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SMITH BARNEY
MASSACHUSETTS
MUNICIPALS
FUND
------------------------------------------
May 31, 1996
[Logo]
Smith Barney Mutual Funds
Investing for your future.
Every day.
S E M I - A N N U A L R E P O R T
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Smith Barney Massachusetts Municipals Fund
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DEAR SHAREHOLDER:
We are pleased to provide you with the semi-annual report for the
Smith Barney Massachusetts Municipals Fund for the period
ended May 31, 1996. For your convenience we have summarized the
period's prevailing economic and market conditions and outlined the
investment strategy employed by the Fund during this time. A
detailed summary of performance and current holdings for the Fund
can be found in the appropriate sections that follow in the semi-
annual report.
MARKET AND ECONOMIC OVERVIEW
Interest rates declined steadily over the latter part of 1995 in
response to low inflation and very sluggish economic growth. During
the first five months of 1996, however, interest rates rose sharply
as economic reports pointed to much stronger growth than was
expected and as concerns over the stalemated federal budget
negotiations continued.
In recent months, the volatility of the municipal bond market has
increased and municipal bond yields have reached their highest
levels in over a year. However, despite continued uncertainty over
the direction of short-term interest rates, there have been some
signs of a possible municipal bond market turnaround as the higher
yields offered by municipal bonds have begun to attract a growing
number of individual and institutional investors.
MASSACHUSETTS ECONOMIC HIGHLIGHTS
The economy in Massachusetts, as well as most of the Northeast, has not
recovered to the same extent as the rest of the U.S. economy. However, the State
has made progress over the past couple of years, which has been reflected in the
state's most recent issue of general obligation bonds which were rated A+ by
Fitch Investor Services. (Fitch is a municipal bond credit rating agency.)
Massachusetts' credit rating has steadily improved, reflecting increased
financial stability and economic growth. Personal income growth has improved
steadily and employment has been rising at a rate of approximately 2% per year.
While approximately 20% of the new jobs created in Massachusetts have been in
high-tech service fields such as communications, biotechnology and software,
jobs within the
1
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computer and defense sectors continue to disappear, and the State has only
recovered about half the jobs lost during the past recession.
MASSACHUSETTS MUNICIPALS FUND'S PERFORMANCE AND INVESTMENT STRATEGY
For the six months ended May 31, 1996, the Smith Barney Massachusetts Municipals
Fund produced a total return for Class A shares of -0.98%. This performance is
roughly in line with its Lipper Analytical Services Inc. peer group average
return of -0.95% for the same period. (Lipper is a major fund tracking
organization.) The Fund paid dividends totaling $0.336 per share over the past
six months; based on a net asset value of $12.50 as of May 31, 1996, this
equates to an annualized yield of 5.38%. For a Massachusetts state resident in
the top combined federal and effective state income tax bracket of 46.85%, the
tax-free yield of 5.38% is equivalent to a taxable yield of 10.12%.
The Fund continues to be managed with a defensive strategy by holding bonds with
high quality ratings and high coupons. Maintaining competitive dividend payments
to our shareholders is an important aspect of the Fund's investment approach. As
of May 31, 1996, 97% of the Fund's holdings were rated investment grade (BBB/Baa
and higher) by either Standard and Poor's Corporation or Moody's Investor
Service, Inc., with 53% of the Fund's investments rated triple-A. (Standard and
Poor's and Moody's are major credit reporting and bond rating agencies.) The
Fund's assets are currently allocated in the following sectors: hospital
(21.7%), followed by general obligation bonds (20.0%), housing (16.9%) and
education (16.4%). The average weighted maturity of the Fund has remained
constant over the past six months at slightly over 21 years.
MUNICIPAL BOND MARKET OUTLOOK
While the day-to-day volatility in the fixed income markets is likely to
continue, the sharp increase in interest rates recently has made long-term
municipal bonds more attractive on a relative basis. In our view, competitive
pressures in the global economy and changing demographics should help to keep
inflation in check and keep wages from going up. (Labor costs constitute roughly
two-thirds of the total cost of all finished goods.) With long-term municipal
bonds providing roughly 90% of the yield available on comparable maturity
Treasury securities, we believe investors are well compensated for the potential
risks.
2
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It was not too long ago that the 'flat tax' issue was touted as potentially the
biggest issue of the upcoming Presidential election in November. The exit of
Republican candidate Steve Forbes from the Presidential race has caused the flat
tax to recede from the political debate. However, between now and November, tax
reform again could move into the political spotlight as the campaign
intensifies. Nevertheless, we believe there is little chance that radical tax
reforms will be enacted. In our view, the municipal bond market remains quite
attractive and the Massachusetts Municipals Fund is well positioned to meet the
challenges presented by the current environment.
Thank you for investing in the Smith Barney Massachusetts Municipals Fund. We
look forward to helping you achieve your financial goals.
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
June 14, 1996
</TABLE>
3
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Smith Barney Massachusetts Municipals Fund
HISTORICAL PERFORMANCE -- CLASS A SHARES
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End of Income Capital Gain Return Total
Period Ended of Period Period Dividends Distributions of Capital Returns(1)
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
5/31/96 $ 12.96 $12.50 $0.34 $0.00 $ 0.00 (0.98)%`D'
- -----------------------------------------------------------------------------------------------------------------------
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
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11/30/90 12.11 11.81 0.85 0.02 0.00 4.93
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11/30/89 11.88 12.11 0.86 0.00 0.00 9.43
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Inception*- 11/30/88 11.40 11.88 0.82 0.06 0.00 12.25`D'
=======================================================================================================================
Total $6.61 $0.25 $ 0.05
=======================================================================================================================
</TABLE>
HISTORICAL PERFORMANCE -- CLASS B SHARES
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End of Income Capital Gain Return Total
Period Ended of Period Period Dividends Distributions of Capital Returns(1)
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
5/31/96 $ 12.96 $12.50 $0.30 $0.00 $ 0.00 (1.23)%`D'
- -----------------------------------------------------------------------------------------------------------------------
11/30/95 11.35 12.96 0.63 0.00 0.00 20.15
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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
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Inception*- 11/30/92 12.52 12.63 0.05 0.00 0.00 1.29`D'
=======================================================================================================================
Total $2.30 $0.13 $0.00
=======================================================================================================================
</TABLE>
HISTORICAL PERFORMANCE -- CLASS C SHARES
<TABLE>
<CAPTION>
Net Asset Value
--------------------
Beginning End of Income Capital Gain Return Total
Period Ended of Period Period Dividends Distributions of Capital Returns(1)
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
5/31/96 $ 12.95 $12.49 $0.30 $0.00 $0.00 (1.17)%`D'
- -----------------------------------------------------------------------------------------------------------------------
11/30/95 11.35 12.95 0.63 0.00 0.00 20.04
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Inception*- 11/30/94 11.34 11.35 0.04 0.00 0.00 0.40`D'
=======================================================================================================================
Total $0.97 $0.00 $0.00
=======================================================================================================================
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS MONTHLY AND CAPITAL GAINS, IF
ANY, ANNUALLY.
4
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Smith Barney Massachusetts Municipals Fund
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
Without Sales Charge(1)
-----------------------------------
Class A Class B Class C
============================================================================================
<S> <C> <C> <C>
Six Months Ended 5/31/96`D' (0.98)% (1.23)% (1.17)%
- --------------------------------------------------------------------------------------------
Year Ended 5/31/96 4.16 3.72 3.63
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Five Years Ended 5/31/96 7.11 N/A N/A
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Inception* through 5/31/96 8.04 5.35 11.90
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2)
-----------------------------------
Class A Class B Class C
============================================================================================
<S> <C> <C> <C>
Six Months Ended 5/31/96`D' (4.95)% (5.57)% (2.17)%
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Year Ended 5/31/96 (0.02) (0.78) 2.63
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Five Years Ended 5/31/96 6.24 N/A N/A
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Inception* through 5/31/96 7.53 4.87 11.90
============================================================================================
</TABLE>
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
Without Sales Charge(1)
====================================================================================
<S> <C>
Class A (Inception* through 5/31/96) 92.23%
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Class B (Inception* through 5/31/96) 20.48
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Class C (Inception* through 5/31/96) 19.12
====================================================================================
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charge with respect to Class A shares or the applicable contingent
deferred sales charges ('CDSC') with respect to Class B and 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 within 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 reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
* Inception dates for Class A, B and C shares are December 21, 1987, November 6,
1992 and November 10, 1994, respectively.
`D' Total return is not annualized, as it may not be representative of the total
return for the year.
5
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Smith Barney Massachusetts Municipals Fund
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'
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December 1987 -- May 1996
[GRAPHIC]
`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 May 31, 1996. 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 index is unmanaged and is not subject
to the same management and trading expenses as a mutual fund. The Lipper
Massachusetts Municipal Fund Average is composed of the Fund's peer group of
mutual funds (50 funds as of May 31, 1996). 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.
6
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Smith Barney Massachusetts Municipals Fund
PORTFOLIO HIGHLIGHTS (UNAUDITED) MAY 31, 1996
INDUSTRY BREAKDOWN
[GRAPHIC]
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 52.8%
Aa AA 12.3
A A 21.3
Baa BBB 10.0
Ba BB 1.2
B B 1.4
NR NR 1.0
-----
100.0%
======
</TABLE>
7
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Smith Barney Massachusetts Municipals Fund
SCHEDULE OF INVESTMENTS (UNAUDITED) MAY 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
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<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- 100.0%
EDUCATION -- 16.4%
Boston Financing Authority, IDR, College of
Pharmacy, Project A, CONNIE LEE-Insured:
$ 750,000 AAA 5.250% due 10/1/14 $ 677,813
1,000,000 AAA 5.250% due 10/1/26 873,750
1,425,000 AAA Chelsea (School Project), AMBAC-Insured,
6.000% due 6/15/14 1,419,656
190,000 A Massachusetts Educational Loan Authority, Issue
D, Series A, 7.650% due 1/1/07(a) 196,887
Massachusetts State Health & Educational
Facilities
Authority Revenue:
430,000 AAA Community College Program, Series A,
CONNIE LEE-Insured, 6.600% due 10/1/22 435,913
1,000,000 AAA Series G, MBIA-Insured, 5.375% due 7/1/24 903,750
Suffolk University, Series B, CONNIE
LEE-Insured:
200,000 AAA 6.250% due 7/1/12 203,000
1,575,000 AAA 6.350% due 7/1/22 1,588,781
Massachusetts State Industrial Finance Agency
Revenue:
750,000 A- Clark University, Series E, 7.000% due 7/1/12 801,562
MBIA-Insured:
1,000,000 AAA College of The Holy Cross, 5.625% due 3/1/26 953,750
500,000 AAA St. Marks School, 5.375% due 1/1/21 455,000
500,000 AAA Southeastern Massachusetts University, Series A,
AMBAC-Insured, 5.900% due 5/1/12 502,500
- --------------------------------------------------------------------------------------
9,012,362
- --------------------------------------------------------------------------------------
GENERAL OBLIGATION -- 20.0%
700,000 AAA Boston GO, Series A, AMBAC-Insured, 6.500% due
7/1/12 742,000
250,000 A- Brockton Utility GO, 6.125% due 6/15/18 240,937
920,000 AAA Dedham-Westwood Water District, Refunding Bonds,
MBIA-Insured, 5.100% due 10/15/12 840,650
500,000 AAA Fall River GO, MBIA-Insured, 7.200% due 6/1/10 550,000
500,000 AAA Gloucester GO, Municipal Purpose Loan,
FSA-Insured, 5.500% due 11/15/13 469,375
250,000 AAA Groveland GO, AMBAC-Insured, 6.850% due 6/15/06 271,563
470,000 AAA Haverhill Revenue Bonds, Series A,
AMBAC-Insured, 6.700% due 9/1/10 501,725
500,000 AAA Holyoke GO, Series B, FSA-Insured, 6.125% due
8/1/13 510,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
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Smith Barney Massachusetts Municipals Fund
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
GENERAL OBLIGATION -- 20.0% (CONTINUED)
Lowell GO:
AMBAC-Insured:
$ 500,000 AAA 6.000% due 8/1/13 $ 503,125
500,000 AAA 6.000% due 8/1/14 498,750
250,000 AAA Series B, FSA-Insured, 5.600% due 11/1/12 241,563
250,000 AAA Mansfield GO, AMBAC-Insured, 6.700% due 1/15/11 266,250
500,000 AAA Massachusetts State Health & Educational
Facilities Authority Revenue, Capital Asset
Program, Series F, MBIA-Insured, 7.300% due
10/1/18 538,750
1,000,000 AAA Northhampton GO, MBIA-Insured, 5.750% due
5/15/16 975,000
250,000 AAA North Reading GO, MBIA-Insured, 6.875% due
6/15/07 269,375
795,000 A- Plymouth County GO, COP, Series A, 6.750% due
10/1/04 862,575
200,000 A Puerto Rico Commonwealth GO, 8.000% due 7/1/08 215,500
500,000 AAA Revere Municipal Purpose Loan, FSA-Insured,
6.125% due 6/15/13 505,625
500,000 AAA Salem GO, AMBAC-Insured, 6.800% due 8/15/10 546,250
750,000 Baa* Springfield GO, School Project Loan, Series B,
7.100% due 9/1/11 798,750
Virgin Islands Public Finance Authority Revenue,
Series A,
15,000 AAA Matching Funds Loan Note, Marine Midland:
Escrowed to Maturity with U.S. Government
Securities, 7.300% due 10/1/18(b) 18,113
110,000 AAA Pre-Refunded -- Escrowed with U.S.
Government
Securities to 10/1/00 Call @ 101,
7.300% due 10/1/18(b) 122,650
485,000 AAA Webster GO, AMBAC-Insured, 6.700% due 9/1/10 516,525
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11,005,676
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HOSPITALS -- 21.7%
1,000,000 AA- Boston Revenue Refunding Bonds, Boston City
Hospital, FHA-Insured, 5.750% due 2/15/23 925,000
Massachusetts State Health & Educational
Facilities
Authority Revenue:
750,000 A* Addison Gilbert Hospital, Series C,
5.750% due 7/1/23 686,250
250,000 A Beth Israel Hospital, Series E, 7.000% due
7/1/14 263,437
1,000,000 A Brockton Hospital, Series B, 8.100% due
7/1/13 1,044,130
750,000 Ba1* Central New England Health Systems, Series
A, 6.300% due 8/1/18 652,500
1,000,000 BBB+ Faulkner Hospital, Series C, 6.000% due
7/1/13 935,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
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Smith Barney Massachusetts Municipals Fund
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
HOSPITALS -- 21.7% (CONTINUED)
$ 750,000 AAA Lahey Clinic Medical Center, Series B,
MBIA-Insured, 5.375% due 7/1/23 $ 679,688
1,000,000 AAA Massachusetts General Hospital, Series F,
AMBAC-Insured, 6.250% due 7/1/20 1,005,000
Morton Hospital & Medical Center, Series B,
CONNIE LEE-Insured:
1,000,000 AAA 5.250% due 7/1/14 900,000
500,000 AAA 5.500% due 7/1/23 448,750
1,000,000 AAA Regular Linked Stars & Cars, AMBAC-Insured,
6.550% due 6/23/22 1,042,500
1,000,000 B1* Saints Memorial Medical Center, Series A,
6.000% due 10/1/23 785,000
750,000 AAA South Shore Hospital, Series E,
MBIA-Insured, 5.500% due 7/1/20 696,562
600,000 AAA University of Massachusetts Medical Center,
CONNIE LEE-Insured, 6.000% due 7/1/23 579,000
700,000 AAA Valley Regional Health System, Series C,
CONNIE LEE-Insured, 7.000% due 7/1/06 778,750
500,000 AAA Winchester Hospital, Series D, CONNIE
LEE-Insured, 5.750% due 7/1/14 478,750
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11,900,317
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HOUSING: MULTI-FAMILY -- 7.2%
1,000,000 AAA Framingham Housing Authority Mortgage Revenue,
Beaver Terrace Apartments, Series A,
GNMA-Collateralized, 6.650% due 2/20/32 1,013,750
Massachusetts State HFA:
1,120,000 A+ Housing Project, Series A, 6.375% due 4/1/21 1,120,000
1,000,000 AAA Rental Mortgage, Series E, AMBAC-Insured,
6.000% due 7/1/37(a) 957,500
795,000 BBB Puerto Rico Commonwealth, Urban Renewal &
Housing Corp. Refunding Bonds, 7.875% due
10/1/04 876,488
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3,967,738
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
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Smith Barney Massachusetts Municipals Fund
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
HOUSING: SINGLE-FAMILY -- 9.7%
Massachusetts State HFA, Housing Revenue,
Single-Family Housing:
$1,000,000 AAA Series A, MBIA-Insured, 5.950% due 12/1/14 $ 1,001,250
100,000 Aa* Series 5, 8.375% due 6/1/15 103,644
960,000 AAA Series 14, FHA-Insured, 7.700% due 12/1/14 998,400
600,000 Aa* Series 18, 7.350% due 12/1/16 632,250
1,000,000 Aa* Series 31, 6.450% due 12/1/16 1,018,750
1,000,000 Aa* Series 38, 7.200% due 12/1/26(a) 1,050,000
500,000 Aa* Series 41, 6.300% due 12/1/14(a) 503,750
- --------------------------------------------------------------------------------------
5,308,044
- --------------------------------------------------------------------------------------
INDUSTRIAL DEVELOPMENT -- 1.7%
Massachusetts State Industrial Finance Agency:
100,000 AAA IDR, Guaranteed Loan Program, Series A, 7.875%
due 5/1/07 (Mandatory Put 5/1/97 @ 100) 101,690
Resource Recovery Revenue, Series A:
250,000 BBB Refusetech Inc. Project, 6.300% due 7/1/05 255,937
500,000 NR S.E. Massachusetts Project, 9.000% due
7/1/15 552,500
- --------------------------------------------------------------------------------------
910,127
- --------------------------------------------------------------------------------------
MISCELLANEOUS -- 2.2%
500,000 A+ Massachusetts State Convention Center Authority,
Boston Common Parking Garage, Series A, 5.375%
due 9/1/13 468,125
250,000 AAA Massachusetts State Industial Finance Agency
Revenue, Concord Academy, FSA-Insured, 6.900%
due 9/1/21 266,875
500,000 BB+ Puerto Rico Port Authority Revenue, Special
Facilities, American Airlines, Series A,
6.300% due 6/1/23(a) 489,375
- --------------------------------------------------------------------------------------
1,224,375
- --------------------------------------------------------------------------------------
POLLUTION CONTROL -- 5.4%
1,000,000 BBB- Massachusetts State Industrial Finance Agency,
PCR, (Eastern Edison Co. Project), Series E,
5.875% due 8/1/08 955,000
1,500,000 AA- Massachusetts State Water Pollution, Series A,
6.375% due 2/1/15 1,546,875
415,000 BB+ Puerto Rico Industrial, Medical & Environmental
Pollution Control Facilities, Finance
Authority Revenue Bonds, Special Facilities,
American Airlines, Series A,
8.750% due 12/1/25 429,044
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31, 1996
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
POLLUTION CONTROL -- 5.4% (CONTINUED)
$ 30,000 A Springfield Industrial Development Finance
Authority, PCR, (Monsanto Company Project),
9.100% due 11/1/04 $ 33,750
- --------------------------------------------------------------------------------------
2,964,669
- --------------------------------------------------------------------------------------
TRANSPORTATION -- 3.3%
750,000 BBB Guam Airport Authority Revenue, Series A,
6.500% due 10/1/23 749,062
1,065,000 A+ Massachusetts Bay Transportation Authority,
Series C, 6.100% due 3/1/23 1,074,319
- --------------------------------------------------------------------------------------
1,823,381
- --------------------------------------------------------------------------------------
UTILITIES -- 4.7%
280,000 A Boston Water & Sewer Commission Revenue , Series
A, 7.750% due 11/1/06 290,074
300,000 AAA Lynn Water & Sewer Commission, General Revenue,
FGIC-Insured, 5.500% due 12/1/10 291,750
2,000,000 BBB+ Massachusetts Municipal Wholesale Electric
Company, Power Supply Revenue, Series D,
6.125% due 7/1/19 1,975,000
- --------------------------------------------------------------------------------------
2,556,824
- --------------------------------------------------------------------------------------
WATER & SEWER -- 7.7%
Massachusetts State Water Resource Authority,
Series B:
1,420,000 A 6.250% due 11/1/10 1,471,475
1,000,000 A 5.500% due 3/1/17 928,750
1,000,000 AAA MBIA-Insured, 5.500% due 3/1/17 942,500
1,000,000 AAA South Essex Sewer District, Series B,
MBIA-Insured, 5.250% due 6/15/24 892,500
- --------------------------------------------------------------------------------------
4,235,225
- --------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $55,079,497**) $54,908,738
- --------------------------------------------------------------------------------------
</TABLE>
(a) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) 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.
** Aggregate cost for Federal income tax purposes is substantially the same.
`See pages 13 and 14 for definitions of ratings and certain security
descriptions.
SEE NOTES TO FINANCIAL STATEMENTS.
12
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<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>
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 circum-
stances 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.
BB -- Bonds rated 'BB' have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B -- Bonds rated 'B' have a greater vulnerability to default but currently have
the capacity to meet interest payments and principal payments. Adverse
business, 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.
Ba -- Bonds that are rated 'Ba' are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
</TABLE>
13
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
SHORT-TERM SECURITIES RATINGS
<TABLE>
<S> <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 HFA -- Housing Finance Authority
Governors
AIG -- American International IDA -- Industrial Development
Guaranty
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
CONNIE LEE -- College Construction Loan LOC -- Letter of Credit
Insurance Association MBIA -- Municipal Bond Investors
COP -- Certificate of Assurance Corporation
Participation
EDA -- Economic Development MVRICS -- Municipal Variable Rate
Authority lnverse
ETM -- Escrowed To Maturity Coupon Security
FLAIRS -- Floating Adjustable PCR -- Pollution Control Revenue
Interest
Rate Securities PSF -- Permanent School Fund
FGIC -- Financial Guaranty RAN -- Revenue Anticipation Notes
Insurance
Company RIBS -- Residual Interest Bonds
FHA -- Federal Housing RITES -- Residual Interest
Administration Tax-Exempt
FHLMC -- Federal Home Loan Mortgage Securities
Corporation TAN -- Tax Anticipation Notes
FNMA -- Federal National Mortgage TECP -- Tax-Exempt Commercial Paper
Association TOB -- Tender Option Bonds
FRTC -- Floating Rate Trust TRAN -- Tax and Revenue
Certificates Anticipation
FSA -- Federal Savings Association Notes
GIC -- Guaranteed Investment SYCC -- Structured Yield Curve
Contract
GNMA -- Government National Certificate
Mortgage
Association VA -- Veterans Administration
GO -- General Obligation VRDD -- Variable Rate Daily Demand
HDC -- Housing Development VRWE -- Variable Rate Wednesday
Corporation Demand
</TABLE>
14
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) MAY 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $55,079,497) $ 54,908,738
Interest receivable 1,162,240
Receivable for Fund shares sold 183,321
Receivable for securities sold 5,000
- --------------------------------------------------------------------------------------
TOTAL ASSETS 56,259,299
- --------------------------------------------------------------------------------------
LIABILITIES:
Payable to bank 1,263,459
Dividends payable 232,479
Distribution fees payable 19,047
Investment advisory fees payable 9,324
Administration fees payable 5,427
Accrued expenses 90,139
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,619,875
- --------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 54,639,424
- --------------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 4,371
Capital paid in excess of par value 54,980,729
Undistributed net investment income 22,600
Accumulated net realized loss on security transactions (197,517)
Net unrealized depreciation of investments (170,759)
- --------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 54,639,424
- --------------------------------------------------------------------------------------
SHARES OUTSTANDING:
Class A 2,149,646
- --------------------------------------------------------------------------------------
Class B 2,207,483
- --------------------------------------------------------------------------------------
Class C 13,524
- --------------------------------------------------------------------------------------
NET ASSET VALUE:
- --------------------------------------------------------------------------------------
Class A (and redemption price) $12.50
- --------------------------------------------------------------------------------------
Class B * $12.50
- --------------------------------------------------------------------------------------
Class C ** $12.49
- --------------------------------------------------------------------------------------
CLASS A MAXIMIUM PUBLIC OFFERING PRICE PER SHARE
(net asset value plus 4.17% of net asset value per share) $13.02
- --------------------------------------------------------------------------------------
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within one year from initial purchase (See Note 4).
** 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.
15
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED MAY 31, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest $ 1,746,620
- --------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 4) 85,814
Administration fees (Note 4) 57,209
Distribution fees (Note 4) 114,705
Audit and legal 23,000
Shareholder communications 22,500
Shareholder and system servicing fees 18,709
Registration fees 17,500
Pricing service fees 7,300
Trustees' fees 6,500
Custody 2,000
Other 2,374
- --------------------------------------------------------------------------------------
TOTAL EXPENSES 357,611
Less: Investment advisory and administration fee waiver (Note 4) (54,349)
- --------------------------------------------------------------------------------------
NET EXPENSES 303,262
- --------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,443,358
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 8,089,515
Cost of securities sold 7,695,751
- --------------------------------------------------------------------------------------
NET REALIZED GAIN 393,764
- --------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of
Investments:
Beginning of period 2,282,929
End of period (170,759)
- --------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED DEPRECIATION (2,453,688)
- --------------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (2,059,924)
- --------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM OPERATIONS $ (616,566)
- --------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
AND THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,443,358 $ 2,826,954
Overdistribution of net investment income -- (99,356)
Net realized gain (loss) 393,764 (145,044)
Increase in net unrealized appreciation
(depreciation) (2,453,688) 7,360,473
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (616,566) 10,042,383
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 3):
Net investment income (1,420,758) (2,792,554)
Overdistribution of net investment income -- (99,356)
- -----------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (1,420,758) (2,891,910)
- -----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 2,665,379 7,850,525
Net asset value of shares issued for reinvestment
of dividends 737,668 1,841,633
Cost of shares reacquired (4,757,132) (9,799,797)
- -----------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (1,354,085) (107,639)
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS (3,391,409) 7,042,834
NET ASSETS:
Beginning of period 58,030,833 50,987,999
- -----------------------------------------------------------------------------------------
END OF PERIOD* $ 54,639,424 $ 58,030,833
- -----------------------------------------------------------------------------------------
* Includes undistributed net investment income of: $ 22,600 --
- -----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 ask prices by an independent
pricing service; (c) securities maturing within 60 days 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)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (h) 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; (i) 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 (j) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
18
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. FUND CONCENTRATION
Since the Fund invests primarily in obligations of issuers within the
Commonwealth of Massachusetts, it is subject to possible concentration risks
associated with economic, political or legal developments or industrial or
regional matters specifically affecting Massachusetts.
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. 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. The Fund
pays SBMFM a fee calculated at the annual rate of 0.30% of its average daily net
assets. This fee is calculated daily and paid monthly. For the six months ended
May 31, 1996, the Fund waived $29,463 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 six months ended May 31,
1996, the Fund waived $24,886 of its administration fees.
Smith Barney Inc. ('SB'), another subsidiary of SBH, acts as distributor of
the Fund's shares. For the six months ended May 31, 1996, SB received sales
charges of approximately $11,000 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 six months ended May 31, 1996, CDSCs paid to SB for Class B
shares were approximately $34,000.
19
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 of each respective 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
of each class, respectively. For the six months ended May 31, 1996, total
Distribution Plan fees incurred were:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Distribution Plan Fees $21,379 $92,820 $506
- --------------------------------------------------------------------------------------
</TABLE>
All officers and one Trustee of the Fund are employees of SB.
5. INVESTMENTS
For the six months ended May 31, 1996, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------
Purchases $8,196,157
- --------------------------------------------------------------------------------------
Sales 8,089,515
- --------------------------------------------------------------------------------------
</TABLE>
At May 31, 1996, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were approximately
as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------
Gross unrealized appreciation $ 1,154,120
Gross unrealized depreciation (1,324,879)
- --------------------------------------------------------------------------------------
Net unrealized depreciation $ (170,759)
- --------------------------------------------------------------------------------------
</TABLE>
6. CAPITAL LOSS CARRYFORWARDS
At November 30, 1995, the Fund had, for Federal tax purposes, $591,281 of
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.
20
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 Amounts $446,237 $145,044
- --------------------------------------------------------------------------------------
</TABLE>
7. SHARES OF BENEFICIAL INTEREST
As of May 31, 1996, 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 May 31, 1996, 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 $26,206,487 $28,614,732 $163,881
- ----------------------------------------------------------------------------------------
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1996 NOVEMBER 30, 1995
------------------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 70,416 $ 901,379 203,917 $ 2,524,279
Shares issued on reinvestment 30,162 387,072 82,621 1,022,258
Shares redeemed (200,469) (2,557,763) (472,105) (5,793,837)
- ---------------------------------------------------------------------------------------------------------
Net Decrease (99,891) $(1,269,312) (185,567) $(2,247,300)
- ---------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 134,841 $ 1,735,639 421,164 $ 5,187,847
Shares issued on reinvestment 27,304 350,289 65,930 817,336
Shares redeemed (171,703) (2,199,369) (321,620) (3,925,753)
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (9,558) $ (113,441) 165,474 $ 2,079,430
- ---------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 2,257 $ 28,361 11,151 $ 138,399
Shares issued on reinvestment 24 307 166 2,039
Shares redeemed -- -- (6,691) (80,207)
- ---------------------------------------------------------------------------------------------------------
Net Increase 2,281 $ 28,668 4,626 $ 60,231
- ---------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
FINANCIAL HIGHLIGHTS
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
<TABLE>
<CAPTION>
CLASS A SHARES 1996(1) 1995 1994 1993(2) 1992 1991
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $12.96 $11.35 $13.26 $12.63 $12.28 $11.81
- -------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (3) 0.34 0.69 0.70 0.72 0.77 0.84
Net realized and unrealized
gain (loss) (0.46) 1.61 (1.85) 0.72 0.43 0.48
- -------------------------------------------------------------------------------------------------------
Total Income (Loss) From
Operations (0.12) 2.30 (1.15) 1.44 1.20 1.32
- -------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.34) (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 (0.34) (0.69) (0.76) (0.81) (0.85) (0.85)
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.50 $12.96 $11.35 $13.26 $12.63 $12.28
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN (0.98)%`DD' 20.73% (9.07)% 11.74% 10.06% 11.57%
- -------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000s) $26,879 $29,159 $27,634 $32,592 $27,354 $19,621
- -------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3) 0.80%`D' 0.83% 0.81% 0.82% 0.71% 0.66%
Net investment income 5.32`D' 5.42 5.55 5.49 6.12 6.89
- -------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 14% 10% 37% 10% 73% 87%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended May 31, 1996 (unaudited).
(2) 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.
(3) The investment adviser waived all or part of its fees for the six months
ended May 31, 1996 and the five years ended November 30, 1995. If such fees
were not waived, the per share effect on net investment income and the
expense ratios would have been as follows:
<TABLE>
<CAPTION>
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
---------------------------------------------- ------------------------------------------------------
1996 1995 1994 1993 1992 1991 1996 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.01 $0.03 $0.04 $0.05 $0.08 $0.07 1.00%`D' 1.07% 1.09% 1.18% 1.32% 1.28%
</TABLE>
`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
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
<TABLE>
<CAPTION>
CLASS B SHARES 1996(1) 1995 1994 1993 1992(2)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.96 $11.35 $13.26 $12.63 $12.52
- -------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (3) 0.30 0.63 0.63 0.66 0.06
Net realized and unrealized gain (loss) (0.46) 1.61 (1.84) 0.72 0.10
- -------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.16) 2.24 (1.21) 1.38 0.16
- -------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.30) (0.62) (0.63) (0.67) (0.05)
Overdistribution of net investment income -- (0.01) (0.01) (0.01) --
Net realized gains -- -- (0.06) (0.07) --
- -------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.63) (0.70) (0.75) (0.05)
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.50 $12.96 $11.35 $13.26 $12.63
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN (1.23)%`DD' 20.15% (9.50)% 11.09% 1.29%`DD'
- -------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000s) $27,591 $28,726 $23,279 $22,317 $2,938
- -------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3) 1.32%`D' 1.35% 1.32% 1.31% 1.34%`D'
Net investment income 4.80`D' 4.94 5.04 4.99 5.49 `D'
- -------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 14% 10% 37% 10% 73%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended May 31,1996 (unaudited).
(2) For the period from November 6, 1992 (inception date) to November 30, 1992.
(3) The investment adviser has waived all or part of its fees for the six months
ended May 31, 1996, the three years ended November 30, 1995 and the period
ended November 30, 1992. If such fees were not waived, the per share effect
on net investment income and the expense ratios would have been as follows:
<TABLE>
<CAPTION>
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
------------------------------------------ ----------------------------------------------------------
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
----- ----- ------ ----- ----- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class B $0.01 $0.04 $0.03 $0.05 $0.01 1.52%`D' 1.59% 1.60% 1.68% 1.94%`D'
</TABLE>
`DD' Total return is not annualized, as it may not be representative of the
total return for the year.
`D' Annualized.
23
<PAGE>
<PAGE>
Smith Barney Massachusetts Municipals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD:
<TABLE>
<CAPTION>
CLASS C SHARES 1996(1) 1995 1994(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.95 $11.35 $11.34
- -----------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (3) 0.30 0.63 0.05
Net realized and unrealized gain (loss) (0.46) 1.61 --
- -----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.16) 2.23 0.05
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.30) (0.63) (0.04)
Overdistribution of net investment income -- (0.00)* (0.00)*
- -----------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.63) (0.04)
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.49 $12.95 $11.35
TOTAL RETURN (1.17)%`DD' 20.04% 0.40%`DD'
- -----------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000S) $169 $146 $75
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses (3) 1.38 %`D' 1.35% 1.36%`D'
- -----------------------------------------------------------------------------------------------
Net investment income 4.74 `D' 4.65 5.00`D'
- -----------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 14 % 10% 37 %
</TABLE>
(1) For the six months ended May 31,1996 (unaudited).
(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 six months
ended May 31, 1996, the year ended November 30, 1995 and the period ended
November 30, 1994. If such fees were not waived, the per share effect on net
investment income and the expense ratios would have been as follows:
<TABLE>
<CAPTION>
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
------------------------- -------------------------
1996 1995 1994 1996 1995 1994
----- ----- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Class C $0.01 $0.04 $0.00* 1.58%`D' 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.
24
<PAGE>
<PAGE>
SMITH BARNEY
MASSACHUSETTS
MUNICIPALS FUND
[LOGO]
TRUSTEES
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr.
OFFICERS
Heath B. McLendon
Chief Executive Officer
Jessica Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Lawrence T. McDermott
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
INVESTMENT ADVISER
Smith Barney Mutual Funds
Management Inc.
DISTRIBUTOR
Smith Barney Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER
SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
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
FD2227 7/96
Statement of Differences
The dagger symbol shall be expressed as 'D'.
The double dagger shall be expressed as 'DD'.
