<PAGE>
[GRAPHIC]
SMALL BOX ABOVE FUND NAME
SHOWING A FLORIDA SKYSCRAPER
WITH ATTACHED BRIDGES.
1994 SMITH BARNEY
ANNUAL FLORIDA
REPORT MUNICIPALS
FUND
.......................................
OCTOBER 31, 1994
[LOGO]
<PAGE>
Florida Municipals Fund
DEAR SHAREHOLDER:
We are pleased to provide you with the Annual Report which
includes the portfolio of investments for Smith Barney
Florida Municipals Fund for the fiscal year ended October 31,
1994. During the past twelve months, in response to declining prices
for municipal bonds, the Fund's net asset value for Class A and Class
B shares declined to $9.24 from $10.53 per share. Investors owning
Class A shares received income distributions of $0.51 per share;
investors owning Class B shares received income distributions of $0.46
per share. The total return for this period was (7.31)% for Class A
shares and (7.76)% for Class B shares. Further information about the
performance of your investment during this and previous fiscal periods
is available on the performance pages of this report.
The year 1994 has produced a difficult investment climate for the
fixed-income investor as fear of an economic expansion and, by implication, the
threat of inflation have gripped both the global and domestic bond markets. In
an effort to combat inflation, the Federal Reserve has raised interest rates six
times this year. This rise in interest rates has led to a bond market
characterized by pessimism and selling pressures, and consequently lower prices
for most fixed-income securities. From our perspective, however, trends
presently aligning themselves in the bond markets should provide positive
developments for the debt markets in general, and tax-exempt securities in
particular.
When the markets become convinced that the Federal Reserve will do what is
necessary to slow economic growth, volatility should lessen and bond prices
should stabilize. This outcome becomes more likely as the Federal Reserve raises
short-term interest rates. Furthermore, as the Federal Reserve increases
interest rates, the dollar should strengthen, which would heighten the appeal of
domestic debt instruments to foreign investors, thereby providing additional
support to domestic markets. We are also of the opinion that since the fall
election cycle is completed, the markets will benefit from a clearer knowledge
of the political makeup and fiscal direction of the Federal government.
The tax-exempt market should continue to benefit from higher Federal tax rates
and a lack of new debt issuance, both of which heighten the value and appeal of
quality tax-exempt income. On a state level, we believe that further tax
increases will be forthcoming. Increased costs for education, social services,
prison reform and overall infrastructure needs may force the
1
<PAGE>
- --------------------------------------------------------------------
D I V I D E N D P O L I C Y
ALTHOUGH NOT EXPLICITLY STATED IN THE PROSPECTUS, THE FUND'S POLICY IS TO
PAY A LEVEL MONTHLY DIVIDEND BASED ON OUR PROJECTIONS FOR THE MUNICIPAL BOND
MARKET AND THE GENERAL DIRECTION OF INTEREST RATES. THIS POLICY HAS NO
APPRECIABLE AFFECT ON THE FUND'S INVESTMENT STRATEGIES OR NET ASSET VALUE
PER SHARE SINCE IT IS GUIDED BY MARKET CONDITIONS. IT MEANS THAT WE DO NOT
INVEST IN SPECULATIVE SECURITIES WHICH MAY UNDERMINE THE FUND'S NET ASSET
VALUE PER SHARE IN ORDER TO MAINTAIN AN UNREALISTICALLY HIGH DIVIDEND
POLICY. WE CONTINUALLY MONITOR BOTH THE MARKET AND THE FUND'S INCOME STREAM
TO SEE THAT OUR DIVIDEND PROJECTIONS ARE REALISTIC.
legislature to raise taxes. Florida also assesses a significant intangibles tax
on all residents' out of state municipal holdings, which increases the value of
in-state municipal paper to Florida residents.
We have maintained a high quality portfolio and believe that the best quality
municipals are at increasingly attractive valuation levels as a percentage of
Treasuries and should outperform on a relative basis going forward. We believe
that we are well positioned to provide our investors with high tax-exempt income
at below average volatility and risk.
In mid-November of this year, the way Smith Barney mutual funds are listed in
the newspapers was changed to reflect our consolidated mutual fund family.
Before the consolidation, Smith Barney and Smith Barney Shearson mutual funds
were listed in the papers under separate headings. All mutual funds now appear
under the heading "Smith Barney." Your Smith Barney Financial Consultant will be
able to help you locate your funds in your newspaper.
2
<PAGE>
We appreciate your continued confidence and patience during this difficult
investment period. We look forward to reporting to you in April in the Fund's
Semi-Annual Report.
Sincerely,
Heath B. McLendon Lawrence T. McDermott
CHAIRMAN OF THE BOARD VICE PRESIDENT AND
INVESTMENT OFFICER
DECEMBER 19, 1994
3
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS A SHARES
<TABLE>
<CAPTION>
Year Ended Net Asset Value Capital Gains Dividends Total
October 31 Beginning Ending Distributed Paid Return*
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
11/6/92 - 10/31/93 $ 9.55 $10.53 $0.04 $0.49 16.07%
- ---------------------------------------------------------------------------
1994 10.53 9.24 0.03 0.52 (7.31)
- ---------------------------------------------------------------------------
Total $0.07 $1.01
- ---------------------------------------------------------------------------
Cumulative Total Return - (11/6/92 through 10/31/94) 7.59%
- ---------------------------------------------------------------------------
<FN>
*Figures assume reinvestment of all dividends and capital gains distributions at
net asset value and do not assume deduction of the front-end sales charge
(maximum 4.5%).
</TABLE>
THE FUND'S POLICY IS TO DISTRIBUTE DIVIDENDS MONTHLY
AND CAPITAL GAINS, IF ANY, ANNUALLY.
- --------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN** -- CLASS A SHARES
<TABLE>
<CAPTION>
Without Sales Charge With Sales Charge***
Without Fee With Fee Without Fee With Fee
Waiver Waiver Waiver Waiver
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
Year Ended 10/31/94 (7.59)% (7.31)% (11.75)% (11.48)%
- ---------------------------------------------------------------------------
Inception (11/6/92) through 10/31/94 3.37% 3.75% 1.00% 1.38%
- ---------------------------------------------------------------------------
<FN>
**All average annual total return figures shown reflect the reinvestment of
dividends and capital gains distributions at net asset value. The Fund waived
investment advisory and administration fees from November 6, 1992 to October 31,
1994. A shareholder's actual return for periods during which waivers were in
effect would be the higher of the two numbers shown.
***Average annual total return figures shown assume the deduction of the maximum
4.5% front-end sales charge.
</TABLE>
NOTE: The Fund commenced operations on November 6, 1992. Class A shares are
subject to a maximum 4.5% front-end sales charge and an annual service fee of
0.15% of the value of the average daily net assets attributable to that class.
Effective November 7, 1994, the maximum front-end sales charge was reduced to
4.0%.
4
<PAGE>
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in Florida Municipals
Fund Class A Shares from November 6, 1992 through October 31, 1994 as compared
with the growth of a $10,000 investment in Lehman Municipal Bond Index. The plot
points used to draw the line graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
GROWTH OF $10,000 INVESTMENT IN THE
INVESTED IN CLASS A SHARES LEHMAN MUNICIPAL
MONTH ENDED OF THE FUND BOND INDEX
<S> <C> <C>
10/92 $10,000 $10,000
11/05/92 $ 9,550 --
11/92 $ 9,721 $10,179
12/92 $ 9,846 $10,361
3/93 $10,263 $10,972
6/93 $10,680 $11,026
9/93 $11,068 $11,459
12/93 $11,179 $11,509
3/94 $10,394 $11,578
6/94 $10,482 $11,299
9/94 $10,533 $11,475
10/94 $10,275 $11,307
</TABLE>
+ Illustration of $10,000 invested in Class A shares at inception on November 6,
1992 assuming the deduction of the maximum 4.5% sales charge at the time of
investment and the reinvestment of dividends and capital gains at net asset
value through October 31, 1994.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is an unmanaged, broad-based index
which includes about 8,000 tax-free bonds and reflects approximately $300
billion of market capitalization.
Index information is available at month end only; therefore, the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here and on the following pages represent past
performance of Class A shares and do not guarantee future results.
FOR A GLOSSARY OF TERMS, PLEASE TURN TO THE END OF THIS REPORT.
5
<PAGE>
Smith Barney
Florida Municipals Fund
---------------------------------------------
HISTORICAL PERFORMANCE -- CLASS B SHARES
<TABLE>
<CAPTION>
Year Ended Capital Gains Dividends Total
October 31 Beginning Ending Distributed Paid Return*
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
11/6/92 - 10/31/93 $ 9.55 $10.53 $0.04 $0.44 15.52%
- ----------------------------------------------------------------------------
1994 10.53 9.24 0.03 0.47 (7.76)
- ----------------------------------------------------------------------------
Total $0.07 $0.91
- ----------------------------------------------------------------------------
Cumulative Total Return - (11/6/92 through 10/31/94) 6.55%
- ----------------------------------------------------------------------------
<FN>
*Figures assume reinvestment of all dividends and capital gains distributions at
net asset value and do not assume deduction of the contingent deferred sales
charge ("CDSC").
</TABLE>
- --------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN** -- CLASS B SHARES
<TABLE>
<CAPTION>
Without CDSC With CDSC***
Without Fee With Fee Without Fee With Fee
Waiver Waiver Waiver Waiver
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
Year Ended 10/31/94 (8.04)% (7.76)% (11.98)% (11.71)%
- ----------------------------------------------------------------------------
Inception (11/6/92) through 10/31/94 2.86% 3.25% 0.96% 1.34%
- ----------------------------------------------------------------------------
<FN>
**All average annual total return figures shown reflect the reinvestment of
dividends and capital gains distributions at net asset value. The Fund waived
investment advisory and administration fees from November 6, 1992 to October 31,
1994. A shareholder's actual return for periods during which waivers were in
effect would be the higher of the two numbers shown.
***Average annual total return figures assume the deduction of the maximum
applicable CDSC which is described in the prospectus.
</TABLE>
NOTE: The Fund began offering Class B shares on November 6, 1992. Class B shares
are subject to a maximum CDSC of 4.50% and service and distribution fees of
0.15% and 0.50%, respectively, of the value of the average daily net assets
attributable to that class.
6
<PAGE>
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in Florida Municipals
Fund Class B Shares from November 6, 1992 through October 31, 1994 as compared
with the growth of a $10,000 investment in Lehman Municipal Bond Index. The plot
points used to draw the line graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
GROWTH OF $10,000 INVESTMENT IN THE
INVESTED IN CLASS B SHARES LEHMAN MUNICIPAL
MONTH ENDED OF THE FUND BOND INDEX
<S> <C> <C>
10/92 -- $10,000
11/05/92 $10,000 --
11/92 $10,175 $10,179
12/92 $10,301 $10,361
3/93 $10,703 $10,972
6/93 $10,146 $11,026
9/93 $11,538 $11,459
12/93 $11,644 $11,509
3/94 $10,812 $11,578
6/94 $10,887 $11,299
9/94 $10,928 $11,475
10/94 $10,268 $11,307
</TABLE>
+ Illustration of $10,000 invested in Class B shares on November 6, 1992
assuming deduction of the maximum CDSC at the time of redemption and the
reinvestment of dividends and capital gains at net asset value through October
31, 1994.
++ Value does not assume deduction of applicable CDSC.
+++ Value assumes deduction of applicable CDSC (assuming redemption on October
31, 1994).
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is an unmanaged, broad-based index
which includes about 8,000 tax-free bonds and reflects approximately $300
billion of market capitalization.
Index information is available at month end only; therefore, the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here and on the following pages represent past
performance of Class B shares and do not guarantee future results.
FOR A GLOSSARY OF TERMS, PLEASE TURN TO THE END OF THIS REPORT.
7
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS OCTOBER 31, 1994 (UNAUDITED)
INDUSTRY BREAKDOWN
Pie chart depicting the allocation of the Florida Municipals Fund investment
securities held at October 31, 1994 by Industry classification. The pie is
broken in pieces representing industries in the following percentages:
<TABLE>
<CAPTION>
INDUSTRY PERCENTAGE
<S> <C>
Net Other Assets and Liabilities 16.8%
Transportation 3.9%
Housing 16.1%
Hospital 17.9%
Pollution Control 8.4%
Utility 11.3%
Industrial 2.0%
Education 9.0%
General Obligations 14.6%
</TABLE>
SUMMARY OF MUNICIPAL BONDS AND NOTES BY COMBINED RATINGS
<TABLE>
<CAPTION>
Percent
Standard & of
Moody's Poor's Value
<S> <C> <C> <C>
-------------------------------------------
AAA OR AAA 45%
-------------------------------------------
AA AA 8
-------------------------------------------
A A 15
-------------------------------------------
BA BB 2
-------------------------------------------
BAA BBB 19
-------------------------------------------
NR NR 11
-------------------------------------------
100%
---------------
</TABLE>
AVERAGE MATURITY 24.5 years
8
<PAGE>
Smith Barney
Florida Municipals Fund
- ------------------------------------------
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1994
-------------------------------------------------------------
<TABLE>
<S> <C>
KEY TO INSURANCE ABBREVIATIONS
AMBAC -- American Municipal Bond Assurance Corporation
CO LEE -- College Construction Loan Association
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Administration
MBIA -- Municipal Bond Investor Assurance
</TABLE>
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED) MARKET VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
<C> <S> <C> <C> <C>
----------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES -- 98.7%
FLORIDA -- 96.3%
Alachua County, Florida,
Health Facilities
Authority, Santa Fe
Healthcare System, Health
Revenue:
$ 230,000 6.875% due 11/15/02 Baa BBB+ $ 234,600
640,000 6.050% due 11/15/16 Baa BBB+ 546,400
250,000 Boca Raton, Florida,
Special Assessment
Improvement, (Visions 90
Project),
6.000% due 7/1/22 A1 NR 227,500
500,000 Boynton Beach, Florida,
Utility System Revenue
Bonds, (FGIC Insured),
6.250% due 11/1/20 Aaa AAA 476,875
860,000 Bradford County, Florida,
Health Facilities, (Santa
Fe Project),
6.050% due 11/15/16 Baa BBB+ 731,000
Brevard County, Florida:
1,000,000 Health Facilities
Authority, (Holmes Regional
Medical Center Project),
5.750% due 10/1/13 A1 NR 882,500
750,000 Housing Finance Authority,
6.600% due 9/1/16 Aaa NR 748,125
400,000 School Board Authority,
Series A,
(AMBAC Insured),
6.500% due 7/1/12 Aaa AAA 400,500
500,000 Tourist Development Tax
Revenue,
6.875% due 3/1/13 NR NR 485,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED) MARKET VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
FLORIDA -- (CONTINUED)
$1,000,000 Broward County, Florida,
Educational Facilities
Authority, (Co Lee
Insured),
6.000% due 4/1/13 NR AAA $ 926,250
400,000 Citrus County, Florida,
Pollution Control Revenue,
Series B, Florida Power
Corporation, (Crystal River
Project),
6.350% due 2/1/22 A1 A+ 383,500
410,000 Clearwater, Florida,
Multifamily Housing
Revenue, (Drew Gardens
Project), Series A, (FHA
Insured),
6.500% due 10/1/25 NR AAA 377,713
300,000 Collier County, Florida,
Special Assessment,
Pine/Naples -- Municipal
Services,
5.600% due 11/1/13 NR BBB 254,250
500,000 Crystal River, Florida,
Water and Sewer Revenue
Bonds, (AMBAC Insured),
6.250% due 10/1/22 Aaa AAA 476,250
Dade County, Florida:
1,000,000 Aviation Facilities
Revenue, Series B , (MBIA
Insured),
6.600% due 10/1/22 Aaa AAA 990,000
500,000 Health Facilities
Authority, Hospital
Revenue, (North Shore
Medical Center Project),
(AMBAC Insured),
6.500% due 8/15/15 Aaa AAA 490,625
500,000 Professional Sports
Franchise Facilities
Tax Revenue, Series B,
(FGIC Insured),
6.000% due 10/1/22 Aaa AAA 459,375
1,000,000 School District, Series A,
(MBIA Insured),
6.125% due 6/1/14 Aaa AAA 950,000
500,000 Davie, Florida, Water and
Sewer Revenue Bonds, (AMBAC
Insured),
6.250% due 10/1/17 Aaa AAA 480,624
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED) MARKET VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
FLORIDA -- (CONTINUED)
$1,000,000 Duval County, Florida,
Housing Finance Authority,
6.700% due 10/1/26 NR NR $ 948,750
500,000 Enflewood, Florida, Water
Distribution
Utility System,
6.000% due 10/1/23 Aaa AAA 463,750
Escambia County, Florida:
750,000 Health and Education
Financing Authority,
(Baptist Hospital & Manor
Project),
6.750% due 10/1/14 NR BBB+ 702,188
500,000 (Champion International
Corporation Project),
6.950% due 11/1/07 Baa1 BBB 486,875
1,000,000 Pollution Control Revenue,
6.900% due 8/1/22 Baa1 BBB 948,750
500,000 Utility Authority Revenue,
Series A,
(FGIC Insured),
6.300% due 1/1/23 Aaa AAA 478,750
750,000 Florida Department of
Transportation, (Right of
Way),
6.500% due 7/1/21 Aa AA 745,312
180,000 Turnpike Authority Revenue,
Series A, (FGIC Insured),
6.350% due 7/1/22 Aaa AAA 175,275
Florida Housing Finance
Agency:
General Mortgage, Series A,
(FHA Insured):
250,000 6.350% due 6/1/14 NR AAA 240,000
500,000 6.400% due 6/1/24 NR AAA 473,125
1,500,000 Series B,
6.650% due 7/1/26 Aa AA 1,421,250
600,000 Single Family Mortgage,
Refunding, Series C,
5.750% due 7/1/27 Aa AA 515,250
750,000 Florida State Board of
Education,
Capital Outlay, Series B,
6.700% due 6/1/22 Aa AA+ 754,688
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED) MARKET VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
FLORIDA -- (CONTINUED)
$ 750,000 Florida State Correctional
Commission, (MBIA Insured),
6.000% due 8/1/14 Aaa AAA $ 702,187
1,250,000 Florida State, Mid-Bay
Bridge Revenue, Series A,
6.100% due 10/1/22 NR NR 1,035,938
445,000 Fort Lauderdale, Florida,
Central Beach Community
Redevelopment Agency,
(AMBAC Insured),
6.150% due 9/1/08 Aaa AAA 437,769
Hillsborough County,
Florida:
1,000,000 Aviation Authority, Special
Purpose,
(Delta Airlines Project),
6.800% due 1/1/24 Ba3 BB 891,250
820,000 Community Center Project,
Series 2,
6.750% due 7/1/22 A A 820,000
1,125,000 School Board, Certificate
of Participation, (MBIA
Insured),
6.000% due 7/1/14 Aaa AAA 1,054,687
Hillsborough County,
Florida, Utilities Revenue,
Refunding and Improvement,
(MBIA Insured):
190,000 (prerefunded 8/1/01),
7.000% due 8/1/14 NR BBB+ 207,338
930,000 (unrefunded 8/1/01),
7.000% due 8/1/14 Baa1 BBB+ 933,487
1,000,000 Homestead, Florida,
Industrial Development
Revenue, Series A,
7.950% due 11/1/18 NR NR 916,250
Jacksonville, Florida:
500,000 Health Facilities
Authority, (Health South
Inc. Project), (MBIA
Insured),
6.000% due 5/1/22 Aaa AAA 458,750
310,000 Hospital Revenue,
(University Medical Center,
Inc. Project), (Co Lee
Insured),
6.600% due 2/1/21 NR AAA 304,575
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED) MARKET VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
FLORIDA -- (CONTINUED)
$1,250,000 Lake County, Florida,
Resource Recovery,
Industrial Revenue, Series
1993-A,
5.950% due 10/1/13 Baa BBB+ $ 1,051,563
840,000 Leesburg, Florida, Hospital
Revenue, (Leesburg Regional
Medical Center Project),
Series B,
5.200% due 7/1/02 Baa1 BBB+ 765,450
1,000,000 Miami, Florida, Sports
Exhibition Authority, (FGIC
Insured),
6.150% due 10/1/20 Aaa AAA 941,250
Nassau County, Florida,
Pollution Control Revenue:
1,000,000 (ITT Rayonier Inc.
Project),
6.200% due 7/1/15 Baa2 BBB 927,500
595,000 (ITT Rayonier Project 6),
6.250% due 6/1/10 Baa2 BBB 565,994
1,250,000 North Miami, Florida,
Educational Facilities
Revenue, (Johnson & Wales
University Project), Series
A,
6.100% due 4/1/13 NR NR 1,090,625
500,000 North Port, Florida,
Utility Revenue,
(FGIC Insured),
6.250% due 10/1/22 Aaa AAA 476,250
500,000 Northern Palm Beach County,
Water Control District,
Unit Development No. 31,
Program 1,
6.750% due 11/1/07 NR NR 483,125
Orange County, Florida,
Health Facilities Authority
Revenue:
1,250,000 6.750% due 10/1/18 Aaa AAA 1,214,062
1,500,000 (Orlando Regional Health
Center),
(MBIA Insured),
6.000% due 11/1/24 Aaa AAA 1,368,750
100,000 Solid Waste Facilities
Revenue Bonds, (FGIC
Insured),
6.375% due 10/1/17 Aaa AAA 97,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED) MARKET VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
FLORIDA -- (CONTINUED)
Tourist Development Tax
Revenue:
$ 750,000 Series B, (AMBAC Insured),
6.000% due 10/1/21 Aaa AAA $ 690,938
1,500,000 Series B,
6.000% due 10/1/24 Aaa AAA 1,378,125
Orlando, Florida:
400,000 Capital Improvement Special
Revenue, (MBIA Insured),
6.000% due 10/1/22 A1 AA- 366,500
1,500,000 Orlando and Orange
Counties, Florida,
Expressway Authority, Jr.
Lien,
5.950% due 7/1/24 NR A- 1,351,875
200,000 Pace Property Finance
Authority, Utility Systems
Refunding & Improvement,
6.250% due 9/1/13 NR BBB 185,250
Palm Beach County, Florida:
1,000,000 Health Facilities
Authority, (Good Samaritan
Health System Project),
6.300% due 10/1/22 NR A- 913,750
100,000 Solid Waste Authority
Revenue,
(MBIA Insured),
6.250% due 12/1/08 Aaa AAA 100,500
800,000 Pinellas County, Florida,
Sewer Revenue, (FGIC
Insured),
6.550% due 8/1/27 Aaa AAA 755,000
500,000 Seminole County, Florida,
Water and Sewer Revenue
Bonds, (MBIA Insured),
6.000% due 10/1/19 Aaa AAA 472,500
1,500,000 South Broward, Florida,
Hospital District,
5.500% due 5/1/28 A1 A+ 1,196,250
1,500,000 Tallahassee Health
Facilities Revenue,
Tallahassee Memorial
Regional Medical Center,
Series B, (MBIA Insured),
6.000% due 12/1/15 Aaa AAA 1,400,625
500,000 Tallahassee, Florida,
Electric Revenue, Series B,
6.200% due 10/1/12 Aa AA- 483,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) OCTOBER 31, 1994
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED) MARKET VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
FLORIDA -- (CONTINUED)
Tampa, Florida:
$1,000,000 Revenue Allegany Health
Systems,
(St. Joseph's Project),
(MBIA Insured),
6.700% due 12/1/12 Aaa AAA $ 1,000,000
500,000 (Florida Aquarium Inc.
Project),
7.750% due 5/1/27 NR NR 525,000
100,000 Water and Sewer Revenue
Bonds, Series A,
Short-Rites, (FGIC Insured)
9.473% due 10/1/12 Aaa AAA 97,125
250,000 Titusville, Florida, Water
and Sewer Revenue Bonds,
Series A,
6.000% due 10/1/24 Aaa AAA 229,687
500,000 West Palm Beach, Florida,
Community Redevelopment
Agency, Series A,
(prerefunded 3/1/02),
6.750% due 3/1/14 A NR 534,375
----------------------------------------------------------------------------
47,299,725
----------------------------------------------------------------------------
GUAM -- 1.5%
750,000 Guam Airport Authority
Revenue, Series A,
6.500% due 10/1/23 NR BBB 692,812
----------------------------------------------------------------------------
PUERTO RICO -- 0.9%
500,000 Commonwealth of Puerto
Rico, Registered Rites,
(AMBAC Insured),
5.875% due 7/1/18 Aaa AAA 454,375
----------------------------------------------------------------------------
SHORT-TERM MUNICIPAL BONDS AND NOTES -- 1.4%
700,000 St. Lucie County, Florida,
Solid Waste
3.650% due 1/1/27+ A2 A-1 700,000
----------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $52,360,522*) 100.1% 49,146,912
OTHER ASSETS AND LIABILITIES (NET) (0.1)% (34,245)
----------------------------------------------------------------------------
NET ASSETS 100.0% $49,112,667
----------------------------------------------------------------------------
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate daily demand notes payable upon not more than one business
day's notice.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost
$52,360,522) (Note 1)
See accompanying schedule $49,146,912
Cash 50,990
Interest receivable 837,884
Receivable for Fund shares sold 216,786
Unamortized organization costs (Note 7) 87,709
- ----------------------------------------------------------------------------
TOTAL ASSETS 50,340,281
- ----------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased $1,005,533
Payable for fund shares purchased 98,046
Dividends payable 22,237
Distribution fee payable (Note 3) 15,127
Investment advisory fee payable (Note
2) 8,347
Service fee payable (Note 3) 6,395
Trustees' fees and expenses (Note 2) 5,500
Administration fee payable (Note 2) 4,770
Custodian fee payable (Note 2) 4,000
Transfer agent fees payable (Note 2) 3,200
Accrued expenses and other payables 54,459
- ----------------------------------------------------------------------------
TOTAL LIABILITIES 1,227,614
- ----------------------------------------------------------------------------
NET ASSETS $49,112,667
- ----------------------------------------------------------------------------
NET ASSETS consist of:
Distributions in excess of net
investment income $ (22,237)
Accumulated net realized loss on
investments sold (561,473)
Unrealized depreciation of investments (3,213,610)
Par value 5,315
Paid-in capital in excess of par value 52,904,672
- ----------------------------------------------------------------------------
TOTAL NET ASSETS $49,112,667
- ----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) OCTOBER 31, 1994
<TABLE>
<S> <C>
NET ASSETS VALUE:
CLASS A SHARES:
NET ASSET VALUE and redemption price per share
($14,086,844 DIVIDED BY 1,524,048 shares of beneficial
interest outstanding) $9.24
- ------------------------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE ($9.24 DIVIDED BY 0.955)
(based on sales charge of 4.50% of the offering price on
October 31,1994) $9.68
- ------------------------------------------------------------------------------
CLASS B SHARES:
NET ASSET VALUE and offering price per share+
($35,025,823 DIVIDED BY 3,790,661 shares of beneficial
interest outstanding) $9.24
- ------------------------------------------------------------------------------
<FN>
+ Redemption price per share is equal to Net Asset Value less any applicable
CDSC.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 3,144,714
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 3,144,714
- -------------------------------------------------------------------------------
EXPENSES:
Distribution fee (Note 3) $ 183,789
Investment advisory fee (Note 2) 179,905
Administration fee (Note 2) 102,803
Service fee (Note 3) 77,102
Legal and audit fees 74,578
Registration and filing fees 46,486
Trustees fees' and expenses (Note 2) 40,681
Amortization of organization costs (Note 7) 29,238
Custodian fees (Note 2) 22,938
Transfer agent fees (Notes 2 and 4) 20,874
Other 60,785
Fees waived by investment adviser and
administrator (Note 2) (145,982)
- -------------------------------------------------------------------------------
TOTAL EXPENSES 693,197
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,451,517
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTES 1 AND 5):
Net realized loss on investments sold during the year (561,473)
Net unrealized depreciation of investments during the year (5,972,896)
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (6,534,369)
- -------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(4,082,852)
- -------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/94 10/31/93*
<S> <C> <C>
Net investment income $ 2,451,517 $ 1,509,040
Net realized gain/(loss) on investments sold during the
period (561,473) 253,201
Net unrealized appreciation/(depreciation) on
investments during the period (5,972,896) 2,759,286
- -------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from
operations (4,082,852) 4,521,527
Distributions to shareholders from net investment
income:
Class A (748,400) (468,582)
Class B (1,703,117) (1,040,458)
Distributions in excess of net investment income:
Class A (15,001) --
Class B (34,140) --
Distribution to shareholders from net realized gain on
investments
Class A (37,401) (36,930)
Class B (87,745) (91,125)
Net increase in net assets from Fund share transactions
(Note 6):
Class A 2,509,303 12,571,092
Class B 5,033,792 32,722,704
- -------------------------------------------------------------------------------------
Net increase in net assets 834,439 48,178,228
NET ASSETS:
Beginning of year 48,278,228 100,000
- -------------------------------------------------------------------------------------
End of year (including distributions in excess of net
income of $22,237 at October 31, 1994) $49,112,667 $48,278,228
- -------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on November 6, 1992.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/94*** 10/31/93*
<S> <C> <C>
Net Asset Value, beginning of period $ 10.53 $ 9.55
- -------------------------------------------------------------------------------------
Income from investment operations:
Net investment income+ 0.51 0.49
Net realized and unrealized gain/(loss) on investments (1.25) 1.02
- -------------------------------------------------------------------------------------
Total from investment operations (0.75) 1.51
Less Distributions:
Dividends from net investment income (0.51) (0.49)
Distributions in excess of net investment income (0.01) --
Distributions from net realized capital gains (0.03) (0.04)
- -------------------------------------------------------------------------------------
Total distributions (0.55) (0.53)
- -------------------------------------------------------------------------------------
Net Asset Value, end of period $ 9.24 $ 10.53
- -------------------------------------------------------------------------------------
Total Return++ (7.31)% 16.07%
- -------------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $14,087 $13,450
Ratio of operating expenses to average net assets+++ 0.99% 0.97%**
Ratio of net investment income to average net assets 5.13% 4.78%**
Portfolio turnover rate 55% 27%
- -------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on November 6, 1992.
** Annualized.
*** Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for the period
since the use of the undistributed method does not accord with results of
operations.
+ Net investment income before waiver of fees by investment adviser and
administrator was $0.48 and $0.45 for the year ended October 31, 1994 and the
period ended October 31, 1993, respectively.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
+++ Annualized expense ratio before waiver of fees by investment adviser and
administrator was 1.27% and 1.38% for the year ended October 31, 1994 and the
period ended October 31, 1993, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
Smith Barney
Florida Municipals Fund
- --------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/94*** 10/31/93*
<S> <C> <C>
Net Asset Value, beginning of period $ 10.53 $ 9.55
- -------------------------------------------------------------------------------------
Income from investment operations:
Net investment income+ 0.46 0.44
Net realized and unrealized gain/(loss) on investments (1.25) 1.02
- -------------------------------------------------------------------------------------
Total from investment operations (0.79) 1.46
Less distributions:
Dividends from net investment income (0.46) (0.44)
Distributions in excess of net investment income (0.01) --
Distributions from net realized capital gains (0.03) (0.04)
- -------------------------------------------------------------------------------------
Total distributions (0.50) (0.48)
- -------------------------------------------------------------------------------------
Net Asset Value, end of period $ 9.24 $ 10.53
- -------------------------------------------------------------------------------------
Total Return++ (7.76)% 15.52%
- -------------------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $35,026 $34,828
Ratio of operating expenses to average net assets+++ 1.49% 1.48%**
Ratio of net investment income to average net assets 4.62% 4.27%**
Portfolio turnover rate 55% 27%
- -------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on November 6, 1992.
** Annualized.
*** Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for the period
since the use of the undistributed method does not accord with results of
operations.
+ Net investment income before waiver of fees by investment adviser and
administrator was $0.43 and $0.40 for the year ended October 31, 1994 and the
period ended October 31, 1993, respectively.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
+++ Annualized expense ratio before waiver of fees by investment adviser and
administrator was 1.78% and 1.88% for the year ended October 31, 1994 and the
period ended October 31, 1993, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Florida Municipals Fund (formerly known as Smith Barney Shearson
Florida Municipals Fund) (the "Fund"), is a non-diversified, open-end management
investment company registered with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund was
organized on August 31, 1992 under the laws of The Commonwealth of Massachusetts
and is a business entity commonly known as a "Massachusetts business trust." The
Fund commenced operations on November 6, 1992. The Fund offers two classes of
shares to the general public: Class A shares and Class B shares. Class A shares
are sold with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge ("CDSC"). Class B shares will automatically
convert to Class A shares eight years after the original purchase date. Each
class of shares has identical rights and privileges except with respect to the
effect of the respective sales charges, the distribution and/
or service fees borne by each class, expenses allocable exclusively to each
class, voting rights on matters affecting a single class, the exchange privilege
of each class and the conversion feature of Class B shares. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements.
PORTFOLIO VALUATION: Securities are valued at the close of trading on the New
York Stock Exchange, Inc. by The Boston Company Advisors, Inc. ("Boston
Advisors") after consultation with an independent pricing service (the
"Service") approved by the Board of Trustees. When, in the judgment of the
Service, quoted bid prices for investments are readily available and are
representative of the bid side of the market, these investments are valued at
the mean between the quoted bid prices and asked prices (as obtained by the
Service from dealers in such securities). Securities for which, in the judgment
of the Service, there are no readily available market quotations (which may
constitute a majority of the portfolio securities) are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of municipal securities of comparable quality, coupon, maturity
and type; indications as to values from dealers; and general market conditions.
Short-term investments that mature in 60 days or less are valued at amortized
cost whenever the Board of Trustees determines that amortized cost reflects the
fair value of those investments.
22
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Interest income is recorded on the accrual basis.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Investment income and realized and unrealized gains and losses are
allocated based upon the relative net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income, if any, are determined on a class level, and are declared daily and paid
on the last business day of the Smith Barney Inc. ("Smith Barney") statement
month. Distributions determined on a Fund level, if any, of any net short-and
long-term capital gains earned by the Fund will be declared and paid annually
after the close of the fiscal year in which they are earned. Additional
distributions of net investment income and capital gains for the Fund may be
made at the discretion of the Board of Trustees in order to avoid the
application of a 4% nondeductible excise tax on certain undistributed amounts of
net investment income and capital gains. To the extent net realized capital
gains can be offset by capital losses and loss carryforwards, it is the policy
of the Fund not to distribute such gains. Permanent differences incurred during
the year ended October 31, 1994 resulting from excess distributions have been
reclassified to paid in capital at year end.
Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund as a whole.
FLORIDA TAXES: Florida currently imposes an "intangibles tax" on certain
securities and other intangible assets owned by Florida residents. The Fund has
received a ruling from Florida authorities that, if on December 31 of any year
the Fund's portfolio consists solely of assets exempt from the intangibles tax,
the Fund's shares will be exempt from the Florida intangibles tax for the
following calendar year. The Fund intends to manage its portfolio so that the
Fund's shares will be exempt from the Florida intangibles tax.
23
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEDERAL INCOME TAXES: The Fund intends to qualify as a regulated investment
company, if such qualification is in the best interests of its shareholders, by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no Federal
income tax provision is required.
2. INVESTMENT ADVISORY FEE,
ADMINISTRATION FEE AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with Greenwich Street Advisors, a division of Mutual Management
Corp., which has been transferred effective November 7, 1994, to Smith Barney
Mutual Fund Management Inc. ("SBMFM"). Mutual Management Corp. and SBMFM are
both wholly owned subsidiaries of Smith Barney Holdings Inc. ("Holdings").
Holdings is a wholly owned subsidiary of The Travelers Inc. Under the Advisory
Agreement, the Fund pays a monthly fee at the following annual rates: .35% of
the value of the Fund's average daily net assets up to $500 million and .32% of
the value of its average daily net assets in excess of $500 million.
Prior to April 20, 1994, the Fund was party to an administration agreement (the
"Administration Agreement") with Boston Advisors, an indirect wholly owned
subsidiary of Mellon Bank Corporation ("Mellon"). Under the Administration
Agreement, the Fund paid a fee computed daily and paid monthly based on the
following annual rates: 0.20% of the value of the Fund's average daily net
assets up to $500 million and 0.18% of the value of the Fund's average daily net
assets in excess of $500 million. As of the close of business on April 20, 1994,
SBMFM (formerly known as Smith, Barney Advisers, Inc.) succeeded Boston Advisors
as the Fund's administrator. The new administration agreement contains
substantially the same terms and conditions, including the level of fees, as the
predecessor agreement.
As of the close of business on April 20, 1994, the Fund and SBMFM entered into a
sub-administration agreement ("Sub-Administration Agreement") with
24
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Boston Advisors. Under the Sub-Administration Agreement, SBMFM pays Boston
Advisors a portion of its fee at a rate agreed upon from time to time between
SBMFM and Boston Advisors.
From time to time the investment adviser and the administrator may voluntarily
waive a portion or all of their respective fees otherwise payable to them. For
the year ended October 31, 1994, the investment adviser and the administrator
voluntarily waived fees in the amounts of $92,898 and $53,084, respectively.
For the year ended October 31, 1994, Smith Barney received $82,800 from
investors representing commissions (sales charges) on sales of Class A shares.
A CDSC is generally payable by a shareholder in connection with the redemption
of Class B shares within five years after the date of purchase. In circumstances
in which the charge is imposed, the amount of the charge ranges between 4.5% and
1% of net asset value depending on the number of years since the date of
purchase. For the year ended October 31, 1994, Smith Barney received from
shareholders $103,281 in CDSCs on the redemption of Class B shares.
No officer, director or employee of Smith Barney or any of its affiliates
receives any compensation from the Fund for serving as a Trustee or officer of
the Fund. The Fund pays each Trustee who is not an officer, director, or
employee of Smith Barney or any of its affiliates $2,500 per annum plus $250 per
meeting attended and reimburses each such Trustee for travel and out-of-pocket
expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary of
Mellon, serves as the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, serves as the Fund's transfer agent.
25
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. DISTRIBUTION PLAN
Smith Barney acts as distributor of the Fund's shares pursuant to a distribution
agreement with the Fund, and sells shares of the Fund through Smith Barney or
its affiliates.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a services and
distribution plan (the "Plan"). Under this Plan, the Fund compensates Smith
Barney for servicing shareholder accounts for Class A and Class B shareholders,
and covers expenses incurred in distributing Class B shares. Smith Barney is
paid an annual service fee with respect to Class A and Class B shares of the
Fund at the annual rate of 0.15% of the value of the average daily net assets of
each respective class of shares. Smith Barney is also paid an annual
distribution fee with respect to Class B shares at the annual rate of 0.50% of
the value of the average daily net assets attributable to those shares. During
the year ended October 31, 1994, the Fund incurred $21,965 and $55,137 in
service fees for Class A and Class B shares, respectively. For the year ended
October 31, 1994, the Fund incurred $183,789 in distribution fees for Class B
shares.
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class of
shares are prorated among the classes based upon the relative net assets of each
class. Operating expenses directly attributable to a class of shares are charged
to that class' operations. In addition to the above servicing and distribution
fees, class specific operating expenses for the year ended October 31, 1994
included transfer agent fees of $5,154 and $15,720 for Class A and Class B
shares, respectively.
5. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the year ended October 31, 1994, amounted to
$34,144,042 and $28,244,036, respectively.
26
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At October 31, 1994, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost amounted to
$56,322, and the aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value amounted to $3,269,932.
6. SHARES OF BENEFICIAL INTEREST
At October 31, 1994, an unlimited number of shares of beneficial interest with
par value of $.001 per share were authorized and divided into two classes, Class
A and Class B.
Changes in shares of beneficial interest outstanding were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
10/31/94 10/31/93*
CLASS A SHARES: Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
Sold 613,550 $ 6,194,067 1,353,429 $13,396,864
Issued as reinvestment of dividends 48,516 481,110 29,852 305,222
Redeemed (415,343) (4,165,874) (111,192) (1,130,994)
- -------------------------------------------------------------------------------------
Net increase 246,723 $ 2,509,303 1,272,089 $12,571,092
- -------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED PERIOD ENDED
10/31/94 10/31/93*
CLASS B SHARES: Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
Sold 1,031,963 $ 10,397,778 3,617,319 $35,975,175
Issued as reinvestment of dividends 102,199 1,014,195 61,430 629,256
Redeemed (651,380) (6,378,181) (376,106) (3,881,727)
- -------------------------------------------------------------------------------------
Net increase 482,782 $ 5,033,792 3,302,643 $32,722,704
- -------------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on November 6, 1992.
</TABLE>
7. ORGANIZATION COSTS
The Fund bears all costs in connection with its organization including the fees
and expenses of registering and qualifying its shares for distribution under
Federal and state securities regulations. All such costs are being amortized on
the straight-line method over a period of five years from November 6, 1992
(commencement of operations). In the event any of the initial shares in the Fund
are redeemed during such period, the Fund will be
27
<PAGE>
Smith Barney
Florida Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
reimbursed for any unamortized organization costs in the same proportion as the
number of shares redeemed bears to the number of initial shares outstanding at
the time of redemption.
8. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of Florida
and its political subdivisions, agencies and public authorities to obtain funds
for various public purposes. The Fund is more susceptible to factors adversely
affecting issuers of Florida municipal securities than is a municipal bond fund
that is not concentrated in these issuers to the same extent.
9. CAPITAL LOSS CARRYFORWARD
At October 31, 1994, the Fund had available for Federal income tax purposes an
unused capital loss carryforward of $561,473 expiring in 2002.
10. CAPITAL STRUCTURE
On July 20, 1994, the Board of Trustees of the Fund approved several changes to
the class and pricing structure of Smith Barney Shearson Mutual Funds to
facilitate consolidation of that fund complex with the Smith Barney mutual fund
complex (the "Uniform Structure"). Under the Uniform Structure, effective
November 7, 1994, shares previously designated as Class A or Class B shares
retained their designations. In addition, the Fund offers newly designated Class
C and Class Y shares. Adoption of the Uniform Structure has no effect on the
rights and privileges of the Fund's current shareholders.
28
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
SMITH BARNEY FLORIDA MUNICIPALS FUND:
We have audited the accompanying statement of assets and liabilities of Smith
Barney Florida Municipals Fund (formerly Smith Barney Shearson Florida
Municipals Fund), including the schedule of portfolio investments, as of October
31, 1994, the related statement of operations for the year then ended, and the
statement of changes in net assets and the financial highlights for the year
then ended and for the period from November 6, 1992 (commencement of operations)
through October 31, 1993. 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
October 31, 1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 Smith
Barney Florida Municipals Fund as of October 31, 1994, the results of its
operations for the year then ended, and the changes in its net assets, and the
financial highlights for the year then ended and for the period from November 6,
1992 (commencement of operations) through October 31, 1993, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 8, 1994
29
<PAGE>
Smith Barney
Florida Municipals Fund
- --------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
FISCAL YEAR ENDED OCTOBER 31, 1994
Of the dividends paid from net investment income for the year ended October 31,
1994, 99% is tax-exempt for regular Federal income tax purposes.
30
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
PARTICIPANTS
DISTRIBUTOR
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
AND ADMINISTRATOR
Smith Barney Mutual Funds
Management Inc.
388 Greenwich Street
New York, New York 10013
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
COUNSEL
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit
and Trust Company
One Boston Place
Boston, Massachusetts 02108
31
<PAGE>
Smith Barney
Florida Municipals Fund
- ---------------------------------------------------------------------------
GLOSSARY OF COMMONLY USED MUTUAL FUND TERMS
CAPITAL GAIN (OR LOSS) This is the increase (or decrease) in the market value
(price) of a security in your portfolio. If a stock or bond appreciates in
price, there is a capital gain; if it depreciates, there is a capital loss. A
capital gain or loss is "realized" upon the sale of a security; if net capital
gains exceed net capital losses, there may be a capital gain distribution to
shareholders.
CDSC (CONTINGENT DEFERRED SALES CHARGE) One kind of back-end load, a CDSC is
imposed if shares are redeemed during the first few years of ownership. The CDSC
may be expressed as a percentage of either the original purchase price or the
redemption proceeds. Most CDSCs decline over time, and some will not be charged
if shares are redeemed after a certain period of time.
DISTRIBUTION RATE This is the rate at which a mutual fund pays out (or
distributes) interest, dividends and realized capital gains to shareholders. A
fund's distribution rate is usually expressed as an annualized percent of the
fund's offering price.
DIVIDEND This is income generated by securities in a portfolio and distributed
after expenses to shareholders.
FRONT-END SALES CHARGE This is the sales charge applied to an investment at the
time of initial purchase.
NET ASSET VALUE (NAV) Net Asset Value is the total market value of all
securities held by a fund, minus any liabilities, divided by the number of
shares outstanding. It is the value of a single share of a mutual fund on a
given day. The total value of your investment would be the NAV multiplied by the
number of shares you own.
SEC YIELD This standardized calculation of a mutual fund's yield is based on a
formula developed by the Securities and Exchange Commission (SEC) to allow funds
to be compared on an equal basis. It is an annualized yield based on the
portfolio's potential earnings from dividends, interest and yield to maturity of
its holdings, and it reflects the payments of all portfolio expenses for the
most recent 30-day period. Mutual funds are required to use this figure when
stating yield.
TOTAL RETURN Total return measures a fund's performance, taking into account the
combination of dividends paid and the gain or loss in the value of the
securities held in the portfolio. It may be expressed on an AVERAGE ANNUAL basis
or CUMULATIVE basis (total change over a given period). In addition, total
return may be expressed with or without the effects of sales charges or the
reinvestment of dividends and capital gains.
Whenever a fund reports any type of performance, it must also report the average
annual total return according to the standardized calculation developed by the
SEC. The SEC AVERAGE ANNUAL TOTAL RETURN calculation includes the effects of all
fees and sales charges and assumes the reinvestment of all dividends and capital
gains.
32
<PAGE>
FLORIDA
MUNICIPALS
FUND
TRUSTEES
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
James J. Crisona
Burt N. Dorsett
Robert A. Frankel
Dr. Paul Hardin
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon
Cornelius C. Rose, Jr.
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD
AND INVESTMENT OFFICER
Stephen J. Treadway
PRESIDENT
Lawrence T. McDermott
VICE PRESIDENT AND
INVESTMENT OFFICER
Karen L. Mahoney-Malcomson
INVESTMENT OFFICER
Lewis E. Daidone
SENIOR VICE PRESIDENT
AND TREASURER
Christina T. Sydor
SECRETARY
[LOGO]
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF
SMITH BARNEY FLORIDA MUNICIPALS FUND. IT IS NOT AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS
FOR THE FUND, WHICH CONTAINS INFORMATION CONCERNING THE FUND'S INVESTMENT
POLICIES, FEES AND EXPENSES AS WELL AS OTHER PERTINENT INFORMATION.
SMITH BARNEY
MUTUAL FUNDS
388 Greenwich Street
New York, New York 10013
[LOGO]
Fund 237, 238
FD0462 L4
