[Smith Barney Logo]
Smith Barney
Oregon
Municipals
Fund
A N N U A L R E P O R T
April 30, 1998
[Smith Barney Logo]
Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
<PAGE>
[Photo of Heath B. McLendon]
HEATH B.
MCLENDON
Chairman
[Photo of Peter M. Coffey]
PETER M.
COFFEY
Vice President
Smith Barney
Oregon
Municipals
Fund
Dear Shareholder:
We are pleased to provide the annual report for the Smith
Barney Oregon Municipals Fund ("Fund") for the year ended April 30, 1998. In
this report, we summarize the period's prevailing economic and market conditions
and outline our portfolio strategy. A detailed summary of the Fund's performance
can be found in the appropriate sections that follow.
Performance and Investment Strategy Update
For the year ended April 30, 1998, the Fund's Class A shares returned 9.97%
before the deduction of any sales charges. In comparison, the Fund's Lipper
Analytical Services, Inc. ("Lipper") peer group average had a total return of
8.57% during the same period. (Lipper is an independent fund-tracking
organization.) Performance information for the Fund's other share classes can be
found beginning on page five.
Based on its net asset value ("NAV") of $10.76 as of April 30, 1998, and the
current monthly income distribution rate of $0.043 for Class A shares, the
Fund's annualized distribution rate is 4.80%. For an Oregon investor in a
combined federal and state tax bracket of 41.76%, the Fund's tax-exempt yield of
4.80% is equivalent to a taxable yield of 8.24%. (This figure assumes an
investors is in a federal income tax bracket of 36%.)
During the reporting period, the Fund continued to own mostly good quality,
higher-coupon bonds. In selecting investments for the Fund, we tend to place
greater emphasis on providing current income rather than total return. As of
April 30, 1998, the Fund's dollar-weighted average life was roughly 12 years and
nearly 95% of the Fund's holdings were rated investment grade. (The weighted
average life differs from the average weighted maturity in that it shows the
length of time before the first optional call date rather than the maturity life
of the bond.) In addition, approximately 36% of the Fund's portfolio was rated
AAA, the highest quality bond rating. (Investment-grade bonds are those rated in
one of the four highest ratings categories by any nationally recognized
statistical rating organization, or determined by the manager to be of
equivalent quality.)
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 1
<PAGE>
Oregon Economic Highlights
Oregon's low level of tax-supported debt and robust economic growth in recent
years has enabled the state to continue to enjoy strong credit ratings. As of
March 30, 1998, Oregon's general obligation bonds were rated in the double-A
category by all three major bond rating services, Moody's, Standard & Poor's and
Fitch IBCA. We remain positive regarding Oregon's long-term economic prospects
relative to the rest of the U.S.
Oregon has been able to accommodate a mandated shift in school funding caused by
the passage of ballot measure 50 last year. (Measure 50 is a "cut and cap"
property tax limitation approved by Oregon voters in May 1997 that preserves tax
relief for property owners.) Despite the cap on local taxes and the fact that
Oregon still must absorb the costs of the new limits imposed on school
districts, the state's sound financial management practices have enabled it to
successfully meet the challenges of maintaining current school funding and
rising prison costs.
Municipal Bond Market and Economic Overview
During the past year, domestic bond market performance was driven primarily by a
healthy economy with low inflation and the uncertainties that continue to cloud
many of the world's major stock markets. Despite robust consumer demand and
labor shortages in many areas, consumer prices remained fairly stable while
wholesale prices for many commodities, particularly oil, actually fell. The
Gross Domestic Product ("GDP"), which measures the total output of goods and
services produced, grew at an annual rate of nearly 4% in 1997 and continued at
about the same rate in the first quarter of 1998.
In late October 1997, the U.S. stock market experienced its first major shock
during its record-setting seven-year rise when the Dow Jones Industrial Average
(a price-weighted average of 30 actively traded blue chip stocks) fell more than
554 points, the largest single-day point drop in stock market history. The stock
market plunge was triggered by concerns that Asia's spreading economic and
financial crisis might eventually impact domestic markets. Despite the ease in
which U.S. and European stock markets recovered from the downturn, many
investors began to shift their attention towards "safe haven" investments such
as U.S. Treasury securities. This renewed demand helped push the yield on the
bellwether 30-year U.S. Treasury bond, which moves in the opposite direction of
its price, to a record low of 5.73% on January 5, 1998.
Just over a year ago, Federal Reserve Board Chairman Alan Greenspan warned
against what he viewed as "irrational exuberance" in financial markets. Since
that time, the economy has continued to expand, the stock market has soared to
even greater heights and in May 1997, unemployment reached its lowest level in
more than 20 years. Yet, inflation has remained subdued. Federal Reserve
policy-makers have made no changes to monetary policy since March 1997.
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
Interest rates, as represented by the 30-year U.S. Treasury bond yields, have
dropped for the most part during the reporting period. Similarly, municipal bond
yields have also declined, although not as sharply. One result of these
historically low interest rates has been a record volume of municipal bond
issuance.
In the first quarter of 1998 alone, more than $68 billion of bonds were sold, an
increase of roughly 70% from the same period last year. Many municipalities took
advantage of the low interest rates by refinancing older, higher-coupon bonds.
Moreover, the strength of the economy has filled government coffers and
increased their debt capacity while the economic expansion has accelerated
demand for more infrastructure improvements, many of which have been on hold in
an era of fiscal conservatism.
In our view, this surge in municipal bond supply has created attractive
investment opportunities. The massive issuance volume that we have witnessed
recently has helped keep municipal bond yields from falling as much as their
taxable counterparts. In addition, the oversupply has resulted in a steeper
yield curve than U.S. Treasury securities and consequently created new
investment opportunities, especially in the longer-term issues. (The yield curve
shows the difference between short- and long-term yields.)
Municipal Bond Market Outlook
We remain bullish on the prospects for the municipal bond market in the coming
months. We believe our positive outlook is supported by the following four
factors:
[bullet] The full impact of the Asian crisis on the U.S. economy has yet to be
realized. Economic strength continued into the first quarter of this
year, but we attribute much of that to temporary factors such as
unusually warm weather. As Asian companies attempt to recover, domestic
companies will face fierce competition and that will tend to hold
prices down and help to contain any emerging inflationary pressures.
[bullet] The rate of inflation remains historically low. Salomon Smith Barney
research forecasts a Consumer Price Index increase of approximately a
1.3% annual rate for 1998, well below the roughly 5.5% annual average
since 1970.
[bullet] The reduction of the federal budget, which should also reduce the need
for issuing Treasury securities.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 3
<PAGE>
[bullet] A significant possibility that the Asian economic and financial
recovery will take longer than many investment professionals currently
anticipate, therefore extending the disinflationary influence on the
U.S. economy.
In closing, we would like to thank you for your investment in the Smith Barney
Oregon Municipals Fund. We look forward to continuing to help you pursue your
financial goals.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
/s/ Peter M. Coffey
Peter M. Coffey
Vice President
June 2, 1998
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
Historical Performance -- Class A Shares
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
- ---------------------------- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
4/30/98 $ 10.27 $ 10.76 $ 0.52 $ 0.00 9.97%
- ------------------ ------- ------- ------ ------ -----
4/30/97 10.26 10.27 0.54 0.15 7.01
- ------------------ ------- ------- ------ ------ -----
4/30/96 10.09 10.26 0.54 0.06 7.70
- ------------------ ------- ------- ------ ------ -----
Inception*-4/30/95[dbldag] 9.55 10.09 0.49 0.00 11.08+
- ------------------ ------- ------- ------ ------ -----
Total $ 2.09 $ 0.21
- ------------------ ------ ------
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
- ---------------------------- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
4/30/98 $ 10.26 $ 10.75 $ 0.47 $ 0.00 9.43%
- ------------------ ------- ------- ------ ------ -----
4/30/97 10.25 10.26 0.49 0.15 6.48
- ------------------ ------- ------- ------ ------ -----
4/30/96 10.09 10.25 0.49 0.06 7.09
- ------------------ ------- ------- ------ ------ -----
Inception*-4/30/95[dbldag] 9.55 10.09 0.45 0.00 10.59+
- ------------------ ------- ------- ------ ------ -----
Total $ 1.90 $ 0.21
- ------------------ ------ ------
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
- -------------------- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
4/30/98 $ 10.27 $ 10.76 $ 0.46 $ 0.00 9.38%
- ------------------ ------- ------- ------ ------ -----
4/30/97 10.26 10.27 0.48 0.15 6.43
- ------------------ ------- ------- ------ ------ -----
Inception*-4/30/96 10.28 10.26 0.47 0.06 4.99+
- ------------------ ------- ------- ------ ------ -----
Total $ 1.41 $ 0.21
- ------------------ ------ ------
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
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Smith Barney Oregon Municipals Fund 5
<PAGE>
Average Annual Total Return
<TABLE>
<CAPTION>
Without Sales Charge(1)
--------------------------------------------
Class A Class B Class C
-------------- -------------- ----------
<S> <C> <C> <C>
Year Ended 4/30/98 9.97% 9.43% 9.38%
- ---------------------------- ---- ---- -----
Inception* through 4/30/98 9.07[dbldag] 8.52[dbldag] 7.02
- ---------------------------- ---- ---- -----
</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(2)
--------------------------------------------
Class A Class B Class C
-------------- -------------- ----------
<S> <C> <C> <C>
Year Ended 4/30/98 5.55% 4.93% 8.38%
- ---------------------------- ---- ---- -----
Inception* through 4/30/98 7.94[dbldag] 8.12[dbldag] 7.02
- ---------------------------- ---- ---- -----
</TABLE>
- --------------------------------------------------------------------------------
Cumulative Total Return
<TABLE>
<CAPTION>
Without Sales Charge(1)
--------------------------
<S> <C>
Class A (Inception* through 4/30/98) 40.78%[dbldag]
- -------------------------------------- -----
Class B (Inception* through 4/30/98) 37.99[dbldag]
- -------------------------------------- -----
Class C (Inception* through 4/30/98) 22.22
- -------------------------------------- -----
</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00% and Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from initial purchase. This CDSC declines by 0.50% the first year after
purchase and thereafter by 1.00% per year until no CDSC is incurred. Class C
shares reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
* The inception date for Class A and B shares is May 23, 1994 and May 16, 1995
for Class C shares.
[dbldag] Total return includes the effect of the cash contribution to capital
from the investment adviser which was made on October 24, 1994. Without
this cash contribution the total returns would have been:
<TABLE>
<CAPTION>
Class A Class B
--------- ----------
<S> <C> <C>
Inception*through 4/30/95 6.23% 5.55%
- --------------------------------------------------- ----- -----
Inception* through 4/30/98:
Average Annual Total Return Without Sales Charge 7.38 6.68
Average Annual Total Return With Sales Charge 5.89 5.77
- --------------------------------------------------- ----- -----
Cumulative Total Return 23.29% 20.94%
- --------------------------------------------------- ----- -----
</TABLE>
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
Historical Performance (unaudited)
Growth of $10,000 Invested in Class A and B Shares
of Smith Barney Oregon Municipals Fund vs.
the Lehman Brothers Municipal Bond Index+
- --------------------------------------------------------------------------------
May 1994 -- April 1998
[Line Chart]
SB Oregon Municipals SB Oregon Municipals Lehman Brothers
Fund Class A Shares Fund Class B Shares Municipal Bond Index
5/23/94 9598 10000 10000
10/94 9822 9762 9830
4/95 10662 10609 10574
10/95 11389 11385 11289
4/96 11483 11442 11414
10/96 12062 12109 11932
4/97 12287 12310 12172
10/97 13149 13259 12946
4/30/98 13512 13599 13305
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
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, if any, at
net asset value through April 30, 1998. In addition, there is an hypothetical
illustration of $10,000 invested in Class B shares at inception on May 23,
1994, assuming deduction of a 4.50% CDSC, which applies if shares are redeemed
within one year from initial purchase. This CDSC declines by 0.50% the first
year after purchase and thereafter by 1.00% per year until no CDSC is
incurred. The Lehman Brothers Municipal Bond Index is a broad based, total
return index comprised of investment grade, fixed rate municipal bonds
selected from issues larger than $50 million issued since January 1991. The
index is unmanaged and is not subject to the same management and trading
expenses as a mutual fund. The performance of the Fund's other class of shares
may be greater or less than Class A and B shares' performance indicated on
this chart, depending on whether greater or lesser sales charges and fees were
incurred by shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
* This figure includes the effect of the cash contribution to capital from the
investment adviser.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 7
<PAGE>
Portfolio Highlights (unaudited) April 30, 1998
Portfolio Breakdown
[Pie Chart]
Pollution Control 1.5%
Miscellaneous 7.9%
Tax Allocation 0.8%
Education 12.9%
Utilities 1.7%
General Obligation 26.2%
Industrial Development 3.4%
Short Term 1.9%
Water and Sewer 10.5%
Hospitals 3.8%
Life Care Systems 3.0%
Transportation 7.5%
Housing 18.9%
Summary of Investments by Combined Ratings
<TABLE>
<CAPTION>
Standard & Percentage of
Moody's and/or Poor's Total Investments
- ----------- -------- ------------ ------------------
<S> <C> <C> <C>
Aaa AAA 35.5%
Aa AA 19.4
A A 24.5
Baa BBB 14.0
NR NR 4.7
P-1/VMIG1 A-1 1.9
-----
100.0%
=====
</TABLE>
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
Schedule of Investments April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- -------------- -------- ------------------------------------------------------- --------------
<S> <C> <C> <C>
Education -- 12.9%
$ 1,000,000 AAA Marion County School District No. 103C, Woodburn
Deferred Interest, Series B, FGIC-Insured, zero
coupon due 11/2/12 $ 495,000
500,000 AAA Multnomah County Educational Facilities Revenue,
(University of Portland Project), Refunding Bonds,
AMBAC-Insured 5.000% due 4/1/18 487,500
1,000,000 AAA Oregon Health Sciences University Revenue, Series A,
MBIA-Insured, zero coupon due 7/1/13 467,500
1,000,000 AA Oregon State Board Higher Education, Series A, 6.000%
due 8/1/26 1,073,750
430,000 A1* Oregon State Health, Housing, Educational & Cultural
Facilities Authority, (Oak Tree Foundation Project),
Series A, 6.100% due 5/1/15 452,575
500,000 AAA Southwestern Oregon Community College District,
AMBAC-Insured, 5.600% due 6/1/16 516,250
500,000 AAA Washington County School District No. 088J, (Sherwood
Project), FSA-Insured, 6.100% due 6/1/12 541,250
- -------------- --- ------------------------------------------------------- -----------
4,033,825
-----------
General Obligation -- 26.2%
450,000 AAA Chemeketa Community College District GO, FGIC-Insured,
5.800% due 6/1/12 482,625
1,000,000 AAA Clackamas & Washington Counties School District
No. 003 JT, FGIC-Insured, 5.000% due 6/1/16 983,750
500,000 AAA Lane County Bethel GO, School District No. 052,
FGIC-Insured, 6.400% due 12/1/09 565,625
500,000 AAA Lincoln County School District GO, Series 95,
FGIC-Insured, 5.250% due 6/15/12 Oregon State 513,750
Veterans Welfare GO:
500,000 AA Series 76A, 5.900% due 10/1/17 529,375
500,000 AA Series 77, 5.200% due 10/1/18 496,250
Puerto Rico Commonwealth GO:
1,500,000 A Capital Appreciation, Public Improvement,
zero coupon due 7/1/14 661,875
1,500,000 AAA MBIA Insured, 4.875% due 7/1/23 1,423,125
1,000,000 A Public Improvement Refunding Bonds, 5.500%
due 7/1/13 1,045,000
1,000,000 Aa3* Washington, Multnomah & Yamhill Counties, School
District No. 1J, Refunding Bonds, 5.000% due 11/1/14 995,000
500,000 AAA Yamhill County School District No. 040, FGIC-Insured,
5.600% due 6/1/16 519,375
- -------------- --- ------------------------------------------------------- -----------
8,215,750
-----------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 9
<PAGE>
Schedule of Investments (continued) April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- ------------ -------- -------------------------------------------------------- --------------
<S> <C> <C> <C>
Hospitals -- 3.8%
$ 595,000 BBB+ Klamath Falls Intercommunity Hospital Authority
Revenue, (Gross-Merle West Medical Center Project),
7.100% due 9/1/24(a) $ 653,013
500,000 BBB Puerto Rico Industrial Tourist Education, Medical &
Environmental Control Facilities, (Ryder Memorial
Hospital Project), Series A, 6.700% due 5/1/24 539,375
- ------------ ---- -------------------------------------------------------- -----------
1,192,388
-----------
Housing: Multi-Family -- 10.1%
215,000 Aa2* Oregon State Housing & Community Services, Housing
& Finance Revenue Bonds, Assisted or Insured Multi-
Unit Mortgages, Series A, FHA-Insured, 6.800%
due 7/1/13 227,631
Portland Housing Authority, Multi-Family Revenue,
Series A:
500,000 Aa1* Cherry Blossom Apartments, GNMA-Collateralized,
6.100% due 12/20/26(b) 533,750
1,000,000 A1* Cherry Ridge Project, 6.250% due 5/1/12(b) 1,047,500
300,000 NR Senior Lien Revenue, (Fairview Woods Project),
6.875% due 8/1/14 310,125
1,000,000 A1* Washington County Housing Authority, Multi-Family
Revenue, (Bethany Meadows Project), 6.250% due
8/1/13(b) 1,051,250
- ------------ ---- -------------------------------------------------------- -----------
3,170,256
-----------
Housing: Single-Family -- 8.8%
Oregon State Housing & Community Services, Mortgage
Revenue Bonds, Single-Family Mortgage Program:
1,000,000 Aa2* Series B, 6.875% due 7/1/28(a) 1,067,500
485,000 Aa2* Series D, 6.500% due 7/1/24(b) 514,706
495,000 AAA Puerto Rico Housing Bank & Finance Agency, Single-
Family Mortgage Revenue, Affordable Housing
Mortgage-Portfolio I, GNMA/FNMA/FHLMC -
Collateralized, 6.250% due 4/1/29(b) 523,462
620,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
Program A, GNMA-Collateralized, 6.450% due
3/1/16(b) 656,425
- ------------ ---- -------------------------------------------------------- -----------
2,762,093
-----------
Industrial Development -- 3.4%
1,000,000 Baa2* Oregon State EDR, Georgia-Pacific Corp., Series CVLII,
6.350% due 8/1/25(b) 1,052,500
- ------------ ---- ---------------------------------------------------- -----------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
Schedule of Investments (continued) April 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- ------------ -------- -------------------------------------------------------- --------------
<S> <C> <C> <C>
Life Care Systems -- 3.0%
$ 400,000 NR Albany Hospital Facilities Authority Revenue, Mennonite
Home of Albany Inc., 5.900% due 10/1/20 $ 404,500
500,000 NR Clackamus County Hospital Facilities Authority Revenue,
(Robison Jewish Home Project), 6.250% due 10/1/28 528,125
- ------------ -------- -------------------------------------------------------- -----------
932,625
-----------
Miscellaneous -- 7.9%
600,000 A2* Oregon State Bond Bank Revenue, Economic
Development Department, Series 1, 6.700% due
1/1/15 654,000
500,000 AAA Oregon State Department of Administrative Services,
COP, Series A, AMBAC-Insured, 5.800% due 5/1/24 529,375
500,000 Baa* Puerto Rico Housing Bank & Finance Agency, Kidder,
7.500% due 12/1/06 583,750
500,000 BBB- Virgin Islands Public Finance Authority Revenue, Senior
Lien, Series A, 5.500% due 10/1/18 495,000
200,000 NR Western Generation Agency, (Wauna Cogeneration
Project), Series B, 7.250% due 1/1/09(b) 215,000
- ------------ -------- -------------------------------------------------------- -----------
2,477,125
-----------
Pollution Control -- 1.5%
450,000 A- Port Umpqua Pollution Control, (International Paper
Company Projects), Series A, 5.050% due 6/1/09 452,813
- ------------ -------- -------------------------------------------------------- -----------
Short-Term (c) -- 1.9%
600,000 VMIG1* Port St. Helens PCR, Portland General Electric Company,
5.000% due 4/1/10 600,000
- ------------ --------- ------------------------------------------------------- -----------
Tax Allocation -- 0.8%
250,000 A- Medford Urban Renewal Agency, Tax Revenue, Series A,
5.875% due 9/1/10 261,563
- ------------ -------- -------------------------------------------------------- -----------
Transportation -- 7.5%
400,000 AAA Port Portland Airport Revenue, Portland International
Airport, Series 10, FGIC-Insured, 5.750% due 7/1/25(b) 413,500
1,500,000 A Puerto Rico Commonwealth Highway & Transportation
Authority, Highway Revenue, Series Y, 5.000% due
7/1/36 1,408,125
500,000 Baa3* Puerto Rico Port Authority Revenue, Special Facilities,
American Airlines, Series A, 6.250% due 6/1/26(b) 540,000
- ------------ -------- -------------------------------------------------------- -----------
2,361,625
-----------
Utilities -- 1.7%
500,000 BBB Guam Power Authority Revenue, Series A, 6.300% due
10/1/22 527,500
- ------------ -------- -------------------------------------------------------- -----------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 11
<PAGE>
Schedule of Investments (continued) April 30, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
- ------------ -------- ------------------------------------------------------ --------------
<S> <C> <C> <C>
Water and Sewer -- 10.5%
$ 250,000 A+ Beavertown Water Revenue, Series 1994, 6.125% due
6/1/14 $ 265,312
500,000 AAA Canby Sewer Revenue Refunding Bonds, FSA-Insured,
5.250% due 12/1/17 501,875
360,000 A+ Clackamas County Service District No. 001, Sewer
Revenue, 6.375% due 10/1/14 393,750
500,000 AAA Klamath Falls Water Revenue, FSA-Insured, 5.600%
due 7/1/16 513,125
1,000,000 AAA Portland Sewer System Revenue Refunding Bonds,
Series A, FGIC-Insured, 5.000% due 6/1/15 983,750
600,000 Aa1* Port Umatilla Water Revenue, 6.650% due 8/1/22(b) 645,750
- ----------- --- ------------------------------------------------------ -----------
3,303,562
-----------
TOTAL INVESTMENTS -- 100%
(Cost--$29,875,731**) $31,343,625
-------------------------------------------------------- -----------
</TABLE>
(a) Security segregated by Custodian for open purchase committments.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
** The cost for Federal income tax purposes is $29,564,045.
See pages 13 and 14 for definition of ratings and certain security
description.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
Bond Ratings
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except those identified by an asterisk(*) are rated by Moody's Investors
Service Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
<TABLE>
<S> <C><C>
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differs from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
</TABLE>
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating
from "Aa" to "Baa," where 1 is the highest and 3 the lowest ranking within its
generic category.
<TABLE>
<S> <C><C>
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative charactristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 13
<PAGE>
Short-Term Security Ratings
<TABLE>
<S> <C><C>
SP-1 -- Standard & Poor's highest rating indicating very strong or
strong capacity to pay principal and interest; those issues
determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of
safety regarding timely payment is either overwhelming or very
strong; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature--VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
</TABLE>
- --------------------------------------------------------------------------------
Security Descriptions
<TABLE>
<S> <C><C>
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE -- College Construction Loan
LEE Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
EDR -- Economic Development Revenue
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financing Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDC -- Housing Development Corporation
</TABLE>
<TABLE>
<S> <C><C>
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate lnverse Coupon Security
PCR -- Pollution Control Revenue
PSF -- Permanent School Fund
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
TAN -- Tax Anticipation Notes
TECP -- Tax-Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
SYCC -- Structured Yield Curve Certificate
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
</TABLE>
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
Statement of Assets and Liabilities April 30, 1998
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $29,875,731) $31,343,625
Receivable for securities sold 2,763,663
Receivable for Fund shares sold 198,115
Interest receivable 482,638
Receivable from investment advisor 53,166
Deferred organization costs 6,770
- ------------------------------------------------------------- -----------
Total Assets 34,847,977
- ------------------------------------------------------------- -----------
LIABILITIES:
Payable for securities purchased 3,620,386
Management fees payable 9,790
Payable to bank 7,623
Distribution fees payable 5,446
Accrued expenses 33,052
- ------------------------------------------------------------- -----------
Total Liabilities 3,676,297
- ------------------------------------------------------------- -----------
Total Net Assets $31,171,680
- ------------------------------------------------------------- -----------
NET ASSETS:
Par value of shares of beneficial interest $ 2,899
Capital paid in excess of par value 29,519,728
Undistributed net investment income 13,447
Accumulated net realized gain from security transactions 167,712
Net unrealized appreciation of investments 1,467,894
- ------------------------------------------------------------- -----------
Total Net Assets $31,171,680
- ------------------------------------------------------------- -----------
Shares Outstanding:
Class A 1,149,605
- ------------------------------------------------------------------------------
Class B 1,552,771
- ------------------------------------------------------------------------------
Class C 196,135
- ------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 10.76
- ------------------------------------------------------------------------------
Class B * $ 10.75
- ------------------------------------------------------------------------------
Class C ** $ 10.76
- ------------------------------------------------------------------------------
Class A Maximium Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) $ 11.21
- ------------------------------------------------------------- -----------
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within one year from initial purchase (See Note 4).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 15
<PAGE>
Statement of Operations For the Year Ended April 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,576,699
- -------------------------------------------------------------------- -----------
EXPENSES:
Distribution fees (Note 4) 127,233
Investment advisory fees (Note 4) 84,332
Administration fees (Note 4) 56,221
Audit and legal 31,300
Trustees' fees 27,500
Shareholder communications 25,500
Shareholder and system servicing fees 23,394
Amortization of deferred organization costs 6,774
Registration fees 6,500
Pricing service fees 6,300
Custody 1,700
Other 5,157
- -------------------------------------------------------------------- -----------
Total Expenses 401,911
Less: Investment advisory and administration fee waivers (Note 4) (130,763)
- -------------------------------------------------------------------- -----------
Net Expenses 271,148
- -------------------------------------------------------------------- -----------
Net Investment Income 1,305,551
- -------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 13,699,221
Cost of securities sold 13,531,509
- -------------------------------------------------------------------- -----------
Net Realized Gain 167,712
- -------------------------------------------------------------------- -----------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 475,768
End of year 1,467,894
- -------------------------------------------------------------------- -----------
Increase in Net Unrealized Appreciation 992,126
- -------------------------------------------------------------------- -----------
Net Gain on Investments 1,159,838
- -------------------------------------------------------------------- -----------
Increase in Net Assets From Operations $2,465,389
- -------------------------------------------------------------------- -----------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
Statements of Changes in Net Assets For the Years Ended April 30,
<TABLE>
<CAPTION>
1998 1997
--------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,305,551 $ 1,033,869
Net realized gain+ 167,712 79,876
Increase in net unrealized appreciation 992,126 228,129
- ---------------------------------------------------------------------- ------------ -------------
Increase in Net Assets From Operations 2,465,389 1,341,874
- ---------------------------------------------------------------------- ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,284,672) (1,041,562)
Net realized gains -- (268,962)
Excess of net realized gains -- (45,630)
- ---------------------------------------------------------------------- ------------ -------------
Decrease in Net Assets From Distributions to Shareholders (1,284,672) (1,356,154)
- ---------------------------------------------------------------------- ------------ -------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 7,708,928 7,070,944
Net asset value of shares issued for reinvestment of dividends 834,873 973,006
Cost of shares reacquired (2,418,872) (2,158,560)
- ---------------------------------------------------------------------- ------------ -------------
Increase in Net Assets From Fund Share Transactions 6,124,929 5,885,390
- ---------------------------------------------------------------------- ------------ -------------
Increase in Net Assets 7,305,646 5,871,110
NET ASSETS:
Beginning of year 23,866,034 17,994,924
- ---------------------------------------------------------------------- ------------ -------------
End of year* $31,171,680 $23,866,034
- ---------------------------------------------------------------------- ------------ -------------
* Includes undistributed (overdistributed) net investment income of: $13,447 ($7,432)
- ---------------------------------------------------------------------- ------------ -------------
</TABLE>
+ Due to a prior period's cash contribution, net realized gains for Federal
income tax purposes were $186,960 and $131,967 for the years ended April 30,
1998 and 1997.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 17
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Smith Barney Oregon Municipals Fund ("Fund"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between the quoted bid and ask prices provided by an independent
pricing service; (c) securities maturing within 60 days are valued at cost plus
accreted discount or minus amortized premium, which approximates value; (d)
gains or losses on the sale of securities are calculated by using the specific
identification method; (e) interest income, adjusted for amortization of premium
and accretion of original issue discount, is recorded on an accrual basis;
market discount is recognized upon the disposition of the security; (f) direct
expenses are charged to the Fund and each class; investment advisory,
administration fees and general fund expenses are allocated on the basis of
relative net assets by class; (g) dividends and distributions to shareholders
are recorded on the ex-dividend date; (h) the Fund intends to comply with the
applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (i) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles; and (j) estimates and assumptions are
required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in the
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ.
In addition, organization costs have been deferred and are being amortized on a
straight-line method over a five-year period, beginning with the commencement of
the Fund's operations in May 1994.
2. Fund Concentration
Since the Fund invests primarily in obligations of issuers within Oregon, it is
subject to possible concentration risks associated with economic, political or
legal developments or industrial or regional matters specifically affecting
Oregon.
3. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax and from designated
state income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (continued)
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually. Additional taxable distributions may be
made if necessary to avoid a Federal excise tax.
4. Investment Advisory Agreement, Administration Agreement and
Affiliated Transactions
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual Funds
Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"),
acts as investment adviser to the Fund. The Fund pays MMC an investment advisory
fee calculated at an annual rate of 0.30% of the Fund's average daily net
assets. This fee is calculated daily and paid monthly. MMC waived a portion of
the investment advisory fees for the Fund for the year ended April 30, 1998.
MMC also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets up to $500
million and 0.18% of the average daily net assets in excess of $500 million.
This fee is calculated daily and paid monthly. MMC waived a portion of its
administration fees for the year ended April 30, 1998.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of the
Fund's shares. For the year ended April 30, 1998, SB received sales charges of
approximately $37,000 on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B shares,
which applies if redemption occurs within one year from initial purchase. This
CDSC declines by 0.50% the first year after purchase and thereafter by 1.00% per
year until no CDSC is incurred. Class C shares have a 1.00% CDSC, which applies
if redemption occurs within the first year of purchase. For the year ended April
30, 1998, CDSCs paid to SB for Class B shares were approximately $23,000.
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and C shares calculated at an annual rate of 0.15% of the average
daily net assets for each respective class. In addition, the Fund pays a
distribution fee with respect to its Class B and C shares calculated at the
annual rates of 0.50% and 0.55% of the average daily net assets for each class,
respectively. For the year ended April 30, 1998, total Distribution Plan fees
incurred were:
<TABLE>
<CAPTION>
Class A Class B Class C
--------- --------- ----------
<S> <C> <C> <C>
Distribution Plan Fees $16,841 $99,462 $10,930
- ------------------------ ------- ------- -------
</TABLE>
All officers and one Trustee of the Fund are employees of SB.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 19
<PAGE>
Notes to Financial Statements (continued)
5. Investments
During the year ended April 30, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<S> <C>
Purchases $20,526,974
- ----------- -----------
Sales 13,699,221
- ----------- -----------
</TABLE>
At April 30, 1998, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $1,816,612
Gross unrealized depreciation (37,032)
- ------------------------------- ----------
Net unrealized appreciation $1,779,580
- ------------------------------- ----------
</TABLE>
6. Shares of Beneficial Interest
At April 30, 1998, the Fund had an unlimited number of shares of beneficial
interest authorized with par value of $0.001 per share. The Fund has the ability
to issue multiple classes of shares. Each share of a class represents an
identical interest and has the same rights, except that each class bears certain
direct expenses, including those specifically related to the distribution of its
shares.
At April 30, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class C
-------------- -------------- -------------
<S> <C> <C> <C>
Total Paid-in Capital $11,640,816 $15,809,076 $2,072,735
- ----------------------- ----------- ----------- ----------
</TABLE>
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (continued)
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
April 30, 1998 April 30, 1997
------------------------------ ------------------------------
Shares Amount Shares Amount
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Class A
Shares sold 227,196 $ 2,433,102 237,837 $ 2,454,025
Shares issued on reinvestment 32,120 344,459 39,968 413,807
Shares redeemed (61,216) (654,241) (59,500) (617,925)
- ------------------------------- ------- ------------ ------- ------------
Net Increase 198,100 $ 2,123,320 218,305 $ 2,249,907
- ------------------------------- ------- ------------ ------- ------------
Class B
Shares sold 358,803 $ 3,835,768 416,538 $ 4,304,476
Shares issued on reinvestment 40,875 437,701 50,591 523,371
Shares redeemed (132,271) (1,424,718) (143,827) (1,494,579)
- ------------------------------- -------- ------------ -------- ------------
Net Increase 267,407 $ 2,848,751 323,302 $ 3,333,268
- ------------------------------- -------- ------------ -------- ------------
Class C
Shares sold 133,622 $ 1,440,058 30,102 $ 312,443
Shares issued on reinvestment 4,905 52,713 3,461 35,828
Shares redeemed (31,329) (339,913) (4,448) (46,056)
- ------------------------------- -------- ------------ -------- ------------
Net Increase 107,198 $ 1,152,858 29,115 $ 302,215
- ------------------------------- -------- ------------ -------- ------------
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 21
<PAGE>
Financial Highlights
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1998 1997 1996 1995(1)
- ------------------------------------ ----------- ----------- ----------- --------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 10.27 $ 10.26 $ 10.09 $ 9.55
- ------------------------------------ ------- ------- ------- -----------
Income From Operations:
Net investment income(2) 0.53 0.54 0.55 0.49
Net realized and unrealized gain 0.48 0.16 0.22 0.54
- ------------------------------------ ------- ------- ------- -----------
Total Income From Operations 1.01 0.70 0.77 1.03
- ------------------------------------ ------- ------- ------- -----------
Less Distributions From:
Net investment income ( 0.52) (0.54) (0.54) (0.49)
Net realized gains -- (0.13) ( 0.06) --
Excess of net realized gains -- (0.02) -- --
- ------------------------------------ ------- -------- -------- -----------
Total Distributions (0.52) (0.69) (0.60) (0.49)
- ------------------------------------ ------- -------- -------- -----------
Net Asset Value, End of Year $ 10.76 $ 10.27 $ 10.26 $ 10.09
- ------------------------------------ ------- -------- -------- -----------
Total Return(3) 9.97% 7.01% 7.70% 11.08%[dbldag]
- ------------------------------------ ------- -------- -------- -----------
Net Assets, End of Year (000s) $12,371 $ 9,769 $ 7,520 $ 6,323
- ------------------------------------ ------- -------- -------- -----------
Ratios to Average Net Assets:
Expenses(2) 0.65% 0.65% 0.66% 0.82%+
Net investment income 4.96 5.21 5.21 5.28+
- ------------------------------------ ------- -------- -------- -----------
Portfolio Turnover Rate 49% 37% 75% 30%
- ------------------------------------ ------- -------- -------- -----------
</TABLE>
(1) For the period from May 23, 1994 (inception date) to April 30, 1995.
(2) The investment adviser and administrator waived all or part of their fees
for the years ended April 30, 1998, April 30, 1997, April 30, 1996 and the
period ended April 30, 1995. In addition, the investment adviser has
reimbursed the Fund for $53,166, $85,446 and $64,336 in expenses for the
years ended April 30, 1997, April 30, 1996 and the period ended April 30,
1995, respectively. If such fees were not waived and expenses were not
reimbursed, the per share effect on the net investment income and the ratios
of expenses to average net assets would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------------------------- ---------------------------------------------
1998 1997 1996 1995 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $ 0.05 $ 0.07 $ 0.11 $ 0.12 1.12% 1.41% 1.75% 2.05%+
</TABLE>
(3) Total return for Class A shares for the period ended April 30, 1995 includes
the effect of the cash contribution from the adviser which was made on
October 24, 1994. The total amount of this contribution was $251,349.
Without this cash contribution the total return would have been 6.23%.
[dbldag] Total return is not annualized, as it may not be representative of
the total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
Financial Highlights (continued)
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class B Shares 1998 1997 1996 1995(1)
- ------------------------------------ ----------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 10.26 $ 10.25 $ 10.09 $ 9.55
- ------------------------------------ ------- ------- ------- ------
Income From Operations:
Net investment income(2) 0.48 0.48 0.49 0.44
Net realized and unrealized gain 0.48 0.17 0.22 0.55
- ------------------------------------ ------- ------- ------- ------
Total Income From Operations 0.96 0.65 0.71 0.99
- ------------------------------------ ------- ------- ------- ------
Less Distributions From:
Net investment income (0.47) (0.49) (0.49) (0.45)
Net realized gains -- (0.13) (0.06) --
Excess of net realized gains -- (0.02) -- --
- ------------------------------------ ------- ------- -------- ------
Total Distributions (0.47) (0.64) (0.55) (0.45)
- ------------------------------------ ------- ------- -------- ------
Net Asset Value, End of Year $ 10.75 $ 10.26 $ 10.25 $10.09
- ------------------------------------ ------- ------- -------- ------
Total Return(3) 9.43% 6.48% 7.09% 10.59%[dbldag]
- ------------------------------------ ------- ------- -------- ------
Net Assets, End of Year (000s) $16,691 $13,184 $ 9,861 $6,558
- ------------------------------------ ------- ------- -------- ------
Ratios to Average Net Assets:
Expenses(2) 1.17% 1.17% 1.21% 1.38%+
Net investment income 4.44 4.69 4.62 4.74+
- ------------------------------------ ------- ------- -------- ------
Portfolio Turnover Rate 49% 37% 75% 30%
- ------------------------------------ ------- ------- -------- ------
</TABLE>
(1) For the period from May 23, 1994 (inception date) to April 30, 1995.
(2) The investment adviser and administrator waived all or part of their fees
for the years ended April 30, 1998, April 30, 1997, April 30, 1996 and the
period ended April 30, 1995. In addition, the investment adviser has
reimbursed the Fund for $53,166, $85,446 and $64,336 in expenses for the
years ended April 30, 1997, April 30, 1996 and the period ended April 30,
1995, respectively. If such fees were not waived and expenses were not
reimbursed, the per share effect on the net investment income and the ratios
of expenses to average net assets would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------------------------------- ---------------------------------------------------
1998 1997 1996 1995 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class B $ 0.05 $ 0.07 $ 0.11 $ 0.11 1.63% 1.93% 2.29% 2.59%+
</TABLE>
(3) Total return for Class B shares for the period ended April 30, 1995 includes
the effect of the cash contribution from the adviser which was made on
October 24, 1994. The total amount of this contribution was $221,558.
Without this cash contribution the total return would have been 5.55%.
[dbldag] Total return is not annualized, as it may not be representative of
the total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 23
<PAGE>
Financial Highlights (continued)
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class C Shares 1998 1997 1996(1)
- ------------------------------------ ----------- ----------- ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 10.27 $ 10.26 $ 10.28
- ------------------------------------ ------- ------- -------
Income From Operations:
Net investment income(2) 0.47 0.47 0.45
Net realized and unrealized gain 0.48 0.17 0.06
- ------------------------------------ ------- ------- -------
Total Income From Operations 0.95 0.64 0.51
- ------------------------------------ ------- ------- -------
Less Distributions From:
Net investment income (0.46) (0.48) (0.47)
Net realized gains -- (0.13) (0.06)
Excess of net realized gains -- (0.02) --
- ------------------------------------ -------- -------- -------
Total Distributions (0.46) (0.63) (0.53)
- ------------------------------------ -------- -------- -------
Net Asset Value, End of Year $ 10.76 $ 10.27 $ 10.26
- ------------------------------------ -------- -------- -------
Total Return 9.38% 6.43% 4.99%[dbldag]
- ------------------------------------ -------- -------- -------
Net Assets, End of Year (000s) $ 2,110 $ 913 $ 614
- ------------------------------------ -------- -------- -------
Ratios to Average Net Assets:
Expenses(2) 1.21% 1.21% 1.25%+
Net investment income 4.39 4.66 4.80+
- ------------------------------------ -------- -------- -------
Portfolio Turnover Rate 49% 37% 75%
- ------------------------------------ -------- -------- -------
</TABLE>
(1) For the period from May 16, 1995 (inception date) to April 30, 1996.
(2) The investment adviser and administrator waived all or part of their fees
for the year ended April 30, 1998, April 30, 1997 and the period ended April
30, 1996. In addition, the investment adviser has reimbursed the Fund for
$53,166 and $85,446 in expenses for the year ended April 30, 1997 and the
period ended April 30, 1996, respectively. If such fees were not waived and
expenses were not reimbursed, the per share effect on the net investment
income and the ratios of expenses to average net assets would have been as
follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
-------------------------------- ----------------------------------
1998 1997 1996 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Class C $ 0.04 $ 0.06 $ 0.10 1.67% 1.96% 2.38%+
</TABLE>
[dbldag] Total return is not annualized, as it may not be representative of
the total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
Independent Auditors' Report
To the Shareholders and Board of Trustees
of the Smith Barney Oregon Municipals Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Smith Barney Oregon Municpals Fund as of
April 30, 1998, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
then ended and financial highlights for each of the years in the three-year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the period from May 23, 1994 (commencement
of operations) to April 30, 1995, were audited by other auditors whose report
thereon, dated June 19, 1995, expressed an unqualified opinion on those
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1998, by correspondence with the custodian. As to securities purchased or
sold but not yet received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Smith Barney Oregon Municipals Fund as of April 30, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended and financial highlights for each of
the years in the three-year period then ended, in conformity with generally
accepted accounting principles.
[Logo - KPMG Peat Marwick LLP - Signature]
New York, New York
June 12, 1998
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 25
<PAGE>
Tax Information (unaudited)
For Federal tax purposes the Fund hereby designates for the fiscal year ended
April 30, 1998:
[bullet] 100% of the dividends paid from net investment income as tax-exempt
for regular Federal income tax purposes.
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
Additional Information (unaudited)
On February 6, 1998, a special meeting of shareholders of the Fund was held for
the purpose of voting on the following matters:
1. To elect Trustees of the Fund; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Percentage Percentage
Shares Voted of Shares Shares Voted of Shares
Name of Trustees For Voted Against Voted
- ------------------------ ------------------ ------------ -------------- -----------
<S> <C> <C> <C> <C>
Herbert Barg 1,438,471.529 94.858% 77,972.076 5.142%
Alfred J. Bianchetti 1,438,471.529 94.858 77,972.076 5.142
Martin Brody 1,438,471.529 94.858 77,972.076 5.142
Dwight B. Crane 1,438,471.529 94.858 77,972.076 5.142
Burt N. Dorsett 1,438,471.529 94.858 77,972.076 5.142
Elliot S. Jaffe 1,438,471.529 94.858 77,972.076 5.142
Stephen E. Kaufman 1,438,471.529 94.858 77,972.076 5.142
Joseph J. McCann 1,438,471.529 94.858 77,972.076 5.142
Heath B. McLendon 1,438,471.529 94.858 77,972.076 5.142
Cornelius C. Rose, Jr. 1,438,471.529 94.858 77,972.076 5.142
- ------------------------ ------------- ------ ---------- -----
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since the
original adoption of these policies by the Fund. The chart below demonstrates
that all proposals were approved by shareholders.
- --------------------------------------------------------------------------------
Modification of the Fundamental Policy/Issuance of Senior Securities Approved
- --------------------------------------------------------------------------------
Modification of the Fundamental Policy/Borrowing Approved
- --------------------------------------------------------------------------------
Modification of the Fundamental Policy/Lending by the Fund Approved
- --------------------------------------------------------------------------------
Modification of the Fundamental Policy/Margin and the Short Sales
of Securities Approved
- --------------------------------------------------------------------------------
Modification of the Fundamental Policy/Real Estate Approved
- --------------------------------------------------------------------------------
The information below reports the lowest percentage of shares voting for
Proposal 2, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.
<TABLE>
<CAPTION>
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
- ------------------ ------------ -------------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C>
1,385,965.986 91.396% 23,839.364 1.572% 106,638.255 7.032%
- ------------- ------ ---------- ----- ----------- -----
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 27
<PAGE>
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<PAGE>
[Back Cover]
SMITH BARNEY
A Member of Travelers Group [Umbrella Logo]
Smith Barney
Oregon
Municipals Fund
Trustees
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliott S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr.
James J. Crisona, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser
and Administrator
Mutual Management Corp.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Transfer Agent
First Data Investors Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
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 a current Prospectus
for the Fund, which contains information concerning the Funds investment
policies and expenses as well as other pertinent information.
Smith Barney
Oregon Municipals Funds
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD0955 6/98
