<PAGE>
- ---------------------------
- --------------------------------------------------------------------------------
1995
1995
1995
1995
1995
SMITH BARNEY
MASSACHUSETTS
MUNICIPALS
FUND
------------------------------------------
November 30, 1995
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every day.
A N N U A L R E P O R T
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
We are pleased to provide the annual report for the year
ended November 30, 1995 for Smith Barney Massachusetts
Municipals Fund.
In this report, we summarize the period's prevailing economic and
market conditions. A more detailed summary of performance and
current holdings can be found in the appropriate sections that
follow in the annual report.
ECONOMIC AND MUNICIPAL BOND
MARKET OVERVIEW
The tax exempt market over the past twelve months has been anything
but dull. Following six interest rate increases by the Federal
Reserve in 1994, economic growth and inflation subsided during 1995.
At this point in time, however, the fixed income markets are
rallying, perhaps having concluded that the Federal Reserve has
achieved the goal of a soft landing for the economy. While
participating in the fixed income markets' overall rally, the
municipal bond market has lagged somewhat. Other factors that have
had an impact on the municipal bond market include the strong
performance of the equity markets, the spillover effect of the
bankruptcy filing by Orange County, California and the current
federal budget impasse in Washington, D.C.
While there are certainly some near-term risks at current market levels, our
long-term outlook for inflation and interest rates is positive. We believe
long-term municipal bonds offer investors excellent value relative to taxable
investments. At more than 90% of the yield on 30-year Treasury bonds, all but
the most radical of tax reform proposals are fully discounted in current
long-term municipal bond prices.
In our view, the Federal Reserve will likely find it necessary to lower
short-term interest rates over the upcoming months to maintain steady economic
growth. A positive resolution of the current budget debate in Washington, D.C.
would perhaps help to accelerate the pattern of Federal Reserve easing. An
equally important factor to the municipal bond market, however, is the outlook
for a continued low level of inflation.
1
<PAGE>
<PAGE>
MASSACHUSETTS ECONOMIC HIGHLIGHTS
From a budgetary standpoint, Massachusetts had one of the best turnarounds we
have ever seen. Much of the credit should go to fiscally conservative Republican
Governor William F. Weld for implementing management and budgetary reforms and
working well with a predominately Democratic state legislature. In September,
Moody's Investor Services Inc. and Standard & Poor's Corporation, two nationally
recognized mutual fund rating organizations, lifted the Bay State's bond rating
to 'A' from 'Baa' and 'BBB,' respectively. In addition, the Massachusetts state
budget is based on genuine revenues and expenditures and does not rely on
one-time cash infusions.
On the economic front, Massachusetts has also begun to experience a turnaround.
The Commonwealth has created approximately 15,000 quality jobs in high-tech
industries such as communications, biotechnology and software since 1991.
However, it should be noted that this job growth has yet to make up for job
losses from previous layoffs in the defense and computer industries.
PORTFOLIO UPDATE
The one-year total return of Smith Barney Massachusetts Municipals Fund was
20.73% for Class A shares. The Fund's average weighted maturity at the end of
November 30, 1995 was 20.72 years.
At this time, we would like to thank you for your investment in Smith Barney
Massachusetts Municipals Fund.
Sincerely,
<TABLE>
<S> <C>
/s/ HEATH B. MCLENDON /s/ LAWRENCE T. MCDERMOTT
Heath B. McLendon Lawrence T. McDermott
Chairman and Chief Vice President and
Executive Officer Investment Officer
January 10, 1996
</TABLE>
2
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS A SHARES
<TABLE>
<CAPTION>
Net Asset Value
--------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning End of Income Capital Gain Return Total
Year Ended of Year Year Dividends Distributions of Capital Returns(1)
- ----------------------------------------------------------------------------------------------------------------
11/30/95 $ 11.35 $12.96 $0.69 $0.00 $0.00 20.73%
- ----------------------------------------------------------------------------------------------------------------
11/30/94 13.26 11.35 0.70 0.06 0.00 (9.07)
- ----------------------------------------------------------------------------------------------------------------
11/30/93 12.63 13.26 0.74 0.07 0.00 11.74
- ----------------------------------------------------------------------------------------------------------------
11/30/92 12.28 12.63 0.77 0.04 0.04 10.06
- ----------------------------------------------------------------------------------------------------------------
11/30/91 11.81 12.28 0.84 0.00 0.01 11.57
- ----------------------------------------------------------------------------------------------------------------
11/30/90 12.11 11.81 0.85 0.02 0.00 4.93
- ----------------------------------------------------------------------------------------------------------------
11/30/89 11.88 12.11 0.86 0.00 0.00 9.43
- ----------------------------------------------------------------------------------------------------------------
Inception*- 11/30/88 11.40 11.88 0.82 0.06 0.00 12.25`D'
- ----------------------------------------------------------------------------------------------------------------
Total $6.27 $0.25 $0.05
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS B SHARES
<TABLE>
<CAPTION>
Net Asset Value
--------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning End of Income Capital Gain Return Total
Year Ended of Year Year Dividends Distributions of Capital Returns(1)
- ---------------------------------------------------------------------------------------------------------------------
11/30/95 $ 11.35 $12.96 $0.63 $0.00 $0.00 20.15%
- ---------------------------------------------------------------------------------------------------------------------
11/30/94 13.26 11.35 0.64 0.06 0.00 (9.50)
- ---------------------------------------------------------------------------------------------------------------------
11/30/93 12.63 13.26 0.68 0.07 0.00 11.09
- ---------------------------------------------------------------------------------------------------------------------
Inception*- 11/30/92 12.52 12.63 0.05 0.00 0.00 1.29`D'
- ---------------------------------------------------------------------------------------------------------------------
Total $2.00 $0.13 $0.00
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS C SHARES
<TABLE>
<CAPTION>
Net Asset Value
--------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning End of Income Capital Gain Return Total
Year Ended of Year Year Dividends Distributions of Capital Returns(1)
- ---------------------------------------------------------------------------------------------------------------------
11/30/95 $ 11.35 $12.95 $0.63 $0.00 $0.00 20.04%
- ---------------------------------------------------------------------------------------------------------------------
Inception*- 11/30/94 11.34 11.35 0.04 0.00 0.00 0.40`D'
- ---------------------------------------------------------------------------------------------------------------------
Total $0.67 $0.00 $0.00
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
3
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
Without Sales Charge(1)
-----------------------------------
<S> <C> <C> <C>
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Year Ended 11/30/95 20.73% 20.15% 20.04%
- -------------------------------------------------------------------------------------------
Five Years Ended 11/30/95 8.54 N/A N/A
- -------------------------------------------------------------------------------------------
Inception* through 11/30/95 8.71 6.67 19.36
- -------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2)
-----------------------------------
<S> <C> <C> <C>
Class A Class B Class C
- -------------------------------------------------------------------------------------------
Year Ended 11/30/95 15.93% 15.65% 19.04%
- -------------------------------------------------------------------------------------------
Five Years Ended 11/30/95 7.66 N/A N/A
- -------------------------------------------------------------------------------------------
Inception* through 11/30/95 8.14 6.10 19.36
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
Without Sales Charge(1)
- ------------------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 11/30/95) 94.14%
- ------------------------------------------------------------------------------------
Class B (Inception* through 11/30/95) 21.90
- ------------------------------------------------------------------------------------
Class C (Inception* through 11/30/95) 20.53
- ------------------------------------------------------------------------------------
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charge with respect to Class A shares or the applicable contingent
deferred sales charges ('CDSC') with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gains distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed less than
one year from initial purchase. This CDSC, on Class B shares, declines by
0.50% the first year after purchase and thereafter by 1.00% per year until
no CDSC is incurred. Class C shares reflect the deduction of a 1.00% CDSC
which applies if shares are redeemed within the first year of purchase.
`D' Total return is not annualized, as it may not be representative of the total
return for the year.
* Inception dates for Class A, B and C shares are December 21, 1987, November
6, 1992 and November 10, 1994, respectively.
4
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
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HISTORICAL PERFORMANCE (UNAUDITED)
GROWTH OF $10,000 INVESTED IN CLASS A SHARES OF
THE SMITH BARNEY MASSACHUSETTS MUNICIPALS FUND VS.
LEHMAN MUNICIPAL BOND FUND INDEX AND
LIPPER MASSACHUSETTS MUNICIPAL FUND AVERAGE`D'
- --------------------------------------------------------------------------------
December 1987 -- November 1995
[GRAPH]
<TABLE>
<CAPTION>
SMITH BARNEY LIPPER MASSACHUSETTS
MASSACHUSETTS STANDARD & POOR'S MUNICIPAL FUND
DATE MUNICIPAL FUND 500 INDEX AVERAGE
----------------- ----------------- ------------------ --------------------
<S> <C> <C> <C>
12/21/87 $ 9,596.00 $10,000.00 $10,000.00
11/30/88 10,771.70 11,172.49 10,866.00
11/30/89 11,787.10 12,234.19 11,857.00
11/30/90 12,367.90 12,958.09 12,579.00
11/30/91 13,798.80 14,344.84 13,902.00
11/30/92 15,186.50 15,816.69 15,348.00
11/30/93 16,970.10 17,665.41 17,152.00
11/30/94 15,430.80 16,390.83 16,100.00
11/30/95 18,629.40 19,434.63 18,813.00
</TABLE>
`D' Hypothetical illustration of $10,000 invested in Class A shares at inception
on December 21, 1987, assuming deduction of the maximum 4.00% sales charge
at the time of investment and reinvestment of dividends and capital gains,
if any, at net asset value through November 30, 1995. The Lehman Municipal
Bond Fund Index is a broad based, total return index comprised of 8,000
actual bonds which are all investment grade, fixed rate, long term
maturities (greater than two years) and are selected from issues larger than
$50 million dated since January, 1984. The Lipper Massachusetts Municipal
Fund Average is composed of the Fund's peer group of mutual funds (50 funds
as of November 30, 1995). The index is unmanaged and is not subject to the
same management and trading expenses as 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 returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
5
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
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PORTFOLIO HIGHLIGHTS NOVEMBER 30, 1995
INDUSTRY BREAKDOWN
[PIE CHART]
General Obligations 24.2%
Water and Sewer 3.0%
Housing: Multi-Family 5.5%
Housing: Single-Family 9.5%
Hospital 20.4%
Miscellaneous 2.5%
Education 14.0%
Utilities 10.7%
Industrial Development 1.6%
Transportation 3.2%
Pollution Control 5.4%
SUMMARY OF INVESTMENTS BY COMBINED RATINGS
<TABLE>
<CAPTION>
STANDARD & PERCENTAGE OF
MOODY'S AND/OR POOR'S TOTAL INVESTMENTS
<S> <C> <C> <C>
- -------------------------------------------------------------------
Aaa AAA 54.4%
Aa AA 10.9
A A 20.0
Baa BBB 12.3
NR NR 2.4
-----
100.0%
-----
-----
</TABLE>
6
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------
<C> <C> <S> <C>
MUNICIPAL BONDS AND NOTES -- 100%
EDUCATION -- 14.0%
Boston Financing Authority, Industrial
Development,
Massachusetts College of Pharmacy,
CONNIE LEE-Insured:
$ 750,000 AAA 5.250% due 10/1/14 $ 720,000
1,000,000 AAA 5.250% due 10/1/26 943,750
1,425,000 AAA Chelsea (School Project), AMBAC-Insured,
6.000% due 6/15/14 1,478,438
200,000 A Massachusetts Educational Loan Authority, Loan
Revenue, Issue D, Series A, 7.650% due 1/1/07 210,000
Massachusetts State Health & Educational
Facilities
Authority Revenue:
1,000,000 AAA Series G, MBIA-Insured, 5.375% due 7/1/24 977,500
430,000 AAA Community College Project, Series A,
CONNIE LEE-Insured, 6.600% due 10/1/22 457,950
Suffolk University, Series B, CONNIE
LEE-Insured:
200,000 AAA 6.250% due 7/1/12 210,500
1,575,000 AAA 6.350% due 7/1/22 1,645,875
750,000 A* Massachusetts State Industrial Finance Agency
Revenue, Clark University, Series E, 7.000%
due 7/1/12 826,875
500,000 AAA Southeastern Massachusetts University, Series A,
AMBAC-Insured, 5.900% due 5/1/12 526,250
- --------------------------------------------------------------------------------------
7,997,138
- --------------------------------------------------------------------------------------
GENERAL OBLIGATION -- 24.2%
700,000 AAA Boston GO, Series A, AMBAC-Insured, 6.500% due
7/1/12 761,250
250,000 A- Brockton Utility, 6.125% due 6/15/18 254,375
200,000 A Commonwealth of Puerto Rico GO, 8.000% due
7/1/08 221,000
920,000 AAA Dedham-Westwood Water District, Refunding Bonds,
MBIA-Insured, 5.100% due 10/15/12 886,650
500,000 AAA Fall River GO, MBIA-Insured, 7.200% due 6/1/10 563,125
500,000 AAA Gloucester, Municipal Purpose Loan, FSA-Insured,
5.500% due 11/15/13 496,250
250,000 AAA Groveland GO, AMBAC-Insured, 6.850% due 6/15/06 278,125
470,000 AAA Haverhill Revenue Bonds, Series A,
AMBAC-Insured, 6.700% due 9/1/10 512,300
500,000 AAA Holyoke GO, Series B, FSA-Insured, 6.125% due
8/1/13 526,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------
<C> <C> <S> <C>
GENERAL OBLIGATION -- 24.2% (CONTINUED)
Lowell GO:
$ 500,000 AAA AMBAC-Insured, 6.000% due 8/1/13 $ 525,000
500,000 AAA AMBAC-Insured, 6.000% due 8/1/14 522,500
500,000 AAA Series B, FSA-Insured, 5.600% due 11/1/12 504,375
250,000 AAA Mansfield GO, AMBAC-Insured, 6.700% due 1/15/11 270,000
500,000 AAA Massachusetts State Health & Educational
Facilities
Authority Revenue, Capital Asset Program,
Series F,
MBIA-Insured, 7.300% due 10/1/18 556,250
250,000 AAA North Reading GO, MBIA-Insured, 6.875% due
6/15/07 275,938
795,000 A- Plymouth County COP, Series A, 6.750% due
10/1/04 890,400
500,000 AAA Revere Municipal Purpose Loan, FSA-Insured,
6.125% due 6/15/13 525,625
500,000 AAA Salem GO, AMBAC-Insured, 6.800% due 8/15/10 558,750
750,000 Baa* Springfield GO, (School Project Loan), Series B,
7.100% due 9/1/11 806,250
485,000 AAA Webster GO, AMBAC-Insured, 6.700% due 9/1/10 527,437
Worcester GO, Refunding & Construction,
MBIA-Insured,
Series A:
700,000 AAA 6.400% due 1/1/05 760,375
330,000 AAA 6.450% due 1/1/06 358,050
2,000,000 AAA Municipal Purpose Loan, Series C, 5.750% due
10/1/14 2,045,000
15,000 AAA Virgin Islands Public Finance Authority Revenue,
Matching Funds Loan Note, Marine Midland
Series A,
7.300% due 10/1/18 18,600
110,000 AAA Virgin Islands Public Finance Authority Revenue,
Series A, Matching Funds Loan Note, Marine
Midland, (Pre-Refunded -- Escrowed with U.S.
Government Securities to 10/1/00 Call @ 101),
7.300% due 10/1/18(a) 125,950
- --------------------------------------------------------------------------------------
13,769,825
- --------------------------------------------------------------------------------------
HOSPITALS -- 20.4%
150,000 Aa* Boston, Revenue Refunding Bonds, Boston City
Hospital, FHA-Insured, 5.750% due 2/15/23 148,500
Massachusetts State Health & Educational
Facilities
Authority Revenue:
1,000,000 AAA AMBAC-Insured, 6.550% due 6/23/22 1,092,500
500,000 AAA CONNIE LEE-Insured, 5.750% due 7/1/14 507,500
700,000 AAA Series C, CONNIE LEE-Insured, 7.000% due
7/1/06 815,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------
<C> <C> <S> <C>
HOSPITALS -- 20.4% (CONTINUED)
Massachusetts State Health & Educational
Facilities
Authority Revenue (continued):
$ 750,000 Baa1* Addison Gilbert Hospital, Series C, 5.750%
due 7/1/23 $ 688,125
250,000 A Beth Israel Hospital, Series E, 7.000% due
7/1/14 268,125
1,000,000 A Brockton Hospital, Series B, 8.100% due
7/1/13 1,063,750
750,000 Baa* Cent New England Health System, Series A,
6.300% due 8/1/18 674,063
1,000,000 BBB+ Faulkner Hospital, Series C, 6.000% due
7/1/13 973,750
1,000,000 AAA Massachusetts General Hospital, Series F,
AMBAC-Insured, 6.250% due 7/1/20 1,056,250
750,000 AAA Medical Center, Lahey Clinic, Series B,
MBIA-Insured, 5.375% due 7/1/23 738,750
Morton Hospital & Medical Center,
CONNIE LEE-Insured, Series B:
1,000,000 AAA 5.250% due 7/1/14 953,750
500,000 AAA 5.500% due 7/1/23 482,500
1,000,000 NR Saint Memorial Medical Center, Series A,
6.000%
due 10/1/23 810,000
750,000 AAA South Shore Hospital, Series E,
MBIA-Insured,
5.500% due 7/1/20 751,875
600,000 AAA University of Massachusetts Medical Center,
CONNIE LEE-Insured, 6.000% due 7/1/23 612,750
- --------------------------------------------------------------------------------------
11,637,688
- --------------------------------------------------------------------------------------
HOUSING: MULTI-FAMILY -- 5.5%
795,000 Baa* Commonwealth of Puerto Rico, Urban Renewal
Housing Revenue Bonds, 7.875% due 10/1/04 906,300
1,000,000 AAA Framingham, Housing Authority, Mortgage Revenue,
Bever Terrace Apartments, Apartment A,
GNMA-Collateralized, 6.650% due 2/20/32 1,028,750
1,150,000 A+ Massachusetts State Housing Finance Agency,
(Housing Project), Series A, 6.375% due 4/1/21 1,170,125
- --------------------------------------------------------------------------------------
3,105,175
- --------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------
<C> <C> <S> <C>
HOUSING: SINGLE-FAMILY -- 9.5%
Massachusetts State Housing Finance Agency,
Housing Revenue, Single-Family Housing:
$ 500,000 Aa* Series 41, 6.300% due 12/1/14 $ 515,625
965,000 AAA Series 14, FHA-Insured, 7.700% due 12/1/14 1,021,694
1,000,000 AAA Series A, MBIA-Insured, 5.950% due 12/1/14 1,015,000
100,000 Aa* Series 5, 8.375% due 6/1/15 104,875
600,000 Aa* Series 18, 7.350% due 12/1/16 644,250
1,000,000 Aa* Series 31, 6.450% due 12/1/16 1,036,250
1,000,000 Aa* Series 38, 7.200% due 12/1/26 1,070,000
- --------------------------------------------------------------------------------------
5,407,694
- --------------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT -- 1.6%
Massachusetts State Industrial Finance Agency
Revenue:
250,000 Baa1* Series A, 6.300% due 7/1/05 263,438
100,000 AAA Guaranteed Loan, Series A, 7.875% due 5/1/07 101,961
500,000 NR S.E. Massachusetts Project, Recovery Revenue,
Series A, 9.000% due 7/1/15 560,000
- --------------------------------------------------------------------------------------
925,399
- --------------------------------------------------------------------------------------
MISCELLANEOUS -- 2.5%
100,000 A-1+ Commonwealth of Puerto Rico GO, 3.450% due
12/1/15 100,000
500,000 A+ Massachusetts State Convention Center Authority,
Series A, 5.375% due 9/1/13 497,500
250,000 AAA Massachusetts State Industrial Finance Agency
Revenue, Concord Academy, FSA-Insured, 6.900%
due 9/1/21 275,000
500,000 Baa3* Puerto Rico, Port Authority Revenue, 6.300% due
6/1/23 509,375
- --------------------------------------------------------------------------------------
1,381,875
- --------------------------------------------------------------------------------------
POLLUTION CONTROL -- 5.4%
1,000,000 Baa2* Massachusetts State Industrial Finance Agency
Revenue, Edison, 5.875% due 8/1/08 1,010,000
1,500,000 Aa* Massachusetts State Water Pollution, Series A,
6.375% due 2/1/15 1,612,500
415,000 Baa1* Puerto Rico Industrial, Medical & Environmental
Pollution Control Facilities, Finance
Authority Revenue Bonds, Special Facilities,
American Airlines, Series A,
8.750% due 12/1/25 432,169
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1995
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------
<C> <C> <S> <C>
POLLUTION CONTROL -- 5.4% (CONTINUED)
$ 30,000 A1* Springfield Industrial Development Finance
Authority, PCR, (Monsanto Company Project),
9.100% due 11/1/04 $ 34,800
- --------------------------------------------------------------------------------------
3,089,469
- --------------------------------------------------------------------------------------
TRANSPORTATION -- 3.2%
750,000 BBB Guam Apartment Authority Revenue, Series A,
6.500% due 10/1/23 751,873
1,065,000 A+ Massachusetts Bay Transportation Authority,
Series C, 6.100% due 3/1/23 1,095,619
- --------------------------------------------------------------------------------------
1,847,492
- --------------------------------------------------------------------------------------
UTILITIES -- 10.7%
280,000 A Boston Water & Sewer Commission Revenue,
7.750%, due 11/1/06 294,632
300,000 AAA Lynn Water & Sewer Commission, General Revenue,
FGIC-Insured, 5.500% due 12/1/10 307,500
Massachusetts Municipal Wholesale Electric
Company, Power Supply Revenue:
1,000,000 AAA Series B, MBIA-Insured, 5.000% due 7/1/17 947,500
2,000,000 A* Series D, 6.125% due 7/1/19 2,060,000
Massachusetts State Water Resource Authority,
Series B:
1,420,000 A 6.250% due 11/1/10 1,501,650
1,000,000 A 5.500% due 3/1/17 983,750
- --------------------------------------------------------------------------------------
6,095,032
- --------------------------------------------------------------------------------------
WATER & SEWER -- 3.0%
1,500,000 AAA South Essex, Sewer District, Series B,
MBIA-Insured, 7.000% due 6/1/24 1,710,000
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $54,683,858)(b) $56,966,787
- --------------------------------------------------------------------------------------
</TABLE>
(a) Pre-Refunded bonds escrowed by U.S. Government Securities and bonds
escrowed to maturity by U.S. Government Securities are considered by the
investment adviser to be triple-A rated even if issuer has not applied for
new ratings.
(b) Aggregate cost for Federal income tax purposes is substantially the same.
See pages 12 and 13 for definitions of ratings and certain security
descriptions.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
BOND RATINGS
All ratings are by Standard & Poor's Corporation ('Standard & Poor's'), except
those identified by an asterisk (*) are rated by Moody's Investors Services
('Moody's'). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Ratings from 'AA' to 'BBB' may be modified by the
addition of a plus (+) or minus (-) sign to show relative standings within the
major rating categories.
<TABLE>
<S> <C> <C>
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 differs 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 it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB -- Bonds rated 'BBB' are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
B -- Bonds rated 'B' have a greater vulnerability to default but currently have
the capacity to meet interest payments and principal payments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The 'B' rating category
is also used for debt subordinated to senior debt that is assigned an
actual or implied 'BB' or 'BB - ' rating.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating from
'Aa' to 'Baa,' where 1 is the highest and 3 the lowest ranking within its
generic category.
Aaa -- Bonds that are 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 that are 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 that are 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 that are 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.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
</TABLE>
12
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
SHORT-TERM SECURITIES RATINGS
<TABLE>
<S> <C> <C>
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.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
</TABLE>
- --------------------------------------------------------------------------------
SECURITY DESCRIPTIONS
<TABLE>
<S> <C> <C> <C>
ABAG -- Association of Bay Area Governors HFA -- Housing Finance Authority
AIG -- American International Guaranty IDA -- Industrial Development
AMBAC -- American Municipal Bond Authority
Assurance Corporation IDB -- Industrial Development Board
BAN -- Bond Anticipation Notes IDR -- Industrial Development
BIG -- Bond Investors Guaranty Revenue
CGIC -- Capital Guaranty Insurance INFLOS -- Inverse Floaters
Company ISD -- Independent School District
CHFCLI -- California Health Facility LOC -- Letter of Credit
Construction Loan Insurance MBIA -- Municipal Bond Investors
CONNIE LEE -- College Construction Loan Assurance Corporation
Insurance Association MVRICS -- Municipal Variable Rate Inverse
COP -- Certificate of Participation Coupon Security
EDA -- Economic Development Authority PCR -- Pollution Control Revenue
ETM -- Escrowed To Maturity PSF -- Permanent School Fund
FLAIRS -- Floating Adjustable Interest RAN -- Revenue Anticipation Notes
Rate Securities RIBS -- Residual Interest Bonds
FGIC -- Financial Guaranty Insurance RITES -- Residual Interest Tax-Exempt
Company Securities
FHA -- Federal Housing Administration TAN -- Tax Anticipation Notes
FHLMC -- Federal Home Loan Mortgage TECP -- Tax-Exempt Commercial Paper
Corporation TOB -- Tender Option Bonds
FNMA -- Federal National Mortgage TRAN -- Tax and Revenue Anticipation
Association Notes
FRTC -- Floating Rate Trust Certificates SYCC -- Structured Yield Curve
FSA -- Federal Savings Association Certificate
GIC -- Guaranteed Investment Contract VA -- Veterans Administration
GNMA -- Government National Mortgage VRDD -- Variable Rate Daily Demand
Association VRWE -- Variable Rate Wednesday
GO -- General Obligation Demand
HDC -- Housing Development
Corporation
</TABLE>
13
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $54,683,858) $56,966,787
Cash 35,271
Interest receivable 1,189,243
Receivable for Fund shares sold 31,351
Receivable for securities sold 25,000
- --------------------------------------------------------------------------------------
TOTAL ASSETS 58,247,652
- --------------------------------------------------------------------------------------
LIABILITIES:
Distribution fees payable 47,790
Payable for Fund shares purchased 12,950
Investment advisory fees payable 9,301
Administration fees payable 5,335
Accrued expenses 141,443
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES 216,819
- --------------------------------------------------------------------------------------
TOTAL NET ASSETS $58,030,833
- --------------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 4,478
Capital paid in excess of par value 56,334,707
Accumulated net realized loss on security transactions (591,281)
Net unrealized appreciation of investments 2,282,929
- --------------------------------------------------------------------------------------
TOTAL NET ASSETS $58,030,833
- --------------------------------------------------------------------------------------
SHARES OUTSTANDING:
Class A 2,249,537
Class B 2,217,041
Class C 11,243
NET ASSET VALUE:
Class A (and redemption price) $12.96
Class B * $12.96
Class C ** $12.95
CLASS A MAXIMIUM PUBLIC OFFERING PRICE PER SHARE
(net asset value plus 4.17% of net asset value per share) $13.50
- --------------------------------------------------------------------------------------
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed less than one year from initial purchase (See Note 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 3,414,891
- --------------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 2) 214,153
Investment advisory fees (Note 2) 190,675
Administration fees (Note 2) 109,514
Audit and legal 52,760
Shareholder and system servicing fees 25,067
Trustees' fees 14,250
Registration fees 14,000
Custody 12,739
Shareholder communications 10,000
Pricing service fees 5,280
Other 69,941
- --------------------------------------------------------------------------------------
TOTAL EXPENSES 718,379
Less: Fee waiver (Note 2) (130,442)
- --------------------------------------------------------------------------------------
NET EXPENSES 587,937
- --------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,826,954
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 7,349,461
Cost of securities sold 7,494,505
NET REALIZED LOSS (145,044)
Change in Net Unrealized Appreciation (Depreciation) of
Investments:
Beginning of year (5,077,544)
End of year 2,282,929
INCREASE IN NET UNREALIZED APPRECIATION 7,360,473
NET GAIN ON INVESTMENTS 7,215,429
INCREASE IN NET ASSETS FROM OPERATIONS $10,042,383
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED NOVEMBER 30
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,826,954 $ 2,912,123
Net realized loss (145,044) (446,237)
Increase (decrease) in net unrealized appreciation 7,360,473 (7,763,594)
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 10,042,383 (5,297,708)
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 3):
Net investment income (2,792,554) (2,939,854)
Overdistribution of net investment income (99,356) --
Net realized gains -- (251,796)
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO
SHAREHOLDERS (2,891,910) (3,191,650)
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 7,850,525 11,838,897
Net asset value of shares issued for reinvestment
of dividends 1,841,633 2,104,556
Cost of shares reacquired (9,799,797) (9,374,645)
INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (107,639) 4,568,808
INCREASE (DECREASE) IN NET ASSETS 7,042,834 (3,920,550)
NET ASSETS:
Beginning of year 50,987,999 54,908,549
END OF YEAR* $58,030,833 $50,987,999
* Includes overdistributed net investment income of: -- $ (34,400)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Massachusetts Municipals Fund ('Fund'), a Massachusetts
business trust, is registered under the Investment Company Act of 1940, as
amended, as a non-diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on the trade date; (b) securities
are valued at the mean between the quoted bid and asked prices by an independent
pricing service; (c) short-term securities and securities that have a maturity
of 60 days or less are valued at cost plus accreted discount or minus amortized
premium, which approximates market value; (d) gains or losses on the sale of
securities are calculated by using the specific identification method; (e)
interest income, adjusted for amortization of premium and accretion of original
issue discount, is recorded on the accrual basis; market discount is recognized
upon the disposition of the security; (f) direct expenses are charged to the
Fund and each class; management fees and general fund expenses are allocated on
the basis of relative net assets; (g) 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; (h) in accordance with Statement of Position 93-2
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies, book
and tax basis differences relating to shareholder distributions and other
permanent book and tax differences are reclassified to paid-in capital. As of
November 30, 1995, the cumulative effect of such differences, totaling $99,356,
were reclassified to paid-in capital from overdistribution of net investment
income. Net investment income, net realized gains, and net assets were not
affected by this change; and (i) certain prior year numbers have been restated
to reflect current year's presentation. Net investment income, net realized
gains, and net assets were not affected by this change.
2. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION AGREEMENT
AND OTHER TRANSACTIONS
Smith Barney Mutual Funds Management Inc. ('SBMFM'), a subsidiary of Smith
Barney Holdings Inc. ('SBH'), acts as investment adviser to the Fund. Effective
November 17, 1995, the investment advisory fee declined from 0.35% to 0.30%. The
fee is calculated at an annual rate based on the Fund's average daily net assets
and is paid by the Fund to SBMFM. This fee is calculated daily
17
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
and paid monthly. For the year ended November 30, 1995, the Fund waived $82,803
of its investment advisory fees.
SBMFM also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets up to $500
million and 0.18% of the average daily net assets in excess of $500 million.
This fee is calculated daily and paid monthly. For the year ended November 30,
1995, the Fund waived $47,639 of its administration fees.
In addition, The Boston Company Advisors, Inc. ('Boston Advisors'), an
indirect wholly owned subsidiary of Mellon Bank Corporation, acted as sub-
administrator to the Fund. SBMFM paid Boston Advisors a portion of its
administration fee at a rate agreed upon from time to time between SBMFM and
Boston Advisors. As of June 19, 1995, this relationship was terminated.
Smith Barney Inc. ('SB'), another subsidiary of SBH, acts as distributor of
the Fund's shares. For the year ended November 30, 1995, SB received sales
charges of approximately $42,000 on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ('CDSC') of 4.50% on Class B
shares, which applies if redemption occurs less than one year from initial
purchase. This CDSC declines by 0.50% the first year after purchase and
thereafter by 1.00% per year until no CDSC is incurred. Class C shares have a
1.00% CDSC, which applies if redemption occurs within the first year of
purchase. For the year ended November 30, 1995, CDSCs paid to SB for Class C
shares were approximately $61,000.
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
its Class A, B and C shares calculated at the annual rate of 0.15% of the
average daily net assets for each class. In addition, the Fund pays a
distribution fee with respect to its Class B and C shares calculated at the
annual rates of 0.50% and 0.55%, respectively, of the average daily net assets
for each class. For the year ended November 30, 1995, total Distribution Plan
fees incurred were:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Distribution Plan Fees $42,539 $171,242 $372
</TABLE>
All officers and one Trustee of the Fund are employees of SB.
18
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax, to retain
such tax-exempt status when distributed to the shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the Commonwealth of
Massachusetts and its political subdivisions, agencies and public authorities to
obtain funds for various public purposes. The Fund is more susceptible to
factors adversely affecting issuers of the Massachusetts municipal securities
than is a municipal bond fund that is not concentrated in these issuers to the
same extent.
5. INVESTMENTS
For the year ended November 30, 1995, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term investments) were as follows:
<TABLE>
<S> <C>
Purchases $5,288,107
Sales 7,349,461
</TABLE>
At November 30, 1995, the aggregate gross unrealized appreciation and
depreciation of investments for tax purposes were as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation $2,686,455
Gross unrealized depreciation (403,526)
Net unrealized appreciation $2,282,929
</TABLE>
6. CAPITAL LOSS CARRYFORWARDS
At November 30, 1995, the Fund had for Federal tax purposes approximately
$591,281 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.
19
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The amount and year of the expiration for each carryforward loss is
indicated below:
<TABLE>
<CAPTION>
11/30/02 11/30/03
<S> <C> <C>
Carryforward Amount $446,237 $145,044
</TABLE>
7. SHARES OF BENEFICIAL INTEREST
As of November 30, 1995, the Fund had an unlimited number 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 and has the same rights, except that each class
bears certain direct expenses, including those specifically related to the
distribution of its shares. At November 30, 1995, total paid-in capital amounted
to the following for each class:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Total Paid-in Capital $27,475,799 $28,728,173 $135,213
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1995 NOVEMBER 30, 1994*
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
CLASS A
Shares sold 203,917 $ 2,524,279 354,792 $ 4,489,952
Shares issued on reinvestment 82,621 1,022,258 102,427 1,278,000
Shares redeemed (472,105) (5,793,837) (479,403) (5,970,026)
Net Decrease (185,567) $(2,247,300) (22,184) $ (202,074)
CLASS B
Shares sold 421,164 $ 5,187,847 577,550 $ 7,273,945
Shares issued on reinvestment 65,930 817,336 66,328 826,518
Shares redeemed (321,620) (3,925,753) (274,929) (3,404,619)
Net Increase 165,474 $ 2,079,430 368,949 $ 4,695,844
CLASS C
Shares sold 11,151 $ 138,399 6,614 $ 75,000
Shares issued on reinvestment 166 2,039 3 38
Shares redeemed (6,691) (80,207) -- --
Net Increase 4,626 $ 60,231 6,617 $ 75,038
</TABLE>
* For Class C shares, transactions are for the period from November 10, 1994
(inception date) to November 30, 1994.
20
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR:
<TABLE>
<CAPTION>
CLASS A SHARES 1995 1994 1993(1) 1992 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.35 $13.26 $12.63 $12.28 $11.81
INCOME (LOSS) FROM OPERATIONS:
Net investment income (2) 0.69 0.70 0.72 0.77 0.84
Net realized and unrealized gain
(loss) 1.61 (1.85) 0.72 0.43 0.48
Total Income (Loss) From Operations 2.30 (1.15) 1.44 1.20 1.32
LESS DISTRIBUTIONS FROM:
Net investment income (0.68) (0.69) (0.73 ) (0.77) (0.84)
Overdistribution of net investment
income (0.01) (0.01) (0.01 ) -- --
Net realized gains -- (0.06) (0.07 ) (0.04) --
Capital -- -- -- (0.04) (0.01)
Total Distributions (0.69) (0.76) (0.81 ) (0.85) (0.85)
NET ASSET VALUE, END OF YEAR $12.96 $11.35 $13.26 $12.63 $12.28
TOTAL RETURN 20.73% (9.07)% 11.74 % 10.06% 11.57%
NET ASSETS, END OF YEAR (000S) $29,159 $27,634 $32,592 $27,354 $19,621
RATIOS TO AVERAGE NET ASSETS:
Expenses (2) 0.83% 0.81% 0.82 % 0.71% 0.66%
Net investment income 5.42 5.55 5.49 6.12 6.89
PORTFOLIO TURNOVER RATE 10% 37% 10 % 73% 87%
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for this year
since use of the undistributed method does not accord with results of
operations.
(2) The investment adviser waived all or part of its fees for the five years
ended November 30, 1995. If such fees were not waived, the per share
decreases in net investment income and expense ratios would have been as
follows:
<TABLE>
<CAPTION>
Per Share Decreases Expense Ratios
in Net Investment Income Without Fee Waivers
-------------------------------------- --------------------------------------
1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.03 $0.04 $0.05 $0.08 $0.07 1.07% 1.09% 1.18% 1.32% 1.28%
</TABLE>
21
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
------------------------------------------- ------------------
1995 1994 1993 1992(1) 1995 1994(2)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.35 $13.26 $12.63 $12.52 $11.35 $11.34
INCOME (LOSS) FROM OPERATIONS:
Net investment income (3) 0.63 0.63 0.66 0.06 0.63 0.05
Net realized and unrealized gain
(loss) 1.61 (1.84) 0.72 0.10 1.60 --
Total Income (Loss) From
Operations 2.24 (1.21) 1.38 0.16 2.23 0.05
LESS DISTRIBUTIONS FROM:
Net investment income (0.62) (0.63) (0.67) (0.05 ) (0.63) (0.04)
Overdistribution of net
investment income (0.01) (0.01) (0.01) -- (0.00)* (0.00)*
Net realized gains -- (0.06) (0.07) -- -- --
Total Distributions (0.63) (0.70) (0.75) (0.05 ) (0.63) (0.04)
NET ASSET VALUE, END OF YEAR $12.96 $11.35 $13.26 $12.63 $12.95 $11.35
TOTAL RETURN 20.15% (9.50)% 11.09% 1.29%`DD' 20.04% 0.40%`DD'
NET ASSETS, END OF YEAR (000S) $28,726 $23,279 $22,317 $2,938 $146 $75
RATIOS TO AVERAGE NET ASSETS:
Expenses (3) 1.35% 1.32% 1.31% 1.34%`D' 1.35% 1.36%`D'
Net investment income 4.94 5.04 4.99 5.49`D' 4.65 5.00`D'
PORTFOLIO TURNOVER RATE 10% 37% 10% 73% 10% 37%
</TABLE>
(1) For the period from November 6, 1992 (inception date) to November 30, 1992.
(2) For the period from November 10, 1994 (inception date) to November 30, 1994.
(3) The investment adviser has waived all or part of its fees for the three
years ended November 30, 1995 and the period ended November 30, 1992. If
such fees were not waived, the per share decreases in net investment income
and expense ratios would have been as follows:
<TABLE>
<CAPTION>
Per Share Decreases Expense Ratios
in Net Investment Income Without Fee Waivers
--------------------------------- -----------------------------------------
1995 1994 1993 1992 1995 1994 1993 1992
----- ------ ----- ----- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class B $0.04 $ 0.03 $0.05 $0.01 1.59% 1.60% 1.68% 1.94%`D'
Class C 0.04 0.00* -- -- 1.58 1.63`D' -- --
</TABLE>
* Amount represents less than $0.01 per share.
`DD' Total return is not annualized, as it may not be representative of the
total return for the year.
`D' Annualized.
22
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
SMITH BARNEY MASSACHUSETTS MUNICIPALS FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney Massachusetts Municipals Fund as of
November 30, 1995, and the related statement of operations, statement of changes
in net assets, and financial highlights for the year 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 audit. The statement of changes
in net assets for the year ended November 30, 1994 and the financial highlights
for each of the years in the four-year period then ended, were audited by other
auditors whose report thereon, dated January 12, 1995 expressed an unqualified
opinion on that statement of changes in net assets and those financial
highlights.
We conducted our audit in accordance with generally accepted auditing standards.
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 November 30, 1995, by
correspondence with the custodian. As to securities sold but not 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Smith Barney Masschusetts
Municipals Fund as of November 30, 1995, and the results of its operations,
changes in its net assets and its financial highlights for the year then ended,
in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
January 17, 1996
23
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
Change in Independent Auditor: On February 8, 1995, based upon the
recommendation of the Audit Committee of the Fund, the Board of Trustees
determined not to retain Coopers & Lybrand, L.L.P. ('Coopers & Lybrand') as the
Fund's independent auditor and voted to appoint KPMG Peat Marwick LLP. During
the Fund's two most recent fiscal years, Coopers & Lybrand's audit reports
contained no adverse opinion or disclaimer of opinion; nor were the reports
qualified or modified as to uncertainty, audit scope, or accounting principles.
Further, during this same period there were no disagreements with Coopers &
Lybrand on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Coopers & Lybrand, would have caused it to make
references to the subject matter of such disagreements in connection with its
audit reports. The Fund has requested Coopers & Lybrand to provide a letter to
the Securities & Exchange Commission stating whether Coopers & Lybrand agrees
with the foregoing statements, and to provide the Fund with a copy of such
letter. A copy of this letter is available upon request by calling the Fund at
(212) 723-9218.
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
96.56% of the dividends paid by the Fund from net investment income for the
year ended November 30, 1995, are tax-exempt for regular Federal income tax
purposes.
24
<PAGE>
<PAGE>
SMITH BARNEY [LOGO]
MASSACHUSETTS
MUNICIPALS FUND
TRUSTEES INVESTMENT ADVISER
Herbert Barg Smith Barney Mutual Funds
Alfred J. Bianchetti Management Inc.
Martin Brody
Dwight B. Crane
Burt N. Dorsett DISTRIBUTOR
Elliot S. Jaffe Smith Barney Inc.
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon CUSTODIAN
Cornelius C. Rose, Jr. PNC Bank
OFFICERS SHAREHOLDER
Heath B. McLendon SERVICING AGENT
Chairman of the Board First Data Investor Services Group, Inc.
and Investment Officer P.O. Box 9134
Boston, MA 02205-9134
Jessica Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Lawrence T. McDermott
Vice President and
Investment Officer
Karen L. Mahoney-Malcomson
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
This report is submitted for the general information of the shareholders of
Smith Barney Massachusetts Municipals Fund. It is not authorized for
distribution to prospective investors unless accompanied or preceded by a
current Prospectus for the Fund, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent information.
SMITH BARNEY MASSACHUSETTS
MUNICIPALS FUND
388 Greenwich Street
New York, New York 10013
FD0302 1/96
STATEMENT OF DIFFERENCES
The double dagger symbol shall be expressed as `DD'
The dagger symbol shall be expressed as `D'
