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 811-5066
Smith Barney Arizona Municipals Fund
(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: May 31
Date of reporting period: November 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
SMITH BARNEY
ARIZONA MUNICIPALS FUND INC.
CLASSIC SERIES | SEMI-ANNUAL REPORT | NOVEMBER 30, 2003
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed.(R) is a registered service mark of
Citigroup Global Markets Inc.
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
WHAT'S INSIDE
Letter from the Chairman.................................... 1
Schedule of Investments..................................... 3
Statement of Assets and Liabilities......................... 9
Statement of Operations..................................... 10
Statements of Changes in Net Assets......................... 11
Notes to Financial Statements............................... 12
Financial Highlights........................................ 18
LETTER FROM THE CHAIRMAN
[PHOTO]
R. JAY GERKEN, CFA
Chairman, President and Chief Executive Officer
Dear Shareholder,
I am pleased to report that your fund, the Smith Barney Arizona Municipals Fund
Inc. (Class A Shares), outperformed the Lehman Brothers Municipal Bond Index/i/
as well as the fund's Lipper Arizona municipal debt funds category average
during the six months ended November 30, 2003. During this six-month time
frame, Class A shares of the fund, excluding sales charges, returned 4.16%. In
comparison, the unmanaged Lehman Brothers Municipal Bond Index returned 0.19%
and the fund's Lipper Arizona municipal debt funds category average returned
0.11% for the same period./1/ Certain investors may be subject to the federal
Alternative Minimum Tax, and state and local taxes may apply. Capital gains, if
any, are fully taxable. Please consult your personal tax adviser.
PERFORMANCE SNAPSHOT
AS OF NOVEMBER 30, 2003
(excluding sales charges)
6 Months
Class A Shares 4.16%
Lehman Brothers Municipal Bond Index 0.19%
Lipper Arizona Municipal Debt Funds Category Average/1/ 0.11%
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.
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. Results for other share classes will vary.
Certain investors may be subject to the federal Alternative Minimum Tax, and
state and local taxes may apply. Capital gains, if any, are fully taxable.
Please consult your personal tax adviser.
All index performance reflects no deduction for fees, expenses or taxes. The
Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond
market with maturities of at least one year. Please note that an investor
cannot invest directly in an index.
/1/Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended November 30, 2003,
calculated among 36 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any, and excluding sales
charges.
1 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
Keep in mind that given the budgetary challenges facing Arizona and the
uncertain interest rate environment, investing in municipal bonds with a
professional fund manager may be a more prudent strategy than buying these
bonds directly. Fund managers can provide the diversification and thorough
credit analysis that is so important in managing risk. Consult your financial
adviser to help you determine your proper allocation to fixed-income securities
based on your risk/reward profile and to explore the role they can play in
pursuing your long-term financial goals.
Special Shareholder Notice
It is with great sadness that we bring to your attention the passing of Alfred
J. Bianchetti, Director Emeritus, and James J. Crisona, Director Emeritus, of
the fund. Messrs. Bianchetti and Crisona, who both passed away on September
4/th/, 2003, lived accomplished lives to the ages of 80 and 97, respectively.
We will sorely miss their presence and will remember the dedicated service they
provided to the fund's shareholders through their outstanding contributions as
long-term members of the Board.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The fund has been informed
that the Adviser and its affiliates are responding to those information
requests, but are not in a position to predict the outcome of these requests
and investigations.
As always, thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
December 15, 2003
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of November 30, 2003 and are subject
to change. Please refer to pages 3 through 6 for a list and percentage
breakdown of the fund's holdings.
All index performance reflects no deduction for fees, expenses or taxes.
/i/ 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 Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) NOVEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------------
General Obligation -- 21.6%
Maricopa County GO:
Elementary School District No. 8, Osborne Elementary
School District:
$1,000,000 A1* 7.500% due 7/1/09 $ 1,235,880
210,000 AAA Series A, FGIC-Insured, 5.875% due 7/1/14 231,609
650,000 AAA Elementary School District No. 14, (Creighton School
Improvement Project of 1990), Series C, FGIC-Insured,
(Partially escrowed to maturity with U.S. government
securities), 6.500% due 7/1/08 762,404
Elementary School District No. 40, (Glendale School
Improvement Project), AMBAC-Insured:
565,000 AAA 6.300% due 7/1/11 (b) 607,002
435,000 AAA Call 7/1/05 @ 101, 6.300% due 7/1/11 (b)(c) 473,258
390,000 AAA School District No. 008, FGIC-lnsured, (Call 7/1/06 @ 101),
5.875% due 7/1/14 (c) 435,993
635,000 AAA School District No. 80, Chandler Unified School District,
FGIC-Insured, 5.800% due 7/1/12 656,787
1,000,000 AA Unified High School District No. 210, (Phoenix Project of 1995),
Series B, (Partially Pre-Refunded -- Escrowed with U.S.
government securities to 7/1/06 Call @ 101),
5.375% due 7/1/13 1,105,350
Phoenix GO:
1,400,000 AA+ Refunding, Series A, 6.250% due 7/1/17 (d) 1,730,820
Series B:
400,000 AA+ 5.000% due 7/1/22 415,532
575,000 AA+ 5.000% due 7/1/23 593,187
400,000 A+ Phoenix Special Assignment, Central Avenue Improvement District,
7.000% due 1/1/06 401,760
1,000,000 AAA Pima County GO, Unified School District No. 1, Tucson,
FGIC-Insured, 7.500% due 7/1/10 1,268,830
500,000 AAA Pinal County Unified School District No. 43, GO, Apache Junction,
Series A, FGIC-Insured, 5.850% due 7/1/15 558,650
Tempe Union High School District No. 213, GO, FGIC-Insured:
285,000 AAA 6.000% due 7/1/10 295,308
715,000 AAA Pre-Refunded -- Escrowed with state and local government
securities to 7/1/04 Call @ 101, 6.000% due 7/1/10 742,435
- -----------------------------------------------------------------------------------------------------
11,514,805
- -----------------------------------------------------------------------------------------------------
Hospitals -- 14.6%
1,500,000 Ba2* Arizona Health Facilities Authority, Hospital Systems Revenue,
Phoenix Children's Hospital, Series A, 6.125% due 11/15/22 1,253,370
Maricopa County Hospital Revenue, Sun Health Corp.:
1,500,000 Baa1* 5.900% due 4/1/09 (d) 1,619,070
1,000,000 Baa1* 6.125% due 4/1/18 1,040,120
See Notes to Financial Statements.
3 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) NOVEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- -------------------------------------------------------------------------------------------------
Hospitals -- 14.6% (continued)
$ 500,000 AAA Maricopa County IDA, Hospital Revenue, Samaritan Health
Services, Series A, MBIA-Insured, 7.000% due 12/1/16 (e) $ 647,340
3,000,000 AAA Mesa IDA, Discovery Health Systems, Series A, MBIA-Insured,
5.625% due 1/1/29 (d) 3,212,070
- -------------------------------------------------------------------------------------------------
7,771,970
- -------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 8.3%
Maricopa County IDA, MFH Revenue:
500,000 AAA Metro Gardens -- Mesa Ridge Project, Series A, MBIA-Insured,
5.650% due 7/1/19 502,175
1,740,000 AAA Mortgage Loan, Series A, FHA-Insured, 5.900% due 7/1/24 (d) 1,757,974
Phoenix IDA, MFH Revenue:
Ventana Palms Apartments Project, Series A, MBIA-Insured:
150,000 Aaa* 6.100% due 10/1/19 160,964
950,000 Aaa* 6.150% due 10/1/29 1,017,317
1,000,000 AA Woodstone & Silver Springs, Radian-Insured,
6.250% due 4/1/23 1,012,080
- -------------------------------------------------------------------------------------------------
4,450,510
- -------------------------------------------------------------------------------------------------
Housing: Single-Family -- 0.4%
75,000 AAA Phoenix IDA, Single-Family Mortgage Revenue, GNMA/FNMA/
FHLMC-Collateralized, 6.300% due 12/1/12 (f)(g) 78,334
155,000 AAA Pima County IDA, Single-Family Mortgage Revenue,
GNMA-Collateralized, 6.750% due 11/1/27 (f) 158,937
- -------------------------------------------------------------------------------------------------
237,271
- -------------------------------------------------------------------------------------------------
Industrial Development -- 11.2%
750,000 NR Navajo County IDA, IDR, (Stone Container Corp. Project),
7.400% due 4/1/26 (f) 765,120
Pima County IDA, Industrial Revenue Refunding:
505,000 AAA FSA-Insured, 7.250% due 7/15/10 518,802
1,000,000 Ba3* Tucson Electric Power Co. Project, Series B,
6.000% due 9/1/29 955,790
2,125,000 NR Stanford Court Apartments, Series B, 6.250% due 7/1/18 (d) 2,071,407
Tempe IDA, IDR, Friendship Village Refunding, Series A:
350,000 NR 6.200% due 12/1/03 350,000
250,000 NR 6.250% due 12/1/04 251,383
1,000,000 AAA Tucson IDA, Lease Revenue, University of Arizona/Marshall
Foundation, Series A, AMBAC-Insured, 5.000% due 7/15/22 1,036,060
- -------------------------------------------------------------------------------------------------
5,948,562
- -------------------------------------------------------------------------------------------------
Miscellaneous -- 22.7%
250,000 AAA Arizona State Municipal Financing Program, COP, Series 20,
BIG-Insured, 7.625% due 8/1/06 (e) 273,180
750,000 Aa1* Arizona Student Loan Revenue Acquisition Authority, Series B,
Guaranteed Student Loan, 6.600% due 5/1/10 (f) 776,520
See Notes to Financial Statements.
4 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) NOVEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- -------------------------------------------------------------------------------------------------
Miscellaneous -- 22.7% (continued)
$ 500,000 AAA Casa Grande Excise Tax Revenue, FGIC-Insured,
6.200% due 4/1/15 $ 528,315
Phoenix Civic Improvement Corp., Excise Tax Revenue, Sr. Lien:
2,630,000 AAA Adams Street Garage Project B, 5.375% due 7/1/29 (d) 2,756,608
2,350,000 AAA Municipal Courthouse Project A, 5.375% due 7/1/10 (d) 2,463,129
Sierra Vista Municipal Property Corp., AMBAC-Insured:
355,000 AAA 6.000% due 1/1/11 374,479
500,000 AAA 6.150% due 1/1/15 527,400
1,325,000 VMIG 1* Tempe Arizona Excise Tax Revenue, (Tempe Center for the Arts
Project), 1.350% due 7/1/20 (h) 1,325,000
1,000,000 AA Tucson COP, (Pre-Refunded -- Escrowed with state and local
government securities to 7/1/04 Call @ 100),
6.375% due 7/1/09 1,030,580
2,000,000 AAA University of Arizona COP, Series B, AMBAC-Insured,
5.000% due 6/1/28 (d) 2,040,920
- -------------------------------------------------------------------------------------------------
12,096,131
- -------------------------------------------------------------------------------------------------
Pollution Control -- 5.2%
Coconino County Pollution Control Corp. Revenue Refunding:
1,000,000 A- Arizona Public Service Co., Series A, 5.875% due 8/15/28 1,010,600
1,000,000 B- Nevada Power Co. Project, 6.375% due 10/1/36 (f) 893,100
850,000 A- Navajo County PCR, Arizona Public Service Co., Series A,
5.875% due 8/15/28 858,865
- -------------------------------------------------------------------------------------------------
2,762,565
- -------------------------------------------------------------------------------------------------
Transportation -- 4.8%
Phoenix Civic Improvement Corp., Airport Revenue:
1,000,000 AAA FGIC-Insured, 5.375% due 7/1/29 (f) 1,019,640
1,500,000 AAA Series A, FSA-Insured, 5.000% due 7/1/25 1,531,110
- -------------------------------------------------------------------------------------------------
2,550,750
- -------------------------------------------------------------------------------------------------
Utilities -- 7.3%
Agricultural Improvement and Power District, Electric Systems
Revenue, (Salt River Project):
1,000,000 AA Series A, 5.000% due 1/1/23 1,033,120
1,555,000 AA Series B, 5.000% due 1/1/31 (d) 1,584,483
250,000 BBB- Prescott Valley Improvement District, Special Assessment, Sewer
Collection System, Roadway Repair, 7.900% due 1/1/12 256,080
1,000,000 BBB Yavapai County IDA, IDR, (Citizens Utilities Co. Project),
5.450% due 6/1/33 (f) 1,005,170
- -------------------------------------------------------------------------------------------------
3,878,853
- -------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
5 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) NOVEMBER 30, 2003
FACE
AMOUNT RATING(a) SECURITY VALUE
- -------------------------------------------------------------------------------------------
Water and Sewer -- 3.9%
$1,000,000 Aaa* Arizona Water Infrastructure Finance Authority, Series A,
5.000% due 10/1/19 $ 1,050,800
1,000,000 AAA Phoenix Civic Improvement Corp. Wastewater System Revenue,
FGIC-Insured, 5.000% due 7/1/24 1,022,740
- -------------------------------------------------------------------------------------------
2,073,540
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $51,077,621**) $53,284,957
- -------------------------------------------------------------------------------------------
(a) All ratings are by Standard & Poor's Ratings Service, except for those
which are identified by an asterisk (*), are rated by Moody's Investors
Service.
(b) All or a portion of this security is held as collateral for open futures
contracts commitments.
(c) 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.
(d) All or a portion of this security is segregated by the custodian for open
futures contracts commitments.
(e) 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.
(f) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(g) A portion of this security has been segregated by the custodian for
extended settlements.
(h) Variable rate obligation payable at par on demand at anytime on no more
than seven days notice.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 7 and 8 for definitions of ratings and certain security
abbreviations.
See Notes to Financial Statements.
6 Smith Barney Arizona Municipals Fund Inc. | 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
"B" 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 -- Bonds rated "BB" have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse busi- ness, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments.
B -- Bonds rated "B" have a greater vulnerability to default but
currently have the capacity to meet interest payments and
principal payments. Adverse business, finan- cial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The "B" rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each generic rating from "Aa" to "Ba," 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 pay- ments 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
thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
7 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
SHORT-TERM SECURITY RATINGS (UNAUDITED)
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety charac- teristics are denoted with a
plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of
safety regarding timely payment is either overwhelming or very
strong; those issues determined to possess over- whelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
ABBREVIATIONS* (UNAUDITED)
ABAG --Association of Bay Area Governments
AIG --American International Guaranty
AMBAC --American Municipal Bond Assurance Corporation
BAN --Bond Anticipation Notes
BIG --Bond Investors Guaranty
CGIC --Capital Guaranty Insurance
CHFCLI --California Health Facility Construction Loan Insurance
CONNIE --College Construction Loan Insurance Association
LEE
COP --Certificate of Participation
EDA --Economic Development Authority
FGIC --Financial Guaranty Insurance Company
FHA --Federal Housing Administration
FHLMC --Federal Home Loan Mortgage Corporation
FLAIRS --Floating Adjustable Interest Rate Securities
FNMA --Federal National Mortgage Association
FRTC --Floating Rate Trust Certificates
FSA --Financial Security Assurance
GIC --Guaranteed Investment Contract
GNMA --Government National Mortgage Association
GO --General Obligation
HDC --Housing Development Corporation
HFA --Housing Finance Authority
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
MFH --Multi-Family Housing
MVRICS --Municipal Variable Rate Inverse Coupon Security
PCR --Pollution Control Revenue
PSF --Permanent School Fund
Radian --Radian Asset Assurance
RAN --Revenue Anticipation Notes
RIBS --Residual Interest Bonds
RITES --Residual Interest Tax-Exempt Securities
SYCC --Structured Yield Curve Certificate
TAN --Tax Anticipation Notes
TECP --Tax-Exempt Commercial Paper
TOB --Tender Option Bonds
TRAN --Tax and Revenue Anticipation Notes
VA --Veterans Administration
VRDD --Variable Rate Daily Demand
VRWE --Variable Rate Wednesday Demand
_________
* Abbreviations may or may not appear in the schedule of investments.
8 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) NOVEMBER 30, 2003
ASSETS:
Investments, at value (Cost -- $51,077,621) $53,284,957
Cash 171,995
Interest receivable 997,567
Receivable from broker -- variation margin 159,375
Receivable for Fund shares sold 44,000
Receivable for securities sold 10,000
- --------------------------------------------------------------------------------
Total Assets 54,667,894
- --------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 106,884
Investment advisory fee payable 13,268
Administration fee payable 8,846
Distribution plan fees payable 3,956
Accrued expenses 71,655
- --------------------------------------------------------------------------------
Total Liabilities 204,609
- --------------------------------------------------------------------------------
Total Net Assets $54,463,285
- --------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 5,357
Capital paid in excess of par value 53,707,792
Undistributed net investment income 14,562
Accumulated net realized loss from investment transactions (838,012)
Net unrealized appreciation of investments and futures contracts 1,573,586
- --------------------------------------------------------------------------------
Total Net Assets $54,463,285
- --------------------------------------------------------------------------------
Shares Outstanding:
Class A 4,141,734
Class B 839,442
Class L 376,193
Net Asset Value:
Class A (and redemption price) $10.17
Class B * $10.17
Class L * $10.16
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $10.59
Class L (net asset value plus 1.01% of net asset value per share) $10.26
- --------------------------------------------------------------------------------
* Redemption price is NAV of Class B and L shares reduced by a 4.50% and 1.00%
contingent deferred sales charge, respectively, if shares are redeemed within
one year from purchase payment (See Note 4).
See Notes to Financial Statements.
9 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
STATEMENT OF OPERATIONS (UNAUDITED)
For the Six Months Ended November 30, 2003
INVESTMENT INCOME:
Interest $1,411,086
- ----------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 4) 79,196
Distribution plan fees (Note 7) 72,366
Administration fee (Note 4) 52,797
Audit and legal 26,872
Shareholder communications (Note 7) 21,895
Registration fees 16,000
Custody 12,015
Shareholder servicing fees (Note 7) 6,332
Directors' fees 5,500
Other 624
- ----------------------------------------------------------------------------------------
Total Expenses 293,597
- ----------------------------------------------------------------------------------------
Net Investment Income 1,117,489
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 5 AND 6):
Realized Gain (Loss) From:
Investment transactions (64,375)
Futures contracts 1,399,992
- ----------------------------------------------------------------------------------------
Net Realized Gain 1,335,617
- ----------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of period 1,909,092
End of period 1,573,586
- ----------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (335,506)
- ----------------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 1,000,111
- ----------------------------------------------------------------------------------------
Increase in Net Assets From Operations $2,117,600
- ----------------------------------------------------------------------------------------
See Notes to Financial Statements.
10 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended November 30, 2003 (unaudited)
and the Year Ended May 31, 2003
November 30 May 31
-------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,117,489 $ 2,394,590
Net realized gain (loss) 1,335,617 (716,981)
Increase (decrease) in net
unrealized appreciation (335,506) 420,064
-------------------------------------------------------------
Increase in Net Assets From
Operations 2,117,600 2,097,673
-------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 8):
Net investment income (1,118,883) (2,443,835)
-------------------------------------------------------------
Decrease in Net Assets
From Distributions to
Shareholders (1,118,883) (2,443,835)
-------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 6,164,047 9,101,785
Net asset value of shares issued
for reinvestment of dividends 519,466 1,220,521
Cost of shares reacquired (6,725,720) (11,130,032)
-------------------------------------------------------------
Decrease in Net Assets From Fund
Share Transactions (42,207) (807,726)
-------------------------------------------------------------
Increase (Decrease) in Net Assets 956,510 (1,153,888)
NET ASSETS:
Beginning of period 53,506,775 54,660,663
-------------------------------------------------------------
End of period* $54,463,285 $ 53,506,775
-------------------------------------------------------------
* Includes undistributed net
investment income of: $14,562 $15,956
-------------------------------------------------------------
See Notes to Financial Statements.
11 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Significant Accounting Policies
Smith Barney Arizona Municipals Fund Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company.
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. Investments
in 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 Directors;
(c) securities maturing within 60 days are valued at cost plus accreted
discount or minus amortized premium, which approximates value; (d) gains or
losses on the sale of securities are calculated by using the specific
identification method; (e) interest income, adjusted for amortization of
premium and accretion of discount, is recorded on an accrual basis; (f )
dividends and distributions to shareholders are recorded on the ex-dividend
date; (g) class specific expenses are charged to each class; management fees
and general fund expenses are allocated on the basis of relative net assets by
class or on another reasonable basis; (h) 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; (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; and (j)
estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ.
2. Fund Concentration
Since the Fund invests primarily in obligations of issuers within Arizona, it
is subject to possible concentration risks associated with economic, political
or legal developments or industrial or regional matters specifically affecting
Arizona.
12 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax and from designated
state income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
It is the Fund's policy to distribute dividends monthly. Capital gains
distributions, if any, are taxable to shareholders, and are declared and paid
at least annually.
4. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Smith Barney Fund Management LLC (''SBFM''), an indirect wholly-owned
subsidiary of Citigroup Inc. ("Citigroup"), acts as investment adviser to the
Fund. The Fund pays SBFM an investment advisory fee calculated at an annual
rate of 0.30% of the Fund's average daily net assets. This fee is calculated
daily and paid monthly.
SBFM also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the Fund's average daily net assets up
to $500 million and 0.18% of the Fund's average daily net assets in excess of
$500 million. 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 November 30, 2003, the Fund paid transfer agent fees of
$5,620 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 4.00% and 1.00% for Class A and L
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
4.50% on Class B shares, which applies if redemption occurs within one year
13 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
from purchase payment. This CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also have a 1.00% CDSC, which applies if redemption occurs within one
year from purchase payment. In certain cases, Class A shares have a 1.00% CDSC,
which applies if redemption occurs within one year of purchase payment. This
CDSC only applies to those purchases of Class A shares, which, when combined
with current holdings of Class A shares, equal or exceed $500,000 in the
aggregate. These purchases do not incur an initial sales charge.
For the six months ended November 30, 2003, CGM received sales charges of
approximately $58,000 and $3,000 on sales of the Fund's Class A and L shares,
respectively. In addition, for the six months ended November 30, 2003, CDSCs
paid to CGM for Class B shares were approximately $11,000.
All officers and one Director of the Fund are employees of Citigroup or its
affiliates.
5. Investments
During the six months ended November 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 $4,525,872
--------------------
Sales 2,634,507
--------------------
At November 30, 2003, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
-----------------------------------------
Gross unrealized appreciation $2,651,316
Gross unrealized depreciation (443,980)
-----------------------------------------
Net unrealized appreciation $2,207,336
-----------------------------------------
6. Futures Contracts
Securities or cash equal to the initial margin amount, are either deposited
with the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the current market
value of the futures contracts. During the period the futures contract is open,
changes in
14 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
the value of the contract are recognized as unrealized gains or losses by
"marking-to-market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to
broker, depending upon whether unrealized gains or losses are incurred. When
the contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of ) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts typically
to hedge a portion of its portfolio. The Fund bears the market risk that arises
from changes in the value of the financial instruments and securities indices.
At November 30, 2003, the Fund had the following open futures contracts:
Number of Basis Market Unrealized
Contracts Expiration Value Value Loss
---------------------------------------------------------------------------
Contracts To Sell:
U.S. Treasury Bonds 170 12/03 $17,944,063 $18,577,813 $(633,750)
---------------------------------------------------------------------------
7. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, the Fund pays a service fee with
respect to its Class A, B and L shares calculated at an annual rate of 0.15% of
the average daily net assets of each respective class. In addition, the Fund
pays a distribution fee with respect to its Class B and L shares calculated at
an annual rate of 0.50% and 0.55% of the average daily net assets for each
class, respectively. For the six months ended November 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
---------------------------------------------------------
Rule 12b-1 Distribution Plan Fees $30,039 $29,663 $12,664
---------------------------------------------------------
For the six months ended November 30, 2003, total Shareholder Servicing fees
were as follows:
Class A Class B Class L
--------------------------------------------------
Shareholder Servicing Fees $4,277 $1,682 $373
--------------------------------------------------
15 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
For the six months ended November 30, 2003, total Shareholder Communication
expenses were as follows:
Class A Class B Class L
----------------------------------------------------------
Shareholder Communication Expenses $15,596 $4,864 $1,435
----------------------------------------------------------
8. Distributions Paid to Shareholders by Class
Six Months Ended Year Ended
Net Investment Income November 30, 2003 May 31, 2003
----------------------------------------------------
Class A $ 875,957 $1,884,380
Class B 173,577 420,544
Class L 69,349 138,911
----------------------------------------------------
Total $1,118,883 $2,443,835
----------------------------------------------------
9. Capital Shares
At November 30, 2003, the Fund had 500 million shares of capital stock
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 and has the same rights, except that each class bears certain direct
expenses specifically related to the distribution of its shares.
Transactions in shares of each class were as follows:
Six Months Ended Year Ended
November 30, 2003 May 31, 2003
--------------------- ----------------------
Shares Amount Shares Amount
---------------------------------------------------------------------------
Class A
Shares sold 547,397 $ 5,532,901 575,907 $ 5,832,668
Shares issued on reinvestment 38,885 392,449 88,616 896,108
Shares reacquired (486,173) (4,898,316) (786,641) (7,988,657)
---------------------------------------------------------------------------
Net Increase (Decrease) 100,109 $ 1,027,034 (122,118) $(1,259,881)
---------------------------------------------------------------------------
Class B
Shares sold 26,257 $ 264,041 232,911 $ 2,367,706
Shares issued on reinvestment 7,666 77,412 21,170 214,383
Shares reacquired (165,566) (1,671,466) (252,796) (2,557,156)
---------------------------------------------------------------------------
Net Increase (Decrease) (131,643) $(1,330,013) 1,285 $ 24,933
---------------------------------------------------------------------------
Class L
Shares sold 36,344 $ 367,105 89,315 $ 901,411
Shares issued on reinvestment 4,916 49,605 10,886 110,030
Shares reacquired (15,415) (155,938) (57,671) (584,219)
---------------------------------------------------------------------------
Net Increase 25,845 $ 260,772 42,530 $ 427,222
---------------------------------------------------------------------------
16 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
10. Additional Information
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue
guarantee agreement with this sub-contractor providing that the sub-contractor
would guarantee certain benefits to CAM or its affiliates (the "Revenue
Guarantee Agreement"). In connection with the subsequent purchase of the
sub-contractor's business by an affiliate of the current sub-transfer agent
(PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee
Agreement was amended eliminating those benefits in exchange for arrangements
that included a one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
$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.
17 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
FINANCIAL HIGHLIGHTS
For a share of each class of capital stock outstanding throughout each year
ended May 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 $ 9.98 $10.04 $10.00 $ 9.54 $10.31 $10.54
- --------------------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income 0.22 0.45 0.48 0.49 0.50 0.49
Net realized and unrealized
gain (loss) 0.19 (0.05) 0.05 0.45 (0.77) (0.10)
- --------------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.41 0.40 0.53 0.94 (0.27) 0.39
- --------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.22) (0.46) (0.49) (0.48) (0.48) (0.49)
Net realized gains -- -- -- -- (0.02) (0.13)
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.22) (0.46) (0.49) (0.48) (0.50) (0.62)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.17 $ 9.98 $10.04 $10.00 $ 9.54 $10.31
- --------------------------------------------------------------------------------------------------------------
Total Return 4.16%++ 4.07% 5.40% 10.03% (2.64)% 3.79%
- --------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $42,101 $40,319 $41,824 $36,862 $36,524 $46,279
- --------------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses 0.98%+ 1.00% 0.91% 0.94% 0.88% 0.88%
Net investment income 4.36+ 4.48 4.80 4.98 5.09 4.64
- --------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 11% 11% 6% 16% 41%
- --------------------------------------------------------------------------------------------------------------
(1) For the six months ended November 30, 2003 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
18 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of capital stock outstanding throughout each year
ended May 31, unless otherwise noted:
Class B Shares 2003/(1)(2)/ 2003/(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/ 1999/(2)/
- ---------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $ 9.98 $10.05 $10.00 $ 9.54 $10.30 $10.54
- ---------------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income 0.19 0.40 0.42 0.44 0.45 0.43
Net realized and unrealized
gain (loss) 0.19 (0.06) 0.07 0.45 (0.77) (0.10)
- ---------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.38 0.34 0.49 0.89 (0.32) 0.33
- ---------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.19) (0.41) (0.44) (0.43) (0.42) (0.44)
Net realized gains -- -- -- -- (0.02) (0.13)
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.19) (0.41) (0.44) (0.43) (0.44) (0.57)
- ---------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 10.17 $ 9.98 $ 10.05 $10.00 $ 9.54 $10.30
- ---------------------------------------------------------------------------------------------------------
Total Return 3.87%++ 3.38% 4.92% 9.40% (3.11)% 3.15%
- ---------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $ 8,539 $ 9,694 $ 9,746 $11,988 $15,860 $19,066
- ---------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses 1.50%+ 1.54% 1.41% 1.48% 1.41% 1.42%
Net investment income 3.84+ 3.94 4.20 4.44 4.56 4.11
- ---------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 11% 11% 6% 16% 41%
- ---------------------------------------------------------------------------------------------------------
(1) For the six months ended November 30, 2003 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
19 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of capital stock outstanding throughout each year
ended May 31, unless otherwise noted:
Class L Shares 2003/(1)(2)/ 2003/(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/ 1999/(2)(3)/
- -------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $ 9.97 $10.04 $10.00 $ 9.53 $10.30 $10.53
- -------------------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income 0.19 0.40 0.42 0.43 0.43 0.42
Net realized and unrealized
gain (loss) 0.19 (0.07) 0.05 0.46 (0.76) (0.09)
- -------------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.38 0.33 0.47 0.89 (0.33) 0.33
- -------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.19) (0.40) (0.43) (0.42) (0.42) (0.43)
Net realized gains -- -- -- -- (0.02) (0.13)
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.19) (0.40) (0.43) (0.42) (0.44) (0.56)
- -------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $10.16 $ 9.97 $10.04 $10.00 $ 9.53 $10.30
- -------------------------------------------------------------------------------------------------------------
Total Return 3.87%++ 3.35% 4.78% 9.48% (3.24)% 3.21%
- -------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $3,823 $3,494 $3,091 $1,837 $988 $1,652
- -------------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses 1.56%+ 1.57% 1.51% 1.48% 1.56% 1.44%
Net investment income 3.79+ 3.91 4.18 4.44 4.38 4.09
- -------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 5% 11% 11% 6% 16% 41%
- -------------------------------------------------------------------------------------------------------------
(1) For the six months ended November 30, 2003 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed as Class L shares.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
20 Smith Barney Arizona Municipals Fund Inc. | 2003 Semi-Annual Report
SMITH BARNEY
ARIZONA MUNICIPALS FUND INC.
DIRECTORS INVESTMENT ADVISER
Herbert Barg* AND ADMINISTRATOR
Dwight B. Crane Smith Barney Fund
Burt N. Dorsett Management LLC
R. Jay Gerken, CFA
Chairman DISTRIBUTOR
Elliot S. Jaffe Citigroup Global Markets Inc.
Stephen E. Kaufman
Joseph J. McCann CUSTODIAN
Cornelius C. Rose, Jr. State Street Bank and
Trust Company
OFFICERS
R. Jay Gerken, CFA TRANSFER AGENT
President and Chief Citicorp Trust Bank, fsb.
Executive Officer 125 Broad Street, 11th Floor
New York, New York 10004
Andrew B. Shoup
Senior Vice President SUB-TRANSFER AGENT
and Chief PFPC Inc.
Administrative Officer P.O. Box 9699
Providence, Rhode Island
Richard L. Peteka 02940-9699
Chief Financial Officer
and Treasurer
Joseph P. Deane
Vice President and
Investment Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer
* Mr. Barg became Director Emeritus on December 31, 2003.
Smith Barney Arizona Municipals Fund Inc.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available without
charge, upon request, by telephoning the Fund (toll-free) at 1-800-451-2010
and by visiting the SEC's web site at www.sec.gov.
This report is submitted for the general information of the shareholders of
Smith Barney Arizona Municipals Fund Inc., but it may also be used as sales
literature when preceded or accompanied by the current Prospectus, which
gives details about charges, expenses, investment objectives and operating
policies of the Fund. If used as sales material after February 29, 2004, this
report must be accompanied by performance information for the most recently
completed calendar quarter.
SMITH BARNEY ARIZONA MUNICIPALS FUND INC.
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
FD0820 1/04 03-5874
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-2(c) under the
Investment Company Act of 1940, as amended) are effective based on
their evaluation of the disclosure controls and procedures as of a
date within 90 days of the filing date of this document.
(b) In the last 90 days, there have been no significant changes in the
Registrant's internal controls or in other factors that could
significantly affect these controls.
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 Arizona Municipals Fund
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Arizona Municipals Fund
Date: January 30,2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Smith Barney Arizona Municipals Fund
Date: January 30,2004
By: /s/ Richard L. Peteka
Chief Financial Officer of
Smith Barney Arizona Municipals Fund
Date: January 30,2004