<PAGE>
1995 SMITH BARNEY
ANNUAL OREGON
REPORT MUNICIPALS
FUND
.......................................
APRIL 30, 1995
[LOGO]
<PAGE>
Oregon Municipals Fund
DEAR SHAREHOLDER:
We are pleased to provide you with the Annual Report and
portfolio of investments for Smith Barney Oregon Municipals
Fund for the fiscal year ended April 30, 1995. Although
municipal bond prices declined generally during the first half of the
Fund's fiscal year, they rebounded quite sharply during its second
half. Despite the variable and often times difficult investment
environment of the past twelve months, the Fund provided positive
total returns to Class A and Class B investors. Performance data for
each class of shares during this first fiscal period is available in
the performance section of the report following this letter.
MARKET AND ECONOMIC OVERVIEW
Since our last report to you in October, the fixed-income markets, and
municipal bonds in particular, have enjoyed a powerful rally. Municipal bond
yields have declined more than a full percentage point, as evidenced by the drop
in the yield of THE BOND BUYER'S weekly 25-Bond Revenue Index of 30-year
municipal bonds from a high of 7.37% on November 17, 1994 to 6.29% at the end of
April. This was substantially better than the performance of the benchmark
30-year Treasury bond, which experienced a decline of 0.80% from 8.13% to 7.34%
during the same time period.
The vastly improved bond markets reflect a growing consensus that inflation will
remain under control and that the Federal Reserve Board will successfully
engineer a "soft landing" by slowing the economy down to a sustainable,
non-inflationary rate of growth. The seven increases in the Federal funds rate
since February 1994 appear to be slowing the pace of economic growth. Recent
economic reports show a slower rate of increase in employment, producer prices,
and retail sales. Industrial production and capacity utilization were also lower
than expected, signaling a possible slowdown in the country's strong
manufacturing sector.
Late in April, several tax-reform proposals which recommend a flat Federal
income tax rate began to receive increased attention in the national financial
press and from municipal bond market participants. Adoption of a flat tax would
diminish the tax-exempt advantages of municipal bonds. Although the various
plans being circulated are only proposals, the publicity surrounding them has
recently caused some investors to back away from the municipal bond market. In
our opinion, it is much too early in the process to predict
1
<PAGE>
what changes in the tax laws, if any, will actually take place, but tax reform
will certainly be a major topic of political debate over the next few years.
Many knowledgeable observers believe that the more radical proposals have little
chance of enactment.
Were it not for these tax-reform concerns, municipals would probably continue to
be strong performers relative to Treasuries and other taxable investments due to
the low supply of new issues. Not only did last year's spike in interest rates
sharply reduce refinancing activity, but voter pressure on states and
municipalities to rein in spending and cut taxes, or at least avoid tax
increases, have resulted in a 30% decline in new issuance. In addition, the
universe of existing municipal bonds is shrinking. In 1995, an estimated $230
billion of older, higher-coupon issues will mature or be called from the market.
With estimates of new issue volume at less than $150 billion, the net reduction
in municipal debt outstanding could approach $100 billion this year, contracting
the market by about eight percent. Ordinarily, a reduction in supply of this
magnitude would provide a powerful boost to municipal bond values as it did
earlier this year. Uncertainties about various tax proposals, however, will
probably keep municipals from trading any better than their normal relationship
to taxable investment alternatives.
PORTFOLIO STRATEGY AND OUTLOOK
The shortage of new issue supply is even more acute in Oregon because so many
issues were rushed to market before last November's election to avoid possible
problems in the event that either the new Measure 5 or Measure 20 were voted
into effect. Both Measures were defeated by wide margins, providing comfort to
investors with respect to outstanding debt, but leaving a dearth of new bond
issuance to meet demand. Oregon general obligation debt continues to be rated in
the double-A category by each of the three major rating agencies: Moody's
Investors Service, Standard & Poor's ("S&P") and Fitch Investors Service, Inc.
("Fitch"). However, a downgrade to the single-A category is possible; S&P's
outlook is "negative" and Fitch considers Oregon's credit trend to be
"uncertain." Although the double-A rating reflects the state's growing and
diversified economic base, strong financial performance and manageable
tax-supported debt burden, the possibility of a downgrading is attributable to,
at least in part, the increasing financial challenge of accommodating a
substantial shift in school funding from local property taxes to the state.
2
<PAGE>
- --------------------------------------------------------------------
D I V I D E N D P O L I C Y
ALTHOUGH NOT EXPLICITLY STATED IN THE PROSPECTUS, THE FUND'S POLICY IS TO
PAY A LEVEL MONTHLY DIVIDEND BASED ON THE INCOME GENERATED BY THE FUND'S
PORTFOLIO HOLDINGS, OUR EXPECTATIONS REGARDING THE MUNICIPAL BOND MARKET AND
THE GENERAL DIRECTION OF INTEREST RATES. THE FUND'S INVESTMENT DECISIONS ARE
GUIDED BY MARKET CONDITIONS, AND ARE NOT MADE WITH THE INTENT OF MAINTAINING
ARTIFICIALLY HIGH DIVIDENDS. WE CONTINUALLY MONITOR BOTH THE MARKET AND THE
FUND'S INCOME STREAM TO ENSURE THAT OUR DIVIDENDS APPROXIMATE THE ACTUAL
EARNINGS OF THE FUND.
Although we have a positive outlook for the fixed income markets, the size of
the rally experienced so far would seem to leave little room for disappointment,
and any sign of a rebound in economic activity is likely to result in higher
interest rates. In light of this viewpoint, we have invested the portfolio in a
combination of both long- and short-term maturities. Most long-term municipal
bonds are callable prior to their stated maturity date. When a bond has a coupon
higher than the prevailing market yields, its maturity is effectively shortened
to the call date because of the possibility that the issuer will exercise its
option to replace the bond with lower-cost debt. We are retaining high-coupon
bonds that trade well above their face value for the defensiveness of their
shorter effective maturities and the high level of income they provide. However,
we are also focusing on eliminating bonds with short call dates when they are
trading near their face value. Such bonds have unfavorable performance
characteristics because they retain the downside risk of their longer maturities
should rates rise, but their appreciation potential is limited by the shorter
call date if interest rates decline. We are replacing such issues with bonds
that have similar stated maturities but greater call protection. We believe that
positioning the portfolio in this manner is the best way to achieve our
objective of the highest tax-free income consistent with prudent investment
risk.
3
<PAGE>
We appreciate your investment in the Fund and the opportunity to help you reach
your investment goals. We look forward to reporting to you in the Fund's
semi-annual report to shareholders.
Sincerely,
Heath B. McLendon Peter M. Coffey
CHAIRMAN OF THE BOARD VICE PRESIDENT AND
INVESTMENT OFFICER
JUNE 9, 1995
4
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS (UNAUDITED) APRIL 30, 1995
INDUSTRY BREAKDOWN
Pie chart depicting the allocation of the Oregon Municipals Fund investment
securities held at April 30, 1995 by industry classification. The pie is broken
in pieces representing industries in the following percentages:
<TABLE>
<CAPTION>
INDUSTRY PERCENTAGE
<S> <C>
Short-Term Tax Exempt Investment and
Net Other Assets and Liabilities 2.8%
Education 21.7%
Housing 12.8%
Transportation 1.8%
Pollution Control 3.5%
Hospital 14.5%
Utility 22.1%
General Obligations 20.8%
</TABLE>
SUMMARY OF MUNICIPAL BONDS AND SHORT-TERM TAX-EXEMPT
INVESTMENTS BY COMBINED RATINGS.
<TABLE>
<CAPTION>
Percentage
of
Standard & Market
Moody's Poor's Value
<S> <C> <C> <C>
-------------------------------------------
AAA OR AAA 36.3%
-------------------------------------------
AA AA 16.1
-------------------------------------------
A A 25.7
-------------------------------------------
BAA BBB 13.5
-------------------------------------------
NR NR 4.6
-------------------------------------------
VMIG/P-1 A-1+ 3.8
-------------------------------------------
100.0%
---------------
</TABLE>
AVERAGE MATURITY 20.94 years
5
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS A SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Period
Ended Net Asset Value Capital Dividends Total
April 30 Beginning Ending Gains Paid Paid Return*
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------
5/23/94-
4/30/95 $9.55 $10.09 -- $0.49 11.12%
- ------------------------------------------------------------------------
Total -- $0.49
- ------------------------------------------------------------------------
Cumulative Total Return - (5/23/94 through 4/30/95) 11.12%
- ------------------------------------------------------------------------
<FN>
*Figures assume reinvestment of all dividends and capital gains distributions at
net asset value and do not assume deduction of the sales charge (maximum 4.00%).
</TABLE>
THE FUND'S POLICY IS TO DISTRIBUTE DIVIDENDS MONTHLY
AND CAPITAL GAINS, IF ANY, ANNUALLY.
- --------------------------------------------------------------------
AGGREGATE TOTAL RETURN** -- CLASS A SHARES
<TABLE>
<CAPTION>
Without Sales Charge With Sales Charge***
With Fee Without Fee With Fee Without Fee
Waiver and Waiver and Waiver and Waiver and
Expense Expense Expense Expense
Reimbursement Reimbursement Reimbursement Reimbursement
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
Inception 5/23/94 through 4/30/95+ 11.12% 9.87% 6.67% 5.47%
- ---------------------------------------------------------------------------
<FN>
**All aggregate total return figures shown reflect reinvestment of dividends and
capital gains distributions at net asset value. The Fund waived fees and
reimbursed expenses for the period ended April 30, 1995. A shareholder's
actual return for the period during which waivers and reimbursements were in
effect would be the higher of the two numbers shown.
***Aggregate total return figures shown assume the deduction of the maximum
4.00% sales charge at the time of investment.
+Total return includes the effect of the cash contribution to capital from the
investment adviser (see Note 2). Without this cash contribution the total
returns would have been 6.23%, 4.97%, 1.98%, and 0.77%, respectively.
</TABLE>
NOTE: The Fund began offering Class A shares on May 23, 1994. Class A shares are
subject to a maximum 4.00% sales charge and an annual service fee of 0.15% of
the value of the average daily net assets attributable to that class.
6
<PAGE>
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in Oregon Municipals Fund
- -- Class A shares on May 23, 1994 through April 30, 1995 as compared with the
growth of a $10,000 investment in Lehman Brothers Municipal Bond Index. The plot
points used to draw the line graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
GROWTH OF $10,000 INVESTMENT IN THE
INVESTED IN CLASS A LEHMAN BROTHERS
MONTH SHARES OF THE MUNICIPAL
ENDED FUND BOND INDEX
<S> <C> <C>
5/23/94 $ 9,600 --
5/94 $ 9,672 $10,000
6/94 $ 9,595 $ 9,880
9/94 $ 9,622 $ 9,920
12/94 $ 9,872 $ 9,694
3/95 $10,659 $10,658
4/95 $10,667 $10,653
</TABLE>
+ Illustration of $10,000 invested in Class A shares on May 23, 1994 assuming
deduction of the maximum 4.00% sales charge at the time of investment and
reinvestment of dividends and capital gains at net asset value through April
30, 1995.
* This figure includes the effect of the cash contribution to capital from the
investment adviser (see Note 2). Without this cash contribution the figure
would have been $10,198.
LEHMAN BROTHERS MUNICIPAL BOND INDEX -- The Lehman Brothers Municipal Bond Index
is an unmanaged weighted composite which is comprised of more than 15,000 bonds
issued within the last 5 years, having a minimum credit rating of at least Baa
and a maturity of at least 2 years, excluding all bonds subject to the
Alternative Minimum Tax and bonds with floating or zero coupons.
Index information is available at month-end only; therefore the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here represent past performance and do not guarantee
future results of Class A shares.
FOR A GLOSSARY OF TERMS, PLEASE TURN TO THE END OF THIS REPORT.
7
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------
HISTORICAL PERFORMANCE -- CLASS B SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Period
Ended Net Asset Value Capital Dividends Total
April 30 Beginning Ending Gains Paid Paid Return*
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------
5/23/94-
4/30/95 $9.55 $10.09 -- $0.45 10.62%
- ------------------------------------------------------------------------
Total -- $0.45
- ------------------------------------------------------------------------
Cumulative Total Return - (5/23/94 through 4/30/95) 10.62%
- ------------------------------------------------------------------------
<FN>
*Figures assume reinvestment of all dividends and capital gains distributions at
net asset value and do not assume deduction of the contingent deferred sales
charge ("CDSC").
</TABLE>
- --------------------------------------------------------------------
AGGREGATE TOTAL RETURN** -- CLASS B SHARES
<TABLE>
<CAPTION>
Without CDSC With CDSC***
With Fee Without Fee With Fee Without Fee
Waiver and Waiver and Waiver and Waiver and
Expense Expense Expense Expense
Reimbursement Reimbursement Reimbursement Reimbursement
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
Inception 5/23/94 through 4/30/95+ 10.62% 9.32% 6.12% 4.91%
- ----------------------------------------------------------------------------
<FN>
**All aggregate total return figures shown reflect reinvestment of dividends and
capital gains distributions at net asset value. The Fund waived fees and
reimbursed expenses for the period ended April 30, 1995. A shareholder's
actual return for the period during which waivers and reimbursements were in
effect would be the higher of the two numbers shown.
***Aggregate total return figures shown assume the deduction of the maximum
applicable CDSC which is described in the prospectus.
+Total return includes the effect of the cash contribution to capital from the
investment adviser (see Note 2). Without this cash contribution the total
returns would have been 5.55%, 4.31%, 1.05%, and (0.16)%, respectively.
</TABLE>
NOTE: The Fund began offering Class B shares on May 23, 1994. Class B shares are
subject to a maximum 4.50% CDSC and annual service and distribution fees of
0.15% and 0.50%, respectively, of the value of the average daily net assets
attributable to that class.
8
<PAGE>
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in Oregon Municipals Fund
- -- Class B shares on May 23, 1994 through April 30, 1995 as compared with the
growth of a $10,000 investment in Lehman Brothers Municipal Bond Index. The plot
points used to draw the line graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000 GROWTH OF $10,000
GROWTH OF $10,000 INVESTED IN CLASS B INVESTMENT IN THE
INVESTED IN CLASS B WITH A 4.50% BACK- LEHMAN BROTHERS
MONTH SHARES OF THE END LOAD SHARES OF MUNICIPAL
ENDED FUND THE FUND BOND INDEX
<S> <C> <C> <C>
5/23/94 $10,000 $10,000 --
5/94 $10,075 $10,075 $10,000
6/94 $ 9,990 $ 9,990 $ 9,880
9/94 $10,007 $10,007 $ 9,920
12/94 $10,254 $10,254 $ 9,694
3/95 $11,058 $11,058 $10,658
4/95 $11,062 $10,612 $10,653
</TABLE>
+ Illustration of $10,000 invested in Class B shares on May 23, 1994 assuming
deduction of the maximum applicable CDSC at the time of redemption and
reinvestment of dividends and capital gains at net asset value through April
30, 1995.
++ Value does not assume deduction of applicable CDSC. This figure includes
the effect of the cash contribution to capital from the investment adviser
(see Note 2). Without the cash contribution the figure would have been
$10,555.
+++ Value assumes deduction of applicable CDSC (assuming deduction on April
30, 1995). This figure includes the effect of the cash contribution to capital
from the investment adviser (See Note 2). Without the cash contribution the
figure would have been $10,105.
LEHMAN BROTHERS MUNICIPAL BOND INDEX -- The Lehman Brothers Municipal Bond
Index is an unmanaged weighted composite which is comprised of more than
15,000 bonds issued within the last 5 years, having a minimum credit rating of
at least Baa and a maturity of at least 2 years, excluding all bonds subject
to the Alternative Minimum Tax and bonds with floating or zero coupons.
Index information is available at month-end only; therefore the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here represent past performance and do not guarantee
future results of Class B shares.
FOR A GLOSSARY OF TERMS, PLEASE TURN TO THE END OF THIS REPORT.
9
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS APRIL 30, 1995
-------------------------------------------------------------
<TABLE>
<S> <C>
KEY TO INSURANCE ABBREVIATIONS
AMBAC -- American Municipal Bond Investors Assurance
FGIC -- Federal Guaranty Insurance Corporation
FHA -- Federal Housing Administration
FSA -- Federal Security Assurance
MBIA -- Municipal Bond Investors Assurance
</TABLE>
<TABLE>
<CAPTION>
RATINGS
FACE (UNAUDITED) MARKET VALUE
VALUE MOODY'S S&P (NOTE 1)
<C> <S> <C> <C> <C>
--------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES -- 97.2%
OREGON -- 78.8%
$250,000 Beaverton, Oregon,
Refunding Bonds, Water
Revenue,
6.125% due 6/1/14 A A+ $ 251,875
500,000 Central Lincoln, Oregon,
Peoples District, Electric
Utility Revenue Bonds,
(AMBAC insured),
5.750% due 01/01/15 Aaa AAA 491,875
360,000 Clackamas County, Oregon,
Service District, Sewer
Revenue,
6.375% due 10/1/14 NR A+ 369,000
450,000 Douglas County, Oregon,
Hospital Revenue, (Catholic
Health Corporation), Series
B, (MBIA insured),
6.000% due 11/15/15 Aaa AAA 450,000
500,000 Eugene, Oregon, Electric
Utility Revenue, Series C,
5.800% due 8/1/19 A1 AA 482,500
400,000 Gresham, Oregon, Refunding
Bonds, Water Revenue,
Series B,
5.300% due 11/1/15 A A+ 364,000
495,000 Klamath Falls, Oregon,
Intercommunity Hospital
Authority, Hospital
Revenue, (Gross-Merle West
Medical Center),
7.100% due 9/1/24 NR BBB+ 507,994
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 1995
<TABLE>
<CAPTION>
RATINGS
FACE (UNAUDITED) MARKET VALUE
VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
OREGON -- (CONTINUED)
$500,000 Lane County, Oregon,
(Bethel),
School District No. 052,
(FGIC insured),
6.400% due 12/1/09 Aaa AAA $ 530,000
500,000 Lane County, Oregon,
(Eugene), School District
No. 4J, Refunding Bonds,
Series A,
5.375% due 7/1/13 Aa NR 477,500
500,000 McMinnville, Oregon, Sewer
System Revenue, Series A,
(FGIC insured),
5.000% due 2/1/14 Aaa AAA 447,500
500,000 Multnomah County, Oregon,
Educational Facilities,
University Revenue,
(University of Portland
Project),
6.000% due 4/1/14 NR A- 496,875
500,000 Oregon State Department of
General Services, Refunding
Bonds, Certificate of
Participation, Series A,
(MBIA insured),
5.500% due 1/15/15 Aaa AAA 478,125
600,000 Oregon State Economic
Development Department,
Bond Bank Revenue, Series
I,
6.700% due 1/1/15 A NR 621,000
Oregon State Housing &
Community Services,
Refunding Bonds:
215,000 Housing and Finance Revenue
Bonds, Assisted or Insured
Multi-unit Mortgages,
Series A, (FHA insured),
6.800% due 7/1/13 A1 A+ 221,719
500,000 Mortgage Revenue Bonds,
Single Family Mortgage
Program, Series B,
6.875% due 7/1/28 Aa NR 516,875
600,000 Port Umatilla, Oregon,
General Obligation Bonds,
Water Revenue,
6.650% due 8/1/22 Aa1 NR 612,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 1995
<TABLE>
<CAPTION>
RATINGS
FACE (UNAUDITED) MARKET VALUE
VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
OREGON -- (CONTINUED)
$300,000 Portland, Oregon, Housing
Authority, Senior Lien
Revenue, (Fairview Woods
Project), Series A,
6.875% due 8/1/14 NR NR $ 296,625
500,000 Portland, Oregon, Sewer
System Revenue, Series A,
6.250% due 6/1/15 A1 A+ 510,625
500,000 Salem-Keizer, Oregon,
School District No. 24J,
General Obligation Bonds,
(FGIC insured),
5.750% due 6/1/12 Aaa AAA 490,625
500,000 Washington County, Oregon,
(Sherwood), School District
No. 088J, (FSA Insured),
6.100% due 6/1/12 Aaa AAA 506,875
300,000 Western Generation Agency,
Oregon, Multiple Utility
Revenue, (James River
Corporation, Wauna
Cogeneration Project),
Series B,
7.250% due 1/1/09 NR NR 304,875
445,000 Western Lane Hospital
District, Oregon, Hospital
Facilities Revenue, (Sister
of St. Joseph Peace), (MBIA
insured),
5.750% due 8/1/19 Aaa AAA 430,537
300,000 Yamhill County, Oregon,
School District No. 029J,
General Obligation Bond,
(FSA insured),
5.500% due 6/1/10 Aaa AAA 290,250
--------------------------------------------------------------------------
10,150,000
--------------------------------------------------------------------------
GUAM -- 5.9%
500,000 Guam Government, General
Obligation Bonds, Series A,
5.375% due 11/15/13 NR BBB 434,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 1995
<TABLE>
<CAPTION>
RATINGS
FACE (UNAUDITED) MARKET VALUE
VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
GUAM -- (CONTINUED)
$400,000 Guam Power Authority
Revenue, Electric Revenue,
Series A,
5.250% due 10/1/23 NR BBB $ 331,500
--------------------------------------------------------------------------
765,875
--------------------------------------------------------------------------
PUERTO RICO -- 7.7%
250,000 Commonwealth of Puerto
Rico, Highway &
Transportation Authority,
Fuel Sales Tax Revenue,
Series W,
5.500% due 7/1/15 Baa1 A 230,000
500,000 Commonwealth of Puerto
Rico, Hospital Revenue,
Medical and Environmental
Control Facilities, (Ryder
Memorial Hospital), Series
A,
6.700% due 5/1/24 NR BBB 485,625
300,000 Commonwealth of Puerto
Rico,
Refunding Bonds,
5.500% due 7/1/13 Baa1 A 277,875
--------------------------------------------------------------------------
993,500
--------------------------------------------------------------------------
VIRGIN ISLANDS -- 4.8%
620,000 Virgin Islands Housing
Finance Authority, Single
Family Revenue, Project A,
(GNMA Collateralized),
6.450% due 3/1/16 NR AAA 615,350
--------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $12,373,441) 12,524,725
--------------------------------------------------------------------------
SHORT-TERM TAX-EXEMPT INVESTMENTS -- 3.9%
OREGON -- 3.9%
200,000 Port Portland, Oregon,
Refunding Bonds, Pollution
Control Revenue,
(Reynolds Metals),
5.150% due 12/1/09+ P-1 NR 200,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) APRIL 30, 1995
<TABLE>
<CAPTION>
RATINGS
FACE (UNAUDITED) MARKET VALUE
VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM TAX-EXEMPT INVESTMENTS -- (CONTINUED)
OREGON -- (CONTINUED)
$300,000 Umatilla County, Oregon,
Hospital Facilities
Authority, Hospital
Revenue, (Franciscan Health
Systems), Series B,
5.150% due 12/1/24+ VMIG1 A-1+ $ 300,000
--------------------------------------------------------------------------
TOTAL SHORT-TERM TAX-EXEMPT
INVESTMENTS
(Cost $500,000) 500,000
--------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $12,873,441*) 101.1% 13,024,725
OTHER ASSETS AND LIABILITIES (NET) (1.1) (145,159)
--------------------------------------------------------------------------
NET ASSETS 100.0% $12,879,566
--------------------------------------------------------------------------
<FN>
+ Variable rate demand notes are payable upon not more than one business day's
notice.
* Aggregate cost for Federal tax purposes.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost
$12,873,441) (Note 1)
See accompanying schedule $13,024,725
Interest receivable 243,603
Receivable for Fund shares sold 118,414
Receivable from investment adviser
(Note 2) 64,336
Unamortized organization costs (Note 7) 27,092
- ------------------------------------------------------------------
TOTAL ASSETS 13,478,170
- ------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased $498,299
Due to custodian 22,901
Dividends payable 15,575
Distribution fee payable (Note 3) 2,650
Service fee payable (Note 3) 1,589
Custodian fees payable (Note 2) 1,000
Transfer agent fees payable (Note 2) 690
Accrued expenses and other payables 55,900
- ------------------------------------------------------------------
TOTAL LIABILITIES 598,604
- ------------------------------------------------------------------
NET ASSETS $12,879,566
- ------------------------------------------------------------------
NET ASSETS consist of:
Distributions in excess of net
investment income $ (3,823)
Accumulated net realized loss on
investments sold (13,541)
Unrealized appreciation of investments 151,284
Par value 1,277
Paid-in capital in excess of par value 12,744,369
- ------------------------------------------------------------------
TOTAL NET ASSETS $12,879,566
- ------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
- ------------------------------------------------------------- APRIL 30, 1995
<TABLE>
<S> <C> <C>
NET ASSET VALUE:
CLASS A SHARES:
NET ASSET VALUE and redemption price per share
($6,323,118 DIVIDED BY 626,807 shares of
beneficial interest outstanding) $10.09
- ------------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE ($10.09
DIVIDED BY 0.960)
(based on sales charge of 4.00% of the offering
price on April 30, 1995) $10.51
- ------------------------------------------------------------------
CLASS B SHARES:
NET ASSET VALUE and offering price per share+
($6,556,448 DIVIDED BY 649,941 shares of
beneficial interest outstanding) $10.09
- ------------------------------------------------------------------
<FN>
+ Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE PERIOD ENDED APRIL 30, 1995*
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $572,799
- -------------------------------------------------------------------------------
EXPENSES:
Legal and audit fees $ 41,291
Trustees' fees and expenses (Note 2) 36,828
Investment advisory fee (Note 2) 32,860
Distribution fee (Note 3) 21,689
Shareholder reports expense 21,183
Administration fee (Note 2) 18,777
Service fee (Note 3) 14,083
Amortization of organization costs (Note 7) 6,773
Transfer agent fees (Notes 2 and 4) 6,579
Custodian fees (Note 2) 5,807
Other 10,264
Fees waived and/or expenses reimbursed by
investment adviser and administrator (Note 2) (115,973)
- -------------------------------------------------------------------------------
TOTAL EXPENSES 100,161
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 472,638
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS (NOTES 1 AND 5):
Net realized loss on investments sold during the
period (13,541)
Net unrealized appreciation of investments
during the period 151,284
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 137,743
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $610,381
- -------------------------------------------------------------------------------
<FN>
* The Fund commenced operations on May 23, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD
ENDED
4/30/95*
<S> <C>
Net investment income $ 472,638
Net realized loss on investments sold during the period (13,541)
Net unrealized appreciation on investments during the
period 151,284
- ------------------------------------------------------------------------
Net increase in net assets resulting from operations 610,381
Distributions to shareholders from net investment
income:
Class A (266,791)
Class B (205,847)
Distributions to shareholders in excess of net
investment income:
Class A (2,158)
Class B (1,665)
Net increase in net assets from Fund share transactions
(Note 6):
Class A 3,994,646
Class B 6,278,095
Cash contribution from investment adviser (Note 2):
Class A 251,349
Class B 221,556
- ------------------------------------------------------------------------
Net increase in net assets 10,879,566
NET ASSETS:
Beginning of period 2,000,000
- ------------------------------------------------------------------------
End of year (including distributions in excess of net
investment income of $3,823 at April 30, 1995) $12,879,566
- ------------------------------------------------------------------------
<FN>
* The Fund commenced operations on May 23, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
PERIOD
ENDED
4/30/95*
<S> <C>
Operating performance:
Net Asset Value, beginning of period $ 9.55
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income*** 0.49
Net realized and unrealized gain on investments 0.54
- -------------------------------------------------------------------------------
Total from investment operations 1.03
Less distributions:
Distributions from net investment income (0.49)
Distributions in excess of net investment income (0.00)#
- -------------------------------------------------------------------------------
Total distributions (0.49)
- -------------------------------------------------------------------------------
Net Asset Value, end of period $10.09
- -------------------------------------------------------------------------------
Total return++ 11.12%(a)
- -------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000's) $6,323
Ratio of operating expenses to average net assets+ 0.82%**
Ratio of net investment income to average net assets 5.28%**
Portfolio turnover rate 30%
- -------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Class A shares on May 23, 1994.
** Annualized.
*** Net investment income before waiver of fees and/or reimbursement of expenses
by investment adviser and administrator for the period ended April 30, 1995
was $0.37.
+ Annualized expense ratio before waiver of fees and/or reimbursement of
expenses by investment adviser and administrator for the period ended April
30, 1995 was 2.05%.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
# Amount represents less than $0.01 per share.
(a) Total return includes the effect of the cash contribution from the investment
adviser (see Note 2). Without this cash contribution the total return would
have been 6.23%.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
PERIOD
ENDED
4/30/95*
<S> <C>
Operating performance:
Net Asset Value, beginning of period $ 9.55
- --------------------------------------------------------------------
Income from investment operations:
Net investment income*** 0.44
Net realized and unrealized gain on investments 0.55
- --------------------------------------------------------------------
Total from investment operations 0.99
Less distributions:
Distributions from net investment income (0.45)
Distributions in excess of net investment income (0.00)#
- --------------------------------------------------------------------
Total distributions (0.45)
- --------------------------------------------------------------------
Net Asset Value, end of period $10.09
- --------------------------------------------------------------------
Total Return++ 10.62%(a)
- --------------------------------------------------------------------
Ratios/ supplemental data:
Net assets, end of period (in 000's) $6,556
Ratio of operating expenses to average net assets+ 1.36%**
Ratio of net investment income to average net assets 4.74%**
Portfolio turnover rate 30%
- --------------------------------------------------------------------
<FN>
* The Fund commenced selling Class B shares on May 23, 1994.
** Annualized.
*** Net investment income before waiver of fees and/or reimbursement of expenses
by investment adviser and administrator for the period ended April 30, 1995
was $0.33.
+ Annualized expense ratio before waiver of fees and/or reimbursement of
expenses by investment adviser and administrator for the period ended April
30, 1995 was 2.59%.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charge.
# Amount represents less than $0.01 per share.
(a) Total return includes the effect of the cash contribution from the investment
adviser (see Note 2). Without this cash contribution the total return would
have been 5.55%.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Oregon Municipals Fund (formerly Smith Barney Shearson Oregon
Municipals Fund) (the "Fund") is a non-diversified, open-end management
investment company registered with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund was
organized on 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 commenced operations on May 23, 1994. Effective November 7, 1994, the Fund
began offering Class C and Class Y shares and continued to offer Class A and
Class B shares. As of April 30, 1995, no Class C or Class Y shares have been
sold. Class A shares are sold with a front-end sales charge. Class B and Class C
shares may be subject to a contingent deferred sales charge ("CDSC") upon
redemption. Class B shares will convert automatically to Class A shares eight
years after the date of original purchase. Class Y shares are available to
investors making an initial investment of at least $5 million and are not
subject to any sales charges, distribution or service fees. All classes of
shares have identical rights and privileges except with respect to the effect of
the respective sales charges, the distribution and/ or service fees borne by
each class, expenses allocable exclusively to each class, voting rights on
matters affecting a single class, the exchange privilege of each class and the
conversion feature of Class B shares. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements.
PORTFOLIO VALUATION: Securities are valued at the close of trading on the New
York Stock Exchange, Inc. by The Boston Company Advisors, Inc. ("Boston
Advisors") after consultation with an independent pricing service (the
"Service") approved by the Board of Trustees. When, in the judgment of the
Service, quoted bid prices for investments are readily available and are
representative of the bid side of the market, these investments are valued at
the mean of the quoted bid prices and asked prices (as obtained by the Service
from dealers in such securities). Securities for which, in the judgment of the
Service, there are no readily available market quotations (which may constitute
a majority of the portfolio securities) are carried at fair value as determined
by the Service, based on methods which include consideration of: yields or
prices of municipal securities of comparable quality, coupon,
21
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
maturity and type; indications as to values from dealers; and general market
conditions. Short-term investments that mature in 60 days or less are valued at
amortized cost whenever the Board of Trustees determines that amortized cost
reflects the fair value of those investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Interest income is recorded on the accrual basis.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Investment income and realized and unrealized gains and losses are
allocated based upon the relative net assets of each class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income are determined on a class level and are declared daily and paid on the
last business day of the Smith Barney Inc. ("Smith Barney") statement month.
Distributions of any net short- and long-term capital gains earned by the Fund,
if any, will be determined on a Fund level and are declared and paid annually
after the close of the fiscal year in which they are earned. Additional
distributions of net investment income and capital gains for the Fund may be
made at the discretion of the Board of Trustees in order to avoid the
application of a 4.00% nondeductible excise tax on certain undistributed amounts
of net investment income and capital gains. To the extent net realized capital
gains can be offset by capital losses and loss carryforwards, it is the policy
of the Fund not to distribute such gains.
Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund as a whole.
FEDERAL INCOME TAXES: The Fund intends to qualify as a regulated investment
company, if such qualification is in the best interests of its shareholders, by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no Federal
income tax provision is required.
22
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT ADVISORY FEE, ADMINISTRATION
FEE AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with a division of Mutual Management Corp., which has been
transferred effective November 7, 1994, to Smith Barney Mutual Funds Management
Inc. ("SBMFM") (formerly known as Smith Barney Advisers, Inc.). Mutual
Management Corp. and SBMFM are both wholly-owned subsidiaries of Smith Barney
Holdings Inc. ("Holdings"). Holdings is a wholly owned subsidiary of Travelers
Group Inc. Under the Advisory Agreement, the Fund pays SBMFM a monthly fee at
the following annual rates: 0.35% of the value of the Fund's average daily net
assets up to $500 million and 0.32% of the value of its average daily net assets
in excess of $500 million.
The Fund has also entered into an administration agreement (the "Administration
Agreement") with SBMFM. Under the Administration Agreement, the Fund pays a fee
computed daily and paid monthly based on the following annual rates: 0.20% of
the value of the Fund's average daily net assets up to $500 million and 0.18% of
the value of the Fund's average daily net assets in excess of $500 million.
The Fund and SBMFM have also entered into a sub-administration agreement
("Sub-Administration Agreement") with Boston Advisors, an indirect wholly owned
subsidiary of Mellon Bank Corporation ("Mellon"). Under the Sub-Administration
Agreement, SBMFM pays Boston Advisors a portion of its administration fee at a
rate agreed upon from time to time between SBMFM and Boston Advisors.
From time to time SBMFM may voluntarily waive a portion or all of the fees
otherwise payable to it. For the period ended April 30, 1995, SBMFM voluntarily
waived advisory fees and administrative fees in the amounts of $32,860 and
$18,777, respectively. In addition, SBMFM reimbursed expenses in the amount of
$64,336 for the period ended April 30, 1995. At October 24, 1994, the investment
adviser also made a cash contribution to capital of $251,349, and $221,556 for
Class A and Class B shares, respectively.
23
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the period ended April 30, 1995, SBMFM received $158,807 from investors
representing commissions (sales charges) on sales of Class A shares.
A CDSC is generally payable by a shareholder in connection with the redemption
of certain Class A, Class B and Class C shares. In circumstances in which the
CDSC is imposed, the amount will vary depending on the number of years since the
date of purchase. For the period ended April 30, 1995, Smith Barney received
from shareholders $11,624 in CDSC on the redemption of Class B shares.
No officer, director or employee of Smith Barney or of any of its affiliates
receives any compensation from the Fund for serving as a Trustee or officer of
the Fund. The Fund pays each Trustee who is not an officer, director, or
employee of Smith Barney or any of its affiliates $2,500 per annum plus $250 per
meeting attended and each Trustee emeritus who is not an officer, director or
employee of Smith Barney or any of its affiliates $1,250 per annum plus $125 per
meeting attended. The Fund reimburses each Trustee for travel and out-of-pocket
expenses incurred to attend such meetings.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary of
Mellon, serves as the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, serves as the Fund's transfer agent.
At April 30, 1995, SBMFM owned 120,158 shares (9.4%) of the Fund.
3. DISTRIBUTION PLAN
Smith Barney acts as distributor of the Fund's shares pursuant to a distribution
agreement with the Fund, and sells shares of the Fund through Smith Barney or
its affiliates.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a services and
distribution plan (the "Plan"). Under this Plan, the Fund compensates Smith
Barney for servicing shareholder accounts for Class A, Class B and Class C
shareholders, and covers expenses incurred in distributing Class B
24
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
and Class C shares. Smith Barney is paid an annual service fee with respect to
Class A, Class B and Class C shares of the Fund at the annual rate of 0.15% of
the value of the average daily net assets of each respective class of shares.
Smith Barney is also paid an annual distribution fee with respect to Class B and
Class C shares at the annual rate of 0.50% and 0.55%, respectively, of the value
of the average daily net assets of each class. For the period ended April 30,
1995, the Fund incurred $7,576 and $6,507 in service fees for Class A and Class
B shares, respectively. For the period ended April 30, 1995, the Fund incurred
$21,689 in distribution fees for Class B shares.
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class of
shares are prorated among the classes based upon the relative net assets of each
class. Operating expenses directly attributable to a class of shares are charged
to that class' operations. In addition to the above servicing and distribution
fees, class specific operating expenses for the period ended April 30, 1995
included transfer agent fees of $2,602 and $3,977 for Class A and Class B
shares, respectively.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the period ended April 30, 1995 amounted to
$15,213,291 and $2,842,940, respectively.
At April 30, 1995, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost amounted to
$195,963, and the aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value amounted to $44,679.
25
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. SHARES OF BENEFICIAL INTEREST
At April 30, 1995, the Fund had an unlimited number of authorized shares of
beneficial interest with a par value of $0.001. These shares are divided into
four classes; (Class A, Class B, Class C and Class Y). Changes in shares of
beneficial interest outstanding were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
APRIL 30, 1995*
CLASS A SHARES: Shares Amount
<S> <C> <C>
- ------------------------------------------------------------------
Sold 510,557 $ 4,937,232
Issued as reinvestment of dividends 23,390 226,604
Redeemed (116,563) (1,169,190)
- ------------------------------------------------------------------
Net increase 417,384 $ 3,994,646
- ------------------------------------------------------------------
<CAPTION>
PERIOD ENDED
APRIL 30, 1995*
CLASS B SHARES: Shares Amount
<S> <C> <C>
- ------------------------------------------------------------------
Sold 706,972 $ 6,822,107
Issued as reinvestment of dividends 15,881 154,333
Redeemed (72,913) (698,345)
- ------------------------------------------------------------------
Net increase 649,940 $ 6,278,095
- ------------------------------------------------------------------
<FN> ------------------------
* The Fund commenced operations on May 23, 1994.
</TABLE>
As of April 30, 1995, no Class C or Class Y shares had been sold.
7. ORGANIZATION COSTS
The Fund bears all costs in connection with its organization including the fees
and expenses of registering and qualifying its shares for distribution under
Federal and state securities regulations. All such costs are being amortized on
the straight-line method over a period of five years from May 23, 1994
(commencement of operations). In the event any of the initial shares in the Fund
are redeemed during such period, the Fund will be reimbursed for any unamortized
organization costs in the same proportion as the number of shares redeemed bears
to the number of initial shares outstanding at the time of redemption.
26
<PAGE>
Smith Barney
Oregon Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of Oregon and
its political subdivisions, agencies and public authorities to obtain funds for
various public purposes. The Fund is more susceptible to factors adversely
affecting issuers of Oregon municipal securities than is a municipal bond fund
that is not concentrated in these issuers to the same extent.
9. CAPITAL LOSS CARRYFORWARD
At April 30, 1995, the Fund had available for Federal tax purposes an unused
capital loss carryforward of $13,541, to offset future net capital gains
expiring in 2003.
27
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
SMITH BARNEY OREGON MUNICIPALS FUND:
We have audited the accompanying statement of assets and liabilities of Smith
Barney Oregon Municipals Fund (formerly Smith Barney Shearson Oregon Municipals
Fund), including the schedule of portfolio investments, as of April 30, 1995 and
the related statements of operations and changes in net assets and the financial
highlights for the period from May 23, 1994 (commencement of operations) through
April 30, 1995. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of April 30, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Smith
Barney Oregon Municipals Fund as of April 30, 1995, the results of its
operations and the changes in its net assets, and the financial highlights for
the period from May 23, 1994 (commencement of operations) through April 30,
1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 19, 1995
28
<PAGE>
Smith Barney
Oregon Municipals Fund
- --------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
PERIOD ENDED APRIL 30, 1995
Of the dividends paid by Smith Barney Oregon Municipals Fund from net investment
income for the period ended April 30, 1995, 100% is tax-exempt for regular
Federal income tax purposes.
29
<PAGE>
Smith Barney
Oregon Municipals Fund
- --------------------------------------------------------------------
PARTICIPANTS
DISTRIBUTOR
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
AND ADMINISTRATOR
Smith Barney Mutual Funds
Management Inc.
388 Greenwich Street
New York, New York 10013
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
TSSG
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and
Trust Company
One Boston Place
Boston, Massachusetts 02108
30
<PAGE>
Smith Barney
Oregon Municipals Fund
- ---------------------------------------------------------------------------
GLOSSARY OF COMMONLY USED MUTUAL FUND TERMS
CAPITAL GAIN (OR LOSS) This is the increase (or decrease) in the market value
(price) of a security in your portfolio. If a stock or bond appreciates in
price, there is a capital gain; if it depreciates, there is a capital loss. A
capital gain or loss is "realized" upon the sale of a security; if net capital
gains exceed net capital losses, there may be a capital gain distribution to
shareholders.
CDSC (CONTINGENT DEFERRED SALES CHARGE) One kind of back-end load, a CDSC is
imposed if shares are redeemed during the first few years of ownership. The CDSC
may be expressed as a percentage of either the original purchase price or the
redemption proceeds. Most CDSC's decline over time, and some will not be charged
if shares are redeemed after a certain period of time.
DIVIDEND This is income generated by securities in a portfolio and distributed
after expenses to shareholders.
FRONT-END SALES CHARGE This is the sales charge applied to an investment at the
time of initial purchase.
NET ASSET VALUE (NAV) Net Asset Value is the total market value of all
securities held by a fund, minus any liabilities, divided by the number of
shares outstanding. It is the value of a single share of a mutual fund on a
given day. The total value of your investment would be the NAV multiplied by the
number of shares you own.
DISTRIBUTION RATE This is the rate at which a mutual fund pays out (or
distributes) interest, dividends and realized capital gains to shareholders. A
fund's distribution rate is usually expressed as an annualized percent of the
fund's offering price.
SEC YIELD This standardized calculation of a mutual fund's yield is based on a
formula developed by the Securities and Exchange Commission (SEC) to allow funds
to be compared on an equal basis. It is an annualized yield based on the
portfolio's potential earnings from dividends, interest and yield to maturity of
its holdings, and it reflects the payments of all portfolio expenses for the
most recent 30-day period. Mutual funds are required to use this figure when
stating yield.
TOTAL RETURN Total return measures a fund's performance, taking into account
the combination of dividends paid and the gain or loss in the value of the
securities held in the portfolio. It may be expressed on an average annual basis
or cumulative basis (total change over a given period). In addition, total
return may be expressed with or without the effects of sales charges or the
reinvestment of dividends and capital gains.
Whenever a fund reports any type of performance, it must also report the average
annual total return according to the standardized calculation developed by the
SEC. The SEC average annual total return calculation includes the effects of all
fees and sales charges and assumes the reinvestment of all dividends and capital
gains.
31
<PAGE>
OREGON
MUNICIPALS
FUND
TRUSTEES
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon
Cornelius C. Rose, Jr.
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD
AND INVESTMENT OFFICER
Jessica M. Bibliowicz
PRESIDENT
Peter Coffey
VICE PRESIDENT AND
INVESTMENT OFFICER
Lewis E. Daidone
SENIOR VICE PRESIDENT
AND TREASURER
Christina T. Sydor
SECRETARY
[LOGO]
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF
SMITH BARNEY OREGON MUNICIPALS FUND. IT IS NOT AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS
FOR THE FUND, WHICH CONTAINS INFORMATION CONCERNING THE FUND'S INVESTMENT
POLICIES, FEES AND EXPENSES AS WELL AS OTHER PERTINENT INFORMATION.
SMITH BARNEY
MUTUAL FUNDS
388 Greenwich Street
New York, New York 10013
Fund 306, 307, 469, 487
[LOGO]
FD0955 F5
