-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HqXlkLo6DPDSzWNShUD9ThC1AxU76LUiSTFcTmJj0QXXVNsALMsxMHpYhSTuJKQY IfVpbr3uHD20FJq8uFgP/A== 0001133228-04-000266.txt : 20040607 0001133228-04-000266.hdr.sgml : 20040607 20040607123129 ACCESSION NUMBER: 0001133228-04-000266 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040607 EFFECTIVENESS DATE: 20040607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMITH BARNEY MUNI FUNDS CENTRAL INDEX KEY: 0000775370 IRS NUMBER: 136861405 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04395 FILM NUMBER: 04851382 BUSINESS ADDRESS: STREET 1: 125 BROAD STREET STREET 2: 10TH FLOOR, MF-2 CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 800-451-2010 MAIL ADDRESS: STREET 1: 125 BROAD STREET STREET 2: 10TH FLOOR, MF-2 CITY: NEW YORK STATE: NY ZIP: 10004 FORMER COMPANY: FORMER CONFORMED NAME: SMITH BARNEY MUNI BOND FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MUNI BOND FUNDS DATE OF NAME CHANGE: 19910804 FORMER COMPANY: FORMER CONFORMED NAME: TEST MANAGED MUNICIPAL BOND FUNDS DATE OF NAME CHANGE: 19860626 N-CSR 1 sb138622.txt ANNUAL REPORT 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 MASSACHUSETTS MONEY MARKET PORTFOLIO ----------------------------------------------------------- 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 o NOT BANK GUARANTEED o MAY LOSE VALUE ----------------------------------------------------------- ================================================================================ WHAT'S INSIDE ================================================================================ Letter from the Chairman ................................................... 1 Manager Overview ........................................................... 3 Schedule of Investments .................................................... 7 Statement of Assets and Liabilities ........................................ 13 Statement of Operations .................................................... 14 Statements of Changes in Net Assets ........................................ 15 Notes to Financial Statements .............................................. 16 Financial Highlights ....................................................... 20 Independent Auditors' Report ............................................... 21 Additional Information ..................................................... 22 Tax Information ............................................................ 27 ================================================================================ LETTER FROM THE CHAIRMAN ================================================================================ [PHOTO OMITTED] R. JAY GERKEN, CFA Chairman, President and Chief Executive Officer Dear Shareholder, Amid uneven prospects about the economy, stock market volatility and geopolitical concerns during the past year, many investors shifted their hard-earned dollars into shorter-term fixed-income funds to complement their higher-risk investments. During much of the year, interest rate concerns remained contained due to lackluster employment data, subdued inflation and comments from the Fed, which led many investors to believe that it would refrain from raising its interest rate targets. However, the U.S. economy picked up over the period, and national job growth for March significantly exceeded estimates.(i) Throughout the year the fund's manager anticipated that economic growth on a national basis could improve, and a pick-up in activity, which could potentially lead to higher inflation and interest rates. Therefore, the manager maintained a relatively defensive posture in managing the portfolio's exposure to inflation and interest rate risk by maintaining a relatively neutral average maturity. Municipal money market securities provide income that is exempt from federal, and sometimes state and local, income taxes. Your financial adviser can help you implement a suitable asset allocation based on your investment profile to help you pursue your long-term financial goals. 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 1 Smith Barney Muni Funds | 2004 Annual Report 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. 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 OMITTED] [PHOTO OMITTED] JOSEPH P. DEANE JULIE P. CALLAHAN, CFA Vice President and Vice President and Investment Officer Investment Officer Performance Review As of March 31, 2004, the seven-day current yield for Class A shares of the Smith Barney Muni Funds--Massachusetts Money Market Portfolio was 0.42% and its seven-day effective yield, which reflects compounding, was 0.42%. These numbers are the same due to rounding. The seven-day effective yield is calculated similarly - -------------------------------------------------------------------------------- SMITH BARNEY MUNI FUNDS--MASSACHUSETTS MONEY MARKET PORTFOLIO YIELDS AS OF MARCH 31, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Seven-day current yield 0.42% - -------------------------------------------------------------------------------- Seven-day effective yield 0.42% - -------------------------------------------------------------------------------- The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors' shares, when redeemed may be worth more or less than their original cost. The fund's yields will vary and performance of other share classes may differ. Please note that your investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation ("FDIC") or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. In the cases where the current yield and effective yield are the same, it is due to rounding. The seven-day current yield reflects the amount of income generated by the investment during that seven-day period and assumes that the income is generated each week over a 365-day period. The yield is shown as a percentage of the investment. The seven-day effective yield is calculated similarly to the seven-day current yield but, when annualized, the income earned by an investment in the fund is assumed to be reinvested. The effective yield typically will be slightly higher than the current yield because of the compounding effect of the assumed reinvestment. Certain investors may be subject to the federal Alternative Minimum Tax, and state and local taxes may apply. Capital gains, if any, are fully taxable. Please consult your personal tax adviser. - -------------------------------------------------------------------------------- 3 Smith Barney Muni Funds | 2004 Annual Report to the seven-day current yield but, when annualized, the income earned by an investment in the fund is assumed to be reinvested. The effective yield typically will be slightly higher than the current yield because of the compounding effect of the assumed reinvestment. Please note that the performance represents past performance, which is not a guarantee of future results and yields will vary. In addition, your investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation ("FDIC") or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Certain investors may be subject to the federal Alternative Minimum Tax, and state and local taxes may apply. Capital gains, if any, are fully taxable. Please consult your personal tax adviser. Market Overview In order to help boost economic activity, last June the Fed reduced its target for the federal funds rate,(ii) which dropped to four-decade lows. As a result, the yields on tax-exempt money market instruments continued to fall. By August, evidence of an improvement in the national economy emerged, and as a result longer-term bond yields started to rise. However, many investors believed the Fed would likely leave short-term interest rates at prevailing low levels over the foreseeable future, and tax-exempt money market yields generally remained near their lows. Stronger-than-anticipated economic growth consensus estimates for the third calendar quarter rekindled concerns about interest rates and inflation. Despite the 8.2% annual growth in gross domestic product ("GDP")(iii) over the third quarter of 2003, investors' concerns about the prospects of inflation and rising rates were contained because some of this growth was attributable to one-time factors, such as the tax cuts and the end of major combat operations in Iraq. Furthermore, many investors felt the Fed appeared to be in a holding pattern from adjusting its rate targets. Investors Question the Fed's Patience 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."(iv) 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. 4 Smith Barney Muni Funds | 2004 Annual Report Estimates of calendar fourth-quarter 2003 GDP annual growth released during the period registered at 4.1%.(iii) This rate was below third-quarter 2003 results but exceeded levels from early last year. Furthermore, in recent testimony to Congress, Fed Chairman, Alan Greenspan revealed that the Fed raised its expectations for economic growth. 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(v) 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,(v) marking the largest number since April 2000.(vi) 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. Massachusetts' Economy(vii) The Governor-proposed $23 billion fiscal 2005 budget, which was introduced to the Massachusetts legislature in late January, eliminates a potential $1.5 billion budget gap without raising taxes or using existing reserve funds. The budget does not rely upon a full economic recovery to maintain balance, and it has a focus on managing costs. The revenue estimate builds in a modest economic recovery. Standard & Poor's recent rating on the state's longer-term bond obligations was AA+ with a stable outlook. Investment Approach The fund included a significant amount of municipal obligations backed by school districts and revenue bonds. Revenue bonds are issued to finance public works such as tunnels, sewer systems and bridges, and are supported directly by the revenues derived from the operations of these systems. The fund maintained a diversified mix of securities that included tax-exempt commercial paper, fixed-rate notes and variable-rate demand obligations. During the year we reduced the average maturity of the fund to 29 days. This was a reflection of the belief that the short-term municipal yield curve was very flat and there was no added benefit from purchasing securities with longer maturities. 5 Smith Barney Muni Funds | 2004 Annual Report Thank you for your investment in the Smith Barney Muni Funds--Massachusetts Money Market Portfolio. We appreciate that you have entrusted us to manage your money and value our relationship with you. Sincerely, /s/ Joseph P. Deane /s/ Julie P. Callahan Joseph P. Deane Julie P. Callahan, CFA Vice President and Vice President and Investment Officer Investment Officer April 12, 2004 The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole. Portfolio holdings and breakdowns are as of March 31, 2004 and are subject to change. Please refer to pages 7 through 10 for a list of the fund's holdings. i Based upon data released on April 1, 2004 from the U.S. Department of Labor. ii 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. iii 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. iv Source: Federal Reserve (January 28, 2004). v Source: U.S. Department of Labor (April 1, 2004). vi Source: Lehman Brothers. vii Source: Standard & Poor's (Public Finance Report Card, April 2004). 6 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Schedule of Investments March 31, 2004 ================================================================================
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== $ 2,496,000 Aaa* Beverly GO MBIA-Insured 3.00% due 11/1/04 $ 2,523,479 1,110,000 AAA Boston Special Obligation Boston City Hospital MBIA-Insured 3.00% due 8/1/04 1,117,153 400,000 A-1+ Boston Water and Sewer Commission Series A 0.95% VRDO 400,000 1,153,000 AAA Bourne GO MBIA-Insured 5.00% due 7/15/04 1,166,263 2,000,000 AAA Canton Housing Authority MFH Canton Arboretum Apts. 1.03% VRDO AMT 2,000,000 Clipper Tax Exempt Trust PART: 4,259,000 VMIG 1* CTFS 2000-2 MBIA-Insured 1.05% due 8/12/04 4,259,000 4,892,000 VMIG 1* Series 1998-8 AMBAC-Insured 1.07% VRDO 4,892,000 330,000 AAA Freetown GO FGIC-Insured 3.00% due 7/15/04 331,793 260,000 AAA Harwich GO MBIA-Insured 5.00% due 12/1/04 266,616 767,000 AAA Holbrook GO FSA-Insured 3.00% due 6/15/04 770,197 250,000 MIG 1* Leominster GO BAN Series B 4.00% due 11/15/04 254,402 500,000 NR+ Martha's Vineyard Regional Transportation Authority RAN 1.75% due 5/7/04 500,338 10,260,000 A-1+ Massachusetts Bay Transportation Authority 1.03% VRDO 10,260,000 Massachusetts DFA: 1,221,000 A-1 0.95% due 5/3/04 TECP 1,221,000 3,000,000 A-1 0.95% due 8/20/04 TECP 3,000,000 2,750,000 A-1 Assisted Living Facilities Whalers Cove Project Series A 1.08% VRDO AMT 2,750,000 Boston University XLCA-Insured: 2,750,000 A-1+ Series R-1 1.03% VRDO 2,750,000 7,250,000 A-1+ Series R-3 1.03% VRDO 7,250,000 3,300,000 A-1 Carleton Williard Village 1.01% VRDO 3,300,000 1,500,000 A-1+ Clark University Series A AMBAC-Insured 1.02% VRDO 1,500,000 2,260,000 A-1 Decas Cranberry 1.08% VRDO AMT 2,260,000 500,000 A-1+ Draper Laboratory Issue MBIA-Insured 1.03% VRDO 500,000 3,385,000 NR+ Epichem Inc. Project 1.18% VRDO AMT 3,385,000 10,738,000 A-1+ Higher Education Smith College 1.01% VRDO 10,738,000 2,880,000 A-1 Horner Millwork Corp. 1.06% VRDO AMT 2,880,000 1,445,000 A-1 Metalcrafters Inc. Series 1999 1.19% VRDO AMT 1,445,000 10,250,000 VMIG 1* Notre Dame Health Care Center 1.10% VRDO 10,250,000 500,000 A-1 Ocean Spray Cranberries 0.98% VRDO 500,000 2,000,000 A-1+ Phillips Academy 1.02% VRDO 2,000,000 3,500,000 VMIG 1* Resource Recovery Semass System Series 563 MBIA-Insured PART 1.02% VRDO 3,500,000 Solid Waste Disposal Newark Group Project: 1,500,000 A-1+ Series A 1.04% VRDO AMT 1,500,000 6,000,000 A-1+ Series C 1.05% VRDO AMT 6,000,000 Massachusetts HEFA: 2,000,000 AAA Amherst College Series H 0.88% due 6/9/04 2,000,000 2,500,000 AAA Baystate Medical Center Series 834 FGIC-Insured PART 1.07% VRDO 2,500,000
See Notes to Financial Statements. 7 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Schedule of Investments (continued) March 31, 2004 ================================================================================
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== $ 2,500,000 AAA Berklee College of Music Series 385 MBIA-Insured PART 1.05% due 7/8/04 $ 2,500,000 2,800,000 VMIG 1* Capital Asset Program Series E MBIA-Insured 1.08% VRDO 2,800,000 4,525,000 VMIG 1* CIL Realty of Massachusetts Inc. Series 1999 1.03% VRDO 4,525,000 1,500,000 A-1 Hallmark Health Systems Series B FSA-Insured 1.02% VRDO 1,500,000 Harvard University: Series EE TECP: 1,500,000 A-1+ 0.98% due 8/5/04 1,500,000 4,000,000 A-1+ 0.98% due 8/6/04 4,000,000 1,000,000 A-1+ Series R PART 0.94% VRDO 1,000,000 Partners Healthcare: 6,050,000 A-1+ Series C FSA-Insured 1.03% VRDO 6,050,000 750,000 A-1+ Series D-3 1.00% VRDO 750,000 1,000,000 A-1 Series D-4 1.00% VRDO 1,000,000 2,000,000 AA- Series E 2.00% due 7/1/04 2,005,033 Simmons College AMBAC-Insured: 4,390,000 VMIG 1* MERLOT Series D PART 1.07% VRDO 4,390,000 1,000,000 VMIG 1* Series E 1.03% VRDO 1,000,000 2,500,000 A-1+ University of Massachusetts Series A 1.00% VRDO 2,500,000 10,050,000 A-1+ Wellesley College Issue Series E 1.00% VRDO 10,050,000 Williams College Issue: 5,605,000 A-1+ Series E 1.00% VRDO 5,605,000 4,000,000 A-1+ Series I 1.10% due 4/1/04 4,000,000 Massachusetts HFA: 5,400,000 VMIG 1* MFH Princeton Crossings 1.08% VRDO AMT 5,400,000 4,050,000 A-1+ Series F FSA-Insured 1.03% VRDO 4,050,000 1,400,000 A-1+ Series I FSA-Insured 3.25% due 6/1/04 AMT 1,404,944 Massachusetts IFA: 1,000,000 A-1 420 Newburyport Turnpike Series 1998 1.05% VRDO 1,000,000 1,400,000 VMIG 1* Buckingham Browne Nichols 0.97% VRDO 1,400,000 600,000 NR+ Peterson American Corp. Project 1.27% VRDO AMT 600,000 1,500,000 VMIG 1* Whitehead Institute for Biomed Research 1.00% VRDO 1,500,000 650,000 AAA Massachusetts Municipal Wholesale Electric Co. Power Supply Nuclear Mix 1-A MBIA-Insured 4.00% due 7/1/04 654,805 Massachusetts Port Authority Series 2003 TECP: 4,000,000 A-1+ 0.92% due 5/4/04 4,000,000 1,000,000 A-1+ 0.95% due 5/4/04 AMT 1,000,000 2,000,000 A-1+ 0.95% due 5/6/04 2,000,000 2,000,000 A-1+ 0.95% due 5/7/04 AMT 2,000,000 5,150,000 VMIG 1* Massachusetts State College Building Authority MERLOT Series B-11 AMBAC-Insured PART 1.07% VRDO 5,150,000
See Notes to Financial Statements. 8 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Schedule of Investments (continued) March 31, 2004 ================================================================================
FACE AMOUNT RATING(a) SECURITY VALUE ========================================================================================================== Massachusetts State GO: $ 1,050,000 A-1+ Central Artery GO Series A 1.12% VRDO $ 1,050,000 5,000,000 A-1 MSTC Series 2002-209 FSA-Insured PART 1.09% VRDO 5,000,000 500,000 A-1+ Series 1997-B 1.02% VRDO 500,000 Series B: 1,000,000 A-1+ 1.01% VRDO 1,000,000 500,000 AA- 5.00% due 5/1/04 501,588 2,500,000 A-1+ Series C 1.06% VRDO 2,500,000 Massachusetts State Turnpike Authority PART: 1,500,000 VMIG 1* Series 334 MBIA-Insured 1.02% VRDO 1,500,000 2,000,000 VMIG 1* Series 335 AMBAC-Insured 1.02% VRDO 2,000,000 Massachusetts State Water Authority: 2,500,000 A-1+ Series 1994 1.05% due 4/8/04 TECP 2,500,000 200,000 AAA Series A MBIA-Insured 6.00% due 8/1/04 206,285 Series C: 250,000 AA 5.25% due 12/1/04 261,895 1,000,000 AAA AMBAC-Insured 5.10% due 12/1/04 1,025,774 1,800,000 A-1+ FGIC-Insured 1.03% VRDO 1,800,000 5,250,000 A-1+ Series D FGIC-Insured 1.03% VRDO 5,250,000 Massachusetts State Water Pollution Abatement Trust: 500,000 AAA Series 8 3.00% due 8/1/04 503,133 2,315,000 AAA Series 9 2.00% due 8/1/04 2,322,665 250,000 AAA Series A 6.00% due 8/1/04 254,091 250,000 Aaa* Newburyport GO MBIA-Insured 5.50% due 5/1/04 250,914 Newton GO: 320,000 Aaa* 2.00% due 8/15/04 321,179 7,015,000 MIG 1* BAN 1.50% due 8/27/04 7,029,655 500,000 MIG 1* Old Rochester Regional School District BAN 2.00% due 4/30/04 500,392 1,345,000 Aaa* Puerto Rico PFC Series 520 MBIA-Insured PART 1.15% due 8/12/04 1,345,000 259,000 Aaa* Tewksbury GO AMBAC-Insured 3.50% due 2/15/05 264,388 - ---------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% (Cost -- $223,191,982**) $223,191,982 ==========================================================================================================
(a) All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"), except for those which are identified by an asterisk (*), are rated by Moody's Investors Service ("Moody's"). + Security has not been rated by either Standard & Poor's or Moody's. However, the Board of Trustees had determined this security to be considered a first tier quality issue due to enhancement features, such as insurance and/or irrevocable letters of credit. ** Aggregate cost for Federal income tax purposes is substantially the same. See pages 11 and 12 for definitions of ratings and certain abbreviations. See Notes to Financial Statements. 9 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Summary of Investments by Industry* ================================================================================ Education 31.8% Hospital 14.5 Transportation 12.3 General Obligation 10.9 Housing 7.9 Water and Sewer 6.5 Industrial Development 3.6 Solid Waste 3.4 Other 9.1 - -------------------------------------------------------------------------------- 100.0% ================================================================================ * As a percentage of total investments. Please note that Fund holdings are as of March 31, 2004 and are subject to change. 10 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") -- Rating "AA" 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. Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be applied to generic rating "Aa", 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 as 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. ================================================================================ Short-Term Security Ratings (unaudited) ================================================================================ SP-1 -- Standard & Poor's highest rating indicating very strong or strong capacity to pay principal and interest; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign. A-1 -- Standard & Poor's highest commercial paper and variable-rate demand obligation (VRDO) rating indicating that the degree of safety regarding timely payment is either overwhelming or very strong; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+)sign. VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO. MIG 1 -- Moody's highest rate for short-term municipal obligations. NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's. 11 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Abbreviations* (unaudited) ================================================================================ ABAG -- Association of Bay Area Governments AIG -- American International Guaranty AMBAC -- Ambac Assurance Corporation AMT -- Alternative Minimum Tax BAN -- Bond Anticipation Notes BIG -- Bond Investors Guaranty CDA -- Community Development Authority CGIC -- Capital Guaranty Insurance Company CHFCLI -- California Health Facility Construction Loan Insurance CONNIE LEE -- College Construction Loan Insurance Association COP -- Certificate of Participation CSD -- Central School District CTFS -- Certificates DFA -- Development Finance Agency EDA -- Economic Development Authority EFA -- Educational Facilities Authority ETM -- Escrowed To Maturity FGIC -- Financial Guaranty Insurance Company FHA -- Federal Housing Administration FHLMC -- Federal Home Loan Mortgage Corporation FLAIRS -- Floating Adjustable Interest Rate Securities FNMA -- Federal National Mortgage Association FRTC -- Floating Rate Trust Certificates FSA -- Federal Savings Association GIC -- Guaranteed Investment Contract GNMA -- Government National Mortgage Association GO -- General Obligation HDC -- Housing Development Corporation HEFA -- Health & Educational Facilities Authority HFA -- Housing Finance Authority IBC -- Insured Bond Certificates IDA -- Industrial Development Authority IDB -- Industrial Development Board IDR -- Industrial Development Revenue IFA -- Industrial Finance Agency Inflos -- Inverse Floaters ISD -- Independent School District ISO -- Independent System Operator LOC -- Letter of Credit MBIA -- Municipal Bond Investors Assurance Corporation MERLOT -- Municipal Exempt Receipts Liquidity Optional Tender MFH -- Multi-Family Housing MSTC -- Municipal Securities Trust Certificates MUD -- Municipal Utilities District MVRICS -- Municipal Variable Rate Inverse Coupon Security PART -- Partnership Structure PCFA -- Pollution Control Finance Authority PCR -- Pollution Control Revenue PFA -- Public Finance Authority PFC -- Public Finance Corporation PSFG -- Permanent School Fund Guaranty Q-SBLF -- Qualified School Bond Loan Fund Radian -- Radian Asset Assurrance RAN -- Revenue Anticipation Notes RAW -- Revenue Anticipation Warrants RDA -- Redevelopment Agency RIBS -- Residual Interest Bonds RITES -- Residual Interest Tax-Exempt Securities SPA -- Standby Bond Purchase Agreement SWAP -- Swap Structure SYCC -- Structured Yield Curve Certificate TAN -- Tax Anticipation Notes TCRS -- Transferable Custodial Receipts TECP -- Tax Exempt Commercial Paper TFA -- Transitional Finance Authority TOB -- Tender Option Bond Structure TRAN -- Tax and Revenue Anticipation Notes UFSD -- Unified Free School District UHSD -- Unified High School District USD -- Unified School District VA -- Veterans Administration VRDD -- Variable Rate Daily Demand VRDO -- Variable Rate Demand Obligation VRWE -- Variable Rate Wednesday Demand XLCA -- XL Capital Assurance - -------------- * Abbreviations may or may not appear on the schedule of investments. 12 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Statement of Assets and Liabilities March 31, 2004 ================================================================================ ASSETS: Investments, at amortized cost $223,191,982 Cash 75,207 Receivable for securities sold 1,000,864 Receivable for Fund shares sold 533,715 Interest receivable 495,009 Prepaid expenses 3,371 Other assets 1,165 - -------------------------------------------------------------------------------- Total Assets 225,301,313 - -------------------------------------------------------------------------------- LIABILITIES: Payable for Fund shares reacquired 2,493,670 Management fee payable 92,355 Dividends payable 41,864 Distribution plan fees payable 6,849 Deferred compensation payable 1,165 Accrued expenses 55,637 - -------------------------------------------------------------------------------- Total Liabilities 2,691,540 - -------------------------------------------------------------------------------- Total Net Assets $222,609,773 ================================================================================ NET ASSETS: Par value of shares of beneficial interest $ 222,487 Capital paid in excess of par value 222,387,286 - -------------------------------------------------------------------------------- Total Net Assets $222,609,773 ================================================================================ Shares Outstanding 222,487,164 - -------------------------------------------------------------------------------- Net Asset Value (and redemption price) $ 1.00 ================================================================================ See Notes to Financial Statements. 13 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Statement of Operations For the Year Ended March 31, 2004 ================================================================================ INVESTMENT INCOME: Interest $2,821,619 - -------------------------------------------------------------------------------- EXPENSES: Management fee (Note 4) 1,296,927 Distribution plan fees (Note 4) 269,617 Transfer agency services 24,003 Audit and legal 23,289 Custody 16,608 Shareholder communications 14,042 Registration fees 2,741 Trustees' fees 1,497 Other 8,091 - -------------------------------------------------------------------------------- Total Expenses 1,656,815 - -------------------------------------------------------------------------------- Net Investment Income $1,164,804 ================================================================================ See Notes to Financial Statements. 14 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 $ 1,164,804 $ 2,113,825 Net realized gain -- 123,089 - --------------------------------------------------------------------------------------------- Increase in Net Assets From Operations 1,164,804 2,236,914 - --------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 3): Net investment income (1,164,804) (2,113,825) - --------------------------------------------------------------------------------------------- Decrease in Net Assets From Distribution to Shareholders (1,164,804) (2,113,825) - --------------------------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 5): Net proceeds from sale of shares 1,122,099,513 950,510,458 Net asset value of shares issued for reinvestment of dividends 1,160,548 2,195,084 Cost of shares reacquired (1,154,786,703) (998,623,569) - --------------------------------------------------------------------------------------------- Decrease in Net Assets From Fund Share Transactions (31,526,642) (45,918,027) - --------------------------------------------------------------------------------------------- Decrease in Net Assets (31,526,642) (45,794,938) NET ASSETS: Beginning of year 254,136,415 299,931,353 - --------------------------------------------------------------------------------------------- End of year $ 222,609,773 $ 254,136,415 =============================================================================================
See Notes to Financial Statements. 15 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Notes to Financial Statements ================================================================================ 1. Significant Accounting Policies The Massachusetts Money Market Portfolio ("Fund"), a separate investment fund of the Smith Barney Muni Funds ("Trust"), a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Trust consists of this Fund and eight other separate investment funds: Florida, Georgia, Limited Term, National, New York, Pennsylvania, California Money Market and New York Money Market Portfolios. The financial statements and financial highlights for the other funds are presented in separate shareholder reports. The 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) the Fund uses the amortized cost method for valuing investments; accordingly, the cost of securities plus accreted discount, or minus amortized premium, approximates value; (c) gains or losses on the sale of securities are calculated by using the specific identification method; (d) interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis; (e) dividends and distributions to shareholders are recorded on ex-dividend date; (f) 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; (g) the character of income and gains to be distributed is determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America; and (h) estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. 2. Fund Concentration Since the Fund invests primarily in obligations of issuers within Massachusetts, it is subject to possible concentration risks associated with economic, political, or legal developments or industrial or regional matters specifically affecting Massachusetts. 16 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Notes to Financial Statements (continued) ================================================================================ 3. Exempt-Interest Dividends and Other Distributions The Fund declares and records a dividend of substantially all its net investment income on each business day. Such dividends are paid or reinvested monthly in fund shares on the payable date. Furthermore, 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. Capital gain distributions, if any, are taxable to shareholders, and are declared and paid at least annually. 4. Management Agreement and Other Transactions Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund. Effective July 1, 2003, the Fund pays SBFM a management fee calculated at an annual rate of 0.475% on the first $1 billion of the Fund's average daily net assets; 0.450% on the next $1 billion; 0.425% on the next $3 billion; 0.400% on the next $5 billion and 0.375% on the Fund's average daily net assets in excess of $10 billion. This fee is calculated daily and paid monthly. Prior to July 1, 2003, the Fund paid SBFM a management fee calculated at an annual rate of 0.500% on the first $2.5 billion of the Fund's average daily net assets; 0.475% on the next $2.5 billion and 0.450% on the Fund's average daily net assets in excess of $5 billion. This fee was 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 $39,132 to CTB. Citigroup Global Markets Inc. ("CGM"), another indirect wholly-owned subsidiary of Citigroup, acts as the Fund's distributor. Pursuant to a Rule 12b-1 Distribution Plan, the Fund pays a distribution fee with respect to its Class A shares calculated at the annual rate of 0.10% of the average 17 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Notes to Financial Statements (continued) ================================================================================ daily net assets of that class. For the year ended March 31, 2004, total Rule 12b-1 Distribution Plan fees, which are accrued daily and paid monthly, were $269,617. All officers and one Trustee of the Trust are employees of Citigroup or its affiliates. 5. 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. Transactions in shares of the Fund were as follows: Year Ended Year Ended March 31, 2004 March 31, 2003 ================================================================================ Class A Shares sold 1,122,099,513 950,510,458 Shares issued on reinvestment 1,160,548 2,195,084 Shares reacquired (1,154,786,703) (998,623,569) - -------------------------------------------------------------------------------- Net Decrease (31,526,642) (45,918,027) ================================================================================ 6. Income Tax Information and Distribution to Shareholders At March 31, 2004, the tax basis components of distributable earnings were: ================================================================================ Undistributed tax-exempt income $43,029 ================================================================================ The tax character of distributions paid during the year ended March 31 was: 2004 2003 ================================================================================ Tax-exempt income $1,164,804 $2,113,825 ================================================================================ 7. 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 18 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Notes to Financial Statements (continued) ================================================================================ 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. 19 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Financial Highlights ================================================================================ For a share of beneficial interest outstanding throughout each year ended March 31, unless otherwise noted:
Class A Shares 2004 2003 2002 2001 2000(1) ========================================================================================================== Net Asset Value, Beginning of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ---------------------------------------------------------------------------------------------------------- Net investment income(2) 0.004 0.008 0.018 0.034 0.016 Dividends from net investment income (0.004) (0.008) (0.018) (0.034) (0.016) - ---------------------------------------------------------------------------------------------------------- Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ---------------------------------------------------------------------------------------------------------- Total Return(3) 0.44% 0.78% 1.81% 3.46% 1.66%++ - ---------------------------------------------------------------------------------------------------------- Net Assets, End of Year (millions) $ 223 $ 254 $ 300 $ 336 $ 260 - ---------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets: Expenses(2)(4) 0.61% 0.65% 0.65% 0.65% 0.65%+ Net investment income 0.43 0.78 1.80 3.36 3.05+ ==========================================================================================================
(1) For the period September 14, 1999 (commencement of operations) to March 31, 2000. (2) The manager waived a portion of its fees for the years ended March 31, 2002, March 31, 2001, and the period ended March 31, 2000. If such fees were not waived, the per share decreases to net investment income and the actual expense ratios would have been as follows: Per Share Decreases to Expense Ratios Net Investment Income Without Fee Waiver ---------------------- ------------------ 2002 $0.000* 0.66% 2001 0.000* 0.66 2000 0.001 0.76+ (3) Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would be reduced. (4) As a result of voluntary expense limitations, the ratio of expenses to average net assets will not exceed 0.80%. * Amount represents less than $0.001 per share. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. 20 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 Massachusetts Money Market Portfolio ("Fund") of the Smith Barney Muni Funds ("Trust") 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 four-year period then ended and for the period from September 14, 1999 (commencement of operations) to March 31, 2000. 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. As to securities sold but not yet delivered, we performed other appropiate 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, and the changes in its net assets for each of the years in the two-year period then ended, and its financial highlights for each the years in the four-year period then ended and for the period from September 14, 1999 to March 31, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMP LLP New York, New York May 12, 2004 21 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Additional Information (unaudited) ================================================================================ Information about Trustees and Officers The business and affairs of the Massachusetts Money Market 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 Office* and Principal in Fund Other Board Position(s) Length Occupation(s) Complex Memberships Name, Address Held with of Time During Past Overseen Held by and Age Fund Served Five Years by Trustee Trustee =============================================================================================================================== Non-Interested Trustees: Lee Abraham Trustee Since Retired; Former Director 27 None 13732 LeHavre Drive 1999 of Signet Group PLC Frenchman's Creek Palm Beach Gardens, FL 33410 Age 76 Allan J. Bloostein Trustee Since President of Allan 34 Taubman 27 West 67th Street 1999 Bloostein Associates, a Realty Corp. New York, NY 10023 consulting firm; Former Age 74 Director of CVS Corp. Jane F. Dasher Trustee Since Controller of PBK 27 None Korsant Partners 1999 Holdings Inc., a family 283 Greenwich Avenue investment company 3rd Floor Greenwich, CT 06830 Age 54 Donald R. Foley Trustee Since Retired 19 None 3668 Freshwater Drive 1985 Jupiter, FL 33477 Age 81 Richard E. Hanson, Jr. Trustee Since Retired; Former Head of 27 None 2751 Vermont 1999 the New Atlanta Jewish Route 140 Community High School Poultney, VT 05764 Age 62 Paul Hardin Trustee Since Professor of Law & 34 None 12083 Morehead 1994 Chancellor Emeritus Chapel Hill, NC at the University of 27514-8426 North Carolina Age 72
22 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Additional Information (unaudited) (continued) ================================================================================
Number of Term of Portfolios Office* and Principal in Fund Other Board Position(s) Length Occupation(s) Complex Memberships Name, Address Held with of Time During Past Overseen Held by and Age Fund Served Five Years by Trustee Trustee =============================================================================================================================== Roderick C. Rasmussen Trustee Since Investment Counselor 27 None 9 Cadence Court 1982 Morristown, NJ 07960 Age 77 John P. Toolan Trustee Since Retired 27 John Hancock 13 Chadwell Place 1992 Funds Morristown, NJ 07960 Age 73 Interested Trustee: R. Jay Gerken** Chairman, Since Managing Director of 221 None Citigroup Asset President 2002 Citigroup Global Markets Management ("CAM") and Chief Inc. ("CGM"); Chairman, 399 Park Avenue Executive President and Chief 4th Floor Officer Executive Officer of Smith New York, NY 10022 Barney 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)
23 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Additional Information (unaudited) (continued) ================================================================================
Number of Term of Portfolios Office* and Principal in Fund Other Board Position(s) Length Occupation(s) Complex Memberships Name, Address Held with of Time During Past Overseen Held by and Age Fund Served Five Years by Trustee Trustee =============================================================================================================================== Officers: Andrew B. Shoup Senior Vice Since Director of CAM; Senior N/A N/A CAM President 2003 Vice President and Chief 125 Broad Street and Chief Administrative Officer of 11th Floor Administrative mutual funds associated New York, NY 10004 Officer with Citigroup; Treasurer Age 47 of certain mutual funds associated with Citigroup; Head of International Funds Administration of CAM (from 2001 to 2003); Director of Global Funds Administration of CAM (from 2000 to 2001); Head of U.S. Citibank Funds Administration of CAM (from 1998 to 2000) Richard L. Peteka Chief Since Director of CGM; Chief N/A N/A CAM Financial 2002 Financial Officer and 125 Broad Street Officer and Treasurer of certain mutual 11th Floor Treasurer funds affiliated with New York, NY 10004 Citigroup; Director and Age 42 Head of Internal Control for CAM U.S. Mutual Fund Administration (from 1999 to 2002); Vice President, Head of Mutual Fund Administration and Treasurer at Oppenheimer Capital (from 1996 to 1999) Julie P. Callahan, CFA Vice Since Vice President of CGM N/A N/A CAM President 2002 399 Park Avenue and 4th Floor Investment New York, NY 10022 Officer Age 31
24 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Additional Information (unaudited) (continued) ================================================================================
Number of Term of Portfolios Office* and Principal in Fund Other Board Position(s) Length Occupation(s) Complex Memberships Name, Address Held with of Time During Past Overseen Held by and Age Fund Served Five Years by Trustee Trustee =============================================================================================================================== Joseph P. Deane Vice Since Managing Director N/A N/A CAM President 1999 of CGM; Investment 399 Park Avenue and Officer of SBFM 4th Floor Investment New York, NY 10022 Officer Age 56 Andrew Beagley Chief Since Director of CGM (since N/A N/A CAM Anti-Money 2002 2000); Director of 399 Park Avenue Laundering Compliance, North America, 4th Floor Compliance CAM (since 2000); Chief New York, NY 10022 Officer Anti-Money Laundering Age 40 Compliance Officer and Vice President of certain mutual funds associated with Citigroup; Director of Compliance, Europe, the Middle East and Africa, CAM (from 1999 to 2000); Compliance Officer, Salomon Brothers Asset Management Limited, Smith Barney Global Capital Management Inc., Salomon Brothers Asset Management Asia Pacific Limited (from 1997 to 1999) Kaprel Ozsolak Controller Since Vice President of CGM; N/A N/A CAM 2002 Controller of certain 125 Broad Street mutual funds associated 11th Floor with Citigroup New York, NY 10004 Age 38
25 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Additional Information (unaudited) (continued) ================================================================================
Number of Term of Portfolios Office* and Principal in Fund Other Board Position(s) Length Occupation(s) Complex Memberships Name, Address Held with of Time During Past Overseen Held by and Age Fund Served Five Years by Trustee Trustee =============================================================================================================================== Robert I. Frenkel Secretary Since Managing Director and N/A N/A CAM and Chief 2003 General Counsel of Global 300 First Stamford Legal Mutual Funds for CAM and Place, 4th Floor Officer its predecessor (since Stamford, CT 06902 1994); Secre tary of CFM Age 48 (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 Fund as defined in the Investment Company Act of 1940, as amended, because Mr. Gerken is an officer of SBFM and certain of its affiliates. 26 Smith Barney Muni Funds | 2004 Annual Report ================================================================================ Tax Information (unaudited) ================================================================================ For the year ended March 31, 2004, 100% of the dividends paid by the Fund from net investment income were tax-exempt for regular Federal income tax and Massachusetts state income tax purposes. 27 Smith Barney Muni Funds | 2004 Annual Report (This page intentionally left blank.) - -------------------------------------------------------------------------------- SMITH BARNEY MUNI FUNDS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUSTEES Lee Abraham Allan J. Bloostein Jane F. Dasher Donald R. Foley R. Jay Gerken, CFA Chairman Richard E. Hanson, Jr. Paul Hardin Roderick C. Rasmussen John P. Toolan OFFICERS R. Jay Gerken, CFA President and Chief Executive Officer Andrew B. Shoup Senior Vice President and Chief Administrative Officer Richard L. Peteka Chief Financial Officer and Treasurer Julie P. Callahan, CFA Vice President and Investment Officer Joseph P. Deane Vice President and Investment Officer Andrew Beagley Chief Anti-Money Laundering Compliance Officer Kaprel Ozsolak Controller Robert I. Frenkel Secretary and Chief Legal Officer INVESTMENT MANAGER Smith Barney Fund Management LLC DISTRIBUTOR Citigroup Global Markets Inc. CUSTODIAN State Street Bank and Trust Company TRANSFER AGENT Citicorp Trust Bank, fsb. 125 Broad Street, 11th Floor New York, New York 10004 SUB-TRANSFER AGENT PFPC Inc. P.O. Box 9699 Providence, Rhode Island 02940-9699 - -------------------------------------------------------------------------------- Smith Barney Muni Funds - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Massachusetts Money Market 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 general information of the shareholders of Smith Barney Muni Funds -- Massachusetts Money Market Portfolio. SMITH BARNEY MUNIFUNDS Smith Barney Mutual Funds 125 Broad Street 10th Floor, MF-2 New York, New York 10004 (C)2004 Citigroup Global Markets Inc. Member NASD, SIPC FD01908 5/04 04-6633 - -------------------------------------------------------------------------------- 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 EX-99.CODE ETH 2 ex99code.txt CODE OF ETHICS June, 2003 EX 99.CODE ETH SARBANES-OXLEY ACT CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF CAM/U.S. REGISTERED INVESTMENT COMPANIES I. Covered Officers/Purpose of the Code This code of ethics (the "Code") for Citigroup Asset Management's ("CAM's") U. S. registered proprietary investment companies (collectively, "Funds" and each a, "Company") applies to each Company's Chief Executive Officer, Chief Administrative Officer, Chief Financial Officer and Controller (the "Covered Officers") for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. Administration of Code The Regional Director of CAM Compliance, North America ("Compliance Officer") is responsible for administration of this Code, including granting pre-approvals (see Section III below) and waivers (as described in Section VI below), applying this Code in specific situations in which questions are presented under it and interpreting this Code in any particular situation. III. Covered Officers Should Ethically Handle Actual and Apparent Conflicts of Interest Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Company. Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of their status as "affiliated persons" of the Company. The compliance programs and procedures of the Company and its investment adviser are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code (see Section VII below). Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between a Company and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Company or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and a Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of a Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors\Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company. * * * * Each Covered Officer must: o not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting (e.g. through fraudulent accounting practices) by the Company whereby the Covered Officer(1) would benefit personally to the detriment of the Company; or o not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than for the benefit of the Company; and o not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market affect of such transactions. o There are some potential conflict of interest situations that should always be discussed with the Compliance Officer, if material. Examples are as follows: (1) service as a director on the board of any public or private company; (2) any ownership interest in, or any consulting or employment relationship with, any of the Company's service providers, other than its investment adviser, (3) a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership; and (4) the receipt of any gifts or the conveyance of any value (including entertainment) from any company with which the Company has current or prospective business dealings, except: (a) any non-cash gifts of nominal value (nominal value is less than $100); and (b) customary and reasonable meals and entertainment at which the giver is present, such as the occasional business meal or sporting event. IV. Disclosure and Compliance Each Covered Officer: o should be familiar with his or her responsibilities in connection with the disclosure requirements generally applicable to the Company; - ---------- (1) Any activity or relationship that would present a conflict for a Covered Officer would also present a conflict for the Covered Officer if a member of a Covered Officer's family (spouse, minor children and any account over which a Covered Officer is deemed to have beneficial interest) engages in such an activity or has such a relationship. o should not knowingly misrepresent, or knowingly cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's directors and auditors, and to governmental regulators and self-regulatory organizations; o should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and the investment adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o is responsible to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. V. Reporting and Accountability Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that the Covered Officer has received, read, and understands the Code; o annually thereafter affirm to the Board that he or she has complied with the requirements of the Code; o annually disclose affiliations and other relationships related to conflicts of interest; o not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and o notify the Compliance Officer promptly if he knows of any violation of this Code (failure to do so is itself a violation of this Code). In rendering decisions and interpretations and in conducting investigations of potential violations under the Code, the Compliance Officer may, at his discretion, consult with such persons as he determines to be appropriate, including, but not limited to, a senior legal officer of the Company or its investment adviser or its affiliates, independent auditors or other consultants, subject to any requirement to seek pre-approval from the Company's audit committee for the retention of independent auditors to perform permissible non-audit services. The Funds will follow these procedures in investigating and enforcing the Code: o the Compliance Officer will take all appropriate action to investigate any potential violation of which he becomes aware; o if, after investigation the Compliance Officer believes that no violation has occurred, the Compliance Officer is not required to take any further action; o any matter that the Compliance Officer believes is a violation will be reported to the Directors of the Fund who are not "interested persons" as defined in the Investment Company Act the ("Non-interested Directors") o if the Non-interested Directors of the Board concur that a violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; and o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules The Compliance Officer shall submit an annual report to the Board describing any waivers granted. VI. Waivers(2) A Covered Officer may request a waiver of any of the provisions of the Code by submitting a written request for such waiver to the Compliance Officer, setting forth the basis of such request and explaining how the waiver would be consistent with the standards of conduct described herein. The Compliance Officer shall review such request and make a determination thereon in writing, which shall be binding. In determining whether to waive any provisions of this Code, the Compliance Officer shall consider whether the proposed waiver is consistent with honest and ethical conduct and other purposes of this Code. VII. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' investment advisers, principal underwriters, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The codes of ethics of the funds and the investment advisers and principal underwriters under Rule 17j-1 of the Investment Company Act and the Citigroup Code of Conduct and Citigroup Statement of Business Practices as well as other policies of the Fund's investment advisers or their affiliates are separate requirements applying to the Covered Officers and others, and are not part of this Code. - ---------- (2) For purposes of this Code, Item 2 of Form N-CSR defines "waiver" as "the approval by a Company of a material departure from a provision of the Code" and includes an "implicit waiver," which means a Company's failure to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an executive officer of the Company. VIII. Amendments Any amendments to this Code, other than amendments to Exhibits A, B and C must be approved or ratified by a majority vote of the Board, including a majority of Non-interested Directors. IX. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and Company and their respective counsel, counsel to the non-Interested Directors or independent auditors or other consultants referred to in Section V above. X. Internal Use The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion. EX-99.CERT 3 ex99cert.txt CERTIFICATION UNDER SECTION 302 CERTIFICATIONS PURSUANT TO SECTION 302 EX-99.CERT CERTIFICATIONS I, R. Jay Gerken, certify that: 1. I have reviewed this report on Form N-CSR of Smith Barney Muni Funds - Massachusetts Money Market Portfolio; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial data; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 4, 2004 /s/ R. Jay Gerken ------------------------------ ----------------------------------- R. Jay Gerken Chief Executive Officer I, Richard L. Peteka, certify that: 1. I have reviewed this report on Form N-CSR of Smith Barney Muni Funds - Massachusetts Money Market Portfolio; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial data; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 4, 2004 /s/ Richard L. Peteka ------------------------------ ----------------------------------- Richard L. Peteka Chief Financial Officer EX-99.906 4 ex99906.txt CERTIFICATION UNDER SECTION 906 CERTIFICATIONS PURSUANT TO SECTION 906 EX-99.906CERT CERTIFICATION R. Jay Gerken, Chief Executive Officer, and Richard L. Peteka, Chief Financial Officer of Smith Barney Muni Funds - Massachusetts Money Market Portfolio (the "Registrant"), each certify to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended March 31, 2004 (the "Form N-CSR") fully complies with the requirements of section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Chief Executive Officer Chief Financial Officer Smith Barney Muni Funds - Smith Barney Muni Funds - Massachusetts Money Market Portfolio Massachusetts Money Market Portfolio /s/ R. Jay Gerken /s/ Richard L. Peteka - ------------------------------- ------------------------------------ R. Jay Gerken Richard L. Peteka Date: June 4, 2004 Date: June 4, 2004 This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----