<PAGE>
[LOGO OF SMITH BARNEY]
SMITH BARNEY
MASSACHUSETTS
MUNICIPALS Fund
SPECIAL DISCIPLINE SERIES
SEMI-ANNUAL REPORT
MAY 31, 2000
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
Your Serious Money. Professionally Managed.(SM)
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<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, 2000. In
this report, we summarize the periods prevailing economic and market conditions
and outline our investment strategy./1/ A detailed summary of the Funds
performance can be found in the appropriate sections that follow. We hope you
find this report to be useful and informative.
Performance Update
For the six months ended May 31, 2000, the Funds Class A shares reported
negative total returns of 4.09% and 0.13%, with and without the effects of sales
charges, respectively. In comparison, the Lehman Brothers Municipal Bond
Index/2/ returned 1.02% for the same period. For additional performance
information on the Funds other share classes, please refer to pages 5 through 7.
Municipal Bond Market Overview
During the period, the municipal bond market was impacted by two conflicting
sets of pressures. On one side was the robust growth of the U.S. economy, which
in our view, led to rising interest rates by the Federal Reserve Board ("Fed").
On the other side were supply and demand conditions may have contributed to bond
shortages in many specialty states, bond sectors and different maturities.
--------------
1 The information provided represents the opinion of the manager and is not
intended to be a forecast of future events, a guarantee of future results
nor investment advice. Further there is no assurance that certain
securities will remain in or out of the portfolio.
2 The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year. An investor
cannot invest directly in an index.
--------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 1
<PAGE>
As a result, the Fed has shifted to a more restrictive monetary stance. We
believe that any future monetary policy tightening by the Fed may also invert
the U.S. yield curve further. (The yield curve is the graphical depiction of the
relationship between the yield on bonds of the same credit quality but different
maturities. An inverted yield curve represents a unique situation whereby
short-term interest rates are higher than long-term rates.)
The municipal bond market is currently less volatile than the overall bond
market. Yet, we do not expect yields on intermediate and long-term maturity
securities to move appreciably higher because:
. New issue supply remains very light by recent standards;
. Municipal bond demand from individual investors remains extremely strong
while demand by institutional buyers is still weak; and
. Many investors are reallocating a portion of assets away from stocks into
bonds in an attempt to lock in gains and reduce overall price volatility in
their portfolios. We feel that the municipal bond market has benefited from
this asset-reallocation.
Massachusetts Economic Highlights/3/
The 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 boasting a wide
variety of knowledge intensive services. The state's transformation has resulted
in strong job growth in high paying industries, greater mobility for skilled
workers and a higher level of competitiveness.
In fact, venture capital investments in Massachusetts for 1999 were
approximately $1.4 billion, representing approximately 10% of total venture
capital investment for the entire U.S., according to PricewaterhouseCoopers,
LLC. Additionally, the Bay State ranks fourth in the U.S. in terms of per capita
income and eleventh in terms of Gross State Product.
We believe that the Commonwealth's healthy economy puts it 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.
------------
3 Source: Fitch IBCA, Inc., Public Finance, Commonwealth of Massachusetts,
February 14, 2000
--------------------------------------------------------------------------------
2 2000 Semi-Annual Report to Shareholders
<PAGE>
Investment Strategy
The Funds investment strategy continues 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./4/ In addition, we seek to maintain
a high-quality portfolio.
As of May 31, 2000, 87.0% of the Funds holdings were rated investment grade/5/
or better,of which 46.3% were rated triple-A by either Standard & Poors Ratings
Service or Moodys Investors Service, Inc., the highest possible rating. In
addition, as of May 31, 2000, the Funds top three sectors were hospital bonds
(21.5%),industrial development bonds (19.4%) and education bonds (12.0%).
Average credit quality remained relatively high during the period. Although
quality spreads have widened due to earnings pressure, especially in the
hospital and health care related sectors, the difference in yield between the
highest quality issues and medium grade issues has been, in our view, relatively
modest.
We think our proprietary research enables us to invest in select medium-term
credits for which perceived market risk may be greater than our analysis
indicates. Moreover, while no guarantees may be given, we think our
income-oriented strategy should prove to be rewarded over time. (Of course, no
guarantees can be given that our expectations will be met.)
We have also taken advantage of rising interest rates to generate additional
yield in the Fund. We also sought to incorporate additional call
protection/6/ into the Fund during the period by selling off some of our higher
coupon bonds with shorter calls, and replacing them with bonds that have similar
high coupon structure, but are not subject to early call.
-----------------
4 Please note that a portion of the Funds income is subject to the Alternative
Minimum Tax ("AMT").
5 Investment-grade bonds are those rated Aaa,Aa,A and Baa by Moodys Investors
Service, Inc. or AAA, AA, A and BBB by Standard & Poors Ratings Service, or
that have an equivalent rating by any nationally recognized statistical
rating organization, or determined by the manager to be of equivalent quality
6 Call protection is the length of time during which a security cannot be
redeemed by the issuer.
--------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 3
<PAGE>
Municipal Bond Market Outlook
While we feel that the bond market is likely to remain volatile over the near
term, we continue to follow an "ease into the market" approach. We tend to favor
longer intermediate maturity securities, where we think most of the benefits of
the steep positive slope of the municipal yield curve can be obtained.
One of our objectives in managing the Fund is to seek to create a built-in
income stream for the long term in a period of rising interest rates. To achieve
that objective, we have generally focused on securities deemed to have high
credit quality and good call protection. Moreover, we have a fairly long
weighted average life/7/ in the portfolio because we believe that the risk of
higher inflation at the present time is negligible. In addition, we think our
greater emphasis on call protection should help us to provide shareholders with
more consistent income if interest rates do in fact go down.
Thank you for investing in the Smith Barney Massachusetts Municipals Fund. We
look forward to helping you pursue your investment goals in the future.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
and Investment Officer
June 15, 2000
---------------
7 Average weighted life is the length of time until the average security in a
fund will mature or be redeemed by its issuer. It indicates a fixed-income
funds sensitivity to interest rate changes: longer average weighted maturity
implies greater volatility in response to interest rate changes.
--------------------------------------------------------------------------------
4 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Hisstorical Performance -- Class A Shares
--------------------------------------------------------------------------------
<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>
5/31/00 $12.09 $11.75 $0.32 $0.00 $0.00 (0.13)%+
-------------------------------------------------------------------------------------------------
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 $7.52 $0.51 $0.05
=================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
<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>
5/31/00 $12.08 $11.75 $0.29 $0.00 $0.00 (0.34)%+
-------------------------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------------------------
11/30/94 13.26 11.35 0.64 0.06 0.00 (9.50)
-------------------------------------------------------------------------------------------------
11/30/93 12.63 13.26 0.68 0.07 0.00 11.09
-------------------------------------------------------------------------------------------------
Inception* - 11/30/92 12.52 12.63 0.05 0.00 0.00 1.29
=================================================================================================
Total $4.64 $0.45 $0.00
=================================================================================================
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 5
<PAGE>
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
<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>
5/31/00 $12.07 $11.74 $0.29 $0.00 $0.00 (0.35)%+
---------------------------------------------------------------------------------------------------
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
---------------------------------------------------------------------------------------------------
11/30/95 11.35 12.95 0.63 0.00 0.00 20.04
---------------------------------------------------------------------------------------------------
Inception* - 11/30/94 11.34 11.35 0.04 0.00 0.00 0.40+
===================================================================================================
Total $3.29 $0.32 $0.00
===================================================================================================
</TABLE>
It is the Funds policy to distribute dividends monthly and capital gains, if
any, annually.
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 5/31/00+ (0.13)% (0.34)% (0.35)%
--------------------------------------------------------------------------------
Year Ended 5/31/00 (5.08) (5.55) (5.58)
--------------------------------------------------------------------------------
Five Years Ended 5/31/00 4.19 3.67 3.62
--------------------------------------------------------------------------------
Ten Years Ended 5/31/00 6.09 N/A N/A
--------------------------------------------------------------------------------
Inception* through 5/31/00 6.79 4.50 5.87
================================================================================
With Sales Charges(2)
------------------------------------
Class A Class B Class L
================================================================================
Six Months Ended 5/31/00+ (4.09)% (4.72)% (2.30)%
--------------------------------------------------------------------------------
Year Ended 5/31/00 (8.85) (9.60) (7.40)
--------------------------------------------------------------------------------
Five Years Ended 5/31/00 3.34 3.50 3.41
--------------------------------------------------------------------------------
Ten Years Ended 5/31/00 5.66 N/A N/A
--------------------------------------------------------------------------------
Inception* through 5/31/00 6.44 4.50 5.68
================================================================================
--------------------------------------------------------------------------------
6 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (5/31/90 through 5/31/00) 80.62%
--------------------------------------------------------------------------------
Class B (Inception* through 5/31/00) 39.57
--------------------------------------------------------------------------------
Class L (Inception* through 5/31/00) 37.29
================================================================================
(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.
--------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 7
<PAGE>
--------------------------------------------------------------------------------
Historical Performance (unaudited)
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
[GRAPH]
May 1990 -- May 2000
Smith Barney Lehman Brothers Lipper Massachusetts
Massachusetts Municipal Municipal
Municipals Fund Bond Index Fund Average
May-90 9,597 10,000 10,000
Nov-90 9,860 10,484 10,383
Nov-91 11,001 11,560 11,494
Nov-92 12,107 12,719 12,674
Nov-93 13,529 14,128 14,154
Nov-94 12,302 13,387 13,145
Nov-95 14,852 15,918 15,573
Nov-96 15,691 16,853 16,354
Nov-97 16,922 18,061 17,430
Nov-98 18,145 19,768 18,537
Nov-99 17,357 19,557 17,881
May-00 17,334 19,757 17,992
+ Hypothetical illustration of $10,000 invested in Class A shares at May 31,
1990, 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, 2000. 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 Funds peer group of mutual funds
(21 funds as of May 31, 2000). The performance of the Funds 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.
--------------------------------------------------------------------------------
8 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Portfolio Highlights (unaudited) May 31, 2000
--------------------------------------------------------------------------------
[GRAPH]
Industry Breakdown
21.5% Hospitals
19.4% Industrial Development
12.0% Education
11.3% General Obligation
9.7% Transportation
9.4% Life Care Systems
6.0% Housing: Single-Family
3.1% Pollution Control
3.1% Escrowed to Maturity
2.3% Miscellaneous
2.2% Housing: Multi-Family
Summary of Investments by Combined Ratings
Standard & Percentage of
Moodys and/or Poor's Total Investments
--------------------------------------------------------------------------------
Aaa AAA 46.3%
Aa AA 12.8
A A 17.5
Baa BBB 10.4
Ba BB 3.6
NR NR 9.4
-----
100.0%
=====
--------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 9
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) May 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
===============================================================================================
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 100%
Education -- 12.0%
$ 110,000 A Massachusetts Educational Loan Authority, Issue D,
Series A, 7.650% due 1/1/07 (b) $ 111,202
3,000,000 Aaa* Massachusetts State College Building Authority Project
Revenue, Capital Appreciation, Series A,
MBIA-Insured, zero coupon due 5/1/22 780,000
Massachusetts State Health & Educational Facilities
Authority Revenue:
1,000,000 AAA Harvard University, Series W, 6.000% due 7/1/35 1,003,750
Massachusetts Institute of Technology:
1,000,000 AAA Series I-1, 5.200% due 1/1/28 888,750
1,000,000 AAA Series I-2, 4.750% due 1/1/28 823,750
1,175,000 AAA Northeastern University, Series I, MBIA-Insured,
5.000% due 10/1/29 981,125
1,000,000 AAA University of Massachusetts, Series A,
AMBAC-Insured, 5.000% due 7/1/18 867,500
Massachusetts State Industrial Finance Agency Revenue:
1,000,000 BBB- Dana Hall School Issue, 5.900% due 7/1/27 898,750
500,000 AAA Southeastern Massachusetts University, Series A,
AMBAC-Insured, 5.900% due 5/1/12 515,625
665,000 A University Virgin Islands, Series A, ACA-Insured,
6.000% due 12/1/19 656,688
------------------------------------------------------------------------------------------------
7,527,140
------------------------------------------------------------------------------------------------
Escrowed to Maturity (c) -- 3.1%
1,545,000 AAA Boston Water & Sewer Community Revenue,
10.875% due 1/1/09 1,931,250
------------------------------------------------------------------------------------------------
General Obligation -- 11.3%
1,000,000 AAA Fitchburg GO, MBIA-Insured, 4.500% due 2/15/19 817,500
250,000 AAA Groveland GO, AMBAC-Insured, 6.850% due 6/15/06 259,223
470,000 AAA Haverhill Revenue Bonds, Series A, AMBAC-Insured,
6.700% due 9/1/10 488,800
500,000 AAA Lowell GO, AMBAC-Insured, 6.000% due 8/1/14 512,500
1,000,000 Aaa* Lynn GO, MBIA-Insured, 5.000% due 2/15/17 900,000
5,000,000 AAA Massachusetts State GO, Series C, zero coupon due 8/1/18 1,662,500
250,000 AAA North Reading GO, MBIA-Insured, 6.875% due 6/15/07 259,208
795,000 AAA Plymouth County GO, COP, Series A, 6.750% due 10/1/04 840,713
500,000 AAA Salem GO, AMBAC-Insured, 6.800% due 8/15/10 520,000
900,000 AAA Springfield Municipal Purpose Loan, FSA-Insured,
5.000% due 11/15/18 802,125
------------------------------------------------------------------------------------------------
7,062,569
------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) May 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
====================================================================================================
<S> <C> <C>
Hospitals -- 21.5%
Massachusetts State Health & Educational Facilities
Authority Revenue:
$ 750,000 A3* Addison Gilbert Hospital, Series C,
5.750% due 7/1/23 $ 652,500
1,000,000 AAA Beth Israel Deaconess Medical Center, Series G-4,
AMBAC-Insured, 7.255% due 7/1/25 (d) 917,500
250,000 BBB Beth Israel Hospital, Series E, 7.000% due 7/1/14 250,000
1,000,000 A Brockton Hospital, Series B, 8.100% due 7/1/13 1,002,370
1,250,000 BBB+ Cape Cod Healthcare, Series B, 5.450% due 11/15/23 971,875
200,000 Aa2* Capital Asset Program, Series E, 3.500% due 1/1/35 (e) 200,000
1,000,000 BBB Caritas Christ, Series A, 5.625% due 7/1/20 790,000
750,000 Baa3* Central New England Health Systems, Series A,
6.300% due 8/1/18 663,750
895,000 NR Christopher House Inc., Series A, 6.875% due 1/1/29 792,075
1,500,000 BBB+ Jordan Hospital, Series D, 5.375% due 10/1/28 1,126,875
1,000,000 BB Learning Center for Deaf Children, Series C,
6.100% due 7/1/19 917,500
500,000 AAA Medical Center of Central Massachusetts, Series B,
AMBAC-Insured, 8.320% due 6/23/22 (d) 534,375
1,750,000 Ba2* Saint Memorial Medical Center, Series A,
6.000% due 10/1/23 1,356,250
2,015,000 A South Shore Hospital, Series F, 5.625% due 7/1/19 1,800,906
700,000 AAA Valley Regional Health System, Series C,
CONNIE LEE-Insured, 7.000% due 7/1/06 756,875
750,000 Aa2* Youville House, FHA-Insured, Project A,
6.050% due 2/15/29 713,438
-----------------------------------------------------------------------------------------------------
13,446,289
-----------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 2.2%
1,000,000 AAA Framingham Housing Authority Mortgage Revenue,
Beaver Terrace Apartments, Series A,
GNMA-Collateralized, 6.650% due 2/20/32 1,025,000
325,000 A+ Massachusetts State HFA, Housing Project, Series A,
6.375% due 4/1/20 325,813
-----------------------------------------------------------------------------------------------------
1,350,813
-----------------------------------------------------------------------------------------------------
Housing: Single-Family -- 6.0%
Massachusetts State HFA, Housing Revenue,
Single-Family Housing:
355,000 A+ Series 18, 7.350% due 12/1/16 366,609
960,000 A+ Series 31, 6.450% due 12/1/16 979,200
2,325,000 A+ Series 38, 7.200% due 12/1/26 (b) 2,406,375
-----------------------------------------------------------------------------------------------------
3,752,184
-----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 11
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) May 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================
<S> <C> <C>
Industrial Development -- 19.4%
Boston Industrial Development Financing Authority Revenue:
$1,000,000 NR First Mortgage, Springhouse Inc., 5.875% due 7/1/18 $ 820,000
990,000 Aaa* North End Community Nursing Home, Refunding Bonds,
Series A, FHA-Insured, 6.450% due 8/1/37 1,009,800
1,000,000 NR Roundhouse Hospitality, LLC Project,
7.875% due 3/1/25 (b) 985,000
Massachusetts State Development Financing Agency Revenue:
1,000,000 AA Applewild School Issue, Asset-Guaranteed,
5.750% due 8/1/29 931,250
1,105,000 AA Assumption College, Series A, Asset-Guaranteed,
5.750% due 3/1/20 1,056,656
1,000,000 BBB Berkshire Retirement Community Inc., First Mortgage,
5.600% due 7/1/19 805,000
1,000,000 Aaa* Brooks School, Issue B, MBIA-Insured,
5.000% due 7/1/24 848,750
1,000,000 A Curry College, Series A, ACA-Insured,
5.375% due 3/1/19 883,750
1,000,000 NR Health Care Facility Alliance, Series A,
7.100% due 7/1/32 908,750
1,395,000 AA May Institute Inc., Asset-Guaranteed,
5.750% due 9/1/29 1,297,350
1,000,000 AA Worcester Redevelopment Authority Issue,
Asset-Guaranteed, 5.250% due 6/1/19 885,000
Massachusetts State Industrial Finance Agency,
Resource Recovery Revenue, Series A:
250,000 BBB+ Refusetech Inc. Project, 6.300% due 7/1/05 253,438
500,000 NR S.E. Massachusetts Project, 9.000% due 7/1/15 530,150
1,250,000 NR Massachusetts State Industrial Finance Agency Revenue,
(Chestnut Knoll Project A), 5.625% due 2/15/25 965,625
--------------------------------------------------------------------------------------------------
12,180,519
--------------------------------------------------------------------------------------------------
Life Care Systems -- 9.4%
Massachusetts Industrial Finance Agency Revenue
Health Care Facilities:
1,500,000 AAA Arbors at Taunton Project, Assisted Living
Facilities Revenue, GNMA-Collateralized,
5.500% due 6/20/40 (b) 1,310,625
1,400,000 AAA Briscoe House Assisted Living, Series A,
FHA-Insured, 7.125% due 2/1/36 (b) 1,475,250
1,375,000 AAA Chelsea Jewish Nursing Home, Series A,
FHA-Insured, 6.500% due 8/1/37 1,381,875
2,000,000 A+ Jewish Geriatric Services, Series B,
5.500% due 5/15/27 1,737,500
--------------------------------------------------------------------------------------------------
5,905,250
--------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
--------------------------------------------------------------------------------
12 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) May 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY VALUE
==================================================================================================
<S> <C> <C>
Miscellaneous -- 2.3%
$ 630,000 AAA Plymouth County COP, Correctional Facility Project,
AMBAC-Insured, 5.000% due 4/1/22 $ 541,013
1,000,000 NR Virgin Islands Public Finance Authority Revenue,
Series E, 5.750% due 10/1/13 910,000
--------------------------------------------------------------------------------------------------
1,451,013
--------------------------------------------------------------------------------------------------
Pollution Control -- 3.1%
1,000,000 AA+ Massachusetts State Water Pollution, Series A,
6.375% due 2/1/15 1,037,500
1,000,000 AAA Massachusetts State Water Pollution Abatement Trust,
Pool Program, Series 5, 5.375% due 8/1/27 900,000
--------------------------------------------------------------------------------------------------
1,937,500
--------------------------------------------------------------------------------------------------
Transportation -- 9.7%
750,000 BBB Guam Airport Authority Revenue, Series A,
6.500% due 10/1/23 778,125
2,420,000 Aa3* Massachusetts State Capital Appreciation,
Federal Highway, zero coupon due 6/15/15 995,225
1,000,000 AA- Massachusetts State Port Authority Revenue, Series B,
5.000% due 7/1/18 (b) 862,500
Massachusetts State Turnpike Authority,
Metropolitan Highway System Revenue:
3,000,000 AAA Capital Appreciation, Series C, MBIA-Insured,
zero coupon due 1/1/23 746,250
2,330,000 AAA Sr. Sub. Notes, Series A, AMBAC-Insured,
5.000% due 1/1/39 1,925,159
750,000 AAA Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series B, MBIA-Insured,
5.875% due 7/1/35 742,500
--------------------------------------------------------------------------------------------------
6,049,759
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $66,763,282**) $62,594,286
--------------------------------------------------------------------------------------------------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those
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) Residual interest bond-coupon varies inversely with level of short-term
tax-exempt interest rates.
(e) Variable rate obligation payable at par at any time on no more than seven
days notice.
** 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 2000 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
ACA -- American Capital Access
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 lnverse 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, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $66,763,283) $62,594,286
Interest receivable 1,218,274
Receivable for Fund shares sold 75,199
----------------------------------------------------------------------------------
Total Assets 63,887,759
----------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 1,727,145
Administration fees payable 84,895
Payable to bank 35,114
Investment advisory fees payable 22,713
Distribution fees payable 5,227
Accrued expenses 40,375
----------------------------------------------------------------------------------
Total Liabilities 1,915,469
----------------------------------------------------------------------------------
Total Net Assets $61,972,290
==================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 5,275
Capital paid in excess of par value 67,250,234
Undistributed net investment income 31,548
Accumulated net realized loss from security transactions (1,145,770)
Net unrealized depreciation of investments (4,168,997)
----------------------------------------------------------------------------------
Total Net Assets $61,972,290
==================================================================================
Shares Outstanding:
Class A 2,861,930
--------------------------------------------------------------------------------
Class B 2,181,210
--------------------------------------------------------------------------------
Class L 231,655
--------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $11.75
--------------------------------------------------------------------------------
Class B * $11.75
--------------------------------------------------------------------------------
Class L ** $11.74
--------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $12.24
--------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $11.86
==================================================================================
</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 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations (unaudited)
--------------------------------------------------------------------------------
For the Six Months Ended May 31, 2000
INVESTMENT INCOME:
Interest $ 2,005,435
-------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 4) 120,431
Investment advisory fees (Note 4) 95,210
Administration fees (Note 4) 63,473
Audit and legal 21,669
Shareholder and system servicing fees 16,254
Shareholder communications 11,282
Trustees' fees 6,418
Pricing service fees 4,513
Registration fees 3,510
Custody 1,806
Other 4,570
-------------------------------------------------------------------------------
Total Expenses 349,136
-------------------------------------------------------------------------------
Net Investment Income 1,656,299
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 5):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 22,204,044
Cost of securities sold 22,964,408
-------------------------------------------------------------------------------
Net Realized Loss (760,364)
-------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period (3,099,554)
End of period (4,168,997)
-------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (1,069,443)
-------------------------------------------------------------------------------
Net Loss on Investments (1,829,807)
-------------------------------------------------------------------------------
Decrease in Net Assets From Operations $ (173,508)
================================================================================
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, 2000 (unaudited)
and the Year Ended November 30, 1999
<TABLE>
<CAPTION>
2000 1999
=====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,656,299 $ 3,254,659
Net realized loss (760,364) (385,406)
Increase in net unrealized depreciation (1,069,443) (6,430,461)
-------------------------------------------------------------------------------------
Decrease in Net Assets From Operations (173,508) (3,561,208)
-------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 3):
Net investment income (1,636,203) (3,239,909)
-------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,636,203) (3,239,909)
-------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 5,585,598 14,076,211
Net asset value of shares issued
for reinvestment of dividends 977,502 1,905,375
Cost of shares reacquired (8,366,214) (13,226,449)
-------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Fund Share Transactions (1,803,114) 2,755,137
-------------------------------------------------------------------------------------
Decrease in Net Assets (3,612,825) (4,045,980)
NET ASSETS:
Beginning of period 65,585,115 69,631,095
-------------------------------------------------------------------------------------
End of period* $ 61,972,290 $ 65,585,115
=====================================================================================
* Includes undistributed net investment income of: $ 31,548 $ 11,452
=====================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
18 2000 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; 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.
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.
--------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 19
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
--------------------------------------------------------------------------------
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"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup") acts as investment advisor 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.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney Private
Trust Company, another subsidiary of Citigroup, acts as the Fund's transfer
agent and PFPC Global Fund Services ("PFPC") acts as the Fund's sub-transfer
agent. CFTC receives account fees and asset-based fees that vary according to
the size and type of account. PFPC is responsible for shareholder recordkeeping
and financial processing for all shareholder accounts and is paid by CFTC.
During the six months ended May 31, 2000, the Fund paid transfer agent fees of
$151,985 to CFTC.
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 are maximum initial sales charges of 4.00% and 1.00% for Class A and L
shares, respectively. 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. 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.
--------------------------------------------------------------------------------
20 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
--------------------------------------------------------------------------------
For the six months ended May 31, 2000, SSB and CFBDS received sales charges of
$14,000 on sales of the Funds Class A shares. In addition, CDSCs paid to SSB
were approximately $23,000 for Class B shares.
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 31,2000,total Distribution Plan fees
incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $25,964 $84,808 $9,659
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
5. Investments
For the six months ended May 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $20,600,299
--------------------------------------------------------------------------------
Sales 22,204,044
================================================================================
At May 31, 2000, the aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 14,707
Gross unrealized depreciation (4,183,704)
--------------------------------------------------------------------------------
Net unrealized depreciation $(4,168,997)
================================================================================
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.
--------------------------------------------------------------------------------
Smith Barney Massachusetts Municipals Fund 21
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
--------------------------------------------------------------------------------
7. Shares of Beneficial Interest
At May 31, 2000, the Fund had an unlimited number of shares of beneficial
interest authorized with a par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest and has the same rights, except that each class bears certain
direct expenses, including those specifically related to the distribution of its
shares.
At May 31, 2000, total paid-in capital amounted to the following for each class:
Class A Class B Class L
================================================================================
Total Paid-in Capital $35,751,231 $28,448,225 $3,056,053
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 2000 November 30, 1999
---------------------- ------------------------
Shares Amount Shares Amount
=========================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 207,466 $ 2,479,308 540,749 $ 7,037,788
Shares issued on reinvestment 50,188 591,903 88,483 1,130,831
Shares reacquired (322,795) (3,836,573) (514,447) (6,518,659)
-----------------------------------------------------------------------------------------
Net Increase (Decrease) (65,141) $ (765,362) 114,785 $ 1,649,960
=========================================================================================
Class B
Shares sold 252,610 $ 2,998,475 440,199 $ 5,647,344
Shares issued on reinvestment 28,865 340,319 54,336 694,458
Shares reacquired (362,768) (4,307,127) (508,468) (6,480,146)
-----------------------------------------------------------------------------------------
Net Decrease (81,293) $ (968,333) (13,933) $ (138,344)
=========================================================================================
Class L
Shares sold 9,117 $ 107,815 106,235 $ 1,391,079
Shares issued on reinvestment 3,844 45,280 6,290 80,086
Shares reacquired (18,805) (222,514) (17,506) (227,644)
-----------------------------------------------------------------------------------------
Net Increase (Decrease) (5,844) $ (69,419) 95,019 $ 1,243,521
=========================================================================================
</TABLE>
8. Subsequent Event
Effective June 5, 2000, the Board of Trustees of the Fund has approved a
Distribution Agreement with SSB, replacing the Distribution Agreement with
CFBDS.
--------------------------------------------------------------------------------
22 2000 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 2000(1)(2) 1999(2) 1998 1997 1996 1995
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.09 $13.32 $13.18 $12.99 $12.96 $11.35
------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.32 0.62 0.65 0.66 0.68 0.69
Net realized and unrealized
gain (loss) (0.34) (1.23) 0.34 0.32 0.02 1.61
------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From
Operations (0.02) (0.61) 0.99 0.98 0.70 2.30
------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (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 (0.32) (0.62) (0.85) (0.79) (0.67) (0.69)
------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.75 $12.09 $13.32 $13.18 $12.99 $12.96
------------------------------------------------------------------------------------------------------------------
Total Return (0.13)%++ (4.73)% 7.66% 7.85% 5.65% 20.73%
------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $33,630 $35,386 $37,451 $32,736 $30,109 $29,159
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.87%+ 0.85% 0.76% 0.80% 0.80% 0.83%
Net investment income 5.47+ 4.84 4.84 5.07 5.32 5.42
------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 66% 51% 58% 23% 10%
==================================================================================================================
</TABLE>
(1) For the six months ended May 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) The investment advisor 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%
++ 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 2000(1)(2) 1999(2) 1998 1997 1996 1995
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.08 $ 13.30 $ 13.17 $ 12.99 $ 12.96 $ 11.35
----------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.29 0.56 0.58 0.60 0.61 0.63
Net realized and unrealized
gain (loss) (0.33) (1.23) 0.33 0.31 0.03 1.61
----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From
Operations (0.04) (0.67) 0.91 0.91 0.64 2.24
----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.29) (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 (0.29) (0.55) (0.78) (0.73) (0.61) (0.63)
----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 11.75 $ 12.08 $ 13.30 $ 13.17 $ 12.99 $ 12.96
----------------------------------------------------------------------------------------------------------------------
Total Return (0.34)%++ (5.18)% 7.05% 7.25% 5.14% 20.15%
----------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $ 25,623 $ 27,332 $ 30,285 $ 27,589 $ 28,874 $ 28,726
----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.37%+ 1.36% 1.28% 1.31% 1.31% 1.35%
Net investment income 4.93+ 4.33 4.32 4.57 4.81 4.94
----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 66% 51% 58% 23% 10%
======================================================================================================================
</TABLE>
(1) For the six months ended May 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) The investment advisor 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%
++ Total return is not annualized, as it may not be representative of
the total return for the year.
+ Annualized.
--------------------------------------------------------------------------------
24 2000 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 2000(1)(2) 1999(2) 1998(3) 1997 1996 1995
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.07 $ 13.30 $ 13.16 $ 12.98 $ 12.95 $ 11.35
-----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.29 0.56 0.58 0.59 0.60 0.63
Net realized and unrealized
gain (loss) (0.33) (1.24) 0.34 0.31 0.03 1.60
-----------------------------------------------------------------------------------------------------------
Total Income (Loss) From
Operations (0.04) (0.68) 0.92 0.90 0.63 2.23
-----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.29) (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 (0.29) (0.55) (0.78) (0.72) (0.60) (0.63)
-----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 11.74 $ 12.07 $ 13.30 $ 13.16 $ 12.98 $ 12.95
-----------------------------------------------------------------------------------------------------------
Total Return (0.35)%++ (5.28)% 7.11% 7.21% 5.09% 20.04%
-----------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $ 2,719 $ 2,867 $ 1,895 $ 428 $ 179 $ 146
-----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.40%+ 1.39% 1.31% 1.34% 1.34% 1.35%
Net investment income 4.90+ 4.32 4.25 4.51 4.77 4.65
-----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 66% 51% 58% 23% 10%
===========================================================================================================
</TABLE>
(1) For the six months ended May 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) The investment advisor 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%
++ 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>
[LOGO OF SALOMON SMITH BARNEY]
Trustees Custodian
Herbert Barg PFPC Trust Company
Alfred J. Bianchetti
Martin Brody Transfer Agent
Dwight B. Crane
Burt N. Dorsett Citi Fiduciary Trust Company
Elliot S. Jaffe 388 Greenwich Street, 22nd Floor
Stephen E. Kaufman New York, New York 10013
Joseph J. McCann
Heath B. McLendon, Chairman Sub-Transfer Agent
Cornelius C. Rose, Jr. PFPC Global Fund Services
P.O. Box 9699
James Crisona, Emeritus Providence, Rhode Island 02940-9699
Officers This report is submitted for the general
information of the shareholders of Smith
Heath B. McLendon Barney Massachusetts Municipals Fund,
President and but it may also be used as sales
Chief Executive Officer literature when proceeded or accompanied
by the current Prospectus, which gives
Lewis E. Daidone details about charges, expenses,
Senior Vice President investment objectives and operating
and Treasurer policies of the Portfolio. If used as
sales material after August 31, 2000,
Peter M. Coffey this report must be accompanied by
Vice President and performance information for the most
Investment Officer recently completed calendar quarter.
Anthony Pace Salomon Smith Barney is a service mark
Controller of Salomon Smith Barney Inc.
Christina T. Sydor Smith Barney
Secretary Massachusetts
Municipals Fund
Investment Advisor 388 Greenwich Street, MF-2
SSB Citi Fund Management LLC New York, New York 10013
Distributor www.smithbarney.com/mutualfunds
CFBDS, Inc.
FD2227 7/00
