<PAGE>
[GRAPHIC]
Smith Barney
Massachusetts
Municipals Fund
------------------
SEMI-ANNUAL REPORT
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May 31, 1999
Smith Barney Mutual Funds
<PAGE>
Smith Barney
Massachusetts
Municipals Fund
[PHOTO] [PHOTO]
HEATH B. PETER M.
McLENDON COFFEY
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney
Massachusetts Municipals Fund ("Fund") for the period ended May 31, 1999. Please
note that on February 2, 1999, Peter M. Coffey assumed management
responsibilities for the Fund. Mr. Coffey has over 30 years of investment
experience and currently manages over $2 billion in assets.
In this report, we summarize the period's prevailing economic and market
conditions and outline our portfolio strategy. A detailed summary of the Fund's
performance can be found in the appropriate sections that follow.
Performance Update
For the six-months ended May 31, 1999, the Class A shares of the Massachusetts
Municipals Fund posted a total return of 0.23%, outperforming the average for
Massachusetts tax-exempt funds according to Lipper Analytical Services, Inc. of
0.13% for the same period. (Lipper is an independent fund-tracking
organization.) For performance information on the Fund's other share classes,
please refer to pages four through six.
Market and Economic Overview
The last six months were a period of economic growth at home and recovery
abroad. Following the events surrounding the Russian debt default in August of
1998--which included a sharp drop in bond yields and a 0.75% decrease in
long-term interest rates--yields have increased in the past two months with
greater volatility. Throughout this period of volatility, municipal bond yields
were relatively stable in comparison to U.S. Treasury bonds, and we expect this
trend to continue despite rising inflation fears and probable interest rate
hikes.
During the first half of 1999, U.S. economic growth continued at a robust pace,
posting a 4.3% annualized Gross Domestic Product growth rate for the first
quarter. Furthermore, the labor market continued to be extremely tight, as the
unemployment rate fell to a 29-year low of 4.2% in March. Defying the
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Smith Barney Massachusetts Municipals Fund 1
<PAGE>
expectations of many economists, inflation--as measured by the Consumer Price
Index ("CPI")--was virtually absent. Many economists have credited productivity
gains in the form of increased use of technology and sagging global demand with
keeping inflation under control. However, in the month of April, the CPI rose by
0.7%--its largest monthly increase in nine years. This, coupled with signs that
many world economies were in the nascent stages of growth and recovery, deepened
fears that inflationary pressures were reaching a breaking point. In response,
the Federal Reserve Board ("Fed") announced a bias towards a tightening monetary
policy, signaling that interest rates may be increased at the Fed's next Federal
Open Market Committee meeting on June 29th and June 30th, 1999. (After the close
of the reporting period, the Fed did raise short-term interest rates 0.25% on
June 30, 1999.)
The impact of these economic conditions on the bond market has been an increase
in yields, especially after inflation fears escalated in the second quarter.
Between April 8th and June 24th, municipal bond yields--as measured by the Bond
Buyer's 25 Revenue Index--grew 0.33% to 5.62%. In the same period, 30-year U.S.
Treasury bond yields rose 0.71% to 6.16%. These rising yields reflect that the
expectation of higher inflation is already being priced into the market.
Municipal bond yields, as expected, have not risen as dramatically as Treasury
bond yields. Although municipal bonds may exhibit a somewhat greater degree of
volatility if interest rates continue to rise, their relative stability of
municipal bonds against market fluctuations makes it an attractive option for
risk-averse investors.
Over the long term, the real rate of returns (after subtracting the effects of
inflation and taxes) is what matters most for fixed-income investors. We believe
that on the basis, municipal bonds are an excellent value. A diligent Fed policy
with the effects of global competition and the high productivity of our economy
should serve to keep inflation at historically low levels. Moreover, long-term
municipal bonds are currently providing approximately 90% of long-term U.S.
Treasury yields. Typically, municipal bonds are considered a good value when
they yield about 85% of comparable-maturity U.S. Treasury bonds.
Massachusetts Economic Highlights
Massachusetts' debt is rated at the low end of the double-A category by all
three major rating agencies with a stable outlook. The Bay State's economy is
growing at a strong pace with per capita personal income ranking the third
highest in the nation. While the Commonwealth's heavy debt load (also third
highest in the nation) is a detraction, this is offset by a diverse economy,
high wealth levels and continuing strong fiscal controls.
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2 1999 Semi-Annual Report to Shareholders
<PAGE>
Investment Strategy
The Fund's investment strategy seeks to provide Massachusetts investors with as
high a level of dividend income exempt* from federal and Massachusetts personal
income taxes as is consistent with prudent investment management and the
preservation of capital.
Although municipal bonds are considered among the most stable of fixed income
investments, unlike U.S. Government bonds which are guaranteed as to the timely
payment of principal and interest, they do carry some degree of risk. These
risks include interest rate risk (a substantial rise in interest rates may cause
the value of the Fund's portfolio to decline), reinvestment risk (assets
invested in bonds that mature or are called away may be invested in bonds paying
lower coupon interest) and credit risk (an issuer of a security owned by the
Fund may default on its obligation or its credit rating may be downgraded).
We seek to reduce risk in the Fund's portfolio through thoughtful issue
selection and careful monitoring of its credit profile maturity and call
structure. During the reporting period, we have removed some of the
longer-maturity bonds in response to rising interest rates. The average weighted
maturity was 20.4 years on May 31, 1999 compared to 21 years on May 31, 1998.
The average life, which includes the impact of callable bonds was, 14.3 years on
May 31, 1999.
In addition, we have maintained our high credit quality emphasis. As of May 31,
1999, approximately 95% of the Fund's holdings were rated investment grade or
better, of which approximately 54% were rated triple-A by either Standard &
Poor's Ratings Service or Moody's Investors Service Inc. As of May 31, 1999, the
Fund's top three sectors were hospital bonds (19.7%), general obligation bonds
(18.9%), transportation bonds (14.2%) and education bonds (10.9%).
Municipal Bond Market Outlook
We remain cautiously optimistic on the municipal bond market in the coming
months. In our view, U.S. economic growth should remain healthy with
productivity gains helping to contain higher inflationary pressures. Clearly,
the Fed's monetary policy bias has changed from the latter part of 1998. After
raising short-term interest rates on June 30, 1999, it is possible that the Fed
will continue to take back the interest rate cuts initiated last year. However,
until more substantial evidence of rising inflation appears, we do not believe
that the Fed will begin an extended campaign of raising interest rates.
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* A portion of the income may be subject to the alternative minimum tax as
well as state and local taxes.
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Smith Barney Massachusetts Municipals Fund 3
<PAGE>
In closing, thank you for your investment in the Smith Barney Massachusetts
Municipals Fund. We look forward to helping you pursue your investment goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
and Investment Officer
July 1, 1999
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Principal Risks of Investing in the Fund
Investors could lose money on their investment in the Fund, or the Fund may not
perform as well as other investments, if:
o Interest rates rise, causing the value of the Fund's portfolio to decline;
o The issuer of a security owned by the Fund defaults on its obligation to
pay principal and/or interest or the security's credit rating is
downgraded. This risk is higher for below investment grade bonds, which
are considered speculative because they have a higher risk of issuer
default, are subject to greater price volatility and may be illiquid;
o Massachusetts municipal securities fall out of favor with investors;
o Unfavorable legislation affects the tax-exempt status of municipal bonds;
o The manager's judgment about the attractiveness, value or income potential
of a particular security proves to be incorrect.
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4 1999 Semi-Annual Report to Shareholders
<PAGE>
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Historical Performance -- Class A Shares
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<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
5/31/99 $13.32 $13.04 $ 0.31 $ 0.00 $ 0.00 0.23%+
- ----------------------------------------------------------------------------------------------------
11/30/98 13.18 13.32 0.65 0.20 0.00 7.66
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11/30/97 12.99 13.18 0.67 0.12 0.00 7.85
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11/30/96 12.96 12.99 0.67 0.00 0.00 5.65
- ----------------------------------------------------------------------------------------------------
11/30/95 11.35 12.96 0.69 0.00 0.00 20.73
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11/30/94 13.26 11.35 0.70 0.06 0.00 (9.07)
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11/30/93 12.63 13.26 0.74 0.07 0.00 11.74
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11/30/92 12.28 12.63 0.77 0.04 0.04 10.06
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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
====================================================================================================
Total $ 7.75 $ 0.51 $ 0.05
====================================================================================================
</TABLE>
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Historical Performance -- Class B Shares
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<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
5/31/99 $13.30 $13.03 $ 0.28 $ 0.00 $ 0.00 0.05%+
- -----------------------------------------------------------------------------------------------------------
11/30/98 13.17 13.30 0.58 0.20 0.00 7.05
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11/30/97 12.99 13.17 0.61 0.12 0.00 7.25
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11/30/96 12.96 12.99 0.61 0.00 0.00 5.14
- -----------------------------------------------------------------------------------------------------------
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)
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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+
===========================================================================================================
Total $ 4.08 $ 0.45 $ 0.00
===========================================================================================================
</TABLE>
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Smith Barney Massachusetts Municipals Fund 5
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Historical Performance -- Class L Shares
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<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
5/31/99 $13.30 $13.02 $ 0.28 $ 0.00 $ 0.00 (0.04)%+
- -------------------------------------------------------------------------------------------------------------
11/30/98 13.16 13.30 0.58 0.20 0.00 7.11
- -------------------------------------------------------------------------------------------------------------
11/30/97 12.98 13.16 0.60 0.12 0.00 7.21
- -------------------------------------------------------------------------------------------------------------
11/30/96 12.95 12.98 0.60 0.00 0.00 5.09
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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+
=============================================================================================================
Total $ 2.73 $ 0.32 $ 0.00
=============================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
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Average Annual Total Returns
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Without Sales Charges(1)
-----------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 5/31/99+ 0.23% 0.05% (0.04)%
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Year Ended 5/31/99 3.96 3.43 3.41
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Five Years Ended 5/31/99 7.06 6.52 N/A
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Ten Years Ended 5/31/99 7.21 N/A N/A
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Inception* through 5/31/99 7.90 6.13 8.56
================================================================================
Without Sales Charges(2)
-----------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 5/31/99+ (3.81)% (4.36)% (1.98)%
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Year Ended 5/31/99 (0.23) (0.96) 1.44
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Five Years Ended 5/31/99 6.20 6.37 N/A
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Ten Years Ended 5/31/99 6.77 N/A N/A
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Inception* through 5/31/99 7.51 6.13 8.33
================================================================================
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6 1999 Semi-Annual Report to Shareholders
<PAGE>
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Cumulative Total Returns
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Without Sales Charges(1)
================================================================================
Class A (5/31/89 through 5/31/99) 100.66%
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Class B (Inception* through 5/31/99) 47.77
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Class L (Inception* through 5/31/99) 45.40
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed within one year from 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 L shares reflect the deduction
of a 1.00% CDSC, which applies if shares are redeemed within the first
year of purchase.
+ 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 L shares are December 21, 1987,
November 6, 1992 and November 10, 1994, respectively.
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Smith Barney Massachusetts Municipals Fund 7
<PAGE>
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Historical Performance (unaudited)
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Growth of $10,000 Invested in Class A Shares of
the Smith Barney Massachusetts Municipals Fund vs.
Lehman Brothers Municipal Bond Index and
Lipper Massachusetts Municipal Fund Average+
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May 1989 -- May 1999
[LINE GRAPH]
<TABLE>
<CAPTION>
Smith Barney Massachusetts Lehman Brothers Lipper Massachusetts
Municipals Fund Municipal Bond Index Municipal Fund Average
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
5/89 9597 10000 10000
11/89 9909 10447 10311
11/90 10398 11252 10921
11/91 11601 12406 12090
11/92 12767 13650 13330
11/93 14267 15163 14887
11/94 12973 14367 13826
11/95 15662 17084 16381
11/96 16547 18087 17201
11/97 17845 19384 18333
11/98 19213 21215 19497
5/99 19257 21387 19523
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares at May 31,
1989, 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, 1999. The Lehman Brothers Municipal Bond Index
is a broad based, total return index comprised of investment grade, fixed
rate municipal bonds selected from issues larger than $50 million issued
since January 1991. 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 (58 funds as of May 31, 1999). 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.
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8 1999 Semi-Annual Report to Shareholders
<PAGE>
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Portfolio Highlights (unaudited) May 31, 1999
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Industry Breakdown
[PIE CHART]
Transportation 14.2%
Industrial Development 8.9%
Utilities 2.8%
Education 10.9%
Life Care Systems 6.9%
Miscellaneous 5.3%
Pollution Control 2.3%
General Obligation 18.9%
Water & Sewer 1.2%
Housing: Multi-Family 3.1%
Housing: Single-Family 3.7%
Hospitals 19.7%
Escrowed to Maturity 2.1%
Summary of Investments by Combined Ratings
Standard & Percentage of
Moody's and/or Poor's Total Investments
- --------------------------------------------------------------------------------
Aaa AAA 54.0%
Aa AA 12.3
A A 12.7
Baa BBB 15.6
B B 2.0
NR NR 3.4
-----
100.0%
=====
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Smith Barney Massachusetts Municipals Fund 9
<PAGE>
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Schedule of Investments (unaudited) May 31, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
<C> <C> <S> <C>
MUNICIPAL BONDS AND NOTES -- 100%
Education -- 10.9%
$ 130,000 A Massachusetts Educational Loan Authority, Issue D,
Series A, 7.650% due 1/1/07(b) $ 132,825
Massachusetts State Health & Educational Facilities
Authority Revenue:
1,000,000 AAA Massachusetts Institute of Technology, Series I-2,
4.750% due 1/1/28 926,250
1,000,000 AAA Northeastern University, Series G, MBIA-Insured,
5.000% due 10/1/18 973,750
1,000,000 AAA University of Massachusetts, Series A,
AMBAC-Insured, 5.000% due 7/1/18 962,500
Massachusetts State Industrial Finance Agency Revenue:
1,000,000 AAA Assumption College Issue, CONNIE LEE-Insured,
6.000% due 7/1/26 1,063,750
750,000 A- Clark University, Series E, 7.000% due 7/1/12 798,750
500,000 Baa1* Concord Academy, 5.450% due 9/1/17 498,750
1,000,000 BBB- Dana Hall School Issue, 5.900% due 7/1/27 1,017,500
1,000,000 AAA Simons Rock College, AMBAC-Insured,
5.500% due 6/1/27 1,017,500
500,000 AAA Southeastern Massachusetts University, Series A,
AMBAC-Insured, 5.900% due 5/1/12 540,625
- ----------------------------------------------------------------------------------------------------------
7,932,200
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Escrowed to Maturity(c) -- 2.1%
1,170,000 AAA Boston Water & Sewer Community Revenue,
10.875% due 1/1/09 1,564,875
- ----------------------------------------------------------------------------------------------------------
General Obligation -- 18.9%
250,000 A Brockton Utility GO, 6.125% due 6/15/18 271,250
1,000,000 AAA Fitchburg GO, MBIA-Insured, 4.500% due 2/15/19 916,250
250,000 AAA Groveland GO, AMBAC-Insured, 6.850% due 6/15/06 267,813
1,000,000 AAA Haverhill Revenue Bonds, Series A, AMBAC-Insured,
6.700% due 9/1/10 1,072,500
Holyoke GO, FSA-Insured:
1,330,000 AAA 5.200% due 8/1/17 1,343,300
500,000 AAA Series B, 6.125% due 8/1/13 541,250
500,000 AAA Lowell GO, AMBAC-Insured, 6.000% due 8/1/14 545,000
1,250,000 Aaa* Lynn GO, MBIA-Insured, 5.000% due 2/15/17 1,231,250
5,000,000 AA- Massachusetts State GO, Series C, zero coupon due 8/1/18 1,849,999
250,000 AAA North Reading GO, MBIA-Insured, 6.875% due 6/15/07 267,500
795,000 AA- Plymouth County GO, COP, Series A, 6.750% due 10/1/04 879,469
Revere GO, Series A, FSA-Insured:
300,000 AAA 5.400% due 6/15/15 310,125
265,000 AAA 5.400% due 6/15/16 272,288
500,000 AAA Revere Municipal Purpose Loan, Bank Qualified,
FSA-Insured, 6.125% due 6/15/13 543,750
</TABLE>
See Notes to Financial Statements.
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10 1999 Semi-Annual Report to Shareholders
<PAGE>
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Schedule of Investments (unaudited) (continued) May 31, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
<C> <C> <S> <C>
General Obligation -- 18.9% (continued)
$ 500,000 AAA Salem GO, AMBAC-Insured, 6.800% due 8/15/10 $ 536,875
1,500,000 AAA Springfield Municipal Purpose Loan, FSA-Insured,
5.000% due 11/15/18 1,466,250
1,500,000 Aaa* Ware GO, FGIC-Insured, 5.000% due 12/15/18 1,466,250
- ----------------------------------------------------------------------------------------------------------
13,781,119
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Hospitals -- 19.7%
Massachusetts State Health & Educational Facilities
Authority Revenue:
750,000 A3* Addison Gilbert Hospital, Series C, 5.750% due 7/1/23 765,000
250,000 BBB+ Beth Israel Hospital, Series E, 7.000% due 7/1/14 255,485
1,000,000 A Brockton Hospital, Series B, 8.100% due 7/1/13 1,011,000
1,250,000 BBB+ Cape Cod Healthcare, Series B, 5.450% due 11/15/23 1,214,063
1,000,000 BBB Caritas Christ, 5.625% due 7/1/20 973,750
750,000 Baa3* Central New England Health Systems, Series A,
6.300% due 8/1/18 780,000
1,000,000 Baa1* Faulkner Hospital, Series C, 6.000% due 7/1/13 1,090,000
1,000,000 AAA Hallmark Health System, Series A, FSA-Insured,
5.000% due 7/1/17 972,500
1,500,000 BBB+ Jordan Hospital, Series D, 5.375% due 10/1/28 1,426,875
1,000,000 AAA Massachusetts General Hospital, Series F,
AMBAC-Insured, 6.250% due 7/1/20 1,101,250
500,000 AAA Medical Center of Central Massachusetts, Series B,
9.570% due 6/23/22(d) 640,625
500,000 AAA Morton Hospital & Medical Center, Series B,
CONNIE LEE-Insured, 5.500% due 7/1/23 503,750
1,500,000 Ba2* Saint Memorial Medical Center, Series A,
6.000% due 10/1/23 1,490,625
700,000 AAA Valley Regional Health System, Series C,
CONNIE LEE-Insured, 7.000% due 7/1/06 807,625
Youville House, FHA-Insured, Project A:
500,000 Aa2* 5.950% due 2/15/17 525,000
750,000 Aa2* 6.050% due 2/15/29 786,563
- ----------------------------------------------------------------------------------------------------------
14,344,111
- ----------------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.1%
1,000,000 AAA Framingham Housing Authority Mortgage Revenue,
Beaver Terrace Apartments, Series A,
GNMA-Collateralized, 6.650% due 2/20/32 1,060,000
1,120,000 A+ Massachusetts State HFA, Housing Project, Series A,
6.375% due 4/1/20 1,192,800
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2,252,800
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
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Smith Barney Massachusetts Municipals Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) May 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
<C> <C> <S> <C>
Housing: Single-Family -- 3.7%
Massachusetts State HFA, Housing Revenue,
Single-Family Housing:
$ 580,000 Aa3* Series 18, 7.350% due 12/1/16 $ 613,350
1,000,000 A+ Series 31, 6.450% due 12/1/16 1,055,000
935,000 A+ Series 38, 7.200% due 12/1/26(b) 995,775
- ----------------------------------------------------------------------------------------------------------
2,664,125
- ----------------------------------------------------------------------------------------------------------
Industrial Development -- 8.9%
1,000,000 NR Boston Industrial Development Financing Authority
Revenue, First Mortgage, Springhouse Inc.,
5.875% due 7/1/18 988,750
Massachusetts State Development Financing Agency Revenue:
1,000,000 BBB Berkshire Retirement Community Inc.,
5.600% due 7/1/19 983,750
1,850,000 Aaa* Brooks School Issue B, MBIA-Insured, 5.000% due 7/1/24 1,773,688
1,000,000 A Curry College, Series A, 5.375% due 3/1/19 1,000,000
Massachusetts State Industrial Finance Agency,
Resource Recovery Revenue, Series A:
250,000 Baa1* Refusetech Inc. Project, 6.300% due 7/1/05 267,188
500,000 NR S.E. Massachusetts Project, 9.000% due 7/1/15 549,375
1,000,000 NR Massachusetts State Industrial Finance Agency Revenue,
(Chestnut Knoll Project A), 5.625% due 2/15/25 957,500
- ----------------------------------------------------------------------------------------------------------
6,520,251
- ----------------------------------------------------------------------------------------------------------
Life Care Systems -- 6.9%
Massachusetts Industrial Finance Agency
Health Care Facilities:
1,450,000 AAA Arbors at Amherst Project, Assisted Living Facilities
Revenue, GNMA-Collateralized, 5.750% due 6/20/17(b) 1,520,688
1,500,000 AAA Arbors at Taunton Project, Assisted Living Facilities
Revenue, GNMA-Collateralized, 5.500% due 6/20/40(b) 1,477,500
2,000,000 A Jewish Geriatric Services, Series B,
5.00% due 5/15/27 2,022,500
- ----------------------------------------------------------------------------------------------------------
5,020,688
- ----------------------------------------------------------------------------------------------------------
Miscellaneous -- 5.3%
1,000,000 AAA Martha's Vineyard Loaned Bank Revenue, Series A,
FSA-Insured, 5.125% due 5/1/18 988,750
1,000,000 AAA Nantucket Island Loaned Bank, Series E, MBIA-Insured,
5.000% due 7/1/19 968,750
2,000,000 AAA Plymouth County COP, Correctional Facility Project,
AMBAC-Insured, 5.000% due 4/1/22 1,920,000
- ----------------------------------------------------------------------------------------------------------
3,877,500
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
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12 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) May 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================================
<C> <C> <S> <C>
Pollution Control -- 2.3%
$ 1,500,000 AA+ Massachusetts State Water Pollution,
Series A, 6.375% due 2/1/15 $ 1,651,875
- ----------------------------------------------------------------------------------------------------------
Transportation -- 14.2%
750,000 BBB Guam Airport Authority Revenue, Series A,
6.500% due 10/1/23 809,062
2,605,000 AAA Massachusetts Bay Transportation Authority Revenue,
General Transportation Systems, Series A, MBIA-Insured,
4.500% due 3/1/26 2,308,679
3,750,000 Aa3* Massachusetts State Capital Appreciation, Federal Highway,
zero coupon due 6/15/15 1,678,125
Massachusetts State Port Authority Revenue:
1,000,000 AA- Series B, 5.000% due 7/1/18(b) 962,500
1,900,000 AAA Special Facilities, (U.S. Air Project), MBIA-Insured,
5.875% due 9/1/23(b) 1,983,125
6,000,000 Aaa* Massachusetts State Turnpike Authority, Metropolitan
Highway System Revenue, Capital Appreciation,
Series C, MBIA-Insured, zero coupon due 1/1/16 2,580,000
- ----------------------------------------------------------------------------------------------------------
10,321,491
- ----------------------------------------------------------------------------------------------------------
Utilities -- 2.8%
2,000,000 BBB+ Massachusetts Municipal Wholesale Electric Co., Power
Supply Revenue, Series D, 6.125% due 7/1/19 2,070,000
- ----------------------------------------------------------------------------------------------------------
Water & Sewer -- 1.2%
1,000,000 AAA Massachusetts State Water Resource Authority,
Series A, FSA-Insured, 4.750% due 8/1/37 897,541
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $71,112,767**) $72,898,576
==========================================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those which
are identified by an asterisk (*), which are rated by Moody's Investors
Service, Inc.
(b) Income from this is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Bond escrowed to maturity by U.S. government securities are considered by
the manager to be triple-A rated even if issuer has not applied new
ratings.
(d) Residual interest bond-coupon varies inversely with level of short-term
tax-exempt interest rates.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 14 and 15 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"B" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and 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
bonds in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than in
higher rated categories.
BB and B -- Bonds rated "BB" and "B" are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB"
represents a lower degree of speculation than "B". While such bonds
will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to
adverse conditions.
Moody's Investors Service Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3 may
be applied to each generic rating from "Aa" to "B," where 1 is the highest and 3
the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A -- Bonds rated "A" possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
14 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Short-Term Security Ratings (unaudited)
- --------------------------------------------------------------------------------
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong;
those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
- --------------------------------------------------------------------------------
Security Descriptions (unaudited)
- --------------------------------------------------------------------------------
ABAG -- Association of Bay Area
Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance
CONNIE -- College Construction Loan
LEE Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Federal Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters Company
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PSF -- Permanent School Fund
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
SYCC -- Structured Yield Curve Certificate
TAN -- Tax Anticipation Notes
TECP -- Tax-Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWD -- Variable Rate Wednesday Demand
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) May 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $71,112,767) $ 72,898,576
Interest receivable 1,215,228
Receivable for securities sold 1,030,000
Receivable for Fund shares sold 401,295
- -------------------------------------------------------------------------------------
Total Assets 75,545,099
- -------------------------------------------------------------------------------------
LIABILITIES:
Payable to bank 1,011,615
Payable for securities purchased 913,363
Dividends payable 270,479
Administration fees payable 84,954
Payable for Fund shares reacquired 67,115
Investment advisory fees payable 22,801
Distribution fees payable 3,671
Accrued expenses 40,009
- -------------------------------------------------------------------------------------
Total Liabilities 2,414,007
- -------------------------------------------------------------------------------------
Total Net Assets $ 73,131,092
=====================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 5,610
Capital paid in excess of par value 71,319,640
Overdistributed net investment income (55,064)
Accumulated net realized gain on security transactions 75,097
Net unrealized appreciation of investments 1,785,809
- -------------------------------------------------------------------------------------
Total Net Assets $ 73,131,092
=====================================================================================
Shares Outstanding:
Class A 3,073,930
- -------------------------------------------------------------------------------------
Class B 2,306,831
- -------------------------------------------------------------------------------------
Class L 228,976
- -------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $13.04
- -------------------------------------------------------------------------------------
Class B* $13.03
- -------------------------------------------------------------------------------------
Class L** $13.02
- -------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $13.58
- -------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $13.15
=====================================================================================
</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 4).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended May 31, 1999
INVESTMENT INCOME:
Interest $ 1,945,235
- --------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 4) 134,118
Investment advisory fees (Note 4) 106,000
Administration fees (Note 4) 70,667
Audit and legal 21,197
Shareholder and system servicing fees 17,287
Shareholder communications 11,035
Trustees' fees 6,278
Pricing service fees 4,414
Registration fees 3,433
Custody 1,767
Other 2,368
- --------------------------------------------------------------------------------
Total Expenses 378,564
- --------------------------------------------------------------------------------
Net Investment Income 1,566,671
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 22,078,020
Cost of securities sold 22,002,923
- --------------------------------------------------------------------------------
Net Realized Gain 75,097
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 3,330,907
End of period 1,785,809
- --------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (1,545,098)
- --------------------------------------------------------------------------------
Net Loss on Investments (1,470,001)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 96,670
================================================================================
See Notes to Financial Statements
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended May 31, 1999 (unaudited)
and the Year Ended November 30, 1998
<TABLE>
<CAPTION>
1999 1998
=========================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,566,671 $ 2,907,244
Net realized gain 75,097 916,626
Increase (decrease) in net unrealized appreciation (1,545,098) 669,959
- -----------------------------------------------------------------------------------------
Increase in Net Assets From Operations 96,670 4,493,829
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 3):
Net investment income (1,618,437) (2,875,741)
In excess of net investment income -- (62,219)
Net realized gains -- (969,819)
- -----------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,618,437) (3,907,779)
- -----------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 8,902,161 15,295,105
Net asset value of shares issued
for reinvestment of dividends 790,869 2,377,234
Cost of shares reacquired (4,671,266) (9,379,926)
- -----------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 5,021,764 8,292,413
- -----------------------------------------------------------------------------------------
Increase in Net Assets 3,499,997 8,878,463
NET ASSETS:
Beginning of period 69,631,095 60,752,632
- -----------------------------------------------------------------------------------------
End of period* $ 73,131,092 $ 69,631,095
=========================================================================================
* Includes overdistributed net investment income of: $ (55,064) $ (3,298)
=========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
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 trade date; (b) securities are valued
at the mean between the quoted bid and ask prices provided by an independent
pricing service; (c) securities for which market quotations are not available
will be valued in good faith at fair value by or under the direction of the
Board of Trustees; (d) securities maturing within 60 days are valued at cost
plus accreted discount or minus amortized premium, which approximates value; (e)
gains or losses on the sale of securities are calculated by using the specific
identification method; (f) interest income, adjusted for amortization of premium
and accretion of original issue discount, is recorded on an accrual basis;
market discount is recognized upon the disposition of the security; (g) direct
expenses are charged to each class; management fees and general fund expenses
are allocated on the basis of relative net assets; (h) dividends and
distributions to shareholders are recorded on the ex-dividend date; (i) the Fund
intends to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to relieve it from substantially all
Federal income and excise taxes; (j) the character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. At November 30, 1998,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Accordingly, a portion of overdistributed net investment
income amounting to $62,219 was reclassified to paid-in capital. Net investment
income, net realized gains and net assets were not affected by this adjustment;
and (k) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
2. 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.
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (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. Investment Advisory Agreement, Administration Agreement and Other
Transactions
SSBC Fund Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
adviser to the Fund. The Fund pays SSBC a fee calculated at an annual rate of
0.30% of its average daily net assets. This fee is calculated daily and paid
monthly.
SSBC 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.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B shares,
which applies if redemption occurs within one year from 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 L shares are being sold at net asset value plus
a maximum initial sales charge of 1.00%. Class L shares also have a 1.00% CDSC,
which applies if redemption occurs within the first year of purchase.
For the six months ended May 31, 1999, CFBDS received sales charges of $79,000
and $10,000 on sales of the Fund's Class A and Class L shares, respectively. In
addition, CDSC's paid to CFBDS were approximately:
Class B Class L
================================================================================
CDSCs $12,000 $ 1,000
================================================================================
- --------------------------------------------------------------------------------
20 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
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 L shares calculated at an 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 L shares calculated at an
annual rate of 0.50% and 0.55%, respectively, of the average daily net assets of
each class. For the six months ended May 31, 1999, total Distribution Plan fees
incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $28,845 $96,896 $ 8,377
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
5. Investments
For the six months ended May 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $25,813,177
- --------------------------------------------------------------------------------
Sales 22,002,923
================================================================================
At May 31, 1999, the aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 2,309,764
Gross unrealized depreciation (523,955)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 1,785,809
================================================================================
6. Shares of Beneficial Interest
At May 31, 1999, 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. Effective June 12, 1998, the Fund adopted the renaming of existing Class
C shares as Class L shares.
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
At May 31, 1999, total paid-in capital amounted to the following for each class:
Class A Class B Class L
================================================================================
Total Paid-in Capital $38,342,087 $29,958,853 $ 3,024,310
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1999 November 30, 1998
--------------------------- ---------------------------
Shares Amount Shares Amount
==================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 354,321 $ 4,700,370 526,237 $ 7,028,660
Shares issued on reinvestment 35,158 465,791 97,541 1,300,205
Shares reacquired (127,835) (1,690,706) (295,379) (3,944,654)
- --------------------------------------------------------------------------------------------------
Net Increase 261,644 $ 3,475,455 328,399 $ 4,384,211
==================================================================================================
Class B
Shares sold 221,419 $ 2,933,619 498,735 $ 6,683,489
Shares issued on reinvestment 22,302 295,247 75,997 1,011,915
Shares reacquired (213,326) (2,824,917) (393,228) (5,258,008)
- --------------------------------------------------------------------------------------------------
Net Increase 30,395 $ 403,949 181,504 $ 2,437,396
==================================================================================================
Class L*
Shares sold 96,063 $ 1,268,172 118,353 $ 1,582,956
Shares issued on reinvestment 2,255 29,831 4,895 65,114
Shares reacquired (11,822) (155,643) (13,273) (177,264)
- --------------------------------------------------------------------------------------------------
Net Increase 86,496 $ 1,142,360 109,975 $ 1,470,806
==================================================================================================
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
22 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30, except where noted:
<TABLE>
<CAPTION>
Class A Shares 1999(1)(2) 1998 1997 1996 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.32 $ 13.18 $ 12.99 $ 12.96 $ 11.35 $ 13.26
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (3) 0.30 0.65 0.66 0.68 0.69 0.70
Net realized and unrealized
gain (loss) (0.27) 0.34 0.32 0.02 1.61 (1.85)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.03 0.99 0.98 0.70 2.30 (1.15)
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.64) (0.67) (0.67) (0.69) (0.70)
In excess of net investment income -- (0.01) -- -- -- --
Net realized gains -- (0.20) (0.12) -- -- (0.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.85) (0.79) (0.67) (0.69) (0.76)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.04 $ 13.32 $ 13.18 $ 12.99 $ 12.96 $ 11.35
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 0.23%++ 7.66% 7.85% 5.65% 20.73% (9.07)%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $40,090 $37,451 $32,736 $30,109 $29,159 $27,634
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 0.82%+ 0.76% 0.80% 0.80% 0.83% 0.81%
Net investment income 4.56+ 4.84 5.07 5.32 5.42 5.55
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 32% 51% 58% 23% 10% 37%
===================================================================================================================================
</TABLE>
(1) For the six months ended May 31, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) The investment adviser waived all or part of its fees for the four years
ended November 30, 1997. 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
-------------------------------------- --------------------------------------
1997 1996 1995 1994 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.01 $0.01 $0.03 $0.04 0.88% 0.91% 1.07% 1.09%
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30, except where noted:
<TABLE>
<CAPTION>
Class B Shares 1999(1)(2) 1998 1997 1996 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 13.30 $ 13.17 $ 12.99 $ 12.96 $ 11.35 $ 13.26
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (3) 0.27 0.58 0.60 0.61 0.63 0.63
Net realized and unrealized
gain (loss) (0.26) 0.33 0.31 0.03 1.61 (1.84)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.01 0.91 0.91 0.64 2.24 (1.21)
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (0.57) (0.61) (0.61) (0.63) (0.64)
In excess of net investment income -- (0.01) -- -- -- --
Net realized gains -- (0.20) (0.12) -- -- (0.06)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.28) (0.78) (0.73) (0.61) (0.63) (0.70)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 13.03 $ 13.30 $ 13.17 $ 12.99 $ 12.96 $ 11.35
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 0.05%++ 7.05% 7.25% 5.14% 20.15% (9.50)%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $30,059 $30,285 $27,589 $28,874 $28,726 $23,279
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 1.32%+ 1.28% 1.31% 1.31% 1.35% 1.32%
Net investment income 4.06+ 4.32 4.57 4.81 4.94 5.04
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 32% 51% 58% 23% 10% 37%
===================================================================================================================================
</TABLE>
(1) For the six months ended May 31, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) The investment adviser has waived all or part of its fees for the four
years ended November 30, 1997. 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
-------------------------------------- --------------------------------------
1997 1996 1995 1994 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class B $0.01 $0.01 $0.04 $0.03 1.39% 1.42% 1.59% 1.60%
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
24 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30, except where noted:
<TABLE>
<CAPTION>
Class L Shares 1999(1)(2) 1998(3) 1997 1996 1995 1994(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $13.30 $13.16 $12.98 $12.95 $11.35 $11.34
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (5) 0.26 0.58 0.59 0.60 0.63 0.05
Net realized and unrealized gain (loss) (0.26) 0.34 0.31 0.03 1.60 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.00 0.92 0.90 0.63 2.23 0.05
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.28) (0.57) (0.60) (0.60) (0.63) (0.04)
In excess of net investment income -- (0.01) -- -- -- --
Net realized gains -- (0.20) (0.12) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.28) (0.78) (0.72) (0.60) (0.63) (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.02 $13.30 $13.16 $12.98 $12.95 $11.35
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (0.04)%++ 7.11% 7.21% 5.09% 20.04% 0.40%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $2,982 $1,895 $ 428 $ 179 $ 146 $ 75
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (5) 1.35%+ 1.31% 1.34% 1.34% 1.35% 1.36%+
Net investment income 4.04+ 4.25 4.51 4.77 4.65 5.00+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 32% 51% 58% 23% 10% 37%
====================================================================================================================================
</TABLE>
(1) For the six months ended May 31, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average share
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) For the period from November 10, 1994 (inception date) to November 30,
1994.
(5) The investment adviser has waived all or part of its fees for the three
years ended November 30, 1997 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
-------------------------------------- --------------------------------------
1997 1996 1995 1994 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class L $0.01 $0.01 $0.04 $0.00* 1.42% 1.44% 1.58% 1.63%+
</TABLE>
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 25
<PAGE>
A member of citigroup[LOGO]
Trustees
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Cornelius C. Rose, Jr.
Heath B. McLendon, Chairman
James Crisona, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President and
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Adviser
SSBC Fund Management Inc.
Distributor
CFBDS, 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 the
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.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Massachusetts
Municipals Fund
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD2227 7/99
