[SIDEBAR TEXT]
SEMI-ANNUAL REPORT
[END SIDEBAR TEXT]
Smith Barney
Oregon
Municipals
Fund
October 31, 1997
[SMITH BARNEY LOGO]
Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
Smith Barney Oregon Municipals Fund
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Oregon
Municipals Fund ("Fund") for the period ended October 31, 1997. 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.
Fund's Performance and Investment Strategy
For the six months ended October 31, 1997, the Class A shares of the Fund
generated a total return of 6.99%. In comparison, the Fund's Lipper Analytical
Services, Inc. ("Lipper") peer group average posted a total return of 5.90% for
the same period. (Lipper is an independent fund-tracking organization.)
Performance information for the Fund's other share classes can be found on page
four.
Based on its net asset value ("NAV") of $10.72 as of October 31, 1997 and the
current monthly distribution rate of $0.043 for Class A shares, the Fund's
annualized distribution rate is 4.81%. For an Oregon investor in a combined
federal and state tax bracket of 41.76%, the Fund's tax-exempt yield of 4.81% is
equivalent to a taxable yield of 8.26%.
During the period covered by this report, the Fund has maintained its emphasis
toward good quality, higher-coupon bonds. In selecting investments for the Fund,
we tend to focus on providing current income more than total return. As of
October 31, 1997, the Fund's average weighted maturity was roughly 22.6 years
and nearly 94.4% of the Fund's holdings were rated investment grade.
(Investment-grade bonds are those rated Aaa, Aa, A and Baa by Moody's Investors
Service, Inc. or AAA, AA, A and BBB by Standard & Poor's Ratings Service, or
have an equivalent rating by any nationally recognized statistical rating
organization, or determined by the Manager to be equivalent.) In addition,
approximately 40.5% of the Fund's portfolio was rated Aaa/AAA, the
highest-quality bond rating.
In addition, we continue to remain broadly diversified across a number of
sectors. As of October 31, 1997, the Fund's largest holdings were concentrated
in housing bonds (21.4%), education bonds (18.0%), water and sewer bonds
(11.9%), and general obligation bonds (11.1%).
1
<PAGE>
Market and Economic Overview
In recent weeks, the municipal bond market has rebounded from the downturn it
experienced in August 1997. In our opinion, this market downturn was caused in
large part by investor concerns that strength in the U.S. economy would
ultimately lead to higher interest rates and greater inflationary pressures.
Despite these concerns, the U.S. economy has continued to grow strongly with low
unemployment and an absence of higher inflationary pressures.
In our view, global competition and improved productivity have enabled the
economy to expand without the upward price pressures traditionally associated
with extended periods of economic growth. Many U.S. corporations continue to
face fierce competition from foreign companies. As a result, many U.S.
corporations have been unable to raise prices significantly. Moreover, the
widespread use of technology has enabled many companies to operate more
efficiently while using fewer workers. This in turn has enabled many companies
to continue operating profitably even though increasingly tight labor markets
have begun to exert upward pressure on wages.
In light of these developments, the Federal Reserve Board ("Fed") has refrained
from further tightening monetary policy after raising the fed-funds rate
slightly to 5.5% in March 1997. (The fed-funds rate is the interest rate banks
charge each other for overnight loans and is a closely watched indicator of the
direction of interest rates.) Since that time, interest rates have generally
declined. For example, the yield on the bellwether 30-year U.S. Treasury bond
has fallen from a high of approximately 7.20% in April to roughly 6.15% as of
October 31, 1997. Many economists, including some Fed officials, have begun to
acknowledge that the U.S. economy may be able to support both strong growth and
low unemployment without a substantial increase in inflation. However, this does
not mean that the Fed has become complacent on the inflation front. In testimony
delivered to the House Budget Committee on October 8, 1997, Fed Chairman Alan
Greenspan again warned that strong economic growth and the extremely tight labor
market could lead to a resurgence in inflation. However, in our view, concerns
about potential effects of devaluation and sharp economic downturns in Asia will
keep the Fed from tightening monetary policy in the near future.
In addition, although nominal interest rates have declined, real
inflation-adjusted interest rates are quite high on a historical basis and
current real yields on municipal bonds (after subtracting the effects of
inflation) are very high by historical standards. In view of the current
favorable economic conditions and our expectations that inflation should remain
subdued, we believe that municipal bonds should continue to provide investors
with attractive real, after-tax rates of return in the months ahead.
2
<PAGE>
Oregon Economic Highlights
Oregon continues to enjoy strong credit ratings thanks to its healthy economy
and prudent fiscal policies. As of October 31, 1997, Oregon's general debt
obligations were rated AA by all three major credit reporting and bond rating
agencies. Economic growth in the State has been vibrant and has helped it to
accomodate a voter-mandated shift in education funding. In our view, tax-relief
initiatives enacted over the past year should not trigger a downgrade of local
credit ratings but could pose a challenge in meeting future school funding needs
and prison costs.
Market Update and Outlook
Some investors have expressed concerns that certain provisions of the recently
enacted Federal Taxpayer Relief Act of 1997 (which was passed as part of the
Balanced Budget Agreement) could erode many of the tax advantages that municipal
bonds now offer. However, we believe that the impact of this legislation will be
largely positive for the municipal bond market. The reduction of the long-term
capital gains tax rate and the introduction of the Roth IRA ostensibly make the
attractiveness of stocks and other investments more compelling than municipals.
Nevertheless, there are new elements in the tax code that may strengthen the
focus on after-tax returns-an area where municipals, which provide a steady
source of tax-exempt income, continue to enjoy a distinct advantage. In
addition, the repeal of the alternative minimum tax for small business
corporations provides favorable tax treatment for many corporate municipal bond
investors. Lastly, the new tax act expands the issuance of education and housing
bonds, two key segments of the municipal bond market.
We believe that the prospects for municipal bonds remain bright over the near
term. The recent turmoil in stock markets worldwide has renewed attention toward
the bond market, which can still provide attractive returns with much greater
stability than stocks. Although interest rates have declined overall, municipal
bond yields have not declined nearly as much as U.S. Treasury bond yields,
further enhancing their relative appeal.
In closing, we would like to thank you for your investment in the Smith Barney
Oregon Municipals Fund. We look forward to helping you pursue your financial
goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
- --------------------- -------------------
Heath B. McLendon Peter M. Coffey
Chairman Vice President and
Investment Officer
November 21, 1997
3
<PAGE>
Historical Performance - Class A Shares
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
======================= =========== =========== =========== =============== ==========
<S> <C> <C> <C> <C> <C>
10/31/97 $10.27 $10.72 $0.26 $0.00 6.99%+
- ------------------ ------ ------ ----- ----- -----
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++ 9.55 10.09 0.49 0.00 11.08+
================== ====== ====== ===== ===== =======
Total $1.83 $0.21
================== ===== =====
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance - Class B Shares
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
======================= =========== =========== =========== =============== ==========
<S> <C> <C> <C> <C> <C>
10/31/97 $10.26 $10.71 $0.24 $0.00 6.73%+
- ------------------ ------ ------ ----- ----- -----
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++ 9.55 10.09 0.45 0.00 10.59+
================== ====== ====== ===== ===== =======
Total $1.67 $0.21
================== ===== =====
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance - Class C Shares
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==================== =========== =========== =========== =============== ==========
<S> <C> <C> <C> <C> <C>
10/31/97 $10.27 $10.72 $0.23 $0.00 6.70%+
- ------------------ ------ ------ ----- ----- ----
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 $1.18 $0.21
================== ===== =====
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
4
<PAGE>
Average Annual Total Return
Without Sales Charge(1)
--------------------------------
Class A Class B Class C
=============================================================================
Six Months Ended 10/31/97+ 6.99% 6.73% 6.70%
- -----------------------------------------------------------------------------
Year Ended 10/31/97 8.99 8.46 8.40
- -----------------------------------------------------------------------------
Inception* through 10/31/97 9.57++ 9.01++ 7.40
=============================================================================
With Sales Charge(2)
--------------------------------
Class A Class B Class C
=============================================================================
Six Months Ended 10/31/97+ 2.69% 2.23% 5.70%
- -----------------------------------------------------------------------------
Year Ended 10/31/97 4.61 3.96 7.40
- -----------------------------------------------------------------------------
Inception* through 10/31/97 8.27++ 8.54++ 7.40
=============================================================================
- -----------------------------------------------------------------------------
Cumulative Total Return
Without Sales Charge(1)
===============================================================================
Class A (Inception* through 10/31/97) 36.97%++
- -------------------------------------------------------------------------------
Class B (Inception* through 10/31/97) 34.59++
- -------------------------------------------------------------------------------
Class C (Inception* through 10/31/97) 19.22
===============================================================================
(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.
++ 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:
Class A Class B
================================================================================
Inception*through 4/30/95 6.23% 5.55%
- --------------------------------------------------------------------------------
Inception* through 10/31/97:
Average Annual Total Return Without Sales Charge 8.26% 7.57%
Average Annual Total Return With Sales Charge 6.96 7.12
- --------------------------------------------------------------------------------
Cumulative Total Return 31.91% 29.08%
- --------------------------------------------------------------------------------
5
<PAGE>
Historical Performance (unaudited)
[PERFORMANCE CHART]
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 - October 1997
SB Oregon Municipals SB Oregon Municipals Lehman Brothers
Fund Class A Fund Class B Municipal
Shares Shares 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
10/31/97 13149 13459 12946
+ 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 October 31, 1997. 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.
6
<PAGE>
Portfolio Highlights (unaudited) October 31, 1997
Portfolio Breakdown
[PIE CHART PLOT POINTS]
Housing Education Water and Sewer General Obligation Other
21.4% 18.0% 11.9% 11.1% 10.8%
Transportation Life Care Systems Hospitals Industrial Development
8.5% 5.1% 4.3% 3.8%
Government Facility Pre-Refunded
3.1% 2.0%
Summary of Investments by Combined Ratings
Standard & Percentage of
Moody's and/or Poor's Total Investments
- ---------------------------------------------------------------------
Aaa AAA 40.5%
Aa AA 15.6
A A 24.3
Baa BBB 14.0
NR NR 5.6
---
100.0%
=====
7
<PAGE>
Schedule of Investments (unaudited) October 31, 1997
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
===============================================================================================================
<S> <C> <C> <C>
Education - 18.0%
$ 1,000,000 AAA Marion County School District No. 103C, Woodburn
Deferred Interest, Series B, FGIC-Insured,
zero coupon due 11/1/12 $ 471,250
Oregon Health Sciences University Revenue, Series A,
MBIA-Insured:
1,000,000 AAA Zero coupon due 7/1/13 446,250
1,000,000 AAA 5.250% due 7/1/28 997,500
1,000,000 AA Oregon State Board Higher Education, Series A,
6.000% due 8/1/26 1,068,750
430,000 A1* Oregon State Health, Housing, Educational & Cultural
Facilities Authority, (Oak Tree Foundation Project),
Series A, 6.100% due 5/1/15 448,275
500,000 AAA Southwestern Oregon Community College District,
AMBAC-Insured, 5.600% due 6/1/16 513,125
500,000 AAA Washington County School District No. 088J, (Sherwood
Project), FSA-Insured, 6.100% due 6/1/12 543,125
500,000 AAA Yamhill County School District No. 040, FGIC-Insured,
5.600% due 6/1/16 518,125
- --------------------------------------------------------------------------------------------------------------
5,006,400
----------
Escrowed to Maturity(a) - 0.5%
135,000 AAA Virgin Islands Territory GO, 8.000% due 3/1/98 136,870
- --------------------------------------------------------------------------------------------------------------
General Obligation - 11.1%
450,000 AAA Chemeketa Community College District GO, FGIC-Insured,
5.800% due 6/1/12 480,938
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, FGIC-Insured,
5.250% due 6/15/12 513,750
500,000 AA Oregon State Veterans Welfare GO, Series 76A,
5.900% due 10/1/17 526,250
1,000,000 A Puerto Rico Commonwealth GO, 5.375% due 7/1/25 988,750
- --------------------------------------------------------------------------------------------------------------
3,075,313
----------
Government Facility - 3.1%
900,000 AAA Puerto Rico Public Buildings Authority Revenue,
Guaranteed Government Facilities, Series B,
AMBAC-Insured, 5.000% due 7/1/27 865,125
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Schedule of Investments (unaudited) (continued) October 31, 1997
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================================
<S> <C> <C> <C>
Hospitals - 4.3%
$ 595,000 BBB+ Klamath Falls Intercommunity Hospital Authority
Revenue, (Gross-Merle West Medical Center Project),
7.100% due 9/1/24(b) $ 650,781
500,000 BBB Puerto Rico Industrial Tourist Education, Medical &
Environmental Control Facilities, (Ryder Memorial
Hospital Project), Series A, 6.700% due 5/1/24 537,500
- -------------------------------------------------------------------------------------------------------------------
1,188,281
----------
Housing: Multi-Family - 11.4%
215,000 A+ Oregon State Housing & Community Services, Housing
& Finance Revenue Bonds, Assisted or Insured
Multi-Unit Mortgages, Series A, FHA-Insured,
6.800% due 7/1/13 227,900
Portland Housing Authority, Multi-Family Revenue, Series A:
500,000 Aaa* Cherry Blossom Apartments, GNMA-Collateralized,
6.100% due 12/20/26(c) 528,750
1,000,000 A1* Cherry Ridge Project, 6.250% due 5/1/12(c) 1,043,750
300,000 NR Senior Lien Revenue, (Fairview Woods Project),
6.875% due 8/1/14 307,500
1,000,000 A1* Washington County Housing Authority, Multi-Family
Revenue, (Bethany Meadows Project),
6.250% due 8/1/13(c) 1,045,000
- -------------------------------------------------------------------------------------------------------------------
3,152,900
----------
Housing: Single-Family - 10.0%
Oregon State Housing & Community Services, Mortgage
Revenue Bonds, Single-Family Mortgage Program:
1,000,000 Aa2* Series B, 6.875% due 7/1/28(b) 1,068,750
490,000 Aa* Series D, 6.500% due 7/1/24(c) 520,625
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(c) 520,988
620,000 AAA Virgin Islands HFA, Single-Family Revenue, Program A,
GNMA-Collateralized, 6.450% due 3/1/16(c) 652,550
- -------------------------------------------------------------------------------------------------------------------
2,762,913
----------
Industrial Development - 3.8%
1,000,000 Baa2* Oregon State EDR, Georgia-Pacific Corp., Series CVLII,
6.350% due 8/1/25(c) 1,046,250
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Schedule of Investments (unaudited) (continued) October 31, 1997
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=====================================================================================================
<S> <C> <C> <C>
Life Care Systems - 5.1%
$ 400,000 NR Albany Hospital Facility Authority Revenue,
Mennonite Home of Albany Inc., 5.900%
due 10/1/20 $ 396,500
500,000 NR Clackamus County Hospital Facilities
Authority Revenue, (Robison Jewish Home
Project), 6.250% due 10/1/28 523,750
500,000 AA Oregon State Elderly & Disabled Housing
GO, Series A, 5.375% due 8/1/28(c) 490,000
- ------------------------------------------------------------------------------------------------------
1,410,250
----------
Miscellaneous - 7.5%
600,000 A2* Oregon State Bond Bank Revenue, Economic
Development Department, Series 1,
6.700% due 1/1/15 656,250
500,000 AAA Oregon State Department of Administrative
Services, COP, Series A, AMBAC-Insured,
5.800% due 5/1/24 523,750
500,000 Baa* Puerto Rico Housing Bank & Finance
Agency, Kidder, 7.500% due 12/1/06 585,625
300,000 NR Western Generation Agency, (Wauna
Cogeneration Project), Series B, 7.250%
due 1/1/09(b)(c) 321,000
- ------------------------------------------------------------------------------------------------------
2,086,625
- ------------------------------------------------------------------------------------------------------
Pre-Refunded(d) - 2.0%
500,000 AAA Portland Sewer System Revenue Bonds, Series A,
(Call 6/1/04 @ 101), 6.250% due 6/1/15 554,375
- ------------------------------------------------------------------------------------------------------
Tax
Allocation - 0.9%
250,000 A- Medford Urban Renewal Agency, Tax
Revenue, Series A, 5.875% due 9/1/10 259,062
- ------------------------------------------------------------------------------------------------------
Transportation - 8.5%
400,000 AAA Port Portland Airport Revenue, Portland
International Airport, Series 10,
FGIC-Insured, 5.750% due 7/1/25(c) 409,500
1,500,000 A Puerto Rico Commonwealth Highway & Transportation
Authority, Highway Revenue, Series Y, 5.000% due 7/1/36 1,413,750
500,000 BBB- Puerto Rico Port Authority Revenue, Special
Facilities, American Airlines, Series A,
6.250% due 6/1/26(c) 536,875
- ------------------------------------------------------------------------------------------------------
2,360,125
- ------------------------------------------------------------------------------------------------------
Utilities -
1.9%
500,000 BBB Guam Power Authority Revenue, Series A,
6.300% due 10/1/22 523,125
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Schedule of Investments (unaudited) (continued) October 31, 1997
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
=================================================================================================================
<S> <C> <C> <C>
Water and Sewer - 11.9%
$ 250,000 A+ Beavertown Water Revenue, Series 1994,
6.125% due 6/1/14 $ 263,750
500,000 AAA Canby Sewer Revenue Refunding, FSA-Insured,
5.250% due 12/1/17 503,125
360,000 A+ Clackamas County Service District No. 001, Sewer
Revenue, 6.375% due 10/1/14 391,050
500,000 AAA Klamath Falls Water Revenue, FSA-Insured,
5.600% due 7/1/16 510,000
600,000 Aa1* Port Umatilla Water Revenue, 6.650% due 8/1/22(c) 643,500
1,000,000 AAA Portland Sewer System Revenue Bonds, Series A,
FGIC-Insured, 5.000% due 6/1/15 986,250
- ------------------------------------------------------------------------------------------------------------------
3,297,675
-----------
TOTAL INVESTMENTS - 100%
(Cost - $26,169,182**) $27,725,289
=================== ===========
</TABLE>
(a) Bond is escrowed to maturity with U.S. government securities and is
considered by Manager to be triple-A rated even if issuer has not applied
for new ratings.
(b) Security segregated by Custodian for open purchase committments.
(c) Income from this issue is considered a preference item for
purposes of calculating the alternative minimum tax.
(d) Pre-refunded bond is escrowed with U.S. government securities and is
considered by the Manager to be triple-A rated even if the issuer has not
applied for new ratings.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 12 and 13 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
11
<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.
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.
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.
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 characteristics
as well.
NR - Indicates that the bond is not rated by Standard & Poor's or Moody's.
12
<PAGE>
Short-Term Security Ratings
SP-1 - Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 - Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of
safety regarding timely payment is either overwhelming or very
strong; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 - Moody's highest rating for issues having a demand feature-VRDO.
P-1 - Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
- --------------------------------------------------------------------------------
Security Descriptions
<TABLE>
<S> <C>
ABAG - Association of Bay Area <C> <C>
Governments HFA - Housing Finance Authority
AIG - American International Guaranty IDA - Industrial Development
AMBAC - AMBAC Indemnity Corporation Authority
BAN - Bond Anticipation Notes IDB - Industrial Development Board
BIG - Bond Investors Guaranty IDR - Industrial Development
CGIC - Capital Guaranty Insurance Revenue
Company INFLOS - Inverse Floaters
CHFCLI - California Health Facility ISD - Independent School District
Construction Loan Insurance LOC - Letter of Credit
CONNIE LEE - College Construction Loan MBIA - Municipal Bond Investors
Insurance Association Assurance Corporation
COP - Certificate of Participation MVRICS - Municipal Variable Rate lnverse
EDA - Economic Development Authority Coupon Security
EDR - Economic Development Revenue PCR - Pollution Control Revenue
ETM - Escrowed To Maturity PSF - Permanent School Fund
FGIC - Financial Guaranty Insurance RAN - Revenue Anticipation Notes
Company RIBS - Residual Interest Bonds
FHA - Federal Housing Administration RITES - Residual Interest Tax-Exempt
FHLMC - Federal Home Loan Mortgage Securities
Corporation TAN - Tax Anticipation Notes
FLAIRS - Floating Adjustable Interest TECP - Tax-Exempt Commercial Paper
Rate Securities TOB - Tender Option Bonds
FNMA - Federal National Mortgage TRAN - Tax and Revenue Anticipation
Association Notes
FRTC - Floating Rate Trust Certificates SYCC - Structured Yield Curve
FSA - Financing Security Assurance Certificate
GIC - Guaranteed Investment Contract VA - Veterans Administration
GNMA - Government National Mortgage VRDD - Variable Rate Daily
Association Demand
GO - General Obligation VRWE - Variable Rate Wednesday
HDC - Housing Development Demand
Corporation
</TABLE>
13
<PAGE>
Statement of Assets and Liabilities (unaudited) October 31, 1997
ASSETS:
Investments, at value (Cost-$26,169,182) $27,725,289
Interest receivable 476,308
Receivable for Fund shares sold 84,000
Receivable from investment advisor 34,392
Deferred organization costs 9,469
- ----------------------------------------------------------- -----------
Total Assets 28,329,458
- ----------------------------------------------------------- -----------
LIABILITIES:
Payable to bank 119,466
Dividend payable 105,492
Distribution fees payable 2,997
Accrued expenses 32,021
- ----------------------------------------------------------- -----------
Total Liabilities 259,976
- ----------------------------------------------------------- -----------
Total Net Assets $28,069,482
=========================================================== ===========
NET ASSETS:
Par value of shares of beneficial interest $ 2,621
Capital paid in excess of par value 26,507,623
Overdistributed net investment income (14,944)
Accumulated net realized gain on security transactions 18,075
Net unrealized appreciation of investments 1,556,107
- ----------------------------------------------------------- -----------
Total Net Assets $28,069,482
=========================================================== ===========
Shares Outstanding:
Class A 1,050,228
- ----------------------------------------------------------- -----------
Class B 1,434,084
- ----------------------------------------------------------- -----------
Class C 136,352
- ----------------------------------------------------------- -----------
Net Asset Value:
Class A (and redemption price) $10.72
- ----------------------------------------------------------- ------
Class B* $10.71
- ----------------------------------------------------------- ------
Class C** $10.72
- ----------------------------------------------------------- ------
Class A Maximum Public Offering Price Per Share
(net asset value plus 4.17% of net asset value per share) $11.17
=========================================================== ======
* 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.
14
<PAGE>
Statement of Operations (unaudited)
For the Six Months Ended October 31, 1997
INVESTMENT INCOME:
Interest $ 756,826
- -------------------------------------------------------------------- ----------
EXPENSES:
Distribution fees (Note 4) 59,752
Investment advisory fees (Note 4) 39,450
Administration fees (Note 4) 26,300
Trustees' fees 18,000
Shareholder communications 15,000
Audit and legal 13,625
Shareholder and system servicing fees 11,330
Amortization of deferred organization costs 4,074
Pricing service fees 3,000
Registration fees 2,950
Custody 780
Other 2,375
- -------------------------------------------------------------------- ----------
Total Expenses 196,636
Less: Investment advisory and administration fee waivers (Note 4) (46,976)
- -------------------------------------------------------------------- ----------
Net Expenses 149,660
- -------------------------------------------------------------------- ----------
Net Investment Income 607,166
- -------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 2,047,518
Cost of securities sold 2,029,443
- -------------------------------------------------------------------- ----------
Net Realized Gain 18,075
- -------------------------------------------------------------------- ----------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 475,768
End of period 1,556,107
- -------------------------------------------------------------------- ----------
Increase in Net Unrealized Appreciation 1,080,339
- -------------------------------------------------------------------- ----------
Net Gain on Investments 1,098,414
- -------------------------------------------------------------------- ----------
Increase in Net Assets From Operations $1,705,580
==================================================================== ==========
See Notes to Financial Statements.
15
<PAGE>
Statements of Changes in Net Assets
For the Six Months Ended October 31, 1997 (unaudited)
and the Year Ended April 30, 1997
<TABLE>
<CAPTION>
October 31 April 30
============= =============
<S> <C> <C>
OPERATIONS:
Net investment income $ 607,166 $ 1,033,869
Net realized gain+ 18,075 79,876
Increase in net unrealized appreciation 1,080,339 228,129
- ------------------------------------------------------ ------------ ------------
Increase in Net Assets From Operations 1,705,580 1,341,874
- ------------------------------------------------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (614,678) (1,041,562)
Net realized gains - (268,962)
Excess of net realized gains - (45,630)
- ------------------------------------------------------ ------------ ------------
Decrease in Net Assets From
Distributions to Shareholders (614,678) (1,356,154)
- ------------------------------------------------------ ------------ ------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 3,858,488 7,070,944
Net asset value of shares issued for
reinvestment of dividends 339,660 973,006
Cost of shares reacquired (1,085,602) (2,158,560)
- ------------------------------------------------------ ------------ ------------
Increase in Net Assets From
Fund Share Transactions 3,112,546 5,885,390
- ------------------------------------------------------ ------------ ------------
Increase in Net Assets 4,203,448 5,871,110
NET ASSETS:
Beginning of period 23,866,034 17,994,924
- ------------------------------------------------------ ------------ ------------
End of period* $ 28,069,482 $ 23,866,034
====================================================== ============ ============
* Includes overdistributed net investment income of: $ (14,944) $ (7,432)
====================================================== ============ ============
</TABLE>
+ Due to a prior period's cash contribution, net realized gains for Federal
income tax purposes were $131,967 for the year ended April 30, 1997.
See Notes to Financial Statements.
16
<PAGE>
Notes to Financial Statements (unaudited)
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. At April 30, 1997, reclassifications
were made to the Fund's capital accounts to reflect permanent book/tax
differences and income and gains available for distributions under income tax
regulations. Accordingly, a portion of accumulated net realized losses amounting
to $234,740 and a portion of overdistributed net investment income amounting to
$6,955 were reclassified to paid-in capital. Net investment income, net realized
gains and net assets were not affected by these changes; 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.
17
<PAGE>
Notes to Financial Statements (unaudited) (continued)
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.
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
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment adviser to the Fund. The Fund
pays SBMFM 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. SBMFM waived a portion of the investment advisory fees for the Fund for
the six months ended October 31, 1997.
SBMFM 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. SBMFM waived a portion of its
administration fees for the six months ended October 31, 1997.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
the Fund's shares. For the six months ended October 31, 1997, SB received sales
charges of approximately $19,000 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 six months ended October 31, 1997, CDSCs paid to SB for Class
B shares were approximately $4,000.
18
<PAGE>
Notes to Financial Statements (unaudited) (continued)
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 six months ended October 31, 1997, total Distribution Plan
fees incurred were:
Class A Class B Class C
================================================================================
Distribution Plan Fees $7,999 $47,341 $4,412
================================================================================
All officers and one Trustee of the Fund are employees of SB.
5. INVESTMENTS
During the six months ended October 31, 1997, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
================================================================================
Purchases $5,941,726
- --------------------------------------------------------------------------------
Sales 2,047,518
================================================================================
At October 31, 1997, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $1,556,845
Gross unrealized depreciation (738)
- --------------------------------------------------------------------------------
Net unrealized appreciation $1,556,107
================================================================================
6. SHARES OF BENEFICIAL INTEREST
At October 31, 1997, 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.
19
<PAGE>
Notes to Financial Statements (unaudited) (continued)
At October 31, 1997, total paid-in capital amounted to the following for
each class:
Class A Class B Class C
================================================================================
Total Paid-in Capital $10,562,625 $14,527,282 $1,420,337
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
October 31, 1997 April 30, 1997
----------------------------- -----------------------------
Shares Amount Shares Amount
============ ============== ============ ==============
<S> <C> <C> <C> <C>
Class A
Shares sold 127,094 $1,345,830 237,837 $ 2,454,025
Shares issued on reinvestment 13,174 139,279 39,968 413,807
Shares redeemed (41,545) (439,980) (59,500) (617,925)
- ------------------------------- ------- ---------- ------- -----------
Net Increase 98,723 $1,045,129 218,305 $ 2,249,907
=============================== ======= ========== ======= ===========
Class B
Shares sold 185,190 $1,955,217 416,538 $ 4,304,476
Shares issued on reinvestment 17,271 182,379 50,591 523,371
Shares redeemed (53,741) (570,639) (143,827) (1,494,579)
- ------------------------------- ------- ---------- -------- -----------
Net Increase 148,720 $1,566,957 323,302 $ 3,333,268
=============================== ======= ========== ======== ===========
Class C
Shares sold 52,733 $ 557,441 30,102 $ 312,443
Shares issued on reinvestment 1,702 18,002 3,461 35,828
Shares redeemed (7,020) (74,983) (4,448) (46,056)
- ------------------------------- ------- ---------- -------- -----------
Net Increase 47,415 $ 500,460 29,115 $ 302,215
=============================== ======= ========== ======== ===========
</TABLE>
20
<PAGE>
Financial Highlights
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1997(1) 1997 1996 1995(2)
====================================== ================= =========== =========== =================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.27 $ 10.26 $ 10.09 $ 9.55
- ------------------------------------- --------- -------- -------- ---------
Income From Operations:
Net investment income(3) 0.26 0.54 0.55 0.49
Net realized and unrealized gain 0.45 0.16 0.22 0.54
- ------------------------------------- --------- -------- -------- ---------
Total Income From Operations 0.71 0.70 0.77 1.03
- ------------------------------------- --------- -------- -------- ---------
Less Distributions From:
Net investment income ( 0.26) ( 0.54) ( 0.54) ( 0.49)
Net realized gains - ( 0.13) ( 0.06) -
Excess of net realized gains - ( 0.02) - -
- ------------------------------------- --------- -------- -------- ---------
Total Distributions ( 0.26) ( 0.69) ( 0.60) ( 0.49)
- ------------------------------------- --------- -------- -------- ---------
Net Asset Value, End of Period $ 10.72 $ 10.27 $ 10.26 $ 10.09
- ------------------------------------- --------- -------- -------- ---------
Total Return(4) 6.99%++ 7.01% 7.70% 11.08%++
- ------------------------------------- --------- -------- -------- ---------
Net Assets, End of Period (000s) $ 11,255 $ 9,769 $ 7,520 $ 6,323
- ------------------------------------- --------- -------- -------- ---------
Ratios to Average Net Assets:
Expenses(3) 0.82%+ 0.65% 0.66% 0.82%+
Net investment income 4.89+ 5.21 5.21 5.28+
- ------------------------------------- --------- -------- -------- ---------
Portfolio Turnover Rate 8% 37% 75% 30%
===================================== ========= ======== ======== =========
</TABLE>
(1) For the six months ended October 31, 1997 (unaudited).
(2) For the period from May 23, 1994 (inception date) to April 30, 1995.
(3) The investment adviser and administrator waived all or part of their fees
for the six months ended October 31, 1997, the years ended 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:
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------------------------------------------------
1997(1) 1997 1996 1995 1997(1) 1997 1996 1995
--------- ------- ------- ------ --------- ------- ------- ------
Class A $0.02 $0.07 $0.11 $0.12 1.17%+ 1.41% 1.75% 2.05%+
(4) 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 returns would have been 6.23%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
21
<PAGE>
Financial Highlights (continued)
Fora share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class B Shares 1997(1) 1997 1996 1995(2)
====================================== =============== =========== =========== =============
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.26 $ 10.25 $ 10.09 $ 9.55
- ------------------------------------- ------- ------- ------- ---------
Income From Operations:
Net investment income(3) 0.23 0.48 0.49 0.44
Net realized and unrealized gain 0.46 0.17 0.22 0.55
- ------------------------------------- ------- ------- -------- ---------
Total Income From Operations 0.69 0.65 0.71 0.99
- ------------------------------------- ------- ------- -------- ---------
Less Distributions From:
Net investment income (0.24) (0.49) (0.49) (0.45)
Net realized gains - (0.13) (0.06) -
Excess of net realized gains - (0.02) - -
- ------------------------------------- ------- ------- -------- ---------
Total Distributions (0.24) (0.64) (0.55) (0.45)
- ------------------------------------- ------- -------- ------- ---------
Net Asset Value, End of Period $ 10.71 $ 10.26 $ 10.25 $ 10.09
- ------------------------------------- ------- -------- -------- ---------
Total Return(4) 6.73%++ 6.48% 7.09% 10.59%++
- ------------------------------------- ------- -------- -------- ---------
Net Assets, End of Period (000s) $15,353 $ 13,184 $ 9,861 $ 6,558
- ------------------------------------- ------- -------- -------- ---------
Ratios to Average Net Assets:
Expenses(3) 1.33%+ 1.17% 1.21% 1.38%+
Net investment income 4.38+ 4.691 4.62 4 .74+
- ------------------------------------- ------- -------- -------- ---------
Portfolio Turnover Rate 8% 37% 75% 30%
===================================== ======= ======== ======== =========
</TABLE>
(1) For the six months ended October 31, 1997 (unaudited).
(2) For the period from May 23, 1994 (inception date) to April 30, 1995.
(3) The investment adviser and administrator waived all or part of their fees
for the six months ended October 31, 1997, the years ended 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
--------------------------------------- ----------------------------------------
1997(1) 1997 1996 1995 1997(1) 1997 1996 1995
--------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class B $0.02 $0.07 $0.11 $0.11 1.69%+ 1.93% 2.29% 2.59%+
</TABLE>
(4) 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 returns would have been 5.55%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
22
<PAGE>
Financial Highlights (continued)
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class C Shares 1997(1) 1997 1996(2)
====================================== ========== =========== ============
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.27 $10.26 $10.28
- ------------------------------------- ------ ------ ------
Income From Operations:
Net investment income(3) 0.22 0.47 0.45
Net realized and unrealized gain 0.46 0.17 0.06
- ------------------------------------- ------ ------ ------
Total Income From Operations 0.68 0.64 0.51
- ------------------------------------- ------ ------ ------
Less Distributions From:
Net investment income (0.23) (0.48) (0.47)
Net realized gains - (0.13) (0.06)
Excess of net realized gains - (0.02) -
- ------------------------------------- ------ ------ ------
Total Distributions (0.23) (0.63) (0.53)
- ------------------------------------- ------ ------ ------
Net Asset Value, End of Period $10.72 $10.27 $10.26
- ------------------------------------- ------ ------ ------
Total Return 6.70%++ 6.43% 4.99%++
- ------------------------------------- ------ ------ ------
Net Assets, End of Period (000s) $1,461 $ 913 $ 614
- ------------------------------------- ------ ------ ------
Ratios to Average Net Assets:
Expenses(3) 1.38%+ 1.21% 1.25%+
Net investment income 4.32+ 4.66 4.80+
- ------------------------------------- ------ ------ ------
Portfolio Turnover Rate 8% 37% 75%
===================================== ====== ====== ======
</TABLE>
(1) For the six months ended October 31, 1997 (unaudited).
(2) For the period from May 16, 1995 (inception date) to April 30, 1996.
(3) The investment adviser and administrator waived all or part of their fees
for the six months ended October 31, 1997, the year ended 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:
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------- --------------------------
1997(1) 1997 1996 1997(1) 1997 1996
--------- ------- ------- --------- ------- --------
Class C $0.02 $0.06 $0.10 1.73%+ 1.96% 2.38%+
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
23
<PAGE>
(This page intentionally left blank.)
<PAGE>
[SMITH BARNEY LOGO]
A Member of TraverlersGroup [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
Smith Barney Mutual Funds
Management Inc.
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 Fund's investment policies
and expenses as well as other pertinent information.
Smith Barney
Oregon Municipals Fund
388 Greenwich Street
New York, New York 10013
FD0820 12/97
