UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4395
Smith Barney Muni Funds
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: March 31
Date of reporting period: March 31, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Annual Report to Stockholders is filed herewith.
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SMITH BARNEY MUNI FUNDS
NEW YORK MONEY MARKET PORTFOLIO
NEW YORK PORTFOLIO
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ANNUAL REPORT | MARCH 31, 2004
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed. 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
New York Money Market Portfolio: Manager Overview....... 3
New York Portfolio:
Manager Overview....................................... 7
Fund Performance....................................... 12
Historical Performance................................. 13
Schedules of Investments................................ 14
Statements of Assets and Liabilities.................... 35
Statements of Operations................................ 36
Statements of Changes in Net Assets..................... 37
Notes to Financial Statements........................... 39
Financial Highlights.................................... 49
Independent Auditors' Report............................ 55
Additional Information.................................. 56
Tax Information......................................... 60
LETTER FROM THE CHAIRMAN
[PHOTO]
R. Jay Gerken
R. JAY GERKEN, CFA
Chairman, President and Chief Executive Officer
Dear Shareholder,
During the past year, the Fed cut its target for short-term interest rates, and
the U.S. economy's quarterly pace of growth picked up considerably./1/ This
stronger-than-expected second- and third-quarter national economic data
exacerbated concerns among bond investors that inflation might pick up and lead
to rising interest rates sooner than previously anticipated, causing bond
prices to decline. However, many of these concerns were tempered somewhat by
tepid employment results and views that the Fed would not raise interest rates
immediately. Although the bond markets shifted course throughout the year,
municipal bonds collectively returned 5.86%,/2/ and municipal money market
instruments in general finished in slightly positive territory on a total
return basis over the past year.
Given the portfolio managers' views during the period that the national economy
could begin to pick up, they maintained defensive postures in managing the
portfolios' exposure to inflation and interest rate risk. Although this
strategy detracted from the performance of the New York Portfolio during times
when bond prices rose, it diminished the negative impact on this portfolio when
bond prices declined. The New York Money Market Portfolio adopted a relatively
conservative posture by maintaining an essentially neutral average maturity.
Short-term fixed-income securities investments can be a safe investment
alternative to complement other portfolio holdings. Furthermore, tax-exempt
municipal bonds and money market securities have continued to offer competitive
after-tax yields over taxable bonds for investors in middle- and higher-income
tax brackets, as municipal securities provide income that is exempt from
federal, and sometimes state and local, income taxes. Your financial adviser
can help you implement a suitable asset allocation based on your investment
profile to help you pursue your long-term financial goals.
/1/Source: Based upon gross domestic product ("GDP") data from the Bureau of
Economic Analysis (January 30, 2004). Gross domestic product is a market
value of goods and services produced by labor and property in a given
country.
/2/Source: As measured by the Lehman Brothers Municipal Bond Index.
1 Smith Barney Muni Funds | 2004 Annual Report
Please read on for a more detailed look at prevailing economic and market
conditions during the funds' fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected fund
performance.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The funds' Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The regulators appear to be
examining, among other things, the funds' response to market timing and
shareholder exchange activity, including compliance with prospectus disclosure
related to these subjects. The funds have been informed that the Adviser and
its affiliates are responding to those information requests, but are not in a
position to predict the outcome of these requests and investigations.
As always thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
April 10, 2004
2 Smith Barney Muni Funds | 2004 Annual Report
MANAGER OVERVIEW
Performance Review
As of March 31, 2004, the seven-day current yield for Class A shares of the
Smith Barney Muni Funds -- New York Money Market Portfolio was 0.42% and its
seven-day effective yield, which reflects compounding, was 0.42%. These numbers
are the same due to rounding.
[PHOTO]
JOSEPH P. DEANE
Vice President and Investment Officer
[PHOTO]
JULIE P. CALLAHAN, CFA
Vice President and Investment Officer
SMITH BARNEY MUNI FUNDS -- NEW YORK MONEY MARKET PORTFOLIO
CLASS A SHARES
YIELDS AS OF MARCH 31, 2004
Seven-day current yield 0.42%
Seven-day effective yield 0.42%
The performance shown represents past performance. Past performance is no
guarantee of future results and current performance may be higher or lower
than the performance shown above. Principal value and investment returns
will fluctuate and investors' shares, when redeemed may be worth more or
less than their original cost.
The fund's yields will vary and performance of other share classes may
differ. Please note that your investment is neither insured nor guaranteed
by the Federal Deposit Insurance Corporation ("FDIC") or any other
government agency. Although the fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
the fund.
In the cases where the current yield and effective yield are the same, it is
due to rounding.
The seven seven-day current yield reflects the amount of income generated by
the investment during that seven-day period and assumes that the income is
generated each week over a 365-day period. The yield is shown as a
percentage of the investment. The seven-day effective yield is calculated
similarly to the seven-day current yield but, when annualized, the income
earned by an investment in the fund is assumed to be reinvested. The
effective yield typically will be slightly higher than the current yield
because of the compounding effect of the assumed reinvestment. The seven-day
current and seven-day effective yields for Class Y shares as of this same
date were 0.54% and 0.54%, respectively.
Certain investors may be subject to the federal Alternative Minimum Tax, and
state and local taxes may apply. Capital gains, if any, are fully taxable.
Please consult your personal tax adviser.
3 Smith Barney Muni Funds | 2004 Annual Report
The seven-day effective yield is calculated similarly to the seven-day current
yield but, when annualized, the income earned by an investment in the fund is
assumed to be reinvested. The effective yield typically will be slightly higher
than the current yield because of the compounding effect of the assumed
reinvestment. Please note that the performance represents past performance,
which is not a guarantee of future results and yields will vary. In addition,
your investment is neither insured nor guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") or any other government agency. Although the
fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
Certain investors may be subject to the federal Alternative Minimum Tax, and
state and local taxes may apply. Capital gains, if any, are fully taxable.
Please consult your personal tax adviser.
Investment Approach
The fund included a significant amount of municipal obligations backed by
school districts and revenue bonds. Revenue bonds are issued to finance public
works such as tunnels, sewer systems and bridges, and are supported directly by
the revenues derived from the operations of these systems. The fund maintained
a diversified mix of securities that included tax-exempt commercial paper,
fixed-rate notes and variable-rate demand obligations. During the year we
reduced the average maturity of the fund to just 29 days. This was a reflection
of the belief that the short-term municipal yield curve was very flat and there
was no added benefit from purchasing securities with longer maturities.
Municipals Markets Review
In order to help boost economic activity, the Fed reduced its target for the
federal funds rate,/i/ which dropped to four-decade lows. As a result, the
yields on tax-exempt money market instruments continued to fall. The prices of
U.S. Treasury bonds plunged through the early summer as stronger-than-expected
economic growth data for the second calendar quarter generated concerns that
inflation could become more pronounced and interest rates rise, as bond prices
move inversely to the direction of interest rate movements. During this
tumultuous time, however, municipal bonds collectively held up better than U.S.
Treasury bonds, although the broader bond markets stabilized as the summer came
to a close. By August evidence of an improvement in the economy emerged and as
a result the yields on longer-term bonds, which move opposite to their prices,
started to rise. However, many investors believed the Fed would likely leave
short-term interest rates at prevailing low levels over the foreseeable future
and tax-exempt money market yields generally remained near their lows.
4 Smith Barney Muni Funds | 2004 Annual Report
Stronger-than-anticipated economic growth consensus estimates for the third
calendar quarter rekindled concerns about interest rates and inflation. Despite
the 8.2% annual growth in gross domestic product ("GDP")/ii/ over the third
quarter of 2003, investors' concerns about the prospects of inflation and
rising rates were contained because some of this growth was attributable to
one-time factors, such as the tax cuts and the end of major combat operations
in Iraq. Furthermore, many investors felt the Fed appeared to be in a holding
pattern from adjusting its rate targets.
Investors Question the Fed's Patience
Bond investors spent the first quarter of 2004 dissecting language from the
Fed, which stated in late January that it "believes that it can be patient in
removing its policy accommodation."/iii/ However, the fact that the Fed did not
include the phrase "considerable period" in this statement as it had before led
many investors to question when the Fed's patience would run out.
Estimates of calendar fourth-quarter 2003 GDP annual growth released during the
period registered at 4.1%./ii/ This rate was below third-quarter 2003 results
but exceeded levels early from last year. Furthermore, in recent testimony to
Congress, Fed Chairman, Alan Greenspan revealed that the Fed raised its
expectations for economic growth. Despite the momentum behind the U.S. economy,
over the first calendar quarter of 2004, the Lehman Brothers Municipal Bond
Index returned 1.73% amid lackluster employment data.
Although the national economy has shown significant signs of improvement since
early last year, the job market has remained the weak link to a sustainable
recovery. Employment data/iv/ released after the first quarter of 2004 ended
showed that the unemployment rose to 5.7% in March, versus 5.6% in February.
However, the U.S. economy added 308,000 non-farm payroll jobs in March,/iv/
marking the largest number since April 2000./v/ This result raised expectations
that the strength of the economy may be improving, raising concerns that
inflation could pick up and interest rates rise sooner than previously
anticipated.
The Economic State of New York/vi/
According to Standard & Poor's, New York State is anticipated to close with a
general fund balance of $1 billion for fiscal 2003 to 2004. Given the benefit
of both unanticipated federal monies and temporary tax increases that were
approved after a particularly difficult budgetary process, New York State
successfully positioned itself for a favorable closing. Standard & Poor's
recent rating on the State's general obligation bonds was AA, but Standard &
Poor's outlook is negative.
5 Smith Barney Muni Funds | 2004 Annual Report
Thank you for your investment in the Smith Barney Muni Funds -- New York Money
Market Portfolio. We appreciate that you have entrusted us to manage your money
and value our relationship with you.
Sincerely,
/s/ Joseph P. Deane /s/ Julie P. Callahan
Joseph P. Deane Julie P. Callahan, CFA
Vice President and Vice President and
Investment Officer Investment Officer
April 10, 2004
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of March 31, 2004 and are subject to
change. Please refer to pages 14 through 21 for a list and percentage breakdown
of the fund's holdings.
All index performance reflects no deduction for fees, expenses or taxes.
/i/ The federal funds rate is the interest rate that banks with excess reserves
at a Federal Reserve district bank charge other banks that need overnight
loans.
/ii/ Source for GDP growth: Bureau of Labor Statistics. Gross domestic product
is a market value of goods and services produced by labor and property in a
given country.
/iii/Source: Federal Reserve (January 28, 2004).
/iv/ Source: U.S. Department of Labor (April 1, 2004).
/v/ Source: Lehman Brothers.
/vi/ Source: Standard & Poor's (Public Finance Report Card, April 2004).
6 Smith Barney Muni Funds | 2004 Annual Report
MANAGER OVERVIEW
[PHOTO]
JOSEPH P. DEANE
Vice President and Investment Officer
[PHOTO]
David T. Fare
DAVID T. FARE
Vice President and Investment Officer
Special Shareholder Notice
On March 10, 2004, David Fare was appointed as co-portfolio manager of the
fund. Mr. Fare is a Director of Citigroup Global Markets Inc. and an investment
officer of the manager, Smith Barney Fund Management LLC. He has 15 years of
investment management experience with the manager.
In addition, effective April 29, 2004, Smith Barney Class L shares were renamed
Class C Shares. The current expenses, management fees, and sales charges have
not changed.
Performance Review
For the 12 months ended March 31, 2004, Class A shares of the Smith Barney Muni
Funds -- New York Portfolio, excluding sales charges, returned 3.87%. These
shares performed worse than the fund's unmanaged benchmark the Lehman Brothers
Municipal Bond Index/i/, which returned 5.86% and its New York municipal bond
component subindex returned 5.73% for the period/ii/ for the same period. They
also underperformed the fund's Lipper New York municipal debt funds category
average, which was 5.45% 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.
Given our concerns early in the period that U.S. economic growth could pick up
and interest rates potentially rise sooner than anticipated, we structured the
fund more defensively to help mitigate the effects of a possible rise in
interest rates. Our strategy entailed focusing on bonds with higher coupons,
maintaining a lower average life than in recent years, and maintaining a short
position in
/1/Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 12-month period ended March 31, 2004, calculated
among the 106 funds in the fund's Lipper category including the reinvestment
of dividends and capital gains, if any, and excluding sales charges.
7 Smith Barney Muni Funds | 2004 Annual Report
SMITH BARNEY MUNI FUNDS -- NEW YORK PORTFOLIO
PERFORMANCE SNAPSHOT
AS OF MARCH 31, 2004
(excluding sales charges)
6 Months 12 Months
Class A Shares 1.35% 3.87%
Lehman Brothers Municipal Bond Index 3.12% 5.86%
Lipper New York Municipal Debt Funds Category Average 2.86% 5.45%
The performance shown represents past performance. Past performance is no
guarantee of future results and current performance may be higher or lower
than the performance shown above. Principal value and investment returns
will fluctuate and investors' shares, when redeemed may be worth more or
less than their original cost. To obtain performance data current to the
most recent month-end, please visit our website at
www.smithbarneymutualfunds.com.
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. Excluding sales charges, Class B shares
returned 1.17%, Class L shares returned 1.15% and Class Y shares returned
1.52% over the six months ended March 31, 2004. Excluding sales charges,
Class B shares returned 3.35%, Class L shares returned 3.30% and Class Y
shares returned 4.13% over the 12 months ended March 31, 2004.
Effective February 2, 2004, initial sales charges on Smith Barney Class L
shares were suspended.
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
Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the period ended March 31, 2004, calculated among the
108 funds for the six-month period and among the 106 funds for the 12-month
period, in the fund's Lipper category including the reinvestment of
dividends and capital gains, if any, and excluding sales charges.
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.
U.S. Treasury futures./iii/ Although this conservative strategy at times
limited the fund's full participation in market rallies, it helped reduce the
impact on the fund during times when bond prices declined, particularly early
in the summer and after the reporting period ended.
Investment Approach
Considering the recent yields on New York State general obligation ("GO") bonds
and accounting for their relative credit risk given New York's fiscal
situation, as of the period's close, the fund held only one New York State GO.
Rather, the fund did hold a significant quantity of revenue bonds, which are
backed by the generally stable revenue streams of specific public works. The
portfolio's heaviest revenue bond exposure in terms of sectors was in
education, transportation, water and sewer, hospitals and government
facilities./iv/ Over the fund's fiscal year, the hospitals sector in particular
was among the leading performers returning 7.80%, while housing was the worst
performer returning 4.36%./v/ The fund had more exposure to these sectors not
because we targeted
8 Smith Barney Muni Funds | 2004 Annual Report
specific industries. Rather, we felt many of these issues had more appealing
yields and offered better relative values on a risk/reward basis when we
invested in them.
Given the pick-up in the economy, shareholders in our funds have asked us on
the municipal bond desk about the long-term value of municipal securities in
the recent environment. Although rising interest rate environments exert
pricing pressure on bonds in general, particularly U.S. Treasuries, which have
tended to be more sensitive to interest rate movements than municipals,
higher-rated municipal securities remain a viable long-term investment for
suitable investors' conservative investment dollars as part of their broader,
balanced portfolios. However, it's important to consider the fund's overall
maturity concentration, as longer-term issues are more sensitive to interest
rate movements than shorter-term issues, and duration, which is a measure of a
portfolio's overall sensitivity to such rate activity. Therefore, as of the
period's close, we maintained a lower-duration approach. Rather than commit a
substantial portion of the fund's assets to low-yielding, short-term
instruments, the fund maintained an emphasis on longer-term, premium-priced
higher-coupon callable bonds for their favorable tax-exempt income streams.
However, it continued to hold a short position in U.S. Treasury bond futures to
help hedge the overall portfolio against some of the effects of potential rate
increases on these holdings. As of the period's close, the fund's average
maturity was approximately 15.6 years, while its average life was 5.9 years./vi/
Municipals Markets Review
In order to help boost economic activity, last spring the Fed reduced its
target for the federal funds rate,/vii/ which dropped to four-decade lows. As a
result, the yields on tax-exempt money market instruments continued to fall.
The prices of U.S. Treasury bonds plunged through the early summer as
stronger-than-expected economic growth data for the second calendar quarter
generated concerns that inflation could become more pronounced and interest
rates rise, as bond prices move inversely to the direction of interest rate
movements. During this tumultuous time, however, municipal bonds collectively
held up better than U.S. Treasury bonds, although the broader bond markets
stabilized as the summer came to a close. By August, evidence of an improvement
in the economy emerged, and as a result the yields on longer-term bonds, which
move opposite to their prices, started to rise. However, many investors
believed the Fed would likely leave short-term interest rates at prevailing low
levels over the foreseeable future, and tax-exempt money market yields
generally remained near their lows.
Stronger-than-anticipated economic growth consensus estimates for the third
calendar quarter rekindled concerns about interest rates and inflation. Despite
9 Smith Barney Muni Funds | 2004 Annual Report
the 8.2% annual growth in gross domestic product ("GDP")/viii/ over the third
quarter of 2003, investors' concerns about the prospects of inflation and
rising rates were contained because some of this growth was attributable to
one-time factors, such as the tax cuts and the end of major combat operations
in Iraq. Furthermore, many investors felt the Fed appeared to be in a holding
pattern from adjusting its rate targets.
Investors Question the Fed's Patience
Bond investors spent the first quarter of 2004 dissecting language from the
Fed, which stated in late January that it "believes that it can be patient in
removing its policy accommodation."/ix/ However, the fact that the Fed did not
include the phrase "considerable period" in this statement as it had before led
many investors to question when the Fed's patience would run out.
Estimates of calendar fourth-quarter 2003 GDP annual growth released during the
period registered at 4.1%./viii/ This rate was below third-quarter 2003 results
but exceeded levels early from last year. Furthermore, in recent testimony to
Congress, Fed Chairman Alan Greenspan revealed that the Fed raised its
expectations for economic growth. Despite the momentum behind the U.S. economy,
over the first calendar quarter of this year, the Lehman Brothers Municipal
Bond Index returned 1.73% amid lackluster employment data.
Although the national economy has shown significant signs of improvement since
early last year, the job market has remained the weak link to a sustainable
recovery. Employment data/x/ released after the first quarter of 2004 ended
showed that the unemployment rose to 5.7% in March, versus 5.6% in February.
However, the U.S. economy added 308,000 non-farm payroll jobs in March,/x/
marking the largest number since April 2000./xi/ This result raised
expectations that the strength of the economy may be improving, raising
concerns that inflation could pick up and interest rates rise sooner than
previously anticipated.
The Economic State of New York/xii/
According to Standard & Poor's, New York State is anticipated to close with a
general fund balance of $1 billion for fiscal 2003 to 2004. Given the benefit
of both unanticipated federal monies and temporary tax increases that were
approved after a particularly difficult budgetary process, New York State
successfully positioned itself for a favorable closing. Standard & Poor's
recent rating on the state's general obligation bonds was AA, but Standard &
Poor's outlook is negative.
Thank you for your investment in the Smith Barney Muni Funds -- New York
Portfolio. We appreciate that you have entrusted us to manage your money and
value our relationship with you.
10 Smith Barney Muni Funds | 2004 Annual Report
Sincerely,
/s/ Joseph P. Deane /s/ David T. Fare
Joseph P. Deane David T. Fare
Vice President and Vice President and
Investment Officer Investment Officer
April 10, 2004
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of March 31, 2004 and are subject to
change. Please refer to pages 22 through 31 for a list and percentage breakdown
of the fund's holdings.
The mention of sector breakdowns is for informational purposes only and should
not be construed as a recommendation to purchase or sell any securities. The
information provided regarding such sectors is not a sufficient basis upon
which to make an investment decision. Investors seeking financial advice
regarding the appropriateness of investing in any securities or investment
strategies discussed should consult their financial professional. Portfolio
holdings are subject to change at any time and may not be representative of the
portfolio manager's current or future investments. The fund's top five sector
holdings as of March 31, 2004 were: Education (27.2%); Transportation (19.3%);
Hospital (11.6%); Water & Sewer (8.5%); Government Facilities (7.4%). The
fund's portfolio composition is subject to change at any time.
RISKS: Keep in mind, the fund's investments are subject to interest rate and
credit risk. As a non-diversified fund, it can invest a larger percentage of
its assets in fewer issues than a diversified fund. This may magnify the fund's
losses from events affecting a particular issuer. The fund may use derivatives,
such as options and futures, which can be illiquid, may disproportionately
increase losses, and have a potentially large impact on fund performance.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
/i/ The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year.
/ii/ Source: Lehman Brothers. This subindex is a broad measure of the market
for New York municipal bonds with maturities of at least one year.
/iii/ Derivatives, such as options and futures, can be illiquid and harder to
value, especially in declining markets. A small investment in certain
derivatives may have a potentially large impact on the fund's performance.
Derivatives can disproportionately increase losses as stated in the
prospectus.
/iv/ Percentages are based on net asset values as a percentage of fund assets
on March 31, 2004.
/v/ Based upon the performance of subindices of the Lehman Brothers Municipal
Bond Index reflective of the performance of municipal bonds in each
respective sector category over the 12-month reporting period.
/vi/ Although the average life measurement takes into account the earliest
dates at which callable bonds in the fund may be called rather than the
final maturity dates on callable issues, there are no assurances that
callable bonds will be called/redeemed on their call dates prior to
maturity.
/vii/ 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.
/viii/Source for GDP growth: Bureau of Labor Statistics. Gross domestic product
is a market value of goods and services produced by labor and property in
a given country.
/ix/ Source: Federal Reserve (January 28, 2004).
/x/ Source: U.S. Department of Labor (April 1, 2004).
/xi/ Source: Lehman Brothers.
/xii/ Source: Standard & Poor's (Public Finance Report Card, April 2004).
11 Smith Barney Muni Funds | 2004 Annual Report
NEW YORK PORTFOLIO
AVERAGE ANNUAL TOTAL RETURNS+ (UNAUDITED)
Without Sales Charges/(1)/
--------------------------------
Class A Class B Class L Class Y
- -------------------------------------------------------------
Twelve Months Ended 3/31/04 3.87% 3.35% 3.30% 4.13%
- -------------------------------------------------------------
Five Years Ended 3/31/04 4.80 4.25 4.20 N/A
- -------------------------------------------------------------
Ten Years Ended 3/31/04 6.16 N/A 5.55 N/A
- -------------------------------------------------------------
Inception* through 3/31/04 6.72 6.42 5.48 5.23
- -------------------------------------------------------------
With Sales Charges/(2)/
--------------------------------
Class A Class B Class L Class Y
- -------------------------------------------------------------
Twelve Months Ended 3/31/04 (0.29)% (1.12)% 2.30% 4.13%
- -------------------------------------------------------------
Five Years Ended 3/31/04 3.94 4.08 4.20 N/A
- -------------------------------------------------------------
Ten Years Ended 3/31/04 5.73 N/A 5.55 N/A
- -------------------------------------------------------------
Inception* through 3/31/04 6.47 6.42 5.48 5.23
- -------------------------------------------------------------
CUMULATIVE TOTAL RETURNS+ (UNAUDITED)
Without Sales Charges/(1)/
---------------------------------------------------------------
Class A (3/31/94 through 3/31/04) 81.80%
--------------------------------------------------------------
Class B (Inception* through 3/31/04) 79.26
--------------------------------------------------------------
Class L (3/31/94 through 3/31/04) 71.66
--------------------------------------------------------------
Class Y (Inception* through 3/31/04) 17.95
--------------------------------------------------------------
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00%; Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from purchase payment. This CDSC declines by 0.50% the first year
after purchase payment and thereafter by 1.00% per year until no CDSC is
incurred. Class L shares also reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within one year from purchase payment. The
1.00% initial sales charge on Class L shares is no longer imposed effective
February 2, 2004.
+ All figures represent past performance and are not a guarantee of future
results. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares.
* Inception dates for Class A, B, L and Y shares are January 16, 1987,
November 11, 1994, January 8, 1993 and January 4, 2001, respectively.
12 Smith Barney Muni Funds | 2004 Annual Report
HISTORICAL PERFORMANCE (UNAUDITED)
Value of $10,000 Invested in Class A Shares of
the New York Portfolio vs.
the Lehman Brothers Municipal Bond Index and
Lipper New York Municipal Debt Funds Average+
- --------------------------------------------------------------------------------
March 1994 -- March 2004
[CHART]
New York Lehman Brothers Lipper New York
Portfolio-- Municipal Municipal Debt
Class A Shares Bond Index Funds Average
------------------ --------------- ---------------
3/94 9,603 10,000 10,000
3/95 10,210 10,744 10,549
3/96 11,100 11,645 11,277
3/97 11,708 12,278 11,827
3/98 13,092 13,594 13,082
3/99 13,813 14,437 13,761
3/00 13,591 14,424 13,449
3/01 15,028 16,000 14,878
3/02 15,502 16,612 15,323
3/03 16,808 18,253 16,596
3/04 17,458 19,323 17,500
+Hypothetical illustration of $10,000 invested in Class A shares on March 31,
1994, assuming deduction of the maximum 4.00% sales charge at the time of
investment and reinvestment of dividends (after deduction of applicable sales
charges through November 6, 1994 and thereafter at net asset value) and
capital gains, if any, at net asset value through March 31, 2004. The Lehman
Brothers Municipal Bond Index is a broad measure of the municipal bond market
with maturities of at least one year. The Index is unmanaged and is not
subject to the same management and trading expenses of a mutual fund. Please
note that an investor cannot invest directly in an index. The Lipper New York
Municipal Debt Funds Average is composed of the Fund's peer group of mutual
funds (106 funds as of March 31, 2004). The performance of the Fund's other
classes may be greater or less than the Class A shares' performance indicated
on this chart, depending on whether greater or lesser sales charges and fees
were incurred by shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment return and principal value of an investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost. The returns shown do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares.
13 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS MARCH 31, 2004
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------
Albany IDA Civic Facilities University at Albany
AMBAC-Insured:
$ 5,055,000 A-1 Series A 0.99% VRDO $ 5,055,000
8,090,000 A-1 Series B 0.99% VRDO 8,090,000
11,200,000 A-1 Series C 0.99% VRDO 11,200,000
15,935,000 A-1 Series D 0.99% VRDO 15,935,000
Brookhaven GO:
300,000 Aaa* FGIC-Insured 5.00% due 5/15/04 301,457
400,000 AAA MBIA-Insured 2.00% due 8/15/04 401,471
Chautauqua County IDA:
7,100,000 A-1+ Gerry Homes Project Series A 1.00% VRDO AMT 7,100,000
4,200,000 Aa2* Red Wing Co. Project 0.98% VRDO 4,200,000
2,000,000 MIG 1* Connetquot CSD GO TAN 2.00% due 6/30/04 2,004,974
5,720,000 A-1+ Dutchess County IDA Marist College Series 98A
1.02% VRDO 5,720,000
Erie County:
15,000,000 MIG 1* GO RAN Series A 1.50% due 6/23/04 15,020,227
1,985,000 VMIG 1* IDA Rosina Food Products Inc. 1.10% VRDO 1,985,000
510,000 Aaa* Frewsburg CSD GO FGIC-Insured 1.50% due 6/15/04 510,518
Garden City UFSD GO TAN:
4,000,000 NR+ 1.50% due 6/29/04 4,005,128
1,000,000 NR+ 1.75% due 6/29/04 1,001,886
2,720,000 A-1 Genesee County IDR RJ Properties Project 1.04%
VRDO AMT 2,720,000
2,900,000 A-1+ Great Neck North Water Authority System Series A
1.03% VRDO 2,900,000
3,532,000 NR++ Greenburgh GO BAN 1.75% due 9/30/04 3,545,123
4,500,000 NR+ Hampton Bays UFSD TAN 1.50% due 6/24/04 4,505,932
Jay Street Development Corp. Court Facilities Lease
Revenue:
15,200,000 A-1+ Series A-1 1.03% VRDO 15,200,000
12,500,000 A-1+ Series A-2 0.95% VRDO 12,500,000
22,375,000 A-1+ Series A-3 1.00% VRDO 22,375,000
2,830,000 A-1+ Lancaster IDA Sealing Devices Inc. 1.10% VRDO AMT 2,830,000
3,500,000 A-1 Lewis County IDA Climax Manufacturing Co. Project
1.04% VRDO AMT 3,500,000
Long Island Power Authority:
17,600,000 A-1+ Series 1A 1.05% VRDO 17,600,000
3,150,000 A-1+ Series 2 Subseries 2B 1.10% VRDO 3,150,000
1,800,000 A-1+ Series 3B 1.10% VRDO 1,800,000
3,000,000 A-1+ Series 7-B MBIA-Insured 1.03% VRDO 3,000,000
3,445,000 A-1+ Series D FSA-Insured 1.05% VRDO 3,445,000
3,200,000 A-1+ Series E FSA-Insured 1.00% VRDO 3,200,000
15,055,000 A-1+ Series F FSA-Insured 1.03% VRDO 15,055,000
See Notes to Financial Statements.
14 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ----------------------------------------------------------------------------------------------
$ 2,200,000 A-1+ Series H FSA-Insured 1.03% VRDO $ 2,200,000
26,070,000 A-1+ Series PA-368 PART 1.09% VRDO 26,070,000
6,000,000 MIG 1* Massapequa UFSD GO TAN 1.50% due 6/29/04 6,012,683
Metropolitan Transportation Authority:
AMBAC-Insured:
10,000,000 A-1 Series G-1 1.01% VRDO 10,000,000
5,000,000 A-1+ Series G-2 1.01% VRDO 5,000,000
4,900,000 A-1+ BAN Series CP-1A Subseries A 0.95% due 6/2/04 TECP 4,900,000
FSA-Insured:
10,800,000 VMIG 1* Munitop Series 99-2 PART 1.04% VRDO 10,800,000
41,570,000 A-1+ Series B 1.01% VRDO 41,570,000
20,400,000 A-1+ Series D-1 1.00% VRDO 20,400,000
2,000,000 A-1+ Series D-2 1.00% VRDO 2,000,000
8,000,000 NR+ Middle Country CSD TAN 1.50% due 6/25/04 8,011,048
Monroe County IDA:
340,000 A-1 JADA Precision Plastic Project Series 97
1.04% VRDO AMT 340,000
9,620,000 VMIG 1* Rochester Institute of Technology Project Series A
1.00% VRDO 9,620,000
1,400,000 VMIG 1* St. Ann's Nursing Home for the Aged Project
0.99% VRDO 1,400,000
Municipal Assistance Corp. for City of New York:
2,500,000 AA+ Series E 6.00% due 7/1/04 2,531,342
1,000,000 AA+ Series H 5.50% due 7/1/04 1,011,300
1,880,000 AA+ Series J 6.00% due 7/1/04 1,903,618
3,500,000 SP-1+ Nassau County GO TAN Series A 2.00% due 4/15/04 3,507,607
Nassau County IDA:
3,495,000 A-1+ Cold Spring Harbor Lab 1.12% VRDO 3,495,000
2,990,000 A-1 Rubbies Costume Co. Project 1.04% VRDO 2,990,000
New York City GO:
15,000,000 SP-1+ RAN Series A 2.00% due 4/15/04 15,006,104
8,000,000 A-1+ Series 95 E-5 1.05% VRDO 8,000,000
16,605,000 A-1+ Series 95 F-4 1.05% VRDO 16,605,000
30,000,000 A-1+ Series A-3 1.05% VRDO 30,000,000
4,800,000 A-1+ Series C-2 1.05% VRDO 4,800,000
10,000,000 A-1 Series H-6 1.01% VRDO 10,000,000
5,995,000 A-1 Series PA 624 AMBAC-Insured PART 1.05% VRDO 5,995,000
600,000 A-1+ Series SGB 35 AMBAC-Insured PART 1.04% VRDO 600,000
New York City HDC MFH FNMA-Insured:
48,000,000 A-1 2 Gold Street Series A 1.05% VRDO 48,000,000
15,000,000 A-1+ 63 Wall Street Series A 1.01% VRDO 15,000,000
11,000,000 A-1+ 90 West Street Series A 1.03% VRDO 11,000,000
12,000,000 A-1+ 96th Street Association Monterey Series A 1.03% VRDO 12,000,000
See Notes to Financial Statements.
15 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------
$ 10,200,000 A-1+ Carnegie Park Series A 1.03% VRDO $ 10,200,000
9,700,000 A-1+ Tribeca Tower Series A 1.08% VRDO AMT 9,700,000
New York City IDA IDR:
3,950,000 VMIG 1* Ahava Food Corp. Project 1.05% VRDO AMT 3,950,000
9,300,000 VMIG 1* Center for Jewish History Project 1.00% VRDO 9,300,000
5,800,000 A-1+ Children's Oncology Society 1.05% VRDO 5,800,000
4,900,000 A-1+ Gary Plastic Packaging Corp. Series 98 1.05%
VRDO AMT 4,900,000
4,205,000 A-1+ Linear Lighting Corp. Project 1.05% VRDO AMT 4,205,000
2,000,000 A-1+ MSMC Realty Corp. Project 1.01% VRDO 2,000,000
2,795,000 VMIG 1* Peninsula Hospital Center Project 1.04% VRDO 2,795,000
4,000,000 NR+ Planned Parenthood Project 1.00% VRDO 4,000,000
1,560,000 A-1+ PS Bibbs Inc. 1.15% VRDO AMT 1,560,000
New York City Municipal Water Finance Authority:
Fiscal 2003:
8,000,000 A-1 Series C-2 1.00% VRDO 8,000,000
16,300,000 A-1+ Series C-3 1.10% VRDO 16,300,000
Series 1:
7,500,000 A-1+ 0.94% due 4/1/04 TECP 7,500,000
5,000,000 A-1+ 0.94% due 4/7/04 TECP 5,000,000
30,000,000 A-1+ Series 5B 1.00% due 7/1/04 TECP 30,000,000
10,000,000 A-1 Series 687 MBIA-Insured PART 1.05% VRDO 10,000,000
800,000 A-1+ Series F-1 1.13% VRDO 800,000
5,000,000 A-1+ Series F-2 1.02% VRDO 5,000,000
3,500,000 A-1+ Series G FGIC-Insured 1.10% VRDO 3,500,000
New York City TFA:
Future Tax Secured:
22,965,000 A-1+ Series A-2 1.05% VRDO 22,965,000
2,700,000 A-1+ Series B 1.10% VRDO 2,700,000
4,000,000 A-1+ Series C 1.02% VRDO 4,000,000
14,920,000 A-1 MSTC Series 122 PART 1.06% VRDO 14,920,000
New York City Recovery:
32,000,000 A-1+ Series 1 1.05% VRDO 32,000,000
1,000,000 A-1+ Series 2A 1.10% VRDO 1,000,000
500,000 A-1+ Series 2F 1.12% VRDO 500,000
1,000,000 A-1+ Series 3B 1.15% VRDO 1,000,000
1,300,000 A-1+ Series 3E 1.12% VRDO 1,300,000
3,035,000 VMIG 1* Series 162 AMBAC-Insured PART 1.05% due 7/1/04 3,035,000
New York City Trust for Cultural Resources:
1,225,000 VMIG 1* Asia Society 1.00% VRDO 1,225,000
3,000,000 A-1 Museum of Broadcasting 0.99% VRDO 3,000,000
3,300,000 A-1 Museum of Modern Art Series 596 AMBAC-Insured
PART 1.05% VRDO 3,300,000
1,130,000 A-1+ Soloman R. Guggenheim Museum Series B
0.99% VRDO 1,130,000
See Notes to Financial Statements.
16 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------
New York State Dormitory Authority:
Columbia University:
$ 11,800,000 A-1+ 0.97% due 6/1/04 TECP $ 11,800,000
5,000,000 A-1+ Series B 1.03% due 3/8/05 5,000,000
2,000,000 A-1+ Series SGA 132 PART 1.06% VRDO 2,000,000
Cornell University:
11,000,000 A-1+ 0.93% due 5/24/04 TECP 11,000,000
8,000,000 A-1+ 0.95% due 5/24/04 TECP 8,000,000
6,780,000 A-1 Glen Eddy Inc. 1.00% VRDO 6,780,000
Mental Health Services:
35,000,000 A-1+ Series 2B FSA-Insured 1.00% VRDO 35,000,000
3,000,000 A-1+ Series 2C MBIA-Insured 1.00% VRDO 3,000,000
51,100,000 A-1+ Series 2E 1.00% VRDO 51,100,000
2,500,000 A-1+ Series 2H 1.00% VRDO 2,500,000
2,000,000 A-1+ Series D-2A MBIA-Insured 1.00% VRDO 2,000,000
Metropolitan Museum of Art:
9,280,000 A-1+ Series A 1.00% VRDO 9,280,000
4,240,000 A-1+ Series B 1.00% VRDO 4,240,000
New York Public Library MBIA-Insured:
5,830,000 A-1 Series 99A 1.03% VRDO 5,830,000
9,490,000 A-1 Series B 1.03% VRDO 9,490,000
5,930,000 VMIG 1* Oxford University Press Inc. 1.00% VRDO 5,930,000
9,675,000 VMIG 1* Rochester Institute of Technology Series B
AMBAC-Insured 0.97% VRDO 9,675,000
1,865,000 A-1+ Rockefeller University Series A 1.00% VRDO 1,865,000
1,125,000 AAA School District Financing Program Series A
MBIA-Insured 3.50% due 10/1/04 1,138,450
7,842,500 VMIG 1* State Personal Income Tax Revenue Series 821
FGIC-Insured PART 1.20% due 2/10/05 7,842,500
State University Series PA:
9,945,000 A-1 622 PART 1.09% VRDO 9,945,000
15,170,000 A-1 842 FGIC-Insured PART 1.04% VRDO 15,170,000
13,280,000 VMIG 1* New York State Energy Research & Development Authority
Long Island Lighting Co. Series A 1.08% VRDO AMT 13,280,000
New York State Environmental Facilities Corp.:
Clean Water and Drinking:
9,990,000 A-1 MSTC Series 9040 PART 1.07% VRDO 9,990,000
9,170,000 A-1 Series PT-409 PART 1.20% due 4/15/04 9,170,000
15,000,000 A-1+ Series 1997A 0.98% due 8/10/04 TECP 15,000,000
New York State GO:
Series 1998A TECP:
12,400,000 A-1+ 0.92% due 6/1/04 12,400,000
40,500,000 A-1+ 0.95% due 6/1/04 40,500,000
14,200,000 A-1+ Series A 1.05% due 10/7/04 14,200,000
8,860,000 A-1+ Series B 1.02% due 8/5/04 8,860,000
See Notes to Financial Statements.
17 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- -------------------------------------------------------------------------------------------
New York State HFA:
$ 3,300,000 VMIG 1* 20 River Terrace Series A 1.05% VRDO $ 3,300,000
1,700,000 VMIG 1* 240 East 39th Street FNMA-Insured 1.08% VRDO AMT 1,700,000
11,800,000 VMIG 1* 750 Sixth Avenue Series A FNMA-Insured
1.08% VRDO AMT 11,800,000
6,000,000 VMIG 1* Biltmore Towers Series A 1.08% VRDO AMT 6,000,000
9,000,000 VMIG 1* Historic Front Street Series A 1.02% VRDO 9,000,000
28,300,000 VMIG 1* Parkledge Apartments Series A FHLMC-Insured
1.02% VRDO AMT 28,300,000
Service Contract Revenue:
37,500,000 A-1+ Series A 1.05% VRDO 37,500,000
7,000,000 A-1+ Series C 1.05% VRDO 7,000,000
4,200,000 VMIG 1* Theatre Row Series A 1.29% VRDO AMT 4,200,000
2,500,000 VMIG 1* Theatre Row Tower Series A 1.29% VRDO AMT 2,500,000
10,000,000 VMIG 1* Worth Street Series A FNMA-Insured 1.07% VRDO AMT 10,000,000
New York State LGAC:
35,400,000 A-1+ Series 3V FGIC-Insured 1.05% VRDO 35,400,000
10,000,000 A-1+ Series 4V FSA-Insured 1.05% VRDO 10,000,000
10,000,000 A-1+ Series 8V 1.05% FSA-Insured VRDO 10,000,000
36,850,000 A-1+ Series 93A 1.03% VRDO 36,850,000
1,200,000 A-1+ Series 95E 1.03% VRDO 1,200,000
250,000 AAA Series A FGIC-Insured 5.00% due 4/1/04 250,000
660,000 VMIG 1* New York State Mortgage Agency MERLOT Series B-3
PART 1.11% VRDO 660,000
New York State Power Authority:
25,000,000 A-1+ 0.95% due 9/1/04 25,000,000
10,000,000 A-1 Series 1 1.00% due 5/10/04 TECP 10,000,000
Series 2 TECP:
15,000,000 A-1 0.95% due 5/6/04 15,000,000
10,000,000 A-1 0.95% due 5/10/04 10,000,000
9,600,000 A-1 0.95% due 7/2/04 9,600,000
16,000,000 A-1 Series 5 1.03% VRDO 16,000,000
1,510,000 Aa2* Series C 5.00% due 2/15/05 1,561,627
New York State Thruway Authority:
15,750,000 A-1+ 0.96% due 5/12/04 TECP 15,750,000
16,000,000 A-1+ 0.94% due 8/5/04 TECP 16,000,000
19,500,000 A-1+ 0.95% due 10/7/04 TECP 19,500,000
8,845,000 A-1 MSTC Series 120 FGIC-Insured PART 1.06% VRDO 8,845,000
5,000,000 A-1+ Series SGA 66 PART 1.06% VRDO 5,000,000
New York State Urban Development Corp. PART:
8,000,000 VMIG 1* MERLOT Series N AMBAC-Insured 1.06% VRDO 8,000,000
21,490,000 A-1+ Putter 313 1.03% VRDO 21,490,000
1,235,000 VMIG 1* Oneida County IDA Hamilton College MBIA-Insured
0.98% VRDO 1,235,000
See Notes to Financial Statements.
18 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ---------------------------------------------------------------------------------------------------
$ 1,875,000 A-1 Oneida County IDR Harden Furniture Series 98
1.04% VRDO $ 1,875,000
31,025,000 A-1+ Oneida Indian Nation Series 2002 1.02% VRDO 31,025,000
Onondaga County IDA:
3,405,000 A-1 Syracuse Executive Air 1.04% VRDO AMT 3,405,000
5,570,000 A-1+ Syracuse Research Corp. 1.00% VRDO 5,570,000
Ontario County IDR:
1,815,000 A-1+ Dixit Enterprises Series B 1.10% VRDO AMT 1,815,000
8,000,000 VMIG 1* Frederick Ferris Thompson Hospital 1.04% VRDO 8,000,000
2,830,000 A-1+ Oswego County IDR Fulton Thermal Corp.
1.04% VRDO AMT 2,830,000
Port Authority of New York & New Jersey:
7,860,000 A-1+ Putter Series 177 MBIA-Insured PART 1.09% VRDO 7,860,000
3,500,000 NR++ Series 98-1 Equipment Notes 1.20% VRDO AMT 3,500,000
3,500,000 NR++ Series 98-2 Equipment Notes 1.10% VRDO 3,500,000
4,755,000 A-1 Series 646 FSA-Insured PART 1.02% VRDO 4,755,000
20,500,000 A-1+ Series 2000-A 0.95% due 5/4/04 TECP AMT 20,500,000
Series B TECP:
810,000 A-1+ 0.94% due 4/7/04 810,000
2,520,000 A-1+ 0.97% due 6/1/04 2,520,000
Versatile Structure Obligation:
12,100,000 A-1+ Series 95-3 1.11% VRDO 12,100,000
23,880,000 A-1+ Series 96-5 1.11% VRDO 23,880,000
Puerto Rico Commonwealth Highway & Transportation
Authority:
11,550,000 A-1 Series A AMBAC-Insured 1.03% VRDO 11,550,000
3,665,000 A-1+ Series PA 472 1.01% FSA-Insured VRDO 3,665,000
2,900,000 A-1+ Puerto Rico Electric Power Authority MBIA-Insured PART
1.04% VRDO 2,900,000
Puerto Rico GO:
1,060,000 AAA MBIA-Insured 5.30% due 7/1/04 1,071,498
4,000,000 VMIG 1* MERLOT Series A44 FGIC-Insured PART 1.05% VRDO 4,000,000
5,100,000 A-1 Series PA-650 PART 1.05% VRDO 5,100,000
30,365,000 SP-1+ TRAN 2.00% due 7/30/04 30,464,938
32,519,000 A-1 Puerto Rico Government Development Bank MBIA-Insured
0.92% VRDO 32,519,000
Puerto Rico IFA MSTC PART:
19,995,000 A-1 Series 103 1.04% VRDO 19,995,000
19,995,000 A-1 Series 106 1.04% VRDO 19,995,000
2,050,000 A-1 Puerto Rico MFA Series PA-610 FSA-Insured PART
1.01% VRDO 2,050,000
Puerto Rico PFC MBIA-Insured PART:
5,000,000 VMIG 1* Series 520 1.15% due 8/12/04 5,000,000
4,765,000 VMIG 1* Series 522X MBIA-Insured 1.02% VRDO 4,765,000
See Notes to Financial Statements.
19 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK MONEY MARKET PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ----------------------------------------------------------------------------------------------
$ 4,945,000 P-1* Rotterdam IDA IDR Rotterdam Park Project 1.03% VRDO $ 4,945,000
2,230,000 P-1* Schenectady County IDR Scotia Industrial Park Project
Series 98A 1.03% VRDO 2,230,000
3,490,000 A-1 St. Lawrence County IDA United Helpers Independent
Living Corp. 1.03% VRDO 3,490,000
4,340,000 A-1+ Suffolk County IDR JBC Realty 1.04% VRDO 4,340,000
10,000,000 MIG 1* Syracuse GO RAN Series C 1.75% due 6/30/04 10,017,557
20,325,000 A-1+ Tompkins County IDA Civic Facilities Cornell University
0.98% VRDO 20,325,000
Triborough Bridge & Tunnel Authority:
7,055,000 A-1+ Putters Series 342 AMBAC-Insured PART 1.03% VRDO 7,055,000
20,280,000 AAA Series 72 MBIA-Insured PART 1.06% VRDO 20,280,000
9,235,000 VMIG 1* Series 109 PART 1.11% VRDO 9,235,000
12,280,000 A-1+ Series A FSA-Insured 1.05% VRDO 12,280,000
30,400,000 A-1+ Series C AMBAC-Insured 1.01% VRDO 30,400,000
17,600,000 A-1+ Series F 1.00% VRDO 17,600,000
6,500,000 A-1+ Troy IDA Rensselaer Polytech Institute Series E
1.00% VRDO 6,500,000
5,000,000 SP-1+ Ulster County BAN 1.75% due 6/11/04 5,007,197
500,000 AAA Virgin Islands PFA Federal Highway Reimbursement Loan
Note 3.50% due 9/1/04 505,165
5,055,000 A-1+ Westchester County IDA Boys & Girls Club Project
1.02% VRDO 5,055,000
2,430,000 A-1 Yates IDR Coach Equipment Manufacturing Corp.
1.04% VRDO AMT 2,430,000
Yonkers IDA Consumers Union Facilities:
2,400,000 VMIG 1* 1.02% VRDO 2,400,000
6,020,000 A-1+ AMBAC-Insured 1.02% VRDO 6,020,000
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $1,964,973,350**) $ 1,964,973,350
- ----------------------------------------------------------------------------------------------
(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
("Moody's").
+ Security has not been rated by either Standard & Poor's or Moody's. However,
the Board of Trustees has determined this security to be considered as a
first tier quality issue due to enhancement features; such as insurance
and/or irrevocable letters of credit.
++ Security has not been rated by either Standard & Poor's or Moody's. However,
the Board of Trustees has determined that the security presents minimal
credit risk.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 32 through 34 for definitions of ratings and certain abbreviations.
See Notes to Financial Statements.
20 Smith Barney Muni Funds | 2004 Annual Report
SUMMARY OF INVESTMENTS BY INDUSTRY*
NEW YORK MONEY MARKET PORTFOLIO
Transportation 17.9%
General Obligation 16.3
Housing 11.7
Finance 9.7
Education 8.7
Utilities 7.8
Hospital 6.1
Industrial Development 5.6
Water and Sewer 5.0
Government Facilities 3.0
Other 8.2
-----------------------------
100.0%
-----------------------------
* As a percentage of total investments. Please note that Fund holdings are as
of March 31, 2004 and are subject to change.
21 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
Education -- 27.6%
$ 2,755,000 Aaa* Albany IDA, Civic Facility Revenue, (St. Rose Project), Series A,
AMBAC-Insured, 5.375% due 7/1/31 $ 2,957,603
Amherst IDA, Civic Facilities Revenue, UBF Faculty-Student
Housing, Series B, AMBAC-Insured:
1,000,000 AAA 5.125% due 8/1/20 1,087,040
3,615,000 AAA 5.250% due 8/1/31 3,847,661
Madison County IDA, Civic Facilities Revenue, (Colgate
University Project), Series B:
2,250,000 AA- 5.000% due 7/1/23 2,346,233
2,000,000 AA- 5.000% due 7/1/33 2,065,600
New York State Dormitory Authority Revenue Bonds:
City University Systems:
16,925,000 AAA 3rd Generation, Series 1, FGIC-Insured,
5.250% due 7/1/25 (b) 17,814,409
4th Generation, Series A:
625,000 AA- 5.250% due 7/1/31 652,856
2,840,000 AA- 2 MBIA/IBC-Insured, (Call 7/1/08 @ 101),
5.000% due 7/1/28 (c) 3,209,399
5,375,000 AA- Call 7/1/11 @ 100, 5.250% due 7/1/31 (c) 6,186,625
1,660,000 AA- MBIA-Insured, 5.000% due 7/1/28 1,710,530
Series A, FGIC-Insured:
5,825,000 AAA 5.625% due 7/1/16 6,863,656
14,000,000 AAA 2nd Generation, 5.000% due 7/1/16 (b) 15,125,180
7,000,000 AAA Series B, FSA-Insured, 6.000% due 7/1/14 8,481,130
2,500,000 A3* Series C, 7.500% due 7/1/10 2,953,600
2,000,000 AAA Columbia University, 5.000% due 7/1/18 2,148,320
1,300,000 A-1+ Cornell University, Series B, 1.120% due 7/1/25 (d) 1,300,000
Court Facilities, City of New York Issue:
5,000,000 A 6.000% due 5/15/39 5,524,900
3,000,000 AAA AMBAC-Insured, 5.750% due 5/15/30 3,389,100
2,000,000 AA- Department of Education, 5.000% due 7/1/24 2,077,860
5,000,000 AAA New School University, MBIA-Insured, 5.000% due 7/1/29 5,171,350
10,260,000 AAA Rockefeller University, 5.000% due 7/1/28 (b) 10,592,424
1,000,000 AA- School Improvement Program, 5.000% due 7/1/18 1,057,830
1,150,000 AAA St. John's University, MBIA-Insured, 5.250% due 7/1/25 1,206,925
State University Dormitory Facility, FGIC-Insured, (Call
7/1/11 @ 100):
1,000,000 AAA 5.500% due 7/1/26 (c) 1,167,200
1,000,000 AAA 5.500% due 7/1/27 (c) 1,167,200
12,000,000 AAA 5.100% due 7/1/31 (b)(c) 13,695,240
See Notes to Financial Statements.
22 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------
Education -- 27.6% (continued)
State University Educational Facility:
Series A:
$ 12,750,000 AAA FGIC-Insured, (Call 5/15/12 @ 101),
5.000% due 5/15/27 (b)(c) $ 14,574,525
12,110,000 AAA FSA-Insured, 5.875% due 5/15/17 (b) 14,601,632
7,030,000 AAA MBIA-Insured, 5.000% due 5/15/16 7,535,949
Series B:
676,000 AA- 7.500% due 5/15/11 814,688
5,000,000 AAA FGIC-Insured, 5.250% due 5/15/19 5,691,250
5,000,000 AAA FSA-Insured, (Call 5/15/10 @ 101),
5.500% due 5/15/30 (c) 5,850,800
University of Rochester, Series A:
7,370,000 A+ Call 7/1/04 @ 102, 6.500% due 7/1/19 (c) 7,614,242
MBIA-Insured:
3,915,000 AAA 5.000% due 7/1/16 4,219,822
2,300,000 AAA 5.000% due 7/1/27 2,370,909
Rensselaer County IDA, Civic Facilities Revenue Bonds,
(Polytechnic Institute Dormitory Project):
5,430,000 A+ Series A, 5.125% due 8/1/29 5,618,475
5,820,000 A+ Series B, 5.125% due 8/1/27 6,027,599
Schenectady IDA, Civic Facilities Revenue Bonds,
(Union College Project), Series A, AMBAC-Insured:
2,000,000 Aaa* 5.375% due 12/1/19 2,219,320
1,725,000 Aaa* 5.000% due 7/1/22 1,826,948
3,000,000 Aaa* 5.450% due 12/1/29 3,221,700
2,390,000 Aaa* 5.625% due 7/1/31 2,654,955
Taconic Hills School District at Craryville, FGIC-Insured,
State Aid Withholding:
1,420,000 Aaa* 5.000% due 6/15/25 1,480,975
700,000 Aaa* 5.000% due 6/15/26 729,078
3,000,000 Aaa* Teachers College, MBIA-Insured, 5.000% due 7/1/22 3,161,220
- -----------------------------------------------------------------------------------------------
214,013,958
- -----------------------------------------------------------------------------------------------
Finance -- 4.7%
New York City Transitional Finance Authority Revenue:
Future Tax Secured:
1,000,000 A-1+ Series B, 1.100% due 2/1/31 (d) 1,000,000
Series C:
2,200,000 A-1+ 1.080% due 5/1/28 (d) 2,200,000
10,000,000 AA+ Call 5/1/10 @ 101, 5.500% due 11/1/29 (b)(c) 11,692,300
1,500,000 A-1 Sub-Series C5, 1.080% due 8/1/31 (d) 1,500,000
NYC Recovery:
2,100,000 A-1+ Sub-Series 1C, 1.080% due 11/1/22 (d) 2,100,000
See Notes to Financial Statements.
23 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------
Finance -- 4.7% (continued)
$ 4,200,000 A-1+ Sub-Series 3B, 1.150% due 11/1/22 (d) $ 4,200,000
2,200,000 A-1+ Sub-Series 3H, 1.080% due 11/1/22 (d) 2,200,000
300,000 A-1+ Sub-Series 2A, 1.100% due 11/1/22 (d) 300,000
5,000,000 AAA New York State Local Government Assistance Corp., Series B,
MBIA-Insured, 4.875% due 4/1/20 5,174,400
435,000 BBB+ New York State Municipal Bond Bank Agency, Special Revenue
Program, City of Buffalo, Series A, 6.875% due 3/15/06 437,184
5,000,000 BBB+ Puerto Rico Public Financial Corp., Series E, 5.500% due 8/1/29 5,429,250
- ----------------------------------------------------------------------------------------------------
36,233,134
- ----------------------------------------------------------------------------------------------------
General Obligation -- 3.2%
New York City GO:
4,000,000 AAA Series B1, MBIA-Insured, (Call 8/15/04 @ 101),
6.950% due 8/15/12 (c) 4,126,840
3,150,000 AAA Series I, AMBAC-Insured, 7.250% due 8/15/14 (e) 3,660,867
500,000 A-1+ Sub-Series A4, LOC-Westdeutsche Landesbank,
1.100% due 8/1/23 (d) 500,000
150,000 A-1+ Sub-Series A6, FSA-Insured, 1.100% due 11/1/26 (d) 150,000
5,500,000 A-1+ Sub-Series C4, LOC-BNP Paribas Bank,
1.030% due 8/1/20 (d) 5,500,000
Sub-Series E5, LOC-J.P. Morgan Chase Bank:
1,000,000 A-1+ 1.110% due 8/1/09 (d) 1,000,000
100,000 A-1+ 1.110% due 8/1/18 (d) 100,000
870,000 A-1+ Sub-Series H3, FSA-Insured, 1.100% due 8/1/23 (d) 870,000
2,750,000 AA New York State GO, 9.875% due 11/15/05 3,116,135
4,505,000 Aaa* North Hempstead GO, Series A, FGIC-Insured,
5.000% due 9/1/22 4,715,699
1,000,000 AAA Yonkers GO, Series C, FGIC-Insured, State Aid Withholding,
5.000% due 6/1/19 1,057,150
- ----------------------------------------------------------------------------------------------------
24,796,691
- ----------------------------------------------------------------------------------------------------
Government Facilities -- 7.4%
New York State Urban Development Corp. Revenue:
20,000,000 AA- Correctional and Youth Facilities, Series A,
5.500% due 1/1/17 (b) 22,330,800
3,050,000 AAA Correctional Capital Facilities, MBIA-Insured,
5.000% due 1/1/20 3,192,099
Correctional Facilities Service Contract:
6,600,000 AAA Series C, AMBAC-Insured, (Call 1/1/09 @ 101),
6.000% due 1/1/29 (c) 7,749,390
18,400,000 AAA Series D, FSA-Insured, (Call 1/1/11 @ 100),
5.250% due 1/1/30 (b)(c) 21,065,056
3,000,000 AA- State Facilities, 5.700% due 4/1/20 3,474,450
- ----------------------------------------------------------------------------------------------------
57,811,795
- ----------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
24 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
Hospitals -- 11.7%
$ 1,620,000 AAA East Rochester, Housing Authority Revenue, (North Park Nursing
Home), GNMA-Collateralized, 5.200% due 10/20/24 $ 1,730,435
5,000,000 AAA Nassau Health Care Corp., Health System Revenue Bonds,
FSA-Insured, 5.500% due 8/1/19 5,577,600
New York City Health and Hospital Corp. Revenue, Health
System, Series A:
3,000,000 AAA AMBAC-Insured, 5.000% due 2/15/20 3,142,440
FSA-Insured:
1,110,000 AAA 5.000% due 2/15/22 1,163,569
3,750,000 AAA 5.125% due 2/15/23 3,941,550
New York State Dormitory Authority Revenue:
5,350,000 A1* Lutheran Center at Poughkeepsie, LOC-Key Bank N.A.,
6.050% due 7/1/26 5,643,020
Mental Health Services Facilities:
Series B:
2,500,000 AA- 5.000% due 2/15/18 2,610,750
4,180,000 AA- 5.625% due 2/15/21 4,453,915
2,820,000 AA- Call 2/15/07 @ 102, 5.625% due 2/15/21 (c) 3,176,392
Series D, FSA-Insured:
280,000 AAA 5.250% due 8/15/30 292,432
2,320,000 AAA Call 8/15/10 @ 100, 5.250% due 8/15/30 (c) 2,660,646
324,000 AA- Series B, (Partially Pre-Refunded with U.S. government
securities to various call dates and prices),
7.500% due 5/15/11 405,314
3,000,000 AA St. Luke's Home, Residential Health, FHA-Insured,
6.375% due 8/1/35 3,179,730
2,450,000 AAA St. Vincent's Hospital and Medical Center, FHA-Insured,
7.400% due 8/1/30 2,500,249
1,500,000 AAA United Cerebral Palsy, AMBAC-Insured, 5.125% due 7/1/21 1,618,320
2,000,000 AAA Victory Memorial Hospital, MBIA-Insured,
5.375% due 8/1/25 2,128,920
2,500,000 AAA Willow Towers Inc. Project, GNMA-Collateralized,
5.400% due 2/1/34 2,622,100
New York State Medical Care Facilities, Finance Agency Revenue:
Series A:
4,000,000 AAA Brookdale Hospital Medical Center, (Pre-Refunded --
Escrowed with state and local government securities to
2/15/05 Call @ 102), 6.800% due 8/15/12 4,278,760
2,500,000 B Central Suffolk Hospital Mortgage Project,
6.125% due 11/1/16 1,792,225
665,000 AA- FHA-Insured, 7.450% due 8/15/31 667,620
955,000 Aa1* Health Center Projects, Secured Mortgage Program,
SONYMA-Insured, 6.375% due 11/15/19 1,019,100
See Notes to Financial Statements.
25 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------
Hospitals -- 11.7% (continued)
$ 4,000,000 AA Mortgage Project, FHA-Insured, (Pre-Refunded --
Escrowed with state and local government securities to
8/15/04 Call @ 102), 6.375% due 8/15/24 $ 4,158,440
4,700,000 AAA New York Downtown Hospital, (Pre-Refunded --
Escrowed with state and local government securities to
2/15/05 Call @ 102), 6.800% due 2/15/20 5,027,543
New York Hospital, AMBAC/FHA-Insured, (Pre-Refunded --
Escrowed with state and local government securities to
2/15/05 Call @ 102):
8,500,000 AAA 6.800% due 8/15/24 (b) 9,092,365
7,600,000 AAA 6.500% due 8/15/29 (f) 8,110,188
2,500,000 AAA 6.900% due 8/15/34 2,676,375
Series B:
930,000 AA Hospital and Nursing Home Insured Mortgage,
FHA-Insured, 7.000% due 8/15/32 942,769
1,860,000 AAA Long Term Healthcare, FSA-Insured, 6.450% due 11/1/14 1,867,273
3,500,000 AA Mortgage Project, FHA-Insured, 6.100% due 2/15/15 3,692,500
665,000 BBB+ Puerto Rico Commonwealth Renewal and Housing Corp.,
7.875% due 10/1/04 667,168
- ----------------------------------------------------------------------------------------------------
90,839,708
- ----------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.2%
35,000 NR Battery Park City Authority, Housing Revenue, FHA-Insured,
(Call 6/1/05 @ 100), 8.625% due 6/1/23 (c) 38,028
New York City HDC:
1,314,798 NR Cadman Project, 6.500% due 11/15/18 1,271,423
1,062,470 NR Kelly Project, 6.500% due 2/15/18 1,032,179
4,000,000 AAA Mortgage Revenue, Series A, FHA-Insured,
6.600% due 4/1/30 (f) 4,066,040
1,360,266 NR Riverbend Project, 6.500% due 11/15/18 1,397,946
New York State Dormitory Authority Revenue, Park Ridge
Housing Inc., FNMA-Collateralized:
1,000,000 AAA 6.375% due 8/1/20 (f) 1,151,940
1,470,000 AAA 6.500% due 8/1/25 1,692,852
New York State Housing Finance Agency Revenue,
Secured Mortgage Program:
Series A, SONYMA-Insured:
500,000 Aa1* 7.000% due 8/15/12 (g) 502,825
2,000,000 Aa1* 6.200% due 8/15/15 (g) 2,085,740
500,000 Aa1* 7.050% due 8/15/24 (g) 502,540
6,870,000 Aa1* Series B, SONYMA-Insured, 6.250% due 8/15/29 (g) 7,198,042
Series C:
1,475,000 AAA FHA-Insured, 6.500% due 8/15/24 1,481,564
1,750,000 Aa1* SONYMA-Insured, 6.600% due 8/15/27 (f) 1,808,887
See Notes to Financial Statements.
26 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.2% (continued)
$ 710,000 A1* Rensselaer Housing Authority, Multi-Family Mortgage Revenue,
Rensselaer Elderly Apartments, Series A, 7.750% due 1/1/11 $ 718,279
- ------------------------------------------------------------------------------------------------------------
24,948,285
- ------------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 1.9%
New York State Mortgage Agency Revenue,
Homeowner Mortgage:
3,320,000 Aa1* Series 65, 5.850% due 10/1/28 (g) 3,426,771
4,845,000 Aa1* Series 67, 5.800% due 10/1/28 (g) 5,026,155
6,000,000 Aa1* Series 71, 5.350% due 10/1/18 (g) 6,173,820
- ------------------------------------------------------------------------------------------------------------
14,626,746
- ------------------------------------------------------------------------------------------------------------
Industrial Development -- 2.0%
2,250,000 BBB Essex County IDA Revenue, Solid Waste, (International Paper
Co. Project), Series A, 6.150% due 4/1/21 (g) 2,364,952
470,000 NR Monroe County IDA Revenue, Public Improvement,
Canal Ponds Park, Series A, 7.000% due 6/15/13 474,249
Onondaga County, IDA:
750,000 AA- Civic Facilities Revenue, (Syracuse Home Association Project),
LOC-HSBC Bank USA, 5.200% due 12/1/18 805,965
8,000,000 AA- Sewer Facilities Revenue, (Bristol-Myers Squibb Co. Project),
5.750% due 3/1/24 (b)(g) 9,033,360
1,410,000 AA- Rensselaer County IDA, Albany International Corp., LOC-Fleet
Trust Co., 7.550% due 7/15/07 1,588,097
1,265,000 B2* Warren and Washington Counties, IDA Resource Recovery
Revenue Bonds, Series A, 7.900% due 12/15/07 1,271,578
- ------------------------------------------------------------------------------------------------------------
15,538,201
- ------------------------------------------------------------------------------------------------------------
Life Care Systems -- 1.9%
New York State Dormitory Authority Revenue Bonds,
FHA-Insured:
3,815,000 AA Hebrew Nursing Home, 6.125% due 2/1/37 4,042,488
1,210,000 AAA Heritage House Nursing Center, 7.000% due 8/1/31 1,214,513
1,535,000 AAA Jewish Geriatric Center, 7.150% due 8/1/14 (f) 1,589,968
1,500,000 AAA Menorah Campus Nursing Home, 6.100% due 2/1/37 1,649,430
1,470,000 AA Niagara Frontier Home, Mortgage Revenue,
6.200% due 2/1/15 1,525,228
3,350,000 AA Wesley Garden Nursing Home, 6.125% due 8/1/35 3,637,564
1,250,000 AAA Syracuse IDA Revenue, James Square Association, FHA-Insured,
7.000% due 8/1/25 1,254,663
- ------------------------------------------------------------------------------------------------------------
14,913,854
- ------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
27 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------------
Pollution Control Revenue -- 0.4%
New York State Environmental Facilities Corp.,
State Water Revolving Fund, Series A:
$ 190,000 AAA 7.500% due 6/15/12 $ 191,083
805,000 AAA GIC-Societe General, 7.250% due 6/15/10 808,880
1,000,000 AAA North Country Development Authority, Solid Waste
Management System Revenue, FSA-Insured,
6.000% due 5/15/15 1,210,990
1,710,000 CCC Puerto Rico Industrial, Medical and Environmental Facilities,
Finance Authority Revenue, American Airlines Inc.,
Series A, 6.450% due 12/1/25 1,256,269
- --------------------------------------------------------------------------------------------------------
3,467,222
- --------------------------------------------------------------------------------------------------------
Public Facilities -- 2.0%
1,655,000 AAA New York City Trust Cultural Resource Revenue, AMBAC-Insured:
American Museum of Natural History, Series A,
5.250% due 7/1/17 1,801,269
Museum of Modern Art:
3,100,000 AAA Series A, 5.000% due 4/1/23 3,256,085
9,000,000 AAA Series D, 5.125% due 7/1/31 (b) 9,477,990
705,000 AA- New York State COP, (Hanson Redevelopment Project),
8.375% due 5/1/08 793,534
- --------------------------------------------------------------------------------------------------------
15,328,878
- --------------------------------------------------------------------------------------------------------
Transportation -- 19.5%
750,000 BBB+ Albany, Parking Authority Revenue, Series A,
5.625% due 7/15/25 794,422
Metropolitan Transportation Authority:
Dedicated Tax Fund, Series A:
11,000,000 AAA FGIC-Insured, 5.250% due 11/15/23 (b) 11,745,250
FSA-Insured, (Call 10/1/14 @100):
2,290,000 AAA 5.125% due 4/1/19 (c) 2,625,164
4,500,000 AAA 5.250% due 4/1/23 (c) 5,207,805
Transit Facilities Revenue, Series A:
5,000,000 AAA Call 7/1/09 @ 100, 6.000% due 7/1/19 (c) 5,894,450
10,000,000 AAA MBIA-Insured, (Call 7/1/07 @ 101.50),
5.625% due 7/1/25 (b)(c) 11,387,200
Triborough Bridge and Tunnel Authority:
Series A:
3,500,000 AA- GO of Authority, Call 1/1/22 @ 100,
5.250% due 1/1/28 (c) 3,956,155
5,200,000 AAA MBIA/IBC-Insured, 5.250% due 11/15/30 5,568,420
Series B, GO of Authority:
4,200,000 AAA Call 1/1/16 @ 100, 5.375% due 1/1/19 (c) 4,899,594
10,125,000 AAA Call 1/1/22 @ 100, 5.500% due 1/1/30 (b)(c) 11,539,868
See Notes to Financial Statements.
28 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------
Transportation -- 19.5% (continued)
Triborough Bridge COP, AMBAC-Insured:
$ 2,595,000 AAA 5.875% due 1/1/30 $ 2,967,512
20,000,000 AAA Series A, 5.250% due 1/1/29 (b) 21,064,200
New York State Thruway Authority:
5,000,000 AA- General Revenue, Series E, GO of Authority,
5.000% due 1/1/25 5,149,800
Highway and Bridge Toll Revenue Fund, FGIC-Insured:
Series A:
3,410,000 AAA 5.000% due 4/1/19 3,643,619
2,000,000 AAA 5.000% due 4/1/20 2,124,360
2,500,000 AAA 5.000% due 4/1/21 2,644,975
15,000,000 AAA Series B, 5.000% due 4/1/19 (b) 15,998,700
4,000,000 AAA Series B-1, 5.500% due 4/1/18 4,479,760
Port Authority New York and New Jersey:
7,250,000 AA- 109th Series, GO of Authority, 5.375% due 1/15/32 7,640,702
8,000,000 B- Delta Airlines Inc. Project, Series 1R, 6.950% due 6/1/08 8,014,720
Special Obligation Revenue:
12,000,000 NR 5th Installment, 6.750% due 10/1/19 (b)(g) 12,387,480
300,000 A-1+ Versatile Structure, Morgan Guaranty Trust, Series 3,
1.110% due 6/1/20 (d) 300,000
1,325,000 AA- Triborough Bridge and Tunnel Authority, (Convention Center
Project), Series E, 7.250% due 1/1/10 1,538,895
- --------------------------------------------------------------------------------------------------
151,573,051
- --------------------------------------------------------------------------------------------------
Utilities -- 5.9%
Long Island Power Authority, Electric System Revenue:
25,660,000 AAA Series A, MBIA-Insured, 5.250% due 12/1/26 (b) 27,047,761
500,000 A-1+ Sub-Series 3B, LOC-WestLB AG, 1.100% due 5/1/33 (d) 500,000
New York State Energy, Research and Development Authority:
5,750,000 A Electric Facilities Revenue, (Consolidated Edison Co. Inc.
Project), Series A, 7.125% due 12/1/29 6,049,978
Gas Facilities Revenue:
3,000,000 A+ Brooklyn Union Gas Co. Project, RIBS, Series B,
12.504% due 7/1/26 (g)(h) 3,680,520
1,500,000 Baa2* Corning Natural Gas Corp., Series A,
8.250% due 12/1/18 (g) 1,520,460
7,000,000 A- Puerto Rico Electric Power Authority, Power Revenue,
Series NN, 5.125% due 7/1/29 7,327,250
- --------------------------------------------------------------------------------------------------
46,125,969
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
29 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- ---------------------------------------------------------------------------------------------------
Water and Sewer -- 8.6%
$ 1,000,000 AAA Buffalo Municipal Water Finance Authority, Water Systems
Revenue, FGIC-Insured, (Call 7/1/06 @ 102),
6.100% due 7/1/26 (c) $ 1,123,790
1,005,000 AAA Commonwealth of Puerto Rico, Aqueduct and Sewer Authority
Revenue Bonds, 10.250% due 7/1/09 (e) 1,248,120
2,150,000 AAA Monroe County Water Authority Revenue, AMBAC-Insured,
(Pre-Refunded -- Escrowed with state and local government
securities to 8/1/04 Call @ 101), 7.000% due 8/1/19 (f) 2,213,489
New York City Municipal Water Finance Authority,
Water and Sewer Systems Revenue:
16,000,000 AA 5.500% due 6/15/33 (b) 17,661,120
Series B:
990,000 AA 6.000% due 6/15/33 1,163,092
5,205,000 AAA FGIC-Insured, 5.125% due 6/15/30 5,339,757
FSA-Insured:
2,750,000 AAA 5.000% due 6/15/29 2,833,930
1,000,000 AAA 5.250% due 6/15/29 1,034,880
1,565,000 AA Pre-Refunded -- Escrowed with state and local
government securities to 6/15/10 Call @ 101,
6.000% due 6/15/33 (c) 1,873,931
Series D:
5,000,000 AA 5.250% due 6/15/25 5,310,600
2,375,000 AAA MBIA-Insured, 5.000% due 6/15/15 2,560,297
700,000 A-1+ Series F-1, 1.130% due 6/15/33 (d) 700,000
New York State Environmental Facilities Corp., Clean Water and
Drinking Revolving Funds:
8,500,000 AAA 5.000% due 6/15/32 (b) 8,842,550
Series B:
965,000 AAA 5.250% due 4/15/17 1,048,694
2,490,000 AAA 5.250% due 10/15/17 2,705,958
1,340,000 AAA 5.250% due 4/15/18 1,454,811
1,880,000 AAA 5.250% due 10/15/18 2,041,078
Call 10/15/09 @ 100:
295,000 AAA 5.250% due 4/15/17 (c) 339,103
400,000 AAA 5.250% due 4/15/18 (c) 459,800
See Notes to Financial Statements.
30 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULES OF INVESTMENTS (CONTINUED) MARCH 31, 2004
NEW YORK PORTFOLIO
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------
Water and Sewer -- 8.6% (continued)
Series C:
$1,060,000 AAA 5.000% due 6/15/16 $ 1,137,507
4,980,000 AAA Pre-Refunded -- Escrowed with state and local
government securities to 6/15/08 Call @ 101,
5.000% due 6/15/16 5,407,384
- --------------------------------------------------------------------------------------
66,499,891
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $707,783,349**) $776,717,383
- --------------------------------------------------------------------------------------
(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 segregated for open futures contracts.
(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) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(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) All or a portion of this security is held as collateral for open futures
contracts.
(g) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(h) Residual interest bond -- coupon varies inversely with level of short-term
tax-exempt interest rates.
** Aggregate cost for Federal income tax purposes is $707,011,163.
See pages 32 through 34 for definitions of ratings and certain abbreviations.
See Notes to Financial Statements.
31 Smith Barney Muni Funds | 2004 Annual Report
BOND RATINGS (UNAUDITED)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"CCC" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated 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 debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than 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 speculation
than "B" and "CCC" the highest degree of speculation. While such
bonds will likely have some quality and protective
characteristics, these are out- weighed by large uncertainties or
major risk exposures to adverse conditions.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each generic rating from "Aa" to "Caa", where 1 is the highest and 3
the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred
to as "gilt edge". Interest 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 these bonds.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
"Aaa" securities, or fluctuation of protective elements may be of
greater ampli- tude, or there may be other elements present which
make the long-term risks appear somewhat larger than in "Aaa"
securities.
A -- Bonds rated "A" possess many favorable investment attributes and
are to be 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 sus- ceptibility 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 payment 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.
B -- Bonds rated "B" generally lack characteristics of the desirable
investments. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of
time may be small.
Caa -- Bonds that are rated "Caa" are of poor standing. Such issues may
be in default or present elements of danger with respect to
principal or interest.
32 Smith Barney Muni Funds | 2004 Annual Report
BOND RATINGS (UNAUDITED) (CONTINUED)
Fitch Ratings ("Fitch") -- Ratings from "AA" to "BBB" may be modified by the
addition of a plus (+) sign or minus (-) sign to show relative standings within
the major ratings categories.
AA -- Bonds rated "AA" are considered to be investment-grade and of very
high credit quality. The obligator's ability to pay interest
and/or dividends and repay principal is very strong.
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 debt or preferred securities with higher
ratings.
BBB -- Bonds rated "BBB" are considered to be investment-grade and of
satisfactory credit quality. The obligator's ability to pay
interest or dividends and repay principal is considered to be
adequate. Adverse changes in economic conditions and
circum- stances, however, are more likely to have adverse impact
on these securities and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below
investment-grade is higher than for securities with higher ratings.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's
or Fitch.
SHORT-TERM SECURITY RATINGS (UNAUDITED)
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety 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.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
MIG 1 -- Moody's highest rating for short-term municipal obligations.
MIG 2 -- Moody's second highest rating for short-term municipal obligations.
33 Smith Barney Muni Funds | 2004 Annual Report
ABBREVIATIONS* (UNAUDITED)
ABAG --Association of Bay Area Governments
AIG --American International Guaranty
AMBAC --Ambac Assurance Corporation
AMT --Alternative Minimum Tax
BAN --Bond Anticipation Notes
BIG --Bond Investors Guaranty
BOCES --Board of Cooperative Education Services
CGIC --Capital Guaranty Insurance Company
COP --Certificate of Participation
CSD --Central School District
ETM --Escrowed to Maturity
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
FRTC --Floating Rate Trust Certificates
FSA --Financial Security Assurance
GDB --Government Development Bank
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
IFA --Infrastructure Financing Authority
INFLOS --Inverse Floaters
IRB --Industrial Revenue Bonds
LGAC --Local Government Assistance Corporation
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance Corporation
MERLOT --Municipal Exempt Receipts Liquidity Optional Tender
MFH --Multi-Family Housing
MSTC --Municipal Securities Trust Certificates
MVRICS --Municipal Variable Rate Inverse Coupon Security
PART --Partnership Structure
PCFA --Pollution Control Financing Authority
PCR --Pollution Control Revenue
PFA --Public Facilities Authority
PFC --Public Facilities Corporation
RAN --Revenue Anticipation Notes
RIBS --Residual Interest Bonds
SAVRS --Select Auction Variable Rate Securities
SONYMA --State of New York Mortgage Association
SWAP --SWAP Structure
TAN --Tax Anticipation Notes
TECP --Tax Exempt Commercial Paper
TFA --Transitional Financial Authority
TRAN --Tax and Revenue Anticipation Notes
UFSD --Union Free School District
VRDN --Variable Rate Demand Note
VRDO --Variable Rate Demand Obligation
VRWE --Variable Rate Wednesday Demand
- --------
*Abbreviations may or may not appear in the schedule of investments.
34 Smith Barney Muni Funds | 2004 Annual Report
STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 2004
New York
Money Market New York
Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $1,964,973,350 and
$707,783,349, respectively) $1,964,973,350 $776,717,383
Cash 225,334 --
Receivable for securities sold 37,973,692 115,000
Receivable for Fund shares sold 16,314,435 1,359,843
Interest receivable 3,774,964 11,015,120
Prepaid expenses 50,425 8,146
Other assets 20,834 --
- ---------------------------------------------------------------------------------------------------
Total Assets 2,023,333,034 789,215,492
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares reacquired 27,942,118 578,725
Payable for securities purchased 26,574,873 --
Dividends payable 352,943 --
Management fees payable 793,638 334,656
Distribution plan fees payable 59,043 72,186
Deferred compensation payable 20,834 13,882
Payable to broker -- variation margin -- 1,790,938
Bank overdraft -- 111,253
Accrued expenses 136,037 90,181
- ---------------------------------------------------------------------------------------------------
Total Liabilities 55,879,486 2,991,821
- ---------------------------------------------------------------------------------------------------
Total Net Assets $1,967,453,548 $786,223,671
- ---------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 1,967,337 $ 57,927
Capital paid in excess of par value 1,965,417,564 749,572,525
Undistributed net investment income 50 760,731
Accumulated net realized gain (loss) from investment
transactions and futures contracts 68,597 (28,609,865)
Net unrealized appreciation of investments and futures contracts -- 64,442,353
- ---------------------------------------------------------------------------------------------------
Total Net Assets $1,967,453,548 $786,223,671
- ---------------------------------------------------------------------------------------------------
Shares Outstanding:
Class A 1,914,651,957 45,468,860
-------------------------------------------------------------------------------------------------
Class B -- 8,833,939
-------------------------------------------------------------------------------------------------
Class L -- 3,329,060
-------------------------------------------------------------------------------------------------
Class Y 52,685,000 295,092
-------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $1.00 $13.57
-------------------------------------------------------------------------------------------------
Class B * -- $13.57
-------------------------------------------------------------------------------------------------
Class L * -- $13.56
-------------------------------------------------------------------------------------------------
Class Y (and redemption price) $1.00 $13.57
-------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) N/A $14.14
- ---------------------------------------------------------------------------------------------------
*Redemption price is NAV of Class B and L shares reduced by a 4.50% and 1.00%
CDSC, respectively, if shares are redeemed within one year from purchase
payment (See Note 4).
See Notes to Financial Statements.
35 Smith Barney Muni Funds | 2004 Annual Report
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2004
New York
Money Market New York
Portfolio Portfolio
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $18,497,657 $41,151,265
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 4) 8,591,039 4,003,397
Distribution plan fees (Note 7) 1,804,716 2,104,797
Transfer agency services (Note 7) 349,853 222,169
Custody 79,472 21,711
Shareholder communications (Note 7) 45,257 35,571
Audit and legal 32,556 9,225
Registration fees 20,937 2,952
Trustees' fees 13,300 2,240
Other 25,126 4,188
- --------------------------------------------------------------------------------
Total Expenses 10,962,256 6,406,250
- --------------------------------------------------------------------------------
Net Investment Income 7,535,401 34,745,015
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES CONTRACTS
(NOTES 5 AND 6):
Realized Gain (Loss) From:
Investment transactions 122,961 3,031,620
Futures contracts -- (3,629,007)
- --------------------------------------------------------------------------------
Net Realized Gain (Loss) 122,961 (597,387)
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Futures Contracts:
Beginning of year -- 68,678,312
End of year -- 64,442,353
- --------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation -- (4,235,959)
- --------------------------------------------------------------------------------
Net Gain (Loss) on Investments and Futures Contracts 122,961 (4,833,346)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 7,658,362 $29,911,669
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
36 Smith Barney Muni Funds | 2004 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
For the Years
Ended March 31,
New York Money Market Portfolio 2004 2003
- ---------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 7,535,401 $ 14,124,646
Net realized gain 122,961 150,049
- --------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 7,658,362 14,274,695
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTES 3 AND 8):
Net investment income (7,535,351) (14,124,646)
Net realized gains (55,938) --
- --------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (7,591,289) (14,124,646)
- --------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 6,925,591,491 6,255,293,832
Net asset value of shares issued for reinvestment of dividends 7,496,507 14,493,091
Cost of shares reacquired (6,793,548,643) (6,486,126,340)
- --------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Fund Share
Transactions 139,539,355 (216,339,417)
- --------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 139,606,428 (216,189,368)
NET ASSETS:
Beginning of year 1,827,847,120 2,044,036,488
- --------------------------------------------------------------------------------------------------
End of year* $ 1,967,453,548 $ 1,827,847,120
- --------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of: $50 --
- --------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
37 Smith Barney Muni Funds | 2004 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the Years
Ended March 31,
New York Portfolio 2004 2003
----------------------------------------------------------------------
OPERATIONS:
Net investment income $ 34,745,015 $ 37,786,975
Net realized loss (597,387) (16,006,348)
Increase (decrease) in net unrealized
appreciation (4,235,959) 45,124,626
---------------------------------------------------------------------
Increase in Net Assets From Operations 29,911,669 66,905,253
---------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTES 3 AND 8):
Net investment income (34,661,370) (37,462,510)
In excess of net investment income (54,503) --
---------------------------------------------------------------------
Decrease in Net Assets
From Distributions to Shareholders (34,715,873) (37,462,510)
---------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 82,850,159 108,871,403
Net asset value of shares issued for
reinvestment of dividends 20,776,310 23,115,978
Cost of shares reacquired (129,069,085) (169,116,496)
---------------------------------------------------------------------
Decrease in Net Assets From Fund Share
Transactions (25,442,616) (37,129,115)
---------------------------------------------------------------------
Decrease in Net Assets (30,246,820) (7,686,372)
NET ASSETS:
Beginning of year 816,470,491 824,156,863
---------------------------------------------------------------------
End of year* $ 786,223,671 $ 816,470,491
---------------------------------------------------------------------
* Includes undistributed net investment
income of: $760,731 $698,420
---------------------------------------------------------------------
See Notes to Financial Statements.
38 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
The New York Money Market and New York Portfolios ("Funds") are separate
investment funds of the Smith Barney Muni Funds ("Trust"), a Massachusetts
business trust, which is registered under the Investment Company Act of 1940,
as amended, as an open-end non-diversified management investment company. The
Trust consists of these Funds and seven other separate investment funds:
Florida, Georgia, Pennsylvania, Limited Term, National, Massachusetts Money
Market and California Money Market Portfolios. The financial statements and
financial highlights for the other funds are presented in separate shareholder
reports.
The following are significant accounting policies consistently followed by the
Funds and are in conformity with generally accepted accounting principles
("GAAP"): (a) security transactions are accounted for on trade date; (b) with
respect to the New York Portfolio, 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; the New York Money Market Portfolio uses the
amortized cost method for valuing investments; accordingly, the cost of
securities plus accreted discount, or minus amortized premium, approximates
value; (c) securities maturing within 60 days are valued at cost plus accreted
discount, or minus amortized premium, which approximates value; (d ) 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; (e) gains or
losses on the sale of securities are calculated by using the specific
identification method; (f ) interest income, adjusted for amortization of
premium and accretion of discount, is recorded on an accrual basis; (g)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (h ) class specific expenses are charged to each class; management fees
and general fund expenses are allocated on the basis of relative net assets of
each class or on another reasonable basis; (i) the Funds intend 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 them 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
39 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
differ from accounting principles generally accepted in the United States of
America. At March 31, 2004, reclassifications were made to the capital accounts
of the New York Portfolio to reflect permanent book/tax differences and income
and gains available for distributions under income tax regulations.
Accordingly, a portion of overdistributed net investment income amounting to
$54,503 was reclassified to paid-in capital for New York Portfolio. Net
investment income, net realized gains and net assets were not affected by this
adjustment; and (k) estimates and assumptions are required to be made regarding
assets, liabilities and changes in net assets resulting from operations when
financial statements are prepared. Changes in the economic environment,
financial markets and any other parameters used in determining these estimates
could cause actual results to differ.
2. Fund Concentration
Since the Funds invest primarily in obligations of issuers within New York, it
is subject to possible concentration risks associated with economic, political,
or legal developments or industrial or regional matters specifically affecting
New York.
3. Exempt-Interest Dividends and Other Distributions
The New York Money Market Portfolio declares and records a dividend of
substantially all of its net investment income on each business day. Such
dividends are paid or reinvested monthly in Fund shares on the payable date.
Furthermore, each Fund intends to satisfy conditions that will enable interest
from municipal securities, which is exempt from 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 New York Portfolio's policy to distribute dividends monthly. Capital
gain distributions, if any, are taxable to shareholders, and are declared and
paid at least annually.
4. Management Agreement and Other Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment manager to the Funds.
Effective July 1, 2003, the New York Money Market Portfolio pays
40 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SBFM a management fee calculated at an annual rate of 0.475% on the first $1
billion of the Fund's average daily net assets; 0.45% on the next $1 billion;
0.425% on the next $3 billion; 0.40% on the next $5 billion and 0.375% on the
Fund's average daily net assets in excess of $10 billion. The New York
Portfolio pays SBFM a management fee calculated at the annual rate of 0.50% of
the Fund's average daily net assets. These fees are calculated daily and paid
monthly.
Prior to July 1, 2003, the New York Money Market Portfolio paid SBFM a
management fee calculated at an annual rate of 0.50% on the first $2.5 billion
of the Fund's average daily net assets; 0.475% on the next $2.5 billion; 0.45%
on the next $2.5 billion; and 0.40% on the Fund's average daily net assets in
excess of $7.5 billion. This fee was calculated daily and paid monthly.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Funds' transfer agent. PFPC Inc. ("PFPC") and Primerica Shareholder Services
("PSS"), another subsidiary of Citigroup, act as the Funds' sub-transfer
agents. CTB receives account fees and asset-based fees that vary according to
the size and type of account. PFPC and PSS are responsible for shareholder
recordkeeping and financial processing for all shareholder accounts and are
paid by CTB. For the year ended March 31, 2004, the Funds paid transfer agent
fees totaling $554,953 to CTB. The totals for each Fund were as follows:
Transfer Agent Fees
- --------------------------------------------------------------------------------
New York Money Market Portfolio $379,081
- -------------------------------------------------------------------------------
New York Portfolio 175,872
- -------------------------------------------------------------------------------
Citigroup Global Markets Inc. ("CGM") and PFS Distributors, Inc., both of which
are subsidiaries of Citigroup, act as the Funds' distributors.
For the New York Portfolio, there is a maximum initial sales charges of 4.00%
for Class A shares. There is also a contingent deferred sales charge ("CDSC")
of 4.50% on Class B shares of the New York Portfolio, which applies if
redemption occurs within one year from purchase payment. This CDSC declines by
0.50% one year from purchase payment and thereafter by 1.00% per year until no
CDSC is incurred. Class L shares also have a 1.00% CDSC, which applies if
redemption occurs within one year from purchase payment. In certain cases,
Class A shares have a 1.00% CDSC, which applies if redemption occurs within one
year from purchase payment. This CDSC only applies to those
41 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 year ended March 31, 2004, CGM and its affiliates received sales
charges of approximately $650,000 and $52,000 on sales of the New York
Portfolio's Class A and L shares, respectively. In addition, for the year ended
March 31, 2004, CDSCs paid to CGM and its affiliates were approximately:
Class A Class B Class L
-----------------------------------------------------
New York Portfolio $31,000 $231,000 $1,000
-----------------------------------------------------
All officers and one Trustee of the Trust are employees of Citigroup or its
affiliates.
5. Investments
During the year ended March 31, 2004, the aggregate cost of purchases and
proceeds from sales of investments (including maturities of long-term
investments, but excluding short-term investments) were as follows:
Purchases Sales
--------------------------------------------------------
New York Money Market Portfolio -- --
--------------------------------------------------------
New York Portfolio $58,780,991 $118,837,892
--------------------------------------------------------
At March 31, 2004, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation
-----------------------------------------------------------------------
New York Money Market Portfolio -- -- --
-----------------------------------------------------------------------
New York Portfolio $70,840,853 $(1,134,633) $69,706,220
-----------------------------------------------------------------------
6. Futures Contracts
The New York Portfolio may from time to time enter into 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
42 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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 March 31, 2004, the New York Portfolio had the following open futures
contracts:
Number of Basis Market Unrealized
Contracts Expiration Value Value Loss
- --------------------------------------------------------------------------------------
Contracts to Sell:
U.S. 20 Year Treasury Bond 2,605 6/04 $292,641,132 $297,132,813 $(4,491,681)
- --------------------------------------------------------------------------------------
7. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, the New York Money Market Portfolio
pays a distribution fee calculated at the annual rate of 0.10% of the average
daily net assets of its Class A shares. The New York Portfolio pays a service
fee with respect to its Class A, B and L shares calculated at the annual rate
of 0.15% of the Fund's average daily net assets of each respective class. In
addition, the New York Portfolio also pays a distribution fee with respect to
its Class B and L shares calculated at the annual rate of 0.50% and 0.55% of
the average daily net assets of each class, respectively. For the year ended
March 31, 2004, total Rule 12b-1 Distribution Plan fees, which are accrued
daily and paid monthly, were as follows:
Class A Class B Class L
------------------------------------------------------------
New York Money Market Portfolio $1,804,716 -- --
------------------------------------------------------------
New York Portfolio 929,230 $856,825 $318,742
------------------------------------------------------------
43 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the year ended March 31, 2004, total Transfer Agency Service expenses were
as follows:
Class A Class B Class L Class Y
----------------------------------------------------------------
New York Money Market Portfolio $342,178 -- -- $7,675
----------------------------------------------------------------
New York Portfolio 148,486 $60,035 $13,582 66
----------------------------------------------------------------
For the year ended March 31, 2004, total Shareholder Communication expenses
were as follows:
Class A Class B Class L Class Y
---------------------------------------------------------------
New York Money Market Portfolio $44,264 -- -- $993
---------------------------------------------------------------
New York Portfolio 24,406 $9,067 $2,081 17
---------------------------------------------------------------
8. Distributions Paid to Shareholders by Class
New York Year Ended Year Ended
Money Market Portfolio March 31, 2004+ March 31, 2003
---------------------------------------------------------------------------------------------------
Class A
Net investment income $ 7,467,004 $14,124,646
Net realized gains 54,826 --
--------------------------------------------------------------------------------------------------
Total $ 7,521,830 $14,124,646
--------------------------------------------------------------------------------------------------
Class Y
Net investment income $ 68,347 --
Net realized gains 1,112 --
--------------------------------------------------------------------------------------------------
Total $ 69,459 --
--------------------------------------------------------------------------------------------------
+For Class Y shares of New York Money Market Portfolio, transactions are for the period December 3,
2003 (inception date) to March 31, 2004.
New York Portfolio
---------------------------------------------------------------------------------------------------
Class A
Net investment income $27,524,202 $29,471,544
In excess of net investment income 42,158 --
--------------------------------------------------------------------------------------------------
Total $27,566,360 $29,471,544
--------------------------------------------------------------------------------------------------
Class B
Net investment income $ 5,185,005 $ 5,750,779
In excess of net investment income 8,984 --
--------------------------------------------------------------------------------------------------
Total $ 5,193,989 $ 5,750,779
--------------------------------------------------------------------------------------------------
Class L
Net investment income $ 1,774,470 $ 1,757,345
In excess of net investment income 3,099 --
--------------------------------------------------------------------------------------------------
Total $ 1,777,569 $ 1,757,345
--------------------------------------------------------------------------------------------------
44 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year Ended Year Ended
New York Portfolio March 31, 2004 March 31, 2003
----------------------------------------------------------------
Class Y
Net investment income $177,693 $482,842
In excess of net investment income 262 --
----------------------------------------------------------------
Total $177,955 $482,842
----------------------------------------------------------------
9. Shares of Beneficial Interest
At March 31, 2004, the Trust had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Funds have the
ability to issue multiple classes of shares. Each share of a class represents
an identical interest in its respective Fund and has the same rights, except
that each class bears certain expenses specifically related to the distribution
of its shares.
Transactions in shares of each class were as follows:
Year Ended Year Ended
March 31, 2004+ March 31, 2003
New York ------------------------------- -------------------------------
Money Market Portfolio Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------
Class A
Shares sold 6,853,379,478 $ 6,853,379,478 6,255,293,832 $ 6,255,293,832
Shares issued on reinvestment 7,445,635 7,445,635 14,493,091 14,493,091
Shares reacquired (6,773,970,758) (6,773,970,758) (6,486,126,340) (6,486,126,340)
- -----------------------------------------------------------------------------------------------
Net Increase (Decrease) 86,854,355 $ 86,854,355 (216,339,417) $ (216,339,417)
- -----------------------------------------------------------------------------------------------
Class Y
Shares sold 72,212,013 $ 72,212,013 -- --
Shares issued on reinvestment 50,872 50,872 -- --
Shares reacquired (19,577,885) (19,577,885) -- --
- -----------------------------------------------------------------------------------------------
Net Increase 52,685,000 $ 52,685,000 -- --
- -----------------------------------------------------------------------------------------------
+For Class Y shares of New York Money Market Portfolio, transactions are for
the period December 3, 2003 (inception date) to March 31, 2004.
New York Portfolio
- ----------------------------------------------------------------------------------
Class A
Shares sold 4,849,558 $ 66,585,524 5,619,910 $ 76,292,635
Shares issued on reinvestment 1,200,560 16,447,286 1,335,210 18,137,590
Shares reacquired (6,490,291) (89,079,717) (9,073,094) (123,475,514)
- ----------------------------------------------------------------------------------
Net Decrease (440,173) $ (6,046,907) (2,117,974) $ (29,045,289)
- ----------------------------------------------------------------------------------
45 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year Ended Year Ended
March 31, 2004 March 31, 2003
------------------------ ------------------------
New York Portfolio Shares Amount Shares Amount
- ---------------------------------------------------------------------------------
Class B
Shares sold 689,683 $ 9,459,820 1,880,545 $ 25,565,327
Shares issued on reinvestment 227,292 3,113,545 257,018 3,491,918
Shares reacquired (2,382,395) (32,675,016) (2,383,698) (32,314,967)
- ---------------------------------------------------------------------------------
Net Decrease (1,465,420) $(20,101,651) (246,135) $ (3,257,722)
- ---------------------------------------------------------------------------------
Class L
Shares sold 479,861 $ 6,574,815 515,918 $ 7,013,441
Shares issued on reinvestment 88,814 1,215,479 90,109 1,223,148
Shares reacquired (533,744) (7,314,352) (444,395) (6,026,015)
- ---------------------------------------------------------------------------------
Net Increase 34,931 $ 475,942 161,632 $ 2,210,574
- ---------------------------------------------------------------------------------
Class Y
Shares sold 16,679 $ 230,000 -- --
Shares issued on reinvestment -- -- 19,447 $ 263,322
Shares reacquired -- -- (532,295) (7,300,000)
- ---------------------------------------------------------------------------------
Net Increase (Decrease) 16,679 $ 230,000 (512,848) $ (7,036,678)
- ---------------------------------------------------------------------------------
10.Capital Loss Carryforward
At March 31, 2004, the New York Portfolio had, for Federal income tax purposes,
approximately $11,908,000 of unused capital loss carryforwards available to
offset future capital gains. To the extent that these carryforward losses are
used to offset capital gains, it is probable that the gains so offset will not
be distributed.
The amount and year of expiration for each carryforward loss is indicated
below. Expiration occurs on March 31 of the year indicated:
2008 2009 2012
---------------------------------------------------
New York Portfolio $6,191,000 $4,647,000 $1,070,000
---------------------------------------------------
In addition, the New York Portfolio had $21,194,016 of capital losses realized
after October 31, 2003, which were deferred for tax purposes to the first day
of the following fiscal year.
46 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. Income Tax Information and Distributions to Shareholders
At March 31, 2004, the tax basis components of distributable earnings were:
Undistributed Undistributed Accumulated
Tax-Exempt Ordinary Capital Unrealized
Income Income Losses Appreciation
----------------------------------------------------------------------------
New York Money Market
Portfolio $365,746 $67,023 -- --
----------------------------------------------------------------------------
New York Portfolio -- -- $(11,907,530) $69,706,220
----------------------------------------------------------------------------
At March 31, 2004, the difference between book basis and tax basis unrealized
appreciation and depreciation was attributable primarily to mark to market of
derivative contracts and the treatment of amortization of premiums and
accretion of discounts.
The tax character of distributions paid during the year ended March 31, 2004
was:
Tax-Exempt Ordinary Long-Term Taxable
Income Income Capital Gains Overdistribution Total
- ----------------------------------------------------------------------------------
New York Money
Market Portfolio $ 7,535,351 -- $55,938 -- $ 7,591,289
- ----------------------------------------------------------------------------------
New York Portfolio 34,658,577 $2,793 -- $54,503 34,715,873
- ----------------------------------------------------------------------------------
The tax character of distributions paid during the year ended March 31, 2003
was:
Tax-Exempt
Income
-------------------------------------------
New York Money Market Portfolio $14,124,646
-------------------------------------------
New York Portfolio 37,462,510
-------------------------------------------
12. Additional Information
The Funds have received the following information from Citigroup Asset
Management ("CAM"), the Citigroup business unit which includes the Funds'
Investment Manager and other investment advisory companies, all of which are
indirect, wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry,
47 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. CAM also plans an
independent review to verify that the transfer agency fees charged by CAM were
fairly priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
13. Subsequent Event
Effective April 29, 2004, Class L shares of the New York Portfolio were renamed
as Class C shares.
48 Smith Barney Muni Funds | 2004 Annual Report
FINANCIAL HIGHLIGHTS
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, unless otherwise noted:
New York Money Market Portfolio
---------------------------------------
Class A Shares 2004 2003 2002 2001 2000
---------------------------------------------------------------------------
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------
Income From Operations:
Net investment income 0.004 0.007 0.017 0.034 0.027
Net realized gain 0.000* -- -- -- --
---------------------------------------------------------------------------
Total Income From Operations 0.004 0.007 0.017 0.034 0.027
---------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.004) (0.007) (0.017) (0.034) (0.027)
Net realized gains (0.000)* -- -- -- --
---------------------------------------------------------------------------
Total Distributions (0.004) (0.007) (0.017) (0.034) (0.027)
---------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------
Total Return 0.42% 0.74% 1.67% 3.40% 2.76%
---------------------------------------------------------------------------
Net Assets, End of Year (millions) $1,915 $1,828 $2,044 $2,058 $1,573
---------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(1)/ 0.60% 0.64% 0.64% 0.65% 0.67%
Net investment income 0.41 0.74 1.65 3.32 2.73
---------------------------------------------------------------------------
(1) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.80%.
* Amount represents less than $0.001 per share.
49 Smith Barney Muni Funds | 2004 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout the
period ended March 31:
New York
Money Market
Portfolio
------------
Class Y Shares 2004/(1)/
-------------------------------------------------
Net Asset Value, Beginning of Period $1.00
-------------------------------------------------
Income From Operations:
Net investment income 0.002
Net realized gain 0.000*
-------------------------------------------------
Total Income From Operations 0.002
-------------------------------------------------
Less Distributions From:
Net investment income (0.002)
Net realized gains (0.000)*
-------------------------------------------------
Total Distributions (0.002)
-------------------------------------------------
Net Asset Value, End of Period $1.00
-------------------------------------------------
Total Return 0.17%++
-------------------------------------------------
Net Assets, End of Period (millions) $52
-------------------------------------------------
Ratios to Average Net Assets:
Expenses/(2)/ 0.47%+
Net investment income 0.51+
-------------------------------------------------
(1) For the period December 3, 2003 (inception date) to March 31, 2004.
(2) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.70%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
* Amount represents less than $0.001 per share.
50 Smith Barney Muni Funds | 2004 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, unless otherwise noted:
New York Portfolio
-----------------------------------------------
Class A Shares 2004/(1)/ 2003/(1)/ 2002/(1)/ 2001/(1)/ 2000/(1)/
- ------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $13.66 $13.19 $13.42 $12.78 $13.69
- ------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(2)/ 0.61 0.63 0.65 0.67 0.68
Net realized and unrealized gain (loss)/(2)/ (0.09) 0.46 (0.23) 0.64 (0.91)
- ------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.52 1.09 0.42 1.31 (0.23)
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.61) (0.62) (0.65) (0.67) (0.67)
In excess of net investment income (0.00)* -- -- -- --
Net realized gains -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.61) (0.62) (0.65) (0.67) (0.68)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.57 $13.66 $13.19 $13.42 $12.78
- ------------------------------------------------------------------------------------------------------
Total Return 3.87% 8.42% 3.15% 10.57% (1.61)%
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $617 $627 $633 $583 $482
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)/ 0.68% 0.70% 0.70% 0.69% 0.71%
Net investment income/(2)/ 4.46 4.62 4.86 5.14 5.20
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 14% 20% 16% 33%
- ------------------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Effective April 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, the
ratio of net investment income to average net assets would have been 4.85%.
Per share information, ratios and supplemental data for the periods prior
to April 1, 2001 have not been restated to reflect this change in
presentation. In addition, the impact of this change to net investment
income and net realized and unrealized loss was less than $0.01 per share.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.85%.
* Amount represents less than $0.01 per share.
51 Smith Barney Muni Funds | 2004 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, unless otherwise noted:
New York Portfolio
-----------------------------------------------
Class B Shares 2004/(1)/ 2003/(1)/ 2002/(1)/ 2001/(1)/ 2000/(1)/
- ------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $13.66 $13.19 $13.42 $12.78 $13.68
- ------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(2)/ 0.54 0.56 0.57 0.60 0.61
Net realized and unrealized gain (loss)/(2)/ (0.09) 0.46 (0.22) 0.64 (0.90)
- ------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.45 1.02 0.35 1.24 (0.29)
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.54) (0.55) (0.58) (0.60) (0.60)
In excess of net investment income (0.00)* -- -- -- --
Net realized gains -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.55) (0.58) (0.60) (0.61)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.57 $13.66 $13.19 $13.42 $12.78
- ------------------------------------------------------------------------------------------------------
Total Return 3.35% 7.86% 2.60% 9.96% (2.09)%
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $120 $140 $139 $148 $156
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)/ 1.21% 1.22% 1.21% 1.22% 1.23%
Net investment income/(2)/ 3.93 4.10 4.27 4.63 4.67
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 14% 20% 16% 33%
- ------------------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Effective April 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, the
ratio of net investment income to average net assets would have been 4.26%.
Per share information, ratios and supplemental data for the periods prior
to April 1, 2001 have not been restated to reflect this change in
presentation. In addition, the impact of this change to net investment
income and net realized and unrealized loss was less than $0.01 per share.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.35%.
* Amount represents less than $0.01 per share.
52 Smith Barney Muni Funds | 2004 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, unless otherwise noted:
New York Portfolio
-----------------------------------------------
Class L Shares 2004/(1)/ 2003/(1)/ 2002/(1)/ 2001/(1)/ 2000/(1)/
- ------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $13.65 $13.18 $13.41 $12.77 $13.67
- ------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(2)/ 0.53 0.55 0.57 0.58 0.60
Net realized and unrealized gain (loss)/(2)/ (0.08) 0.47 (0.23) 0.65 (0.90)
- ------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.45 1.02 0.34 1.23 (0.30)
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.54) (0.55) (0.57) (0.59) (0.59)
In excess of net investment income (0.00)* -- -- -- --
Net realized gains -- -- -- -- (0.01)
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.55) (0.57) (0.59) (0.60)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.56 $13.65 $13.18 $13.41 $12.77
- ------------------------------------------------------------------------------------------------------
Total Return 3.30% 7.82% 2.56% 9.91% (2.14)%
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $45 $45 $41 $32 $18
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)/ 1.24% 1.26% 1.26% 1.26% 1.27%
Net investment income/(2)/ 3.90 4.05 4.27 4.55 4.64
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 14% 20% 16% 33%
- ------------------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) Effective April 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, the
ratio of net investment income to average net assets would have been 4.26%.
Per share information, ratios and supplemental data for the periods prior
to April 1, 2001 have not been restated to reflect this change in
presentation. In addition, the impact of this change to net investment
income and net realized and unrealized loss was less than $0.01 per share.
(3) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 1.40%.
* Amount represents less than $0.01 per share.
53 Smith Barney Muni Funds | 2004 Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended March 31, unless otherwise noted:
New York Portfolio
---------------------------------------
Class Y Shares 2004/(1)/ 2003/(1)/ 2002/(1)/ 2001/(1)(2)/
- --------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $13.65 $13.19 $13.42 $13.46
- --------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(3)/ 0.63 0.67 0.67 0.16
Net realized and unrealized gain (loss)/(3)/ (0.07) 0.44 (0.23) (0.03)
- --------------------------------------------------------------------------------------------------------
Total Income From Operations 0.56 1.11 0.44 0.13
- --------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.64) (0.65) (0.67) (0.17)
In excess of net investment income (0.00)* -- -- --
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.64) (0.65) (0.67) (0.17)
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.57 $13.65 $13.19 $13.42
- --------------------------------------------------------------------------------------------------------
Total Return 4.13% 8.53% 3.33% 1.00%++
- --------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $4 $4 $11 $10
- --------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(4)/ 0.51% 0.52% 0.52% 0.54%+
Net investment income/(3)/ 4.63 4.78 5.01 4.97+
- --------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 14% 20% 16%
- --------------------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period January 4, 2001 (inception date) to March 31, 2001.
(3) Effective April 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, the
ratio of net investment income to average net assets would have been 5.00%.
Per share information, ratios and supplemental data for the periods prior
to April 1, 2001 have not been restated to reflect this change in
presentation. In addition, the impact of this change to net investment
income and net realized and unrealized loss was less than $0.01 per share.
(4) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.70%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
* Amount represents less than $0.01 per share.
54 Smith Barney Muni Funds | 2004 Annual Report
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees
of Smith Barney Muni Funds:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the New York Money Market Portfolio
and New York Portfolio of Smith Barney Muni Funds ("Funds") as of March 31,
2004, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
five-year period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of March 31, 2004 by
correspondence with the custodian and broker. As to securities purchased or
sold but not yet received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of the
New York Money Market Portfolio and New York Portfolio of Smith Barney Muni
Funds as of March 31, 2004 and the results of their operations for the year
then ended, the changes in their net assets for each of the years in the
two-year period then ended and their financial highlights for each of the years
in the five-year period then ended, in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
New York, New York
May 12, 2004
55 Smith Barney Muni Funds | 2004 Annual Report
ADDITIONAL INFORMATION (UNAUDITED)
Information about Directors and Officers
The business and affairs of the New York Money Market and New York Portfolios
("Funds") are managed under the direction of the Smith Barney Muni Funds'
("Trust") Board of Trustees. Information pertaining to the Trustees and
Officers of the Trust is set forth below. The Statement of Additional
Information includes additional information about Trustees and is available,
without charge, upon request by calling the Trust's transfer agent (Citicorp
Trust Bank, fsb. at 1-800-451-2010).
Number of
Term of Portfolios Other
Office* and Principal in Fund Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen By Held by
and Age Fund Served Five Years Trustee Trustee
- -----------------------------------------------------------------------------------------------
Non-Interested Trustees:
Lee Abraham Trustee Since Retired; Former 27 None
13732 LeHavre Drive 1999 Director of Signet
Frenchman's Creek Group PLC
Palm Beach Gardens, FL
33410
Age 76
Allan J. Bloostein Trustee Since President of Allan 34 Taubman
27 West 67th Street 1999 Bloostein Associates, a Realty Corp.
Apt. 5FW consulting firm; Former
New York, NY 10023 Director of CVS Corp.
Age 74
Jane F. Dasher Trustee Since Controller of PBK 27 None
Korsant Partners 1999 Holdings Inc., a family
283 Greenwich Avenue investment company
3rd Floor
Greenwich, CT 06830
Age 54
Donald R. Foley Trustee Since Retired 19 None
3668 Freshwater Drive 1985
Jupiter, FL 33477
Age 81
Richard E. Hanson, Jr. Trustee Since Retired; Former Head 27 None
2751 Vermont 1999 of the New Atlanta
Route 140 Jewish Community
Poultney, VT 05764 High School
Age 62
Paul Hardin Trustee Since Professor of Law & 34 None
12083 Morehead 1994 Chancellor Emeritus at
Chapel Hill, NC the University of North
27514-8426 Carolina
Age 72
56 Smith Barney Muni Funds | 2004 Annual Report
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Number of
Term of Portfolios Other
Office* and Principal in Fund Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen By Held by
and Age Fund Served Five Years Trustee Trustee
- ----------------------------------------------------------------------------------------------
Roderick C. Rasmussen Trustee Since Investment Counselor 27 None
9 Cadence Court 1985
Morristown, NJ 07960
Age 77
John P. Toolan Trustee Since Retired 27 John Hancock
13 Chadwell Place 1985 Funds
Morristown, NJ 07960
Age 73
Interested Trustee:
R. Jay Gerken, CFA** Chairman, Since Managing Director of 221 None
Citigroup Asset President 2002 Citigroup Global
Management and Chief Markets Inc. ("CGM");
("CAM") Executive Chairman, President
399 Park Avenue Officer and Chief Executive
4th Floor Officer of Smith Barney
New York, NY 10022 Fund Management LLC
Age 52 ("SBFM"), Travelers
Investment Adviser, Inc
("TIA") and Citi Fund
Management Inc.
("CFM"); President
and Chief Executive
Officer of certain
mutual funds
associated with
Citigroup Inc.
("Citigroup");
Formerly, Portfolio
Manager of Smith
Barney Allocation
Series Inc. (from 1996
to 2001) and Smith
Barney Growth and
Income Fund (from
1996 to 2000)
57 Smith Barney Muni Funds | 2004 Annual Report
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Number of
Term of Portfolios Other
Office* and Principal in Fund Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen By Held by
and Age Fund Served Five Years Trustee Trustee
- -----------------------------------------------------------------------------------------------
Officers:
Andrew B. Shoup Senior Vice Since Director of CAM; N/A N/A
CAM President and 2003 Senior Vice President
125 Broad Street Chief and Chief
11th Floor Administrative Administrative
New York, NY 10004 Officer Officer of mutual
Age 47 funds associated
with Citigroup;
Treasurer of certain
mutual funds
associated with
Citigroup; Head of
International Funds
Administration of
CAM (from 2001 to
2003); Director of
Global Funds
Administration of
CAM (from 2000 to
2001); Head of U.S.
Citibank Funds
Administration of
CAM (from 1998 to
2000)
Richard L. Peteka Chief Since Director of CGM; N/A N/A
CAM Financial 2002 Chief Financial
125 Broad Street Officer and Officer and Treasurer
11th Floor Treasurer of certain mutual
New York, NY 10004 funds associated
Age 42 with Citigroup;
Director and Head of
Internal Control for
CAM U.S. Mutual
Fund Administration
(from 1999 to 2002);
Vice President, Head
of Mutual Fund
Administration and
Treasurer at
Oppenheimer Capital
(from 1996 to 1999)
Julie P. Callahan, CFA Vice Since Vice President of N/A N/A
CAM President and 2002 CGM
399 Park Avenue Investment
4th Floor Officer
New York, NY 10022
Age 31
58 Smith Barney Muni Funds | 2004 Annual Report
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Number of
Term of Portfolios Other
Office* and Principal in Fund Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen By Held by
and Age Fund Served Five Years Trustee Trustee
- -----------------------------------------------------------------------------------------
Joseph P. Deane Vice Since Managing Director of N/A N/A
CAM President 1999 CGM; Investment
399 Park Avenue and Officer of SBFM
4th Floor Investment
New York, NY 10022 Officer
Age 56
David T. Fare Vice Since Director of CGM; N/A N/A
CAM President 2004 Investment Officer of
399 Park Avenue and SBFM
4th Floor Investment
New York, NY 10022 Officer
Age 41
Andrew Beagley Chief Since Director of CGM N/A N/A
CAM Anti-Money 2002 (since 2000);
399 Park Avenue Laundering Director of
4th Floor Compliance Compliance, North
New York, NY 10022 Officer America, CAM (since
Age 40 2000); Chief Anti-
Money Laundering
Compliance Officer
and Vice President of
certain mutual funds
associated with
Citigroup; Director of
Compliance Europe,
the Middle East and
Africa, CAM (from
1999 to 2000);
Compliance Officer,
Salomon Brothers
Asset Management
Limited, Smith
Barney Global
Capital Management
Inc., Salomon
Brothers Asset
Management Asia
Pacific Limited (from
1997 to 1999)
Kaprel Ozsolak Controller Since Vice President of N/A N/A
CAM 2002 CGM; Controller of
125 Broad Street certain mutual funds
11th Floor associated with
New York, NY 10004 Citigroup
Age 38
59 Smith Barney Muni Funds | 2004 Annual Report
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Number of
Term of Portfolios Other
Office* and Principal in Fund Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen By Held by
and Age Fund Served Five Years Trustee Trustee
- -----------------------------------------------------------------------------------------------
Robert I. Frenkel Secretary Since Managing Director N/A N/A
CAM and Chief 2003 and General Counsel
300 First Stamford Place Legal of Global Mutual
4th Floor Officer Funds for CAM and
Stamford, CT 06902 its predecessor (since
Age 48 1994); Secretary of
CFM (from 2001 to
2004); Secretary and
Chief Legal Officer of
mutual funds
associated with
Citigroup
- --------
* Each Trustee and Officer serves until his or her successor has been duly
elected and qualified.
** Mr. Gerken is an "interested person" of the Trust as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is an
officer of SBFM and certain of its affiliates.
TAX INFORMATION (UNAUDITED)
For Federal tax purposes, the Funds hereby designate for the year ended
March 31, 2004:
. Total long-term capital gain dividends designated by:
New York Money Market Portfolio $55,938
The following percentages of dividends paid by the Funds from net investment
income were tax-exempt for regular Federal income tax and New York State income
tax purposes:
New York Money Market Portfolio 100.00%
New York Portfolio 99.83
60 Smith Barney Muni Funds | 2004 Annual Report
SMITH BARNEY
MUNI FUNDS
TRUSTEES OFFICERS (continued)
Lee Abraham Kaprel Ozsolak
Allan J. Bloostein Controller
Jane F. Dasher
Donald R. Foley Robert I. Frenkel
R. Jay Gerken, CFA Chairman Secretary and
Richard E. Hanson, Jr. Chief Legal Officer
Paul Hardin
Roderick C. Rasmussen INVESTMENT MANAGER
John P. Toolan Smith Barney Fund
Management LLC
OFFICERS
R. Jay Gerken, CFA DISTRIBUTORS
President and Chief Executive Officer Citigroup Global Markets Inc.
PFS Distributors, Inc.
Andrew B. Shoup
Senior Vice President CUSTODIAN
and Chief Administrative Officer State Street Bank and
Trust Company
Richard L. Peteka
Chief Financial Officer and Treasurer TRANSFER AGENT
Citicorp Trust Bank, fsb.
Julie P. Callahan, CFA 125 Broad Street, 11th Floor
Vice President and New York, New York 10004
Investment Officer
SUB-TRANSFER AGENTS
Joseph P. Deane PFPC Inc.
Vice President and P.O. Box 9699
Investment Officer Providence, Rhode Island
02940-9699
David T. Fare
Vice President and Primerica Shareholder Services
Investment Officer P.O. Box 9662
Providence, Rhode Island
Andrew Beagley 02940-9662
Chief Anti-Money
Laundering Compliance Officer
Smith Barney Muni Funds
New York Money Market Portfolio
New York Portfolio
The Funds are separate investment funds of the Smith Barney Muni Funds, a
Massachusetts business trust.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available without
charge, upon request, by telephoning the Fund (toll-free) at 1-800-451-2010
and by visiting the SEC's web site at www.sec.gov.
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds -- New York Money Market Portfolio and New York
Portfolio.
SMITH BARNEY MUNI FUNDS
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
(C)2004 Citigroup Global Markets Inc.
Member NASD, SIPC
FD02397 5/04 04-6668
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that Jane F.
Dasher, the Chairman of the Board's Audit Committee, possesses the
technical attributes identified in Instruction 2(b) of Item 3 to Form
N-CSR to qualify as an "audit committee financial expert," and has
designated Ms. Dasher as the Audit Committee's financial expert. Ms.
Dasher is an "independent" Trustee pursuant to paragraph (a)(2) of Item
3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees for Smith Barney Muni Funds were $170,500 and $162,500
for the years ended 3/31/04 and 3/31/03.
(b) Audit-Related Fees for Smith Barney Muni Funds were $0 and $0 for
the years ended 3/31/04 and 3/31/03.
(c) Tax Fees for Smith Barney Muni Funds were $18,500 and $18,400 for
the years ended 3/31/04 and 3/31/03. These amounts represent
aggregate fees paid for tax compliance, tax advice and tax
planning services, which include (the filing and amendment of
federal, state and local income tax returns, timely RIC
qualification review and tax distribution and analysis planning)
rendered by the Accountant to Smith Barney Muni Funds
(d) There were no all other fees for Smith Barney Muni Funds for the
years ended 3/31/04 and 3/31/03.
(e) (1) Audit Committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
The Charter for the Audit Committee (the "Committee") of the Board
of each registered investment company (the "Fund") advised by
Smith Barney Fund Management LLC or Salomon Brothers Asset
Management Inc or one of their affiliates (each, an "Adviser")
requires that the Committee shall approve (a) all audit and
permissible non-audit services to be provided to the Fund and (b)
all permissible non-audit services to be provided by the Fund's
independent auditors to the Adviser and any Covered Service
Providers if the engagement relates directly to the operations and
financial reporting of the Fund. The Committee may implement
policies and procedures by which such services are approved other
than by the full Committee.
The Committee shall not approve non-audit services that the
Committee believes may impair the independence of the auditors. As
of the date of the approval of this Audit Committee Charter,
permissible non-audit services include any professional services
(including tax services), that are not prohibited services as
described below, provided to the Fund by the independent auditors,
other than those provided to the Fund in connection with an audit
or a review of the financial statements of the Fund. Permissible
non-audit services may not include: (i) bookkeeping or other
services related to the accounting records or financial statements
of the Fund; (ii) financial information systems design and
implementation; (iii) appraisal or valuation services, fairness
opinions or contribution-in-kind reports; (iv) actuarial services;
(v) internal audit outsourcing services; (vi) management functions
or human resources; (vii) broker or dealer, investment adviser or
investment banking services; (viii) legal services and expert
services unrelated to the audit; and (ix) any other service the
Public Company Accounting Oversight Board determines, by
regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount of
all such permissible non-audit services provided to the Fund, the
Adviser and any service providers controlling, controlled by or
under common control with the Adviser that provide ongoing
services to the Fund ("Covered Service Providers") constitutes not
more than 5% of the total amount of revenues paid to the
independent auditors during the fiscal year in which the
permissible non-audit services are provided to (a) the Fund, (b)
the Adviser and (c) any entity controlling, controlled by or under
common control with the Adviser that provides ongoing services to
the Fund during the fiscal year in which the services are provided
that would have to be approved by the Committee; (ii) the
permissible non-audit services were not recognized by the Fund at
the time of the engagement to be non-audit services; and (iii)
such services are promptly brought to the attention of the
Committee and approved by the Committee (or its delegate(s)) prior
to the completion of the audit.
(f) N/A
(g) Non-audit fees billed - $100,000 and $1.2 million for the years
ended 12/31/2003 and 12/31/2002.
(h) Yes. The Smith Barney Muni Funds' Audit Committee has considered
whether the provision of non-audit services that were rendered to
Service Affiliates which were not pre-approved (not requiring
pre-approval) is compatible with maintaining the Accountant's
independence. All services provided by the Accountant to the Smith
Barney Muni Funds or to Service Affiliates which were required to
be pre-approved were pre-approved as required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are likely to materially
affect the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, there unto duly authorized.
Smith Barney Muni Funds
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Muni Funds
Date: June 4, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Muni Funds
Date: June 4, 2004
By: /s/ Richard L. Peteka
Richard L. Peteka
Chief Financial Officer of
Smith Barney Muni Funds
Date: June 4, 2004