, Student Housing Lease Revenue, (Georgia
Southern University Project), AMBAC-Insured, 5.000% due 8/1/22 (b) 1,039,730
3,000,000 NR Capital Projects Finance Authority, Student Housing Revenue, CAFRA Capital Corp.,
Florida Universities, Series A, 7.850% due 8/15/31 (b) 3,022,050
1,000,000 AAA Chicago, IL Board of Education, School Reform, Series A, MBIA-Insured,
5.500% due 12/1/28 (b) 1,079,660
1,000,000 Baa3* Colorado Educational & Cultural Facilities Authority Revenue, Charter School, (Bromley
East Project), Series A, 7.250% due 9/15/30 1,007,730
1,000,000 AAA Lake Superior, MI State University Revenue, AMBAC-Insured, 5.500% due 11/15/21 1,097,230
405,000 AAA Montana State Board of Regents Revenue, 10.000% due 11/15/08 (c) 494,845
1,000,000 BBB- New Hampshire Health & Education Facilities Authority Revenue, New Hampshire
College, 7.500% due 1/1/31 1,089,780
1,500,000 Ba1* New Hampshire Higher Education & Health, Brewster Academy, 6.750% due 6/1/25 1,544,385
2,000,000 AA- New York State Dormitory Authority Lease Revenue, State University Dormitory Facilities,
5.375% due 7/1/18 2,184,140
New York State Dormitory Authority Revenue:
3,500,000 AAA School Districts Financing Program, Series E, 5.750% due 10/1/22 3,894,590
486,000 AA- Series B, (Call 5/15/05 @ 100), 7.500% due 5/15/11 (d) 615,777
1,014,000 AA- Unrefunded Balance, Series B, 7.500% due 5/15/11 1,238,145
985,000 Baa3* Pennsylvania State Higher Educational Facilities Authority, Student Housing Revenue,
(Student Association Inc. Project), Series A, 6.750% due 9/1/32 1,033,964
1,000,000 BBB- Savannah, GA EDA Revenue, (College of Art & Design Inc. Project), 6.900% due 10/1/29 1,083,510
1,000,000 Baa3* Student Housing Corp., TX Student Housing Revenue, (Midwestern State University
Project), 6.500% due 9/1/34 (b) 981,770
10,000 AAA Weatherford, TX ISD, PSFG, Unrefunded Balance, Capital Appreciation,
zero coupon due 2/15/21 3,592
1,835,000 B-++ Will County, IL Student Housing Revenue, (Joliet Junior College Project), Series A,
6.750% due 9/1/33 1,744,736
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24,512,622
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Finance -- 3.4%
2,200,000 NR Harrisburg, PA Redevelopment Authority, First Mortgage Office Building,
6.750% due 5/15/25 2,213,684
3,840,000 AAA Indiana Bond Bank, Series A, AMBAC-Insured, 9.750% due 8/1/09 (c) 4,760,870
1,500,000 AAA Indiana Bond Bank Guaranty, State Revolving Fund, Series A, 6.875% due 2/1/12 1,636,020
5,685,000 AAA Mississippi Development Bank Special Obligation, Capital Projects & Equipment Program,
Series A, AMBAC-Insured, 5.625% due 7/1/31 6,306,086
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14,916,660
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General Obligation -- 3.2%
1,200,000 AAA Alaska Municipal Bond Bank Authority, Series E, 5.250% due 12/1/22 1,271,676
3,130,000 AAA Cincinnati, OH City School District, School Improvement, FSA-Insured,
5.250% due 6/1/16 3,462,876
2,000,000 AAA Massachusetts State, RITES-PA 993-R, MBIA-Insured, 5.500% due 11/1/15 (e) 2,659,480
5,000,000 AAA Washoe County, NV Reno-Sparks Convention, Series A, FSA-Insured,
(Call 1/1/10 @ 100), 6.400% due 7/1/29 (b)(d) 6,024,400
1,490,000 AAA Weatherford, TX ISD, Capital Appreciation, PSFG, (Call 2/15/10 @ 48.281),
zero coupon due 2/15/21 (d) 587,745
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14,006,177
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See Notes to Financial Statements.
3 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
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Hospital -- 16.7%
$ 3,000,000 BBB Arizona Health Facilities Authority Revenue, Catholic Healthcare West, Series A,
6.625% due 7/1/20 $ 3,213,780
2,000,000 BBB- Arkansas State Development Finance Authority, Hospital Revenue, Washington Regional
Medical Center, 7.375% due 2/1/29 2,172,340
Colorado Health Facilities Authority Revenue Bonds:
1,000,000 Baa1* Parkview Medical Center Project, 6.500% due 9/1/20 1,069,340
1,000,000 A Vail Valley Medical Center, Series A, 6.500% due 1/15/13 1,053,700
3,000,000 BBB Cuyahoga County, OH Hospital Facilities Revenue, (Canton Inc. Project),
7.500% due 1/1/30 3,326,130
815,000 NR Douglas County, NE Hospital Authority No. 2, Bergan Mercy, 9.500% due 7/1/10 (f) 1,034,284
350,000 BB- Green Springs, OH Health Care Facilities Revenue, (St. Francis Health Care Center
Project), Series A, 7.125% due 5/15/25 269,794
3,000,000 BBB Henderson, NV Health Care Facility Revenue, Catholic Healthcare West, Series A,
6.750% due 7/1/20 3,167,790
2,750,000 A Highlands County Health Facilities Authority Revenue, Hosp-Adventist Health Systems,
Series D, 5.875% due 11/15/29 2,881,203
Illinois Health Facilities Authority Revenue:
592,000 AAA Community Provider Pooled Loan Program, FSA-Insured, 7.350% due 8/15/10 593,705
2,890,000 CCC Mercy Hospital & Medical Center, 7.000% due 1/1/07 1,098,200
780,000 AAA Methodist Medical Center Project, 9.000% due 10/1/10 (c) 948,059
3,000,000 A OSF Healthcare Systems, 6.250% due 11/15/29 3,160,770
1,500,000 A Passavant Memorial Area Hospital, 6.000% due 10/1/24 1,549,935
3,000,000 BBB- Indiana Health Facility Financing Authority, Hospital Revenue, Community Foundation
Northwest, Series A, 6.375% due 8/1/31 3,016,740
3,000,000 A1* Iowa Finance Authority, Health Care Facilities Revenue, Genesis Medical Center,
6.250% due 7/1/25 3,178,740
3,000,000 AA Iowa Finance Authority Revenue, Catholic Health Initiatives, Series A,
6.000% due 12/1/18 3,214,200
Klamath Falls, OR Inter-Community Hospital Authority Revenue, (Merle West Medical
Center Project):
900,000 BBB 7.100% due 9/1/24 967,491
1,000,000 BBB Call 9/1/12 @ 101, 6.250% due 9/1/31 (d) 1,044,230
1,345,000 BBB- Louisiana Public Facilities Authority Revenue, (General Health Systems Project),
6.800% due 11/1/16 1,344,906
Massachusetts State Health & Educational Facilities Authority Revenue:
1,000,000 AA Berkshire Health System, Series E, Radian-Insured, 5.700% due 10/1/25 1,067,390
3,000,000 BBB Caritas Christi Obligation, Series B, 6.750% due 7/1/16 3,092,400
3,000,000 AAA INFLOS, Series G-4, 6.000% due 7/1/25 (e) 3,077,640
1,250,000 BBB University of Massachusetts, Memorial Healthcare Inc., Series C, 6.625% due 7/1/32 1,302,387
540,000 AAA Minneapolis, MN Hospital Revenue, St. Mary's Hospital & Rehabilitation,
10.000% due 6/1/13 (c) 741,911
950,000 A- New Hampshire Health & Education Facilities Authority Revenue, Healthcare System,
Covenant Health, 6.125% due 7/1/31 988,380
2,000,000 BBB- New Jersey Health Care Facilities Financing Authority Revenue, Trinitas Hospital
Obligation Group, 7.400% due 7/1/20 2,209,900
250,000 A+ New Mexico State Hospital Equipment Loan Council, Hospital Revenue, Presbyterian
Healthcare Services, Series A, 5.500% due 8/1/30 255,590
4,920,000 B- Oklahoma Development Finance Authority Refunding Revenue, Hillcrest Healthcare
System, Series A, 5.625% due 8/15/29 3,310,176
2,000,000 NR Orange County, FL Health Facilities Authority Revenue, First Mortgage, Health Care
Facilities, 9.000% due 7/1/31 2,011,080
See Notes to Financial Statements.
4 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
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Hospital -- 16.7% (continued)
$ 1,000,000 A Pennsylvania State Higher Educational Facilities Authority Revenue, University of
Pennsylvania Medical Center Health System, Series A, 6.000% due 1/15/31 $ 1,045,660
1,025,000 AAA Philadelphia Hospitals & Higher Education Facilities Authority, Hospital Revenue,
Presbyterian Medical Center, 6.650% due 12/1/19 (c) 1,292,423
2,000,000 A1* Pinellas County, FL Health Facilities Authority Revenue, Baycare Health System,
5.500% due 11/15/33 2,034,220
3,900,000 Aa3* Rhode Island Health & Educational Building Corp., Refunding Revenue, Health Facilities,
St. Antoine Residence, Series A, 6.125% due 11/15/18 4,134,078
990,000 NR Suffolk County, NY IDA, Civic Facilities Revenue, Eastern Long Island Hospital
Association, Series A, 7.750% due 1/1/22 (b) 1,002,830
2,500,000 A Tarrant County, TX Health Facilities Development Corp., Hospital Revenue,
6.700% due 11/15/30 (b) 2,700,700
1,000,000 A3* University of Colorado Hospital Authority Revenue, Series A, 5.600% due 11/15/21 (b) 1,034,170
1,750,000 AAA Weber County, UT Hospital Revenue, St. Benedict's Hospital, 10.000% due 3/1/10 (c)(f) 2,232,143
Wisconsin State Health & Educational Facilities Authority Revenue:
1,000,000 A- Agnesian Healthcare Inc., 6.000% due 7/1/30 1,032,360
875,000 A Kenosha Hospital & Medical Center Project, 5.700% due 5/15/20 895,239
540,000 A3* Monroe Clinic Inc., 5.375% due 2/15/22 539,649
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74,305,663
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Housing: Multi-Family -- 11.6%
Bexar County, TX Housing Finance Corp., MFH Revenue:
1,450,000 Aaa* New Light Village, Series A1, GNMA-Collateralized, 5.900% due 2/20/38 (b) 1,557,634
3,000,000 A3* Refunding, Nob Hill Apartments, Series A, 6.000% due 6/1/31 (b) 3,074,850
1,000,000 Aaa* Waters at Northern Hills Apartments, Series A, MBIA-Insured, 6.050% due 8/1/36 (b) 1,082,940
1,500,000 Aaa* Columbia Heights, MN MFH Revenue, Crest View, Series A-1, GNMA-Collateralized,
6.625% due 4/20/43 1,697,445
250,000 Aaa* Cuyahoga County, OH MFH, Dalebridge Apartments, FHA-Insured, GNMA-Collateralized,
6.500% due 10/20/20 (g) 262,123
1,000,000 Aaa* De Kalb County, GA Housing Authority, MFH Revenue, (Snapwoods Project), Series A,
GNMA-Collateralized, 5.500% due 12/20/32 1,034,620
El Paso County, TX Housing Finance Corp., MFH Revenue, Series A:
3,000,000 A3* American Village Communities, 6.375% due 12/1/32 2,993,760
2,390,000 A3* La Plaza Apartments, 6.750% due 7/1/30 2,616,811
1,000,000 A3* Las Lomas Apartments, 6.375% due 12/1/29 1,049,450
4,000,000 Aaa* Fort Worth, TX Housing Finance Corp., MFH, Villas Eastwood Terrace,
GNMA-Collateralized, 6.000% due 8/20/43 4,366,120
1,000,000 Aaa* Franklin County, OH Mortgage Revenue, Villas at St. Therese, Series E,
GNMA-Collateralized, 5.900% due 6/20/39 1,077,800
1,000,000 AAA Grand Prairie, TX Housing Finance Corp., MFH Revenue, (Landings of Carrier Project),
Series A, GNMA-Collateralized, 6.750% due 9/20/32 1,107,610
Illinois Housing Development Authority, MFH Revenue:
1,360,000 A+ Series 1991A, 8.125% due 7/1/10 1,358,545
1,830,000 AAA Series A-1, GNMA-Collateralized, 5.750% due 12/20/32 1,970,599
1,500,000 A+ Indiana State HFA, MFH Mortgage Revenue, Hunters Run, FHA-Insured,
7.250% due 5/1/18 (g) 1,540,545
1,000,000 Aaa* Louisiana Local Government Environmental Facilities and Community Development
Authority Revenue, Mortgage, Sharlo Apartments, Series A, GNMA-Collateralized,
6.500% due 6/20/37 1,127,510
1,500,000 A3* Lubbock, TX Housing Finance Corp., MFH Revenue, Las Colinas Quail Creek Apartments,
Series A, 6.000% due 7/1/32 1,527,495
See Notes to Financial Statements.
5 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
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Housing: Multi-Family -- 11.6% (continued)
$ 2,450,000 AAA Maricopa County, AZ IDA, MFH Revenue Refunding, FHA-Insured, GNMA-Collateralized,
6.000% due 10/20/31 $ 2,631,521
1,865,000 AAA Mohave County, AZ IDA, MFH, Copper Ridge Apartments, FHA-Insured,
7.375% due 4/1/32 (g) 1,894,877
994,000 Aaa* Panhandle, TX Regional Housing Finance Corp., Series A, GNMA-Collateralized,
6.650% due 7/20/42 1,106,600
500,000 Aa2* Portland, OR MFH, LOC U.S. National Bank of Oregon,
6.250% due 5/1/12 (g) 514,085
405,000 AAA Rogers County, OK HFA, MFH Revenue Refunding, Series A, FHA-Insured,
FNMA-Collateralized, 7.750% due 8/1/23 406,004
2,347,000 AAA Seattle, WA Housing Authority, Low Income Housing Revenue, GNMA-Collateralized,
7.400% due 11/20/36 2,623,312
1,000,000 Ba3* Tarrant County, TX Housing Finance Corp., MFH Revenue, Westridge,
Series A, 6.000% due 6/1/31 (b) 900,750
Texas State Affordable Housing Corp., MFH Revenue:
2,000,000 Baa3* Ashton Place & Woodstock Apartments, Series A, 6.300% due 8/1/33 (b) 2,047,580
3,940,000 Ba1* Sub-HIC Arbrostone/Baybrook, Series C, 7.250% due 11/1/31 (b) 3,929,362
1,000,000 AA Texas State GO, Veterans Housing Assistance, Series D, 6.450% due 12/1/20 (b)(g) 1,048,050
4,000,000 B3* Travis County, TX Housing Finance Authority, MFH Revenue, (Lakeview Apartments
Project), Series A, 6.375% due 1/1/34 (b) 2,985,080
1,875,000 AAA Yuma, AZ IDA, Mortgage, MFH Revenue Refunding,
Series A, GNMA-Collateralized, 6.100% due 9/20/34 (g) 2,051,587
- ------------ --------- --------------------------------------------------------------------------------- -------------
51,584,665
- ------------ --------- --------------------------------------------------------------------------------- -------------
Housing: Single-Family -- 1.6%
40,000 NR Aurora Kane & Dupage, IL Single-Family Mortgage Revenue, Series A,
FHLMC/GNMA-Collateralized, 7.950% due 10/1/25 (g) 40,082
Chicago, IL Single-Family Mortgage Revenue:
885,000 Aaa* Series A, FNMA/GNMA-Collateralized, 6.350% due 10/1/30 (g) 937,923
265,000 AAA Series C, FHLMC/FNMA/GNMA-Collateralized, 7.000% due 3/1/32 278,181
45,000 Aa2* Colorado HFA, Single-Family Program Refunding, Sr. Bonds,
Series 94 D-1, 8.000% due 12/1/24 45,916
1,180,000 AAA Cowley & Shawnee Counties, KS Mortgage Revenue, Series B, AMBAC-Insured,
GNMA-Collateralized, zero coupon due 6/1/22 (g) 277,442
65,000 AAA Fort Worth, TX Housing Finance Corp., Single-Family Mortgage Revenue, Capital
Appreciation, Series A, GNMA-Collateralized, zero coupon due 6/1/21 (g) 15,590
1,000,000 A+ King County, WA Housing Authority Revenue Refunding, Sr. Bonds,
Series A, 6.800% due 3/1/26 1,039,480
690,000 AA Massachusetts State HFA, Single-Family Mortgage Housing Revenue,
Series 38, 7.200% due 12/1/26 (g) 714,978
240,000 AAA Missouri State Housing Development Community Mortgage Revenue,
Series C, FNMA/GNMA-Collateralized, 7.450% due 9/1/27 (g) 252,149
75,000 AAA Ohio Housing Finance Agency Residential Mortgage, Series A-2,
GNMA-Collateralized, 6.625% due 3/1/26 (g) 77,702
10,000 BBB Panhandle, TX Regional Housing Finance Corp., Single-Family Mortgage Revenue,
10.375% due 3/1/09 10,005
535,000 AA+ Pennsylvania State HFA, Single-Family Mortgage Revenue, Series 39B,
6.875% due 10/1/24 (g) 548,471
635,000 AAA Pima County, AZ Single-Family Mortgage Revenue, Series A,
FHLMC/FNMA/GNMA-Collateralized, 7.100% due 11/1/29 (g) 687,381
15,000 AAA Prince Georges County, MD Housing Authority, Single-Family Mortgage Revenue
Refunding, Series A, GNMA-Collateralized, 8.000% due 1/1/17 15,762
See Notes to Financial Statements.
6 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 1.6% (continued)
$ 100,000 AAA Reno County, KS Single-Family Mortgage Revenue, Series A, AMBAC-Insured,
zero coupon due 12/1/14 $ 28,648
1,650,000 Aaa* Sedgwick & Shawnee Counties, KS Single-Family Mortgage Revenue,
Series A-1, GNMA-Collateralized, 6.875% due 12/1/26 (g) 1,781,224
160,000 AAA Travis County, TX Housing Finance Corp., Single-Family Mortgage Revenue,
Series B, FNMA/GNMA-Collateralized, 7.100% due 10/1/27 (b)(g) 165,816
- --------------------------------------------------------------------------------------------------------------------------
6,916,750
- --------------------------------------------------------------------------------------------------------------------------
Industrial Development -- 5.9%
2,500,000 NR Alaska Industrial Development & Export Authority Revenue, Williams Lynxs Alaska
Cargoport, 8.125% due 5/1/31 2,590,325
2,500,000 Baa3* Boston, MA Industrial Development Financing Authority, (Crosstown Center Project),
6.500% due 9/1/35 (b) 2,517,275
5,000,000 A- Brazos River, TX Habor Navigation District, Brazoria County Environmental, (Dow
Chemical Co. Project), Series A-7, 6.625% due 5/15/33 (b)(g) 5,357,500
2,000,000 NR Hillsborough County, FL IDA, Exempt Facilities Revenue, National Gypsum, Series A,
7.125% due 4/1/30 (g) 2,060,900
1,000,000 AA Massachusetts State Development Finance Agency Revenue, May Institute Issue,
Radian-Insured, 5.750% due 9/1/29 1,080,660
2,000,000 NR Midlothian, TX Development Authority, Tax Increment Contract Revenue,
7.875% due 11/15/26 2,164,900
3,000,000 AAA New York State Urban Development Corp. Revenue, Personal Tax Income, Series C-1,
5.500% due 3/15/21 3,296,640
1,640,000 AA- Oklahoma City, OK Industrial & Cultural Facilities, Trigen Energy Corp.,
6.750% due 9/15/17 (g) 1,645,855
1,000,000 BBB-++ Overland Park, KS Development Corp. Revenue, First Tier, Overland Park, Series A,
7.375% due 1/1/32 1,026,810
1,000,000 A+ Rensselaer County, NY IDA, Albany International Corp., LOC Fleet Bank,
7.550% due 7/15/07 (g) 1,143,140
1,000,000 B2* Rockbridge County, VA IDA Revenue, Virginia Horse Center, Series C,
6.850% due 7/15/21 1,016,110
2,000,000 A+ West Chicago, IL IDR, (Leggett & Platt Inc. Project), 6.900% due 9/1/24 (g) 2,098,020
- --------------------------------------------------------------------------------------------------------------------------
25,998,135
- --------------------------------------------------------------------------------------------------------------------------
Life Care -- 3.7%
1,500,000 BBB- Bexar County, TX Health Facilities Development Corp. Revenue, (Army Retirement
Residence Project), 6.300% due 7/1/32 (b) 1,519,425
2,925,000 Aa2* Hamilton County, OH Mortgage Revenue, Judson Care Center, Series A, FHA-Insured,
6.500% due 8/1/26 3,163,212
2,500,000 BBB Illinois Development Finance Authority, Health Facilities, Community Living,
7.125% due 3/1/10 2,543,600
1,000,000 B3* Indianapolis, IN Industrial EDR, Refunding & Improvement, 7.625% due 10/1/22 602,950
1,150,000 NR Lancaster, PA IDA Revenue, (Garden Spot Village Project), Series A, 7.625% due 5/1/31 1,213,710
1,000,000 A- Lancaster County, PA Hospital Authority Revenue, Health Center, (Willow Valley
Retirement Project), 5.875% due 6/1/31 1,026,290
945,000 AAA Massachusetts State Industrial Finance Agency Revenue Refunding, Series A, Chelsea
Jewish, FHA-Insured, 6.500% due 8/1/37 1,036,013
1,000,000 NR Montgomery County, PA Higher Education & Health Authority Revenue, Temple
Continuing Care Center, 6.750% due 7/1/29 (h) 440,000
2,000,000 NR North Manchester, Industrial Revenue, (Peabody Retirement Community Project),
Series A, 7.125% due 7/1/22 1,982,360
See Notes to Financial Statements.
7 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
Life Care -- 3.7% (continued)
Orange County, NY IDA, Civic Facilities Revenue, (Arden Hill Life Care Center Project),
Series A:
$ 1,000,000 NR 7.000% due 8/1/21 $ 1,021,940
1,000,000 NR 7.000% due 8/1/31 1,014,750
1,000,000 NR St. Joseph, MO IDA, Healthcare Revenue, (Living Community St. Joseph Project),
7.000% due 8/15/32 1,008,200
- ----------------------------------------------------------------------------------------------------------------------------
16,572,450
- ----------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 8.0%
5,000,000 NR Barona Band of Mission Indians, CA, 8.250% due 1/1/20 (b)(f) 5,378,850
2,265,000 NR Bonnet Creek Resort Community Development District, Special Assessment,
7.375% due 5/1/34 (b) 2,352,180
2,000,000 NR Capital Trust Agency Revenue, Seminole Tribe Convention, Series A,
8.950% due 10/1/33 (b) 2,221,800
1,950,000 NR Century Parc Community Development District, FL Special Assessment,
7.000% due 11/1/31 (b) 2,005,907
Dauphin County, PA General Authority:
4,000,000 NR Hyatt Regency, 6.200% due 1/1/29 3,260,360
1,515,000 NR Riverfront Office, 6.000% due 1/1/25 1,439,917
2,000,000 Caa2* Galveston, TX Special Contract Revenue Refunding, (Farmland Industries Inc. Project),
5.500% due 5/1/15 1,425,280
2,000,000 A+ Houston, TX Participation Interest, 6.400% due 6/1/27 2,201,340
2,000,000 A Illinois Development Finance Authority Revenue, City of East St. Louis,
7.250% due 11/15/09 2,125,500
2,375,000 NR Maryland State Economic Development Corp. Revenue, Health & Mental Hygiene
Program, Series A, 7.750% due 3/1/25 2,520,635
1,000,000 NR New Morgan, PA Municipal Authority Office Revenue, (Commonwealth Office Project),
Series A, 6.500% due 6/1/25 1,023,120
3,500,000 NR Reunion East Community Development District, FL Special Assessment, Series A,
7.375% due 5/1/33 3,627,225
3,000,000 AA Rhode Island State Economic Development Corp. Revenue, Providence
Plaza Mall, Sr. Note, Radian-Insured, 6.125% due 7/1/20 3,414,060
2,470,000 NR Wenonah Park Properties Inc., Bay City Hotel Revenue, 7.500% due 4/1/33 2,465,603
- ----------------------------------------------------------------------------------------------------------------------------
35,461,777
- ----------------------------------------------------------------------------------------------------------------------------
Pollution Control -- 6.2%
1,700,000 BBB Adams County, MS Environmental Improvement Revenue Refunding, (International Paper
Co. Project), Series A, 6.800% due 8/1/24 (g) 1,828,656
5,000,000 Aa3* Brazos River, TX Navigation District, (BASF Corp. Project), 6.750% due 2/1/10 (b) 5,983,900
1,000,000 BBB De Kalb County, GA Development Authority, PCR Refunding, (General Motors Corp.
Project), 6.000% due 3/15/21 1,037,650
3,425,000 BBB La Crosse, WI Resource Recovery Revenue Refunding, (Northern States Power Co.
Project), 6.000% due 11/1/21 (g) 3,516,379
3,000,000 BBB Lowndes County, MS Solid Waste Disposal & PCR Refunding, (Weyerhaeuser Co. Project),
Series A, 6.800% due 4/1/22 3,491,310
1,000,000 BBB Mobile, AL IDB, Environmental Improvement Revenue, (International Paper Co. Project),
Series B, 6.450% due 5/15/19 (g) 1,050,040
1,000,000 BBB Rapides, LA Finance Authority, Environmental Improvement Revenue, (International Paper
Co. Project), Series A, 6.550% due 11/15/23 (g) 1,055,690
1,000,000 BBB Richland County, SC Environmental Improvement Revenue, (International Paper Co.
Project), 6.100% due 4/1/23 1,048,170
See Notes to Financial Statements.
8 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
Pollution Control -- 6.2% (continued)
$ 3,000,000 NR Rockdale County, GA Solid Waste Authority Revenue, (Visy Paper Inc. Project),
7.500% due 1/1/26 (g) $ 3,038,220
1,945,000 A- Saint Charles Parish, LA PCR, (Union Carbide Project), 7.350% due 11/1/22 (g) 1,931,054
1,130,000 A Southwestern Illinois Development Authority, Solid Waste Disposal Revenue, (Laclede
Steel Co. Project), 8.500% due 8/1/20 (g) 1,141,995
2,200,000 BB+ Sweetwater County, WY Solid Waste Disposal Revenue, (FMC Corp. Project), Series A,
7.000% due 6/1/24 (b)(g) 2,204,972
- -----------------------------------------------------------------------------------------------------------------------------
27,328,036
- -----------------------------------------------------------------------------------------------------------------------------
Public Facilities -- 4.6%
2,250,000 BBB- Austin, TX Convention Enterprises Inc., Convention Center, First Tier, Series A,
6.700% due 1/1/32 2,346,525
3,685,000 AA Indianapolis, IN Local Public Improvement Bond Bank, Series D, 6.750% due 2/1/14 4,544,637
3,000,000 AAA Lower Colorado River Authority, TX Transmission Contract Revenue, FSA-Insured,
5.250% due 5/15/17 3,266,370
1,000,000 AAA Metropolitan Pier & Exposition Authority, IL Dedicated State Tax Revenue, Capital
Appreciation, McCormick Place Expansion, MBIA-Insured, Series A,
5.500% due 6/15/23 1,090,890
1,250,000 A Pinal County, AZ IDA, Correctional Facilities Contract Revenue, Florence West Prison,
Series A, ACA-Insured, 5.250% due 10/1/22 1,299,025
2,500,000 AAA Summit County, CO Sports Facilities Refunding Revenue, (Keystone Resorts Management
Inc. Project), Ralston Purina Co. Guaranteed, 7.750% due 9/1/06 (b) 2,910,675
3,960,000 AA- Tulsa, OK Public Facilities Authority, Lease Payment Revenue Refunding, Assembly
Center, 6.600% due 7/1/14 (b) 4,858,920
- -----------------------------------------------------------------------------------------------------------------------------
20,317,042
- -----------------------------------------------------------------------------------------------------------------------------
Tax Allocation -- 2.0%
2,500,000 A- Dekalb County, IN Redevelopment, (Mini-Mill Local Public Improvement Project), Series A,
6.500% due 1/15/14 2,655,350
1,000,000 AAA Illinois State Sales Tax Revenue, 5.250% due 6/15/20 1,073,810
1,970,000 NR Midlothian, TX Development Authority, Tax Increment Contract Revenue,
6.700% due 11/15/23 1,972,246
1,095,000 NR Portland, TX Community Center Sales Tax Gross Revenue, (Call 2/15/04 @ 102),
7.000% due 2/15/25 (d) 1,140,782
1,000,000 B Providence, RI Special Obligation, Tax Increment, Series D, 6.650% due 6/1/16 991,460
1,000,000 AAA Southeast Wisconsin Professional Baseball Park District Sales Tax Revenue, Series A,
5.500% due 12/15/15 1,164,680
- -----------------------------------------------------------------------------------------------------------------------------
8,998,328
- -----------------------------------------------------------------------------------------------------------------------------
Tobacco -- 4.1%
2,000,000 BBB++ Chautauqua, NY Tobacco, Asset Securitization Corp., 6.750% due 7/1/40 (b) 2,046,060
5,000,000 BBB Educational Enhancement Funding Corp., SD Tobacco, Series B, 6.500% due 6/1/32 (b) 4,387,100
Golden State Tobacco Securitization Corp., CA Tobacco Settlement Revenue:
2,000,000 BBB- Enhanced-Asset Backed-B, 5.625% due 6/1/38 1,974,280
2,000,000 BBB Series 2003 A-1, 6.250% due 6/1/33 1,735,620
Tobacco Settlement Financing Corp.:
5,000,000 BBB NJ, 6.750% due 6/1/39 (b) 4,507,200
2,500,000 NR RI, RITES-PA 1048, 6.000% due 6/1/23 (b)(e) 1,969,800
2,000,000 NR Tobacco Settlement Revenue, Management Authority, SC Tobacco Settlement Revenue,
RITES-PA 962, 6.375% due 11/15/09 (b)(e) 1,457,640
- -----------------------------------------------------------------------------------------------------------------------------
18,077,700
- -----------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
9 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------------------
Transportation -- 9.6%
$ 3,000,000 CCC Alliance Airport Authority Inc., TX Special Facilities Revenue, (American Airlines Inc.
Project), 7.500% due 12/1/29 (g) $ 1,771,320
3,000,000 AAA Chicago, IL Skyway Toll Bridge Revenue, AMBAC-Insured, 5.500% due 1/1/31 3,218,700
3,000,000 AAA Chicago O'Hare International Airport, Gen-Airport, 3rd Lein-B2, 6.000% due 1/1/29 (b) 3,263,040
2,010,000 NR Connecticut Development Authority, Airport Facilities Revenue, (Signature Flight Co.
Project), Guaranty Agreement, Series A, 6.625% due 12/1/14 (g) 2,018,080
Connector 2000 Association Inc., Toll Road Revenue, Capital Appreciation, Sr. Bonds,
Series B:
20,000,000 B- Zero coupon due 1/1/37 679,400
19,000,000 B- Zero coupon due 1/1/38 642,390
3,500,000 CCC Dallas-Fort Worth, TX International Airport Revenue, Facility Improvement Corp. Revenue,
American Airlines Inc., 6.375% due 5/1/35 (g) 1,961,960
3,335,000 AAA Delaware River Port Authority PA & NJ, R-B RITES-PA 964, 5.500% due 1/1/10 (e) 4,221,510
2,000,000 NR Kenton County, KY Airport Board, Special Facilities Revenue, (Mesaba Aviation Inc.
Project), Series A, 6.700% due 7/1/29 (g) 1,608,360
New Hampshire State Turnpike Systems Revenue Refunding, FGIC-Insured:
2,500,000 AAA Series A, 6.750% due 11/1/11 2,894,825
1,000,000 AAA Series C, RIBS, 6.806% due 11/1/17 (e) 1,254,440
New Jersey State Transportation Trust Fund Authority, MBIA-Insured, RITES:
2,500,000 AAA Series-PA 958R, 6.000% due 12/15/09 (e) 3,514,450
1,000,000 AAA Series-PA 958R-B, 6.000% due 12/15/09 (e) 1,405,780
10,000,000 AAA Northwest Parkway, Public Highway Authority, CO Revenue, Capital Appreciation, Sr.
Bonds, Series B, AMBAC-Insured, zero coupon due 6/15/31 (h) 1,914,400
Pocahontas Parkway Association, VA Toll Road Revenue, Capital Appreciation,
Sr. Bonds, Series B:
25,000,000 BB Zero coupon due 8/15/34 1,767,500
35,000,000 BB Zero coupon due 8/15/35 2,270,800
1,250,000 NR Port Authority, NY & NJ Special Obligation Revenue, (5th Installment Special Project),
Series 4, 6.750% due 10/1/19 (g) 1,294,287
2,865,000 A3* Port Longview, WA Revenue Refunding, Series A, 6.250% due 12/1/18 (g) 3,213,756
1,045,000 AAA Regional Transit Authority, IL, Series C, FGIC-Insured, 7.750% due 6/1/20 1,435,569
2,000,000 AA- Triborough Bridge & Tunnel Authority, NY Revenue, (Convention Center Project), Series E,
7.250% due 1/1/10 (b) 2,324,260
- --------------------------------------------------------------------------------------------------------------------------
42,674,827
- --------------------------------------------------------------------------------------------------------------------------
Utilities -- 4.1%
1,500,000 A Georgia Municipal Electric Authority Power Revenue, Series X, 6.500% due 1/1/12 1,771,755
960,000 AAA Hawaii State Department Budget & Finance, Hawaiian Electric Co., Inc., Series A,
MBIA-Insured, 5.650% due 10/1/27 (g) 1,031,280
1,220,000 AAA Hillsborough County, FL Utility Refunding Revenue, 9.875% due 12/1/11 (c) 1,607,631
1,500,000 AAA Municipal Electric Authority, GA, (Combustion Turbine Project), Series A, MBIA-Insured,
5.250% due 11/1/22 1,600,305
1,000,000 A New York State Energy Research & Development, (Con Edison Project), Series A,
7.125% due 12/1/29 (g) 1,074,280
North Carolina Eastern Municipal Power Agency, Power System Revenue Refunding:
1,310,000 BBB Series A, (Call 1/1/22 @ 100), 6.000% due 1/1/26 (d) 1,556,306
1,700,000 A Series B, ACA-Insured, 5.750% due 1/1/24 1,790,253
2,500,000 BBB Series D, 6.700% due 1/1/19 2,787,775
1,500,000 AAA North Carolina Municipal Power Agency No. 1, Catawba Electric Revenue,
MBIA-Insured, 5.250% due 1/1/11 (e) 1,901,805
See Notes to Financial Statements.
10 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------------------
Utilities -- 4.1% (continued)
$ 1,235,000 AAA Piedmont, SC Municipal Power Agency, Electric Revenue Refunding, FGIC-Insured,
6.750% due 1/1/20 $ 1,572,562
1,045,000 AAA Provo, UT Electric Revenue, 10.125% due 4/1/15 (c) 1,483,398
- -----------------------------------------------------------------------------------------------------------------------
18,177,350
- -----------------------------------------------------------------------------------------------------------------------
Water & Sewer -- 9.8%
1,555,000 AAA Boston, MA Water & Sewer Revenue, Series A, 10.875% due 1/1/09 (b)(c)(f) 1,956,579
5,000,000 AAA California State Department of Water Resources Power Supply Revenue, Series A,
AMBAC-Insured, 5.500% due 5/1/16 (b) 5,575,500
2,180,000 AAA Colorado Water Resource & Power Authority, Small Water Resources Revenue,
Series A, FGIC-Insured, 5.375% due 11/1/20 2,388,844
2,400,000 A- Dauphin County, PA IDA, General Water Works Corp., 6.900% due 6/1/24 (g) 3,030,000
3,000,000 AAA Detroit, MI Water Supply System Revenue, Series B, MBIA-Insured, 5.250% due 7/1/32 3,113,310
1,315,000 AAA Fairmont, WV Water & Sewer Revenue, AMBAC-Insured, 9.250% due 11/1/11 (c) 1,685,120
5,000,000 Ba3* Gulf Coast IDA, TX Solid Waste Disposal Revenue, (Citgo Petroleum Project),
8.000% due 4/1/28 5,009,100
2,500,000 NR Michigan State Strategic Fund, Resource Recovery, Limited Obligation Revenue,
Central Wayne Energy Recovery, Series A, 7.000% due 7/1/27 (g)(h) 125,000
2,140,000 AAA Mississippi Development Bank Special Obligation, Water & Solid Waste Management,
Series A, FSA-Insured, 5.375% due 2/1/22 2,286,269
6,615,000 AAA Ohio State Water Development Authority Revenue, Safe Water, Series 2,
9.375% due 12/1/10 (c) 8,072,417
1,550,000 Aaa* Paris, TX Water & Sewer Revenue, FGIC-Insured, 5.375% due 6/15/20 1,657,167
1,000,000 AAA Portland, OR Sewer System Revenue, Ref-Second Lein, Series A, 5.250% due 6/1/19 1,095,100
3,400,000 Aa1* Port of Umatilla, OR Water Revenue, LOC ABN AMRO Bank,
6.650% due 8/1/22 (g) 3,542,562
2,750,000 BBB Trumbull County, OH Sewer Disposal Revenue, (General Motors Corp. Project),
6.750% due 7/1/14 (b)(g) 3,141,105
1,000,000 NR Wasco County, OR Solid Waste Disposal Revenue, (Waste Connections Inc. Project),
7.250% due 3/1/21(b)(g) 1,041,490
- -----------------------------------------------------------------------------------------------------------------------
43,719,563
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $433,756,633**) $ 443,567,745
- -----------------------------------------------------------------------------------------------------------------------
(a) All ratings are by Standard & Poor's Ratings Service, except for those
which are identified by an asterisk (*) or a double dagger (++), are rated
by Moody's Investors Service and Fitch Ratings, respectively.
(b) All or a portion of this security is segregated for open futures contracts
commitments (Note 5).
(c) Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(d) Pre-Refunded bonds are escrowed with U.S. government securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(e) Residual interest bond -- coupon varies inversely with level of short-term
tax-exempt interest rates.
(f) All or a portion of this security is held as collateral for open futures
contracts commitments (Note 5).
(g) Income from this issue is considered a preference item for purpose of
calculating the alternative minimum tax.
(h) Security is currently in default.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 12 through 14 for definitions of ratings and certain abbreviations.
See Notes to Financial Statements.
11 Smith Barney Muni Funds | 2003 Semi-Annual Report
BOND RATINGS (UNAUDITED)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"CCC" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard
& Poor's to a debt obligation. Capacity to pay interest and
repay principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest
and repay principal and differ from the highest rated issues
only in a small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and
repay principal although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity
to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated
categories.
BB, -- Bonds rated "BB", "B", "CCC" and "CC" are regarded, on balance,
B, CCC and CC as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of
the obligation. "BB" represents a lowest degree of speculation
than "B", "CCC" and "CC", the highest degree of speculation.
While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk, exposures to adverse conditions.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each generic rating from "Aa" to "Caa," where 1 is the highest and 3
the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by
a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as
large in "Aaa" securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger
than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds rated "Baa" are considered to be medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the
protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and
bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period
of time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be in
default, or present elements of danger may exist with respect
to principal or interest.
12 Smith Barney Muni Funds | 2003 Semi-Annual Report
BOND RATINGS (UNAUDITED) (CONTINUED)
Fitch Ratings ("Fitch") -- Ratings of "A" to "B" may be modified by the
addition of a plus (+) or minus (-) sign to show relative standings with the
major ratings categories.
A -- Bonds rated "A" are considered to have a low expectation of
credit risk. The capacity for timely payment of financial
commitments is considered to be strong, but may be more
vulnerable to changes in economic conditions and circumstances
than bonds with higher ratings.
BBB -- Bonds rated "BBB" currently have a low expectation of credit
risk. The capacity for timely payment of financial commitments
is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to
impair this capacity. This is the lowest investment-grade
category assigned by Fitch.
BB -- Bonds rated "BB" indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic
change over time; however, business of financial alternatives
may be available to allow financial commitments to be met.
B -- Bonds rated "B" indicate that significant credit risk is
present, but a limited margin of safety remains. Financial
Commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable
business and economic environment.
NR -- Indicates that the bond is not rated by Standard & Poor's,
Moody's or Fitch.
SHORT-TERM SECURITY RATINGS (UNAUDITED)
SP-1 -- Standard & Poor's highest rating indicating very strong or
strong capacity to pay principal and interest; those issues
determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of
safety regarding timely payment is either overwhelming or very
strong; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature --
VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior
to the advent of the VMIG 1 rating.
13 Smith Barney Muni Funds | 2003 Semi-Annual Report
ABBREVIATIONS* (UNAUDITED)
ABAG -- Association of Bay Area Governors
ACA -- American Capital Assurance
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance
Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan
Insurance
CONNIE
LEE -- College Construction Loan Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
EDR -- Economic Development Revenue
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
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LEVRRS -- Leveraged Reverse Rate Securities
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
Corporation
MFH -- Multi-Family Housing
MVRICS -- Municipal Variable Rate Inverse Coupon
Security
PCR -- Pollution Control Revenue
PSFG -- Permanent School Fund Guaranty
Radian -- Radian Asset Assurance
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
SYCC -- Structured Yield Curve Certificate
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
- --------
* Abbreviations may or may not appear on the schedule of investments.
14 Smith Barney Muni Funds | 2003 Semi-Annual Report
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) SEPTEMBER 30, 2003
ASSETS:
Investments, at value (Cost -- $433,756,633) $443,567,745
Interest receivable 8,251,110
Receivable for securities sold 6,298,583
Receivable for Fund shares sold 471,840
Prepaid expenses 1,388
- -------------------------------------------------------------------------
Total Assets 458,590,666
- -------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 6,014,624
Payable to broker -- variation margin 1,676,563
Bank overdraft 502,410
Payable for Fund shares reacquired 201,156
Management fee payable 165,697
Distribution plan fees payable 38,002
Deferred compensation payable 7,779
Accrued expenses 142,022
- -------------------------------------------------------------------------
Total Liabilities 8,748,253
- -------------------------------------------------------------------------
Total Net Assets $449,842,413
- -------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 34,140
Capital paid in excess of par value 448,445,681
Undistributed net investment income 1,582,195
Accumulated net realized loss from investment
transactions and futures contracts (5,123,877)
Net unrealized appreciation of investments and futures
contracts 4,904,274
- -------------------------------------------------------------------------
Total Net Assets $449,842,413
- -------------------------------------------------------------------------
Shares Outstanding:
Class A 27,020,905
- --------------------------------------------------------------------------
Class B 4,710,487
- --------------------------------------------------------------------------
Class L 2,408,474
- --------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $13.18
- --------------------------------------------------------------------------
Class B * $13.16
- --------------------------------------------------------------------------
Class L * $13.21
- --------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value
per share) $13.73
- --------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value
per share) $13.34
- -------------------------------------------------------------------------
* Redemption price is NAV of Class B and L shares reduced by a 4.50% and 1.00%
contingent deferred sales charge, respectively, if shares are redeemed within
one year from purchase payment (See Note 3).
See Notes to Financial Statements.
15 Smith Barney Muni Funds | 2003 Semi-Annual Report
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003
INVESTMENT INCOME:
Interest $14,847,430
- ------------------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 3) 1,033,847
Distribution plan fees (Note 6) 590,301
Shareholder communications (Note 6) 49,227
Shareholder servicing fees (Note 6) 42,456
Custody 39,894
Registration fees 18,300
Audit and legal 14,823
Trustees' fees 3,843
Other 6,771
- ------------------------------------------------------------------------------------------
Total Expenses 1,799,462
- ------------------------------------------------------------------------------------------
Net Investment Income 13,047,968
- ------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 4 AND 5):
Realized Gain (Loss) From:
Investment transactions (655,133)
Futures contracts 4,477,006
- ------------------------------------------------------------------------------------------
Net Realized Gain 3,821,873
- ------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of period 8,987,360
End of period 4,904,274
- ------------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (4,083,086)
- ------------------------------------------------------------------------------------------
Net Loss on Investments and Futures Contracts (261,213)
- ------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $12,786,755
- ------------------------------------------------------------------------------------------
See Notes to Financial Statements.
16 Smith Barney Muni Funds | 2003 Semi-Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended September 30, 2003 (unaudited) and the Year Ended
March 31, 2003
September 30 March 31
- -------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 13,047,968 $ 27,512,946
Net realized gain (loss) 3,821,873 (4,359,508 )
Increase (decrease) in net unrealized
appreciation (4,083,086) 3,625,384
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 12,786,755 26,778,822
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 2 AND
7):
Net investment income (12,567,005) (26,970,923)
- -------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to
Shareholders (12,567,005) (26,970,923)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 22,778,890 58,737,804
Net asset value of shares issued for
reinvestment of dividends 5,982,830 13,205,291
Cost of shares reacquired (42,842,784) (100,288,361)
- -------------------------------------------------------------------------------
Decrease in Net Assets From Fund Share
Transactions (14,081,064) (28,345,266)
- -------------------------------------------------------------------------------
Decrease in Net Assets (13,861,314) (28,537,367)
NET ASSETS:
Beginning of period 463,703,727 492,241,094
- -------------------------------------------------------------------------------
End of period* $449,842,413 $ 463,703,727
- -------------------------------------------------------------------------------
* Includes undistributed net investment income of: $1,582,195 $1,101,232
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
17 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Significant Accounting Policies
The National 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 a diversified open-end
management investment company. The Trust consists of this Fund and eight other
separate investment funds: Florida, Georgia, Limited Term, New York,
Pennsylvania, California Money Market, 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 significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are
valued at the mean between the bid and asked prices provided by an independent
pricing service which are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; (c) securities for
which market quotations are not available will be valued in good faith at fair
value by or under the direction of the Board of Trustees; (d) securities
maturing within 60 days are valued at cost plus accreted discount, or minus
amortized premium, which approximates value; (e) gains or losses on the sale of
securities are calculated by using the specific identification method; (f )
interest income, adjusted for amortization of premium and accretion of
discount, is recorded on an accrual basis; (g) dividends and distributions to
shareholders are recorded on the ex-dividend date; (h) 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; (i) 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; ( j)
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 (k) estimates and
assumptions are required to be made regarding assets, liabilities and changes
in net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
2. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax and from designated
state income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
It is the Fund's policy to distribute dividends monthly. Capital gains
distributions, if any, are taxable to shareholders, and are declared and paid
at least annually.
3. Management Agreement and Other Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund. The
Fund pays SBFM a management fee calculated at the annual rate of 0.45% of the
Fund's average daily net assets. This fee is calculated daily and paid monthly.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Fund's transfer agent. PFPC Inc. ("PFPC") acts as the Fund's sub-transfer
agent. CTB receives account fees and asset-based fees that vary according to
the size and type of account. PFPC is responsible for shareholder recordkeeping
and financial processing for all shareholder accounts and is paid by CTB. For
the six months ended September 30, 2003, the Fund paid transfer agent fees of
$44,646 to CTB.
18 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
There are maximum initial sales charges of 4.00% and 1.00% for Class A and L
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
4.50% on Class B shares, which applies if redemption occurs within one year
from purchase payment. This CDSC declines by 0.50% the first year after
purchase payment and thereafter by 1.00% per year until no CDSC is incurred.
Class L shares also have a 1.00% CDSC, which applies if redemption occurs
within one year from purchase payment. In certain cases, Class A shares have a
1.00% CDSC, which applies if redemption occurs within one year from purchase
payment. This CDSC only applies to those purchases of Class A shares, which
when combined with current holdings of Class A shares, equal or exceed $500,000
in the aggregate. These purchases do not incur an initial sales charge.
For the six months ended September 30, 2003, Citigroup Global Markets Inc.
("CGM"), another indirect wholly-owned subsidiary of Citigroup, received sales
charges of approximately $120,000 and $24,000 on sales of the Fund's Class A
and L shares, respectively.
In addition, for the six months ended September 30, 2003, CDSCs paid to CGM
were approximately:
Class A Class B Class L
- --------------------------------------------------------------------------
CDSCs $4,000 $38,000 $1,000
- -------------------------------------------------------------------------
All officers and one Trustee of the Trust are employees of Citigroup or its
affiliates.
4. Investments
During the six months ended September 30, 2003, 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 $ 89,930,796
- -----------------------------------------------
Sales 104,121,853
- -----------------------------------------------
At September 30, 2003, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
- ------------------------------------------------
Gross unrealized
appreciation $ 26,880,022
Gross unrealized depreciation (17,068,910)
- ------------------------------------------------
Net unrealized appreciation $ 9,811,112
- ------------------------------------------------
5. Futures Contracts
Securities or cash equal to the initial margin amount are either deposited with
the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the current market
value of the futures contract. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to
broker, depending upon whether unrealized gains or losses are incurred. When
the contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of ) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts typically
to hedge a portion of its portfolio. The Fund bears the market risk that arises
from changes in the value of the financial instruments and securities indices.
19 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
At September 30, 2003, the Fund had the following open futures contracts:
Number of Basis Market Unrealized
Contracts Expiration Value Value Loss
- -----------------------------------------------------------------------------------------------
Contracts to Sell:
20 Year, 6.000% U.S. Treasury Bond 925 12/03 $108,651,369 $103,744,531 $(4,906,838)
- ----------------------------------------------------------------------------------------------
6. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, the Fund pays a service fee with
respect to its Class A, B and L shares calculated at the annual rate of 0.15%
of the average daily net assets of each respective class. In addition, the Fund
pays a distribution fee with respect to its Class B and L shares calculated at
the annual rates of 0.50% and 0.55% of the average daily net assets of each
class, respectively. For the six months ended September 30, 2003, total Rule
12b-1 Distribution Plan fees, which are accrued daily and paid monthly, were as
follows:
Class A Class B Class L
- --------------------------------------------------------------
Rule 12b-1 Distribution Plan Fees $273,302 $205,370 $111,629
- --------------------------------------------------------------
For the six months ended September 30, 2003, total
Shareholder Servicing fees were as follows:
Class A Class B Class L
- --------------------------------------------------------------
Shareholder Servicing Fees $29,280 $6,405 $6,771
- --------------------------------------------------------------
For the six months ended September 30, 2003, total
Shareholder Communication expenses were as follows:
Class A Class B Class L
- --------------------------------------------------------------
Shareholder Communication Expenses $36,600 $7,137 $5,490
- --------------------------------------------------------------
7. Distributions Paid to Shareholders by Class
Six Months Ended Year Ended
September 30, 2003 March 31, 2003
- ---------------------------------------------------------------------
Net Investment Income
Class A $10,159,773 $22,137,785
Class B 1,609,150 3,275,632
Class L 798,082 1,557,506
- --------------------------------------------------------------------
Total $12,567,005 $26,970,923
- --------------------------------------------------------------------
8. Shares of Beneficial Interest
At September 30, 2003, the Trust had an unlimited number of shares of
beneficial interest authorized with a par value of $0.001 per share. The Fund
has the ability to issue multiple classes of shares. Each share of a class
represents an identical interest in the Fund and has the same rights, except
that each class bears certain expenses specifically related to the distribution
of its shares.
20 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Transactions in shares of each class were as follows:
Six Months Ended Year Ended
September 30, 2003 March 31, 2003
------------------------ ------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------
Class A
Shares sold 1,139,826 $ 15,037,741 2,427,448 $ 32,527,105
Shares issued on
reinvestment 373,048 4,917,508 824,698 10,990,786
Shares reacquired (2,447,728) (32,273,316) (6,009,823) (80,211,889)
- -----------------------------------------------------------------------
Net Decrease (934,854) $(12,318,067) (2,757,677) $(36,693,998)
- -----------------------------------------------------------------------
Class B
Shares sold 342,150 $ 4,517,016 1,323,486 $ 17,673,852
Shares issued on
reinvestment 48,235 634,817 101,066 1,344,619
Shares reacquired (573,785) (7,545,956) (910,856) (12,111,637)
- -----------------------------------------------------------------------
Net Increase
(Decrease) (183,400) $ (2,394,123) 513,696 $ 6,906,834
- -----------------------------------------------------------------------
Class L
Shares sold 243,752 $ 3,224,133 636,505 $ 8,536,847
Shares issued on
reinvestment 32,589 430,505 65,158 869,886
Shares reacquired (229,419) (3,023,512) (595,401) (7,964,835)
- -----------------------------------------------------------------------
Net Increase 46,922 $ 631,126 106,262 $ 1,441,898
- -----------------------------------------------------------------------
9. Subsequent Event
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue
guarantee agreement with this sub-contractor providing that the sub-contractor
would guarantee certain benefits to CAM or its affiliates (the "Revenue
Guarantee Agreement"). In connection with the subsequent purchase of the
sub-contractor's business by an affiliate of the current sub-transfer agent
(PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee
Agreement was amended eliminating those benefits in exchange for arrangements
that included a one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
$16 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.
21 Smith Barney Muni Funds | 2003 Semi-Annual Report
FINANCIAL HIGHLIGHTS
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, unless otherwise noted:
Class A Shares 2003/(1)(2)/ 2003/(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/ 1999/(2)/
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.17 $13.18 $13.58 $12.94 $13.97 $14.16
- --------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(3)/ 0.38 0.77 0.77 0.76 0.74 0.74
Net realized and unrealized gain (loss)/(3)/ (0.00)* (0.02) (0.41) 0.64 (1.03) 0.03
- --------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.38 0.75 0.36 1.40 (0.29) 0.77
- --------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.37) (0.76) (0.76) (0.76) (0.73) (0.75)
Net realized gains -- -- -- -- (0.01) (0.21)
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.37) (0.76) (0.76) (0.76) (0.74) (0.96)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.18 $13.17 $13.18 $13.58 $12.94 $13.97
- --------------------------------------------------------------------------------------------------------------
Total Return 2.91%++ 5.74% 2.67% 11.16% (2.03)% 5.50%
- --------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $356,069 $368,188 $404,803 $388,838 $363,812 $404,498
- --------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.67%+ 0.67% 0.66% 0.68% 0.68% 0.66%
Net investment income/(3)/ 5.77+ 5.76 5.67 5.75 5.59 5.21
- --------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 43% 52% 52% 68% 61%
- --------------------------------------------------------------------------------------------------------------
Class B Shares 2003/(1)(2)/ 2003/(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/ 1999/(2)/
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.15 $13.16 $13.57 $12.93 $13.96 $14.16
- --------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(4)/ 0.35 0.70 0.70 0.69 0.67 0.67
Net realized and unrealized gain (loss)/(4)/ (0.00)* (0.02) (0.41) 0.64 (1.03) 0.02
- --------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.35 0.68 0.29 1.33 (0.36) 0.69
- --------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) (0.69) (0.70) (0.69) (0.66) (0.68)
Net realized gains -- -- -- -- (0.01) (0.21)
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.34) (0.69) (0.70) (0.69) (0.67) (0.89)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.16 $13.15 $13.16 $13.57 $12.93 $13.96
- --------------------------------------------------------------------------------------------------------------
Total Return 2.65%++ 5.25% 2.13% 10.64% (2.56)% 4.92%
- --------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $61,968 $64,348 $57,661 $46,534 $42,872 $36,451
- --------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.18%+ 1.18% 1.17% 1.18% 1.18% 1.16%
Net investment income/(4)/ 5.25+ 5.25 5.17 5.26 5.11 4.71
- --------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 43% 52% 52% 68% 61%
- --------------------------------------------------------------------------------------------------------------
(1) For the six months ended September 30, 2003 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) Effective April 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, the
ratio of net investment income to average net assets would have been 5.64%.
Per share information, ratios and supplemental data for the periods prior
to April 1, 2001 have not been restated to reflect this change in
presentation. In addition, the impact of this change to net investment
income and net realized and unrealized loss was less than $0.01 per share.
(4) Effective April 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, net
investment income, net realized and unrealized loss and the ratio of net
investment income to average net assets would have been $0.69, $0.40 and
5.14%, respectively. Per share information, ratios and supplemental data
for the periods prior to April 1, 2001 have not been restated to reflect
this change in presentation.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
22 Smith Barney Muni Funds | 2003 Semi-Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, unless otherwise noted:
Class L Shares 2003/(1)(2)/ 2003/(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/ 1999/(2)(3)/
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.20 $13.20 $13.59 $12.95 $13.97 $14.16
- ----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(4)/ 0.34 0.69 0.70 0.68 0.66 0.65
Net realized and unrealized gain (loss)/(4)/ (0.00)* (0.01) (0.41) 0.64 (1.02) 0.02
- ----------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.34 0.68 0.29 1.32 (0.36) 0.67
- ----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.33) (0.68) (0.68) (0.68) (0.65) (0.65)
Net realized gains -- -- -- -- (0.01) (0.21)
- ----------------------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.68) (0.68) (0.68) (0.66) (0.86)
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.21 $13.20 $13.20 $13.59 $12.95 $13.97
- ----------------------------------------------------------------------------------------------------------------
Total Return 2.61%++ 5.18% 2.13% 10.46% (2.57)% 4.79%
- ----------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $31,805 $31,168 $29,777 $23,294 $19,434 $18,528
- ----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.26%+ 1.24% 1.23% 1.25% 1.26% 1.24%
Net investment income/(4)/ 5.18+ 5.19 5.11 5.19 5.03 4.63
- ----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 20% 43% 52% 52% 68% 61%
- ----------------------------------------------------------------------------------------------------------------
(1) For the six months ended September 30, 2003 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed as Class L shares.
(4) Effective April 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, net
investment income, net realized and unrealized loss and the ratio of net
investment income to average net assets would have been $0.69, $0.40 and
5.08%, respectively. Per share information, ratios and supplemental data
for the periods prior to April 1, 2001 have not been restated to reflect
this change in presentation.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
23 Smith Barney Muni Funds | 2003 Semi-Annual Report
SMITH BARNEY
MUNI FUNDS
TRUSTEES INVESTMENT MANAGER
Lee Abraham Smith Barney Fund Management LLC
Allan J. Bloostein
Jane F. Dasher DISTRIBUTOR
Donald R. Foley Citigroup Global Markets Inc.
R. Jay Gerken, CFA
Chairman CUSTODIAN
Richard E. Hanson, Jr. State Street Bank and
Paul Hardin Trust Company
Roderick C. Rasmussen
John P. Toolan TRANSFER AGENT
Citicorp Trust Bank, fsb.
OFFICERS 125 Broad Street, 11th Floor
R. Jay Gerken, CFA New York, New York 10004
President and
Chief Executive Officer SUB-TRANSFER AGENT
PFPC Inc.
Andrew B. Shoup* P.O. Box 9699
Senior Vice President and Providence, Rhode Island
Chief Administrative Officer 02940-9699
Richard L. Peteka
Chief Financial Officer
and Treasurer
Peter M. Coffey
Vice President and
Investment Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel*
Secretary and
Chief Legal Officer
* As of November 25, 2003.
Smith Barney Muni Funds
National Portfolio
The Fund is a separate investment fund of the Smith Barney Muni Funds, a
Massachusetts business trust.
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds --National Portfolio, but it may also be used as sales
literature when preceded or accompanied by the current Prospectus, which gives
details about charges, expenses, investment objectives and operating policies
of the Fund. If used as sales material after December 31, 2003, this report
must be accompanied by performance information for the most recently completed
calendar quarter.
SMITH BARNEY MUNI FUNDS
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
For complete information on any Smith Barney Mutual Funds, including
management fees and expenses, call or write your financial professional for a
free prospectus. Read it carefully before you invest or send money.
www.smithbarneymutualfunds.com
(C)2003 Citigroup Global Markets Inc. Member NASD, SIPC
FD0806 11/03 03-5683
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. 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) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, there unto duly authorized.
Smith Barney Muni Funds
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Muni Funds
Date: December 12, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Muni Funds
Date: December 12, 2003
By: /s/ Richard L. Peteka
Richard L. Peteka
Chief Financial Officer of
Smith Barney Muni Funds
Date: December 12, 2003