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.
[INSERT SHAREHOLDER REPORT]
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SMITH BARNEY
MUNI FUNDS
LIMITED TERM PORTFOLIO
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STYLE PURE SERIES | SEMI-ANNUAL REPORT | SEPTEMBER 30, 2003
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed. is a registered service mark of
Citigroup Global Markets Inc.
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NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
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WHAT'S INSIDE
Letter from the Chairman........... 1
Schedule of Investments............ 3
Statement of Assets and Liabilities 23
Statement of Operations............ 24
Statements of Changes in Net Assets 25
Notes to Financial Statements...... 26
Financial Highlights............... 33
LETTER FROM THE CHAIRMAN
[PHOTO]
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/i/
to just 1%, its lowest level since the Eisenhower Administration. Consequently,
bond yields continued to decline from April through June. 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 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: Limited Term Portfolio's Performance
For the six months ended September 30, 2003, Class A shares of the fund,
without sales charges, returned 2.78%./1/ This compared with a return of 2.66%
of the broad-based, unmanaged Lehman Brothers Municipal Bond Index/ii/, and
2.26% of the average of the fund's Lipper peer group of intermediate municipal
debt funds, over the same period./2/
At times of uncertainty such as these, we believe that it is more important
than ever to develop and stick with a long-range plan. In addition to their
income-producing capabilities, 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 may apply. Capital gains, if any, are fully
taxable.
/1/Performance for the fund's other share classes can be found in the Financial
Highlights section in this report. Performance for other share classes may
vary.
/2/Lipper is a major independent mutual-fund tracking organization. Returns are
based on the six-month period ended September 30, 2003, calculated among 147
funds in the Lipper intermediate municipal debt funds category with
reinvestment of dividends and capital gains excluding sales charges.
1 Smith Barney Muni Funds | 2003 Semi-Annual Report
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 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
PERFORMANCE SNAPSHOT
AS OF SEPTEMBER 30, 2003
(not including sales charges)
6 Months
Class A Shares 2.78%
Lehman Brothers Municipal Bond Index 2.66%
Average of Lipper intermediate municipal debt funds 2.26%
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 147
funds in the Lipper intermediate 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 income taxes may apply. Capital gains, if any, are fully
taxable. Consult your personal tax adviser for more details.
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 20 for a list and percentage
breakdown of the fund's holdings.
/i/The federal funds rate is the interest rate that banks with excess reserves
at a Federal Reserve district bank charge other banks that need overnight
loans.
/ii/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.
2 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- ---------------------------------------------------------------------------------------------------
Cogeneration Facilities -- 0.3%
$ 2,000,000 BB+++ Klamath Falls, OR Electric Revenue, Sr. Lien, (Klamath
Cogeneration Project), 5.750% due 1/1/13 $ 2,008,020
- ---------------------------------------------------------------------------------------------------
Education -- 10.7%
5,000,000 AAA Alabama State Public School and College Authority,
5.125% due 11/1/15 (b) 5,472,000
1,165,000 NR Allen Academy COP, 7.000% due 6/1/15 (b) 1,121,825
1,000,000 Aa2* Arizona Educational Loan Marketing Corp., Education Loan
Revenue Bonds, 6.375% due 9/1/05 (b)(c) 1,017,710
1,000,000 AAA Arizona State University Revenues, Revenue Bonds,
FGIC-Insured, 5.500% due 7/1/21 (b) 1,105,810
3,000,000 NR Capital Projects Finance Authority, FL Student Housing Revenue,
Cafra Capital Corp., Series A, 7.750% due 8/15/20 (b) 3,042,870
1,000,000 AAA Carman-Ainsworth, MI Community School District GO,
FGIC-Insured, 5.500% due 5/1/19 (b) 1,107,980
2,500,000 Aaa* Central Bucks, PA School District GO, FGIC-Insured,
5.500% due 5/15/19 2,759,425
1,070,000 A Chester County, PA School Authority, School Lease Revenue,
5.375% due 6/1/17 (b) 1,182,500
1,775,000 AAA Chippewa Valley, MI Schools Administration Building,
Q-SBLF-Insured, 5.500% due 5/1/18 1,981,681
3,000,000 AAA Clark County, NV School District GO, Building and Renovation,
Series B, FGIC-Insured, 5.250% due 6/15/17 3,242,790
1,025,000 Baa3* Colorado Educational & Cultural Facilities Authority Revenue,
Charter School, (Bromley East Project), Series A,
7.000% due 9/15/20 1,066,041
3,000,000 Aaa* Cook Kane Lake & McHenry Counties, IL Community College,
District No. 512, William Rainey Harper College, Series A,
5.500% due 12/1/15 3,393,240
1,225,000 AAA District of Columbia Revenue, Georgetown University, Capital
Appreciation Bonds, Series A, MBIA-Insured,
zero coupon due 4/1/19 552,095
1,000,000 AAA Fort Bend, TX GO, ISD, PSF, 5.500% due 2/15/16 1,101,150
Greenville County, SC School District Installment Purchase
Revenue, Building Equity Sooner for Tomorrow:
1,000,000 AA- 5.875% due 12/1/19 1,131,430
3,000,000 AA- 6.000% due 12/1/21 3,398,070
310,000 AAA Greeneville, TN Health & Educational Facilities Board, Hospital
Revenue, Southern Adventist Health System,
8.700% due 10/1/09 (d) 372,068
2,400,000 AA Hillsborough County, FL Educational Facilities Authority
Revenue, Refunding, (University of Tampa Project),
Radian-Insured, 5.750% due 4/1/18 2,662,776
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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Education -- 10.7% (continued)
$3,500,000 AAA Hillsborough County, FL School District Sales Tax Revenue,
AMBAC-Insured, 5.375% due 10/1/15 $ 3,889,725
480,000 AAA Illinois Educational Facilities Authority Revenue, Chicago College
of Osteopathic, 8.750% due 7/1/05 (d) 522,178
1,000,000 AAA Lawrence Township, IN Metropolitan School District, First
Mortgage, IBC/MBIA-Insured, 6.750% due 7/5/13 1,250,580
1,410,000 Aaa* Logan Hocking, OH Local School District GO, Construction &
Improvement, MBIA-Insured, 5.500% due 12/1/16 1,597,925
4,000,000 NR Los Angeles, CA Unified School District, RITES PA-1118,
MBIA-Insured, 9.185% due 1/1/11 (e) 4,941,600
Massachusetts State Health & Educational Facilities Authority
Revenue:
1,000,000 AAA Harvard University, Series Z, 5.000% due 1/15/16 1,060,720
1,300,000 AAA University of Massachusetts, Series C, 5.500% due 10/1/18 1,454,427
3,515,000 Aaa* Midlothian, TX ISD, Capital Appreciation Bonds, PSFG,
zero coupon due 2/15/17 1,662,771
1,075,000 AAA Mishawaka, IN School Building Corp., First Mortgage,
AMBAC-Insured, 5.500% due 7/15/18 1,189,445
130,000 AAA Montana State University Revenue, MBIA-Insured,
10.000% due 11/15/08 (d) 158,839
900,000 AAA New Hampshire Health & Education Facilities Authority Revenue,
University System of New Hampshire, AMBAC-Insured,
5.375% due 7/1/16 1,003,563
New York State Dormitory Authority Revenue:
1,000,000 AAA Columbia University, Series B, 5.250% due 7/1/17 1,110,110
1,780,000 AA Marymount Manhattan College, Radian-Insured,
6.375% due 7/1/14 2,097,338
2,500,000 AAA School Districts Financing Programs, Series D, MBIA-Insured,
5.500% due 10/1/17 2,803,025
1,715,000 AAA State University Educational Facilities, MBIA-Insured,
6.000% due 5/15/15 2,022,139
1,330,000 A North Forest ISD, ACA-Insured, 6.500% due 8/15/17 (b) 1,611,335
Radford Court Properties, WA Student Housing Revenue,
MBIA-Insured:
1,695,000 AAA 6.000% due 6/1/17 1,981,319
1,000,000 AAA 5.375% due 6/1/19 1,084,280
1,320,000 BBB- Savannah, GA EDA, (College of Art & Design Inc. Project),
6.200% due 10/1/09 1,486,901
1,000,000 Baa3* Texas State Student Housing Corp., Student Housing Revenue,
(Midwestern State University Project), 6.500% due 9/1/22 1,001,010
2,000,000 AAA Texas Technical University Revenues Financing System, Seventh
Series, MBIA-Insured, 5.500% due 8/15/18 2,217,440
1,960,000 AAA University of Akron, OH General Receipts Bonds,
AMBAC-Insured, 5.250% due 1/1/17 2,101,140
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
- -----------------------------------------------------------------------------------------------
Education -- 10.7% (continued)
$1,085,000 AAA University of Iowa Facilities Corp., (Medical Education &
Biomed Research Facilities Project), AMBAC-Insured,
5.375% due 6/1/18 $ 1,174,057
2,000,000 AAA University of Texas Revenues Financing System, Series B,
5.375% due 8/15/18 2,192,420
1,000,000 AAA Utah State Board of Regents, Utah State University Hospital,
MBIA-Insured, 5.500% due 8/1/18 1,110,540
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78,436,288
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General Obligation -- 17.1%
3,000,000 AA+ Anne Arundel County, MD GO, 5.375% due 3/1/14 (b) 3,392,670
2,620,000 AA+ Austin, TX GO, Public Improvement,
5.500% due 9/1/19 (b) 2,850,848
1,445,000 AA Chesapeake VA GO, Public Improvement,
5.500% due 12/1/17 (b) 1,626,709
4,000,000 AAA Chicago, IL GO, Project & Refunding, Series A, AMBAC-Insured,
5.375% due 1/1/16 (b) 4,505,960
1,500,000 AAA Chicago, IL GO, Series A, FGIC-Insured, (Call 7/1/10 @ 101),
6.000% due 1/1/14 (f) 1,805,505
2,415,000 AAA Cicero, IL GO, MBIA-Insured, 5.625% due 12/1/16 2,806,930
2,240,000 AA Clark County, NV GO, 5.375% due 6/1/15 2,468,166
Connecticut State GO:
5,000,000 AA Series C, 5.000% due 12/15/11 5,620,200
5,000,000 AA Series D, 5.375% due 11/15/19 5,520,650
1,000,000 AAA Cranston, RI GO, FGIC-Insured, 6.375% due 11/15/14 1,206,830
2,000,000 AAA Delaware State, GO, Series A, 5.000% due 7/1/13 2,198,900
3,500,000 NR Georgia State, GO, RITES-PA-1197-A, 5.575% due 4/1/09 4,720,870
1,750,000 AAA Greater Johnstown, PA GO, School District, Series B,
MBIA-Insured, 5.375% due 8/1/14 1,957,007
3,000,000 AAA Guilford County, NC GO, Public Improvement, Series B,
5.250% due 10/1/15 3,357,750
1,000,000 AAA Harlandale, TX GO, ISD, Refunding, PSFG,
6.000% due 8/15/16 1,172,010
4,000,000 AAA Hawaii State GO, Series CW, 5.375% due 8/1/15 4,494,880
1,000,000 AAA Houston, TX GO, Public Improvement, FSA-Insured,
5.750% due 3/1/18 1,136,370
Illinois State GO, First Series:
3,000,000 AA 5.250% due 12/1/11 3,408,510
5,000,000 AAA 5.375% due 7/1/19 5,486,150
2,440,000 AAA Kane County, IL GO, FGIC-Insured, 5.500% due 1/1/15 2,752,027
105,000 AAA Loveland, CO GO, 8.875% due 11/1/05 (d) 113,333
Massachusetts State GO, RITES, MBIA-Insured:
3,500,000 AAA Series PA 964-R, 9.113% due 11/1/09 (e)(f) 4,654,090
1,500,000 AAA Series PA 993-R, 9.090% due 5/1/09 (e)(f) 1,994,610
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
- ---------------------------------------------------------------------------------------------------
General Obligation -- 17.1% (continued)
$2,000,000 AA Memphis, TN GO, General Improvement,
5.250% due 4/1/16 $ 2,181,560
2,635,000 Aa2* Minnehaha County, SD GO, Limited Tax Certificates,
5.625% due 12/1/19 2,937,366
3,800,000 AAA Mobile, AL GO, 10.875% due 11/1/07 (d) 4,533,628
1,800,000 AAA Montgomery, TX GO, ISD, PSFG, 5.500% due 2/15/17 2,001,042
1,000,000 AAA Mount Clemens, MI GO, Community School District,
Q-SBLF-Insured, 5.500% due 5/1/16 1,128,390
3,320,000 Aa2* Multnomah County, OR GO, Series A, 5.250% due 4/1/14 3,642,770
1,000,000 AA+ New Hampshire State GO, Capital Improvement,
Series A, 5.125% due 10/1/17 1,083,710
2,500,000 A New York City, NY GO, Series A, 6.250% due 8/1/08 2,797,300
3,000,000 AAA North Carolina State GO, Public Improvement,
(Call 3/1/09 @ 102), Series A, 5.250% due 3/1/18 (b)(f) 3,479,130
3,000,000 AAA North Carolina State GO, Series A, 5.100% due 9/1/16 (b) 3,292,800
Pennsylvania State GO, Second Series:
2,025,000 AA 5.250% due 10/15/13 2,269,094
4,000,000 AAA 5.500% due 5/1/15 4,606,520
5,000,000 AAA 5.750% due 10/1/17 5,725,900
Philadelphia, PA GO, School District:
Series A, FSA-Insured:
2,000,000 AAA 5.500% due 2/1/20 2,189,820
1,865,000 AAA 5.500% due 2/1/21 2,028,318
2,000,000 AAA Series B, 5.625% due 8/1/18 2,236,440
2,000,000 AAA Pierce County, WA GO, School District No. 10 Tacoma,
FGIC-Insured, 5.375% due 12/1/14 2,235,520
2,000,000 AAA Pittsfield, MA GO, MBIA-Insured, 5.500% due 4/15/17 2,277,540
1,000,000 AAA Saraland, AL GO, MBIA-Insured, 5.250% due 1/1/14 1,105,990
2,000,000 AA- Wisconsin State GO, Series B, 5.500% due 5/1/14 (b) 2,257,080
2,000,000 Aaa* Woonsocket, RI GO, FGIC-Insured,
5.375% due 10/1/20 (b) 2,177,660
- ---------------------------------------------------------------------------------------------------
125,438,553
- ---------------------------------------------------------------------------------------------------
Hospitals -- 16.2%
2,030,000 BBB Arizona Health Facilities Authority Revenue, Catholic Healthcare
West, Series A, 6.125% due 7/1/09 (b) 2,255,898
Arkansas State Development Financing Authority, Hospital
Revenue, Washington Regional Medical Center:
1,500,000 BBB- 7.000% due 2/1/15 (b) 1,631,235
2,500,000 BBB- 7.250% due 2/1/20 (b) 2,712,825
1,000,000 AAA Calcasieu Parish, LA Memorial Hospital Services District Revenue,
(Lake Charles Memorial Hospital Project), Series A,
CONNIE LEE-Insured, 7.500% due 12/1/05 (b) 1,128,690
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
- ----------------------------------------------------------------------------------------------------
Hospitals -- 16.2% (continued)
$ 225,000 AAA Camarillo, CA Hospital Revenue, Pleasant Valley Hospital Building
Corp., 9.700% due 12/15/07 (d) $ 264,161
1,185,000 A Carson City, NV Hospital Revenue, (Carson-Tahoe Hospital
Project), 6.000% due 9/1/14 (b) 1,320,374
1,000,000 AA Clackamas County, OR Hospital Facilities Authority Revenue,
Legacy Health System, 5.750% due 5/1/16 1,096,060
Colorado Health Facilities Authority, Hospital Revenue Bonds:
695,000 A- Rocky Mountain Adventist Healthcare, 6.250% due 2/1/04 704,987
1,075,000 NR Weld County General Hospital Project, 9.375% due 7/1/09 (d) 1,321,390
3,000,000 BBB Cuyahoga County, OH Hospital Facilities Revenue, (Canton Inc.
Project), 6.750% due 1/1/10 3,370,590
3,165,000 AAA Duncanville, TX Hospital Authority, (Methodist Hospitals of Dallas
Project), 9.000% due 1/1/10 (d) 3,884,626
510,000 AAA Erie County, OH Hospital Improvement Revenue,
Sandusky Memorial Hospital, 8.750% due 1/1/06 (d) 555,946
1,305,000 AA Fauquier County, VA IDA Hospital Revenue, Fauquier Hospital
Foundation Inc., Radian-Insured, 5.500% due 10/1/15 1,484,842
1,470,000 NR Franklin County, OH Hospital Revenue, (Children's Hospital
Project), 10.375% due 6/1/13 (d) 2,032,451
Illinois Health Facilities Authority Revenue:
705,000 AAA Methodist Medical Center of Illinois Project,
9.000% due 10/1/10 (d) 856,899
5,000,000 A OSF Healthcare System, 6.250% due 11/15/19 5,335,300
1,140,000 A Passavant Memorial Area Hospital, 6.250% due 10/1/17 1,219,013
50,000 A Victory Memorial Hospital Association Project,
7.500% due 10/1/06 (d) 54,288
3,000,000 A1* Iowa Finance Authority, Health Care Facilities Revenue,
Genesis Medical Center, 6.250% due 7/1/20 3,175,230
1,500,000 BBB Klamath Falls, OR, Intercommunity Hospital Authority Revenue,
(Merle West Medical Center Project), 6.125% due 9/1/22 1,563,825
990,000 AAA Lake County, OH Hospital Improvement Revenue, (Lake County
Memorial Hospitals Project), 8.625% due 11/1/09 (d) 1,183,357
2,580,000 NR Lee Memorial Health System Board of Directors,
FL Hospital Revenue, RITES, Series PA 1026R-B, FSA-Insured,
9.527% due 4/1/10 (e) 3,393,887
340,000 AAA Lima, OH Hospital Revenue, St. Rita's Medical Center,
7.500% due 11/1/06 (d) 371,195
390,000 NR Los Angeles, CA COP, Hollywood Presbyterian Medical Center,
9.625% due 7/1/13 (d) 531,500
465,000 AAA Louisiana Public Facilities Hospital Authority Revenue,
(Southern Baptist Hospital Inc. Project), AETNA-Insured,
8.000% due 5/15/12 (d) 581,380
870,000 AAA Madison County, IN Hospital Facilities Authority Revenue,
(Community Hospital Anderson Project), 9.250% due 1/1/10 (d) 1,076,590
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
- -------------------------------------------------------------------------------------------------
Hospitals -- 16.2% (continued)
$1,900,000 BB- Maplewood, MN Healthcare Facilities Revenue,
(Health East Project), 5.950% due 11/15/06 $ 1,900,798
Maricopa County, AZ Hospital Revenue:
140,000 AAA Intercommunity Healthcare, (Sun City Project),
8.625% due 1/1/10 (d) 169,799
St. Luke's Medical Center:
1,495,000 AAA 8.750% due 2/1/10 (d) 1,827,279
160,000 AAA 10.250% due 2/1/11 (d) 208,312
1,000,000 A- Marshall County, AL Health Care Authority Revenue, Series A,
6.250% due 1/1/22 1,064,110
1,000,000 A Maryland State Health & Higher Educational Facilities Authority
Revenue, University of Maryland Medical System,
6.000% due 7/1/22 1,066,400
Massachusetts State Health & Educational Facilities Authority
Revenue, Caritas Christi Obligated Group, Series B:
2,000,000 BBB 6.500% due 7/1/12 2,073,920
3,000,000 BBB 6.750% due 7/1/16 3,092,400
1,000,000 BB Miami Beach, FL Health Facilities Authority, Hospital Revenue,
Mt. Sinai Medical Center, Series A, 6.700% due 11/15/19 949,920
1,000,000 A3* Minneapolis, MN Health Care System Revenue,
Allina Health System, Series A, 6.000% due 11/15/18 1,091,560
2,775,000 AA Montgomery County, OH Revenue, Catholic Health Initiatives,
5.500% due 9/1/14 2,990,423
3,835,000 A- New Hampshire Health & Education Facilities Authority Revenue,
Covenant Health System, 6.500% due 7/1/17 4,275,220
New Jersey Healthcare Facilities, Financing Authority Revenue:
455,000 AAA Hackensack Hospital, 8.750% due 7/1/09 (d) 549,240
3,000,000 BBB- Trinitas Hospital Obligation Group, 7.375% due 7/1/15 3,319,560
1,000,000 AAA New York City, NY Health & Hospital Corp. Revenue,
Health System, Series A, FSA-Insured, 5.500% due 2/15/19 1,104,970
New York City, NY IDA Civic Facility Revenue:
1,716,000 NR Community Hospital, Brooklyn, 6.875% due 11/1/10 1,741,757
1,090,000 NR Special Needs Facilities Pooled Project, Series A-1,
6.100% due 7/1/12 1,118,078
1,000,000 A3* New York State Dormitory Authority Revenue,
Lenox Hill Hospital Obligated Group, 5.750% due 7/1/17 1,075,750
750,000 A Norton, VA IDA Hospital Revenue, Norton Community Hospital,
ACA-Insured, 6.000% due 12/1/22 808,365
Oklahoma Development Financing Authority, Revenue Refunding:
Hillcrest Healthcare System, Series A:
1,500,000 B- 5.750% due 8/15/15 (b) 1,178,220
3,000,000 B- 5.625% due 8/15/19 (b) 2,192,070
2,750,000 AA St. John's Health System, 5.750% due 2/15/18 (b) 2,950,090
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
-----------------------------------------------------------------------------
Hospitals -- 16.2% (continued)
Orange County, FL Health Facilities
Authority Revenue:
$1,835,000 NR First Mortgage, 8.875% due 7/1/21 (b) $ 1,842,248
2,000,000 A Hospital Adventist Health System, 6.250%
due 11/15/24 (b) 2,161,340
250,000 AAA Oshkosh, WI Hospital Facility Revenue,
Mercy Medical Center, (Call 7/1/07 @
100), 7.375% due 7/1/09 (f) 286,870
Pennsylvania State Higher Educational
Facilities Authority, Health Services
Revenue:
3,330,000 AAA Allegheny Delaware Valley Obligation
Group, Series A, MBIA-Insured, 5.600%
due 11/15/09 3,844,618
1,000,000 A University of Pittsburgh, UPMC Health
System, Series A, 6.250% due 1/15/18 1,097,170
500,000 AAA Philadelphia, PA Hospitals Authority
Revenue, (United Hospitals Inc.
Project), (Call 7/1/05 @ 100), 10.875%
due 7/1/08 (f) 569,990
1,181,000 AAA Pima County, AZ Hospital Revenue, Tucson
Medical Center, 10.375% due 4/1/07 (d) 1,391,171
665,000 AAA Pulaski County, AR Hospital Revenue,
Arkansas Children's Hospital, 9.250% due
3/1/10 (d) 829,208
1,500,000 AAA Salt Lake County, UT Hospital Revenue,
IHC Health Services Inc., AMBAC-Insured,
5.500% due 5/15/13 1,701,900
265,000 AAA San Leandro, CA Hospital Revenue, Vesper
Memorial Hospital, 11.500% due 5/1/11 (d) 368,692
860,000 AAA Santa Rosa, CA Hospital Revenue, (Santa
Rosa Hospital Memorial Project), 10.300%
due 3/1/11 (d) 1,134,159
1,000,000 BB+ Scranton-Lackawanna, PA Health & Welfare
Authority Revenue, (Moses Taylor
Hospital Project), 6.050% due 7/1/10 701,380
1,445,000 AA Southcentral, PA, General Authority
Revenue, Hanover Hospital Inc.,
Radian-Insured, 5.500% due 12/1/18 1,583,431
940,000 AAA Southeast Texas Hospital Financing
Agency, (Memorial Hospital System
Project), 8.500% due 12/1/08 (d) 1,113,176
2,135,000 AAA St. Joseph County, IN Hospital Authority
Facilities Revenue, Memorial Hospital
South Bend, 9.400% due 6/1/10 (d) 2,714,354
1,000,000 A St. Paul, MN Housing & Redevelopment
Authority, Hospital Revenue, (Health
East Project), Series B,
ACA/CBI-Insured, 5.850% due 11/1/17 1,081,230
1,210,000 AAA St. Tammany Parish, LA Hospital Service
District No. 2, Hospital Revenue, CONNIE
LEE-Insured, 6.250% due 10/1/14 1,289,485
1,985,000 NR Suffolk County, NY IDA, Civic Facility
Revenue, Eastern Long Island Hospital
Association, Series A, 7.750% due 1/1/22 2,010,726
Tarrant County, TX Health Facilities
Development Corp., Hospital Revenue:
2,000,000 A 6.625% due 11/15/20 2,174,000
4,000,000 AA- Baylor Health Care System Project,
5.750% due 11/15/19 4,308,280
115,000 AAA Tarrant County, TX Hospital Authority
Revenue, St. Joseph Hospital Project,
8.750% due 2/1/10 (d) 141,051
See Notes to Financial Statements.
9 Smith Barney Muni Funds | 2003 Semi-Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------
Hospitals -- 16.2% (continued)
$2,000,000 Baa2* Tomball, TX Hospital Authority Revenue, Tomball Regional
Hospital, 5.500% due 7/1/09 $ 2,150,360
1,415,000 BBB+ Vermont Educational & Health Buildings Financing Agency
Revenue, Developmental & Mental Health, Series A,
5.500% due 6/15/12 1,465,317
Wisconsin State Health & Educational Facilities Authority
Revenue:
1,000,000 A- Agnesian Health Care Inc., 6.000% due 7/1/17 (b) 1,061,490
1,500,000 A Wheaton Franciscan Services Inc., 6.000% due 8/15/15 (b) 1,662,360
- ------------------------------------------------------------------------------------------------
118,538,786
- ------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 2.4%
710,000 NR Asheville, NC Housing Development Corp., First Lien Revenue,
Ashville Gardens, HUD SECT 8-Insured, (Call 11/1/09 @ 100),
10.500% due 5/1/11 (f) 912,975
Bexar County, TX Housing Finance Corp., Multi-Family Housing
Revenue, Series A:
440,000 A3* American Opportunity For Housing-Nob Hill Apartments
LLC, 6.000% due 6/1/21 453,948
700,000 Aaa* The Waters At Northern Hills Apartments, MBIA-Insured,
5.800% due 8/1/21 763,609
2,000,000 AA+ Dakota County, MN Community Development Agency,
5.250% due 1/1/19 2,147,820
2,250,000 AAA Dekalb County, GA HFA, Multi-Family Housing Revenue,
Refunding, (Chimney Trace Project), FNMA-Collateralized,
5.625% mandatory tender 5/1/05 2,314,215
El Paso County, TX Housing Finance Corp., Multi-Family Housing
Revenue, Series A:
American Village Communities:
1,250,000 A3* 6.250% due 12/1/20 1,298,412
1,000,000 A3* 6.250% due 12/1/24 1,025,820
415,000 A3* La Plaza Apartments, 6.700% due 7/1/20 457,450
1,000,000 AAA Grand Prairie, TX Housing Finance Corp., Multi-Family Housing
Revenue, (Landings of Carrier Project), Series A,
GNMA-Collateralized, 6.750% due 9/20/32 1,107,610
1,000,000 AAA Harrisonburg, VA Redevelopment & Housing Authority,
Multi-Family Housing Revenue, (Greens of Salem Run Project),
FSA-Insured, 6.000% due 4/1/12 (c) 1,077,610
740,000 NR Maricopa County, AZ IDA, Multi-Family Housing Revenue,
Stanford Court Apartments, Series B, 5.750% due 7/1/08 746,949
910,000 AA Missouri State, Housing Development Community, Multi-Family
Housing Revenue, Series I, 5.500% due 12/1/15 977,504
865,000 AAA Nevada Housing Division, Multi-Unit Housing, Saratoga Palms,
FNMA-Collateralized, 6.250% due 10/1/16 (c) 910,153
See Notes to Financial Statements.
10 Smith Barney Muni Funds | 2003 Semi-Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 2.4% (continued)
$ 95,000 A3* Odessa, TX Housing Development Corp. No. 2, Multi-Family
Revenue Refunding, Chaparral Village, Series A,
6.375% due 12/1/03 $ 95,284
755,000 Aaa* Panhandle, TX Regional Housing Finance, Series A,
GNMA-Collateralized, 6.500% due 7/20/21 849,284
675,000 AAA SCA Tax Exempt Trust, Knox Health Educational & Housing,
FSA-Insured, 7.125% due 1/1/30 705,389
2,530,000 B3* Travis County, TX HFA, Multi-Family Housing Revenue, Agape
Austin Housing Inc., (Lakeview Apartments Project), Series A,
6.250% due 7/1/22 1,946,127
- ------------------------------------------------------------------------------------------------
17,790,159
- ------------------------------------------------------------------------------------------------
Housing: Single-Family -- 0.9%
655,000 AAA Arkansas Housing Development Agency, Single-Family
Mortgage, FHA/VA-Insured, 8.375% due 7/1/10 (d) 802,925
400,000 AAA Arkansas State Development Finance Authority, Single-Family
Mortgage Revenue, Series A, FNMA/GNMA-Collateralized,
6.200% due 7/1/15 417,484
605,000 AA Colorado HFA, Single-Family Mortgage Program, Series D-2,
Sr. Bonds, 6.900% due 4/1/29 (c) 642,425
925,000 Aaa* Jefferson Parish, LA Home Mortgage Authority, Single-Family
Mortgage Revenue, Series G, FNMA/GNMA-Collateralized,
6.300% due 6/1/32 (c) 995,633
230,000 NR Lafayette, LA Public Trust Financing Authority, Single-Family
Mortgage Revenue, FHA-Insured, 7.200% due 4/1/10 (d) 267,382
Massachusetts State HFA, Single-Family Housing Revenue:
1,165,000 AA Series 38, 7.200% due 12/1/26 (c) 1,207,173
1,160,000 AA Series 41, 6.300% due 12/1/14 1,214,706
595,000 AA+ Minnesota State HFA Revenue, Single-Family Mortgage,
Series H, 6.700% due 1/1/18 609,238
425,000 Aa2* Oregon State Housing & Community Services Department,
Mortgage Revenue, Single-Family Mortgage Program,
Series B, 6.875% due 7/1/28 427,444
- ------------------------------------------------------------------------------------------------
6,584,410
- ------------------------------------------------------------------------------------------------
Industrial Development -- 1.7%
1,000,000 NR Alaska Industrial Development & Export Authority Revenue,
Williams Lynxs Alaska Cargo Port LLC,
8.000% due 5/1/23 (b)(c) 1,034,500
1,000,000 Baa3* Albany, NY IDA, Civic Facility Revenue Bonds, (Charitable
Leadership Project), Series A, 6.000% due 7/1/19 (b) 1,068,350
2,000,000 NR Fishhawk Community Development District II Special Assessment
Revenue, Series B, 5.000% due 11/1/07 2,011,560
2,000,000 A- Michigan State Strategic Fund Limited, Obligation Revenue,
Refunding, (Dow Chemical Project), 4.600% due 6/1/14 2,111,400
See Notes to Financial Statements.
11 Smith Barney Muni Funds | 2003 Semi-Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------
Industrial Development -- 1.7% (continued)
Philadelphia, PA Authority for Industrial Development, Series B,
FSA-Insured:
$2,000,000 AAA 5.500% due 10/1/15 $ 2,265,060
1,000,000 AAA 5.500% due 10/1/19 1,108,330
2,000,000 B2* Rockbridge County, VA IDA Revenue, Virginia Horse Center
Foundation, Series C, 6.850% due 7/15/21 2,032,220
1,000,000 NR Sumter Landing Community Development District Special
Assessment Revenue, 6.250% due 5/1/13 1,007,100
- --------------------------------------------------------------------------------------------------
12,638,520
- --------------------------------------------------------------------------------------------------
Life Care -- 1.7%
1,405,000 NR Berks County Municipal Authority, (Phoebe Berks Village Inc.
Project), (Call 5/15/06 @ 102), 7.500% due 5/15/13 (b)(f) 1,600,098
830,000 B3* Colorado Health Facilities Authority, Hospital Revenue Bonds,
National Benevolent, Series A, 6.125% due 9/1/16 500,498
950,000 A2* Harris County, TX Health Facilities Development Corp., (Memorial
Health System Project), (Call 6/1/04 @ 100),
7.125% due 6/1/05 (f) 986,936
1,000,000 A-++ Lee's Summit, MO IDA Health Facilities Revenue, John Knox
Village, 5.750% due 8/15/11 1,102,870
Massachusetts State Development Finance Agency Revenue,
First Mortgage, (Edgecombe Project):
585,000 BBB- Series A, 6.000% due 7/1/11 615,607
1,000,000 BBB- Series B, 5.750% due 7/1/29 1,014,640
1,405,000 AAA Massachusetts State Industrial Finance Agency Revenue,
University Commons Nursing, Series A, FHA-Insured,
6.550% due 8/1/18 1,560,688
2,000,000 NR North Manchester IN Revenue, (Peabody Retirement Community
Project), Series A, 7.125% due 7/1/22 (b) 1,982,360
795,000 NR Orange County, NY IDA, Civic Facility Revenue Bonds, Arden Hill
Life Care Center at Newburgh Inc., 7.000% due 8/1/21 812,442
1,750,000 NR Rainbow City, AL Special Health Care Facilities Financing
Authority, Regency Pointe Inc., Series B, 7.250% due 1/1/06 1,768,725
770,000 AAA Rio Grande Valley, Health Facilities Development Corp., TX
Hospital Revenue, (Valley Baptist Medical Center Project),
MBIA-Insured, 6.250% due 8/1/06 779,309
- --------------------------------------------------------------------------------------------------
12,724,173
- --------------------------------------------------------------------------------------------------
Miscellaneous -- 5.1%
3,000,000 NR Barona Band of Mission Indians, CA GO, 8.250% due 1/1/20 (b) 3,227,310
1,170,000 NR Bonita Springs, FL Vasari Community Development District
Revenue, Capital Improvement, Series B,
6.200% due 5/1/09 (b) 1,195,869
980,000 NR Capital Region Community Development, FL Development District
Revenue, Capital Improvement, Series B,
5.950% due 5/1/06 992,760
See Notes to Financial Statements.
12 Smith Barney Muni Funds | 2003 Semi-Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------
Miscellaneous -- 5.1% (continued)
$2,000,000 NR Gateway Services Community Development District, FL Special
Assessment Revenue, Sun City Center, (Fort Meyers Project),
Series B, 5.500% due 5/1/10 $ 2,001,440
2,785,000 NR Greyhawk Landing Community Development District, FL Special
Assessment Revenue, Series B, 6.250% due 5/1/09 2,834,573
1,000,000 AAA Holland, MI Area Community Swimming Pool Authority GO,
FGIC-Insured, 5.125% due 5/1/19 1,038,440
Illinois Development Finance Authority Revenue:
1,435,000 A Debt Restructure -- East St. Louis, 6.875% due 11/15/05 1,534,388
2,000,000 Aaa* Revolving Fund -- Master Trust, 5.500% due 9/1/17 2,226,120
800,000 AAA Indiana Bond Bank, Special Program, Series A, AMBAC-Insured,
9.750% due 8/1/09 (d) 991,848
1,000,000 Ba2* Lehigh County, PA General Purpose Authority Revenue, Kids
Peace Corp., 5.800% due 11/1/12 969,120
2,030,000 NR Lexington Oaks Community Development District, FL Special
Assessment Revenue, Series B, 5.625% due 5/1/06 2,053,386
755,000 NR Mediterra North Community Development District, FL Capital
Improvement Revenue, Series B, 6.000% due 5/1/08 761,855
790,000 NR Panther Trace Community Development District, FL Special
Assessment Revenue, Series B, 6.500% due 5/1/09 801,724
1,525,000 NR Parklands West Community Development District, FL Special
Assessment Revenue, Series B, 6.000% due 5/1/06 1,541,196
2,290,000 NR Renaissance Community Development District, FL Capital
Improvement Revenue, Series B, 6.250% due 5/1/08 2,344,617
2,780,000 NR Reunion East Community Development District, FL Special
Assessment Revenue, Series B, 5.900% due 11/1/07 2,825,648
3,900,000 D Spokane, WA Downtown Foundation Parking Revenue,
(River Park Square Project), 5.000% due 8/1/08 (g) 2,106,000
1,000,000 A Territory of American Samoa, ACA-Insured, 6.000% due 9/1/08 1,133,570
220,000 AA Tucson, AZ COP, Radian-Insured, 6.000% due 7/1/04 (d) 224,752
1,000,000 NR Village Community Development District No. 5, FL Special
Assessment Revenue, Series B, 5.400% due 5/1/07 1,011,280
705,000 NR Waterlefe Community Development District, FL Capital
Improvement Revenue, Series B, 6.250% due 5/1/10 706,086
2,985,000 NR Wenonah Park Properties Inc. Revenue, MI Bay City Hotel,
7.875% due 4/1/22 3,084,998
1,000,000 AAA West View, PA Municipal Authority, 9.500% due 11/15/14 (b)(d) 1,420,220
- -----------------------------------------------------------------------------------------------
37,027,200
- -----------------------------------------------------------------------------------------------
Pollution Control -- 2.5%
2,610,000 BBB- Carbon County, PA IDA, (Panther Creek Partners Project),
6.650% due 5/1/10 (b)(c) 2,797,868
5,000,000 Ba3* Gulf Coast Industrial Development Authority Texas Solid Waste
Disposal Revenue, (Citgo Petroleum Corp. Project),
7.500% due 5/1/25 4,961,400
See Notes to Financial Statements.
13 Smith Barney Muni Funds | 2003 Semi-Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- -------------------------------------------------------------------------------------------------
Pollution Control -- 2.5% (continued)
$1,500,000 BB+ Nez Perce County, ID PCR, Refunding, Potlatch Corp. Project,
6.125% due 12/1/07 $ 1,520,415
6,000,000 BBB- Ohio State, OH Air Quaility Development Authority Revenue,
Refunding, Cleveland Pollution Control, Series A,
6.000% due 12/1/13 (b) 6,218,640
2,200,000 A- South Charleston WV PCR, Revenue Refunding Union
Carbide-Remarketed 5/1/91, 7.625% due 8/1/05 2,195,930
1,000,000 BB+ Warren County, AR Solid Waste Disposal Revenue, Potlatch Corp.
Project, 7.000% due 4/1/12 1,025,690
- -------------------------------------------------------------------------------------------------
18,719,943
- -------------------------------------------------------------------------------------------------
Public Facilities -- 5.9%
1,000,000 BBB- Austin, TX Convention Enterprises Inc., Convention Center,
First Tier, Series A, 6.600% due 1/1/21 (b) 1,049,070
3,000,000 NR Dauphin County, PA General Authority Revenue, Office and
Packaging, 5.500% due 1/1/08 3,024,540
1,980,000 AAA East Point, GA Building Authority Revenue, FSA-Insured,
zero coupon due 2/1/20 822,334
1,720,000 AAA Evansville Vanderburgh Public Library Leasing Corp.,
First Mortgage, MBIA-Insured, 5.750% due 7/15/18 1,945,888
Florida Municipal Loan Council Revenue, Series A, MBIA-Insured:
1,790,000 AAA 5.250% due 11/1/13 2,006,125
3,175,000 AAA 5.250% due 11/1/16 3,504,311
1,500,000 Aaa* Hamilton County, OH Sales Tax Revenue, Series B,
AMBAC-Insured, 5.250% due 12/1/18 1,609,875
1,125,000 AAA Harris County, TX Houston Sports Authority Revenue, Series G,
MBIA-Insured, 5.250% due 11/15/16 1,228,927
1,025,000 A+ Kentucky Infrastructure Authority, Series A, 5.250% due 6/1/12 1,144,576
2,500,000 AAA Las Vegas New Convention & Visitors Authority Revenue,
AMBAC-Insured, 6.000% due 7/1/14 2,925,550
2,200,000 AAA Longmont Co. Sales & Use Tax Revenue, 5.750% due 11/15/19 2,493,062
2,000,000 AAA Memphis-Shelby County, TN Sports Authority Inc. Revenue,
(Memphis Arena Project), Series A, 5.500% due 11/1/18 2,247,480
Ohio State Building Authority, Series A:
3,000,000 AA 5.375% due 10/1/14 (b) 3,383,400
3,600,000 AAA State Facilities-Administration Building Fund, FSA-Insured,
5.500% due 10/1/14 (b) 4,111,776
Oregon State Department Administrative Services Lottery
Revenue:
1,375,000 AAA Series A, FSA-Insured, 5.500% due 4/1/14 1,565,809
3,500,000 AAA Series B, 5.250% due 4/1/15 (b) 3,860,360
2,000,000 AAA Pennsylvania State Department of General Services, COP,
FSA-Insured, 5.250% due 5/1/16 2,188,380
1,000,000 AAA Providence, RI Public Building Authority, General Revenue,
Series A, MBIA-Insured, 5.375% due 12/15/21 1,081,460
See Notes to Financial Statements.
14 Smith Barney Muni Funds | 2003 Semi-Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
Public Facilities -- 5.9% (continued)
$1,750,000 AA+ Virginia State Public Building Authority, Public Facilities Revenue,
Series A, 5.750% due 8/1/20 $ 1,970,238
1,050,000 AAA Westmoreland County, PA Municipal Authority,
9.125% due 7/1/10 (b)(d) 1,232,669
- ------------------------------------------------------------------------------------------------------
43,395,830
- ------------------------------------------------------------------------------------------------------
Solid Waste -- 0.4%
2,585,000 NR Wasco County, OR Solid Waste Disposal Revenue, (Waste
Connections Inc. Project), 7.000% due 3/1/12 (c) 2,720,506
- ------------------------------------------------------------------------------------------------------
Tax Allocation -- 3.3%
5,000,000 AAA Connecticut State Special Tax Obligation Revenue, Revenue
Refunding-Transportation Infrastructure B,
5.375% due 10/1/15 5,567,700
3,000,000 AAA Denver, CO City & County Excise Tax Revenue, Refunding,
Series A, FSA-Insured, 5.500% due 9/1/14 3,374,010
2,500,000 AAA Hamilton County, IN County Optional Income Tax Revenue,
FSA-Insured, 5.250% due 1/10/20 2,660,725
2,275,000 AAA Illinois State Sales Tax Revenue, 5.500% due 6/15/16 2,547,067
3,000,000 NR Midlothian, TX Development Authority Tax, Increment Contract
Revenue, 7.875% due 11/15/21 3,247,350
3,000,000 AAA Pasco County, FL Optional Gas Tax Revenue, Refunding,
FGIC-Insured, 5.250% due 8/1/11 3,418,290
3,120,000 Aaa* Tampa, FL Occupational License Tax, Series A, FGIC-Insured,
5.375% due 10/1/14 3,521,825
- ------------------------------------------------------------------------------------------------------
24,336,967
- ------------------------------------------------------------------------------------------------------
Tobacco -- 1.7%
Alabama 21st Century Authority, Tobacco Settlement Revenue:
2,330,000 A- 5.750% due 12/1/15 (b) 2,231,557
2,415,000 A- 5.750% due 12/1/17 (b) 2,259,329
Tobacco Settlement Financing Corp.:
2,290,000 BBB NJ, Asset-Backed, 5.500% due 6/1/11 2,212,117
5,000,000 AA- NY, Asset-Backed, Series A-1, Callable, 5.500% due 6/1/16 5,344,000
- ------------------------------------------------------------------------------------------------------
12,047,003
- ------------------------------------------------------------------------------------------------------
Transportation -- 11.5%
3,000,000 AAA Allegheny County, PA Port Authority Special Revenue,
FGIC-Insured, 5.500% due 3/1/16 (b) 3,380,370
3,040,000 AAA Birmingham, AL Airport Authority, Airport Revenue,
MBIA-Insured, 5.500% due 7/1/16 (b) 3,252,040
2,000,000 A Bradley International Airport, Series A, ACA-Insured,
6.375% due 7/1/12 (c) 2,203,720
5,450,000 AAA Butler County, OH Transportation Improvement District, Series A,
5.125% due 4/1/17 (b) 5,880,168
See Notes to Financial Statements.
15 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------------
Transportation -- 11.5% (continued)
Chicago, IL O'Hare International Airport:
$1,500,000 AAA Second Lien Passenger Facility, Series B, AMBAC-Insured,
5.500% due 1/1/16 $ 1,639,575
2,500,000 Ca* Special Facilities Revenue, (United Airlines Project), Series C,
6.300% due 5/1/16 (g) 586,525
Connecticut State Special Tax Obligation Revenue, RITES,
FSA-Insured:
2,000,000 AAA Series A, 9.208% due 10/1/09 (e) 2,510,160
2,000,000 AAA Series B, 9.208% due 10/1/09 (e) 2,454,160
2,000,000 AAA Connecticut State Special Tax Obligation Revenue, Transportation
Infrastructure, Series A, FSA-Insured, 5.375% due 7/1/16 2,229,220
6,400,000 B- Connector 2000 Association Inc., SC Toll Road, Sr. Revenue Bond,
Capital Appreciation, Series B, zero coupon due 1/1/16 1,194,432
3,000,000 CCC Dallas-Fort Worth, TX International Airport Facility Improvement
Corp., Revenue Bonds, American Airlines Inc., Series C,
6.150% mandatory tender 11/1/07 (c) 1,977,480
3,440,000 AAA Delaware River Port Authority, Series A,
9.088% due 1/1/10 4,386,000
1,760,000 Aaa* Greater Cleveland Regional Transit Authority, Capital
Improvement, Series A, 5.625% due 12/1/16 1,983,467
260,000 AAA Houston, TX Airport System Revenue, 9.500% due 7/1/10 (d) 335,689
3,000,000 NR Kenton County, KY Airport Board, Special Facilities Revenue,
(Mesaba Aviation Inc. Project), Series A, 6.625% due 7/1/19 (c) 2,516,160
1,480,000 AAA Louisiana Local Government Environment Facilities and
Community Development Authority Revenue, Series A,
AMBAC-Insured, (Parking Facilities Corp. Garage Project),
5.625% due 10/1/17 1,672,326
1,140,000 AAA Massachusetts Rail Connections Inc., Route 128, Parking Garage
Revenue, Series A, (Call 7/1/09 @ 102), 6.000% due 7/1/13 (f) 1,376,778
2,000,000 Aa3* Massachusetts State Grant Anticipation Notes, Series A,
5.750% due 6/15/15 2,311,640
715,000 AAA Massachusetts State Port Authority Revenue,
13.000% due 7/1/13 (d) 1,115,414
1,000,000 AAA Memphis-Shelby County, TN Airport Authority, Airport Revenue,
Series D, AMBAC-Insured, 6.250% due 3/1/14 (c) 1,163,420
4,000,000 AAA New Jersey State Highway Authority, Garden State Parkway
General Revenue, Refunding, FGIC-Insured, 5.500% due 1/1/11 4,626,840
New Jersey State Turnpike Authority Revenue:
725,000 AAA 6.750% due 1/1/09 (d) 809,948
345,000 AAA 6.000% due 1/1/14 (d) 398,817
New Jersey Transportation Trust Fund Authority:
1,890,000 AAA Series B, (Call 12/15/11 @ 100), 6.000% due 12/15/19 (f) 2,273,462
RITES, MBIA-Insured:
2,500,000 AAA 5.500% due 6/15/16 (b) 2,845,725
2,500,000 AAA Series A, 10.136% due 12/15/09 (e) 3,514,450
1,000,000 AAA Series B, 10.136% due 12/15/09 (e) 1,405,780
See Notes to Financial Statements.
16 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------
Transportation -- 11.5% (continued)
$ 500,000 A Northwest Arkansas Regional Airport Authority Revenue,
5.625% due 2/1/16 $ 544,020
1,895,000 A Pendleton County, KY Multi-County Lease Revenue, Associated
Counties Leasing Trust, Program A, 6.500% due 3/1/19 1,956,910
Philadelphia, PA Parking Authority, Parking Revenue,
FSA-Insured:
2,000,000 AAA 5.625% due 9/1/15 2,256,240
1,500,000 AAA 5.625% due 9/1/19 1,661,550
1,375,000 NR Pittsburgh, PA Public Parking Authority, Parking Revenue, St.
Francis General Hospital, 6.625% due 10/1/12 (b)(d) 1,609,919
10,000,000 BB Pocahontas Parkway Association, VA Toll Road, Sr. Revenue
Bond, Capital Appreciation, Series B, zero coupon due
8/15/19 2,620,900
2,000,000 AAA Puerto Rico Highway and Transportation Authority Highway
Revenue, Ref Series AA, 5.000% due 7/1/26 2,242,500
4,530,000 AAA South Carolina Transportation Infrastructure Bank Revenue,
Series A, 5.000% due 10/1/15 4,955,458
1,000,000 AAA St. Louis, MO Airport Revenue, Airport Development Program,
Series A, MBIA-Insured, 5.625% due 7/1/16 1,117,120
1,725,000 AAA Tulsa, OK Airports Improvement Trust General Revenue, Series A,
6.000% due 6/1/14 (c) 1,945,300
2,915,000 AA- Wisconsin State Transportation Revenue, Series A,
5.500% due 7/1/11 (b) 3,341,377
- --------------------------------------------------------------------------------------------------
84,295,060
- --------------------------------------------------------------------------------------------------
Utilities -- 8.8%
45,000 AAA Brownsville, TX Utility System Revenue, 9.400% due 1/1/13 (d) 59,494
4,000,000 BBB Burlington, KS Environmental Improvement Revenue, Kansas City
Power & Light, Refunding, 4.750% due 9/1/15 (b) 4,227,680
70,000 AAA Chillicothe, MO Electric Revenue, AMBAC-Insured,
10.250% due 9/1/06 (d) 80,335
1,750,000 AAA Cleveland, OH Public Power System Revenue, AMBAC-Insured,
5.500% due 11/15/15 1,988,752
4,000,000 AAA Energy Northwest Washingtion Electric Revenue, (Project
Number 1), Refunding, Series A, 5.500% due 7/1/14 4,504,840
185,000 AAA Farmington, NM Utilities Systems Revenue, AMBAC-Insured,
9.875% due 1/1/08 (d) 216,474
2,500,000 AAA Georgia Municipal Electric Authority Revenue, (Combustion
Turbine Project), Series A, MBIA-Insured,
5.250% due 11/1/19 2,656,050
600,000 A Georgia Municipal Gas Authority Revenue, (Southern Storage
Gas Project), 6.300% due 7/1/09 632,766
25,000 AAA Idaho Falls, ID Electric Revenue, 10.250% due 4/1/06 (d) 28,285
See Notes to Financial Statements.
17 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------
Utilities -- 8.8% (continued)
$3,000,000 AAA Indianapolis Local Public Improvement Bond Bank, (Waterworks
Project), Series A, 5.500% due 7/1/19 $ 3,336,120
2,500,000 AAA Intermountain Power Agency, UT Power Supply Revenue,
Refunding, Series B, MBIA-Insured, 5.750% due 7/1/19 2,790,175
Jacksonville Beach, FL Utility Revenue:
2,620,000 AAA 7.900% due 10/1/14 (d) 3,316,396
2,145,000 Aaa* 5.000% due 4/1/18 2,260,036
7,000,000 AAA Jefferson County AL Sewer Revenue, Refunding, Series B 8,
5.250% due 2/1/16 7,635,600
Muscatine, IA Electric Revenue:
130,000 AAA 9.500% due 1/1/04 (d) 132,687
4,295,000 AAA 9.700% due 1/1/13 (d) 5,818,909
North Carolina, Eastern Municipal Power Agency, Power System
Revenue:
550,000 A Series B, ACA/CBI-Insured, 5.650% due 1/1/16 602,272
2,000,000 BBB Series D, 5.500% due 1/1/14 2,179,720
North Carolina Municipal Power Agency No. 1, Catawba Electric
Revenue:
3,775,000 AAA 10.500% due 1/1/10 (b)(d)(h) 4,825,054
3,000,000 A Series B, ACA/CBI-Insured, 6.375% due 1/1/13 (b) 3,372,780
1,470,000 AA Orlando, FL Utilities Commission Water & Electric Revenue,
Series A, 5.250% due 10/1/13 1,639,359
90,000 AAA Owensboro, KY Electric, Light & Power Revenue,
10.500% due 1/1/04 (d) 92,079
Philadelphia, PA Gas Works Revenue, Third Series:
3,240,000 AAA 5.500% due 8/1/19 3,568,244
1,675,000 AAA FSA-Insured, 5.500% due 8/1/17 1,869,752
Provo, UT Electric Revenue:
1,055,000 AAA 10.125% due 4/1/15 (d) 1,497,594
1,180,000 AAA MBIA-Insured, 10.125% due 4/1/15 (d) 1,675,034
10,000 AAA Series A, AMBAC-Insured, 10.375% due 9/15/15 (d) 14,223
3,000,000 BBB+ York County, VA Industrial Development Authority PCR, Electric &
Power Co., Refunding Market, 5.500% due 7/1/09 (b) 3,214,320
- --------------------------------------------------------------------------------------------------
64,235,030
- --------------------------------------------------------------------------------------------------
Water and Sewer -- 9.8%
2,315,000 AAA Boston, MA Water & Sewer Community Revenue,
10.875% due 1/1/09 (b)(h) 2,912,849
5,000,000 AAA California State Department Water Resources Power Supply
Revenue, Series A, AMBAC-Insured, 5.375% due 5/1/18 (b) 5,484,650
1,285,000 AAA Charleston, SC Waterworks & Sewer Revenue,
10.375% due 1/1/10 (b)(d) 1,646,124
See Notes to Financial Statements.
18 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------
Water and Sewer -- 9.8% (continued)
$2,000,000 AA+ Chicago Metropolitan Water Reclamation District Greater
Chicago, Capital Improvement, Series A, 5.500% due 12/1/14 $ 2,329,080
1,480,000 AAA Denver, CO City & County Wastewater Revenue, FGIC-Insured,
5.250% due 11/1/14 1,663,979
2,000,000 AA Fort Worth, TX Water & Sewer Revenue, 5.625% due 2/15/18 2,238,120
1,630,000 AAA Fulton County, GA Water and Sewer Revenue,
5.000% due 1/1/16 1,757,189
Houston, TX Water & Sewer System Revenue, Refunding, Jr. Lien:
1,000,000 AAA Series A, FSA-Insured, 5.500% due 12/1/17 1,122,000
4,545,000 AAA Series B, 5.750% due 12/1/16 5,153,712
3,375,000 AAA Las Vegas Valley, NV Water District, Refunding & Water
Improvement, Series A, FGIC-Insured, 5.250% due 6/1/11 3,839,197
5,350,000 AAA Los Angeles, CA Water & Power Revenue, Power System,
Series AA1, 5.250% due 7/1/19 5,747,024
4,000,000 AAA Michigan Muni Bond Authority Revenue, Clean Water Revolving
Fund, 5.250% due 10/1/16 4,416,960
2,000,000 AAA Minnesota Public Facilities Authority Water PCR, Series A,
5.000% due 3/1/11 2,247,020
1,500,000 Aaa* Missouri State Environmental Improvement & Energy Resources
Authority, Water Pollution State Revolving Funds Programs,
Series A, 5.250% due 1/1/16 1,660,125
45,000 BBB- Nevada, MO Waterworks System Revenue,
10.000% due 10/1/07 (d) 52,643
Ohio State Water Development Authority Revenue:
7,700,000 AAA 9.375% due 12/1/10 (b)(d) 9,396,464
1,965,000 AAA Safe Water, Series 3, 9.000% due 12/1/10 (b)(d) 2,268,239
3,095,000 Aaa* Passaic Valley, NJ Sewage Commissioners Sewer System,
Series E, AMBAC-Insured, 5.625% due 12/1/17 3,496,205
985,000 NR Port St. Lucie, FL Special Assessment Revenue, Series A,
6.375% due 9/1/11 1,007,310
240,000 AAA Ringwood Boro, NJ Sewage Authority, 9.875% due 1/1/14 320,597
1,000,000 Aaa* Spanish Fork City, UT Water Revenue, FSA-Insured,
5.500% due 6/1/17 1,120,490
205,000 AAA Tamarac, FL Water & Sewer Utilities Revenue, AMBAC-Insured,
9.250% due 10/1/10 (b)(d) 257,615
3,500,000 AAA Texas Water Development Board Revenue, Revolving Fund,
Sr. Lien, Series B, 5.250% due 7/15/17 3,766,910
5,035,000 AAA Virginia State Resources Authority Clean Water Revenue,
Revolving Fund, 5.400% due 10/1/18 5,551,742
840,000 AAA West Coast Regional Water Supply Authority, FL Capital
Improvement Revenue, (Hillsborough County Project),
AMBAC-Insured, 10.300% due 10/1/04 (d) 877,313
See Notes to Financial Statements.
19 Smith Barney Muni Funds | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------
Water and Sewer -- 9.8% (continued)
$1,000,000 AAA Wichita Falls, TX Water & Sewer Revenue, Priority Lien,
AMBAC-Insured, 5.375% due 8/1/19 (b) $ 1,084,580
- -----------------------------------------------------------------------------------------
71,418,137
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $705,763,590**) $732,354,585
- -----------------------------------------------------------------------------------------
(a) All ratings are by Standard & Poor's Ratings Service, except those which
are identified by an asterisk (*), are rated by Moody's Investors Service
and those which are identified by a (++) are rated by Fitch Ratings.
(b) All or a portion of this security is segregated for open futures contracts
commitments (Note 5).
(c) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(d) Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(e) Inverse floating rate security-coupon varies inversely with level of
short-term tax-exempt interest rates.
(f) Pre-Refunded bonds are escrowed with U.S. government securities and are
considered by the manager to be triple-A rated even if issuer has not
applied for new ratings.
(g) Security is currently in default.
(h) All or a portion of this security is held as collateral for open futures
contracts commitments (Note 5).
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 21 and 22 for definitions of ratings and certain abbreviations.
See Notes to Financial Statements.
20 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. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issue only in
a small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circum- stances and economic
conditions than bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
BB, B and -- Bonds rated "BB", "B" and "CCC" are regarded, on balance, as
CCC predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms
of the obligation. BB indicates the lowest degree of
spec- ulation and C the highest degree of speculation. While
such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
D -- Bonds rated "D" are in default, and payment of interest and/or
repayment of princi- pal is in arrears.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each generic rating from "Aa" to "Caa", where 1 is the highest and 3
the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large 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 some- what larger than in Aaa securities.
A -- Bonds rated "A" possess many favorable investment attributes and are
to be consid- ered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack out- standing investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds rated "B" 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. Such issues may be in default
or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds rated "Ca" represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
shortcomings.
21 Smith Barney Muni Funds | 2003 Semi-Annual Report
BOND RATINGS (UNAUDITED) (CONTINUED)
Fitch Ratings ("Fitch") -- Ratings of "A" and "BB" may be modified by the
addition of a plus (+) or minus (-) sign to show relative standings within the
major rating categories.
A -- Bonds rated "A" are considered to be investment-grade and of high
credit quality. The obligor's ability to pay interest and/or
dividends and repay principal is consid- ered to be strong, but
may be more vulnerable to adverse changes in economic con- ditions
and circumstances than securities with higher ratings.
BB -- Bonds rated "BB" carry the possibility of credit risk developing,
particularly as the result of adverse economic change over time.
Business or financial alternatives may, however, be available to
allow financial commitments to be met. Securities rated in this
category are not considered by Fitch to be investment grade.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's
or Fitch.
SHORT-TERM SECURITY RATINGS (UNAUDITED)
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 over- whelming 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 rating 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.
ABBREVIATIONS* (UNAUDITED)
ABAG --Association of Bay Area Governments
ACA --American Capital Access
AIG --American International Guaranty
AMBAC --American Municipal Bond Assurance Corporation
BIG --Bond Investors Guaranty
CBI --Certificate of Bond Insurance
CGIC --Capital Guaranty Insurance Company
CONNIE --College Construction Loan Insurance Association
LEE
COP --Certificate of Participation
EDA --Economic Development Authority
FLAIRS --Floating Adjustable Interest Rate Securities
FGIC --Financial Guaranty Insurance Company
FHA --Federal Housing Administration
FHLMC --Federal Home Loan Mortgage Corporation
FNMA --Federal National Mortgage Association
FSA --Financial Security Assurance
GIC --Guaranteed Investment Contract
GNMA --Government National Mortgage Association
GO --General Obligation
HFA --Housing Finance Authority
IBC --Insured Bond Certificates
IDA --Industrial Development Authority
IDB --Industrial Development Board
IDR --Industrial Development Revenue
INFLOS --Inverse Floaters
ISD --Independent School District
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance Corporation
MVRICS --Municipal Variable Rate Inverse Coupon Security
PCFA --Pollution Control Financing Authority
PCR --Pollution Control Revenue
PSFG --Permanent School Fund Guaranty
RIBS --Residual Interest Bonds
RITES --Residual Interest Tax-Exempt Securities
VA --Veterans Administration
VRDN --Variable Rate Demand Note
VRWE --Variable Rate Wednesday Demand
- --------
*Abbreviations may or may not appear in the schedule of investments.
22 Smith Barney Muni Funds | 2003 Semi-Annual Report
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) SEPTEMBER 30, 2003
ASSETS:
Investments, at value (Cost -- $705,763,590) $732,354,585
Cash 6,059,023
Interest receivable 13,006,050
Receivable for securities sold 5,591,710
Receivable for Fund shares sold 3,140,441
- ------------------------------------------------------------------------------------------------
Total Assets 760,151,809
- ------------------------------------------------------------------------------------------------
LIABILITIES:
Payable to broker -- variation margin 2,628,125
Payable for securities purchased 2,196,400
Payable for Fund shares reacquired 848,233
Management fee payable 305,838
Distribution plan fees payable 97,112
Accrued expenses 202,963
- ------------------------------------------------------------------------------------------------
Total Liabilities 6,278,671
- ------------------------------------------------------------------------------------------------
Total Net Assets $753,873,138
- ------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 114,004
Capital paid in excess of par value 756,338,751
Undistributed net investment income 1,273,770
Accumulated net realized loss from investment transactions and futures contracts (22,752,589)
Net unrealized appreciation of investments and futures contracts 18,899,202
- ------------------------------------------------------------------------------------------------
Total Net Assets $753,873,138
- ------------------------------------------------------------------------------------------------
Shares Outstanding:
Class A 55,297,235
Class B 839,158
Class L 48,425,111
Class O 4,995,219
Class Y 4,447,595
Net Asset Value:
Class A (and redemption price) $6.61
Class B (and redemption price) $6.61
Class L (and redemption price) $6.62
Class O * $6.62
Class Y (and redemption price) $6.61
Maximum Public Offering Price Per Share:
Class A (net asset value plus 2.04% of net asset value per share) $6.74
Class O (net asset value plus 1.01% of net asset value per share) $6.69
- ------------------------------------------------------------------------------------------------
*Redemption price is NAV of Class O shares reduced by a 1.00% contingent
deferred sales charge if shares are redeemed within one year from purchase
payment (See Note 3).
See Notes to Financial Statements.
23 Smith Barney Muni Funds | 2003 Semi-Annual Report
STATEMENT OF OPERATIONS (UNAUDITED)
For the Six Months Ended September 30, 2003
INVESTMENT INCOME:
Interest $19,636,803
- ------------------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 3) 1,869,972
Distribution plan fees (Note 6) 1,575,357
Registration fees 109,844
Shareholder servicing fees (Note 6) 66,833
Custody 64,050
Shareholder communications (Note 6) 46,299
Audit and legal 25,437
Trustees' fees 4,575
Other 7,686
- ------------------------------------------------------------------------------------------
Total Expenses 3,770,053
- ------------------------------------------------------------------------------------------
Net Investment Income 15,866,750
- ------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 4 AND 5):
Realized Gain (Loss) From:
Investment transactions (699,732)
Futures contracts 7,682,231
- ------------------------------------------------------------------------------------------
Net Realized Gain 6,982,499
- ------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of period 22,950,493
End of period 18,899,202
- ------------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (4,051,291)
- ------------------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 2,931,208
- ------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $18,797,958
- ------------------------------------------------------------------------------------------
See Notes to Financial Statements.
24 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 $ 15,866,750 $ 29,429,701
Net realized gain (loss) 6,982,499 (12,436,983)
Increase (decrease) in net unrealized appreciation (4,051,291) 24,743,835
- ----------------------------------------------------------------------------------
Increase in Net Assets From Operations 18,797,958 41,736,553
- ----------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTES 2 AND 7):
Net investment income (14,946,757) (29,296,012)
In excess of net investment income -- (1,016,197)
- ----------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to
Shareholders (14,946,757) (30,312,209)
- ----------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 177,166,208 576,187,125
Net asset value of shares issued for reinvestment
of dividends 9,190,523 19,053,976
Cost of shares reacquired (171,234,663) (385,682,504)
- ----------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 15,122,068 209,558,597
- ----------------------------------------------------------------------------------
Increase in Net Assets 18,973,269 220,982,941
NET ASSETS:
Beginning of period 734,899,869 513,916,928
- ----------------------------------------------------------------------------------
End of period* $ 753,873,138 $ 734,899,869
- ----------------------------------------------------------------------------------
* Includes undistributed net investment income of: $1,273,770 $353,777
- ----------------------------------------------------------------------------------
See Notes to Financial Statements.
25 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Significant Accounting Policies
The Limited Term Portfolio ("Fund"), a separate diversified 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, New York, Pennsylvania, National,
California Money Market, New York Money Market and Massachusetts 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 quoted bid and asked prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities for which market quotations are not available will be valued in good
faith at fair value by or under the direction of the Board of Trustees; (d)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (e) gains or losses on the
sale of securities are calculated by using the specific identification method;
(f) interest income, adjusted for amortization of premium and accretion of
discount, is recorded on an accrual basis; (g) dividends and distributions to
shareholders are recorded on the ex-dividend date; (h) class specific expenses
are charged to each Fund and each class; management fees and general fund
expenses are allocated on the basis of relative net assets by class or on
another reasonable basis; (i) the Fund intends to comply with the applicable
provisions of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise
taxes; (j) the character of income and gains to be distributed is determined in
accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America; 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
26 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 gain
distributions, if any, are taxable to shareholders, and are declared and paid
at least annually.
3. Management Agreement and Transactions with Affiliated Persons
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund. The
Fund pays SBFM a management fee calculated at an annual rate of 0.50% of the
Fund's average daily net assets. This fee is calculated daily and paid monthly.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Fund's transfer agent. PFPC Inc. ("PFPC") acts as the Fund's sub-transfer
agent. CTB receives account fees and asset-based fees that vary according to
the size and type of account. PFPC is responsible for shareholder recordkeeping
and financial processing for all shareholder accounts and is paid by CTB. For
the six months ended September 30, 2003, the Fund paid transfer agent fees of
$27,549 to CTB.
Citigroup Global Markets Inc. ("CGM"), another indirect wholly-owned subsidiary
of Citigroup, acts as the Fund's distributor.
There are maximum initial sales charges of 2.00% and 1.00% for Class A and O
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
5.00% on Class B shares, which applies if redemption occurs within one year
from purchase payment and declines thereafter by 1.00% per year until no
27 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
CDSC is incurred. There is a CDSC of 1.00% on Class A shares, which applies if
redemption occurs within one year from purchase payment. This CDSC only applies
to those purchases of Class A shares, which, when combined with current
holdings of Class A shares, equal or exceed $500,000 in the aggregate. These
purchases do not incur an initial sales charge. Class O shares also have a
1.00% CDSC, which applies if redemption occurs within one year from purchase
payment.
For the six months ended September 30, 2003, CGM received sales charges of
approximately $323,000 and $6,000 on sales of the Fund's Class A and O 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 $23,000 $2,000 $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 $134,596,738
- -----------------------------------------------------------------------------
Sales 119,762,369
- -----------------------------------------------------------------------------
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 $36,073,484
Gross unrealized depreciation (9,482,489)
-----------------------------------------------------------------------------
Net unrealized appreciation $26,590,995
-----------------------------------------------------------------------------
28 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 contracts. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received and recognized as assets due from or liabilities due to
broker, depending upon whether unrealized gains or losses are incurred. When
the contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of ) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts typically
to hedge a portion of its portfolio. The Fund bears the market risk that arises
from changes in the value of the financial instruments and securities indices.
At September 30, 2003, the Fund had the following open futures contracts:
# of Basis Market Unrealized
To Sell: Contracts Expiration Value Value Loss
- -------------------------------------------------------------------------------------------
20 Year U.S. Treasury Bond, 6.000% 1,450 12/03 $10,319,918 $2,628,125 $(7,691,793)
- -------------------------------------------------------------------------------------------
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, L and O shares calculated at the annual rate of
0.15% of the average daily net assets of each respective class. The Fund also
pays a distribution fee with respect to Class B, L and O shares calculated at
the annual rate of 0.50%, 0.60% and 0.20%, of the average daily net assets of
each class, respectively. For the six months ended September 30, 2003, total
Rule 12b-1 Distribution Plan fees incurred, which are accrued daily and paid
monthly, were as follows:
Class A Class B Class L Class O
---------------------------------------------------------------------
Rule 12b-1 Distribution Plan Fees $272,909 $15,331 $1,227,243 $59,874
---------------------------------------------------------------------
29 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
For the six months ended September 30, 2003, total Shareholder Servicing fees
were as follows:
Class A Class B Class L Class O Class Y
------------------------------------------------------------------
Shareholder Servicing Fees $22,692 $183 $38,430 $5,490 $38
------------------------------------------------------------------
For the six months ended September 30, 2003, total Shareholder Communication
expenses were as follows:
Class A Class B Class L Class O Class Y
-----------------------------------------------------------------
Shareholder Communication
Expenses $25,620 $183 $16,104 $4,026 $366
-----------------------------------------------------------------
7. Distributions Paid to Shareholders by Class
Six Months Ended Year Ended
September 30, 2003 March 31, 2003+
- -------------------------------------------------------------------------------------
Class A
Net investment income $7,776,447 $15,327,148
In excess of net investment income -- 531,657
- ------------------------------------------------------------------------------------
Total $7,776,447 $15,858,805
- ------------------------------------------------------------------------------------
Class B
Net investment income $ 90,937 $ 32,778
In excess of net investment income -- 1,137
- ------------------------------------------------------------------------------------
Total $ 90,937 $ 33,915
- ------------------------------------------------------------------------------------
Class L
Net investment income $5,970,183 $11,775,543
In excess of net investment income -- 408,460
- ------------------------------------------------------------------------------------
Total $5,970,183 $12,184,003
- ------------------------------------------------------------------------------------
Class O
Net investment income $ 687,823 $ 1,635,483
In excess of net investment income -- 56,730
- ------------------------------------------------------------------------------------
Total $ 687,823 $ 1,692,213
- ------------------------------------------------------------------------------------
Class Y
Net investment income $ 421,367 $ 525,060
In excess of net investment income -- 18,213
- ------------------------------------------------------------------------------------
Total $ 421,367 $ 543,273
- ------------------------------------------------------------------------------------
+For Class B shares, transactions are for the period January 13, 2003
(inception date) to March 31, 2003.
30 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. Shares of Beneficial Interest
At September 30, 2003, 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. In addition, Class O shares are available for purchase only by
former Class L shareholders.
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 7,689,170 $ 50,741,255 23,718,817 $ 156,478,803
Shares issued on reinvestment 672,388 4,432,333 1,406,425 9,234,972
Shares reacquired (8,510,544) (56,179,418) (13,975,698) (92,002,465)
- -------------------------------------------------------------------------------------
Net Increase (Decrease) (148,986) $ (1,005,830) 11,149,544 $ 73,711,310
- -------------------------------------------------------------------------------------
Class B
Shares sold 297,063 $ 1,953,163 618,342 $ 4,062,715
Shares issued on reinvestment 9,419 62,100 3,579 23,490
Shares reacquired (88,864) (585,821) (381) (2,497)
- -------------------------------------------------------------------------------------
Net Increase 217,618 $ 1,429,442 621,540 $ 4,083,708
- -------------------------------------------------------------------------------------
Class L
Shares sold 15,616,129 $ 103,429,227 60,113,599 $ 397,113,276
Shares issued on reinvestment 627,539 4,142,695 1,292,221 8,504,172
Shares reacquired (16,730,515) (110,439,365) (41,256,559) (271,618,070)
- -------------------------------------------------------------------------------------
Net Increase (Decrease) (486,847) $ (2,867,443) 20,149,261 $ 133,999,378
- -------------------------------------------------------------------------------------
Class O
Shares sold 82,125 $ 542,563 230,774 $ 1,523,695
Shares issued on reinvestment 65,870 434,683 166,055 1,091,456
Shares reacquired (485,943) (3,206,454) (1,148,527) (7,550,836)
- -------------------------------------------------------------------------------------
Net Decrease (337,948) $ (2,229,208) (751,698) $ (4,935,685)
- -------------------------------------------------------------------------------------
Class Y
Shares sold 3,092,579 $ 20,500,000 2,562,915 $ 17,008,636
Shares issued on reinvestment 18,047 118,712 30,210 199,886
Shares reacquired (124,840) (823,605) (2,193,120) (14,508,636)
- -------------------------------------------------------------------------------------
Net Increase 2,985,786 $ 19,795,107 400,005 $ 2,699,886
- -------------------------------------------------------------------------------------
+ For Class B shares, transactions are for the period January 13, 2003
(inception date) to March 31, 2003.
31 Smith Barney Muni Funds | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
32 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 $6.57 $6.40 $6.51 $6.36 $6.78 $6.76
- ---------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(3)/ 0.15 0.31 0.34 0.34 0.32 0.32
Net realized and unrealized
gain (loss)/(3)/ 0.03 0.17 (0.10) 0.16 (0.42) 0.03
- ---------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.18 0.48 0.24 0.50 (0.10) 0.35
- ---------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.14) (0.30) (0.35) (0.35) (0.32) (0.33)
In excess of net investment income -- (0.01) (0.00)* -- -- (0.00)*
- ---------------------------------------------------------------------------------------------
Total Distributions (0.14) (0.31) (0.35) (0.35) (0.32) (0.33)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $6.61 $6.57 $6.40 $6.51 $6.36 $6.78
- ---------------------------------------------------------------------------------------------
Total Return 2.78%++ 7.64% 3.70% 8.06% (1.46)% 5.29%
- ---------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $365 $364 $284 $222 $236 $311
- ---------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(4)/ 0.73%+ 0.75% 0.72% 0.72% 0.75% 0.72%
Net investment income/(3)/ 4.51+ 4.64 5.26 5.41 4.97 4.72
- ---------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 57% 53% 49% 108% 52%
- ---------------------------------------------------------------------------------------------
(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
which requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, the
ratio of net investment income to average net assets would have been 5.24%.
Per share, 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 per share was less than $0.01.
(4) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.85%.
* 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.
33 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 B Shares 2003/(1)(2)/ 2003/(2)(3)/
- -------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.57 $6.57
- ----------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.13 0.05
Net realized and unrealized gain 0.04 0.02
- ----------------------------------------------------------------------------------------
Total Income From Operations 0.17 0.07
- ----------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.13) (0.07)
In excess of net investment income -- (0.00)*
- ----------------------------------------------------------------------------------------
Total Distributions (0.13) (0.07)
- ----------------------------------------------------------------------------------------
Net Asset Value, End of Period $6.61 $6.57
- ----------------------------------------------------------------------------------------
Total Return++ 2.54% 1.07%
- ----------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $5,545 $4,084
- ----------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.21% 1.31%
Net investment income 4.01 4.14
- ----------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 57%
- ----------------------------------------------------------------------------------------
(1) For the six months ended September 30, 2003 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period January 13, 2003 (inception date) to March 31, 2003.
* 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.
34 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)(3)/
- -----------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $6.58 $6.41 $6.46
- -------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(4)/ 0.13 0.27 0.08
Net realized and unrealized gain (loss)/(4)/ 0.03 0.17 (0.04)
- -------------------------------------------------------------------------------
Total Income From Operations 0.16 0.44 0.04
- -------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.12) (0.26) (0.09)
In excess of net investment income -- (0.01) --
- -------------------------------------------------------------------------------
Total Distributions (0.12) (0.27) (0.09)
- -------------------------------------------------------------------------------
Net Asset Value, End of Period $6.62 $6.58 $6.41
- -------------------------------------------------------------------------------
Total Return 2.46%++ 6.99% 0.58%++
- -------------------------------------------------------------------------------
Net Assets, End of Period (millions) $320 $322 $184
- -------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(5)/ 1.35%+ 1.35% 1.32%+
Net investment income/(4)/ 3.91+ 4.02 4.68+
- -------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 57% 53%
- -------------------------------------------------------------------------------
(1) For the six months ended September 30, 2003 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period December 19, 2001 (inception date) to March 31, 2002.
(4) Effective April 1, 2001, the Fund adopted a change in the accounting method
which requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the period ended March 31, 2002,
the ratio of net investment income to average net assets would have been
4.65%. Per share, 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 per share was less than $0.01.
(5) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.45%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
35 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 O Shares/(1)/ 2003/(2)(3)/ 2003/(3)/ 2002/(3)/ 2001/(3)/ 2000/(3)/ 1999/(3)(4)/
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.58 $6.41 $6.52 $6.37 $6.79 $6.76
- ----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(5)/ 0.14 0.29 0.33 0.33 0.31 0.31
Net realized and unrealized
gain (loss)/(5)/ 0.03 0.18 (0.11) 0.15 (0.43) 0.03
- ----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.17 0.47 0.22 0.48 (0.12) 0.34
- ----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.13) (0.29) (0.33) (0.33) (0.30) (0.31)
In excess of net investment
income -- (0.01) (0.00)* -- -- (0.00)*
- ----------------------------------------------------------------------------------------------------------
Total Distributions (0.13) (0.30) (0.33) (0.33) (0.30) (0.31)
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $6.62 $6.58 $6.41 $6.52 $6.37 $6.79
- ----------------------------------------------------------------------------------------------------------
Total Return 2.66%++ 7.38% 3.48% 7.82% (1.69)% 5.04%
- ----------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $33,047 $35,079 $39,009 $32,157 $33,113 $41,844
- ----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(6)/ 0.97%+ 0.98% 0.95% 0.95% 0.98% 0.94%
Net investment income/(5)/ 4.28+ 4.42 5.04 5.18 4.74 4.50
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 57% 53% 49% 108% 52%
- ----------------------------------------------------------------------------------------------------------
(1) On December 19, 2001, Class L shares were renamed Class O shares.
(2) For the six months ended September 30, 2003 (unaudited).
(3) Per share amounts have been calculated using the monthly average shares
method.
(4) On June 12, 1998, Class C shares were renamed Class L shares.
(5) Effective April 1, 2001, the Fund adopted a change in the accounting method
which requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002,
those amounts would have been $0.32, $0.10 and 5.01% for net investment
income, net realized and unrealized loss and the ratio of net investment
income to average net assets, respectively. Per share, ratios and
supplemental data for the periods prior to April 1, 2001 have not been
restated to reflect this change in presentation.
(6) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.05%.
* 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.
36 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 Y Shares 2003/(1)(2)/ 2003/(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/ 1999/(2)(3)/
- -----------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $6.57 $6.40 $6.51 $6.36 $6.78 $6.82
- ------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(4)/ 0.16 0.32 0.36 0.36 0.33 0.12
Net realized and unrealized
gain (loss)/(4)/ 0.03 0.17 (0.11) 0.15 (0.42) (0.02)
- ------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.19 0.49 0.25 0.51 (0.09) 0.10
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.15) (0.31) (0.36) (0.36) (0.33) (0.14)
In excess of net investment income -- (0.01) (0.00)* -- -- (0.00)*
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.15) (0.32) (0.36) (0.36) (0.33) (0.14)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $6.61 $6.57 $6.40 $6.51 $6.36 $6.78
- ------------------------------------------------------------------------------------------------------
Total Return 2.86%++ 7.83% 3.89% 8.26% (1.31)% 1.46%++
- ------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $29,391 $9,604 $6,797 $12,030 $12,843 $45,408
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(5)/ 0.53%+ 0.56% 0.55% 0.54% 0.55% 0.53%+
Net investment income/(4)/ 4.93+ 4.80 5.47 5.59 5.09 4.65+
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 57% 53% 49% 108% 52%
- ------------------------------------------------------------------------------------------------------
(1) For the six months ended September 30, 2003 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period November 12, 1998 (inception date) to March 31, 1999.
(4) Effective April 1, 2001, the Fund adopted a change in the accounting method
which 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 5.44%.
Per share, 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 per share was less than $0.01.
(5) 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 $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
37 Smith Barney Muni Funds | 2003 Semi-Annual Report
SMITH BARNEY
MUNI FUNDS
TRUSTEES INVESTMENT MANAGER
Lee Abraham Smith Barney Fund
Allan J. Bloostein Management LLC
Jane F. Dasher
Donald R. Foley DISTRIBUTOR
R. Jay Gerken, CFA Citigroup Global Markets Inc.
Chairman
Richard E. Hanson, Jr. CUSTODIAN
Paul Hardin State Street Bank and
Roderick C. Rasmussen Trust Company
John P. Toolan
TRANSFER AGENT
OFFICERS Citicorp Trust Bank, fsb.
R. Jay Gerken, CFA 125 Broad Street, 11th Floor
President and Chief New York, New York 10004
Executive Officer
SUB-TRANSFER AGENT
Andrew B. Shoup* PFPC Inc.
Senior Vice President and P.O. Box 9699
Chief Administrative Providence, Rhode Island
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
Limited Term 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 -- Limited Term Portfolio, but it may also be used as
sales literature when preceded or accompanied by the current Prospectus which
gives details about changes, 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
FD0804 11/03 03-5645
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