Smith Barney
Massachusetts
Municipals Fund
ANNUAL REPORT
November 30, 1999
[LOGO] Smith Barney Mutual Funds
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
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 annual report for the Smith Barney Massachusetts
Municipals Fund ("Fund") for the year ended November 30, 1999. We hope you find
this report to be useful and informative. 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 year ended November 30, 1999, the Class A shares of the Fund returned
negative 4.73%, without sales charges, as compared to the negative 1.07% for the
Lehman Brothers Municipal Bond Index. (Lehman Brothers Municipal Bond Index is a
broad measure of the municipal bond market with maturities of at least one
year.) During the period covered by this report, the Fund distributed income
dividends totaling $0.62 per Class A share. For additional performance
information on the Fund's other share classes, please refer to pages 4 and 5.
Market and Economic Overview
The reporting period was marked by continued strong U.S. economic growth,
historically low inflation and low unemployment. Meanwhile, the Federal Reserve
Board ("Fed") reversed its three short-term interest rate cuts during late 1998,
with three 25-basis-point (100 basis points are equal to one percent) increases
on June 30, August 24 and November 16, 1999, respectively.
Against this backdrop, yields on long-term municipal bonds have increased in
recent months. With long-term municipal yields close to 6% and the yield curve
steep, we believe extending our average weighted maturity may be a prudent
investment strategy. (The yield curve shows the difference between short- and
long-term rates. Average weighted maturity is the weighted average of the dates
on which the principal is required to be repaid.)
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Smith Barney Massachusetts Municipals Fund 1
Since the most recent peak in late June, the yield on current coupon long-term
U.S. Treasury bonds is up roughly 20 basis points. (A basis point is the
smallest measurement in quoting yields, equal to 1/100 of one percent or 0.01%.)
For the same period, the yield on long-term municipals was up more than 50 basis
points. Taking a slightly longer view, long-term municipal yields are up nearly
90 basis points from their lows in late January 1999. As a result, we believe
the outlook for long-term municipal yields is now more promising than it has
been recently.
The bond market has had many reasons to trade lower, and has resisted them. The
decline of the U.S. dollar against the Japanese yen has had a negative impact on
the bond markets during the period. However, because the U.S. dollar's weakness
has been limited to the yen, there has been little concern about possible
capital outflows from the U.S. or higher domestic inflation. Similarly, the
recent rise in oil prices has not yet translated into higher bond yields because
inflation appears to be well contained. The same holds true for the recent surge
in gold prices, which we do not view as a possible sign of either higher
inflation or higher bond yields.
Massachusetts Economic Highlights
Massachusetts' economy continues to be one of the nation's most prosperous, due
in a large part to its fiscal stability, diversified economy, balanced budgets
and an improving business climate. The Bay State's economy has evolved from one
dominated by defense and computer hardware to one featuring more knowledge-
intensive services. The State's transformation has resulted in strong job growth
in high paying industries, more mobility for skilled workers and greater
competitiveness. Massachusetts' current 3.3% unemployment rate is lower than the
national average and lowest among industrial states. Also, Massachusetts has the
third highest level of personal per-capita income, which is 23% higher than the
U.S. average.
We believe that the Commonwealth's economy is healthy and in a strong position
to continue to excel in the 21st century. As a result, Massachusetts' general
obligation debt has received consistently high ratings from the major credit
agencies.
Investment Strategy
The Fund's investment strategy is to seek 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.1 In addition, we strive to maintain a high-quality
portfolio. As of November 30, 1999, over 86% of the Fund's holdings were rated
investment grade or better, of which approximately 45% were rated triple-A by
- ---------
1 Please note that a portion of the Fund's income is subject to the Alternative
Minimum Tax ("AMT").
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2 1999 Annual Report to Shareholders
either Standard & Poor's Ratings Service or Moody's Investors Service, Inc. At
the end of the reporting period, the Fund's average weighted maturity was
roughly 21 years. In addition, as of November 30, 1999, the Fund's top three
sectors were hospital bonds (22.2%), general obligations (15.9%) and industrial
development bonds (12.9%).
Municipal Bond Market Outlook
In our view, the U.S. economy appears to be in a tug-of-war. On the one hand,
inflation seems to be subdued. On the other hand, most economic observers --
including most Fed officials -- want the U.S. economy to slow down from its
current 4% annual growth rate to prevent a possible rebound in inflation. We
believe that a modest amount of additional restraint could put the U.S. economy
on a path toward sustainable, non-inflationary growth.
The recent rise in interest rates has currently created several buying
opportunities that should enable us to maintain a competitive level of tax-
exempt income for our shareholders. Yields on municipal securities have risen
quite substantially and the long end of the yield curve continues to favor
municipal bonds.
However, municipal bonds could become a scarce commodity as January 1, 2000
nears. Amid recent heavy issuance, municipal securities have become so plentiful
that many prices have declined to yearly lows. This increased volume has
resulted in lower prices and higher yields.
In our opinion, the bolstered yields resulting from Y2K concerns and supply
pressures are reaching levels that make municipal issues good investment
opportunities. We also believe that yields have peaked, and that the best
investment opportunities going forward may be in spread products such as
municipal issues.
Thank you for investing in the Smith Barney Massachusetts Municipals Fund. We
look forward to helping you pursue your investment goals in the new century.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
and Investment Officer
December 6, 1999
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Smith Barney Massachusetts Municipals Fund 3
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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
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
==========================================================================================
<S> <C> <C> <C> <C> <C> <C>
11/30/99 $13.32 $12.09 $0.62 $0.00 $0.00 (4.73)%
- ------------------------------------------------------------------------------------------
11/30/98 13.18 13.32 0.65 0.20 0.00 7.66
- ------------------------------------------------------------------------------------------
11/30/97 12.99 13.18 0.67 0.12 0.00 7.85
- ------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------
11/30/94 13.26 11.35 0.70 0.06 0.00 (9.07)
- ------------------------------------------------------------------------------------------
11/30/93 12.63 13.26 0.74 0.07 0.00 11.74
- ------------------------------------------------------------------------------------------
11/30/92 12.28 12.63 0.77 0.04 0.04 10.06
- ------------------------------------------------------------------------------------------
11/30/91 11.81 12.28 0.84 0.00 0.01 11.57
- ------------------------------------------------------------------------------------------
11/30/90 12.11 11.81 0.85 0.02 0.00 4.93
==========================================================================================
Total $7.20 $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
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
==========================================================================================
<S> <C> <C> <C> <C> <C> <C>
11/30/99 $13.30 $12.08 $0.55 $0.00 $0.00 (5.18)%
- ------------------------------------------------------------------------------------------
11/30/98 13.17 13.30 0.58 0.20 0.00 7.05
- ------------------------------------------------------------------------------------------
11/30/97 12.99 13.17 0.61 0.12 0.00 7.25
- ------------------------------------------------------------------------------------------
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 $4.35 $0.45 $0.00
==========================================================================================
</TABLE>
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4 1999 Annual Report to Shareholders
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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
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
==========================================================================================
<S> <C> <C> <C> <C> <C> <C>
11/30/99 $13.30 $12.07 $0.55 $0.00 $0.00 (5.28)%
- ------------------------------------------------------------------------------------------
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 $3.00 $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
======================================================================
Year Ended 11/30/99 (4.73)% (5.18)% (5.28)%
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Five Years Ended 11/30/99 7.13 6.58 6.53
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Ten Years Ended 11/30/99 6.33 N/A N/A
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Inception* through 11/30/99 7.10 4.88 6.54
======================================================================
With Sales Charges(2)
-----------------------------
Class A Class B Class L
======================================================================
Year Ended 11/30/99 (8.58)% (9.27)% (7.10)%
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Five Years Ended 11/30/99 6.26 6.42 6.33
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Ten Years Ended 11/30/99 5.90 N/A N/A
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Inception* through 11/30/99 6.73 4.88 6.34
======================================================================
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Smith Barney Massachusetts Municipals Fund 5
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Cumulative Total Returns
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Without Sales Charges(1)
================================================================================
Class A (11/30/89 through 11/30/99) 84.70%
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Class B (Inception* through 11/30/99) 40.05
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Class L (Inception* through 11/30/99) 37.78
================================================================================
(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 also 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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6 1999 Annual Report to Shareholders
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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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November 1989 -- November 1999
Smith Barney Lehman Brothers Lipper Massachusetts
Massachusetts Municipal Bond Municipal Fund
Municipals Fund Index Average
Nov-89 9604 10000 10000
May-90 10273 10201
Nov-90 10077 10770 10592
May-91 11309 11155
Nov-91 11243 11875 11725
May-92 12419 12309
Nov-92 12373 13066 12928
May-93 13905 13824
Nov-93 13826 14514 14438
May-94 14249 14057
Nov-94 12572 13753 13409
May-95 15547 15192
Nov-95 15178 16353 15886
May-96 16258 15731
Nov-96 16036 17313 16682
May-97 17604 16918
Nov-97 17294 18554 17781
May-98 19556 18319
Nov-98 18620 20307 18909
May-99 19257 20472 18934
Nov-99 17738 20091 18241
+ Hypothetical illustration of $10,000 invested in Class A shares at November
30, 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 November 30, 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 (57 funds as of November 30, 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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Smith Barney Massachusetts Municipals Fund 7
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Portfolio Highlights (unaudited) November 30, 1999
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Industry Breakdown
[PIE CHART]
6.8% Transportation 3.9% Pollution Control
12.9% Industrial Development 15.9% General Obligation
10.4% Education 3.4% Water & Sewer
7.2% Life Care Systems 3.4% Housing: Multi-Family
5.7% Miscellaneous 5.8% Housing: Single-Family
2.4% Escrowed to Maturity 22.2% Hospitals
Summary of Investments by Combined Ratings
Standard & Percentage of
Moody's and/or Poor's Total Investments
- -------------------------------------------------------------
Aaa AAA 44.7%
Aa AA 13.4
A A 17.5
Baa BBB 11.0
Ba BB 3.9
NR NR 9.5
------
100.0%
======
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8 1999 Annual Report to Shareholders
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Schedule of Investments November 30, 1999
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<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==========================================================================================
MUNICIPAL BONDS AND NOTES -- 100%
Education -- 10.4%
<S> <C> <C> <C>
$ 120,000 A Massachusetts Educational Loan Authority, Issue D,
Series A, 7.650% due 1/1/07(b) $ 121,392
3,000,000 Aaa* Massachusetts State College Building Authority Project
Revenue, MBIA-Insured, zero coupon due 5/1/22 787,500
Massachusetts State Health & Educational Facilities
Authority Revenue:
Massachusetts Institute of Technology:
1,000,000 AAA Series I-1, 5.200% due 1/1/28 902,500
1,000,000 AAA Series I-2, 4.750% due 1/1/28 825,000
1,000,000 AAA University of Massachusetts, Series A,
AMBAC-Insured, 5.000% due 7/1/18 898,750
Massachusetts State Industrial Finance Agency Revenue:
1,000,000 BBB- Dana Hall School Issue, 5.900% due 7/1/27 920,000
500,000 AAA Southeastern Massachusetts University, Series A,
AMBAC-Insured, 5.900% due 5/1/12 524,375
1,595,000 AAA University Commons Nursing, Series A, FHA-Insured,
6.550% due 8/1/18 1,654,813
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6,634,330
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Escrowed to Maturity(c) -- 2.4%
1,215,000 AAA Boston Water & Sewer Community Revenue,
10.875% due 1/1/09 1,564,312
- ------------------------------------------------------------------------------------------
General Obligation -- 15.9%
250,000 A Brockton Utility GO, 6.125% due 6/15/18 251,563
1,000,000 AAA Fitchburg GO, MBIA-Insured, 4.500% due 2/15/19 828,750
250,000 AAA Groveland GO, AMBAC-Insured, 6.850% due 6/15/06 262,500
470,000 AAA Haverhill Revenue Bonds, Series A, AMBAC-Insured,
6.700% due 9/1/10 494,087
2,325,000 Aaa Ipswich GO, FGIC-Insured, 5.250% due 11/15/17 2,202,937
500,000 AAA Lowell GO, AMBAC-Insured, 6.000% due 8/1/14 523,750
1,000,000 Aaa* Lynn GO, MBIA-Insured, 5.000% due 2/15/17 911,250
5,000,000 AA- Massachusetts State GO, Series C, zero
coupon due 8/1/18 1,643,750
250,000 AAA North Reading GO, MBIA-Insured, 6.875%
due 6/15/07 262,187
795,000 NR Plymouth County GO, COP, Series A, 6.750%
due 10/1/04 856,613
500,000 AAA Revere Municipal Purpose Loan, Bank Qualified,
FSA-Insured, 6.125% due 6/15/13 528,750
500,000 AAA Salem GO, AMBAC-Insured, 6.800% due 8/15/10 526,250
1,000,000 AAA Springfield Municipal Purpose Loan, FSA-Insured,
5.000% due 11/15/18 903,750
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10,196,137
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</TABLE>
See Notes to Financial Statements.
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Smith Barney Massachusetts Municipals Fund 9
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Schedule of Investments (continued) November 30, 1999
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FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------
Hospitals -- 22.2%
Massachusetts State Health & Educational Facilities
Authority Revenue:
$ 750,000 A3* Addison Gilbert Hospital, Series C,
5.750% due 7/1/23 $ 703,125
250,000 BBB+ Beth Israel Hospital, Series E,
7.000% due 7/1/14 255,595
1,000,000 A Brockton Hospital, Series B,
8.100% due 7/1/13 1,003,550
1,250,000 BBB+ Cape Cod Healthcare, Series B,
5.450% due 11/15/23 1,078,125
1,000,000 BBB Caritas Christ, 5.625% due 7/1/20 861,250
750,000 Baa3* Central New England Health Systems, Series A,
6.300% due 8/1/18 716,250
895,000 NR Christopher House Inc., Series A,
6.875% due 1/1/29 832,350
1,500,000 BBB+ Jordan Hospital, Series D, 5.375% due 10/1/28 1,256,250
1,000,000 BB Learning Center for Deaf Children, Series C,
6.100% due 7/1/19 950,000
1,000,000 AAA Massachusetts General Hospital, Series F,
AMBAC-Insured, 6.250% due 7/1/20 1,075,000
500,000 AAA Medical Center of Central Massachusetts,
Series B, 9.570% due 6/23/22(d) 543,750
1,750,000 Ba2* Saint Memorial Medical Center, Series A,
6.000% due 10/1/23 1,531,250
2,015,000 A South Shore Hospital, Series F,
5.625% due 7/1/19 1,881,506
700,000 AAA Valley Regional Health System, Series C,
CONNIE LEE-Insured, 7.000% due 7/1/06 779,625
750,000 Aa2* Youville House, FHA-Insured, Project A,
6.050% due 2/15/29 736,875
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14,204,501
- --------------------------------------------------------------------------------
Housing: Multi-Family -- 3.4%
1,000,000 AAA Framingham Housing Authority Mortgage Revenue,
Beaver Terrace Apartments, Series A,
GNMA-Collateralized, 6.650% due 2/20/32 1,041,250
1,120,000 A+ Massachusetts State HFA, Housing Project, Series A,
6.375% due 4/1/20 1,162,000
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2,203,250
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Housing: Single-Family -- 5.8%
Massachusetts State HFA, Housing Revenue,
Single-Family Housing:
355,000 Aa3* Series 18, 7.350% due 12/1/16 369,644
960,000 A+ Series 31, 6.450% due 12/1/16 984,000
2,325,000 A+ Series 38, 7.200% due 12/1/26(b) 2,374,406
- --------------------------------------------------------------------------------
3,728,050
- --------------------------------------------------------------------------------
Industrial Development -- 12.9%
1,000,000 NR Boston Industrial Development Financing Authority Revenue,
First Mortgage, Springhouse Inc.,
5.875% due 7/1/18 880,000
See Notes to Financial Statements.
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10 1999 Annual Report to Shareholders
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Schedule of Investments (continued) November 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------
Industrial Development -- 12.9% (continued)
Massachusetts State Development Financing Agency Revenue:
$1,000,000 AA Applewild School Issue, Asset-Guaranteed,
5.750% due 8/1/29 $ 942,500
1,000,000 BBB Berkshire Retirement Community Inc.,
5.600% due 7/1/19 891,250
1,000,000 Aaa* Brooks School Issue B, MBIA-Insured,
5.000% due 7/1/24 871,250
1,000,000 A Curry College, Series A, 5.375% due 3/1/19 918,750
1,000,000 NR Health Care Facility Alliance, Series A,
7.100% due 7/1/32 956,250
1,000,000 AA Worcester Redevelopment Authority Issue,
Asset-Guaranteed, 5.250% due 6/1/19 907,500
Massachusetts State Industrial Finance Agency,
Resource Recovery Revenue, Series A:
250,000 Baa1* Refusetech Inc. Project, 6.300% due 7/1/05 259,062
500,000 NR S.E. Massachusetts Project, 9.000% due 7/1/15 539,375
1,250,000 NR Massachusetts State Industrial Finance Agency Revenue,
(Chestnut Knoll Project A), 5.625% due 2/15/25 1,057,813
- --------------------------------------------------------------------------------
8,223,750
- --------------------------------------------------------------------------------
Life Care Systems -- 7.2%
Massachusetts Industrial Finance Agency
Health Care Facilities:
1,430,000 AAA Arbors at Amherst Project, Assisted Living Facilities
Revenue, GNMA-Collateralized,
5.750% due 6/20/17(b) 1,428,213
1,500,000 AAA Arbors at Taunton Project, Assisted Living Facilities
Revenue, GNMA-Collateralized,
5.500% due 6/20/40(b) 1,338,750
2,000,000 A+ Jewish Geriatric Services, Series B,
5.500% due 5/15/27 1,815,000
- --------------------------------------------------------------------------------
4,581,963
- --------------------------------------------------------------------------------
Miscellaneous -- 5.7%
1,000,000 AAA Nantucket Island Loaned Bank, Series E, MBIA-Insured,
5.000% due 7/1/19 892,500
2,000,000 AAA Plymouth County COP, Correctional Facility Project,
AMBAC-Insured, 5.000% due 4/1/22 1,757,500
1,000,000 NR Virgin Islands Public Finance Authority Revenue,
Series E, 5.750% due 10/1/13 972,500
- --------------------------------------------------------------------------------
3,622,500
- --------------------------------------------------------------------------------
Pollution Control -- 3.9%
1,500,000 AA+ Massachusetts State Water Pollution, Series A,
6.375% due 2/1/15 1,578,750
1,000,000 AAA Massachusetts State Water Pollution Abatement Trust,
Pool Program, Series 5, 5.375% due 8/1/27 927,500
- --------------------------------------------------------------------------------
2,506,250
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See Notes to Financial Statements.
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Smith Barney Massachusetts Municipals Fund 11
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1999
- --------------------------------------------------------------------------------
FACE
AMOUNT RATING(a) SECURITY VALUE
- --------------------------------------------------------------------------------
Transportation -- 6.8%
$ 750,000 BBB Guam Airport Authority Revenue, Series A,
6.500% due 10/1/23 $ 783,750
3,750,000 Aa3* Massachusetts State Capital Appreciation, Federal
Highway, zero coupon due 6/15/15 1,514,063
1,000,000 AA- Massachusetts State Port Authority Revenue,
Series B, 5.000% due 7/1/18(b) 886,250
3,000,000 Aaa* Massachusetts State Turnpike Authority, Metropolitan
Highway System Revenue, Capital Appreciation,
Series C, MBIA-Insured, zero coupon due 1/1/16 1,177,500
- --------------------------------------------------------------------------------
4,361,563
- --------------------------------------------------------------------------------
Water & Sewer -- 3.4%
2,750,000 AAA Massachusetts State Water Resource Authority,
Series A, FSA-Insured, 4.750% due 8/1/37 2,196,562
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $67,122,722**) $64,023,168
================================================================================
(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 issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Bond is escrowed to maturity by U.S. government securities and is
considered by the manager to be triple-A rated even if issuer has not
applied new ratings.
(d) Inverse floating rate security 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 13 and 14 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
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12 1999 Annual Report to Shareholders
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 13
- --------------------------------------------------------------------------------
Short-Term Security Ratings (audited)
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
ABAG -- Association of Bay Area HDC -- Housing Development Corporation
Governments HFA -- Housing Finance Authority
AIG -- American International Guaranty IDA -- Industrial Development Authority
AMBAC -- AMBAC Indemnity Corporation IDB -- Industrial Development Board
BAN -- Bond Anticipation Notes IDR -- Industrial Development Revenue
BIG -- Bond Investors Guaranty INFLOS -- Inverse Floaters Company
CGIC -- Capital Guaranty Insurance ISD -- Independent School District
CONNIE -- College Construction Loan LOC -- Letter of Credit
LEE Insurance Association MBIA -- Municipal Bond Investors Assurance
COP -- Certificate of Participation Corporation
EDA -- Economic Development Authority MVRICS -- Municipal Variable Rate lnverse
FGIC -- Financial Guaranty Insurance Coupon Security
Company PCR -- Pollution Control Revenue
FHA -- Federal Housing Administration PSF -- Permanent School Fund
FHLMC -- Federal Home Loan Mortgage RAN -- Revenue Anticipation Notes
Corporation RIBS -- Residual Interest Bonds
FLAIRS -- Floating Adjustable Interest Rate RITES -- Residual Interest Tax-Exempt
Securities Securities
FNMA -- Federal National Mortgage SYCC -- Structured Yield Curve Certificate
Association TAN -- Tax Anticipation Notes
FRTC -- Floating Rate Trust Certificates TECP -- Tax-Exempt Commercial Paper
FSA -- Federal Security Assurance TOB -- Tender Option Bonds
GIC -- Guaranteed Investment Contract TRAN -- Tax and Revenue Anticipation Notes
GNMA -- Government National VA -- Veterans Administration
Mortgage Association VRDD -- Variable Rate Daily Demand
GO -- General Obligation VRWD -- Variable Rate Wednesday Demand
</TABLE>
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities November 30, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $67,122,722) $64,023,168
Interest receivable 1,188,235
Receivable for securities sold 1,093,023
Receivable for Fund shares sold 114,161
- --------------------------------------------------------------------------------
Total Assets 66,418,587
- --------------------------------------------------------------------------------
LIABILITIES:
Payable to bank 632,041
Administration fees payable 96,205
Investment advisory fees payable 56,735
Distribution fees payable 5,419
Accrued expenses 43,072
- --------------------------------------------------------------------------------
Total Liabilities 833,472
- --------------------------------------------------------------------------------
Total Net Assets $65,585,115
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 5,427
Capital paid in excess of par value 69,053,196
Undistributed net investment income 11,452
Accumulated net realized loss from security transactions (385,406)
Net unrealized depreciation of investments (3,099,554)
- --------------------------------------------------------------------------------
Total Net Assets $65,585,115
================================================================================
Shares Outstanding:
Class A 2,927,071
------------------------------------------------------------------------------
Class B 2,262,503
------------------------------------------------------------------------------
Class L 237,499
------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $12.09
------------------------------------------------------------------------------
Class B * $12.08
------------------------------------------------------------------------------
Class L ** $12.07
------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $12.59
------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $12.19
================================================================================
* 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.
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 15
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 4,022,833
- --------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 4) 268,708
Investment advisory fees (Note 4) 212,123
Administration fees (Note 4) 141,415
Audit and legal 43,223
Shareholder and system servicing fees 34,785
Shareholder communications 28,502
Trustees' fees 12,801
Pricing service fees 9,001
Registration fees 7,001
Custody 3,603
Other 7,012
- --------------------------------------------------------------------------------
Total Expenses 768,174
- --------------------------------------------------------------------------------
Net Investment Income 3,254,659
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 5):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 46,663,186
Cost of securities sold 47,048,592
- --------------------------------------------------------------------------------
Net Realized Loss (385,406)
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of Investments:
Beginning of year 3,330,907
End of year (3,099,554)
- --------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (6,430,461)
- --------------------------------------------------------------------------------
Net Loss on Investments (6,815,867)
- --------------------------------------------------------------------------------
Decrease in Net Assets From Operations $(3,561,208)
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended November 30,
1999 1998
===================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,254,659 $ 2,907,244
Net realized gain (loss) (385,406) 916,626
Increase in net unrealized appreciation (depreciation) (6,430,461) 669,959
- -----------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (3,561,208) 4,493,829
- -----------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 3):
Net investment income (3,239,909) (2,875,741)
In excess of net investment income -- (62,219)
Net realized gains -- (969,819)
- -----------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (3,239,909) (3,907,779)
- -----------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 14,076,211 15,295,105
Net asset value of shares issued
for reinvestment of dividends 1,905,375 2,377,234
Cost of shares reacquired (13,226,449) (9,379,926)
- -----------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 2,755,137 8,292,413
- -----------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (4,045,980) 8,878,463
NET ASSETS:
Beginning of year 69,631,095 60,752,632
- -----------------------------------------------------------------------------------
End of year* $ 65,585,115 $69,631,095
===================================================================================
* Includes undistributed (overdistributed) net
investment income of: $ 11,452 $ (3,298)
===================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 17
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Smith Barney Massachusetts Municipals Fund ("Fund"), a Massachusetts business
trust, is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on 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; 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.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax, to retain such tax-
exempt status when distributed to the shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. Investment Advisory Agreement, Administration Agreement and Other
Transactions
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), which, in
turn, is a subsidiary of Citigroup Inc. ("Citigroup") 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.
Effective October 1999, Smith Barney Private Trust Company, another subsidiary
of Citigroup, became the Fund's transfer agent and PFPC Global Fund Services
became the Fund's sub-transfer agent. During the period October 1, 1999 through
November 30, 1999, the Fund paid transfer agent fees of $3,057 to Smith Barney
Private Trust Company.
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
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 19
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
1.00% CDSC, which applies if redemption occurs within the first year of
purchase. There is also a CDSC of 1.00% on Class A shares, which applies if
redemption occurs within the first year of purchase. This CDSC only applies to
those purchases of Class A shares, which, when combined with current holdings of
Class A shares, equal or exceed $500,000 in the aggregate. These purchases do
not incur an initial sales charge.
For the year ended November 30, 1999, CFBDS received sales charges of $70,000
and $14,000 on sales of the Fund's Class A and L shares, respectively. In
addition, CDSC's paid to CFBDS were approximately:
Class A Class B
- ----------------------------------------------------------------
CDSCs $5,000 $30,000
- ----------------------------------------------------------------
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 year ended November 30, 1999, total Distribution Plan fees
incurred were:
Class A Class B Class L
- --------------------------------------------------------------------
Distribution Plan Fees $57,668 $192,362 $18,678
- --------------------------------------------------------------------
All officers and one Trustee of the Fund are employees of SSB.
5. Investments
For the year ended November 30, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
- --------------------------------------------------------------------
Purchases $46,208,495
- --------------------------------------------------------------------
Sales 46,663,186
- --------------------------------------------------------------------
At November 30, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
- --------------------------------------------------------------------
Gross unrealized appreciation $ 788,644
Gross unrealized depreciation (3,888,198)
- --------------------------------------------------------------------
Net unrealized depreciation $(3,099,554)
- --------------------------------------------------------------------
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
6. Capital Loss Carryforward
At November 30, 1999, the Fund had, for Federal income tax purposes,
approximately $382,000 of unused capital loss carryforwards available to offset
future capital gains expiring in 2007. 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.
7. Shares of Beneficial Interest
At November 30, 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.
At November 30, 1999, total paid-in capital amounted to the following for each
class:
Class A Class B Class L
- --------------------------------------------------------------------------------
Total Paid-in Capital $36,516,592 $29,416,560 $3,125,471
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
Year Ended Year Ended
November 30, 1999 November 30, 1998
-------------------- --------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Class A
Shares sold 540,749 $ 7,037,788 526,237 $ 7,028,660
Shares issued on reinvestment 88,483 1,130,831 97,541 1,300,205
Shares reacquired (514,447) (6,518,659) (295,379) (3,944,654)
- --------------------------------------------------------------------------------
Net Increase 114,785 $ 1,649,960 328,399 $ 4,384,211
- --------------------------------------------------------------------------------
Class B
Shares sold 440,199 $ 5,647,344 498,735 $ 6,683,489
Shares issued on reinvestment 54,336 694,458 75,997 1,011,915
Shares reacquired (508,468) (6,480,146) (393,228) (5,258,008)
- --------------------------------------------------------------------------------
Net Increase (Decrease) (13,933) $ (138,344) 181,504 $ 2,437,396
- --------------------------------------------------------------------------------
Class L*
Shares sold 106,235 $ 1,391,079 118,353 $ 1,582,956
Shares issued on reinvestment 6,290 80,086 4,895 65,114
Shares reacquired (17,506) (227,644) (13,273) (177,264)
- --------------------------------------------------------------------------------
Net Increase 95,019 $ 1,243,521 109,975 $ 1,470,806
- --------------------------------------------------------------------------------
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 21
Financial Highlights
For a share of each class of beneficial interest outstanding throughout
each year ended November 30:
<TABLE>
<CAPTION>
Class A Shares 1999(1) 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.32 $ 13.18 $ 12.99 $ 12.96 $ 11.35
- --------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(2) 0.62 0.65 0.66 0.68 0.69
Net realized and unrealized gain (loss) (1.23) 0.34 0.32 0.02 1.61
- --------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.61) 0.99 0.98 0.70 2.30
- --------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.62) (0.64) (0.67) (0.67) (0.69)
In excess of net investment income -- (0.01) -- -- --
Net realized gains -- (0.20) (0.12) -- --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.62) (0.85) (0.79) (0.67) (0.69)
- --------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.09 $ 13.32 $ 13.18 $ 12.99 $ 12.96
- --------------------------------------------------------------------------------------------------
Total Return (4.73)% 7.66% 7.85% 5.65% 20.73%
- --------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $35,386 $37,451 $32,736 $30,109 $29,159
- --------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.85% 0.76% 0.80% 0.80% 0.83%
Net investment income 4.84 4.84 5.07 5.32 5.42
- --------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 66% 51% 58% 23% 10%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The investment adviser waived all or part of its fees for the three 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:
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
-------------------------- --------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Class A $0.01 $0.01 $0.03 0.88% 0.91% 1.07%
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30:
<TABLE>
<CAPTION>
Class B Shares 1999(1) 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.30 $ 13.17 $ 12.99 $ 12.96 $ 11.35
- --------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(2) 0.56 0.58 0.60 0.61 0.63
Net realized and unrealized gain (loss) (1.23) 0.33 0.31 0.03 1.61
- --------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.67) 0.91 0.91 0.64 2.24
- --------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.55) (0.57) (0.61) (0.61) (0.63)
In excess of net investment income -- (0.01) -- -- --
Net realized gains -- (0.20) (0.12) -- --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.78) (0.73) (0.61) (0.63)
- --------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.08 $ 13.30 $ 13.17 $ 12.99 $ 12.96
- --------------------------------------------------------------------------------------------------
Total Return (5.18)% 7.05% 7.25% 5.14% 20.15%
- --------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $27,332 $30,285 $27,589 $28,874 $28,726
- --------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.36% 1.28% 1.31% 1.31% 1.35%
Net investment income 4.33 4.32 4.57 4.81 4.94
- --------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 66% 51% 58% 23% 10%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The investment adviser has waived all or part of its fees for the three
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:
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
-------------------------- --------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Class B $0.01 $0.01 $0.04 1.39% 1.42% 1.59%
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 23
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30:
<TABLE>
<CAPTION>
Class L Shares 1999(1) 1998(2) 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.30 $13.16 $12.98 $12.95 $11.35
- --------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.56 0.58 0.59 0.60 0.63
Net realized and unrealized gain (loss) (1.24) 0.34 0.31 0.03 1.60
- --------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.68) 0.92 0.90 0.63 2.23
- --------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.55) (0.57) (0.60) (0.60) (0.63)
In excess of net investment income -- (0.01) -- -- --
Net realized gains -- (0.20) (0.12) -- --
- --------------------------------------------------------------------------------------------------
Total Distributions (0.55) (0.78) (0.72) (0.60) (0.63)
- --------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.07 $13.30 $13.16 $12.98 $12.95
- --------------------------------------------------------------------------------------------------
Total Return (5.28)% 7.11% 7.21% 5.09% 20.04%
- --------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $2,867 $1,895 $ 428 $ 179 $ 146
- --------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.39% 1.31% 1.34% 1.34% 1.35%
Net investment income 4.32 4.25 4.51 4.77 4.65
- --------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 66% 51% 58% 23% 10%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) The investment adviser has waived all or part of its fees for the three
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:
Per Share Decreases Expense Ratios
to Net Investment Income Without Fee Waivers
-------------------------- --------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Class L $0.01 $0.01 $0.04 1.42% 1.44% 1.58%
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
November 30, 1999:
. 100% of the dividends paid by the fund from net investment income as
tax exempt for regular Federal income tax purposes.
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
- --------------------------------------------------------------------------------
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees of Smith Barney Massachusetts Municipals
Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Smith Barney Massachusetts Municipals Fund
as of November 30, 1999, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the two-
year period then ended and the financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1999, by correspondence with the custodian. As to securities sold
but not yet delivered, we performed other appropriate auditing procedures. An
audit also includes assessing the accounting principals used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Smith Barney Massachusetts Municipals Fund as of November 30, 1999, the results
of its operations for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended and the financial highlights
for each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG LLP
New York, New York
January 14, 2000
- --------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 25
[LOGO OF SALOMON SMITH BARNEY]
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.
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
Anthony Pace
Controller
Christina T. Sydor
Secretary
Investment Adviser
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Transfer Agent
Smith Barney Private Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
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/mutualfunds
FD0302 1/00
