<PAGE>
MAY 23, 1994
SMITH BARNEY SHEARSON
OREGON
MUNICIPALS
FUND
PROSPECTUS BEGINS
ON PAGE ONE.
[LOGO]
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
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PROSPECTUS May 23, 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson Oregon Municipals Fund (the "Fund") is a non-
diversified
municipal fund that seeks to provide Oregon investors with as high a level of
dividend income exempt from Federal income tax and Oregon state personal
income
tax as is consistent with prudent investment management and preservation of
capital.
This Prospectus concisely sets forth certain information about the Fund,
including sales charges, distribution and service fees and expenses, which
prospective investors will find helpful in making an investment decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference.
Additional information about the Fund is contained in a Statement of
Additional Information dated May 23, 1994, as amended or supplemented
from
time to time, that is available upon request and without charge by calling or
writing the Fund at the telephone number or address set forth above or by
contacting your Smith Barney Shearson Financial Consultant. The Statement of
Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated by reference into this Prospectus
in
its entirety.
SMITH BARNEY SHEARSON INC.
Distributor
GREENWICH STREET ADVISORS
Investment Adviser
SMITH, BARNEY ADVISERS, INC.
Administrator
THE BOSTON COMPANY ADVISORS, INC.
Sub-Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A
CRIMINAL OFFENSE.
1
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
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TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
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VARIABLE PRICING SYSTEM 9
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THE FUND'S PERFORMANCE 11
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MANAGEMENT OF THE FUND 12
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 14
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OREGON MUNICIPAL SECURITIES 22
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PURCHASE OF SHARES 23
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REDEMPTION OF SHARES 27
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VALUATION OF SHARES 31
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EXCHANGE PRIVILEGE 31
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DISTRIBUTOR 38
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DIVIDENDS, DISTRIBUTIONS AND TAXES 39
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ADDITIONAL INFORMATION 42
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</TABLE>
2
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL
INFORMATION. CROSS REFERENCES IN THIS SUMMARY ARE TO HEADINGS IN THE
PROSPECTUS.
SEE "TABLE OF CONTENTS."
BENEFITS TO INVESTORS THE FUND OFFERS INVESTORS SEVERAL IMPORTANT BENEFITS:
- - Dividends consisting primarily of income which is exempt from Federal
income
tax and Oregon state personal income tax.
- - A professionally managed portfolio comprised primarily of investment-grade
Oregon municipal bonds.
- - Investment liquidity through convenient purchase and redemption procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of municipal
obligations.
- - Different methods for purchasing shares that allow investment flexibility
and
a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within the
same class of shares of most other funds in the Smith Barney Shearson Group
of Funds.
INVESTMENT OBJECTIVE The Fund is an open-end, non-diversified, management
investment company that seeks to provide Oregon investors with as high a level
of dividend income exempt from Federal income taxes and Oregon state personal
income tax as is consistent with prudent investment management and the
preservation of capital. Its investments consist primarily of intermediate-
and
long-term investment-grade municipal securities issued by the State of Oregon,
local governments in the State of Oregon and certain other municipal issuers
such as the Commonwealth of Puerto Rico ("Oregon Municipal Securities") that
pay
interest which is excluded from gross income for Federal income tax purposes
and
exempt from Oregon state personal income taxes. Intermediate- and long-term
securities have remaining maturities at the time of purchase of between three
and twenty years. See "Investment Objective and Management Policies."
3
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
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PROSPECTUS SUMMARY (CONTINUED)
VARIABLE PRICING SYSTEM The Fund offers two classes of shares ("Classes")
designed to provide investors with the flexibility of selecting an investment
best suited to their needs. These Classes, Class A shares and Class B shares,
differ principally in terms of the sales charges and rate of expenses to which
they are subject. See "Variable Pricing System."
CLASS A SHARES These shares are offered at net asset value per share plus a
maximum initial sales charge of 4.50%. The Fund pays an annual service fee of
.15% of the value of average daily net assets of this Class. See "Purchase of
Shares."
CLASS B SHARES These shares are offered at net asset value per share subject
to
a maximum contingent deferred sales charge ("CDSC") of 4.50% of redemption
proceeds, declining by .50% after the first year and by 1% each year
thereafter
to zero. The Fund pays an annual service fee of .15% and an annual
distribution
fee of .50% of the value of average daily net assets of this Class. See
"Purchase of Shares."
CLASS B CONVERSION FEATURE Class B shares will convert automatically to Class
A
shares, based on relative net asset value, eight years after the date of
original purchase. Upon conversion, these shares will no longer be subject to
an
annual distribution fee. See "Variable Pricing System -- Class B Shares."
PURCHASE OF SHARES Shares may be purchased through the Fund's distributor,
Smith
Barney Shearson Inc. ("Smith Barney Shearson"), or a broker that clears
securities transactions through Smith Barney Shearson on a fully disclosed
basis
(an "Introducing Broker"). Smith Barney Shearson recommends that single
investments of $250,000 or more should be made in Class A shares. See
"Purchase
of Shares."
INVESTMENT MINIMUMS Investors are subject to a minimum initial investment
requirement of $1,000 and a minimum subsequent investment requirement of $200.
See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic
Investment
Plan under which they may authorize the automatic placement of a purchase
order
each month or quarter for Fund shares in an amount not less than $100. See
"Purchase of Shares."
4
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
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PROSPECTUS SUMMARY (CONTINUED)
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. Class A shares are redeemable at
net asset value and Class B shares are redeemable at net asset value
less any
applicable CDSC. See "Redemption of Shares."
MANAGEMENT OF THE FUND Greenwich Street Advisors, a division of Mutual
Management Corp. serves as the Fund's investment adviser. Mutual Management
Corp., provides investment advisory and management services to
investment
companies affiliated with Smith Barney Shearson. Smith, Barney Advisers, Inc.
serves as the Fund's administrator. Mutual Management Corp., Smith, Barney
Advisers, Inc., together with Smith Barney Shearson are wholly owned
subsidiaries of Smith Barney Shearson Holdings Inc., which is in turn a wholly
owned subsidiary of The Travelers Inc. ("Travelers") (formerly Primerica
Corporation), a diversified financial services holding company principally
engaged in the businesses of providing investment, consumer finance and
insurance services.
The Boston Company Advisors, Inc. ("Boston Advisors") serves as the Fund's
sub-administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), which in turn is a wholly owned subsidiary of Mellon
Bank
Corporation ("Mellon"). See "Management of the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
class of certain other funds in the Smith Barney Shearson Group of Funds and
certain money market funds. Certain exchanges may be subject to a sales charge
differential. See "Exchange Privilege."
VALUATION OF SHARES Net asset value of each Class is quoted daily in the
financial section of most newspapers and is also available from your Smith
Barney Shearson Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income are declared
daily and paid on the last business day of the Smith Barney Shearson statement
month. Distributions of net realized long- and short-term capital gains, if
any,
are declared and paid annually after the end of the fiscal year in which they
were earned. See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically unless otherwise specified by an
5
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
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PROSPECTUS SUMMARY (CONTINUED)
investor in additional shares of the same Class at current net asset value.
Shares acquired by dividend and distribution reinvestments will not be subject
to any sales charge or CDSC. Class B shares acquired through dividend and
distribution reinvestments will become eligible for conversion to Class A
shares
on a pro-rata basis. See "Dividends, Distributions and Taxes" and "Variable
Pricing System."
RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no assurance that the
Fund will achieve its investment objective. Assets of the Fund also may be
invested
in the municipal securities of non-Oregon municipal issuers. Dividends paid by
the Fund which are derived from interest attributable to Oregon Municipal
Securities will be excluded from gross income for Federal income tax purposes
and exempt from Oregon state personal income taxes (but not from Oregon state
corporate franchise (excise) tax or Oregon state corporate income
tax). Dividends derived from
interest on obligations of non-Oregon municipal issuers will be exempt from
Federal income taxes, but generally will be subject to Oregon state
personal income taxes.
Dividends derived from certain municipal securities (including Oregon
Municipal
Securities), however, may be a specific tax item for Federal alternative
minimum
tax purposes. The Fund may invest without limit in securities subject to the
Federal alternative minimum tax. See "Investment Objective and Management
Policies" and "Dividends, Distributions and Taxes."
The Fund is more susceptible to factors adversely affecting issuers of
Oregon
municipal securities than is a municipal bond fund that does not
concentrate its investments in these
issuers. See "Oregon Municipal Securities" in the Prospectus and "Special
Considerations Relating to Oregon Municipal Securities" in the Statement of
Additional Information for further details about the risks of investing in
Oregon obligations.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), which means that
the Fund is not limited by the 1940 Act in the proportion of its assets that
it
may invest in the obligations of a single issuer. The Fund's assumption of
large
positions in the obligations of a small number of issuers may cause the Fund's
share price to fluctuate to a greater extent than that of a diversified
company
as a result of changes in the financial condition or in the market's
assessment
of the issuers. See "Investment Objective and Management Policies."
6
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
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PROSPECTUS SUMMARY (CONTINUED)
The Fund generally will invest at least 75% of its assets in securities
rated
investment grade, and may invest the remainder of its assets in securities
rated
as low as C by Moody's Investors Service, Inc. ("Moody's") or D by Standard &
Poor's Corporation ("S&P"), or in unrated obligations of comparable quality.
Securities in the fourth highest rating category, though considered to be
investment grade, have speculative characteristics. Securities rated as low as
D
are extremely speculative and are in actual default of interest and/or
principal
payments.
There are several risks in connection with the use of certain portfolio
strategies by the Fund, such as the use of when-issued securities, municipal
bond index futures contracts and put and call options on interest rate futures
as hedging devices, municipal leases and securities lending. See "Investment
Objective and Management Policies -- Certain Portfolio Strategies."
THE FUND'S EXPENSES The following expense table lists the costs and expenses
an
investor will incur either directly or indirectly as a shareholder of the
Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at the
time of purchase or redemption and the Fund's operating expenses:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C>
<C>
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SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charges imposed on purchases
(as a percentage of offering price) 4.50% --
Maximum CDSC (as a percentage of redemption
proceeds) -- 4.50%
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ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees (includes Administration fees) 0.55
0.55
12b-1 fees* 0.15
0.65
Other expenses** 0.30 0.30
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TOTAL FUND OPERATING EXPENSES 1.00% 1.50%
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<FN>
* (Includes service and distribution fees.) Upon conversion, Class B
shares will no longer be subject to a distribution fee.
**Estimated expenses based upon Greenwich Street Advisors' management of
similar funds.
</TABLE>
7
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
The sales charge and CDSC set forth in the above table are the maximum
charges
imposed on purchases or redemptions of Fund shares and investors may pay
actual
charges of less than 4.50% depending on the amount purchased and, in the case
of
Class B shares, the length of time the shares are held. See "Purchase
of Shares"
and "Redemption of Shares." Management fees paid by the Fund include
investment
advisory fees paid to Greenwich Street Advisors 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
and
also include administration fees paid to Smith, Barney Advisers, Inc. at the
following annual rates: .20% of the value of the Fund's average daily net
assets
up to $500 million and .18% of the value of its average daily net asset in
excess of $500 million. The nature of the services for which the Fund pays
management and administration fees is described under "Management of the
Fund."
Smith Barney Shearson receives an annual 12b-1 service fee of .15% of the
value
of average daily net assets of Class A shares. Smith Barney Shearson also
receives with respect to Class B shares an annual 12b-1 fee of .65% of
the value
of average daily net assets of Class B shares, consisting of a .50%
distribution
fee and a .15% service fee. "Other expenses" in the above table include fees
for
shareholder services, custodial fees, legal and accounting fees, printing
costs
and registration fees.
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to
a hypothetical $1,000 investment in the Fund assuming a 5% total return. THE
EXAMPLE ASSUMES PAYMENT BY THE FUND OF OPERATING EXPENSES AT THE LEVELS SET
FORTH IN THE ABOVE TABLE. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION
OF PAST OR FUTURE EXPENSES AND ACTUAL
8
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. MOREOVER, WHILE THE EXAMPLE
ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY
RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C> <C> <C>
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- ---
Class A shares** $55 $ 75
Class B shares:
Assumes complete redemption at end
of each time period*** $60 $77
Assumes no redemption $15 $47
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- ---
<FN>
*Assumes deduction at the time of purchase of the maximum 4.50%
sales charge.
** Assumes deduction at the time of redemption of the maximum CDSC
applicable
for that time period.
</TABLE>
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VARIABLE PRICING SYSTEM
The Fund offers individual investors two methods of purchasing shares, thus
enabling investors to choose the Class that best suits their needs, given the
amount of purchase and intended length of investment.
CLASS A SHARES. Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 4.50% imposed at the time of purchase. The
initial sales charge may be reduced or waived for certain purchases. Class A
shares are subject to an annual service fee of .15% of the value of the Fund's
average daily net assets attributable to Class A. The annual service fee is
used
by Smith Barney Shearson to compensate its Financial Consultants for ongoing
services provided to shareholders. The sales charge is used to compensate
Smith
Barney Shearson for expenses incurred in selling Class A shares. See "Purchase
of Shares."
CLASS B SHARES. Class B shares are sold at net asset value per share subject
to a maximum 4.50% CDSC, which is assessed only if the shareholder redeems
shares within the first five years of investment. This results in 100% of the
investor's assets' being used to acquire shares of the Fund. After the first
year after the purchase of a share, the CDSC declines to 4.00%. For
each year of
investment thereafter within this five-year time
9
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
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VARIABLE PRICING SYSTEM (CONTINUED)
frame, the applicable CDSC declines by 1%, so that in year six, the
applicable CDSC is
reduced to 0%. See "Purchase of Shares" and "Redemption of Shares."
Class B shares are subject to an annual service fee of .15% and an
annual
distribution fee of .50% of the value of the Fund's average daily net assets
attributable to the Class. Like the service fee applicable to Class A shares,
the Class B service fee is used to compensate Smith Barney Shearson
Financial
Consultants for ongoing services provided to shareholders. Additionally, the
distribution fee paid with respect to Class B shares compensates
Smith Barney
Shearson for expenses incurred in selling those shares, including expenses
such
as sales commissions, Smith Barney Shearsons' branch office overhead expenses
and marketing costs associated with Class B shares, such as preparation of
sales
literature, advertising and printing and distributing prospectuses, statements
of additional information and other materials to prospective investors in
Class
B shares. A Financial Consultant may receive different levels of
compensation
for selling different Classes. Class B shares are subject to a
distribution fee
and a higher transfer agency fee than Class A shares which, in turn, will
cause
Class B shares to have a higher expense ratio and pay lower dividends
than Class
A shares.
Eight years after the date of purchase, Class B shares will convert
automatically to Class A shares, based on the relative net asset values of
shares of each Class, and will no longer be subject to a distribution fee. In
addition, a certain portion of Class B shares that have been acquired through
the reinvestment of dividends and distributions ("Class B Dividend Shares")
will
be converted at that time. That portion will be a percentage of the total
number
of Class B Dividend Shares owned by the shareholder, equal to the ratio of the
total number of Class B shares converting at the time to the total number of
Class B shares (other than Class B Dividend Shares) owned by the shareholder.
The conversion of Class B shares into Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that such
conversions will not constitute taxable events for Federal tax purposes.
10
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
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THE FUND'S PERFORMANCE
YIELD
From time to time, the Fund may advertise its 30-day "yield" and "equivalent
taxable yield" for each Class. The yield of a Class of the Fund refers to the
income generated by an investment in those shares over the 30-day period
identified in the advertisement and is computed by dividing the net investment
income per share earned by the Class during the period by the maximum public
offering price per share on the last day of the period. This income is
"annualized" by assuming that the amount of income is generated each month
over
a one-year period and is compounded semi-annually. The annualized income is
then
shown as a percentage of the net asset value.
The Fund's equivalent taxable yield demonstrates the yield on a taxable
investment necessary to produce an after-tax yield equal to the Fund's tax-
exempt yield for each class of shares. It is calculated by increasing the
yield
shown for the Class to the extent necessary to reflect the payment of taxes at
specified tax rates. Thus, the equivalent taxable yield always will exceed the
Fund's yield. For more information on equivalent taxable yields, refer to the
table under "Dividends, Distributions and Taxes."
TOTAL RETURN
From time to time, the Fund may advertise its "average annual total return"
over various periods of time for each Class. Such total return figures show
the
average percentage change in the value of an investment in the Class from the
beginning date of the measuring period to the end of the measuring period.
These
figures reflect changes in the price of the Fund's shares and assume that any
income dividends and/or capital gains distributions made by the Fund with
respect to that Class during the period were reinvested in shares of that
Class
of the Fund. Class A total return figures include the maximum initial 4.50%
sales charge and Class B total return figures include any applicable
CDSC. These
figures also take into account the service and distribution fees, if any,
payable with respect to the Classes.
Total return figures will be given for the recent one-, five-and ten-year
periods, or for the life of a Class to the extent it has not been in existence
for any such periods, and may be given for other periods as well, such as on a
year-by-year basis. When considering average annual total return figures for
periods longer than one year, it is important to note that the average
11
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
THE FUND'S PERFORMANCE (CONTINUED)
annual total return for any one year in the period might have been greater or
less than the average for the entire period. "Aggregate total return" figures
may be used for various periods, representing the cumulative change in the
value
of an investment in a Class for the specific period (again reflecting changes
in
share prices and assuming reinvestment of dividends and distributions).
Aggregate total return may be calculated either with or without the effect of
the maximum 4.50% sales charge for the Class A shares or any applicable CDSC
for
Class B shares and may be shown by means of schedules, charts or
graphs, and may
indicate subtotals of the various components of total return (that is, changes
in the value of initial investment, income dividends and capital gains
distributions). Because of the differences in sales charges and distribution
fees, the performance for each of the Classes will differ.
In reports or other communications to shareholders or in advertising
material,
performance of the Classes may be compared with that of other mutual funds or
Classes of shares of other funds as listed in the rankings prepared by Lipper
Analytical Services, Inc. or similar independent services that monitor the
performance of mutual funds, or other industry or financial publications such
as
BARRON'S, BUSINESS WEEK, CDA INVESTMENT TECHNOLOGIES, INC., FORBES, FORTUNE,
INSTITUTIONAL INVESTOR, INVESTORS DAILY, KIPLINGER'S PERSONAL FINANCE,
MORNINGSTAR MUTUAL FUND VALUES, MONEY, THE WALL STREET JOURNAL, THE NEW YORK
TIMES and USA TODAY. Performance figures are based on historical earnings and
are not intended to indicate future performance. To the extent that any
advertisement or sales literature of the Fund describes the expenses or
performance of a Class it will also disclose such information for the other
Class. The Statement of Additional Information contains a description of the
methods used to determine performance. Performance figures may be obtained
from
your Smith Barney Shearson Financial Consultant.
- --------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Trustees. The Trustees approve all significant
12
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE FUND (CONTINUED)
agreements between the Fund and the companies that furnish services to the
Fund,
including agreements with its distributor, investment adviser and
administrator,
sub-administrator, custodian and transfer agent. The day-to-day operations of
the Fund are delegated to the Fund's investment adviser, administrator and
sub-administrator. The Statement of Additional Information contains general
background information regarding each Trustee and executive officer of the
Fund.
INVESTMENT ADVISER--GREENWICH STREET ADVISORS
Greenwich Street Advisors, located at Two World Trade Center, New York, New
York 10048, serves as the Fund's investment adviser. Greenwich Street Advisors
(through predecessor entities) has been in the investment counseling business
since 1934 and is a division of Mutual Management Corp., which was
incorporated
in 1978. The Greenwich Street Advisors division of Mutual Management Corp.
renders investment advice to investment company clients which had aggregate
assets under management as of April 30, 1994, in excess of 42.6
billion. Mutual Management Corp. as a whole provides investment management and
investment
administration services to investment companies which had aggregate assets as
of
April 30, 1994, in excess of 48.9 billion.
Subject to the supervision and direction of the Fund's Board of Trustees,
Greenwich Street Advisors manages the Fund's portfolio in accordance with the
Fund's investment objective and policies, makes investment decisions for the
Fund, places orders to purchase and sell securities and employs professional
portfolio managers and securities analysts who provide research services to
the
Fund.
PORTFOLIO MANAGEMENT
Peter M. Coffey, Managing Director of Smith Barney Shearson and
Greenwich Street Advisors, serves as Vice President and Investment
Officer of the Fund and manages the day-to-day operations of the Fund
including making all investment decisions. Mr. Coffey has served in this
capacity since the inception of the Fund. Prior to the acquisition of
Greenwich Street Advisors, Mr. Coffey served, and continues to serve, in a
similar position with Smith Barney Shearson.
13
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE FUND (CONTINUED)
ADMINISTRATOR
Smith, Barney Advisers, Inc. located at 1345 Avenue of the Americas, New
York,
New York 10105, serves as the Fund's administrator. Smith, Barney Advisers,
Inc.
provides investment management and administrative services to investment
companies that had aggregate assets as of April 30, 1994, in excess of
$8.9
billion. Smith, Barney Advisers, Inc., among other responsibilities, provides
senior executive management for the Fund and generally oversees and directs
all
aspects of the Fund's administration and operation.
SUB-ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's sub-administrator. Boston Advisors provides investment
management and investment administrative services to investment companies that
had aggregate assets as of April 30, 1994, in excess of $91.9
billion. Boston
Advisors, among other responsibilities, calculates the net asset value of the
Fund's shares and generally assists in various aspects of the Fund's
administration and operation.
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The investment objective of the Fund is to provide Oregon investors with as
high a level of dividend income exempt from Federal income taxes and Oregon
state personal income tax as is consistent with prudent investment management
and the preservation of capital. This investment objective may not be changed
without the approval of the holders of a majority of the Fund's outstanding
shares. There can be no assurance that the Fund's investment objective will be
achieved.
The Fund will operate subject to an investment policy providing that, under
normal market conditions, the Fund will invest at least 80% of its net assets
in
Oregon Municipal Securities, which pay interest which is excluded from gross
income for Federal income tax purposes and which is exempt from Oregon state
personal income tax.
14
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SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
The Fund may invest up to 20% of its net assets in municipal securities of
non-Oregon municipal issuers, the interest on which is excluded from gross
income for Federal income tax purposes (not including the possible
applicability
of a Federal alternative minimum tax), but which is subject to Oregon state
personal income tax. When Greenwich Street Advisors believes that market
conditions warrant adoption of a temporary defensive investment posture, the
Fund may invest without limit in non-Oregon municipal issuers and in
"Temporary
Investments" as described below.
The Fund generally will invest at least 75% of its total assets in
investment
grade debt obligations rated no lower than Baa, MIG 3 or Prime-1 by Moody's or
BBB, SP-2 or A-1 by S&P, or in unrated obligations of comparable quality.
Unrated securities will be considered to be of investment grade if deemed by
Greenwich Street Advisors to be comparable in quality to instruments so rated,
or if other outstanding obligations of the issuers thereof are rated Baa or
better by Moody's or BBB or better by S&P. The balance of the Fund's assets
may
be invested in securities rated as low as C by Moody's or D by S&P, or
comparable unrated securities. Securities in the fourth highest rating
category,
though considered to be investment grade, have speculative characteristics.
Securities rated as low as D are extremely speculative and are in actual
default
of interest and/or principal payments.
The Fund's average weighted maturity will vary from time to time based on
the
judgment of Greenwich Street Advisors. The Fund intends to focus on
intermediate- and long-term obligations, that is, obligations with remaining
maturities at the time of purchase of between three and twenty years.
Obligations which are rated Baa by Moody's or BBB by S&P and those which are
rated lower than investment-grade are subject to greater market fluctuation
and
more uncertainty as to payment of principal and interest, and therefore
generate
higher yields than obligations rated above Baa or BBB.
LOW AND COMPARABLE UNRATED SECURITIES. While the market values of low-rated
and comparable unrated securities tend to react less to fluctuations in
interest
rate levels than the market values of higher-rated securities, the market
values
of certain low-rated and comparable unrated municipal securities also tend to
be
more sensitive than higher-rated securities to short-term corporate and
industry
developments and changes in economic
15
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
conditions (including recession) in specific regions or localities or among
specific types of issuers. In addition, low-rated securities and comparable
unrated securities generally present a higher degree of credit risk. During an
economic downturn or a prolonged period of rising interest rates, the ability
of
issuers of low-rated and comparable unrated securities to service their
payment
obligations, meet projected goals or obtain additional financing may be
impaired. The risk of loss due to default by such issuers is significantly
greater because low-rated and comparable unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness. The Fund may incur additional expenses to the extent it is
required to seek recovery upon a default in payment of principal or interest
on
its portfolio holdings.
While the market for municipal securities is considered to be generally
adequate, the existence of limited markets for particular low-rated and
comparable unrated securities may diminish the Fund's ability to (a) obtain
accurate market quotations for purposes of valuing such securities and
calculating its net asset value and (b) sell the securities at fair value
either
to meet redemption requests or to respond to changes in the economy or in the
financial markets. The market for certain low-rated and comparable unrated
securities is relatively new and has not fully weathered a major economic
recession. Any such economic downturn also could adversely affect the ability
of
the issuers of such securities to repay principal and pay interest thereon.
Fixed-income securities, including low-rated securities and comparable
unrated
securities, frequently have call or buy-back features that permit their
issuers
to call or repurchase the securities from their holders, such as the Fund. If
an
issuer exercises these rights during the periods of declining interest rates,
the Fund may have to replace the security with a lower yielding security, thus
resulting in a decreased return to the Fund. A description of the rating
systems
of Moody's and S&P is contained in the Statement of Additional Information.
MUNICIPAL LEASES. The Funds may invest in "Municipal leases," which
generally
are participations in intermediate- and short-term debt obligations issued by
municipalities consisting of leases or installment purchase contracts for
property or equipment. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing
16
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
power is pledged, a lease obligation is ordinarily backed by the
municipality's
covenant to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In addition to the "non-appropriation" risk,
these securities represent a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional bonds.
Although "non-appropriation" lease obligations are often secured by the
underlying property, disposition of the property in the event of foreclosure
might prove difficult. There is no limitation on the percentage of the Fund's
assets that may be invested in municipal lease obligations. In evaluating
municipal lease obligations, Greenwich Street Advisors will consider such
factors as it deems appropriate, which may include: (a) whether the lease can
be
canceled; (b) the ability of the lease obligee to direct the sale of the
underlying assets; (c) the general creditworthiness of the lease obligor; (d)
the likelihood that the municipality will discontinue appropriating funding
for
the leased property in the event such property is no longer considered
essential
by the municipality; (e) the legal recourse of the lease obligee in the event
of
such a failure to appropriate funding; (f) whether the security is backed by a
credit enhancement such as insurance; and (g) any limitations which are
imposed
on the lease obligor's ability to utilize substitute property or services
rather
than those covered by the lease obligation.
The Fund may invest without limit in private activity bonds. Interest income
on certain types of private activity bonds issued after August 7, 1986 to
finance non-governmental activities is a specific tax preference item for
purposes of the Federal individual and corporate alternative minimum taxes.
Individual and corporate shareholders may be subject to a Federal alternative
minimum tax to the extent the Fund's dividends are derived from interest on
those bonds. Dividends derived from interest income on Oregon Municipal
Securities are a component of the "current earnings" adjustment item for
purposes of the Federal corporate alternative minimum tax.
The Fund is classified as a non-diversified investment company under the
1940
Act, which means that the Fund is not limited by the 1940 Act in the
proportion
of its assets that it may invest in the obligations of a single issuer. The
Fund
intends to conduct its operations, however, so as to qualify
17
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
as a "regulated investment company" for purposes of the Internal Revenue Code
of
1986, as amended (the "Code"), which will relieve the Fund of any liability
for
Federal income tax and Oregon state franchise tax to the extent its earnings
are
distributed to shareholders. To so qualify, among other requirements, the Fund
will limit its investments so that, at the close of each quarter of the
taxable
year, (a) not more than 25% of the market value of the Fund's total assets
will
be invested in the securities of a single issuer and (b) with respect to 50%
of
the market value of its total assets, not more than 5% of the market value of
its total assets will be invested in the securities of a single issuer and the
Fund will not own more than 10% of the outstanding voting securities of a
single
issuer. The Fund's assumption of large positions in the obligations of a small
number of issuers may cause the Fund's share price to fluctuate to a greater
extent than that of a diversified company as a result of changes in the
financial condition or in the market's assessment of the issuers.
The Fund may invest without limit in debt obligations that are repayable out
of revenue streams generated from economically-related projects or facilities.
Sizeable investments in such obligations could involve an increased risk to
the
Fund should any of the related projects or facilities experience financial
difficulties. In addition, the Fund also may invest up to an aggregate of 15%
of
its total assets in securities with contractual or other restrictions on
resale
and other instruments which are not readily marketable. The Fund
also is authorized to borrow an amount of up to
10% of its total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) in order to meet anticipated
redemptions and to pledge its assets to the same extent in connection with the
borrowings.
Further information about the Fund's investment policies, including a list
of
those restrictions on the Fund's investment activities that cannot be changed
without shareholder approval, appears in the Statement of Additional
Information.
CERTAIN PORTFOLIO STRATEGIES
In attempting to achieve its investment objective, the Fund may employ,
among
others, the following portfolio strategies.
18
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
WHEN-ISSUED SECURITIES. New issues of Oregon Municipal Securities (and other
tax-exempt obligations) frequently are offered on a when-issued basis, which
means that delivery and payment for such securities normally take place within
15 to 45 days after the date of the commitment to purchase. The payment
obligation and the interest rate that will be received on when-issued
securities
are fixed at the time the buyer enters into the commitment. Oregon Municipal
Securities, like other investments made by the Fund, may decline or appreciate
in value before their actual delivery to the Fund. Due to fluctuations in the
value of securities purchased and sold on a when-issued basis, the yields
obtained on these securities may be higher or lower than the yields available
in
the market on the date when the investments actually are delivered to the
buyers. The Fund will not accrue income with respect to a when-issued security
prior to its stated delivery date. The Fund will establish a segregated
account
with the Fund's custodian consisting of cash, obligations issued or guaranteed
by the United States government or its agencies or instrumentalities ("U.S.
government securities") or other high grade debt obligations in an amount
equal
to the purchase price of the when-issued securities. Placing securities rather
than cash in the segregated account may have a leveraging effect on the Fund's
net assets. The Fund generally will make commitments to purchase Oregon
Municipal Securities (and other tax-exempt obligations) on a when-issued basis
only with the intention of actually acquiring the securities, but the Fund may
sell such securities before the delivery date if it is deemed advisable.
TEMPORARY INVESTMENTS. Under normal market conditions, the Fund may hold up
to
20% of its total assets in cash or money market instruments, including taxable
money market instruments ("Temporary Investments"). In addition, when
Greenwich
Street Advisors believes that market conditions warrant, including when
acceptable Oregon Municipal Securities are not available, the Fund may take a
temporary defensive posture and invest without limitation in Temporary
Investments. Tax-exempt securities eligible for short-term investment by the
Fund are municipal notes having, at the time of purchase, a rating within the
three highest grades of Moody's or S&P or, if not rated, having an issue of
outstanding debt securities rated within the three highest grades of Moody's
or
S&P, and certain taxable short-term instruments having quality characteristics
comparable to those for tax-exempt investments. To the extent the Fund holds
Temporary Investments, it may not achieve its investment objective.
19
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
FINANCIAL FUTURES AND OPTIONS TRANSACTIONS. The Fund may enter into
financial
futures contracts and invest in options on financial futures contracts that
are
traded on a U.S. exchange or board of trade. Such investments, if any, by the
Fund will be made solely for the purpose of hedging against the changes in the
value of its portfolio securities due to anticipated changes in interest rates
and market conditions and where the transactions are economically appropriate
to
the reduction of risks inherent in the management of the Fund. The futures
contract or options on futures contracts that may be entered into by the Fund
will be restricted to those that are either based on a municipal bond index or
relate to debt securities the prices of which are anticipated by Greenwich
Street Advisors to correlate with the prices of the Municipal Bonds owned or
to
be purchased by the Fund.
In entering into a financial futures contract, the Fund will be required to
deposit with the broker through which it undertakes the transaction an amount
of
cash or cash equivalents equal to approximately 5% of the contract amount.
This
amount, which is known as "initial margin," is subject to change by the
exchange
or board of trade on which the contract is traded, and members of the exchange
or board of trade may charge a higher amount. Initial margin is in the nature
of
a performance bond or good faith deposit on the contract that is returned to
the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. In accordance with a process known as
"marking-to-market," subsequent payments known as "variation margin," to and
from the broker will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short
positions
in the futures contract more or less valuable. At any time prior to the
expiration of a futures contract, the Fund may elect to close the position by
taking an opposite position, which will operate to terminate the Fund's
existing
position in the contract.
A financial futures contract provides for the future sale by one party and
the
purchase by the other party of a certain amount of a specified property at a
specified price, date, time and place. Unlike the direct investment in a
20
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
futures contract, an option on a financial futures contract gives the
purchaser
the right, in turn for the premium paid, to assume a position in the financial
futures contract at a specified exercise price at any time prior to the
expiration date of the option. Upon exercise of an option, the delivery of the
futures position by the writer of the option to the holder of the option will
be
accompanied by delivery of the accumulated balance in the writer's futures
margin account, which represents the amount by which the market price of the
futures contract exceeds, in the case of a call, or is less than, in the case
of
a put, the exercise price of the option on the futures contract. The potential
loss related to the purchase of an option on financial futures contracts is
limited to the premium paid for the option (plus transaction costs). The value
of the option may change daily and that change would be reflected in the net
asset value of the Fund.
Regulations of the Commodity Futures Trading Commission applicable to the
Fund
require that its transactions in financial futures contracts and options on
financial futures contracts engaged in for other than bona fide hedging
purposes
be limited such that no such transactions may be entered into by the Fund if
the
aggregate initial margin deposits and premiums paid by the Fund exceed 5% of
the
market value of its assets. In addition, the Fund will, with respect to its
purchases of financial futures contracts, establish a segregated account
consisting of cash or cash equivalents in an amount equal to the total market
value of the futures contracts, less the amount of initial margin on deposit
for
the contracts. The Fund's ability to trade in financial futures contracts and
options on financial futures contracts may be limited to some extent by the
requirements of the Internal Revenue Code of 1986, as amended, applicable to a
regulated investment company that are described below under "Dividends,
Distributions and Taxes."
LENDING OF PORTFOLIO SECURITIES. The Fund has the ability to lend securities
from its portfolio to brokers, dealers and other financial organizations. Such
loans, if and when made, may not exceed 20% of the Fund's total assets, taken
at
value. Loans of portfolio securities by the Fund will be collateralized by
cash,
letters of credit or U.S. government securities which are maintained at all
times in an amount equal to at least 100% of the current market value
(determined by marking to market daily) of the loaned securities. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delays in receiving additional collateral or in the
recovery
of the securities or possible loss of rights in the collateral
21
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
should the borrower fail financially. Loans will be made to firms deemed by
Greenwich Street Advisors to be of good standing and will not be made unless,
in
the judgment of Greenwich Street Advisors, the consideration to be earned from
such loans would justify the risk.
- --------------------------------------------------------------------
OREGON MUNICIPAL SECURITIES
As used in this Prospectus, the term "Oregon Municipal Securities"
generally
refers to intermediate-and long-term debt obligations issued by the State of
Oregon and local governments in the State of Oregon, together with certain
other
governmental issuers such as the Commonwealth of Puerto Rico, to obtain funds
for various public purposes. The interest on such obligations is, in the
opinion
of bond counsel to the issuers, excluded from gross income for Federal income
tax purposes and exempt from Oregon state personal income tax, and for that
reason generally is fixed at a lower rate than it would be if it were subject
to
such taxes. Interest income on certain municipal securities (including Oregon
Municipal Securities) is a specific tax preference item for purposes of the
Federal individual and corporate alternative minimum taxes.
CLASSIFICATIONS
The two principal classifications of Oregon Municipal Securities are
"general
obligation bonds" and "revenue bonds." General obligation bonds are secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are payable from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source, but not
from
the issuer's general taxing power. Sizeable investments in such
obligations could involve
an increased risk to the Fund should any of such related facilities experience
financial difficulties. In addition, certain types of private activity bonds
issued by or on behalf of public authorities to obtain funds for privately
operated facilities are included in the term Oregon Municipal Securities,
provided the interest paid thereon is excludable from gross income
for
Federal income tax purposes and exempt from Oregon state personal
income tax.
Private activity bonds generally do not carry the pledge of the credit of the
issuing municipality.
22
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- ---------------------------------------------------------------------------
OREGON MUNICIPAL SECURITIES (CONTINUED)
SPECIAL CONSIDERATIONS
The Fund ordinarily will invest at least 65% of its total assets in Oregon
Municipal Securities, and therefore it is more susceptible to factors
adversely
affecting issuers of Oregon Municipal Securities than is a tax-exempt
mutual fund
that is not concentrated in issuers of Oregon Municipal Securities to
this degree.
The State of Oregon forecasts modest acceleration of the economy, fueled by
the
impact of low interest rates on the construction sector, in-migration,
appreciating home values, continued gains in high technology manufacturing, an
expanding service sector, and strong small business income growth.
However,
structural change is expected to limit the State's overall economic growth
rate.
President Clinton's forest plan is expected to cause further reductions in
timber jobs, and government employment is expected to remain weak as state and
local government revenues shrink relative to the overall economy. Nonfarm wage
and salary employment is expected to grow 3.0% in the first quarter of 1994.
Personal income is expected to increase 6.9% in 1994, compared to growth of
5.1%
in 1993.
A recently enacted property tax limitation has adversely affected the
financial condition of the State of Oregon and many local governments. In
addition, efforts to protect threatened and endangered species have limited,
and
may further restrict, available timber and fish supplies, and could
increase costs of
power and transportation in the State. Greenwich Street Advisors
does not believe that the
current economic conditions in Oregon will have a significant adverse effect
on
the Fund's ability to invest in high quality Oregon Municipal Securities
Because the
Fund's portfolio will be comprised primarily of investment grade securities,
the
Fund is expected to be less subject to market and credit risks than a fund
that
invests primarily in lower quality Oregon Municipal Securities. See
"Special
Considerations Relating to Oregon Municipal Securities" in the Statement of
Additional Information.
- --------------------------------------------------------------------
PURCHASE OF SHARES
Purchases of shares must be made through a brokerage account maintained with
Smith Barney Shearson or with an Introducing Broker. When purchasing shares of
the Fund, investors must specify whether the purchase is for Class Aor Class B
shares. No maintenance fee will be charged in connection with a
23
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
brokerage account through which an investor purchases or holds shares.
Purchases
are effected at the public offering price next determined after a purchase
order
is received by Smith Barney Shearson or an Introducing Broker (the "trade
date"). Payment for Fund shares is generally due to Smith Barney Shearson or
an
Introducing Broker on the fifth business day (the "settlement date") after the
trade date. Investors who make payment prior to the settlement date may permit
the payment to be held in their brokerage accounts or may designate a
temporary
investment (such as a money market fund in the Smith Barney Shearson Group of
Funds) for such payment until the settlement date. The Fund reserves the right
to reject any purchase order and to suspend the offering of shares for a
period
of time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE, currently 4:00 p.m., New
York
time, on any day the Fund calculates its net asset value, are priced according
to the net asset value determined on that day. Purchase orders received after
the close of regular trading on the NYSE are priced as of the time the net
asset
value is next determined. See "Valuation of Shares."
SYSTEMATIC INVESTMENT PLAN. The Fund offers shareholders a Systematic
Investment Plan under which shareholders may authorize Smith Barney Shearson
or
an Introducing Broker to place a purchase order each month or quarter for Fund
shares in an amount not less than $100. The purchase price is paid
automatically
from cash held in the shareholder's Smith Barney Shearson brokerage account or
through the automatic redemption of the shareholder's shares of a Smith Barney
Shearson money market fund. For further information regarding the Systematic
Investment Plan, shareholders should contact their Smith Barney Shearson
Financial Consultants.
MINIMUM INVESTMENTS. The minimum initial investment in the Fund is $1,000,
and
the minimum subsequent investment is $200, except that the minimum initial and
subsequent investments for the Systematic Investment Plan are both $100. There
are no minimum investment requirements for employees of Smith Barney
Shearson and its
affiliates. The Fund reserves the right to vary at any time the initial and
subsequent investment minimums. Certificates for Fund shares are issued upon
request to the Fund's transfer agent, The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation.
24
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
CLASS A SHARES
The public offering price for Class A shares is the per share net asset
value
of that Class plus a sales charge, which is imposed in accordance with the
following schedule:
<TABLE>
<CAPTION>
SALES CHARGE AS % SALES CHARGE
AS %
AMOUNT OF INVESTMENT* OF OFFERING PRICE OF NET ASSET
VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
- --------
Less than $25,000 4.50% 4.71%
$25,000 but under $50,000 4.00% 4.17%
$50,000 but under $100,000 3.50% 3.63%
$100,000 but under $250,000 3.00% 3.09%
$250,000 but under $500,000 2.50% 2.56%
$500,000 but under $1,000,000 1.50% 1.52%
$1,000,000 or more** 0.00% 0.00%
- ------------------------------------------------------------------------------
- -------
<FN>
*Smith Barney Shearson has adopted guidelines directing its Financial
Consultants and
Introducing Brokers that single investments of $250,000 or more should be
made in
Class A shares.
**No sales charge is imposed on purchases of Class A shares of $1 million or
more;
however, a CDSC of .75% is imposed for the first year after purchase. The
CDSC on
Class A shares is payable to Smith Barney Shearson which, with Boston
Advisors,
compensates Smith Barney Shearson Financial Consultants upon the sale of
these
shares. The CDSC is waived in the same circumstances in which the CDSC
applicable to
Class B shares is waived. See "Redemption of Shares --
Contingent Deferred
Sales Charge -- Class B Shares."
</TABLE>
REDUCED SALES CHARGES--CLASS A SHARES
Reduced sales charges are available to investors who are eligible to combine
their purchases of Fund shares to receive volume discounts. Investors eligible
to receive volume discounts include individuals and their immediate families,
tax-qualified employee benefit plans and trustees or other professional
fiduciaries (including a bank or an investment adviser registered with the SEC
under the Investment Advisers Act of 1940, as amended) purchasing shares for
one
or more trust estates or fiduciary accounts even though more than one
beneficiary is involved. The initial sales charge also is reduced to 1% for
Smith Barney Shearson Personal Living Trust program participants for whom
Smith
Barney Shearson acts as Trustee. Reduced sales charges on Class A shares also
are available under a combined right of accumulation, under which an investor
may combine the value of Class A shares already held in the Fund and in any of
the funds in the Smith Barney Shearson Group of Funds listed below (except
those
sold without a sales charge), along with
25
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
the value of the Class A shares being purchased, to qualify for a reduced
sales
charge. For example, if an investor owns Class A shares of the Fund and other
funds in the Smith Barney Shearson Group of Funds that have an aggregate value
of $22,000, and makes an additional investment in Class A shares of the Fund
of
$4,000, the sales charge applicable to the additional investment would be 4%,
rather than the 4.50% normally charged on a $4,000 purchase. Investors
interested in further information regarding reduced sales charges should
contact
their Smith Barney Shearson Financial Consultants.
Class A shares may be offered without any applicable sales charges to: (a)
employees of Smith Barney Shearson and its affiliates and employee benefit
plans
for such employees and their immediate families when orders on their behalf
are
placed by such employees; (b) accounts managed by registered investment
advisory
subsidiaries of Travelers; (c) directors, trustees or general partners of any
investment company for which Smith Barney Shearson serves as distributor; (d)
any other investment company in connection with the combination of such
company
with the Fund by merger, acquisition of assets or otherwise; (e) shareholders
who have redeemed Class A shares in the Fund (or Class A shares of another
fund
in the Smith Barney Shearson Group of Funds that are sold with a maximum sales
charge of at least 4.50%) and who wish to reinvest their redemption proceeds
in
the Fund, provided the reinvestment is made within 30 days of the redemption;
and (f) any client of a newly employed Smith Barney Shearson Financial
Consultant (for a period up to 90 days from the commencement of the Financial
Consultant's employment with Smith Barney Shearson), on the condition the
purchase is made with the proceeds of the redemption of shares of a mutual
fund
which (i) was sponsored by the Financial Consultant's prior employer, (ii) was
sold to the client by the Financial Consultant and (iii) when purchased, such
shares were sold with a sales charge ; and (g) clients who purchase Class
A shares of the Fund if such shares are purchased with the proceeds from a
redemption of shares of an investment company distributed by an entity other
than the Distributor if such redemption has occurred no more than 30 days
prior to the purchase of Class A shares of the Fund and the purchaser paid an
initial sales charge on the redeemed account. In order to obtain such
discounts the purchaser must provide sufficient information at the time of
purchase to permit verification that the purchase would qualify for the waiver
of the sales charge.
CLASS B SHARES
The public offering price for Class B shares is the per share net
asset value
of that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on certain redemptions of Class B shares.
See
"Redemption of Shares" which describes the CDSC in greater detail.
26
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
Smith Barney Shearson has adopted guidelines, in view of the relative sales
charges and distribution fees applicable to the Classes, directing Financial
Consultants and Introducing Brokers that all purchases of shares of $250,000
or
more should be for Class A shares. Smith Barney Shearson reserves the right to
vary these guidelines at any time.
- --------------------------------------------------------------------
REDEMPTION OF SHARES
Shareholders may redeem their shares on any day that the Fund calculates
its net
asset value. See "Valuation of Shares." Redemption requests received in proper
form prior to the close of regular trading on the NYSE are priced at the net
asset value per share determined on that day. Redemption requests received
after
the close of regular trading on the NYSE are priced at the net asset value as
next determined. If a shareholder holds shares in more than one Class, any
request for redemption must specify the Class of shares being redeemed. In the
event of a failure to specify which Class, or if the investor owns fewer
shares
of the Class than specified, the redemption request will be delayed until the
Fund's transfer agent receives further instructions from Smith Barney
Shearson,
or if the shareholder's account is not with Smith Barney Shearson, from the
shareholder directly.
The Fund normally transmits redemption proceeds for credit to the
shareholder's account at Smith Barney Shearson or to the Introducing Broker at
no charge (other than any applicable CDSC) within seven days after receipt of
a
redemption request. Generally, these funds will not be invested for the
shareholder's benefit without specific instruction and Smith Barney Shearson
will benefit from the use of temporarily uninvested funds. A shareholder who
pays for Fund shares by personal check will be credited with the proceeds of a
redemption of those shares only after the purchase check has been collected,
which may take up to 10 days or more. A shareholder who anticipates the need
for
more immediate access to his or her investment should purchase shares with
Federal funds, by bank wire or a certified or cashier's check.
A Fund account that is reduced by a shareholder to a value of $500 or less
may
be subject to redemption by the Fund, but only after the shareholder has been
given at least 30 days in which to increase the account balance to more than
$500.
27
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
Shares may be redeemed in one of the following ways:
REDEMPTION THROUGH SMITH BARNEY SHEARSON
Redemption requests may be made through Smith Barney Shearson or an
Introducing Broker. A shareholder desiring to redeem Fund shares represented
by
certificates must present the certificates to Smith Barney Shearson
or the
Introducing Broker endorsed for transfer (or accompanied by an endorsed stock
power), signed exactly as the shares are registered. Redemption requests
involving shares represented by certificates will not be deemed received until
the certificates are received by the Fund's transfer agent in proper form.
REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to:
Smith Barney Shearson Oregon Municipals Fund
Class A or B (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request to the Fund's transfer agent or your Smith
Barney
Shearson Financial Consultant must (a) state the Class and number or dollar
amount of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are
registered.
If the shares to be redeemed were issued in certificate form, the certificates
must be endorsed for transfer (or accompanied by an endorsed stock power) and
must be submitted to TSSG together with the redemption request. Any signature
appearing on a redemption request, share certificate or stock power must be
guaranteed by a domestic bank, savings and loan institution, domestic credit
union, member bank of the Federal Reserve System or a member firm of a
national
securities exchange. TSSG may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees or
guardians. A redemption request will not be deemed properly received until
TSSG
receives all required documents in proper form.
28
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under which
shareholders who own shares with a value of at least $10,000 may elect to
receive periodic cash payments of at least $50 monthly. Any applicable CDSC
will
not be waived on amounts withdrawn by a shareholder that exceed 2% per month
of
the value of the shareholder's shares subject to the CDSC at the time the
withdrawal plan commences. For further information regarding the automatic
cash
withdrawal plan, shareholders should contact their Smith Barney Shearson
Financial Consultants.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES
A CDSC payable to Smith Barney Shearson is imposed on any redemption of
Class
B shares, however effected, that causes the current value of a
shareholder's
account to fall below the dollar amount of all payments by the shareholder for
the purchase of Class B shares ("purchase payments") during the
preceding five
years. No charge is imposed to the extent that the net asset value of
the Class
B shares redeemed does not exceed (a) the current net asset value of
Class B shares purchased through reinvestment of dividends or capital
gains
distributions, plus (b) the current net asset value of Class B shares
purchased
more than five years prior to the redemption, plus (c) increases in
the net
asset value of the shareholder's Class B shares above the purchase
payments made
during the preceding five years.
In circumstances in which the CDSC is imposed, the amount of the charge will
depend on the number of years since the shareholder made the purchase payment
from which the amount is being redeemed. Solely for the purposes of
determining
the number of years since a purchase payment, all purchase payments during a
month will be aggregated and deemed to have been made on the last day of the
preceding Smith Barney Shearson statement month.
29
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
The following table sets forth the rates of the charge for redemptions of
Class B shares by investors:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE PAYMENT WAS MADE
CDSC
<S> <C>
- ------------------------------------------------------------------------------
- ----
First
4.50%
Second
4.00%
Third
3.00%
Fourth
2.00%
Fifth
1.00%
Sixth
0.00%
Seventh
0.00%
Eighth
0.00%
- ------------------------------------------------------------------------------
- ----
</TABLE>
Class B shares will automatically convert to Class A shares eight
years after
the date on which they were purchased and thereafter will no longer
be subject
to any distribution fee. The first of these conversions will commence on or
about September 30, 1994. See "Variable Pricing System -- Class B
Shares."
The purchase payment from which a redemption of Class B shares is
made is
assumed to be the earliest purchase payment from which a full redemption has
not
already been effected. In the case of redemptions of Class B shares of other
funds in the Smith Barney Shearson Group of Funds issued in exchange for Class
B
shares of the Fund, the term "purchase payments" refers to the purchase
payments
for the shares given in exchange. In the event of an exchange of Class B
shares
of funds with differing CDSC schedules, the shares will be, in all cases,
subject to the higher CDSC schedule. See "Exchange Privilege."
WAIVERS OF CDSC. The CDSC will be waived on: (a) exchanges (see "Exchange
Privilege"); (b) automatic cash withdrawals in amounts equal to or less than
2%
per month of the value of the shareholders' shares at the time the withdrawal
plan commences (see above); (c) redemption of shares following the death or
disability of the shareholders; (d) involuntary redemptions; (e) redemption
proceeds from other funds in the Smith Barney Shearson Group of Funds that are
reinvested within 30 days of the redemption; and (f) redemptions of shares in
connection with a combination of any investment company with the Fund by
merger,
acquisition of assets or otherwise.
30
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- --------------------------------------------------------------------
VALUATION OF SHARES
For each Class the net asset value per share is calculated on each day,
Monday
through Friday, except days on which the NYSE is closed. The NYSE currently is
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively.
The net asset value per share of a Class is determined as of the close of
regular trading on the NYSE and is computed by dividing the value of the
Fund's
net assets attributable to that Class by the total number of shares of that
Class outstanding. Generally, the Fund's investments are valued at market
value
or, in the absence of a market value with respect to any securities, at fair
value as determined by or under the direction of the Fund's Board of Trustees.
Short-term investments that mature in 60 days or less are valued at amortized
cost whenever the Trustees determine that amortized cost reflects fair value
of
those investments. Amortized cost involves valuing an instrument at its cost
initially and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. Further information regarding the Fund's
valuation policies is contained in the Statement of Additional Information.
- --------------------------------------------------------------------
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class in the
following funds in the Smith Barney Shearson Group of Funds, to the extent
shares are offered for sale in the shareholder's state of residence:
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
-----------------------------------------------------------------------------
- --
MUNICIPAL BOND FUNDS
A SMITH BARNEY SHEARSON LIMITED MATURITY MUNICIPALS FUND, an
intermediate-term municipal bond fund investing in
investment-grade obligations.
</TABLE>
31
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
-----------------------------------------------------------------------------
- --
<S> <C>
A, B SMITH BARNEY SHEARSON MANAGED MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund.
A, B SMITH BARNEY SHEARSON TAX-EXEMPT INCOME FUND, an
intermediate-
and long-term municipal bond fund investing in medium- and
lower-rated securities.
A, B SMITH BARNEY SHEARSON ARIZONA MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
Arizona investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA
MUNICIPALS FUND, an intermediate-term municipal bond fund
designed for California investors.
A, B SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND, an
intermediate-and long-term municipal bond fund designed for
California investors.
A, B SMITH BARNEY SHEARSON FLORIDA MUNICIPALS FUND, an
intermediate- and long-term municipal bond fund designed for
Florida investors.
A, B SMITH BARNEY SHEARSON MASSACHUSETTS MUNICIPALS FUND, an
intermediate- and long-term municipal bond fund designed for
Massachusetts investors.
A, B SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
New Jersey investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY NEW YORK
MUNICIPALS FUND, an intermediate-term municipal bond fund
designed for New York investors investing in investment
grade
obligations.
</TABLE>
32
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
-----------------------------------------------------------------------------
- --
<S> <C>
A, B SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
New York investors.
INCOME FUNDS
A, B SMITH BARNEY SHEARSON ADJUSTABLE RATE GOVERNMENT INCOME
FUND,
seeks high current income while limiting the degree of
fluctuation in net asset value resulting from movement in
interest rates.
A SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND,
invests
exclusively in securities issued by the United States
Treasury
and other U.S. government securities.
A, B SMITH BARNEY SHEARSON DIVERSIFIED STRATEGIC INCOME FUND,
seeks
high current income primarily by allocating and reallocating
its assets among various types of fixed-income securities.
A, B SMITH BARNEY SHEARSON MANAGED GOVERNMENT FUND INC., invests
in
obligations issued or guaranteed by the United States
government and its agencies and instrumentalities with
emphasis on mortgage-backed government securities.
A, B SMITH BARNEY SHEARSON GOVERNMENT SECURITIES FUND, seeks a
high
current return by investing in U.S. government securities.
A, B SMITH BARNEY SHEARSON INVESTMENT GRADE BOND FUND, seeks
maximum current income consistent with prudent investment
management and preservation of capital by investing in
corporate bonds.
A, B SMITH BARNEY SHEARSON HIGH INCOME FUND, seeks high current
income by investing in high-yield corporate bonds,
debentures
and notes.
</TABLE>
33
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
-----------------------------------------------------------------------------
- --
<S> <C>
A, B SMITH BARNEY SHEARSON GLOBAL BOND FUND, seeks current income
and capital appreciation by investing in bonds, debentures
and
notes of foreign and domestic issuers.
GROWTH AND INCOME FUNDS
A*, B* SMITH BARNEY SHEARSON CONVERTIBLE FUND, seeks current income
and capital appreciation by investing in convertible
securities.
A*, B* SMITH BARNEY SHEARSON GROWTH AND INCOME FUND, seeks income
and
long-term capital growth by investing in income-producing
equity securities.
A*, B* SMITH BARNEY SHEARSON UTILITIES FUND, seeks total return by
investing in equity and debt securities of utilities
companies.
A*, B* SMITH BARNEY SHEARSON STRATEGIC INVESTORS FUND, seeks high
total return consisting of current income and capital
appreciation by investing in a combination of equity, fixed-
income and money market securities.
A*, B* SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND, seeks total
return by investing in dividend-paying common stocks.
GROWTH FUNDS
A*, B* SMITH BARNEY SHEARSON APPRECIATION FUND INC., seeks long-
term
appreciation of capital.
A*, B* SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC., seeks
long-term capital growth with current income as a secondary
objective.
A*, B* SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND, seeks
capital appreciation, with income as a secondary
consideration.
</TABLE>
34
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
-----------------------------------------------------------------------------
- --
<S> <C>
A*, B* SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC., seeks
above-average capital growth.
A*, B* SMITH BARNEY SHEARSON SPECIAL EQUITIES FUND, seeks long-term
capital appreciation by investing in equity securities
primarily of emerging growth companies.
A*, B* SMITH BARNEY SHEARSON GLOBAL OPPORTUNITIES FUND, seeks
long-term capital growth by investing principally in the
common stocks of foreign and domestic issuers.
A*, B* SMITH BARNEY SHEARSON EUROPEAN FUND, seeks long-term capital
appreciation by investing primarily in securities of issuers
based in European countries.
A*, B* SMITH BARNEY SHEARSON PRECIOUS METALS AND MINERALS FUND
INC.,
seeks long-term capital appreciation by investing primarily
in
precious metal- and mineral-related companies and gold
bullion.
MONEY MARKET FUNDS
** SMITH BARNEY SHEARSON MONEY MARKET FUND, invests in a
diversified portfolio of higher quality money market
instruments.
*** SMITH BARNEY SHEARSON DAILY DIVIDEND FUND INC., invests in a
diversified portfolio of high quality money market
instruments.
*** SMITH BARNEY SHEARSON GOVERNMENT AND AGENCIES FUND INC.,
invests in short-term U.S. government and agency securities.
*** SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND INC.,
invests in short-term high quality municipal obligations.
</TABLE>
35
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
-----------------------------------------------------------------------------
- --
<S> <C>
*** SMITH BARNEY SHEARSON CALIFORNIA MUNICIPAL MONEY MARKET
FUND,
invests in short-term, high quality California municipal
obligations.
*** SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND, invests
in
short-term, high quality New York municipal obligations.
--------------------------------------------------------------------
<FN>
*Shares of this fund are subject to a higher sales charge or CDSC than that
applicable to the Fund's shares.
**Shares of this money market fund may be exchanged for Class B shares of
the
Fund.
***Shares of this money market fund may be exchanged for Class A shares of
the
Fund.
</TABLE>
TAX EFFECT. The exchange of shares of one fund for shares of another fund is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder generally
will realize a
taxable gain or loss in connection with an exchange.
CLASS A EXCHANGES. Class A shareholders of the funds in the Smith Barney
Shearson Group of Funds sold without a sales charge or with a maximum sales
charge of less than 4.50% will be subject to the appropriate "sales charge
differential" upon the exchange of their shares for Class A shares of the Fund
or other fund sold with a higher sales charge. The "sales charge differential"
is limited to a percentage rate no greater than the excess of the sales charge
rate applicable to purchases of shares of the mutual fund being acquired in
the
exchange over the sales charge rate(s) actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For
purposes of the exchange privilege, shares obtained through automatic
reinvestment of dividends, as described below, are treated as having paid the
same sales charges applicable to the shares on which the dividends were paid;
however, if no sales charge was imposed upon the initial purchase of the
shares,
any shares obtained through automatic reinvestment will be subject to a sales
charge differential upon exchange.
CLASS B EXCHANGES. Class B shareholders of the Fund who wish to exchange all
or a portion of their Class B shares for Class B shares in any of the funds
identified above may do so without imposition of any exchange fee.
36
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
In the event a Class B shareholder wishes to exchange all or a portion of his
or
her shares for shares in any of the funds imposing a CDSC higher than that
imposed by the Fund, the exchanged Class B shares will be subject to the
higher
applicable CDSC. Upon an exchange, the new Class B shares will be deemed to
have
been purchased on the same date as the Class B shares of the Fund that have
been
exchanged.
ADDITIONAL INFORMATION REGARDING THE EXCHANGE PRIVILEGE. Although the
exchange
privilege is an important benefit, excessive exchange transactions can be
detrimental to the Fund's performance and its shareholders. Greenwich Street
Advisors may determine that a pattern of frequent exchanges is excessive and
contrary to the best interests of the Fund's other shareholders. In this
event,
Greenwich Street Advisors will notify Smith Barney Shearson, and Smith Barney
Shearson may, at its discretion, decide to limit additional purchases and/or
exchanges by the shareholder. Upon such a determination, Smith Barney Shearson
will provide notice in writing or by telephone to the shareholder at least 15
days prior to suspending the exchange privilege and during the 15-day period
the
shareholder will be required to (a) redeem his or her shares in the Fund or
(b)
remain invested in the Fund or exchange into any of the funds in the Smith
Barney Shearson Group of Funds ordinarily available, which position the
shareholder would be expected to maintain for a significant period of
time. All
relevant factors will be considered in determining what constitutes an abusive
pattern of exchanges.
Shareholders exercising the exchange privilege with any of the other funds
in
the Smith Barney Shearson Group of Funds should review the prospectus of that
fund carefully prior to making an exchange. Smith Barney Shearson reserves the
right to reject any exchange request. The exchange privilege may be modified
or
terminated at any time after written notice to shareholders. For further
information regarding the exchange privilege or to obtain the current
prospectus
for members of the Smith Barney Shearson Group of Funds, investors should
contact their Smith Barney Shearson Financial Consultant.
37
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- --------------------------------------------------------------------
DISTRIBUTOR
Smith Barney Shearson is located at 388 Greenwich Street, New York, New York
10013 and serves as distributor of the Fund's shares. Smith Barney Shearson is
paid an annual service fee with respect to Class A and Class B
shares of theFund at the rate of .15% of the value of average daily net
assets of the
respective Class. Smith Barney Shearson is paid an annual distribution fee
with
respect to Class B shares at the rate of .50% of the value of the
average daily
net assets attributable to those shares. The fees are authorized pursuant to a
services and distribution plan (the "Plan") adopted by the Fund pursuant to
Rule
12b-1 under the 1940 Act and are used by Smith Barney Shearson to pay its
Financial Consultants for servicing shareholder accounts and, in the case of
Class B shares, to cover expenses primarily intended to result in the sale of
those shares. These expenses include: costs of printing and distributing the
Fund's Prospectus, Statement of Additional Information and sales literature to
prospective investors; an allocation of overhead and other Smith Barney
Shearsons' branch office distribution-related expenses; payments to and
expenses
of Smith Barney Shearson Financial Consultants and other persons who provide
support services in connection with the distribution of the shares; and
accruals
for interest on the amount of the foregoing expenses that exceed distribution
fees and, in the case of Class B shares, the CDSC received by Smith
Barney
Shearson. The payments to Smith Barney Shearson Financial Consultants for
selling shares of a Class include a commission paid at the time of sale and a
continuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. The service fee is credited at the rate of
.15%
of the value of the average daily net assets of the particular Class of shares
that remain invested in the Fund. Smith Barney Shearson Financial Consultants
may receive different levels of compensation for selling one Class over
another.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney Shearson and
the
payments may exceed distribution expenses actually incurred. The Fund's Board
of
Trustees will evaluate the appropriateness of the Plan and its payment terms
on
a continuing basis and in so doing will consider all relevant factors,
including
expenses borne by Smith Barney Shearson, the amount received under
the Plan and
proceeds of the CDSC.
38
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- --------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS AND TAXES
The Fund declares dividends from its net investment income (that is, income
other than its net realized long-and short-term capital gains) on each day the
Fund is open for business and pays dividends on the last business day of the
Smith Barney Shearson statement month. Distributions of net realized long-and
short-term capital gains, if any, are declared and paid annually after the end
of the fiscal year in which they have been earned. Unless a shareholder
instructs that dividends and capital gains distributions on shares of any
Class
be paid in cash and credited to the shareholder's account, dividends and
capital
gains distributions will be reinvested automatically in additional shares of
the
Class at net asset value, subject to no sales charge or CDSC. The Fund's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
next business day. Shares redeemed during the month are entitled to dividends
declared up to and including the date of redemption. In addition, in order to
avoid the application of a 4% nondeductible excise tax on certain
undistributed
amounts of ordinary income and capital gains, the Fund may make an additional
distribution shortly before December 31 in each year of any undistributed
ordinary income or capital gains and expects to make any other distributions
as
are necessary to avoid the application of this tax.
If, for any full fiscal year, the Fund's total distributions exceed current
and accumulated earnings and profits, the excess distributions generally will
be
treated as a tax-free return of capital (up to the amount of the shareholder's
tax basis in his or her shares). The amount treated as a tax-free return of
capital will reduce a shareholder's adjusted basis in his or her shares.
Pursuant to the requirements of the 1940 Act and other applicable laws, a
notice
will accompany any distribution paid from sources other than net investment
income. In the event the Fund distributes amounts in excess of its net
investment income and net realized capital gains, such distributions may have
the effect of decreasing the Fund's total assets, which may increase the
Fund's
expense ratio.
TAXES
The Fund intends to qualify and to continue to qualify each year as
a
regulated investment company under the Code and will designate and pay
exempt-interest dividends derived from interest earned on qualifying tax-
exempt
obligations. Such exempt-interest dividends may be excluded by shareholders of
the Fund from their gross income for Federal income tax purposes although (a)
all or a portion of such exempt-interest dividends will
39
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS AND TAXES (CONTINUED)
be a specific preference item for purposes of the Federal individual and
corporate alternative minimum taxes to the extent they are derived from
certain
types of private activity bonds issued after August 7, 1986 and (b) all
exempt-interest dividends will be a component of the "current earnings"
adjustment item for purposes of the Federal corporate alternative minimum tax.
In addition, corporate shareholders may incur a greater Federal
"environmental"
tax liability through the receipt of the Fund's dividends and distributions.
Dividends derived from interest on Oregon Municipal Securities also will be
exempt from Oregon state personal income (but not corporate franchise
(excise) corporate income) taxes.
Dividends paid from taxable net investment income, if any, and distributions
of any net realized short-term capital gains (whether from tax-exempt or
taxable
securities) are taxable to shareholders as ordinary income, regardless of how
long they have held their Fund shares and whether such dividends or
distributions are received in cash or reinstated in additional Fund shares.
Distributions of net realized long-term capital gains are taxable to
shareholders as long-term capital gains, regardless of how long they have held
their Fund shares and whether such distributions are received in cash
or
reinvested in additional shares. Furthermore, as a general rule, a
shareholder's
gain or loss on a sale or redemption of his or her shares will be a long-term
capital gain or loss if the shareholder has held the shares for more than one
year and will be a short-term capital gain or loss if the shareholder has held
the shares for one year or less. The Fund's dividends and distributions will
not
qualify for the dividends-received deduction for corporations. The per share
dividends and distributions on Class A shares will be higher than those on
Class
B shares as a result of lower distribution and transfer agency fees
applicable
to Class A shares.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Each shareholder will also receive, if
appropriate, various written notices after the close of the Fund's prior
taxable
year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during the Fund's prior
taxable
year. These statements may set forth the dollar amount of income excluded or
exempt from Federal income taxes or Oregon state personal income taxes and the
dollar amount, if any, subject to such taxes. Moreover, these statements will
designate the amount of exempt-interest dividends that
40
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS AND TAXES (CONTINUED)
is a specific preference item for purposes of the Federal individual and
corporate alternative minimum taxes. Shareholders should consult their tax
advisors with specific reference to their own tax situations.
TAX-EXEMPT INCOME VS. TAXABLE INCOME
The table below shows Oregon individual taxpayers how to translate
Federal and Oregon
State tax savings from investments such as the Fund into an equivalent return
from a taxable investment which generated ordinary income such as interest
or dividends.. To the extent that the equivalent taxable yields,
illustrated in this table, are based on an effective tax rate which combines
the
Federal and Oregon marginal income tax rates, the table is not applicable to
tax payers who do not pay Oregon State personal income tax such
as corporations. The yields used below are
for illustration only and are not intended to represent current or future
yields
for the Fund, which may be higher or lower than those shown.
<TABLE>
<CAPTION>
COMBINED
FEDERAL OREGON COMBINED EFFECTIVE
TAXABLE INCOME* MARGINAL MARGINAL MARGINAL MARGINAL TAX
EXEMPT YIELDS
SINGLE JOINT RATE RATE RATE RATE** 4.00%
5.00% 6.00% 7.00% 8.00% 9.00%
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
-----------------------------------------------------------------------------
- --------------------
EQUIVALENT TAXABLE YIELDS
$ 22,750 $ 38,000 15.00% 9.00% 24.00% 22.65% 5.26% 6.58% 7.51%
9.21% 10.53% 11.84%
55,100 91,850 28.00% 9.00% 37.00% 34.48% 6.35% 7.94%
9.52% 11.11% 12.70% 14.29%
115,000 140,000 31.00% 9.00% 40.00% 37.21% 6.67%
7.99% 10.00% 11.67% 13.33% 15.00%
250,000 250,000 36.00% 9.00% 45.00% 41.76% 6.27% 8.68%
10.91% 12.73% 14.55% 16.36%
250,000 250,000 39.60% 9.00% 48.60% 45.04% 7.78% 9.30%
11.67% 13.62% 15.56% 17.51%
-----------------------------------------------------------------------------
- --------
<FN>
*Combined effective marginal tax rate represents the combined Federal and
Oregon state income tax
rates adjusted to account for the Federal deduction of state taxes paid. The
combined effective marginal income tax rate generally is lower than
the sum of the Federal and Oregon state marginal rates because the
state taxes that shareholders of the Fund will pay are deductible from
Federal taxable income for taxpayers who itemize their duductions.
The federal tax rates shown are those currently in effect for 1994 and are
subject to change. The calculations reflected in the table assume that no
income will be subjec to any federal, state or local individual alternative
minimum taxes. The rate brackets are subject to adjustment for the Internal
Revenue Service inflation indexation.
** This Fund is not an appropriate investment vehicle for low-income
taxpayers. The Oregon personal income tax is imposed at the rate of 9% for
taxable incomes in excess of $5,000 for individuals filing as single status
and for taxable incomes in excess of $10,000 for married couples filing
jointly. Dividends qualifying for federal income tax purposes as capital
gains dividends are treated by shareholders as long-term capital gains and
subject to a maximum tax rate of 28%. Oregon taxes long-term capital gains at
the same rates as oridinary income while restricting the deductibility of
capital losses.
41
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- --------------------------------------------------------------------
ADDITIONAL INFORMATION
The Fund was organized on March 10, 1994 under the laws of the
Commonwealth of
Massachusetts and is a business entity commonly known as a "Massachusetts
business trust." The Fund offers shares of beneficial interest, with a par
value
of $.001 per share.
Each Class of shares has a par value of $.001 per share and represents an
identical interest in the Fund's investment portfolio. As a result, the
Classes
have the same rights, privileges and preferences, except with respect to: (a)
the designation of each Class; (b) the effect of the respective sales charges
for each Class; (c) the distribution and/or service fees borne by each Class;
(d) the expenses allocable exclusively to each Class; (e) voting rights on
matters exclusively affecting a single Class; (f) the exchange privilege of
each
Class; and (g) the conversion feature of the Class B shares. The Fund's Board
of
Trustees does not anticipate that there will be any conflicts among the
interests of the holders of the different Classes. The Trustees, on an ongoing
basis, will consider whether any such conflict exists and, if so, take
appropriate action.
The Fund does not hold annual shareholder meetings. There normally will be
no
meetings of shareholders for the purpose of electing Trustees unless and until
such time as less than a majority of the Trustees holding office have been
elected by shareholders. The Trustees will call a meeting for any purpose upon
written request of shareholders holding at least 10% of the Fund's outstanding
shares. When matters are submitted for shareholder vote, shareholders of each
Class will have one vote for each full share owned and a proportionate,
fractional vote for any fractional share held of that Class. Generally, shares
of the Fund will be voted on a Fund-wide basis on all matters except matters
affecting only the interests of one Class.
Boston Safe Deposit and Trust Company, a wholly owned subsidiary of TBC, is
located at One Boston Place, Boston, Massachusetts 02108, and serves as
custodian of the Fund's investments.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and serves
as
the Fund's transfer agent.
The Fund sends to each of its shareholders a semi-annual report and an
audited
annual report, which include listings of the investment securities held by the
Fund at the end of the period covered. In an effort to reduce the Fund's
printing and mailing costs, the Fund plans to consolidate the mailing
42
<PAGE>
SMITH BARNEY SHEARSON
OREGON MUNICIPALS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
of its semi-annual and annual reports by household. This consolidation means
that a household having multiple accounts with the identical address of record
will receive a single copy of each report. In addition, the Fund also plans to
consolidate the mailing of its Prospectus so that a shareholder having
multiple
accounts will receive a single Prospectus annually. Any shareholder who does
not
want this consolidation to apply to his or her account should contact his or
her
Financial Consultant or TSSG. Shareholders may make inquiries regarding the
Fund
to their Smith Barney Shearson Financial Consultants.
-------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT
OF
ADDITIONAL INFORMATION AND/OR THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION
WITH THE OFFERING OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED
BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
43
</TABLE>
