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.
--------------------------------------------------
SMITH BARNEY
MUNI FUNDS
LIMITED TERM PORTFOLIO
--------------------------------------------------
STYLE PURE SERIES | ANNUAL REPORT | MARCH 31, 2004
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed.(R) is a registered service mark of
Citigroup Global Markets Inc.
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
WHAT'S INSIDE
Letter from the Chairman............. 1
Manager Overview..................... 3
Fund Performance..................... 8
Historical Performance............... 9
Schedule of Investments.............. 10
Statement of Assets and Liabilities.. 30
Statement of Operations.............. 31
Statements of Changes in Net Assets.. 32
Notes to Financial Statements........ 33
Financial Highlights................. 41
Independent Auditors' Report......... 46
Additional Information............... 47
Tax Information...................... 51
LETTER FROM THE CHAIRMAN
[PHOTO]
R. Jay Gerken
R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
Dear Shareholder,
The U.S. economy's quarterly pace of growth picked up considerably during the
year ending March 31, 2004./i/ Stronger-than-expected economic growth
exacerbated bond investors' concerns that inflation might pick up and lead to
rising interest rates sooner than previously anticipated, which caused bond
prices to decline over the summer. However, as the period advanced, many of
these concerns were tempered somewhat by tepid employment results and comments
from the Fed, which maintained its interest rate targets at four-decade lows.
On a local level, state-tax revenues improved during the second half of last
year, and U.S. job growth for March significantly exceeded estimates./ii/ Given
that the fund's manager had anticipated that the economies on a national and
state level could begin to pick up, the manager maintained a defensive posture
in managing the portfolio's exposure to inflation and interest rate risk.
Although this strategy detracted from the fund's performance during times when
bond prices rose, it diminished the negative impact on the portfolio when bond
prices declined.
Please read on for a more detailed look at prevailing economic and market
conditions during the fund's fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected fund
performance.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The regulators appear to be
examining, among other things, the fund's response to market timing and
shareholder exchange activity, including compliance with prospectus disclosure
related to these subjects. The fund has been informed that the Adviser and its
affiliates are responding to those information requests, but are not in a
position to predict the outcome of these requests and investigations.
1 Smith Barney Muni Funds | 2004 Annual Report
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 12, 2004
2 Smith Barney Muni Funds | 2004 Annual Report
MANAGER OVERVIEW
[PHOTO]
Peter M. Coffey
PETER M. COFFEY
Vice President and
Investment Officer
Special Shareholder Notice
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 -- Limited Term Portfolio, excluding sales charges, returned 4.67%. In
comparison the Lehman Brothers Municipal Bond Index,/iii/ returned 5.86% for
the same period. The fund's Lipper intermediate municipal debt funds category
average returned 4.31% during the same time frame./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 could potentially rise sooner than anticipated, we
structured the fund defensively to help mitigate the effects of a possible rise
in interest rates. Our strategy entailed focusing on intermediate-term bonds
with higher coupons, maintaining a lower average life than in recent years, and
maintaining a short position in U.S. Treasury futures./iv/ 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.
Bond Market Review
In order to help boost a relatively sluggish economy, early last year the Fed
reduced its target for the federal funds rate,/v/ which dropped to four-decade
lows in June. However, 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
/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 148 funds in the fund's Lipper category including the reinvestment
of dividends and capital gains, if any, and excluding sales charges.
3 Smith Barney Muni Funds | 2004 Annual Report
PERFORMANCE SNAPSHOT
AS OF MARCH 31, 2004
(excluding sales charges)
6 Months 12 Months
Class A Shares 1.84% 4.67%
Lehman Brothers Municipal Bond Index 3.12% 5.86%
Lipper Intermediate Municipal Debt Funds Category Average 1.95% 4.31%
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 1.60%, Class L shares returned 1.53%, Class O shares returned 1.72%
and Class Y shares returned 1.77% over the six months ended March 31, 2004.
Excluding sales charges, Class B shares returned 4.18%, Class L shares
returned 4.02%, Class O shares returned 4.42% and Class Y shares returned
4.68% 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
149 funds for the six-month period and among the 148 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.
pronounced and interest rates rise, (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. As the
summer came to a close, the broader bond markets stabilized in response to the
Fed's concerns about the lack of growth in employment and lingering
disinflation.
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")/vi/ 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.
4 Smith Barney Muni Funds | 2004 Annual Report
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."/vii/ 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 fourth calendar-quarter 2003 GDP annual growth released during the
period registered at 4.1%./vi/ This rate was below third-quarter 2003 results
but exceeded levels early last year. Furthermore, in recent testimony to
Congress, Fed Chairman, Alan Greenspan revealed that the Fed raised its
expectations for economic growth. On a state level, revenues have continued to
rise amid the improvement in the national economy. Tax revenues for the fourth
quarter of last year on average increased 7.2% at the state level over results
for the final quarter of 2002./viii/ 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 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/ix/ 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,/ix /marking the
largest number since April 2000./viii/ 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.
Emphasis on Revenue Bonds
The fund continued to concentrate its assets in higher-yielding revenue bonds,
which are backed by the revenue streams of specific public works. The
portfolio's heaviest revenue bond exposure in terms of sectors was hospitals,
transportation, utilities, and water & sewer. Over the period, the hospitals
sector in particular was among the leading performers returning 7.80%, while
housing was the worst performer returning 4.36%./x/ The fund had more exposure
to these sectors not because we targeted specific industries but, rather,
because 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.
Why Higher-Coupon Callable Bonds?
In rising-rate environments, the prices of shorter-term fixed-income
obligations have typically held up better than those on longer-term bonds.
Rather than
5 Smith Barney Muni Funds | 2004 Annual Report
commit a substantial portion of the fund's assets to low-yielding, short-term
instruments, the fund maintained an emphasis on premium-priced, higher-coupon
callable issues with longer maturities within the intermediate-term investment
universe for their favorable income streams and the reduced market-sensitivity
provided by their above-market level coupons and shorter effective maturities.
The fund also continued to hold a short position in U.S. Treasury bond futures
to help hedge the portfolio against interest rate risk. As of the period's
close, the fund's average maturity was approximately 10.87 years, while its
average life call-adjusted effective maturity, which is adjusted to account for
the shorter call dates on our premium bonds, was 6.56 years./xi/
One of the advantages to intermediate-term municipal bonds over longer-term
issues is that their prices have tended to be less susceptible to interest rate
movements than longer-term bonds. While no one can say for sure where interest
rates will head, given the recent economic picture, as of the end of the period
we continued to maintain a defensive posture with regard to interest rate risk.
Thank you for your investment in the Smith Barney Muni Funds -- Limited Term
Portfolio. We appreciate that you have entrusted us to manage your money and
value our relationship with you.
Sincerely,
/s/ Peter M. Coffey
Peter M. Coffey
Vice President and Investment Officer
April 12, 2004
6 Smith Barney Muni Funds | 2004 Annual Report
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
Portfolio holdings and breakdowns are as of March 31, 2004 and are subject to
change. Please refer to pages 10 through 27 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: General Obligation (19.5%); Hospitals
(15.9%); Transportation (11.6%); Utilities (8.4%); Water & Sewer (8.1%). 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. Portfolio holdings may include lower-quality securities which
present greater risk of loss of principal and interest than higher rated
securities. 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.
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.
/i/ Source: Based upon gross domestic product 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.
/ii/ Based upon data released on April 1, 2004 from the U.S. Department of
Labor.
/iii/ The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year.
/iv/ 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.
/v/ 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.
/vi/ Source for GDP (gross domestic product) growth: Bureau of Labor
Statistics. Gross domestic product is a market value of goods and services
produced by labor and property in a given country.
/vii/ Source: Federal Reserve (January 28, 2004).
/viii/Source: Lehman Brothers (April 2004).
/ix/ Source: U.S. Department of Labor (April 1, 2004).
/x/ Based upon the performance of sub indices 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.
/xi/ There are no assurances that callable bonds will be called/redeemed on
their call dates prior to maturity.
7 Smith Barney Muni Funds | 2004 Annual Report
AVERAGE ANNUAL TOTAL RETURNS+ (UNAUDITED)
Without Sales Charges/(1)/
-------------------------------------------
Class A Class B Class L Class O/(2)/ Class Y
- -------------------------------------------------------------------------
Twelve Months Ended 3/31/04 4.67% 4.18% 4.02% 4.42% 4.68%
- ------------------------------------------------------------------------
Five Years Ended 3/31/04 4.46 N/A N/A 4.23 4.61
- ------------------------------------------------------------------------
Ten Years Ended 3/31/04 5.28 N/A N/A 5.05 N/A
- ------------------------------------------------------------------------
Inception* through 3/31/04 6.03 4.35 5.07 4.98 4.56
- ------------------------------------------------------------------------
With Sales Charges/(3)/
-------------------------------------------
Class A Class B Class L Class O/(2)/ Class Y
- -------------------------------------------------------------------------
Twelve Months Ended 3/31/04 2.64% (0.82)% 4.02% 2.33% 4.68%
- ------------------------------------------------------------------------
Five Years Ended 3/31/04 4.04 N/A N/A 4.01 4.61
- ------------------------------------------------------------------------
Ten Years Ended 3/31/04 5.08 N/A N/A 4.94 N/A
- ------------------------------------------------------------------------
Inception* through 3/31/04 5.89 1.07 5.07 4.88 4.56
- ------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS+ (UNAUDITED)
Without Sales Charges/(1)/
- -----------------------------------------------------------------
Class A (3/31/94 through 3/31/04) 67.34%
- ----------------------------------------------------------------
Class B (Inception* through 3/31/04) 5.30
- ----------------------------------------------------------------
Class L (Inception* through 3/31/04) 11.94
- ----------------------------------------------------------------
Class O (3/31/94 through 3/31/04)/(2)/ 63.67
- ----------------------------------------------------------------
Class Y (Inception* through 3/31/04) 27.11
- ----------------------------------------------------------------
(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 charges with respect to Class A and O shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and O shares.
(2) On December 19, 2001, Class L shares were renamed as Class O shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and O shares reflect the
deduction of the maximum initial sales charges of 2.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from purchase payment.
Thereafter, this CDSC declines by 1.00% per year until no CDSC is incurred.
In addition, Class O shares also reflect the deduction of a 1.00% CDSC,
which applies if shares are redeemed within one year from purchase payment.
+ 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, O and Y shares are November 28, 1988,
January 13, 2003, December 19, 2001, January 5, 1993 and November 12, 1998,
respectively.
8 Smith Barney Muni Funds | 2004 Annual Report
HISTORICAL PERFORMANCE (UNAUDITED)
Value of $10,000 Invested in Class A Shares of
the Limited Term Portfolio vs.
Lehman Brothers Municipal Bond Index
and Lipper Intermediate Municipal Debt Funds Average+
- --------------------------------------------------------------------------------
March 1994 -- March 2004
[CHART]
Limited Lehman Lipper
Term Brothers Intermediate
Portfolio - Municipal Bond Municipal Debt
Class A Shares Index Funds Average
-------------- -------------- -------------
3/94 $ 9,805 $10,000 $10,000
3/95 10,363 10,744 10,576
3/96 11,052 11,645 11,313
3/97 11,527 12,278 11,818
3/98 12,526 13,594 12,802
3/99 13,189 14,437 13,453
3/00 12,996 14,424 13,388
3/01 14,044 16,000 14,606
3/02 14,563 16,612 15,053
3/03 15,676 18,253 16,358
3/04 16,408 19,323 17,063
+Hypothetical illustration of $10,000 invested in Class A shares on March 31,
1994, assuming deduction of the maximum 2.00% sales charge at the time of
investment and reinvestment of dividends (after deduction of applicable sales
charge through November 6, 1994, afterwards 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-based, total return index comprised of
investment-grade, fixed rate municipal bonds selected from issues larger than
$50 million issued since January 1984. The Lipper Intermediate Municipal Debt
Funds Average is composed of the Fund's peer group of mutual funds (148 funds
as of March 31, 2004). The Index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund. 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.
9 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
Education -- 9.1%
$ 5,000,000 AAA Alabama State Public School and College Authority,
5.125% due 11/1/15 (b) $ 5,468,900
1,165,000 NR Allen Academy COP, 7.000% due 6/1/15 1,134,162
1,000,000 Aaa* Arizona Educational Loan Marketing Corp., Education Loan
Revenue, 6.375% due 9/1/05 (c) 1,005,000
1,000,000 AAA Arizona State University Revenues, Revenue Bonds,
FGIC-Insured, 5.500% due 7/1/21 1,114,740
3,000,000 NR Capital Projects Finance Authority, FL Student Housing Revenue,
Cafra Capital Corp., Series A, 7.750% due 8/15/20 (b) 3,029,310
1,070,000 A Chester County, PA School Authority, School Lease Revenue,
5.375% due 6/1/17 1,185,474
1,775,000 AA+ Chippewa Valley, MI Schools Administration Building,
Q-SBLF-Insured, 5.500% due 5/1/18 2,005,395
1,025,000 Baa3* Colorado Educational & Cultural Facilities Authority Revenue,
Charter School, (Bromley East Project), Series A,
7.000% due 9/15/20 1,069,536
3,000,000 Aaa* Cook Kane Lake & McHenry Counties, IL Community College,
District No. 512, William Rainey Harper College, Series A,
5.500% due 12/1/15 (b) 3,431,820
1,225,000 AAA District of Columbia Revenue, Georgetown University, Capital
Appreciation Bonds, Series A, MBIA-Insured,
zero coupon due 4/1/19 575,774
345,000 Aaa* Greenville, TN Health & Educational Facilities Board, Hospital
Revenue, Southern Adventist Health System,
8.700% due 10/1/09 (d) 412,917
Greenville County, SC School District Installment Purchase
Revenue, Building Equity Sooner for Tomorrow:
1,000,000 AA- 5.875% due 12/1/19 1,138,350
3,000,000 AA- 6.000% due 12/1/21 3,444,570
2,295,000 AA Hillsborough County, FL Educational Facilities Authority
Revenue, Refunding, (University of Tampa Project),
Radian-Insured, 5.750% due 4/1/18 2,527,461
3,500,000 AAA Hillsborough County, FL School District Sales Tax Revenue,
AMBAC-Insured, 5.375% due 10/1/15 (b) 3,931,480
480,000 AAA Illinois Educational Facilities Authority Revenue, Chicago College
of Osteopathic, 8.750% due 7/1/05 (d) 504,614
1,000,000 AAA Lawrence Township, IN Metropolitan School District, First
Mortgage, IBC/MBIA-Insured, 6.750% due 7/5/13 1,257,560
4,000,000 NR Los Angeles, CA Unified School District, RITE PA-1118,
MBIA-Insured, 9.304% due 1/1/11 (b)(e) 5,000,080
Massachusetts State Health & Educational Facilities Authority
Revenue:
1,000,000 AAA Harvard University, Series Z, 5.000% due 1/15/16 1,092,560
1,300,000 AAA University of Massachusetts, Series C, 5.500% due 10/1/18 1,460,069
See Notes to Financial Statements.
10 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- -------------------------------------------------------------------------------------------------------
Education -- 9.1% (continued)
$ 3,515,000 Aaa* Midlothian, TX ISD, Capital Appreciation Bonds, PSFG,
zero coupon due 2/15/17 $ 1,735,672
1,075,000 AAA Mishawaka, IN School Building Corp., First Mortgage,
AMBAC-Insured, 5.500% due 7/15/18 1,213,492
110,000 AAA Montana State University Revenue, MBIA-Insured,
10.000% due 11/15/08 (d) 132,689
900,000 AAA New Hampshire Health & Education Facilities Authority Revenue,
University System of New Hampshire, AMBAC-Insured,
5.375% due 7/1/16 1,010,349
New York State Dormitory Authority Revenue:
1,000,000 AAA Columbia University, Series B, 5.250% due 7/1/17 1,110,650
1,780,000 AA Marymount Manhattan College, Radian-Insured,
6.375% due 7/1/14 2,091,945
2,500,000 AAA School Districts Financing Programs, Series D, MBIA-Insured,
5.500% due 10/1/17 2,842,825
1,715,000 AAA State University Educational Facilities, MBIA-Insured,
6.000% due 5/15/15 2,028,279
1,330,000 A North Forest ISD, ACA-Insured, 6.500% due 8/15/17 1,626,470
Radford Court Properties, WA Student Housing Revenue,
MBIA-Insured:
1,695,000 AAA 6.000% due 6/1/17 2,008,660
1,000,000 AAA 5.375% due 6/1/19 1,088,430
1,320,000 NR Savannah, GA EDA, (College of Art & Design Inc. Project),
6.200% due 10/1/09 1,470,084
1,000,000 Baa3* Texas State Student Housing Corp., Student Housing Revenue,
(Midwestern State University Project), 6.500% due 9/1/22 1,065,310
2,000,000 AAA Texas Technical University Revenues Financing System, Seventh
Series, MBIA-Insured, 5.500% due 8/15/18 2,227,640
1,960,000 AAA University of Akron, OH General Receipts Bonds,
AMBAC-Insured, 5.250% due 1/1/17 2,140,575
1,085,000 AAA University of Iowa Facilities Corp., (Medical Education & Biomed
Research Facilities Project), AMBAC-Insured,
5.375% due 6/1/18 1,172,386
2,000,000 AAA University of Texas Revenues Financing System, Series B,
5.375% due 8/15/18 2,315,860
1,000,000 AAA Utah State Board of Regents, Utah State University Hospital,
MBIA-Insured, 5.500% due 8/1/18 1,132,980
- -------------------------------------------------------------------------------------------------------
69,204,068
- -------------------------------------------------------------------------------------------------------
General Obligation -- 19.8%
3,000,000 AA+ Anne Arundel County, MD GO, 5.375% due 3/1/14 (b) 3,434,460
2,620,000 AA+ Austin, TX GO, Public Improvement, 5.500% due 9/1/19 (b) 2,915,484
3,000,000 NR Barona Band of Mission Indians, CA GO, 8.250% due 1/1/20 (b) 3,250,650
1,000,000 AAA Carman-Ainsworth, MI Community School District GO,
FGIC-Insured, 5.500% due 5/1/19 1,114,250
See Notes to Financial Statements.
11 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
General Obligation -- 19.8% (continued)
$ 2,500,000 Aaa* Central Bucks, PA School District GO, FGIC-Insured,
5.500% due 5/15/19 $ 2,777,575
1,445,000 AA Chesapeake, VA GO, Public Improvement, 5.500% due 12/1/17 1,649,005
Chicago, IL GO:
4,000,000 AAA Project & Refunding, Series A, AMBAC-Insured,
5.375% due 1/1/16 (b) 4,477,880
1,500,000 AAA Series A, FGIC-Insured, (Call 7/1/10 @ 101),
6.000% due 1/1/14 (f) 1,793,175
2,415,000 AAA Cicero, IL GO, MBIA-Insured, 5.625% due 12/1/16 2,797,439
2,240,000 AA Clark County, NV GO, 5.375% due 6/1/15 (b) 2,458,221
3,000,000 AAA Clark County, NV School District GO, Building and Renovation,
Series B, FGIC-Insured, 5.250% due 6/15/17 (b) 3,357,120
Connecticut State GO:
5,000,000 AA Series C, 5.000% due 12/15/11 (b) 5,653,000
5,000,000 AA Series D, 5.375% due 11/15/19 (b) 5,596,900
1,000,000 AAA Cranston, RI GO, FGIC-Insured, 6.375% due 11/15/14 1,206,270
Delaware State GO, Series A:
1,596,000 AAA 5.000% due 7/1/13 1,757,228
404,000 AAA Call 7/1/10 @ 100, 5.000% due 7/1/13 (f) 456,512
1,500,000 AA+ Florida State Board of Education GO, Series A, 5.500% due 6/1/16 1,709,970
1,000,000 AAA Fort Bend, TX GO, ISD, PSFG, 5.500% due 2/15/16 1,113,220
3,500,000 NR Georgia State GO, RITES-PA-1197-A, 10.082% due 4/1/09 (b) 4,694,830
1,750,000 AAA Greater Johnstown, PA GO, School District, Series B, MBIA-Insured,
5.375% due 8/1/14 1,974,017
3,000,000 AAA Guilford County, NC GO, Public Improvement, Series B,
5.250% due 10/1/15 (b) 3,377,760
1,000,000 AAA Harlandale, TX GO, ISD, Refunding, PSFG, 6.000% due 8/15/16 1,180,760
4,000,000 AAA Hawaii State GO, Series CW, 5.375% due 8/1/15 (b) 4,486,040
1,000,000 AAA Holland, MI Area Community Swimming Pool Authority GO,
FGIC-Insured, 5.125% due 5/1/19 1,034,410
Houston, TX GO:
4,000,000 AAA PSFG 5.250% due 2/15/18 (b) 4,336,280
1,000,000 AAA Public Improvement, FSA-Insured, 5.750% due 3/1/18 1,156,000
Illinois State GO, First Series:
3,000,000 AA 5.250% due 12/1/11 (b) 3,425,460
5,000,000 AAA 5.375% due 7/1/19 (b) 5,552,300
2,440,000 AAA Kane County, IL GO, FGIC-Insured, 5.500% due 1/1/15 2,842,527
1,000,000 AAA Lewisville, TX ISD GO, PSFG, 5.000% due 8/15/23 1,043,080
1,410,000 Aaa* Logan Hocking, OH Local School District GO, Construction &
Improvement, MBIA-Insured, 5.500% due 12/1/16 1,612,124
4,000,000 AAA Los Angeles, CA Unified School District, GO, Series A,
5.250% due 7/1/19 (b) 4,392,520
70,000 Aaa* Loveland, CO GO, 8.875% due 11/1/05 (d) 75,445
Massachusetts State GO, RITES, MBIA-Insured:
3,500,000 AAA Series PA 964-R, 9.554% due 11/1/09 (b)(e) 4,692,870
1,500,000 AAA Series PA 993-R, 9.531% due 5/1/09 (e) 2,011,230
See Notes to Financial Statements.
12 Smith Barney Muni Funds | 2004 Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------
General Obligation -- 19.8% (continued)
$ 2,000,000 AA Memphis, TN GO, General Improvement, 5.250% due 4/1/16 $ 2,184,960
2,635,000 Aa2* Minnehaha County, SD GO, Limited Tax Certificates,
5.625% due 12/1/19 (b) 2,986,483
3,215,000 AAA Mobile, AL GO, 10.875% due 11/1/07 (d) 3,820,577
1,800,000 AAA Montgomery, TX GO, ISD, PSFG, 5.500% due 2/15/17 (b) 2,030,688
1,000,000 AAA Mount Clemens, MI GO, Community School District,
Q-SBLF-Insured, 5.500% due 5/1/16 (b) 1,134,850
3,320,000 Aa2* Multnomah County, OR GO, Series A, 5.250% due 4/1/14 (b) 3,657,810
1,000,000 AA New Hampshire State GO, Capital Improvement, Series A,
5.125% due 10/1/17 1,086,380
New York City, NY GO:
2,500,000 A Series A, 6.250% due 8/1/08 2,765,950
1,700,000 AA- Variable B2, 1.050% due 8/15/23 (e) 1,700,000
North Carolina State GO:
3,000,000 AAA Public Improvement, Series A, (Call 3/1/09 @ 102),
5.250% due 3/1/18 (f) 3,454,320
3,000,000 AAA Series A, 5.100% due 9/1/16 3,346,950
Pennsylvania State GO, Second Series:
4,000,000 AAA 5.500% due 5/1/15 4,600,720
5,000,000 AAA 5.750% due 10/1/17 5,774,750
Philadelphia, PA GO, School District:
Series A, FSA-Insured:
2,000,000 AAA 5.500% due 2/1/20 2,203,920
1,865,000 AAA 5.500% due 2/1/21 2,047,266
2,000,000 AAA Series B, 5.625% due 8/1/18 2,243,060
2,000,000 AAA Pierce County, WA GO, School District No. 10 Tacoma,
FGIC-Insured, 5.375% due 12/1/14 2,251,260
2,000,000 AAA Pittsfield, MA GO, MBIA-Insured, 5.500% due 4/15/17 2,277,880
1,000,000 AAA Saraland, AL GO, MBIA-Insured, 5.250% due 1/1/14 1,109,560
2,000,000 AA- Wisconsin State GO, Series B, 5.500% due 5/1/14 2,327,520
2,000,000 Aaa* Woonsocket, RI GO, FGIC-Insured, 5.375% due 10/1/20 (b) 2,186,860
- --------------------------------------------------------------------------------------------------------
150,597,776
- --------------------------------------------------------------------------------------------------------
Hospitals -- 16.2%
2,030,000 BBB+ Arizona Health Facilities Authority Revenue, Catholic Healthcare
West, Series A, 6.125% due 7/1/09 2,222,139
Arkansas State Development Financing Authority, Hospital
Revenue, Washington Regional Medical Center:
1,500,000 BBB- 7.000% due 2/1/15 1,674,630
2,500,000 BBB- 7.250% due 2/1/20 (b) 2,802,300
1,000,000 AAA Calcasieu Parish, LA Memorial Hospital Services District Revenue,
(Lake Charles Memorial Hospital Project), Series A,
CONNIE LEE-Insured, 7.500% due 12/1/05 1,094,950
See Notes to Financial Statements.
13 Smith Barney Muni Funds | 2004 Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
Hospitals -- 16.2% (continued)
$ 225,000 NR Camarillo, CA Hospital Revenue, Pleasant Valley Hospital
Building Corp., 9.700% due 12/15/07 (d) $ 263,066
1,185,000 BBB+ Carson City, NV Hospital Revenue, (Carson-Tahoe Hospital
Project), 6.000% due 9/1/14 1,332,295
1,000,000 AA Clackamas County, OR Hospital Facilities Authority Revenue,
Legacy Health System, 5.750% due 5/1/16 1,105,940
1,125,000 NR Colorado Health Facilities Authority, Hospital Revenue, (Weld
County General Hospital Project), 9.375% due 7/1/09 (d) 1,341,607
2,650,000 BBB Cuyahoga County, OH Hospital Facilities Revenue, (Canton Inc.
Project), 6.750% due 1/1/10 (b) 2,978,282
3,280,000 AAA Duncanville, TX Hospital Authority, (Methodist Hospitals of Dallas
Project), 9.000% due 1/1/10 (b)(d) 3,978,706
5,000,000 AAA Elizabethton, TN Health & Educational Facilities Board Revenue,
Series B, 5.750% due 7/1/23 (b) 5,632,650
360,000 AAA Erie County, OH Hospital Improvement Revenue, Sandusky
Memorial Hospital, 8.750% due 1/1/06 (d) 391,212
1,305,000 AA Fauquier County, VA IDA Hospital Revenue, Fauquier Hospital
Foundation Inc., Radian-Insured, 5.500% due 10/1/15 1,499,067
1,835,000 NR Franklin County, OH Hospital Revenue, (Children's Hospital
Project), 10.375% due 6/1/13 (d) 2,490,334
Illinois Health Facilities Authority Revenue:
705,000 AAA Methodist Medical Center of Illinois Project,
9.000% due 10/1/10 (d) 860,100
5,000,000 A OSF Healthcare System, 6.250% due 11/15/19 (b) 5,370,550
1,140,000 A Passavant Memorial Area Hospital, 6.250% due 10/1/17 1,231,793
50,000 A Victory Memorial Hospital Association Project,
7.500% due 10/1/06 (d) 54,290
3,000,000 A1* Iowa Finance Authority, Health Care Facilities Revenue,
Genesis Medical Center, 6.250% due 7/1/20 (b) 3,200,250
1,500,000 BBB Klamath Falls, OR, Intercommunity Hospital Authority Revenue,
(Merle West Medical Center Project), 6.125% due 9/1/22 1,583,820
885,000 AAA Lake County, OH Hospital Improvement Revenue, (Lake County
Memorial Hospitals Project), 8.625% due 11/1/09 (d) 1,056,513
2,580,000 NR Lee Memorial Health System Board of Directors, FL Hospital
Revenue, RITES, Series PA 1026R-B, FSA-Insured,
9.985% due 4/1/10 (e) 3,359,728
265,000 AAA Lima, OH Hospital Revenue, St. Rita's Medical Center,
7.500% due 11/1/06 (d) 288,866
415,000 NR Los Angeles, CA COP, Hollywood Presbyterian Medical Center,
9.625% due 7/1/13 (d) 555,610
465,000 AAA Louisiana Public Facilities Hospital Authority Revenue,
(Southern Baptist Hospital Inc. Project), Aetna-Insured,
8.000% due 5/15/12 (d) 570,369
775,000 AAA Madison County, IN Hospital Facilities Authority Revenue,
(Community Hospital Anderson Project), 9.250% due 1/1/10 (d) 947,414
See Notes to Financial Statements.
14 Smith Barney Muni Funds | 2004 Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------------
Hospitals -- 16.2% (continued)
$ 1,900,000 BB Maplewood, MN Healthcare Facilities Revenue,
(Health East Project), 5.950% due 11/15/06 $ 1,901,349
Maricopa County, AZ Hospital Revenue:
135,000 AAA Intercommunity Healthcare, (Sun City Project),
8.625% due 1/1/10 162,356
St. Luke's Medical Center:
1,525,000 AAA 8.750% due 2/1/10 (d) 1,848,010
180,000 AAA 10.250% due 2/1/11 (d) 233,789
1,000,000 A- Marshall County, AL Health Care Authority Revenue, Series A,
6.250% due 1/1/22 1,075,470
1,000,000 A Maryland State Health & Higher Educational Facilities Authority
Revenue, University of Maryland Medical System,
6.000% due 7/1/22 1,077,260
Massachusetts State Health & Educational Facilities Authority
Revenue, Caritas Christi Obligated Group, Series B:
2,000,000 BBB 6.500% due 7/1/12 2,257,960
3,000,000 BBB 6.750% due 7/1/16 3,323,490
1,000,000 BB Miami Beach, FL Health Facilities Authority, Hospital Revenue,
Mt. Sinai Medical Center, Series A, 6.700% due 11/15/19 1,008,350
1,000,000 A3* Minneapolis, MN Health Care System Revenue, Allina Health
System, Series A, 6.000% due 11/15/18 1,104,550
2,775,000 AA Montgomery County, OH Revenue, Catholic Health Initiatives,
5.500% due 9/1/14 (b) 3,020,865
3,835,000 A- New Hampshire Health & Education Facilities Authority Revenue,
Covenant Health System, 6.500% due 7/1/17 4,315,564
New Jersey Healthcare Facilities Financing Authority Revenue:
455,000 AAA Hackensack Hospital, 8.750% due 7/1/09 (d) 531,495
3,000,000 BBB- Trinitas Hospital Obligation Group, 7.375% due 7/1/15 (b) 3,368,700
1,000,000 AAA New York City, NY Health & Hospital Corp. Revenue,
Health System, Series A, FSA-Insured, 5.500% due 2/15/19 1,115,260
New York City, NY IDA Civic Facilities Revenue:
1,550,000 NR Community Hospital, Brooklyn, 6.875% due 11/1/10 1,595,632
1,090,000 NR Special Needs Facilities Pooled Project, Series A-1,
6.100% due 7/1/12 1,138,625
1,000,000 A3* New York State Dormitory Authority Revenue, Lenox Hill Hospital
Obligated Group, 5.750% due 7/1/17 1,095,350
750,000 A Norton, VA IDA Hospital Revenue, Norton Community Hospital,
ACA-Insured, 6.000% due 12/1/22 818,798
Oklahoma Development Financing Authority Revenue, Refunding:
Hillcrest Healthcare System, Series A:
1,500,000 B- 5.750% due 8/15/15 1,306,665
3,000,000 B- 5.625% due 8/15/19 2,494,110
2,750,000 AA St. John's Health System, 5.750% due 2/15/18 2,993,403
See Notes to Financial Statements.
15 Smith Barney Muni Funds | 2004 Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------
Hospitals -- 16.2% (continued)
Orange County, FL Health Facilities Authority Revenue:
$ 1,835,000 NR First Mortgage, 8.875% due 7/1/21 $ 1,868,636
2,000,000 A Hospital Adventist Health System, 6.250% due 11/15/24 2,209,880
250,000 AAA Oshkosh, WI Hospital Facility Revenue, Mercy Medical Center,
(Call 7/1/07 @ 100), 7.375% due 7/1/09 (f) 278,925
Pennsylvania State Higher Educational Facilities Authority,
Health Services Revenue, Series A:
3,330,000 AAA Allegheny Delaware Valley Obligation Group,
MBIA-Insured, 5.600% due 11/15/09 3,726,503
1,000,000 A University of Pittsburgh, UPMC Health System,
6.250% due 1/15/18 1,114,150
500,000 Aaa* Philadelphia, PA Hospitals Authority Revenue, (United Hospitals
Inc. Project), (Call 7/1/05 @ 100), 10.875% due 7/1/08 (f) 546,665
961,000 AAA Pima County, AZ Hospital Revenue, Tucson Medical Center,
10.375% due 4/1/07 (d) 1,088,265
595,000 AAA Pulaski County, AR Hospital Revenue, Arkansas Children's
Hospital, 9.250% due 3/1/10 (d) 736,057
1,500,000 AAA Salt Lake County, UT Hospital Revenue, IHC Health Services Inc.,
AMBAC-Insured, 5.500% due 5/15/13 1,709,235
265,000 AAA San Leandro, CA Hospital Revenue, Vesper Memorial Hospital,
11.500% due 5/1/11 (d) 357,840
835,000 AAA Santa Rosa, CA Hospital Revenue, (Santa Rosa Hospital
Memorial Project), 10.300% due 3/1/11 (d) 1,099,620
1,445,000 AA Southcentral, PA General Authority Revenue, Hanover Hospital
Inc., Radian-Insured, 5.500% due 12/1/18 1,593,430
810,000 AAA Southeast Texas Hospital Financing Agency, (Memorial Hospital
System Project), 8.500% due 12/1/08 (d) 943,747
2,135,000 AAA St. Joseph County, IN Hospital Authority Facilities Revenue,
Memorial Hospital South Bend, 9.400% due 6/1/10 (d) 2,632,562
1,000,000 A St. Paul, MN Housing & Redevelopment Authority, Hospital
Revenue, (Health East Project), Series B, ACA/CBI-Insured,
5.850% due 11/1/17 1,084,280
1,210,000 AAA St. Tammany Parish, LA Hospital Service District No. 2, Hospital
Revenue, CONNIE LEE-Insured, 6.250% due 10/1/14 1,262,405
1,970,000 NR Suffolk County, NY IDA, Civic Facility Revenue, Eastern Long
Island Hospital Association, Series A, 7.750% due 1/1/22 2,030,046
Tarrant County, TX Health Facilities Development Corp.,
Hospital Revenue:
2,000,000 A 6.625% due 11/15/20 2,190,620
4,000,000 AA- Baylor Health Care System Project, 5.750% due 11/15/19 4,389,400
155,000 AAA Tarrant County, TX Hospital Authority Revenue, St. Joseph
Hospital Project, 8.750% due 2/1/10 (d) 187,855
2,000,000 Baa2* Tomball, TX Hospital Authority Revenue, Tomball Regional
Hospital, 5.500% due 7/1/09 2,156,080
See Notes to Financial Statements.
16 Smith Barney Muni Funds | 2004 Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- ---------------------------------------------------------------------------------------------------
Hospitals -- 16.2% (continued)
$ 1,415,000 BBB+ Vermont Educational & Health Buildings Financing Agency
Revenue, Developmental & Mental Health, Series A,
5.500% due 6/15/12 $ 1,486,231
Wisconsin State Health & Educational Facilities Authority
Revenue:
1,000,000 A- Agnesian Health Care Inc., 6.000% due 7/1/17 1,082,090
1,500,000 A Wheaton Franciscan Services Inc., 6.000% due 8/15/15 1,684,560
- ---------------------------------------------------------------------------------------------------
123,132,614
- ---------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.0%
915,000 NR Asheville, NC Housing Development Corp., First Lien Revenue,
Ashville Gardens, HUD Section 8-Insured, (Call 11/1/09 @ 100),
10.500% due 5/1/11 (f) 1,146,971
Bexar County, TX Housing Finance Corp., Multi-Family Housing
Revenue, Series A:
440,000 A3* American Opportunity For Housing-Nob Hill Apartments LLC,
6.000% due 6/1/21 455,620
700,000 Aaa* The Waters At Northern Hills Apartments, MBIA-Insured,
5.800% due 8/1/21 757,708
2,250,000 AAA Dekalb County, GA HFA, Multi-Family Housing Revenue,
Refunding, (Chimney Trace Project), FNMA-Collateralized,
5.625% due 5/1/25, mandatory tender 5/1/05 2,277,697
El Paso County, TX Housing Finance Corp., Multi-Family Housing
Revenue, Series A:
American Village Communities:
1,250,000 A3* 6.250% due 12/1/20 1,301,537
1,000,000 A3* 6.250% due 12/1/24 1,031,560
415,000 A3* La Plaza Apartments, 6.700% due 7/1/20 459,463
1,000,000 AAA Grand Prairie, TX Housing Finance Corp., Multi-Family Housing
Revenue, (Landings of Carrier Project), Series A,
GNMA-Collateralized, 6.750% due 9/20/32 1,110,540
1,000,000 AAA Harrisonburg, VA Redevelopment & Housing Authority,
Multi-Family Housing Revenue, (Greens of Salem Run Project),
FSA-Insured, 6.000% due 4/1/12 (c) 1,076,820
740,000 NR Maricopa County, AZ IDA, Multi-Family Housing Revenue,
Stanford Court Apartments, Series B, 5.750% due 7/1/08 743,508
910,000 AA Missouri State Housing Development Community, Multi-Family
Housing Revenue, Series I, 5.500% due 12/1/15 977,750
865,000 AAA Nevada Housing Division, Multi-Unit Housing, Saratoga Palms,
FNMA-Collateralized, 6.250% due 10/1/16 (c) 906,113
755,000 Aaa* Panhandle, TX Regional Housing Finance, Series A,
GNMA-Collateralized, 6.500% due 7/20/21 849,428
650,000 AAA SCA Tax Exempt Trust, Knox Health Educational & Housing,
FSA-Insured, 7.125% due 1/1/30 673,329
See Notes to Financial Statements.
17 Smith Barney Muni Funds | 2004 Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.0% (continued)
$ 4,000,000 NR Sterling Hill, FL Community Development District, Series B,
5.500% due 11/1/10 $ 4,055,680
2,530,000 B3* Travis County, TX HFA, Multi-Family Housing Revenue, Agape
Austin Housing Inc., (Lakeview Apartments Project), Series A,
6.250% due 7/1/22 1,762,018
3,000,000 NR Village Community Development District No. 5, FL Special
Assessment Revenue, Series B, 5.000% due 5/1/08 3,029,580
- --------------------------------------------------------------------------------------------------
22,615,322
- --------------------------------------------------------------------------------------------------
Housing: Single-Family -- 0.8%
685,000 AAA Arkansas Housing Development Agency, Single-Family
Mortgage, FHA/VA-Insured, 8.375% due 7/1/10 (d) 819,411
320,000 AAA Arkansas State Development Finance Authority, Single-Family
Mortgage Revenue, Series A, GNMA/FNMA-Collateralized,
6.200% due 7/1/15 331,450
175,000 AA Chicago Heights, IL Single-Family Mortgage Revenue,
7.600% due 5/1/10 206,278
490,000 AA Colorado HFA, Single-Family Mortgage Program, Sr. Bonds,
Series D-2, 6.900% due 4/1/29 (c) 511,124
860,000 Aaa* Jefferson Parish, LA Home Mortgage Authority, Single-Family
Mortgage Revenue, Series G, GNMA/FNMA-Collateralized,
6.300% due 6/1/32 (c) 922,565
730,000 NR Lafayette, LA Public Trust Financing Authority, Single-Family
Mortgage Revenue, FHA-Insured, 7.200% due 4/1/10 (d) 828,784
Massachusetts State HFA, Single-Family Housing Revenue:
795,000 AA Series 38, 7.200% due 12/1/26 (c) 818,135
815,000 AA Series 41, 6.300% due 12/1/14 845,823
380,000 AA+ Minnesota State HFA Revenue, Single-Family Mortgage,
Series H, 6.700% due 1/1/18 387,619
280,000 Aa2* Oregon State Housing & Community Services Department,
Mortgage Revenue, Single-Family Mortgage Program,
Series B, 6.875% due 7/1/28 281,212
- --------------------------------------------------------------------------------------------------
5,952,401
- --------------------------------------------------------------------------------------------------
Industrial Development -- 1.7%
1,000,000 NR Alaska Industrial Development & Export Authority Revenue,
Williams Lynxs Alaska Cargo Port LLC, 8.000% due 5/1/23 (c) 1,052,870
1,000,000 Baa3* Albany, NY IDA, Civic Facility Revenue, (Charitable Leadership
Project), Series A, 6.000% due 7/1/19 1,078,340
1,890,000 NR Fishhawk Community Development District II Special Assessment
Revenue, Series B, 5.000% due 11/1/07 1,920,108
2,000,000 A- Michigan State Strategic Fund Limited Obligation Revenue,
Refunding, (Dow Chemical Project), 4.600% due 6/1/14 2,142,420
See Notes to Financial Statements.
18 Smith Barney Muni Funds | 2004 Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- -------------------------------------------------------------------------------------------------------
Industrial Development -- 1.7% (continued)
Philadelphia, PA Authority for Industrial Development, Series B,
FSA-Insured:
$ 2,000,000 AAA 5.500% due 10/1/15 $ 2,278,340
1,000,000 AAA 5.500% due 10/1/19 1,124,390
2,000,000 B2* Rockbridge County, VA IDA Revenue, Virginia Horse Center
Foundation, Series C, 6.850% due 7/15/21 1,902,740
1,000,000 NR Sumter Landing Community Development District Special
Assessment Revenue, 6.250% due 5/1/13 1,029,920
- -------------------------------------------------------------------------------------------------------
12,529,128
- -------------------------------------------------------------------------------------------------------
Life Care -- 1.5%
1,405,000 NR Berks County Municipal Authority, (Phoebe Berks Village Inc.
Project), (Call 5/15/06 @ 102), 7.500% due 5/15/13 (f) 1,556,599
950,000 A2* Harris County, TX Health Facilities Development Corp.,
(Memorial Health System Project), (Call 6/1/04 @ 100),
7.125% due 6/1/05 (f) 958,996
1,000,000 NR Lee's Summit, MO IDA, Health Facilities Revenue,
John Knox Village, 5.750% due 8/15/11 1,110,580
Massachusetts State Development Finance Agency Revenue,
First Mortgage, (Edgecombe Project):
585,000 BBB- Series A, 6.000% due 7/1/11 624,874
1,000,000 BBB- Series B, 5.750% due 7/1/29 1,010,870
1,370,000 AAA Massachusetts State Industrial Finance Agency Revenue,
University Commons Nursing, Series A,
FHA-Insured, 6.550% due 8/1/18 1,524,769
2,000,000 NR North Manchester IN Revenue, (Peabody Retirement Community
Project), Series A, 7.125% due 7/1/22 2,031,420
1,750,000 NR Rainbow City, AL Special Health Care Facilities Financing
Authority, Regency Pointe Inc., Series B, 7.250% due 1/1/06 1,764,840
770,000 AAA Rio Grande Valley, Health Facilities Development Corp.,
TX Hospital Revenue, (Valley Baptist Medical Center Project),
MBIA-Insured, 6.250% due 8/1/06 780,295
- -------------------------------------------------------------------------------------------------------
11,363,243
- -------------------------------------------------------------------------------------------------------
Miscellaneous -- 4.8%
1,070,000 NR Bonita Springs, FL Vasari Community Development District
Revenue, Capital Improvement, Series B, 6.200% due 5/1/09 1,121,970
790,000 NR Capital Region Community Development, FL Development District
Revenue, Capital Improvement, Series B, 5.950% due 5/1/06 803,477
1,960,000 NR Gateway Services Community Development District, FL Special
Assessment Revenue, Sun City Center, (Fort Meyers Project),
Series B, 5.500% due 5/1/10 1,994,692
2,475,000 NR Greyhawk Landing Community Development District, FL Special
Assessment Revenue, Series B, 6.250% due 5/1/09 (b) 2,551,651
See Notes to Financial Statements.
19 Smith Barney Muni Funds | 2004 Annual Report
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FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------
Miscellaneous -- 4.8% (continued)
Illinois Development Finance Authority Revenue:
$ 1,005,000 A Debt Restructure -- East St. Louis, 6.875% due 11/15/05 $ 1,056,175
2,000,000 Aaa* Revolving Fund -- Master Trust, 5.500% due 9/1/17 (b) 2,248,740
825,000 AAA Indiana Bond Bank, Special Program, Series A, AMBAC-Insured,
9.750% due 8/1/09 (d) 1,007,812
1,000,000 Ba2* Lehigh County, PA General Purpose Authority Revenue,
Kids Peace Corp., 5.800% due 11/1/12 1,014,660
1,490,000 NR Lexington Oaks Community Development District, FL Special
Assessment Revenue, Series B, 5.625% due 5/1/06 1,513,617
575,000 NR Mediterra North Community Development District, FL Capital
Improvement Revenue, Series B, 6.000% due 5/1/08 591,658
5,000,000 AA+ New York City, NY Transitional Finance Authority,
5.000% due 11/1/13 5,605,450
1,000,000 NR Oglala Sioux Tribe, SD Revenue, 5.500% due 7/1/13 1,035,050
460,000 NR Panther Trace Community Development District, FL Special
Assessment Revenue, Series B, 6.500% due 5/1/09 472,935
1,165,000 NR Parklands West Community Development District, FL Special
Assessment Revenue, Series B, 6.000% due 5/1/06 1,182,580
2,185,000 NR Renaissance Community Development District, FL Capital
Improvement Revenue, Series B, 6.250% due 5/1/08 2,258,416
2,430,000 NR Reunion East Community Development District, FL Special
Assessment Revenue, Series B, 5.900% due 11/1/07 2,491,528
3,900,000 D Spokane, WA Downtown Foundation Parking Revenue,
(River Park Square Project), 5.000% due 8/1/08 (g) 1,950,000
1,000,000 A Territory of American Samoa, ACA-Insured, 6.000% due 9/1/08 1,121,590
110,000 AA Tucson, AZ COP, Radian-Insured, 6.000% due 7/1/04 111,307
975,000 NR Village Community Development District No. 5, FL Special
Assessment Revenue, Series B, 5.400% due 5/1/07 993,720
525,000 NR Waterlefe Community Development District, FL Capital
Improvement Revenue, Series B, 6.250% due 5/1/10 534,502
2,985,000 NR Wenonah Park Properties Inc. Revenue, MI Bay City Hotel,
7.875% due 4/1/22 3,056,371
1,000,000 AAA West View, PA Municipal Authority, 9.500% due 11/15/14 (d) 1,407,030
- --------------------------------------------------------------------------------------------------
36,124,931
- --------------------------------------------------------------------------------------------------
Pollution Control -- 2.5%
2,610,000 BBB- Carbon County, PA IDA, (Panther Creek Partners Project),
6.650% due 5/1/10 (c) 2,861,813
5,000,000 Ba3* Gulf Coast IDA, Texas Solid Waste Disposal Revenue,
(Citgo Petroleum Corp. Project), 7.500% due 5/1/25 (b) 5,229,350
1,500,000 BB+ Nez Perce County, ID PCR, Refunding, (Potlatch Corp. Project),
6.125% due 12/1/07 1,535,505
See Notes to Financial Statements.
20 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
Pollution Control -- 2.5% (continued)
$ 6,000,000 BB+ Ohio State, OH Air Quality Development Authority Revenue,
Refunding, Cleveland Pollution Control, Series A,
6.000% due 12/1/13 $ 6,243,720
2,200,000 BBB- South Charleston, WV PCR, Revenue Refunding, Union Carbide,
Remarketed 5/1/91, 7.625% due 8/1/05 2,207,260
1,000,000 BB+ Warren County, AR Solid Waste Disposal Revenue, (Potlatch Corp.
Project), 7.000% due 4/1/12 1,046,600
- -------------------------------------------------------------------------------------------------------
19,124,248
- -------------------------------------------------------------------------------------------------------
Public Facilities -- 7.1%
1,000,000 BBB- Austin, TX Convention Enterprises Inc., Convention Center,
First Tier, Series A, 6.600% due 1/1/21 1,072,180
2,480,000 NR Dauphin County, PA General Authority Revenue, Office and
Packaging, 5.500% due 1/1/08 2,524,144
1,980,000 AAA East Point, GA Building Authority Revenue, FSA-Insured,
zero coupon due 2/1/20 847,400
1,720,000 AAA Evansville Vanderburgh Public Library Leasing Corp.,
First Mortgage, MBIA-Insured, 5.750% due 7/15/18 1,973,855
Florida Municipal Loan Council Revenue, Series A, MBIA-Insured:
1,790,000 AAA 5.250% due 11/1/13 2,024,544
3,175,000 AAA 5.250% due 11/1/16 (b) 3,548,158
1,500,000 Aaa* Hamilton County, OH Sales Tax Revenue, Series B,
AMBAC-Insured, 5.250% due 12/1/18 1,644,315
Harris County, TX Houston Sports Authority Revenue, Series G:
3,000,000 AAA 5.750% due 11/15/19 (b) 3,398,190
1,125,000 AAA MBIA-Insured, 5.250% due 11/15/16 1,238,917
1,025,000 A+ Kentucky Infrastructure Authority, Series A, 5.250% due 6/1/12 1,152,110
5,000,000 AAA Kentucky Property & Buildings, 5.375% due 10/1/19 (b) 5,802,100
2,500,000 AAA Las Vegas New Convention & Visitors Authority Revenue,
AMBAC-Insured, 6.000% due 7/1/14 2,912,775
2,200,000 AAA Longmont Co. Sales & Use Tax Revenue, 5.750% due 11/15/19 2,537,480
1,500,000 AA Macon-Bibb County, GA Urban Development Authority Revenue,
5.500% due 10/1/22 1,683,690
2,000,000 AAA Memphis-Shelby County, TN Sports Authority Inc. Revenue,
(Memphis Arena Project), Series A, 5.500% due 11/1/18 2,259,200
Ohio State Building Authority, Series A:
3,000,000 AA 5.375% due 10/1/14 3,409,680
3,600,000 AAA State Facilities-Administration Building Fund, FSA-Insured,
5.500% due 10/1/14 4,134,564
Oregon State Department Administrative Services Lottery Revenue:
1,375,000 AAA Series A, FSA-Insured, 5.500% due 4/1/14 1,601,655
3,500,000 AAA Series B, 5.250% due 4/1/15 3,868,515
2,000,000 AAA Pennsylvania State Department of General Services, COP,
FSA-Insured, 5.250% due 5/1/16 2,208,600
See Notes to Financial Statements.
21 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------
Public Facilities -- 7.1% (continued)
$ 1,000,000 AAA Providence, RI Public Building Authority, General Revenue,
Series A, MBIA-Insured, 5.375% due 12/15/21 $ 1,091,620
1,750,000 AA+ Virginia State Public Building Authority, Public Facilities Revenue,
Series A, 5.750% due 8/1/20 2,014,320
920,000 AAA Westmoreland County, PA Municipal Authority,
9.125% due 7/1/10 (d) 1,043,758
- --------------------------------------------------------------------------------------------------------
53,991,770
- --------------------------------------------------------------------------------------------------------
Solid Waste -- 0.4%
2,585,000 NR Wasco County, OR Solid Waste Disposal Revenue,
(Waste Connections Inc. Project), 7.000% due 3/1/12 (c) 2,765,769
- --------------------------------------------------------------------------------------------------------
Tax Allocation -- 2.1%
3,000,000 AAA Denver, CO City & County Excise Tax Revenue, Refunding,
Series A, FSA-Insured, 5.500% due 9/1/14 (b) 3,400,410
2,500,000 AAA Hamilton County, IN County Optional Income Tax Revenue,
FSA-Insured, 5.250% due 1/10/20 (b) 2,687,675
2,930,000 NR Midlothian, TX Development Authority Tax, Increment Contract
Revenue, 7.875% due 11/15/21 3,205,684
3,000,000 AAA Pasco County, FL Optional Gas Tax Revenue, Refunding,
FGIC-Insured, 5.250% due 8/1/11 3,438,510
3,120,000 Aaa* Tampa, FL Occupational License Tax, Series A, FGIC-Insured,
5.375% due 10/1/14 3,553,774
- --------------------------------------------------------------------------------------------------------
16,286,053
- --------------------------------------------------------------------------------------------------------
Tobacco -- 2.5%
Alabama 21st Century Authority, Tobacco Settlement Revenue:
2,330,000 A- 5.750% due 12/1/15 (b) 2,422,548
2,415,000 A- 5.750% due 12/1/17 (b) 2,474,095
Tobacco Settlement Financing Corp.:
2,290,000 BBB NJ, Asset-Backed, 5.500% due 6/1/11 2,307,312
NY, Asset-Backed:
5,000,000 AA- Series A-1, Callable, 5.500% due 6/1/16 5,445,200
6,000,000 AA- Series C-1, Callable, 5.500% due 6/1/14 6,514,140
- --------------------------------------------------------------------------------------------------------
19,163,295
- --------------------------------------------------------------------------------------------------------
Transportation -- 11.8%
3,000,000 AAA Allegheny County, PA Port Authority Special Revenue,
FGIC-Insured, 5.500% due 3/1/16 (b) 3,396,630
3,040,000 AAA Birmingham, AL Airport Authority, Airport Revenue,
MBIA-Insured, 5.500% due 7/1/16 (b) 3,266,298
2,000,000 A Bradley International Airport, Series A, ACA-Insured,
6.375% due 7/1/12 (c) 2,215,840
5,450,000 AAA Butler County, OH Transportation Improvement District, Series A,
5.125% due 4/1/17 (b) 5,874,064
See Notes to Financial Statements.
22 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- -------------------------------------------------------------------------------------------------------------
Transportation -- 11.8% (continued)
Chicago, IL O'Hare International Airport:
$ 1,500,000 AAA Second Lien Passenger Facility, Series B, AMBAC-Insured,
5.500% due 1/1/16 $ 1,655,310
2,500,000 NR Special Facilities Revenue, (United Airlines Project), Series C,
6.300% due 5/1/16 (g) 796,750
Connecticut State Special Tax Obligation Revenue:
RITES, FSA-Insured:
2,000,000 AAA Series A, 9.327% due 10/1/09 (e) 2,552,440
2,000,000 AAA Series B, 9.327% due 10/1/09 (e) 2,490,320
2,000,000 AAA Transportation Infrastructure, Series A, FSA-Insured,
5.375% due 7/1/16 2,254,080
6,400,000 B- Connector 2000 Association Inc., SC Toll Road, Sr. Revenue
Bond, Capital Appreciation, Series B, zero coupon due 1/1/16 1,627,712
3,000,000 AAA Dallas, TX Area Rapid Transit, AMBAC-Insured,
5.000% due 12/1/19 (b) 3,198,030
3,000,000 CCC Dallas-Fort Worth, TX International Airport Facility Improvement
Corp. Revenue, American Airlines Inc., Series C,
6.150% due 5/1/29, mandatory tender 11/1/07 (b)(c) 2,647,350
3,440,000 AAA Delaware River Port Authority, Series A,
9.529% due 1/1/10 (b) 4,445,718
3,840,000 AAA Houston, TX Airport System Revenue,
9.500% due 7/1/10 (b)(d) 4,838,669
3,000,000 NR Kenton County, KY Airport Board, Special Facilities Revenue,
(Mesaba Aviation Inc. Project), Series A, 6.625% due 7/1/19 (c) 2,451,960
1,480,000 AAA Louisiana Local Government Environment Facilities and
Community Development Authority Revenue, Series A,
AMBAC-Insured, (Parking Facilities Corp. Garage Project),
5.625% due 10/1/17 1,681,443
1,140,000 Aaa* Massachusetts Rail Connections Inc., Route 128, Parking Garage
Revenue, Series A, (Call 7/1/09 @ 102), 6.000% due 7/1/13 (f) 1,360,978
2,000,000 Aa3* Massachusetts State, Grant Anticipation Notes, Series A,
5.750% due 6/15/15 2,322,020
1,715,000 AAA Massachusetts State Port Authority Revenue,
13.000% due 7/1/13 2,602,667
1,000,000 AAA Memphis-Shelby County, TN Airport Authority, Airport Revenue,
Series D, AMBAC-Insured, 6.250% due 3/1/14 (c) 1,162,400
4,000,000 AAA New Jersey State Highway Authority, Garden State Parkway
General Revenue, Refunding, FGIC-Insured,
5.500% due 1/1/11 (b) 4,626,960
New Jersey State Turnpike Authority Revenue:
725,000 AAA 6.750% due 1/1/09 (d) 798,051
320,000 AAA 6.000% due 1/1/14 (d) 365,030
See Notes to Financial Statements.
23 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------
Transportation -- 11.8% (continued)
New Jersey Transportation Trust Fund Authority, RITES,
MBIA-Insured:
$ 2,500,000 AAA 5.500% due 6/15/16 $ 2,844,100
2,500,000 AAA Series A, (Call 12/15/11 @ 100),
10.531% due 12/15/09 (e)(f) 3,535,000
1,000,000 AAA Series B, 10.531% due 12/15/09 (e) 1,414,000
1,890,000 AAA Series B, (Call 12/15/11 @ 100), 6.000% due 12/15/19 (f) 2,281,230
1,895,000 A Pendleton County, KY Multi-County Lease Revenue, Associated
Counties Leasing Trust, Program A, 6.500% due 3/1/19 1,921,265
Philadelphia, PA Parking Authority, Parking Revenue,
FSA-Insured:
2,000,000 AAA 5.625% due 9/1/15 2,270,720
1,500,000 AAA 5.625% due 9/1/19 1,683,090
1,375,000 NR Pittsburgh, PA Public Parking Authority, Parking Revenue,
St. Francis General Hospital, 6.625% due 10/1/12 (d) 1,620,671
10,000,000 BB Pocahontas Parkway Association, VA Toll Road,
Sr. Revenue Bond, Capital Appreciation, Series B,
zero coupon due 8/15/19 3,319,200
2,000,000 AAA Puerto Rico Highway and Transportation Authority Highway
Revenue, Refunding, Series AA, 5.000% due 7/1/26 2,247,740
4,530,000 AAA South Carolina Transportation Infrastructure Bank Revenue,
Series A, 5.000% due 10/1/15 4,951,471
1,000,000 AAA St. Louis, MO Airport Revenue, Airport Development Program,
Series A, MBIA-Insured, 5.625% due 7/1/16 1,134,110
1,725,000 AAA Tulsa, OK Airports Improvement Trust General Revenue,
Series A, 6.000% due 6/1/14 (c) 1,950,647
- -------------------------------------------------------------------------------------------------
89,803,964
- -------------------------------------------------------------------------------------------------
Utilities -- 8.5%
45,000 AAA Brownsville, TX Utility System Revenue, 9.400% due 1/1/13 59,328
4,000,000 BBB Burlington, KS Environmental Improvement Revenue, Kansas City
Power & Light, Refunding, 4.750% due 9/1/15 (b) 4,298,880
70,000 AAA Chillicothe, MO Electric Revenue, AMBAC-Insured,
10.250% due 9/1/06 (d) 77,125
1,750,000 AAA Cleveland, OH Public Power System Revenue, AMBAC-Insured,
5.500% due 11/15/15 1,999,602
4,000,000 AAA Energy Northwest Washington Electric Revenue, Refunding,
(Project Number 1), Series A, 5.500% due 7/1/14 (b) 4,525,280
180,000 AAA Farmington, NM Utilities Systems Revenue, AMBAC-Insured,
9.875% due 1/1/08 (d) 209,120
2,500,000 AAA Georgia Municipal Electric Authority Revenue,
(Combustion Turbine Project), Series A, MBIA-Insured,
5.250% due 11/1/19 (b) 2,732,600
See Notes to Financial Statements.
24 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------------
Utilities -- 8.5% (continued)
$ 600,000 A Georgia Municipal Gas Authority Revenue, (Southern Storage Gas
Project), 6.300% due 7/1/09 $ 618,810
15,000 Aaa* Idaho Falls, ID Electric Revenue, 10.250% due 4/1/06 (d) 16,302
3,000,000 AAA Indianapolis Local Public Improvement Bond Bank,
(Waterworks Project), Series A, 5.500% due 7/1/19 (b) 3,348,690
2,500,000 AAA Intermountain Power Agency, UT Power Supply Revenue,
Refunding, Series B, MBIA-Insured, 5.750% due 7/1/19 (b) 2,825,850
Jacksonville Beach, FL Utility Revenue:
2,620,000 AAA 7.900% due 10/1/14 (b)(d) 3,290,091
2,145,000 Aaa* 5.000% due 4/1/18 (b) 2,279,105
7,000,000 AAA Jefferson County, AL Sewer Revenue, Refunding, Series B 8,
5.250% due 2/1/16 (b) 7,643,720
4,320,000 AAA Muscatine, IA Electric Revenue, 9.700% due 1/1/13 (b)(d) 5,746,248
North Carolina Eastern Municipal Power Agency, Power System
Revenue:
550,000 A Series B, ACA/CBI-Insured, 5.650% due 1/1/16 603,669
2,000,000 BBB Series D, 5.500% due 1/1/14 2,210,980
North Carolina Municipal Power Agency No. 1,
Catawba Electric Revenue:
4,285,000 AAA 10.500% due 1/1/10 (d) 5,443,064
3,000,000 A Series B, ACA/CBI-Insured, 6.375% due 1/1/13 3,387,450
1,470,000 AA Orlando, FL Utilities Commission Water & Electric Revenue,
Series A, 5.250% due 10/1/13 1,658,822
Philadelphia, PA Gas Works Revenue, Third Series:
3,240,000 AAA 5.500% due 8/1/19 3,621,931
1,675,000 AAA FSA-Insured, 5.500% due 8/1/17 1,880,456
Provo, UT Electric Revenue:
1,010,000 AAA 10.125% due 4/1/15 (d) 1,417,101
1,120,000 AAA MBIA-Insured, 10.125% due 4/1/15 (d) 1,571,438
10,000 AAA Series A, AMBAC-Insured, 10.375% due 9/15/15 (d) 14,371
3,000,000 BBB+ York County, VA IDA, PCR, Electric & Power Co.,
Refunding Market, 5.500% due 7/1/09 (b) 3,228,960
- --------------------------------------------------------------------------------------------------
64,708,993
- --------------------------------------------------------------------------------------------------
Water and Sewer -- 8.2%
2,025,000 AAA Boston, MA Water & Sewer Community Revenue,
10.875% due 1/1/09 (b)(d) 2,516,123
2,500,000 NR California State Department Water Resources Power Supply
Revenue, RITES, Series A, AMBAC-Insured,
9.258% due 5/1/10 (b) 3,024,700
1,175,000 AAA Charleston, SC Waterworks & Sewer Revenue,
10.375% due 1/1/10 (d) 1,485,035
See Notes to Financial Statements.
25 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------------------
Water and Sewer -- 8.2% (continued)
$ 2,000,000 AA+ Chicago Metropolitan Water Reclamation District Greater
Chicago, Capital Improvement, Series A, 5.500% due 12/1/14 $ 2,350,520
1,480,000 AAA Denver, CO City & County Wastewater Revenue, FGIC-Insured,
5.250% due 11/1/14 1,670,343
2,000,000 AA Fort Worth, TX Water & Sewer Revenue, 5.625% due 2/15/18 2,260,440
1,630,000 AAA Fulton County, GA Water and Sewer Revenue,
5.000% due 1/1/16 1,769,072
Houston, TX Water & Sewer System Revenue, Refunding, Jr. Lien:
1,000,000 AAA Series A, FSA-Insured, 5.500% due 12/1/17 1,130,380
4,545,000 AAA Series B, 5.750% due 12/1/16 (b) 5,173,255
5,350,000 AAA Los Angeles, CA Water & Power Revenue, Power System,
Series AA1, 5.250% due 7/1/19 (b) 5,847,229
5,255,000 AAA Minnesota Public Facilities Authority, Water PCR, Series A,
5.250% due 3/1/17 (b) 5,820,806
1,500,000 Aaa* Missouri State Environmental Improvement & Energy Resources
Authority, Water Pollution State Revolving Funds Programs,
Series A, 5.250% due 1/1/16 1,666,005
45,000 BBB- Nevada, MO Waterworks System Revenue,
10.000% due 10/1/07 (d) 52,289
Ohio State Water Development Authority Revenue:
6,875,000 AAA 9.375% due 12/1/10 (d) 8,353,744
1,425,000 AAA Safe Water, Series 3, 9.000% due 12/1/10 (d) 1,666,295
3,095,000 Aaa* Passaic Valley, NJ Sewage Commissioners Sewer System,
Series E, AMBAC-Insured, 5.625% due 12/1/17 3,547,706
985,000 NR Port St. Lucie, FL Special Assessment Revenue, Series A,
6.375% due 9/1/11 1,025,848
225,000 AAA Ringwood Boro, NJ Sewage Authority, 9.875% due 1/1/14 (d) 302,366
Spanish Fork City, UT Water Revenue, FSA-Insured:
760,000 Aaa* 5.500% due 6/1/17 853,237
240,000 Aaa* Call 6/1/12 @ 100, 5.500% due 6/1/17 (f) 279,151
205,000 AAA Tamarac, FL Water & Sewer Utilities Revenue, AMBAC-Insured,
9.250% due 10/1/10 (d) 250,012
3,500,000 AAA Texas Water Development Board Revenue, Revolving Fund,
Sr. Lien, Series B, 5.250% due 7/15/17 3,829,210
5,035,000 AAA Virginia State Resources Authority, Clean Water Revenue,
Revolving Fund, 5.400% due 10/1/18 5,601,437
840,000 AAA West Coast Regional Water Supply Authority, FL Capital
Improvement Revenue, (Hillsborough County Project),
AMBAC-Insured, 10.300% due 10/1/04 (d) 878,002
See Notes to Financial Statements.
26 Smith Barney Muni Funds | 2004 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 2004
FACE
AMOUNT RATING(a) SECURITY VALUE
- -----------------------------------------------------------------------------------------
Water and Sewer -- 8.2% (continued)
$1,000,000 AAA Wichita Falls, TX Water & Sewer Revenue, Priority Lien,
AMBAC-Insured, 5.375% due 8/1/19 $ 1,090,450
- -----------------------------------------------------------------------------------------
62,443,655
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $724,168,428**) $759,807,230
- -----------------------------------------------------------------------------------------
(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 and/or held as collateral
for open futures contracts.
(c) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(d) Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if the issuer has not
applied for new ratings.
(e) Inverse floating rate security -- coupon varies inversely with level of
short-term tax-exempt interest rates.
(f) Pre-Refunded bonds are escrowed with U.S. government securities and are
considered by the Manager to be triple-A rated even if issuer has not
applied for new ratings.
(g) Security is currently in default.
** Aggregate cost for Federal income tax purposes is $724,023,676.
See pages 28 and 29 for definitions of ratings and certain abbreviations.
See Notes to Financial Statements.
27 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. 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 circumstances and economic
conditions than bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
BB, B and -- Bonds rated "BB", "B" and "CCC" are regarded, on balance, as
CCC predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of
the obligation. BB indicates the lowest degree of speculation
and C the highest degree of speculation. While such bonds will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
D -- Bonds rated "D" are in default, and payment of interest and/or
repayment of principal is in arrears.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each generic rating from "Aa" to "Caa", where 1 is the highest and 3
the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred
to as "gilt edge". Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection
of interest and principal payments may be very moderate, and
therefore not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa -- Bonds rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
28 Smith Barney Muni Funds | 2004 Annual Report
BOND RATINGS (UNAUDITED) (CONTINUED)
Ca -- Bonds rated "Ca" represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
Fitch Ratings ("Fitch") -- Ratings of "A" and "BB" may be modified by the
addition of a plus (+) or minus (-) sign to show relative standings within the
major rating categories.
A -- Bonds rated "A" are considered to be investment-grade and of high
credit quality. The obligor's ability to pay interest and/or
dividends and repay principal is considered to be strong, but
may be more vulnerable to adverse changes in economic conditions
and circumstances than securities with higher ratings.
BB -- Bonds rated "BB" carry the possibility of credit risk developing,
particularly as the result of adverse economic change over time.
Business or financial alternatives may, however, be available to
allow financial commitments to be met. Securities rated in this
category are not considered by Fitch to be investment grade.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's
or Fitch.
SHORT-TERM SECURITY RATINGS (UNAUDITED)
A-1 -- Standard & Poor's highest commercial paper and variable rate
demand obligation (VRDO) rating indicating that the degree of
safety regarding timely payment is either overwhelming or very
strong; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
MIG 1 -- Moody's highest rating for short-term municipal obligations.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
ABBREVIATIONS* (UNAUDITED)
ABAG -- Association of Bay Area Governments
ACA -- American Capital Access
Aetna -- Aetna Life Insurance Company
AIG -- American International Guaranty
AMBAC -- Ambac Assurance Corporation
BIG -- Bond Investors Guaranty
CBI -- Certificate of Bond Insurance
CGIC -- Capital Guaranty Insurance Company
CONNIE -- College Construction Loan Insurance Association
LEE
COP -- Certificate of Participation
EDA -- Economic Development Authority
FLAIRS -- Floating Adjustable Interest Rate Securities
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
HUD -- Housing of Urban Development
IBC -- Insured Bond Certificates
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCFA -- Pollution Control Financing Authority
PCR -- Pollution Control Revenue
PSFG -- Permanent School Fund Guaranty
Radian -- Radian Asset Assurance
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
VA -- Veterans Administration
VRDN -- Variable Rate Demand Note
VRWE -- Variable Rate Wednesday Demand
- --------
*Abbreviations may or may not appear in the schedule of investments.
29 Smith Barney Muni Funds | 2004 Annual Report
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004
ASSETS:
Investments, at value (Cost -- $724,168,428) $759,807,230
Cash 107,901
Interest receivable 13,163,330
Receivable for Fund shares sold 2,880,420
Receivable for securities sold 700,000
Other assets 28,447
- ------------------------------------------------------------------------------------------------
Total Assets 776,687,328
- ------------------------------------------------------------------------------------------------
LIABILITIES:
Payable to broker -- variation margin 1,546,875
Payable for Fund shares reacquired 1,364,788
Management fee payable 327,592
Distribution plan fees payable 115,679
Accrued expenses 104,104
- ------------------------------------------------------------------------------------------------
Total Liabilities 3,459,038
- ------------------------------------------------------------------------------------------------
Total Net Assets $773,228,290
- ------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 117,293
Capital paid in excess of par value 776,576,934
Undistributed net investment income 1,148,847
Accumulated net realized loss from investment transactions and futures contracts (34,783,273)
Net unrealized appreciation of investments and futures contracts 30,168,489
- ------------------------------------------------------------------------------------------------
Total Net Assets $773,228,290
- ------------------------------------------------------------------------------------------------
Shares Outstanding:
Class A 57,089,749
Class B 971,821
Class L 53,177,558
Class O 4,763,201
Class Y 1,290,213
Net Asset Value:
Class A (and redemption price) $6.59
Class B (and redemption price) $6.59
Class L (and redemption price) $6.60
Class O * $6.60
Class Y (and redemption price) $6.58
Maximum Public Offering Price Per Share:
Class A (net asset value plus 2.04% of net asset value per share) $6.72
Class O (net asset value plus 1.01% of net asset value per share) $6.67
- ------------------------------------------------------------------------------------------------
*Redemption price is NAV of Class O shares reduced by a 1.00% CDSC if shares
are redeemed within one year from purchase payment (See Note 3).
See Notes to Financial Statements.
30 Smith Barney Muni Funds | 2004 Annual Report
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2004
INVESTMENT INCOME:
Interest $38,066,296
- ------------------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 3) 3,762,259
Distribution plan fees (Note 6) 3,147,400
Transfer agency services (Note 6) 133,667
Shareholder communications (Note 6) 92,598
Custody 83,200
Audit and legal 24,899
Registration fees 15,799
Trustees' fees 9,150
Other 14,210
- ------------------------------------------------------------------------------------------
Total Expenses 7,283,182
- ------------------------------------------------------------------------------------------
Net Investment Income 30,783,114
- ------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES CONTRACTS
(NOTES 4 AND 5):
Realized Loss From:
Investment transactions (1,121,931)
Futures contracts (5,666,148)
- ------------------------------------------------------------------------------------------
Net Realized Loss (6,788,079)
- ------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of year 22,950,493
End of year 30,168,489
- ------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 7,217,996
- ------------------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 429,917
- ------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $31,213,031
- ------------------------------------------------------------------------------------------
See Notes to Financial Statements.
31 Smith Barney Muni Funds | 2004 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED MARCH 31,
2004 2003
- -----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 30,783,114 $ 29,429,701
Net realized loss (6,788,079) (12,436,983)
Increase in net unrealized appreciation 7,217,996 24,743,835
- ----------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 31,213,031 41,736,553
- ----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTES 2 AND 7):
Net investment income (29,987,923) (29,296,012)
In excess of net investment income -- (1,016,197)
- ----------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (29,987,923) (30,312,209)
- ----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 347,860,600 576,187,125
Net asset value of shares issued for reinvestment of dividends 18,303,894 19,053,976
Cost of shares reacquired (329,061,181) (385,682,504)
- ----------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 37,103,313 209,558,597
- ----------------------------------------------------------------------------------------------
Increase in Net Assets 38,328,421 220,982,941
NET ASSETS:
Beginning of year 734,899,869 513,916,928
- ----------------------------------------------------------------------------------------------
End of year* $ 773,228,290 $ 734,899,869
- ----------------------------------------------------------------------------------------------
* Includes undistributed net investment income of: $1,148,847 $353,777
- ----------------------------------------------------------------------------------------------
See Notes to Financial Statements.
32 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
The Limited Term Portfolio ("Fund"), a separate diversified investment fund of
the Smith Barney Muni Funds ("Trust"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Trust consists of this Fund and eight other
separate investment funds: Florida, Georgia, New York, Pennsylvania, National,
California Money Market, New York Money Market and Massachusetts Money Market
Portfolios. The financial statements and financial highlights for the other
funds are presented in separate shareholder reports.
The following are significant accounting policies consistently followed by the
Fund and are in conformity with generally accepted accounting principles
("GAAP"): (a) security transactions are accounted for on trade date; (b)
securities are valued at the mean between the quoted bid and asked prices
provided by an independent pricing service that are based on transactions in
municipal obligations, quotations from municipal bond dealers, market
transactions in comparable securities and various relationships between
securities; (c) securities for which market quotations are not available will
be valued in good faith at fair value by or under the direction of the Board of
Trustees; (d) securities maturing within 60 days are valued at cost plus
accreted discount or minus amortized premium, which approximates value; (e)
gains or losses on the sale of securities are calculated by using the specific
identification method; (f) interest income, adjusted for amortization of
premium and accretion of discount, is recorded on an accrual basis; (g)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (h) class specific expenses are charged to each 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 Fund intends to comply with
the applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (j) the character of income and gains to be distributed is
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America. At
March 31, 2004, reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Accordingly, expired capital loss
carry-
33 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
forwards from accumulated net realized loss amounting to $1,739,773 were
reclassified to paid-in capital. 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. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax and from designated
state income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
It is the Fund's policy to distribute dividends monthly. Capital gain
distributions, if any, are taxable to shareholders, and are declared and paid
at least annually.
3. Management Agreement and Transactions with Affiliated Persons
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund. The
Fund pays SBFM a management fee calculated at an annual rate of 0.50% of the
Fund's average daily net assets. This fee is calculated daily and paid monthly.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Fund's transfer agent. PFPC Inc. ("PFPC") acts as the Fund's sub-transfer
agent. CTB receives account fees and asset-based fees that vary according to
the size and type of account. PFPC is responsible for shareholder recordkeeping
and financial processing for all shareholder accounts and is paid by CTB. For
the year ended March 31, 2004, the Fund paid transfer agent fees of $54,570 to
CTB.
Citigroup Global Markets Inc. ("CGM"), another indirect wholly-owned subsidiary
of Citigroup, acts as the Fund's distributor.
There are maximum initial sales charges of 2.00% and 1.00% for Class A and O
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
34 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5.00% on Class B shares, which applies if redemption occurs within one year
from purchase payment and declines thereafter by 1.00% per year until no CDSC
is incurred. There is a CDSC of 1.00% on Class A shares, which applies if
redemption occurs within one year from purchase payment. This CDSC only applies
to those purchases of Class A shares, which, when combined with current
holdings of Class A shares, equal or exceed $500,000 in the aggregate. These
purchases do not incur an initial sales charge. Class O shares also have a
1.00% CDSC, which applies if redemption occurs within one year from purchase
payment.
For the year ended March 31, 2004, CGM received sales charges of approximately
$800,000 and $4,000 on sales of the Fund's Class A and O shares, respectively.
In addition, for the year ended March 31, 2004, CDSCs paid to CGM were
approximately:
Class A Class B Class O
-----------------------------------------
CDSCs $54,000 $3,000 $1,000
-----------------------------------------
All officers and one Trustee of the Trust are employees of Citigroup or its
affiliates.
4. 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 $229,211,769
-----------------------------------------------------------------------------
Sales 194,952,449
-----------------------------------------------------------------------------
At March 31, 2004, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
-----------------------------------------------------------------------------
Gross unrealized appreciation $42,749,708
Gross unrealized depreciation (6,966,154)
-----------------------------------------------------------------------------
Net unrealized appreciation $35,783,554
-----------------------------------------------------------------------------
35 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. Futures Contracts
Securities or cash equal to the initial margin amount are either deposited with
the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the current market
value of the futures contracts. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
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 Fund had the following open futures contracts:
# of Basis Market Unrealized
Contracts Expiration Value Value Loss
- ---------------------------------------------------------------------------------------
Contracts to Sell:
20 Year U.S. Treasury Bond,
6.000% 2,250 6/04 $251,170,312 $256,640,625 $(5,470,313)
- ---------------------------------------------------------------------------------------
6. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, the Fund pays a service fee with
respect to its Class A, B, L and O shares calculated at the annual rate of
0.15% of the average daily net assets of each respective class. The Fund also
pays a distribution fee with respect to Class B, L and O shares calculated at
the annual rate of 0.50%, 0.60% and 0.20%, of the average daily net assets of
each class, respectively. For the 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 Class O
----------------------------------------------------------------------
Rule 12b-1 Distribution Plan Fees $549,982 $35,537 $2,445,590 $116,291
----------------------------------------------------------------------
36 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 O Class Y
------------------------------------------------------------------------
Transfer Agency Service Expenses $45,384 $366 $76,860 $10,980 $77
------------------------------------------------------------------------
For the year ended March 31, 2004, total Shareholder Communication expenses
were as follows:
Class A Class B Class L Class O Class Y
--------------------------------------------------------------------------
Shareholder Communication Expenses $51,240 $366 $32,208 $8,052 $732
--------------------------------------------------------------------------
7. Distributions Paid to Shareholders by Class
Year Ended Year Ended
March 31, 2004 March 31, 2003+
- ---------------------------------------------------------------------------------
Class A
Net investment income $15,629,546 $15,327,148
In excess of net investment income -- 531,657
- --------------------------------------------------------------------------------
Total $15,629,546 $15,858,805
- --------------------------------------------------------------------------------
Class B
Net investment income $ 209,312 $ 32,778
In excess of net investment income -- 1,137
- --------------------------------------------------------------------------------
Total $ 209,312 $ 33,915
- --------------------------------------------------------------------------------
Class L
Net investment income $11,902,719 $11,775,543
In excess of net investment income -- 408,460
- --------------------------------------------------------------------------------
Total $11,902,719 $12,184,003
- --------------------------------------------------------------------------------
Class O
Net investment income $ 1,331,391 $ 1,635,483
In excess of net investment income -- 56,730
- --------------------------------------------------------------------------------
Total $ 1,331,391 $ 1,692,213
- --------------------------------------------------------------------------------
Class Y
Net investment income $ 914,955 $ 525,060
In excess of net investment income -- 18,213
- --------------------------------------------------------------------------------
Total $ 914,955 $ 543,273
- --------------------------------------------------------------------------------
+For Class B shares, transactions are for the period January 13, 2003
(inception date) to March 31, 2003.
37 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. Shares of Beneficial Interest
At March 31, 2004, the Trust had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents
an identical interest in the Fund and has the same rights, except that each
class bears certain expenses specifically related to the distribution of its
shares. In addition, Class O shares are available for purchase only by former
Class L shareholders.
Transactions in shares of each class were as follows:
Year Ended Year Ended
March 31, 2004 March 31, 2003+
-------------------------- --------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------
Class A
Shares sold 16,203,203 $ 107,309,065 23,718,817 $ 156,478,803
Shares issued on reinvestment 1,341,962 8,864,846 1,406,425 9,234,972
Shares reacquired (15,901,637) (105,224,263) (13,975,698) (92,002,465)
- -------------------------------------------------------------------------------------
Net Increase 1,643,528 $ 10,949,648 11,149,544 $ 73,711,310
- -------------------------------------------------------------------------------------
Class B
Shares sold 582,428 $ 3,840,565 618,342 $ 4,062,715
Shares issued on reinvestment 21,197 140,075 3,579 23,490
Shares reacquired (253,344) (1,675,541) (381) (2,497)
- -------------------------------------------------------------------------------------
Net Increase 350,281 $ 2,305,099 621,540 $ 4,083,708
- -------------------------------------------------------------------------------------
Class L
Shares sold 32,434,087 $ 215,388,844 60,113,599 $ 397,113,276
Shares issued on reinvestment 1,255,744 8,307,432 1,292,221 8,504,172
Shares reacquired (29,424,231) (194,787,267) (41,256,559) (271,618,070)
- -------------------------------------------------------------------------------------
Net Increase 4,265,600 $ 28,909,009 20,149,261 $ 133,999,378
- -------------------------------------------------------------------------------------
Class O
Shares sold 124,362 $ 822,126 230,774 $ 1,523,695
Shares issued on reinvestment 125,362 829,103 166,055 1,091,456
Shares reacquired (819,690) (5,420,675) (1,148,527) (7,550,836)
- -------------------------------------------------------------------------------------
Net Decrease (569,966) $ (3,769,446) (751,698) $ (4,935,685)
- -------------------------------------------------------------------------------------
Class Y
Shares sold 3,092,579 $ 20,500,000 2,562,915 $ 17,008,636
Shares issued on reinvestment 24,655 162,438 30,210 199,886
Shares reacquired (3,288,830) (21,953,435) (2,193,120) (14,508,636)
- -------------------------------------------------------------------------------------
Net Increase (Decrease) (171,596) $ (1,290,997) 400,005 $ 2,699,886
- -------------------------------------------------------------------------------------
+For Class B shares, transactions are for the period January 13, 2003
(inception date) to March 31, 2003.
38 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. Capital Loss Carryforward
At March 31, 2004, the Fund had, for Federal income tax purposes, approximately
$23,926,000 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 2010 2011 2012
-------------------------------------------------------------------------
Carryforward Amounts $9,495,000 $5,515,000 $214,000 $5,538,000 $3,164,000
-------------------------------------------------------------------------
In addition, the Fund had $15,986,206 of capital losses realized after October
31, 2003, which were deferred for tax purposes to the first day of the
following fiscal year.
10. Income Tax Information and Distributions to Shareholders
At March 31, 2004, the tax basis components of distributable earnings were:
---------------------------------------------
Undistributed tax-exempt income $ 665,874
---------------------------------------------
Accumulated capital losses (23,926,260)
---------------------------------------------
Unrealized appreciation 35,783,554
---------------------------------------------
At March 31, 2004, the difference between book basis and tax basis unrealized
appreciation and depreciation was attributable primarily to wash sale loss
deferrals, mark to market of derivative contracts and the treatment of
accretion of discounts and amortization of premiums.
The tax character of distributions paid during the years ended March 31, 2004
and 2003 was:
2004 2003
-----------------------------------------
Tax-exempt income $29,987,923 $29,266,492
Ordinary income -- 1,045,717
-----------------------------------------
Total $29,987,923 $30,312,209
-----------------------------------------
39 Smith Barney Muni Funds | 2004 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. Additional Information
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue
guarantee agreement with this sub-contractor providing that the sub-contractor
would guarantee certain benefits to CAM or its affiliates (the "Revenue
Guarantee Agreement"). In connection with the subsequent purchase of the
sub-contractor's business by an affiliate of the current sub-transfer agent
(PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee
Agreement was amended eliminating those benefits in exchange for arrangements
that included a one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
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.
12. Subsequent Event
Effective April 29, 2004, Class L shares were renamed as Class C shares.
40 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:
Class A Shares 2004/(1)/ 2003/(1)/ 2002/(1)/ 2001/(1)/ 2000/(1)/
- -------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $ 6.57 $ 6.40 $ 6.51 $ 6.36 $ 6.78
- -------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(2)/ 0.29 0.31 0.34 0.34 0.32
Net realized and unrealized gain (loss)/(2)/ 0.01 0.17 (0.10) 0.16 (0.42)
- -------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.30 0.48 0.24 0.50 (0.10)
- -------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (0.30) (0.35) (0.35) (0.32)
In excess of net investment income -- (0.01) (0.00)* -- --
- -------------------------------------------------------------------------------------------------
Total Distributions (0.28) (0.31) (0.35) (0.35) (0.32)
- -------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $6.59 $6.57 $6.40 $6.51 $6.36
- -------------------------------------------------------------------------------------------------
Total Return 4.67% 7.64% 3.70% 8.06% (1.46)%
- -------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $376 $364 $284 $222 $236
- -------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)/ 0.70% 0.75% 0.72% 0.72% 0.75%
Net investment income/(2)/ 4.36 4.64 5.26 5.41 4.97
- -------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 57% 53% 49% 108%
- -------------------------------------------------------------------------------------------------
(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
which requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, the
ratio of net investment income to average net assets would have been 5.24%.
Per share 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 a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.85%.
* Amount represents less than $0.01 per share.
41 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:
Class B Shares 2004/(1)/ 2003/(1)(2)/
- -------------------------------------------------------------
Net Asset Value, Beginning of Year $ 6.57 $ 6.57
- -----------------------------------------------------------
Income From Operations:
Net investment income 0.26 0.05
Net realized and unrealized gain 0.01 0.02
- -----------------------------------------------------------
Total Income From Operations 0.27 0.07
- -----------------------------------------------------------
Less Distributions From:
Net investment income (0.25) (0.07)
In excess of net investment income -- (0.00)*
- -----------------------------------------------------------
Total Distributions (0.25) (0.07)
- -----------------------------------------------------------
Net Asset Value, End of Year $6.59 $6.57
- -----------------------------------------------------------
Total Return 4.18% 1.07%++
- -----------------------------------------------------------
Net Assets, End of Year (000s) $6,401 $4,084
- -----------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)/ 1.18% 1.31%+
Net investment income 3.87 4.14+
- -----------------------------------------------------------
Portfolio Turnover Rate 27% 57%
- -----------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period January 13, 2003 (inception date) to March 31, 2003.
(3) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.35%.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
42 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:
Class L Shares 2004/(1)/ 2003/(1)/ 2002/(1)(2)/
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $ 6.58 $ 6.41 $ 6.46
- ----------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(3)/ 0.25 0.27 0.08
Net realized and unrealized gain (loss)/(3)/ 0.01 0.17 (0.04)
- ----------------------------------------------------------------------------
Total Income From Operations 0.26 0.44 0.04
- ----------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.24) (0.26) (0.09)
In excess of net investment income -- (0.01) --
- ----------------------------------------------------------------------------
Total Distributions (0.24) (0.27) (0.09)
- ----------------------------------------------------------------------------
Net Asset Value, End of Year $6.60 $6.58 $6.41
- ----------------------------------------------------------------------------
Total Return 4.02% 6.99% 0.58%++
- ----------------------------------------------------------------------------
Net Assets, End of Year (millions) $351 $322 $184
- ----------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(4)/ 1.30% 1.35% 1.32%+
Net investment income/(3)/ 3.75 4.02 4.68+
- ----------------------------------------------------------------------------
Portfolio Turnover Rate 27% 57% 53%
- ----------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period December 19, 2001 (inception date) to March 31, 2002.
(3) Effective April 1, 2001, the Fund adopted a change in the accounting method
which requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the period ended March 31, 2002,
the ratio of net investment income to average net assets would have been
4.65%. 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 a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.45%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
43 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:
Class O Shares/(1)/ 2004/(2)/ 2003/(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/
- ------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $ 6.58 $ 6.41 $ 6.52 $ 6.37 $ 6.79
- ------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(3)/ 0.27 0.29 0.33 0.33 0.31
Net realized and unrealized gain (loss)/(3)/ 0.02 0.18 (0.11) 0.15 (0.43)
- ------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.29 0.47 0.22 0.48 (0.12)
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.27) (0.29) (0.33) (0.33) (0.30)
In excess of net investment income -- (0.01) (0.00)* -- --
- ------------------------------------------------------------------------------------------------------
Total Distributions (0.27) (0.30) (0.33) (0.33) (0.30)
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $6.60 $6.58 $6.41 $6.52 $6.37
- ------------------------------------------------------------------------------------------------------
Total Return 4.42% 7.38% 3.48% 7.82% (1.69)%
- ------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $31,414 $35,079 $39,009 $32,157 $33,113
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(4)/ 0.93% 0.98% 0.95% 0.95% 0.98%
Net investment income/(3)/ 4.13 4.42 5.04 5.18 4.74
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 57% 53% 49% 108%
- ------------------------------------------------------------------------------------------------------
(1) On December 19, 2001, Class L shares were renamed as Class O shares.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) Effective April 1, 2001, the Fund adopted a change in the accounting method
which requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002,
those amounts would have been $0.32, $0.10 and 5.01% for net investment
income, net realized and unrealized loss and the ratio of net investment
income to average net assets, respectively. Per share information, ratios
and supplemental data for the periods prior to April 1, 2001 have not been
restated to reflect this change in presentation.
(4) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 1.05%.
* Amount represents less than $0.01 per share.
44 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:
Class Y Shares 2004/(1)/ 2003/(1)/ 2002/(1)/ 2001/(1)/ 2000/(1)/
- ---------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $ 6.57 $ 6.40 $ 6.51 $ 6.36 $ 6.78
- ---------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(2)/ 0.32 0.32 0.36 0.36 0.33
Net realized and unrealized gain (loss)/(2)/ (0.02) 0.17 (0.11) 0.15 (0.42)
- ---------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.30 0.49 0.25 0.51 (0.09)
- ---------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.29) (0.31) (0.36) (0.36) (0.33)
In excess of net investment income -- (0.01) (0.00)* -- --
- ---------------------------------------------------------------------------------------------------
Total Distributions (0.29) (0.32) (0.36) (0.36) (0.33)
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $6.58 $6.57 $6.40 $6.51 $6.36
- ---------------------------------------------------------------------------------------------------
Total Return 4.68% 7.83% 3.89% 8.26% (1.31)%
- ---------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $8,495 $9,604 $6,797 $12,030 $12,843
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)/ 0.53% 0.56% 0.55% 0.54% 0.55%
Net investment income/(2)/ 4.62 4.80 5.47 5.59 5.09
- ---------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 57% 53% 49% 108%
- ---------------------------------------------------------------------------------------------------
(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
which requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended March 31, 2002, the
ratio of net investment income to average net assets would have been 5.44%.
Per share 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 a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.70%.
* Amount represents less than $0.01 per share.
45 Smith Barney Muni Funds | 2004 Annual Report
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of Smith Barney Muni Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Limited Term Portfolio ("Fund") of Smith
Barney Muni Funds as of March 31, 2004, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of
the years in the two-year period then ended and the financial highlights for
each of the years in the five-year period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of March 31, 2004, by
correspondence with the custodian and broker. As to securities sold but not yet
delivered, we performed other appropriate auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of March 31, 2004, and the results of its operations for the year then
ended, the changes in its net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
five-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
New York, New York
May 12, 2004
46 Smith Barney Muni Funds | 2004 Annual Report
ADDITIONAL INFORMATION (UNAUDITED)
Information about Trustees and Officers
The business and affairs of the Limited Term Portfolio ("Fund") are managed
under the direction of the Smith Barney Muni Funds' ("Trust") Board of
Trustees. Information pertaining to the Trustees and Officers of the Trust is
set forth below. The Statement of Additional Information includes additional
information about 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 J. 34 Taubman
27 West 67th Street 1999 Bloostein Associates, Realty Corp.
New York, NY 10023 a consulting firm;
Age 74 Former Director of CVS
Corp.
Jane F. Dasher Trustee Since Controller of PBK 27 None
Korsant Partners 1999 Holdings Inc.,
283 Greenwich Avenue a family investment
3rd Floor company
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 Route 140 1999 of the New Atlanta
Poultney, VT 05764 Jewish Community
Age 62 High School
Paul Hardin Trustee Since Professor of Law and 34 None
12083 Morehead Drive 1994 Chancellor Emeritus at
Chapel Hill, NC the University of North
27514-8426 Carolina
Age 72
Roderick C. Rasmussen Trustee Since Investment Counselor 27 None
9 Cadence Court 1985
Morristown, NJ 07960
Age 77
47 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
- ------------------------------------------------------------------------------------------------
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 and 2002 Citigroup Global
Management 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)
Officers:
Andrew B. Shoup Senior Since Director of CAM; Senior N/A N/A
CAM Vice President 2003 Vice President and
125 Broad Street and Chief Chief Administrative
11th Floor Administrative Officer of mutual funds
New York, NY 10004 Officer associated with
Age 47 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)
48 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
- ------------------------------------------------------------------------------------------
Richard L. Peteka Chief Since Director of CGM; Chief N/A N/A
CAM Financial 2002 Financial Officer and
125 Broad Street Officer and Treasurer of certain
11th Floor Treasurer mutual funds
New York, NY 10004 associated with
Age 42 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)
Peter M. Coffey Vice Since Managing Director of N/A N/A
CAM President 1987 CGM; Investment
399 Park Avenue and Officer of SBFM
4th Floor Investment
New York, NY 10022 Officer
Age 58
Andrew Beagley Chief Anti- Since Director of CGM (since N/A N/A
CAM Money 2002 2000); Director of
399 Park Avenue Laundering Compliance, North
4th Floor Compliance America, CAM (since
New York, NY 10022 Officer 2000); Chief Anti-
Age 40 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)
49 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
- -----------------------------------------------------------------------------------------------
Kaprel Ozsolak Controller Since Vice President of CGM; N/A N/A
CAM 2002 Controller of certain
125 Broad Street mutual funds
11th Floor associated with
New York, NY 10004 Citigroup
Age 38
Robert I. Frenkel Secretary Since Managing Director and N/A N/A
CAM and Chief 2003 General Counsel of
300 First Stamford Place Legal Global Mutual Funds
4th Floor Officer for CAM and its
Stamford, CT 06902 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.
50 Smith Barney Muni Funds | 2004 Annual Report
TAX INFORMATION (UNAUDITED)
For Federal tax purposes, the Fund hereby designates for the fiscal year ended
March 31, 2004:
. 100.00% of the dividends paid by the Fund from net investment income as
tax exempt for regular Federal income tax purposes.
51 Smith Barney Muni Funds | 2004 Annual Report
SMITH BARNEY
MUNI FUNDS
TRUSTEES OFFICERS (continued)
Lee Abraham Robert I. Frenkel
Allan J. Bloostein Secretary and
Jane F. Dasher Chief Legal Officer
Donald R. Foley
R. Jay Gerken, CFA INVESTMENT MANAGER
Chairman Smith Barney Fund
Richard E. Hanson, Jr. Management LLC
Paul Hardin
Roderick C. Rasmussen DISTRIBUTOR
John P. Toolan Citigroup Global Markets Inc.
OFFICERS CUSTODIAN
R. Jay Gerken, CFA State Street Bank and
President and Chief Trust Company
Executive Officer
TRANSFER AGENT
Andrew B. Shoup Citicorp Trust Bank, fsb.
Senior Vice President and 125 Broad Street, 11th Floor
Chief Administrative New York, New York 10004
Officer
SUB-TRANSFER AGENT
Richard L. Peteka PFPC Inc.
Chief Financial Officer P.O. Box 9699
and Treasurer Providence, Rhode Island
02940-9699
Peter M. Coffey
Vice President and
Investment Officer
Andrew Beagley
Chief Anti-Money
Laundering Compliance
Officer
Kaprel Ozsolak
Controller
Smith Barney Muni Funds
Limited Term Portfolio
The Fund is a separate investment fund of the Smith Barney Muni Funds, a
Massachusetts business trust.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available without
charge, upon request, by telephoning the Fund (toll-free) at 1-800-451-2010
and by visiting the SEC's web site at www.sec.gov.
This report is submitted for the general information of the shareholders of
Smith Barney Muni Funds -- Limited Term Portfolio, but it may also be used as
sales literature when preceded or accompanied by the current Prospectus.
SMITH BARNEY MUNI FUNDS
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
This document must be preceded or accompanied by a free prospectus. Investors
should consider the fund's investment objectives, risks, charges and expenses
carefully before investing. The prospectus contains this and other important
information about the fund. Please read the prospectus carefully before you
invest or send money.
www.smithbarneymutualfunds.com
(C)2004 Citigroup Global Markets Inc.
Member NASD, SIPC
FD2305 5/04 04-6649
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