SMITH BARNEY SHEARSON OREGON MUNICIPAL FUND, 485APOS, 1999-06-18

SMITH BARNEY SHEARSON OREGON MUNICIPAL FUND
485APOS, 1999-06-18

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Registration Nos. 33-52643
811-7149

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

[ ] Pre-Effective Amendment No.

[X] Post-Effective Amendment No. 8

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940, as amended

[ X ] Amendment No. 11

SMITH BARNEY OREGON MUNICIPALS FUND
(Exact name of Registrant as Specified in Charter)

388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)

(212) 816-6474
(Registrant's Telephone Number, including Area Code)

Christina T. Sydor
Secretary

Smith Barney Oregon Municipals Fund
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: Continuous

It is proposed that this filing become effective (check
appropriate box):

[ ] Immediately upon filing pursuant to paragraph (b)
[ ] on August 28, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (1)
[ X ] on August 27, 1999 pursuant to paragraph (a) (1)
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] on (date) pursuant to paragraph (a) (2) of Rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment

SMITH BARNEY OREGON MUNICIPALS FUND

PART A-Prospectus

<PAGE>

- ----------------------------------------
[Logo]

Smith Barney Mutual Funds

Investing for your future.

Every day.
- ----------------------------------------

Prospectus Smith Barney
Mutual Funds

- --------------------------------------------------------------------------------

August 27, 1999 Oregon Municipals Fund

Class A, B, L and Y Shares

The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>

Oregon Municipals Fund

- --------------------------------------------------------------------------------
Contents
- --------------------------------------------------------------------------------

Investments, risks and performance.............. 4

More on the fund's investments.................. 8

Management...................................... 9

Choosing a class of shares to buy.............. 10

Comparing the fund's classes................... 11

Sales charges.................................. 12

More about deferred sales charges.............. 15

Buying shares.................................. 16

Exchanging shares.............................. 17

Redeeming shares............................... 18

Other things to know about
share transactions............................ 20

Dividends, distributions and
taxes......................................... 22

Share price.................................... 23

Financial highlights........................... 24

You should know:

An investment in the fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government agency.

-1-
<PAGE>

- --------------------------------------------------------------------------------
Investments, risks and performance
- --------------------------------------------------------------------------------

Investment objective

The fund seeks to provide Oregon investors with as high a level of dividend
income exempt from federal income tax and Oregon state personal income tax as is
consistent with prudent investment management and preservation of capital.

Principal investment strategies

Key investments The fund invests at least 80% of its net assets in municipal
securities, and at least 65% of the aggregate principal amount of its
investments in Oregon municipal securities. Oregon municipal securities
include securities issued by the State of Oregon and certain other municipal
issuers, political subdivisions, agencies and public authorities that pay
interest which is exempt from Oregon personal income taxes.

The fund invests primarily in intermediate-term and long-term investment grade
municipal securities, which have remaining maturities at the time of purchase of
from three to more than twenty years. Investment grade securities are rated in
any of the four highest long-term rating categories, or if unrated, of
comparable quality. The fund may invest up to 25% of its assets in below
investment grade securities or unrated securities of equivalent quality
(commonly known as "junk bonds").

Selection process The manager selects securities primarily by identifying
undervalued sectors and individual securities, while also selecting securities
it believes will benefit from changes in market conditions. In selecting
individual securities, the manager:

. Uses fundamental credit analysis to estimate the relative value and
attractiveness of various securities and sectors and to exploit opportunities
in the municipal bond market

. May trade between general obligation and revenue bonds and among various
revenue bond sectors, such as housing, hospital and industrial development,
based on their apparent relative values

. Considers the yield available for securities with different maturities and a
security's maturity in light of the outlook for the issuer, its sector and
interest rates

. Identifies individual securities with the most potential for added value,
such as those involving unusual situations, new issuers, the potential for
credit upgrades, unique structural characteristics or innovative features

- -2-
<PAGE>

Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if:

. Interest rates rise, causing the value of the fund's portfolio to decline
. The issuer of a security owned by the fund defaults on its obligation to pay
principal and/or interest or the security's credit rating is downgraded
. Oregon municipal securities fall out of favor with investors. The fund will
suffer more than a national municipal fund from adverse events affecting
Oregon municipal issuers
. Unfavorable legislation affects the tax-exempt status of municipal bonds
. The manager's judgment about the attractiveness, value or income potential of
a particular security proves to be incorrect

It is possible that some of the fund's income distributions may be, and
distributions of the fund's gains generally will be, subject to federal and
Oregon state taxation. The fund may realize taxable gains on the sale of its
securities or on transactions in futures contracts. Some of the fund's income
may be subject to the federal alternative minimum tax. In addition,
distributions of the fund's income and gains will be taxable to investors in
states other than Oregon.

The fund is classified as "non-diversified," which means it may invest a larger
percentage of its assets in one issuer than a diversified fund. To the extent
the fund concentrates its assets in fewer issuers, the fund will be more
susceptible to negative events affecting those issuers.

Who may want to invest The fund may be an appropriate investment if you are an
Oregon taxpayer and:

. Are in a high federal tax bracket, seeking income exempt from Oregon and
federal taxation
. Currently have exposure to other asset classes and are seeking to broaden your
investment portfolio
. Are willing to accept the risks of municipal securities, including the risks
of concentrating in a single state

-3-
<PAGE>

Risk return bar chart

This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. Past performance does not
necessarily indicate how the fund will perform in the future.

[THE CHART BELOW WAS REPRESENTED IN THE PRINTED MATERIAL BY A BAR GRAPH]

Total Return for Class A Shares

'95 '96 '97

11.06% 7.7% 7.01%

Calendar years ended December 31

This bar chart shows the performance of the fund's Class A shares for each full
calendar year since the fund's inception. Class B, L and Y shares would have
different performance because of their different expenses. The performance
information in the chart does not reflect sales charges, which would reduce your
return.

Quarterly returns: Highest: xx% in ___ quarter 199X; Lowest: xx% in ___
quarter 199X
Year to date: xx% through 6/30/99

Risk return table

This table indicates the risks of investing in the fund by comparing the average
annual total return of each class for the periods shown with that of the Lehman
Brothers Municipal Bond Index (the "Lehman Index"), a broad-based unmanaged
index of municipal bonds and the Lipper Oregon Municipal Fund Average (the
"Lipper Average"), an average composed of the fund's peer group of mutual funds.
This table assumes imposition of the maximum sales charge applicable to the
class, redemption of shares at the end of the period, and reinvestment of
distributions and dividends.

- --------------------------------------------------------------------------------
Average Annual Total Returns -- Calendar Years Ended December 31, 1998
- --------------------------------------------------------------------------------
Class 1 year 5 years 10 years Since Inception Inception date

A n/a 05/23/94

B n/a 05/23/94

L n/a n/a 05/16/95

Y n/a n/a [xx/xx/98]

Lehman Index * n/a

Lipper Average * n/a

*Index comparisons begin on __________.

- -4-
<PAGE>

Fee table
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Shareholder fees
- -----------------------------------------------------------------------------------------------------------
(fees paid directly from your investment) Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on purchases (as 4.00% None 1.00% None
a % of offering price)

Maximum deferred sales charge (load) (as a % of the None* 4.50% 1.00% None
lower of net asset value at purchase or redemption)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Annual fund operating expenses
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(expenses deducted from fund assets) Class A Class B Class L Class Y

Management fee** [0.49%] [0.49%] [0.49%] [0.49%]

Distribution and service (12b-1) fees 0.15% 0.65% 0.70% None

Other expenses
-------- -------- -------- --------

Total annual fund operating expenses**
======== ======== ======== ========
</TABLE>
*You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial sales charge) but if you redeem those shares within 12
months of their purchase, you will pay a deferred sales charge of 1.00%.
**Because the manager has agreed to limit total annual fund operating expenses,
actual expenses were:
<TABLE>
<CAPTION>
Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Management fee

Total annual fund operating expenses
</TABLE>

Example
This example helps you compare the costs of investing in the fund with the costs
of investing in other mutual funds. Your actual costs may be higher or lower.
The example assumes:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a sales charge
. The fund's operating expenses remain the same

- --------------------------------------------------------------------------------
Number of years you own your shares 1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------

Class A (with or without redemption) $ $ $ $

Class B (redemption at end of period) $ $ $ $

Class B (no redemption) $ $ $ $

Class L (redemption at end of period) $ $ $ $

Class L (no redemption) $ $ $ $

Class Y (with or without redemption) $ $ $ $

-5-
<PAGE>

- --------------------------------------------------------------------------------
More on the fund's investments
- --------------------------------------------------------------------------------

Oregon municipal securities Oregon municipal securities include debt
obligations issued by certain non-Oregon governmental issuers such as Puerto
Rico, the Virgin Islands and Guam. The interest on Oregon municipal securities
is exempt from federal income tax and Oregon personal income tax. As a result,
the interest rate on these bonds normally is lower than it would be if the bonds
were subject to taxation. The Oregon municipal securities in which the fund
invests include general obligation bonds, revenue bonds and municipal leases.
These securities may pay interest at fixed, variable or floating rates. The
fund may also hold zero coupon securities which pay no interest during the life
of the obligation but trade at prices below their stated maturity value. The
fund also may invest up to 20% of its net assets in municipal securities of non-
Oregon issuers. These will generally be exempt from federal, but not Oregon,
income taxes.

Below investment grade securities Below investment grade securities, also known
as "junk bonds", are considered speculative with respect to the issuer's ability
to pay interest and principal, involve a high risk of loss and are susceptible
to default or decline in market value because of adverse economic and business
developments. The market value for these securities tends to be very volatile,
and they are less liquid than investment grade debt securities.

Derivative contracts The fund may, but need not, use derivative contracts, such
as financial futures and options on financial futures, for any of the following
purposes:
. To hedge against the economic impact of adverse changes in the market value of
portfolio securities because of changes in interest rates
. As a substitute for buying or selling securities

A futures contract will obligate or entitle the fund to deliver or receive an
asset or cash payment based on the change in value of one or more securities.
Even a small investment in futures can have a big impact on a fund's interest
rate exposure. Therefore, using futures can disproportionately increase losses
and reduce opportunities for gains when interest rates are changing. The fund
may not fully benefit from or may lose money on futures if changes in their
value do not correspond accurately to changes in the value of the fund's
holdings. The other parties to certain futures present the same types of
default risk as issuers of fixed income securities. Futures can also make a
fund less liquid and harder to value, especially in declining markets.

Defensive investing The fund may depart from its principal investment
strategies in response to adverse market, economic or political conditions by
taking temporary defensive positions in all types of money market and short-term
debt securities. If the fund takes a temporary defensive position, it may be
unable to achieve its investment goal.

- -6-
<PAGE>

- --------------------------------------------------------------------------------
Management
- --------------------------------------------------------------------------------

Manager The fund's investment adviser and administrator (the manager) is SSBC
Fund Management Inc., an affiliate of Salomon Smith Barney Inc.

The manager's address is 388 Greenwich Street, New York, New York 10013. The
manager selects the fund's investments and oversees its operations. The manager
and Salomon Smith Barney are subsidiaries of Citigroup Inc. Citigroup businesses
produce a broad range of financial services -- asset management, banking and
consumer finance, credit and charge cards, insurance, investments, investment
banking and trading -- and use diverse channels to make them available to
consumer and corporate customers around the world.

Peter M. Coffey, investment officer of SSBC Fund Management Inc. and managing
director of Salomon Smith Barney, has been responsible for the day-to-day
management of the fund's portfolio since its inception. Mr. Coffey has over 30
years of securities business experience.

Management fees During the fiscal year ended April 30, 1999, the manager
received an advisory fee and an administrative fee equal to ___% and ___%,
respectively, of the fund's average daily net assets.

Distributor The fund has entered into an agreement with CFBDS, Inc. to
distribute the fund's shares. A selling group consisting of Salomon Smith
Barney and other broker-dealers sells fund shares to the public.

Distribution plans The fund has adopted Rule 12b-1 distribution plans for its
Class A, B and L shares. Under each plan, the fund pays distribution and
service fees. These fees are an ongoing expense and, over time, may cost you
more than other types of sales charges.

Year 2000 issue Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the fund. The cost of addressing the Year 2000 issue, if
substantial, could adversely affect companies and governments that issue
securities held by the fund. The manager and Salomon Smith Barney are
addressing the Year 2000 issue for their systems. The fund has been informed by
other service providers that they are taking similar measures. Although the
fund does not expect the Year 2000 issue to adversely affect it, the fund cannot
guarantee that the efforts of the fund, which are limited to requesting and
receiving reports from its service providers, or the efforts of its service
providers to correct the problem will be successful.

-7-
<PAGE>

- --------------------------------------------------------------------------------
Choosing a class of shares to buy
- --------------------------------------------------------------------------------

You can choose among four classes of shares: Classes A, B, L and Y. Each class
has different sales charges and expenses, allowing you to choose the class that
best meets your needs. Which class is more beneficial to an investor depends on
the amount and intended length of the investment.

. If you plan to invest regularly or in large amounts, buying Class A shares
may help you reduce sales charges and ongoing expenses.

. For Class B shares, all of your purchase amount and, for Class L shares, more
of your purchase amount (compared to Class A shares) will be immediately
invested. This may help offset the higher expenses of Class B and Class L
shares, but only if the fund performs well.

. Class L shares have a shorter deferred sales charge period than Class B
shares. However, because Class B shares convert to Class A shares, and Class L
shares do not, Class B shares may be more attractive to long-term investors.

You may buy shares from:

. A Salomon Smith Barney Financial Consultant
. An investment dealer in the selling group or a broker that clears through
Salomon Smith Barney -- a dealer representative
. The fund, but only if you are investing through certain dealer
representatives

Investment minimums Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Initial Additional
------------------------------ -----------
- -----------------------------------------------------------------------------------
Classes A, B, L Class Y All Classes
<S> <C> <C> <C>
General $1,000 $15 million $50

Monthly Systematic Investment Plans $ 25 n/a $25

Quarterly Systematic Investment Plans $ 50 n/a $50

Uniform Gift to Minors Accounts $ 250 $15 million $50
</TABLE>

- -8-
<PAGE>

- --------------------------------------------------------------------------------
Comparing the fund's classes
- --------------------------------------------------------------------------------

Your Salomon Smith Barney Financial Consultant or dealer representative can help
you decide which class meets your goals. They may receive different
compensation depending upon which class you choose.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Class A Class B Class L Class Y
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Key . Initial sales . No initial sales . Initial sales . No initial or
features charge charge charge is lower deferred sales
. You may qualify . Deferred sales than Class A charge
for reduction or charge declines . Deferred sales . Must invest at
waiver of initial over time charge for only 1 least $5 million
sales charge . Converts to year . Lower annual
. Lower annual Class A after 8 . Does not expenses than the
expenses than years convert to other classes
Class B and Class . Higher annual Class A
L expenses than . Higher annual
Class A expenses than
Class A

Initial sales Up to 4.00%; None 1.00% None
charge reduced for large
purchases and
waived for certain
investors. No
charge for
purchases of
$500,000 or more

Deferred 1% on purchases Up to 4.50% 1% if you None
sales charge of $500,000 or charged when redeem within 1
more if you you redeem year of purchase
redeem within 1 shares. The
year of purchase charge is reduced
over time and
there is no
deferred sales
charge after 6
years

Annual 0.15% of average 0.65% of average 0.70% of average None
distribution daily net assets daily net assets daily net assets
and service
fees

Exchange-able into* Class A shares of Class B shares of Class L shares of Class Y shares of
most Smith most Smith most Smith most Smith Barney
Barney funds Barney funds Barney funds funds
- ---------------------------------------------------------------------------------------------------------
</TABLE>

*Ask your Salomon Smith Barney Financial Consultant or dealer representative or
visit the web site for the Smith Barney funds available for exchange.

-9-
<PAGE>

- --------------------------------------------------------------------------------
Sales charges
- --------------------------------------------------------------------------------

Class A shares

You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge
on the fund's distributions or dividends you reinvest in additional Class A
shares.

<TABLE>
<CAPTION>
- ------------------------------------------------------------
Sales Charge as a % of:

Offering Net amount
Amount of purchase price (%) invested (%)
- ------------------------------------------------------------
<S> <C> <C>
Less than $25,000 4.00 4.17

$25,000 but less than $50,000 3.50 3.63

$50,000 but less than $100,000 3.00 3.09

$100,000 but less than $250,000 2.50 2.56

$250,000 but less than $500,000 1.50 1.52

$500,000 or more -0- -0-
</TABLE>

Investments of $500,000 or more You do not pay an initial sales charge when you
buy $500,000 or more of Class A shares. However, if you redeem these Class A
shares within one year of purchase, you will pay a deferred sales charge of 1%.

Qualifying for a reduced Class A sales charge There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.

Accumulation privilege - lets you combine the current value of Class A shares
owned

. by you, or
. by members of your immediate family,

and for which a sales charge was paid, with the amount of your next purchase of
Class A shares for purposes of calculating the initial sales charge. Certain
trustees and fiduciaries may be entitled to combine accounts in determining
their sales charge.

- -10-
<PAGE>

Letter of intent - lets you purchase Class A shares of the fund and other Smith
Barney funds over a 13-month period and pay the same sales charge, if any, as if
all shares had been purchased at once. You may include purchases on which you
paid a sales charge within 90 days before you sign the letter.

Waivers for certain Class A investors. Class A initial sales charges are waived
for certain types of investors, including:

. Employees of members of the NASD

. Clients of newly employed Salomon Smith Barney Financial Consultants, if
certain conditions are met

. Investors who redeemed Class A shares of a Smith Barney fund in the past 60
days, if the investor's Salomon Smith Barney Financial Consultant or dealer
representative is notified

If you want to learn about additional waivers of Class A initial sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the Statement of Additional Information ("SAI").

-11-
<PAGE>

Class B shares

You buy Class B shares at net asset value without paying an initial sales
charge. However, if you redeem your Class B shares within six years of
purchase, you will pay a deferred sales charge. The deferred sales charge
decreases as the number of years since your purchase increases.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
6th
Year after purchase through
1st 2nd 3rd 4th 5th 8th

- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Deferred sales charge 4.5% 4% 3% 2% 1% 0%
- -------------------------------------------------------------------
</TABLE>

Class B conversion. After 8 years, Class B shares automatically convert into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Shares issued: Shares issued: Shares issued:
At initial On reinvestment of Upon exchange from
purchase dividends and another Smith Barney
distributions fund
- ----------------------------------------------------------------------------------
<S> <C> <C>
Eight years after In same proportion as the On the date the shares
the date of number of Class B shares originally acquired would
purchase converting is to total Class B have converted into Class A
shares you own (excluding shares
shares issued as a dividend)
- ----------------------------------------------------------------------------------
</TABLE>

Class L shares

You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund on June 12, 1998,
you will not pay an initial sales charge on Class L shares you buy before June
22, 2001.

Class Y shares

You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can use a letter of intent to meet this requirement
by buying Class Y shares of the fund over a 13-month period. To qualify, you
must initially invest $5,000,000.

- -12-
<PAGE>

- --------------------------------------------------------------------------------
More about deferred sales charges
- --------------------------------------------------------------------------------

The deferred sales charge is based on the net asset value at the time of
purchase or redemption, whichever is less, and therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.

In addition, you do not pay a deferred sales charge on:

. Shares exchanged for shares of another Smith Barney fund
. Shares representing reinvested distributions and dividends
. Shares no longer subject to the deferred sales charge

If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net asset
value and be credited with the amount of the deferred sales charge, if you
notify your Salomon Smith Barney Financial Consultant or dealer representative.

Salomon Smith Barney receives deferred sales charges as partial compensation for
its expenses in selling shares, including the payment of compensation to your
Salomon Smith Barney Financial Consultant or dealer representative.

Deferred sales charge waivers

The deferred sales charge for each share class will generally be waived:

. On payments made through certain systematic withdrawal plans
. For involuntary redemptions of small account balances
. For 12 months following the death or disability of a shareholder

If you want to learn more about additional waivers of deferred sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the SAI.

-13-
<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Buying shares
- -----------------------------------------------------------------------------------

<S> <C>
Through a You should contact your Salomon Smith Barney Financial
Salomon Consultant or dealer representative to open a brokerage account and
Smith make arrangements to buy shares.
Barney
Financial If you do not provide the following information, your order will be
Consultant rejected:
or dealer
represen- . Class of shares being bought
tative . Dollar amount or number of shares being bought

You should pay for your shares through your brokerage account no
later than the third business day after you place your order.
Salomon Smith Barney or your dealer representative may charge an
annual account maintenance fee.
- -----------------------------------------------------------------------------------
Through Certain investors who are clients of the selling group are eligible to
the fund's buy shares directly from the fund.
transfer
agent . Write the transfer agent at the following address:

Smith Barney Oregon Municipals Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128

. Enclose a check to pay for the shares. For initial purchases,
complete and send an account application.

. For more information, call the transfer agent at 1-800-451-2010.
- -----------------------------------------------------------------------------------
Through a You may authorize Salomon Smith Barney, your dealer
systematic representative or the transfer agent to transfer funds automatically
investment from a regular bank account, cash held in a Salomon Smith Barney
plan brokerage account or Smith Barney money market fund to buy
shares on a regular basis.

. Amounts transferred should be at least: $25 monthly or $50
quarterly

. If you do not have sufficient funds in your account on a transfer
date, Salomon Smith Barney, your dealer representative or the
transfer agent may charge you a fee

For more information, contact your Salomon Smith Barney Financial
Consultant, dealer representative or the transfer agent or consult the SAI.
</TABLE>

- -14-
<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Exchanging shares
- -----------------------------------------------------------------------------------

<S> <C>
Smith You should contact your Salomon Smith Barney Financial Consultant
Barney or dealer representative to exchange into other Smith Barney funds.
offers a Be sure to read the prospectus of the Smith Barney fund you are
distinctive exchanging into. An exchange is a taxable transaction.
family of
funds . You may exchange shares only for shares of the same class of
tailored to another Smith Barney fund. Not all Smith Barney funds offer all
help meet classes.
the
varying . Not all Smith Barney funds may be offered in your state of
needs of residence. Contact your Salomon Smith Barney Financial Consultant,
both large dealer representative or the transfer agent.
and small
investors . You must meet the minimum investment amount for each fund.

. If you hold share certificates, the transfer agent must receive the
certificates endorsed for transfer or with signed stock powers
(documents transferring ownership of certificates) before the
exchange is effective.

. The fund may suspend or terminate your exchange privilege if
you engage in an excessive pattern of exchanges.
- -----------------------------------------------------------------------------------
Waiver of Your shares will not be subject to an initial sales charge at the time
additional of the exchange.
sales
charges Your deferred sales charge (if any) will continue to be measured
from the date of your original purchase. If the fund you exchange
into has a higher deferred sales charge, you will be subject to that
charge. If you exchange at any time into a fund with a lower
charge, the sales charge will not be reduced.
- -----------------------------------------------------------------------------------
By If you do not have a brokerage account, you may be eligible to
telephone exchange shares through the transfer agent. You must complete an
authorization form to authorize telephone transfers. If eligible, you
may make telephone exchanges on any day the New York Stock
Exchange is open. Call the transfer agent at 1-800-451-2010 between
9:00 a.m. and 5:00 p.m. (Eastern time). Requests received after the
close of regular trading on the Exchange are priced at the net asset
value next determined.

You can make telephone exchanges only between accounts that have
identical registrations.
- -----------------------------------------------------------------------------------
By mail If you do not have a Salomon Smith Barney brokerage account,
contact your dealer representative or write to the transfer agent at
the address on the opposite page.
</TABLE>

-15-
<PAGE>

- --------------------------------------------------------------------------------
Redeeming shares
- --------------------------------------------------------------------------------

Generally Contact your Salomon Smith Barney Financial Consultant or
dealer representative to redeem shares of the fund.

If you hold share certificates, the transfer agent must receive
the certificates endorsed for transfer or with signed stock
powers before the redemption is effective.

If the shares are held by a fiduciary or corporation, other
documents may be required.

Your redemption proceeds will be sent within three business
days after your request is received in good order. However,
if you recently purchased your shares by check, your
redemption proceeds will not be sent to you until your
original check clears, which may take up to 15 days.

If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account and not
reinvested without your specific instruction. In other cases,
unless you direct otherwise, your redemption proceeds will
be paid by check mailed to your address of record.
- --------------------------------------------------------------------------------
By mail For accounts held directly at the fund, send written requests
to the transfer agent at the following address:

Smith Barney Oregon Municipals Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128

Your written request must provide the following:

. Your account number

. The class of shares and the dollar amount or number of
shares to be redeemed

. Signatures of each owner exactly as the account is
registered

- -16-
<PAGE>

By If you do not have a brokerage account, you may be eligible
telephone to redeem shares in amounts up to $10,000 per day through
the transfer agent. You must complete an authorization form
to authorize telephone redemptions. If eligible, you may
request redemptions by telephone on any day the New York
Stock Exchange is open. Call the transfer agent at 1-800-451-
2010 between 9:00 a.m. and 5:00 p.m. (Eastern time).
Requests received after the close of regular trading on the
Exchange are priced at the net asset value next determined.

Your redemption proceeds can be sent by check to your
address of record or by wire transfer to a bank account
designated on your authorization form. You must submit a
new authorization form to change the bank account
designated to receive wire transfers and you may be asked to
provide certain other documents.
- --------------------------------------------------------------------------------
Automatic You can arrange for the automatic redemption of a portion of
cash your shares on a monthly or quarterly basis. To qualify you
withdrawal must own shares of the fund with a value of at least $10,000
plans and each automatic redemption must be at least $50. If your
shares are subject to a deferred sales charge, the sales charge
will be waived if your automatic payments do not exceed 1%
per month of the value of your shares subject to a deferred
sales charge.

The following conditions apply:

. Your shares must not be represented by certificates

. All dividends and distributions must be reinvested

For more information, contact your Salomon Smith Barney
Financial Consultant or dealer representative or consult the SAI.

-17-
<PAGE>

- --------------------------------------------------------------------------------
Other things to know about share transactions
- --------------------------------------------------------------------------------

When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed:

. Name of the fund
. Account number
. Class of shares being bought, exchanged or redeemed
. Dollar amount or number of shares being bought, exchanged or
redeemed
. Signature of each owner exactly as the account is registered

The transfer agent will try to confirm that any telephone exchange or redemption
request is genuine by recording calls, asking the caller to provide a personal
identification number for the account, sending you a written confirmation or
requiring other confirmation procedures from time to time.

Signature guarantees To be in good order, your redemption request must include
a signature guarantee if you:

. Are redeeming over $10,000 of shares

. Are sending signed share certificates or stock powers to the transfer agent

. Instruct the transfer agent to mail the check to an address different from
the one on your account

. Changed your account registration

. Want the check paid to someone other than the account owner(s)

. Are transferring the redemption proceeds to an account with a different
registration

You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.

- -18-
<PAGE>

The fund has the right to:

. Suspend the offering of shares

. Waive or change minimum and additional investment amounts

. Reject any purchase or exchange order

. Change, revoke or suspend the exchange privilege

. Suspend telephone transactions

. Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securities
and Exchange Commission

. Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities

Small account balances If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.

Excessive exchange transactions The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other
shareholders. If so, the fund may limit additional purchases and/or exchanges
by the shareholder.

Share certificates The fund does not issue share certificates unless a written
request signed by all registered owners is made to the transfer agent. If you
hold share certificates it will take longer to exchange or redeem shares.

-19-
<PAGE>

- --------------------------------------------------------------------------------
Dividends, distributions and taxes
- --------------------------------------------------------------------------------

Dividends The fund pays dividends each month from its net investment income.
The fund generally makes capital gain distributions, if any, once a year,
typically in December. The fund may pay additional distributions and dividends
at other times if necessary for the fund to avoid a federal tax. Capital gain
distributions and dividends are reinvested in additional fund shares of the same
class you hold. The fund expects distributions to be primarily from income.
You do not pay a sales charge on reinvested distributions or dividends.
Alternatively, you can instruct your Salomon Smith Barney Financial Consultant,
dealer representative or the transfer agent to have your distributions and/or
dividends paid in cash. You can change your choice at any time to be effective
as of the next distribution or dividend, except that any change given to the
transfer agent less than five days before the payment date will not be
effective until the next distribution or dividend.

Taxes In general, redeeming shares, exchanging shares and receiving
distributions (whether in cash or additional shares) are all taxable events.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Transaction Federal tax status Oregon tax status
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Redemption or Usually capital gain or loss; long- Usually capital gain or loss
exchange of shares term only if shares owned more
than one year

Long-term capital gain Taxable gain Taxable gain
distributions

Short-term capital gain Ordinary income Ordinary income
distributions

Dividends Exempt if from interest on tax- Exempt if from interest on
exempt securities, otherwise Oregon municipal securities,
ordinary income otherwise ordinary income
- ---------------------------------------------------------------------------------------------
</TABLE>

Any taxable dividends and capital gain distributions are taxable whether
received in cash or reinvested in fund shares. Long-term capital gain
distributions are taxable to you as long-term capital gain regardless of how
long you have owned your shares. You may want to avoid buying shares when the
fund is about to declare a capital gain distribution or a taxable dividend,
because it will be taxable to you even though it may actually be a return of a
portion of your investment.

After the end of each year, the fund will provide you with information about the
distributions and dividends you received and any redemptions of shares during
the previous year. If you do not provide the fund with your correct taxpayer
identification number and any required certifications, you may be subject to
back-up withholding of 31% of your distributions, dividends, and redemption
proceeds. Because each shareholder's circumstances are different and special
tax rules may apply, you should consult your tax adviser about your investment
in the fund.

- -20-
<PAGE>

- --------------------------------------------------------------------------------
Share price
- --------------------------------------------------------------------------------

You may buy, exchange or redeem shares at their net asset value, plus any
applicable sales charge, next determined after receipt of your request in good
order. The fund's net asset value is the value of its assets minus its
liabilities. Net asset value is calculated separately for each class of shares.
The fund calculates its net asset value every day the New York Stock Exchange is
open. The Exchange is closed on certain holidays listed in the SAI. This
calculation is done when regular trading closes on the Exchange (normally 4:00
p.m., Eastern time).

Generally, the fund's investments are valued by an independent pricing service.
If market quotations or a valuation from the pricing service is not readily
available or if a security's value has been materially affected by events
occurring after the close of the Exchange or market on which the security is
principally traded, that security may be valued by another method that the
fund's board believes accurately reflects fair value. A fund that uses fair
value to price securities may value those securities higher or lower than
another fund using market quotations to price the same securities. A security's
valuation may differ depending on the method used for determining fair value.

In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer
representative before the New York Stock Exchange closes. If the Exchange
closes early, you must place your order prior to the actual closing time.
Otherwise, you will receive the next business day's price.

Salomon Smith Barney or members of the selling group must transmit all orders to
buy, exchange or redeem shares to the fund's agent before the agent's close of
business.

- --------------------------------------------------------------------------------
Financial highlights
- --------------------------------------------------------------------------------

The financial highlights tables are intended to help you understand the
performance of each class for the past 5 years (or since inception if less than
5 years). Certain information reflects financial results for a single share.
Total return represents the rate that a shareholder would have earned (or lost)
on a fund share assuming reinvestment of all dividends and distributions. The
information in the following tables for the fiscal years 1996 through 1999 was
audited by KPMG LLP, independent accountants, whose report, along with the
fund's financial statements, is included in the annual report (available upon
request). The fiscal year 1995 was audited by other independent accountants.

-21-
<PAGE>

- --------------------------------------------------------------------------------
For a Class A share of capital stock outstanding throughout each year
ended April 30:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1999 1998 1997 1996 1995/(1)/
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ $ $10.26 $10.09 $ 9.55
- ----------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income/(2)/ 0.54 0.55 0.49
Net realized and unrealized gain 0.16 0.22 0.54
- ----------------------------------------------------------------------------------
Total income from operations 0.70 0.77 1.03
- ----------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.54) (0.54) (0.49)
Net realized gain (0.13) (0.06) --
Excess of net realized gain (0.02) -- --
- ----------------------------------------------------------------------------------
Total distributions (0.69) (0.60) (0.49)
- ----------------------------------------------------------------------------------
Net asset value, end of year $ 0.27 $10.26 $ 10.09/(3)/
- ----------------------------------------------------------------------------------
Total return 7.01% 7.70% 11.08%/(4)/
- ----------------------------------------------------------------------------------
Net assets, end of year (000)'s $9,769 $7,520 $ 6,323
- ----------------------------------------------------------------------------------
Ratios to average net assets:
Expenses/(2)/ 0.65% 0.66% 0.82%/(5)/
Net investment income 5.21 5.21 5.28/(5)/
- ----------------------------------------------------------------------------------
Portfolio turnover rate 37% 75% 30%
- ----------------------------------------------------------------------------------
</TABLE>

(1) For the period from May 23, 1994 (inception date) to April 30, 1995.
(2) The manager waived all or part of its fees for the years ended April 30,
1997 and April 30, 1996 and the period ended April 30, 1995. In addition,
the manager reimbursed the Fund for $53,166, $85,446 and $64,336 in expenses
for the years ended April 30, 1997 and April 30, 1996 and the period ended
April 30, 1995, respectively. If such fees had not been waived and expenses
not reimbursed, the per share effect on net investment income and the
expense ratios would have been as follows:

Expenses Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ ------------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Class A $0.07 $0.11 $0.12 1.41% 1.75% 2.05%/(5)/

(3) Total return for Class A shares for the period ended April 30, 1995 includes
the effect of a cash contribution from the investment 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%.
(4) Not annualized.
(5) Annualized.

- -22-
<PAGE>

- --------------------------------------------------------------------------------
For a Class B share of capital stock outstanding throughout each year
ended April 30:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995/(1)/
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of $ $ $ 10.25 $ 10.09 $ 9.55
- --------------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income/(2)/ 0.48 0.49 0.44
Net realized and unrealized gain 0.17 0.22 0.55
- --------------------------------------------------------------------------------------
Total income (loss) from 0.65 0.71 0.99
- --------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.49) (0.49) (0.45)
Net realized gain (0.13) (0.06) --
Capital -- (0.02) -- --
- --------------------------------------------------------------------------------------
Total distributions (0.64) (0.55) (0.45)
- --------------------------------------------------------------------------------------
Net asset value, end of year $ 10.26 $ 10.25 $ 10.09
- --------------------------------------------------------------------------------------
Total return/(3)/ 6.48% 7.09% 10.59%/(/
- --------------------------------------------------------------------------------------
/Net assets, end of year (000)'s $13,184 $9,861 $6,556
- --------------------------------------------------------------------------------------
Ratios to average net assets:
Expenses/(2)/ 1.17% 1.21% 1.36%/(5)/
Net investment income 4.69 4.62 4.74%/(5)/
- --------------------------------------------------------------------------------------
Portfolio turnover rate 37% 75% 30-%
- --------------------------------------------------------------------------------------
</TABLE>

(3) Total return for Class B shares for the period ended April 30, 1995 includes
the effect of a cash contribution from the investment adviser which was made
on October 24, 1994. The total amount of this contribution was $221,556.
Without this cash contribution the total return would have been 5.55%.
(4) Not annualized.
(5) Annualized.

-23-
<PAGE>

- --------------------------------------------------------------------------------
For a Class L share of capital stock outstanding throughout each year
ended April 30:
- --------------------------------------------------------------------------------

- -------------------------------------------------------------------------
1999 1998 1997 1996/(1)/
------------------------------------
Net asset value, beginning of year $ $ $10.26 $ 10.28
- -------------------------------------------------------------------------
Income (loss) from operations:
Net investment income/(2)/ 0.47 0.45
Net realized and unrealized gain 0.17 0.06
- -------------------------------------------------------------------------
Total income (loss) from operations 0.64 0.51
- -------------------------------------------------------------------------
Less distributions from:
Net investment income (0.48) (0.47)
Net realized gain (0.13) (0.06)
Excess of net realized gain (0.02) --
- -------------------------------------------------------------------------
Total distributions (0.63) (0.53)
- -------------------------------------------------------------------------
Net assets value, end of year $10.27 $ 10.26
- -------------------------------------------------------------------------
Total return 6.43% 4.99%/(3)/
- -------------------------------------------------------------------------
Net assets, end of year (000)'s $ 913 $ 614
- -------------------------------------------------------------------------
Ratios to average net assets:
Expenses/(2)/ 1.21% 1.25%/(4)/
Net investment income (loss) 4.66 4.80/(4)/
- -------------------------------------------------------------------------
Portfolio turnover rate 37% 75%
- -------------------------------------------------------------------------

(1) For the period from May 16, 1995 (inception date) to April 30, 1996.
(2) The manager waived all or part of its fees for the year ended April 30, 1997
and the period ended April 30, 1996. In addition, the manager 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 had
not been waived and expenses not reimbursed, the per share effect on the net
investment income and the expense ratios would have been as follows:

Expenses Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ ------------------------
1997 1996 1997 1996
---- ---- ---- ----
Class L $0.06 $0.10 $1.96 2.38%/(4)/

(3) Not annualized.
(4) Annualized.

- -24-
<PAGE>

Salomon Smith Barney/SM/
a member of citigroup [Symbol]

Oregon Municipals Fund

Shareholder reports Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market conditions and investment strategies that affected the fund's
performance.

The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.

Statement of additional information The statement of additional information
provides more detailed information about the fund and is incorporated by
reference into (is legally part of) this prospectus.

You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salomon
Smith Barney Financial Consultant or dealer representative, by calling the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual Funds, 388
Greenwich Street, MF2, New York, New York 10013.

Visit our web site Our web site is located at www.smithbarney.com

You can also review and copy the fund's shareholder reports, prospectus and
statement of additional information at the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. You can get copies of these materials
for a duplicating fee by writing to the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
information free from the Commission's Internet web site at http:www.sec.gov

If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. Neither the fund nor the distributor is
offering to sell shares of the fund to any person to whom the fund may not
lawfully sell its shares.

/SM/ Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.

(Investment Company Act file no. 811-7149)
[FD00000 6/99]

PART B-Statement of Additional Information

August 27, 1999

STATEMENT OF ADDITIONAL INFORMATION

SMITH BARNEY OREGON MUNICIPALS FUND

388 Greenwich Street
New York, New York 10013
(800) 451-2010

This Statement of Additional Information ("SAI") is not a
prospectus and is meant to be read in conjunction with the
Prospectus of the Smith Barney Oregon Municipals Fund (the
"fund") dated August 27, 1999, as amended or supplemented
from time to time (the "prospectus"), and is incorporated
by reference in it entirety into the prospectus. Additional
information about the fund's investments is available in the
fund's annual and semi-annual reports to shareholders that
are incorporated herein by reference. The prospectus and
copies of the reports may be obtained free of charge by
contacting a Salomon Smith Barney Financial Consultant, or
by writing or calling Salomon Smith Barney at the address or
telephone number above.

TABLE OF CONTENTS

Trustrees and Executive Officers of the Fund
Investment Objective and Management Policies
Risk Factors...................................................
Special Considerations Relating to Oregon Municipal
Securities .....................
Investment Restrictions.................................................
Portfolio Transactions.................................................
Portfolio Turnover.....................................................
Purchase of Shares.....................................................
Determination of Net Asset
Value.................................................................
Redemption of Shares
Investment Management and Other Services
Valuation of Shares
Exchange Privilege
Performance Information
Dividends, Distributions and Taxes
Additional Information
Financial Statements..................................................
Other Information
Appendix A

TRUSTEES AND EXECUTIVE OFFICERS OF THE FUND

The names of the trustees of the fund and executive officers
of the fund, together with information as to their principal
business occupations, are set forth below. The executive
officers of the fund are employees of organizations that
provide services to the fund. Each trustee who is an
"interested person" of the fund, as defined in the 1940 Act,
is indicated by an asterisk. The address of the "non-
interested" directors and executive officers of the fund is
388 Greenwich Street, New York, New York 10013.

Herbert Barg (Age 76). Trustee
Private Investor. Director or trustee of 18 investment
companies associated with Citigroup Inc. ("Citigroup") His
address is 273 Montgomery Avenue, Bala Cynwyd, Pennsylvania
19004.

*Alfred J. Bianchetti (Age 76). Trustee
Retired; formerly Senior Consultant to Dean Witter Reynolds
Inc. Director or trustee of 13 investment companies
associated with Citigroup. His address is 19 Circle End
Drive, Ramsey, New Jersey 07466.

Martin Brody (Age 77). Trustee
Consultant, HMK Associates; Retired Vice Chairman of the
Board of Restaurant Associates Corp. Director or trustee of
22 investment companies associated with Citigroup. His
address is c/o HMK Associates, 30 Columbia Turnpike, Florham
Park, New Jersey 07932.

Dwight B. Crane (Age 61). Trustee
Professor, Harvard Business School. Director or trustee of
25 investment companies associated with Citigroup. His
address is c/o Harvard Business School, Soldiers Field Road,
Boston, Massachusetts 02163.

Burt N. Dorsett (Age 68). Trustee
Managing Partner of Dorsett McCabe Management. Inc., an
investment counseling firm; Director of Research Corporation
Technologies, Inc., a nonprofit patent clearing and
licensing firm. Director or trustee of 13 investment
companies associated with Citigroup. His address is 201 East
62nd Street, New York, New York 10021.

Elliot S. Jaffe (Age 73). Trustee
Chairman of the Board and President of The Dress Barn, Inc.
Director or trustee of 13 investment companies associated
with Citigroup. His address is 30 Dunnigan Drive, Suffern,
New York 10901.

Stephen E. Kaufman (Age 67). Trustee
Attorney. Director or trustee of 15 investment companies
associated with Citigroup. His address is 277 Park Avenue,
New York, New York 10172.

Joseph J. McCann (Age 68). Trustee
Financial Consultant; Retired Financial Executive, Ryan
Homes, Inc. Director or trustee of 13 investment companies
associated with Citigroup. His address is 200 Oak Park
Place, Pittsburgh, Pennsylvania 15243.

*Heath B. McLendon (Age 66). Chairman of the Board and
Investment Officer
Managing Director of Salomon Smith Barney Inc.; President of
SSBC and Travelers Investment Adviser, Inc. ("TIA");
Chairman or Co-Chairman of the Board and director or trustee
of 64 investment companies associated with Citigroup. His
address is 388 Greenwich Street, New York, New York 10013.

Cornelius C. Rose, Jr. (Age 65). Trustee
President, Cornelius C. Rose Associates, Inc., financial
consultants, and Chairman and Director of Performance
Learning Systems, an educational consultant. Director or
trustee of 13 investment companies associated with
Citigroup. His address is Meadowbrook Village, Building 4,
Apt 6, West Lebanon, New Hampshire 03784.

Lewis E. Daidone (Age 41). Senior Vice President and
Treasurer
Managing Director of Salomon Smith Barney; Chief Financial
Officer of the Smith Barney Mutual funds; Director and
Senior Vice President of SSBC and TIA. Senior Vice President
and Treasurer of 59 investment companies associated with
Citigroup.

Joseph P. Deane (Age 51) Vice President and Investment
Officer; Investment Officer of SSBC; Managing Director of
Salomon Smith Barney.

Paul Brook (Age 45). Controller
Director of Salomon Smith Barney; from 1997-1998 Managing
Director of AMT Capital Services Inc.; prior to 1997 Partner
with Ernst & Young LLP. Controller or Assistant Treasurer
of 43 investment companies associated with Citigroup.

Christina T. Sydor (Age 48). Secretary
Managing Director of Salomon Smith Barney; General Counsel
and Secretary of SSBC and TIA. Secretary of 59 investment
companies associated with Citigroup.

As of August , 1999, the trustees and officers of the
funds, as a group, owned less than 1% of the outstanding
shares of beneficial interest of the fund.

To the best knowledge of the trustees, as of August ,
1999, the following shareholders or "groups" (as such term
is defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) owned beneficially or of record more
than 5% of the shares of the following classes:

Shareholder

Class

Shares Held

No officer, director or employee of Salomon Smith Barney or
any of its affiliates receives any compensation from the
fund for serving as an officer of the funds or trustee of
the fund. The fund pays each trustee who is not an officer,
director or employee of Salomon Smith Barney or any of its
affiliates a fee of $ per annum plus $ per in-
person meeting and $ per telephonic meeting. Each
trustee emeritus who is not an officer, director or employee
of Salomon Smith Barney or its affiliates receives a fee of
$ per annum plus $ per in-person meeting and $ per
telephonic meeting. All trustees are reimbursed for travel
and out-of-pocket expenses incurred to attend such meetings.

For the fiscal year ended April 30, 1998, the trustees of
the fund were paid the following compensation:

Name of Person

Aggregate
Compensati
on
from Fund
Total
Pension or
Retirement
Benefits
Accrued
As part of
Fund
Expenses

Compensati
on
From Fund
And Fund
Complex
Paid to
Trustees

Number of
Funds for
Which
Trustees
Serves
Within
Fund Complex

Herbert Barg **

Alfred
Bianchetti * **

Martin Brody **

Dwight B. Crane
**

Burt N. Dorsett
**

Elliot S. Jaffe
**

Stephen E.
Kaufman **

Joseph J. McCann
**

Heath B.
McLendon *

Cornelius C.
Rose, Jr. **

* Designates an "interested" trustee.
** Designates member of Audit Committee.
Upon attainment of age 80, fund trustees are required
to change to emeritus status. Trustees emeritus are
entitled to serve in emeritus status for a maximum of
10 years. A trustee emeritus may attend meetings but
has no voting rights. During the fund's last fiscal
year, aggregate compensation paid by the fund to
trustees achieving emeritus status totaled $

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The prospectus discusses the fund's investment objective and
the policies. For purposes of this SAI, obligations of non-
Oregon municipal issuers, the interest on which is at least
exempt from federal income taxation ("Other Municipal
Securities"), and obligations of the State of Oregon and its
political subdivisions, agencies and public authorities
(together with certain municipal issuers such as the
Commonwealth of Puerto Rico, the Virgin Islands and Guam)
that pay interest which is excluded from gross income for
federal income tax purposes and exempt from Oregon personal
income taxes ("Oregon Municipal Securities") are
collectively referred to as "Municipal Bonds." SSBC Fund
Management, Inc. ("SSBC" or the "manager") serves as
investment manager and administrator to the fund.

The fund will operate subject to an investment policy
providing that, under normal market conditions, the fund
will invest at least 80% of its net assets in Municipal
Securities, and at least 65% of the aggregate principal
amount of the fund's investment in Oregon Municipal
Securities, which pay interest which is excluded from gross
income for federal income tax purposes and which is exempt
from Oregon state personal income tax. The fund may invest
up to 20% of its net assets in municipal securities of non-
Oregon municipal issuers, the interest on which is excluded
from gross income for federal income tax purposes (not
including the possible applicability of a federal
alternative minimum tax), but which is subject to Oregon
state personal income tax. When the manager believes that
market conditions warrant adoption of a temporary defensive
investment posture, the fund may invest without limit in
non-Oregon municipal issuers and in "Temporary Investments"
as described below.

Non-Diversified Classification

The fund is classified as a non-diversified fund under the
Investment Company Act of 1940, as amended (the "1940
Act") which means the fund is not limited by the Act in the
proportion of its assets it may invest in the obligations of
a single issuer. The fund intends to conduct its
operations, however, so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"), which will relieve
the fund of any liability for the Federal income tax and
Oregon franchise tax, as applicable, to the extent its
earnings are distributed to shareholders. To qualify as a
regulated investment company, the fund will, among other
things, limit its investments so that, at the close of each
quarter of the taxable year (a) not more than 25% of the
market value of the fund's total assets will be invested in
the securities of a single issuer and (b) with respect to
50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested
in the securities of a single issuer and the fund will not
own more than 10% of the outstanding voting securities of a
single issuer.

As a result of the fund's non-diversified status, an
investment in the fund may present greater risks to
investors than an investment in a diversified fund. The
investment return on a non-diversified fund typically is
dependent upon the performance of a smaller number of
securities relative to the number of securities held in a
diversified fund. The fund's assumption of large positions
in the obligations of a small number of issuers will affect
the value of its portfolio to a greater extent than that of
a diversified fund in the event of changes in the financial
condition, or in the market's assessment, of the issuers.

The identification of the issuer of Exempt Obligations
generally depends upon the terms and conditions of the
security. When the assets and revenues of an agency,
authority, instrumentality or other political subdivision
are separate from those of the government creating the
issuing entity and the security is backed only by the assets
and revenues of such entity, such entity would be deemed to
be the sole issuer. Similarly, in the case of a private
activity bond, if that bond is backed only by the assets and
revenues of the nongovernmental user, then such
nongovernmental user is deemed to be the sole issuer. If in
either case, however, the creating government or some other
entity guarantees a security, such a guarantee would be
considered a separate security and would be treated as an
issue of such government or other entity.

Use of Ratings as Investment Criteria

In general, the ratings of Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Group ("S&P") and
other nationally recognized statistical ratings
organizations ("NRSROs") represent the opinions of those
agencies as to the quality of the Municipal Bonds and short-
term investments which they rate. It should be emphasized,
however, that such ratings are relative and subjective, are
not absolute standards of quality and do not evaluate the
market risk of securities. These ratings will be used by the
fund as initial criteria for the selection of portfolio
securities, but the fund also will rely upon the independent
advice of the manager to evaluate potential investments.
Among the factors that will be considered are the long-term
ability of the issuer to pay principal and interest and
general economic trends. To the extent the fund invests in
lower-rated and comparable unrated securities, the fund's
achievement of its investment objective may be more
dependent on the manager's credit analysis of such
securities than would be the case for a portfolio consisting
entirely of higher-rated securities. The Appendix contains
further information concerning the ratings of Moody's and
S&P and other NRSROs and their significance.

Subsequent to its purchase by the fund, an issue of
Municipal Bonds may cease to be rated or its rating may be
reduced below the rating given at the time the securities
were acquired by the fund. Neither event will require the
sale of such Municipal Bonds by the fund, but the manager
will consider such event in its determination of whether the
fund should continue to hold such Municipal Bonds. In
addition, to the extent the ratings change as a result of
changes in such organizations, in their rating systems or
because of a corporate restructuring of Moody's, S&P or any
NRSRO, the fund will attempt to use comparable ratings as
standards for its investments in accordance with its
investment objective and policies.

The fund generally will invest at least 75% of its total
assets in investment grade debt obligations rated no lower
than Baa, MIG 3 or Prime-1 by Moody's or BBB, SP-2 or A-1
by S&P, or have the equivalent rating by any NRSRO or in
unrated obligations of comparable quality. Unrated
obligations will be considered to be of investment grade if
deemed by the manager to be comparable in quality to
instruments so rated, or if other outstanding obligations of
the issuers thereof are rated Baa or better by Moody's or
BBB or better by S&P. The balance of the fund's assets may
be invested in securities rated as low as C by Moody's or D
by S&P or have the equivalent rating by any NRSRO, or deemed
by the manager to be comparable unrated securities, which
are sometimes referred to as "junk bonds." Securities in
the fourth highest rating category, though considered to be
investment grade, have speculative characteristics.
Securities rated as low as D are extremely speculative and
are in actual default of interest and/or principal payments.
It should be emphasized that ratings are relative and
subjective and are not absolute standards of quality.
Although these ratings are initial criteria for selection of
portfolio investments, the fund also will make its own
evaluation of these securities. Among the factors that will
be considered are the long-term ability of the issuers to
pay principal and interest and general economic trends.

The value of debt securities varies inversely to changes in
the direction of interest rates. When interest rates rise,
the value of debt securities generally falls, and when
interest rates fall, the value of debt securities generally
rises.

Low and Comparable Unrated Securities. While the market
values of low-rated and comparable unrated securities tend
to react less to fluctuations in interest rate levels than
the market values of higher rated securities, the market
values of certain low-rated and comparable unrated municipal
securities also tend to be more sensitive than higher-rated
securities to short-term corporate and industry developments
and changes in economic conditions (including recession) in
specific regions or localities or among specific types of
issuers, In addition, low-rated securities and comparable
unrated securities generally present a higher degree of
credit risk. During an economic downturn or a prolonged
period of rising interest rates, the ability of issuers of
low-rated and comparable unrated securities to service their
payment obligations, meet projected goals or obtain
additional financing may be impaired. The risk of loss
because of default by such issuers is significantly greater
because low-rated and comparable unrated securities
generally are unsecured and frequently are subordinated to
the prior payment of senior indebtedness. The fund may
incur additional expenses to the extent it is required to
seek recovery upon a default in payment of principal or
interest on its portfolio holdings.

While the market for municipal securities is considered to
be generally adequate, the existence of limited markets for
particular low-rated and comparable unrated securities may
diminish the fund's ability to (a) obtain accurate market
quotations for purposes of valuing such securities and
calculating its net asset value and (b) sell the securities
at fair value either to meet redemption requests or to
respond to changes in the economy or in the financial
markets. The market for certain low-rated and comparable
unrated securities has not fully weathered a major economic
recession. Any such recession, however, would likely disrupt
severely the market for such securities and adversely affect
the value of the securities and the ability of the issuers
of such securities to repay principal and pay interest
thereon.

Fixed-income securities, including low-rated securities and
comparable unrated securities, frequently have call or buy-
back features that permit their issuers to call or
repurchase the securities from their holders, such as the
fund. If an issuer exercises these rights during periods of
declining interest rates, the fund may have to replace the
security with a lower yielding security, thus resulting in a
decreased return to the fund.

Municipal Bonds. tc " Municipal Bonds." Municipal Bonds
generally are understood to include debt obligations issued
to obtain funds for various public purposes, including
construction of a wide range of public facilities, refunding
of outstanding obligations, payment of general operating
expenses and extensions of loans to public institutions and
facilities. Private activity bonds issued by or on behalf
of public authorities to finance various privately operated
facilities are included within the term Municipal Bonds if
the interest paid thereon qualifies as excluded from gross
income (but not necessarily from alternative minimum taxable
income) for federal income tax purposes in the opinion of
bond counsel to the issuer.

The yield on Municipal Bonds is dependent on a variety of
factors, including general economic and monetary conditions,
general money market factors, general conditions of the
Municipal Bond market, the financial condition of the
issuer, the size of a particular offering, maturity of the
obligation offered and the rating of the issue.

Municipal Bonds also may be subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors, such as the federal Bankruptcy
Code, and laws, if any, which may be enacted by Congress or
state legislatures extending the time for payment of
principal or interest, or both, or imposing other
constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The possibility
also exists that, as a result of litigation or other
conditions, the power or ability of any one or more issuers
to pay, when due, the principal of and interest on, its or
their Municipal Bonds may be materially and adversely
affected.

Municipal Leases. The fund may invest without limit in
"municipal leases", which are obligations issued by state
and local governments or authorities to finance the
acquisition of equipment or facilities. The interest on
such obligations is, in the opinion of counsel to the
issuers, excluded from gross income for federal income tax
purposes. Although lease obligations do not constitute
general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation
is ordinarily backed by the municipality's covenant to
budget for, appropriate and make the payments due under the
lease obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment
purchase payments in future years unless money is
appropriated for such purpose on a yearly basis. In
addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not
yet developed the depth of marketability associated with
more conventional bonds. Although "non-appropriation" lease
obligations are often secured by the underlying property,
disposition of the property in the event of foreclosure
might prove difficult. There is no limitation on the
percentage of the fund's assets that may be invested in
municipal lease obligations. In evaluating municipal lease
obligations, the manager will consider such factors as it
deems appropriate, which may include: (a) whether the lease
can be canceled; (b) the ability of the lease obligee to
direct the sale of the underlying assets; (c) the general
creditworthiness of the lease obligor; (d) the likelihood
that the municipality will discontinue appropriating funding
for the leased property in the event such property is no
longer considered essential by the municipality; (e) the
legal recourse of the lease obligee in the event of such a
failure to appropriate funding; (f) whether the security is
backed by a credit enhancement such as insurance; and (g)
any limitations which are imposed on the lease obligor's
ability to utilize substitute property or services rather
than those covered by the lease obligation.

The fund may invest without limit in debt obligations which
are repayable out of revenue streams generated from
economically-related projects or facilities or debt
obligations whose issuers are located in the same state.
Sizeable investments in such obligations could involve an
increased risk to the fund should any of the related
projects or facilities experience financial difficulties.
Private Activity Bonds. The fund may invest without limits
in private activity bonds. Interest income on certain types
of private activity bonds issued after August 7, 1986 to
finance non-governmental activities is a specific tax
preference item for purposes of the federal individual and
corporate alternative minimum taxes. Individual and
corporate shareholders may be subject to a federal
alternative minimum tax to the extent the fund's dividends
are derived from interest on those bonds. Dividends derived
from interest income on Oregon Municipal Securities are a
component of the "current earnings" adjustment item for
purposes of the federal corporate alternative minimum tax.

Zero Coupon Bonds. The fund may also invest in zero coupon
bonds. Zero coupon securities are debt obligations which do
not entitle the holder to any periodic payments of interest
prior to maturity or a specified cash payment date when the
securities begin paying current interest (the "cash payment
date") and therefore are issued and traded at a discount
from their face amounts or par values. The discount varies
depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer.
The discount, in the absence of financial difficulties of
the issuer, decreases as the final maturity or cash payment
date of the security approaches. The market prices of zero
coupon securities generally are more volatile than the
market prices of other debt securities that pay interest
periodically and are likely to respond to changes in
interest rates to a greater degree than do debt securities
having similar maturities and credit quality. The credit
risk factors pertaining to low-rated securities also apply
to low-rated zero coupon bonds. Such zero coupon bonds
carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the fund will
realize no cash until the cash payment date unless a portion
of such securities is sold and, if the issuer defaults, the
fund may obtain no return at all on its investment.

When-Issued Securities. The fund may purchase Municipal
Bonds on a "when-issued" basis (i.e., for delivery beyond
the normal settlement date at a stated price and yield).
The payment obligation and the interest rate that will be
received on the Municipal Bonds purchased on a when-issued
basis are each fixed at the time the buyer enters into the
commitment. Although the fund will purchase Municipal Bonds
on a when-issued basis only with the intention of actually
acquiring the securities, the fund may sell these securities
before the settlement date if it is deemed advisable as a
matter of investment strategy.

Municipal Bonds are subject to changes in value based upon
the public's perception of the creditworthiness of the
issuers and changes, real or anticipated, in the level of
interest rates. In general, Municipal Bonds tend to
appreciate when interest rates decline and depreciate when
interest rates rise. Purchasing Municipal Bonds on a when-
issued basis, therefore, can involve the risk that the
yields available in the market when the delivery takes place
may actually be higher than those obtained in the
transaction itself. To account for this risk, a separate
account of the fund consisting of cash or liquid debt
securities equal to the amount of the when-issued
commitments will be established on the fund's books. For the
purpose of determining the adequacy of the securities in the
account, the deposited securities will be valued at market
or fair value. If the market or fair value of such
securities declines, additional cash or securities will be
placed in the account on a daily basis so the value of the
account will equal the amount of such commitments by the
fund. Placing securities rather than cash in the segregated
account may have a leveraging effect on the fund's net
assets. That is, to the extent the fund remains
substantially fully invested in securities at the same time
it has committed to purchase securities on a when-issued
basis, there will be greater fluctuations in its net assets
than if it had set aside cash to satisfy its purchase
commitments. Upon the settlement date of the when-issued
securities, the fund will meet obligations from then-
available cash flow, sale of securities held in the
segregated account, sale of other securities or, although it
normally would not expect to do so, from the sale of the
when-issued securities themselves (which may have a value
greater or less than the fund's payment obligations). Sales
of securities to meet such obligations may involve the
realization of capital gains, which are not exempt from
federal income taxes or Oregon state personal income tax.

When the fund engages in when-issued transactions, it relies
on the seller to consummate the trade. Failure of the seller
to do so may result in the fund's incurring a loss or
missing an opportunity to obtain a price considered being
advantageous.

Repurchase Agreements. The fund may agree to purchase
securities from a bank or recognized securities dealer and
simultaneously commit to resell the securities to the bank
or dealer at an agreed-upon date and price reflecting a
market rate of interest unrelated to the coupon rate or
maturity of the purchased securities ("repurchase
agreements"). The fund would maintain custody of the
underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price
on the date agreed to would be, in effect, secured by such
securities. If the value of such securities were less than
the repurchase price, plus interest, the other party to the
agreement would be required to provide additional collateral
so that at all times the collateral is at least 102% of the
repurchase price plus accrued interest. Default by or
bankruptcy of a seller would expose the fund to possible
loss because of adverse market action, expenses and/or
delays in connection with the disposition of the underlying
obligations. The financial institutions with which the fund
may enter into repurchase agreements will be banks and non-
bank dealers of U.S. Government securities that are on the
Federal Reserve Bank of New York's list of reporting
dealers, if such banks and non-bank dealers are deemed
creditworthy by the fund's manager. The manager will
continue to monitor creditworthiness of the seller under a
repurchase agreement, and will require the seller to
maintain during the term of the agreement the value of the
securities subject to the agreement to equal at least 102%
of the repurchase price (including accrued interest). In
addition, the manager will require that the value of this
collateral, after transaction costs (including loss of
interest) reasonably expected to be incurred on a default,
be equal to 102% or greater than the repurchase price
(including accrued premium) provided in the repurchase
agreement or the daily amortization of the difference
between the purchase price and the repurchase price
specified in the repurchase agreement. The manager will
mark-to-market daily the value of the securities.
Lending of Portfolio Securities. Consistent with applicable
regulatory requirements, the fund may lend portfolio
securities to brokers, dealers and other financial
organizations that meet capital and other credit
requirements or other criteria established by the Board.
Loans of portfolio securities will be collateralized by
cash, letters of credit or U.S. Government Securities, which
are maintained at all times in an amount equal to at least
102% of the current market value of the loaned securities.
Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be
for the account of the fund. From time to time, the fund
may return a part of the interest earned from the investment
of collateral received for securities loaned to the borrower
and/or a third party that is unaffiliated with the fund and
that is acting as a "finder."
By lending its securities, the fund can increase its income
by continuing to receive interest and any dividends on the
loaned securities as well as by either investing the
collateral received for securities loaned in short-term
instruments or obtaining yield in the form of interest paid
by the borrower when U.S. Government Securities are used as
collateral. Although the generation of income is not the
primary investment goal of the fund, income received could
be used to pay the fund's expenses and would increase an
investor's total return. The fund will adhere to the
following conditions whenever its portfolio securities are
loaned: (i) the fund must receive at least 102% cash
collateral or equivalent securities of the type discussed in
the preceding paragraph from the borrower; (ii) the borrower
must increase such collateral whenever the market value of
the securities rises above the level of such collateral;
(iii) the fund must be able to terminate the loan at any
time; (iv) the fund must receive reasonable interest on the
loan, as well as any dividends, interest or other
distributions on the loaned securities and any increase in
market value; (v) the fund may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on
the loaned securities may pass to the borrower, provided,
however, that if a material event adversely affecting the
investment occurs, the Board must terminate the loan and
regain the right to vote the securities. Loan agreements
involve certain risks in the event of default or insolvency
of the other party including possible delays or restrictions
upon a Fund's ability to recover the loaned securities or
dispose of the collateral for the loan.
Temporary Investments. Under normal market conditions, the
fund may hold up to 20% of its total assets in cash or money
market instruments, including taxable money market
instruments. When the fund is maintaining a defensive
position, the fund may invest in short-term investments
("Temporary Investments") consisting of: (a) tax-exempt
securities in the form of notes of municipal issuers having,
at the time of purchase, a rating within the three highest
grades of Moody's, S&P or the equivalent rating from an
NRSRO or, if not rated, having an issue of outstanding
Municipal Bonds rated within the three highest grades by
Moody's, S&P or the equivalent rating from an NRSRO; and (b)
the following taxable securities: obligations of the United
States government, its agencies or instrumentalities ("U.S.
government securities"), repurchase agreements, other debt
securities rated within the three highest grades by Moody's,
S&P or the equivalent rating from an NRSRO, commercial paper
rated in the highest grade by any of such rating services,
and certificates of deposit of domestic banks with assets of
$1 billion or more. The fund may invest in Temporary
Investments for defensive reasons in anticipation of a
market decline. At no time will more than 20% of the fund's
total assets be invested in Temporary Investments unless the
fund has adopted a defensive investment policy. The fund
intends, however, to purchase tax-exempt Temporary
Investments pending the investment of the proceeds of the
sale of portfolio securities or shares of the fund's common
stock, or in order to have highly liquid securities
available to meet anticipated redemptions.

Financial Futures and Options Transactions. The fund may
enter into financial futures contracts and invest in options
on financial futures contracts that are traded on a domestic
exchange or board of trade. Such investments, if any, by
the fund will be made solely for the purpose of hedging
against changes in the value of portfolio securities due to
anticipated changes in interest rates and market conditions
and where the transactions are economically appropriate to
the reduction of risks inherent in the management of the
fund. The futures contracts or options on futures contracts
that may be entered into by the fund will be restricted to
those that are either based on a municipal bond index or
related to debt securities, the prices of which are
anticipated by the manager to correlate with the prices of
the Oregon Municipal Securities owned or to be purchased by
the fund.

In entering into a financial futures contract, the fund will
be required to deposit with the broker through which it
undertakes the transaction an amount of cash or cash
equivalents equal to approximately 5% of the contract
amount. This amount, which is known as "initial margin," is
subject to change by the exchange or board of trade may
charge a higher amount. Initial margin is in the nature of
a performance bond or good faith deposit on the contract
that is returned to the fund upon termination of the futures
contract, assuming all contractual obligations have been
satisfied. In accordance with a process known as "marking-
to-market," subsequent payments, known as "variation
margin," to and from the broker will be made daily as the
price of the index or securities underlying the futures
contract fluctuates, making the long and short positions in
the futures contract more or less valuable. At any time
prior to the expiration of a futures contract, the fund may
elect to close the position by taking an opposite position,
which will operate to terminate the fund's existing position
in the contract.

A financial futures contract provides for the future sale by
one party and the purchase by the other party of a certain
amount of a specified property at a specified price, date,
time and place. Unlike the direct investment in a futures
contract, an option on a financial futures contract gives
the purchaser the right, in return for the premium paid, to
assume a position in the financial futures contract at a
specified exercise price at any time prior to the expiration
date of the option. Upon exercise of an option, the
delivery of the futures position by the writer of the option
to the holder of the option will be accompanied by delivery
of the accumulated balance in the writer's futures margin
account, which represents the amount by which the market
price of the futures contract exceeds, in the case of a
call, or is less than, in the case of a put, the exercise
price of the option in the futures contract. The potential
loss related to the purchase of an option on financial
futures contracts is limited to the premium paid for the
option (plus transaction costs). The value of the option
may change daily and that change would be reflected in the
next asset value of the fund.

Regulations of the Commodity Futures Trading Commission
applicable to the fund require that its transactions in
financial futures contracts and options on financial futures
contracts be engaged in for bona fide hedging purposes, or
if the fund enters into futures contracts for speculative
purposes, that the aggregate initial margin deposits and
premiums paid by the fund will not exceed 5% of the market
value of its assets. In addition, the fund will, with
respect to its purchases of financial futures contracts,
establish a segregated account consisting of cash or cash
equivalents in an amount equal to the total market value of
the futures contracts, less the amount of initial margin on
a deposit for the contracts.

Municipal Bond Index Futures Contracts. A municipal bond
index futures contract is an agreement pursuant to which two
parties agree to take or make delivery of an amount of cash
equal to a specific dollar amount multiplied by the
difference between the value of the index at the close of
the last trading day of the contract and the price at which
the index contract was originally written. No physical
delivery of the underlying municipal bonds in the index is
made. Municipal bond index futures contracts based on an
index of 40 tax-exempt, long-term municipal bonds with an
original issue size of at least $50 million and a rating of
A- or higher by S&P or A or higher by Moody's began trading
in mid-1985. The purpose of the acquisition or sale of a
municipal bond index futures contract by the fund, as the
holder of long-term municipal securities, is to protect the
fund from fluctuations in interest rates on tax-exempt
securities without actually buying or selling long-term
municipal securities.

There are several risks in connection with the use of
futures contracts as a hedging device. Successful use of
futures contracts by the fund is subject to the manager's
ability to predict correctly movements in the direction of
interest rates. Such predictions involve skills and
techniques which may be different from those involved in the
management of a long-term municipal bond portfolio. In
addition, there can be no assurance that there will be a
correlation between movements in the price of the municipal
bond index and movements in the price of the Municipal Bonds
which are the subject of the hedge. The degree of
imperfection of correlation depends upon various
circumstances, such as variations in speculative market
demand for futures contracts and municipal securities,
technical influences on futures trading, and differences
between the municipal securities being hedged and the
municipal securities underlying the futures contracts, in
such respects as interest rate levels, maturities and
creditworthiness of issuers. A decision of whether, when and
how to hedge involves the exercise of skill and judgment and
even a well-conceived hedge may be unsuccessful to some
degree because of market behavior or unexpected trends in
interest rates.
Although the fund intends to purchase or sell futures
contracts only if there is an active market for such
contracts, there is no assurance that a liquid market will
exist for the contracts at any particular time. Most
domestic futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the
maximum amount the price of a futures contract may vary
either up or down from the previous day's settlement price
at the end of a trading session. Once the daily limit has
been reached in a particular contract, no trades may be made
that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day
and, therefore, does not limit potential losses because the
limit may prevent the liquidation of unfavorable positions.
It is possible that futures contract prices could move to
the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation
of futures positions and subjecting some futures traders to
substantial losses. In such event, it will not be possible
to close a futures position and, in the event of adverse
price movements, the fund would be required to make daily
cash payments of variation margin. In such circumstances,
an increase in the value of the portion of the portfolio
being hedged, if any, may partially or completely offset
losses on the futures contract. As described above, however,
there is no guarantee that the price of Municipal Bonds
will, in fact, correlate with the price movements in the
municipal bond index futures contract and thus provide an
offset to losses on a futures contract.

If the fund has hedged against the possibility of an
increase in interest rates adversely affecting the value of
the Municipal Bonds held in its portfolio and rates decrease
instead, the fund will lose part or all of the benefit of
the increased value of the Municipal Bonds it has hedged
because it will have offsetting losses in its futures
positions. In addition, in such situations, if the fund has
insufficient cash, it may have to sell securities to meet
daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased
prices which reflect the decline in interest rates. The fund
may have to sell securities at a time when it may be
disadvantageous to do so.

When the fund purchases municipal bond index futures
contracts, an amount of cash and U.S. government securities
or other high grade debt securities equal to the market
value of the futures contracts will be deposited in a
segregated account with the fund's custodian (and/or such
other persons as appropriate) to collateralize the positions
and thereby insure that the use of such futures contracts is
not leveraged. In addition, the ability of the fund to trade
in municipal bond index futures contracts and options on
interest rate futures contracts may be materially limited by
the requirements of the Code applicable to a regulated
investment company. See "Taxes."

Options on Financial Futures Contracts. The fund may
purchase put and call options on futures contracts which are
traded on a domestic exchange or board of trade as a hedge
against changes in interest rates, and may enter into
closing transactions with respect to such options to
terminate existing positions. The fund will sell put and
call options on interest rate futures contracts only as part
of closing sale transactions to terminate its options
positions. There is no guarantee that such closing
transactions can be effected.

Options on futures contracts, as contrasted with the direct
investment in such contracts, gives the purchaser the right,
in return for the premium paid, to assume a position in
futures contracts at a specified exercise price at any time
prior to the expiration date of the options. Upon exercise
of an option, the delivery of the futures position by the
writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the
writer's futures contract margin account, which represents
the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case
of a put, the exercise price of the option on the futures
contract. The potential loss related to the purchase of an
option on interest rate futures contracts is limited to the
premium paid for the option (plus transaction costs).
Because the value of the option is fixed at the point of
sale, there are no daily cash payments to reflect changes in
the value of the underlying contract; however, the value of
the option does change daily and that change would be
reflected in the net asset value of the fund

There are several risks relating to options on futures
contracts. The ability to establish and close out positions
on such options will be subject to the existence of a liquid
market. In addition, the fund's purchase of put or call
options will be based upon predictions as to anticipated
interest rate trends by the manager, which could prove to be
inaccurate. Even if the manager's expectations are correct
there may be an imperfect correlation between the change in
the value of the options and of the fund's portfolio
securities.

Other Investments. The fund may invest up to an aggregate
of 15% of its total assets in securities with contractual or
other restrictions on resale and other instruments which are
not readily marketable. The fund also is authorized to
borrow an amount of up to 10% of its total assets (including
the amount borrowed) valued at market less liabilities (not
including the amount borrowed) in order to meet anticipated
redemptions and to pledge its assets to the same extent in
connection with the borrowings.

INVESTMENT RESTRICTIONS

The fund has adopted the following investment restrictions
for the protection of shareholders. Restrictions 1 through
7 cannot be changed without approval by the holders of a
majority of the outstanding shares of the fund, defined as
the lesser of (a) 67% of the fund's shares present at a
meeting if the holders of more than 50% of the outstanding
shares of the fund are present or represented by proxy or
(b) more than 50% of the fund's outstanding shares. The
remaining restrictions may be changed by the board of
trustees at any time. The fund may not:

1. Issue "senior securities" as defined in the 1940 Act
and the rules, regulations and orders thereunder,
except as permitted under the 1940 Act and the rules,
regulations and orders thereunder

2. Invest more than 25% of its total assets in
securities, the issuers of which are in the same
industry. For purposes of this limitation, U.S.
government securities and securities of state or
municipal governments and their political subdivisions
are not considered to be issued by members of any
industry.

3. Borrow money, except that (a) the fund may borrow
from banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests
which might otherwise require the untimely disposition
of securities, and (b) the fund may, to the extent
consistent with its investment policies, enter into
reverse repurchase agreements, forward roll
transactions and similar investment strategies and
techniques. To the extent that it engages in
transactions described in (a) and (b), the fund will be
limited so that no more than 33 1/3% of the value of
its total assets (including the amount borrowed),
valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) valued
at the time the borrowing is made, is derived from such
transactions.

4. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may
invest consistent with its investment objectives and
policies; (b) repurchase agreements; and (c) loans of
its portfolio securities, to the fullest extent
permitted under the 1940 Act.

5. Engage in the business of underwriting securities
issued by other persons, except to the extent that the
fund may technically be deemed to be an underwriter
under the Securities Act of 1933, as amended, in
disposing of portfolio securities.

6. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this
restriction shall not prevent the fund from (a)
investing in securities of issuers engaged in the real
estate business or the business of investing in real
estate (including interests in limited partnerships
owning or otherwise engaging in the real estate
business or the business of investing in real estate)
and securities which are secured by real estate or
interests therein; (b) holding or selling real estate
received in connection with securities it holds or
held; (c) trading in futures contracts and options on
futures contracts (including options on currencies to
the extent consistent with the fund's investment
objective and policies); or (d) investing in real
estate investment trust securities.

7. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance
of purchases and sales of portfolio securities) or sell
any securities short (except "against the box"). For
purposes of this restriction, the deposit or payment by
the fund of underlying securities and other assets in
escrow and collateral agreements with respect to
initial or maintenance margin in connection with
futures contracts and related options and options on
securities, indexes or similar items is not considered
to be the purchase of a security on margin.

8. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be
invested in securities that are illiquid.

9. Purchase or sell oil and gas interests.

10. Invest more than 5% of the value of its total assets
in the securities of issuers having a record,
including predecessors, of less than three years of
continuous operation, except U.S. government
securities. (For purposes of this restriction,
issuers include predecessors, sponsors, controlling
persons, general partners, guarantors and originators
of underlying assets.)

11. Invest in companies for the purpose of exercising
control.

12. Invest in securities of other investment companies,
except as they may be acquired as part of a merger,
consolidation or acquisition of assets and except to
the extent permitted by Section 12 of the 1940 Act
(currently, up to 5% of the total assets of the fund
and no more than 3% of the total outstanding voting
stock of any one investment company).

13. Engage in the purchase or sale of put, call, straddle
or spread options or in the writing of such options,
except that the fund may engage in transactions
involving municipal bond index and interest rate
futures contracts and options thereon after approval
of these investment strategies by the board of
trustees and notice thereof to the fund's
shareholders.

If a percentage restriction is complied with at the time of
an investment, a later increase or decrease in the
percentage of assets resulting from a change in the values
of portfolio securities or in the amount of the fund's
assets will not constitute a violation of such restriction.
In order to permit the sale of the fund's shares in certain
states, the fund may make commitments more restrictive than
the restrictions described above. Should the fund determine
that any such commitment is no longer in the best interests
of the fund and its shareholders, it will revoke the
commitment by terminating sales of its shares in the state
involved.

Certain restrictions listed above permit the fund to engage
in investment practices that the fund does not currently
pursue. The fund has no present intention of altering its
current investment practices as otherwise described in the
prospectus and this SAI and any future change in those
practices would require Board approval and appropriate
notice to shareholders. If a percentage restriction is
complied with at the time of an investment, a later increase
or decrease in the percentage of assets resulting from a
change in the values of portfolio securities or in the
amount of the fund's assets will not constitute a violation
of such restriction.

For the purposes of Investment Restriction 3, private
activity bonds, where the payment of principal and interest
is the ultimate responsibility of companies within the same
industry, are grouped together as an "industry."

RISK FACTORS

Alternative Minimum Tax

Under current federal income tax law, (1) interest on tax-
exempt municipal securities issued after August 7, 1986
which are "specified private activity bonds," and the
proportionate share of any exempt-interest dividend paid by
a regulated investment company which receives interest from
such specified private activity bonds, will be treated as an
item of tax preference for purposes of the alternative
minimum tax ("AMT") imposed on individuals and corporations,
though for regular Federal income tax purposes such interest
will remain fully tax-exempt, and (2) interest on all tax-
exempt obligations will be included in "adjusted current
earnings" of corporations for AMT purposes. Such private
activity bonds ("AMT-Subject bonds"), which include
industrial development bonds and bonds issued to finance
such projects as airports, housing projects, solid waste
disposal facilities, student loan programs and water and
sewage projects, have provided, and may continue to provide,
somewhat higher yields than other comparable municipal
securities.

Investors should consider that, in most instances, no state,
municipality or other governmental unit with taxing power
will be obligated with respect to AMT-Subject bonds. AMT-
Subject bonds are in most cases revenue bonds and do not
generally have the pledge of the credit or the taxing power,
if any, of the issuer of such bonds. AMT-Subject bonds are
generally limited obligations of the issuer supported by
payments from private business entities and not by the full
faith and credit of a state or any governmental subdivision.
Typically the obligation of the issuer of AMT-Subject bonds
is to make payments to bond holders only out of and to the
extent of, payments made by the private business entity for
whose benefit the AMT-Subject bonds were issued. Payment of
the principal and interest on such revenue bonds depends
solely on the ability of the user of the facilities financed
by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide
specific detail on each of these obligations in which Fund
assets may be invested.

Risk of Concentration In a Single State

The primary purpose of investing in a portfolio of a single
state's municipal securities is the special tax treatment
accorded the state's resident individual investors.
However, payment of interest and preservation of principal
is dependent upon the continuing ability of the state's
issuers and/or obligors on state, municipal and public
authority debt obligations to meet their obligations
thereunder. Investors should be aware of certain factors
that might affect the financial condition of issuers of
municipal securities, consider the greater risk of the
concentration of a fund versus the safety that comes with a
less concentrated investment portfolio and compare yields
available in portfolios of the relevant state's issues with
those of more diversified portfolios, including out-of-state
issues, before making an investment decision.

Municipal securities in which a fund's assets are invested
may include debt obligations of the municipalities and other
subdivisions of the relevant state issued to obtain funds
for various public purposes, including the construction of a
wide range of public facilities such as airports, bridges,
highways, schools, streets and water and sewer works. Other
purposes for which municipal securities may be issued
include the obtaining of funds to lend to public or private
institutions for the construction of facilities such as
educational, hospital, housing, and solid waste disposal
facilities. The latter, including most AMT-Subject bonds,
are generally payable from private sources which, in varying
degrees, may depend on local economic conditions, but are
not necessarily affected by the ability of the state and its
political subdivisions to pay their debts. It is not
possible to provide specific details on each of these
obligations in which fund assets may be invested. However,
all such securities, the payment of which is not a general
obligation of an issuer having general taxing power, must
satisfy, at the time of an acquisition by the fund, the
minimum rating(s). See "Appendix A: Bond and Commercial
Paper Ratings" for a description of ratings and rating
criteria. Some municipal securities may be rated based on a
"moral obligation" contract which allows the municipality to
terminate its obligation by deciding not to make an
appropriation. Generally, no legal remedy is available
against the municipality that is a party to the "moral
obligation" contract in the event of such non-appropriation.

Municipal Market Volatility. Municipal securities can be
significantly affected by political changes as well as
uncertainties in the municipal market related to taxation,
legislative changes, or the rights of municipal security
holders. Because many municipal securities are issued to
finance similar projects, especially those relating to
education, health care, transportation and utilities,
conditions in those sectors can affect the overall municipal
market. In addition, changes in the financial condition of
an individual municipal insurer can affect the overall
municipal market.

Interest Rate Changes. Debt securities have varying levels
of sensitivity to changes in interest rates. In general, the
price of a debt security can fall when interest rates rise
and can rise when interest rates fall. Securities with
longer maturities can be more sensitive to interest rate
changes. In other words, the longer the maturity of a
security, the greater the impact a change in interest rates
could have on the security's price. In addition, short-term
and long-term interest rates do not necessarily move in the
same amount or the same direction. Short-term securities
tend to react to changes in short-term interest rates, and
long-term securities tend to react to changes in long-term
interest rates.

Issuer-Specific Changes. Changes in the financial condition
of an issuer, changes in specific economic or political
conditions that affect a particular type of security or
issuer, and changes in general economic or political
conditions can affect the credit quality or value of an
issuer's securities. Lower-quality debt securities (those of
less than investment-grade quality) tend to be more
sensitive to these changes than higher-quality debt
securities. Entities providing credit support or a maturity-
shortening structure also can be affected by these types of
changes. Municipal securities backed by current or
anticipated revenues from a specific project or specific
assets can be negatively affected by the discontinuance of
the taxation supporting the project or assets or the
inability to collect revenues for the project or from the
assets. If the Internal Revenue Service determines an issuer
of a municipal security has not complied with applicable tax
requirements, interest from the security could become
taxable and the security could decline significantly in
value. In addition, if the structure of a security fails to
function as intended, interest from the security could
become taxable or the security could decline in value.

SPECIAL CONSIDERATIONS RELATING TO OREGON MUNICIPAL
SECURITIES

Some of the significant financial considerations relating to
the fund's investments in Oregon Exempt Obligations are
summarized below. This summary information is derived
principally from official statements and prospectuses
relating to securities offerings of the State of Oregon and
various local agencies in Oregon, available as of the date
of this SAI and does not purport to be a complete
description of any of the considerations mentioned herein.
The accuracy and completeness of the information contained
in such official statements and disclosure statement has not
been independently verified. The fund has not undertaken to
verify independently such information and the fund assumes
no responsibility for the accuracy of such information.

Oregon Economic Review and Forecast

Oregon's economy picked up modestly in the fourth quarter,
following a very weak third quarter. Similar to the nation
as a whole, consumers are the primary catalysts for growth
in the state. Oregon's manufacturing and resource industries
are still clearly feeling the effects of falling exports to
Asia.

The Oregon Employment Department conducts an annual revision
of employment data. This revision updates previous monthly
estimates. The preliminary figures put state job growth at
2.7% for 1998. The new 1998-benchmarked employment figures
show job growth of 2.0%. This revised figure is much lower
than the 3.5% growth in 1997.

The revised 1998 job growth figure is lower than the growth
for the U.S. as a whole. As a result, 1998 ends a run where
Oregon's job growth surpassed that of the nation as a whole.

Jobs grew 2.3% in the fourth quarter. This followed a 1.1%
increase in the prior quarter. The vast bulk of the increase
occurred in three sectors: local government, services, and
communication and utilities. Retail trade grew close to the
overall average at 2.2%.

The slower job growth in Oregon is attributable to the
disproportionate impact of declining exports to Asia. This
can be seen by looking at job growth rankings for major
sectors. Oregon ranks relatively high in employment growth
for government, services and trade. These sectors are
closely linked to consumer income and spending. They are
only indirectly tied to exports. Manufacturing employment
trends are much more indicative of the Asian impact. Oregon
ranks 40th in manufacturing job growth over the past year.
Based on the bench marked data, Oregon is likely ranked
lower than 9th among states. The rankings by sector would
still show the relative strengths and weaknesses.

Another factor slowing the Oregon economy is the maturation
of the construction sector. This sector grew very rapidly
throughout most of the 1990s. The growth occurred in both
residential and nonresidential construction. Job growth has
flattened out over the past year. Construction employment
inched up at 0.6% annual rate in the fourth quarter. Oregon
now ranks 38th among the states in construction job growth
for the twelve months ending in November.
Based on preliminary estimates, housing starts totaled
25,100 in Oregon for 1998. This is down slightly from 25,600
in 1997.

Local government employment jumped 11.9% (annual rate) in
the fourth quarter. Some of this gain is due to temporary
hiring of election workers in November. Data for December
provides a more accurate picture of the trend. Local
government jobs have grown 4.6% over the 12-month period
ending in December. This represents an increase of 7,700.
Public education employment accounts for 3,200 of the
increase. Other local government rose 4,200. Tribal
employment also included in this category, rose 300.

Service employment increased at a strong 5.2% annual rate in
the fourth quarter. This sector accounted for 14,600 of the
22,700 increase in Oregon payroll employment between
December 1997 and December 1998. Within this category, the
largest gains have come in health services (3,400), social
services (2,800), private education (2,500), and business
services (2,000).
Oregon consumers have benefited from the same factors that
are influencing the rest of the nation. These factors are
low inflation, capital gains from the stock market, and low
interest rates. Oregon's December unemployment rate was
5.5%. This compares to 4.3% for the nation. Nonetheless, the
state's labor markets are relatively strong, especially in
the metropolitan areas. Retail trade employment data
indicates a moderately strong Christmas season. Retail trade
rose at a 2.2% rate. December retail trade jobs were 3,500
more than the previous December.

A different picture emerges from data on state exports and
manufacturing activity. Third quarter exports were 14.9%
below the same period in 1997. Oregon exporters continue to
suffer from declining sales to Japan. Japanese exports fell
15.9% in the third quarter compared to the third quarter of
1997. Exports to Canada, Oregon's largest market, only grew
by 1.5%, much slower than the double digit year over year
increases in the previous six quarters.
Manufacturing employment declined at a 4.4% annual rate in
the fourth quarter. This follows a decline of 5.9% in the
third quarter. Declining forest product exports helped push
lumber and wood products jobs down 3.3% for the fourth
quarter. Weak agricultural markets contributed to an 8.4%
decline in food processing jobs. The losses were broad
based, with durable goods producers cutting back at a 4.8%
rate and nondurable goods industries decreasing 3.3%.

Weak world markets and general excess capacity have been
major factors forcing job reductions in Oregon's high
technology manufacturing sector. Declines continued in the
fourth quarter. The electronics industry (including
semiconductors) fell at an 8.8% annual rate. Nonelectrical
machinery, a combination of high technology and traditional
industries, fell at a 9.9% annual rate in the fourth
quarter. Scientific instrument manufacturing jobs decreased
at an 8.6% annual rate.

As was the case in the third quarter, the only major
manufacturing industry in the state to post sizeable gains
was transportation equipment. This sector was benefited from
strong heavy truck and recreational vehicle demand. These
industries are not closely linked to Asian markets. The
Aerospace component of the industry does have strong ties to
Asia, but layoffs in this industry have not yet shown up in
the data.

The December forecast projected job growth of 1.4% in the
fourth quarter. The 1998-benchmarked actual rate of growth
was 2.3%. Local government employment growth of 11.9%
exceeded the forecast growth of 6.4%. Service employment
growth of 5.2% is over the forecast of 2.9%. Retail trade
employment growth of 2.2% about matched the forecast of
2.1%. On the other hand, manufacturing employment growth
declined 4.4%, lower than the forecast decline of 2.0%.

Short-Term Outlook

Overview. The economy appears to have bottomed out in the
second half of 1998. The Office of Economic Analysis (OEA)
forecasts continued sluggishness for the Oregon economy
through the first quarter of 1999. A modest acceleration is
anticipated for the rest of the year. Higher growth is
expected for 2000. Oregon manufacturers and farmers face
soft, though moderately improving, demand through much of
1999. An Asian rebound, expected in the second half of 1999,
should bring recovery to Oregon's goods producing sectors in
2000. Industries with strong links to the consumer sector
should continue to grow through 2000, though the rate of
increase is expected to slow.

OEA projects job growth of 1.9% for Oregon in 1999. This
compares with 1.5% growth projected for the nation as a
whole. Oregon's projected job growth rate would be the
lowest since 1992, the slow growth year after the last
national recession of 1991. State employment growth is
expected to pick up to 2.3% in 2000.

The impetus for continued growth in Oregon will be local and
national consumer spending. Both are expected to slow from
the rapid pace of 1998. Nonetheless, spending should
continue to rise faster than the projected low inflation
rate. Local consumer spending will fuel job growth in the
state's retain and service sectors. National consumer
demand, particularly from Oregon, should cushion the effects
of soft world demand on Oregon's manufacturers.
The preliminary estimate for 1998 personal income growth in
Oregon is 4.7%, slower than the national estimate of 5.0%.
Oregon's growth rate is projected to be 4.9% in 1999. This
is higher than the U.S. forecast of 4.6%. However, on a per
capita basis, Oregon income growth is projected to be 3.4%
compared to 3.7% for the U.S. Oregon's higher population
growth projection accounts for the difference.

Forecast Changes. The Oregon forecast is little changed from
December. Employment is essentially unchanged in 1999, but
the comparison of levels is distorted by the revised
benchmark data for 1998. The slightly higher forecast for
1999 is a modest increase compared to 1998, primarily due to
the stronger fourth quarter numbers.

After 1999, employment levels are slightly higher than the
December projection. This primarily reflects an expected
upturn in the national job forecast.

The personal income forecast for 1999 and 2000 is up
modestly compared to December. This reflects a stronger
national income forecast. Inflation adjusted income is 0.4
and 1.0% higher than the previous forecast for 1999 and
2000, respectively.

The state housing outlook is stronger than the previous
forecast. Housing starts are projected to be 24,400 for
1999. This is 5.8% higher than the December forecast. The
new forecast reflects the continued impact of rising home
affordability. Housing price inflation in the state is
finally slowing. Preliminary figures for the Repeat Purchase
Housing Index show prices rose only 4.2% in 1998. They are
forecast to increase 4.4% in 1999.

Personal Income Components. The third and final installment
of the minimum wage
increase occurred on January 1, 1999. Minimum wages are now
$6.50, the highest
in the nation. Because of this increase, wages are expected
to increase 3.8% in 1999, slightly faster than in 1998.
Manufacturing wages increased an estimated 5.2% in 1998.
They are forecast to grow 4.2% in 1999. The slowdown in
growth is due to lower profits for the states' major high-
tech employers which should result in smaller bonus payments
to workers. Labor markets in this sector should also soften
with the cutbacks in employment.

Service sector wages are expected to rebound in 1999,
growing 4.0%. Part of the rebound is due to the increase in
the minimum wage. In addition, consumer spending is now
driving the economy. As a result, rapid growth in this
sector will continue to push wages higher as employers
compete for workers. Strength in the housing markets will
keep construction jobs at high levels, also pushing up wages
in this category.

Total wage and salary income is forecast to grow 5.7% in
1999, the same rate as the nation. This compares with 5.6%
growth in 1998. Wage growth is expected to increase further
in 2000.

Nonfarm proprietor's income is forecast to slow to 4.9% in
1999. This is the result of the slowing economy. Farm
proprietor's income is expected to rise in 1999. The
increase is based upon assumptions about increasing
commodity prices. Income in this sector has been at very
depressed levels in recent years.

Dividend, interest, and rent income grew only 3.0% in 1998.
It is forecast to rise 3.6% in 1999. This is the result of
low short term interest rates. While lower interest rates
stimulate the economy, they also reduce income flows from
savings. With regard to income, retirees tend to be the
group most impacted by changes in interest rates.

Goods-Producing Sectors. The declines in Oregon's high
technology and timber industry will reduce employment in the
manufacturing sector by 2,800 in 1999. This is a decline of
1.1%. A mild strengthening is forecast for 2000.

High tech employment will decline by 1.3% in 1999. This year
over year decline is due to weakened demand and over-
capacity in the industry. However, the industry bottomed out
at the end of 1998. A recovery in the 2nd quarter and
through the rest of 1999 will not bring employment back to
early 1998 levels. Thus, while we see a decline on a yearly
basis, high tech should increase employment by 300 jobs in
1999.

Low demand and price competition continues to depress
Oregon's timber industry.
The sector is forecast to shrink an additional 2.3% in 1999
and 0.7% in 2000. This will lower the number of jobs in the
industry from 50,300 in 1998 to 48,800 in 2000.

Job losses are also forecast for the metals industry and
food products industries. Similar to high tech, the food
products industries will see modest employment gains in
1999. The one manufacturing sector continuing to expand is
transportation equipment. A gain of 900 jobs is forecast for
1999.

Service-Producing Sectors. The driving force behind Oregon's
economy in 1999 will be the consumer. In 1999, consumer
spending is expected to slow from the very high rate of
1998. It is expected to grow at about the same pace as
income. As a result, service sector jobs are forecast to
increase 4.5% in 1999. This is on top of 3.5% gains in 1998.
Most of the growth will be in the non-health service
industries, which will increase 4.8% in 1999.

Jobs in the state's trade industry are expected to rise at
the same pace as overall employment in the state. Wholesale
trade employment will increase 1.4% in 1999. Retail trade
jobs will increase 1.8%.

Finance, insurance and real estate jobs will increase 1.0%
in 1999. This sector was essentially flat in 1998.

OEA forecasts a 1.9% increase in overall government
employment in 1999. Local governments, the largest component
of government jobs in the state, will increase payrolls by
3,200, a 1.9% increase. A large reason for this increase is
the expansion in tribal government employment. State jobs
will increase 3.6%. Federal government jobs are expected to
decline slightly.

Forecast Risks. The major risk to the forecast is a change
in consumer spending patterns. A high level of capital gains
income and high consumer confidence has fueled the recent
surge in spending. If the stock market experiences a sharp
correction or consumer confidence is shaken, spending habits
could suddenly change. Since consumers are the driving force
behind economic growth in the U.S. and in Oregon, the impact
on the economy would be pronounced. In Oregon this would
impact both goods producers selling to the national market
and local retailers. A second risk is further turmoil in
world economic markets. If the troubles in Brazil spread,
then demand for Oregon products could be reduced. If Asian
markets experience further financial problems or take
significantly longer to recover than expected, this would
have a negative impact on Oregon's manufacturing industry.

Extended Outlook. Oregon's economy has grown relatively
faster than the nation throughout the 1990s. OEA expects
Oregon to remain a high growth state in the future. The
state is forecast to increase from 1.14% of the U.S. in 1998
to 1.23% in 2005.

The key factors that will fuel the state's growth long term
are:

1. Export Rebound: The Asian countries are expected to begin
to grow again in
late 1999 and 2000. This will fuel demand for Oregon
products. The trend toward a lower dollar will benefit
Oregon exporters as well.

2. Recovery in the semiconductor industry: Increasing demand
for computers and an increase in orders should eliminate the
excess capacity in the industry by late 1999. The strength
in the industry will allow previously announced investment
plans in the state to be carried out in the 2000-2005
period.

3. Rising commodity prices: Agricultural and timber
producers in the state will benefit from a turn-around in
commodity prices. This will spur higher income and job
growth for these large sectors of the economy.

Litigation

The following summary of litigation relates to matters as to
which the State of Oregon is a party and as to which the
State of Oregon has indicated that the individual claims
against the State exceed $5 million. Other litigation may
exist with respect to individual municipal issuers as to
which the State of Oregon is not a party, but which, if
decided adversely, could have a materially adverse effect on
the financial condition of the individual municipal issuer.

Refund of Workers' Compensation Moneys from the General
Fund: Alsea Veneer, Inc. et al v. State of Oregon, et al
ABC Roofing Co., Inc., et al v. State of Oregon, et al Two
companion class actions were filed in September 1998 by
Workers' Compensation policyholders insured by the State
Accident Insurance Fund Corporation ("SAIF"). The plaintiffs
sought damages based on the Oregon Legislative Assembly's
1983 transfer of $81 million in surplus reserves from the
Industrial Accident Fund to the State general fund under
Oregon laws 1982 (Special Session 3) chapter 2. Because both
cases were brought on behalf of the same class of employer-
policyholders, the combined maximum claims in both cases
could not exceed $81 million, plus interest and attorney
fees.

On November 19, 1993, the Oregon Supreme Court issued on
opinion ruling against the State and holding that the State
must return to the Industrial Accident Fund the $81 million
that the legislature transferred to the General Fund. The
Supreme Court remanded the case to the trial court to
fashion a decree based on evidence of what SAIF would have
done with the money if the money had been available to SAIF.

On remand, the trial court ordered the State to return the
$81 million to SAIF, with interest at the rate Industrial
Accident Fund investments have earned since July 1, 1982.
Initial estimates indicate that the amount of principal and
interest owing under the court's ruling will be
approximately $280 million.

The parties drafted a proposal settlement agreement, which
the court approved on February 26, 1996. Under the
agreement, the State is obligated to pay a total of $225
million. Of that amount, $145 million has been paid and an
additional $80 million will be payable at the end of the
1999 legislative session. If the State fails to appropriate
the required amounts, the State will be in breach of the
agreement and subject to additional court action from the
plaintiffs.

Taxation of Federal Retiree Pension Benefits. On June 18,
1998, in Vogl v. Dept. of Rev., 327 Or 193 (1998), the
Oregon Supreme Court decided several cases on appeals from
cases filed in the Tax Court and Multnomah County Circuit
Court. The federal retiree plaintiffs in those consolidated
cases claimed that the benefits paid to State retirees under
Oregon laws 1995, Chapter 569, were, in effect, tax rebates
and discriminatory in violation of the U.S. Supreme Court's
ruling in Davis v. Michigan Dept. of Treasury under
principles of intergovernmental tax immunity.

In Vogl, the court held that Oregon Laws 1995, Chapter 569,
provides a benefit increase to PERS retirees that "generally
replicates the effect of a tax rebate" and that, under
principles of intergovernmental tax immunity, the federal
retirees are entitled to an equivalent tax benefit. The Vogl
court expressly declined to overrule its earlier decision in
Ragsdale v. Dept. of Rev., 321 Or 216, cert denied, 516 US
1011 (1995) (Ragsdale II), which denied a federal retiree's
tax refund claim based on payment of benefits to PERS
recipients, pursuant to Oregon Laws 1991, Chapter 796. The
court distinguished the 1991 and 1995 benefit payments,
concluding that the 1991 benefits were less closely
connected with the tax paid by the State retirees than were
the 1995 benefits.

The Oregon Department of Revenue estimates that the amount
of General Fund tax money to be paid eventually to federal
retirees pursuant to the court's decision in Vogl, as
reported to the State Economist in October 1998, could be as
much as $410 million.

Bibeau v. Pacific NW Research. This is a federal court class
action suit that has been brought on behalf of inmates and
their families for injuries the inmates sustained in
radiation experiments to which the inmates were subjected in
the 1960s and 1970s. The former head of the medical services
for the Oregon State Police is named as one of the
defendants in the suit. The plaintiffs seek $250 million in
damages. Although it is unlikely that they will recover the
full amount sought, it is too early to provide an accurate
measure of the damages which plaintiffs may reasonably
recover at this stage of the case.
The State has tendered its defense to the insurance company
that provided coverage to the State in the relevant time
frame. Defenses based on statutes of limitation and ultimate
repose were asserted on behalf of the State. The court
granted the State's motion for summary judgment and
dismissed the case based on the statute of limitations. The
plaintiffs have appealed the trial court's decision to the
Ninth Circuit Court of Appeals. The Court of Appeals heard
oral arguments on September 15, 1998.

Kinross Copper Corp. v. State. An inverse condemnation case
has been filed against the State, which involves the denial
of a permit, by the State's Environmental Quality Commission
("EQC"). The Kinross Copper Corporation acquired land for
the purpose of mining copper. As part of the minimum
operations, the company intended to dig a huge pit for which
a wastewater discharge permit is required. The EQC denied
the company's request for a permit based upon an
administrative rule that prohibits the issuance of a waste
water discharge permit in the area where the copper mine
would be located because of the area's proximity to a river
that supplies drinking water for the City of Salem, Oregon
and other communities. The company alleges a "taking" by the
State of the company's property and damages of $32 million
as the amount of money it would have earned if the company
had been granted a permit and allowed to operate a mine. The
State asserts that because the administrative rule
prohibiting the issuance of a permit in the relevant area
was in effect at the time the company purchased the
property, there can be no "taking." The trial court ruled in
favor of the State's motion for summary judgment. However,
the plaintiff has appealed that decision to the Oregon Court
of Appeals. The State believes that it will prevail and
plaintiff will not receive any damages based upon the EQC's
denial of the permit. The case was argued before the Court
of Appeals in May of 1998.

Young v. State. A class action complaint has been filed
against the State on behalf of a class of 3,000 State
managerial employees for unpaid overtime or compensation
time. Initial estimates placed the State's potential
liability exposure between $1 million and $5 million, but
revised estimates are that the liability could be as high as
$11 million. Plaintiffs' claims are based on a legislative
change that occurred in the 1995 Oregon legislative session.
The Legislative Assembly amended the status relating to the
payment of overtime or allowing compensation time to require
that all persons who work over 40 hours per week receive
overtime or compensation time. There were a number of
Exceptions to this requirement drafted for professionals.
However, State managerial employees were not included in the
express statutory exceptions. The Legislative Assembly
enacted an exemption that would cover State employees in its
1997 session. Therefore, liability may only be imposed for
the period between 1995 and 1997. The state circuit court
for Marion County ruled in favor of the State on its motion
for summary judgment. The plaintiffs have appealed the
decision to the Oregon Court of Appeals.

Taxation on Timber Harvest. Two cases have been filed in the
Oregon Tax Court challenging the constitutionality of the
state's privilege tax on the harvesting of timber. The state
imposes a harvest tax at one rate for timber cut east of the
Cascade mountains and imposes a higher rate for timber cut
west of the Cascade mountains. Plaintiff contend (i) that
the difference between the eastern and western tax rates is
unconstitutionally discriminatory and (ii) that the harvest
privilege tax is in reality a form of property tax that
should be subject to constitutional limits placed on the
amount of property taxes. If the plaintiffs prevail, the
State would be required to refund the unconstitutional
amount of tax paid from the year in which the complaint was
filed to the date of the decision declaring the tax
unconstitutional. The State estimates that it would take
approximately three years for both cases to be decided by
the Oregon Tax Court and the Oregon Supreme Court.
Therefore, in the event of an adverse ruling, the State
would be potentially liable for three years of refund. If
the required refund amount were for the entire amount of the
tax, initial estimates are that the refund amount would
range between $34 to $37 million per year. The State
believes it is unlikely that the entire amount of the tax
would be required to be refunded. If the court declares only
the part of the western tax that exceeds the eastern tax to
be unconstitutional, initial estimates are that the refund
liability would range between $14 to $15 million per year.
If the court declares the tax subject to the constitutional
property tax limitations, initial estimates are that the
refund liability would range between $19 and $21 million per
year. The plaintiffs filed an amended complaint and a motion
for summary judgment. The State filed a cross-motion for
summary judgment. The Tax Court heard arguments on the
motions in November of 1998.

Pro Se Cases. There are also several pro se cases on the
docket in which plaintiffs representing themselves are suing
the State for many millions of dollars. The possibility of
having to pay anything in any of these cases is negligible.
The Department of Administrative Services is not at this
time a party to any litigation which would have a material
adverse effect on the ability of the State to appropriate
Available Funds under the Loan Agreement

SPECIAL CONSIDERATIONS REGARDING PUERTO RICO

The following highlights some of the more significant
financial trends and problems affecting the Commonwealth of
Puerto Rico (the "Commonwealth" or "Puerto Rico"), and is
based on information drawn from official statements and
prospectuses relating to the securities offerings of Puerto
Rico, its agencies and instrumentalities, as available on
the date of this SAI. SSBC has not independently verified
any of the information contained in such official
statements, prospectuses, and other publicly available
documents, but is not aware of any fact that would render
such information materially inaccurate.

The economy of Puerto Rico is fully integrated with that of
the United States. In fiscal 1997, trade with the United
States accounted for approximately 88% of Puerto Rico's
exports and approximately 62% of its imports. In this
regard, in fiscal 1997 Puerto Rico experienced a $2.7
billion positive adjusted merchandise trade balance.

Since fiscal 1985, personal income, both aggregate and per
capita, has increased consistently each fiscal year. In
fiscal 1997, aggregate personal income was $32.1 billion
($30.0 billion in 1992 prices) and personal per capita
income was $8,509 ($7,957 in 1992 prices). Gross product in
fiscal 1993 was $25.1 billion ($24.5 billion in 1992 prices)
and gross product in fiscal 1997 was $32.1 billion ($27.7
billion in 1992 prices). This represents an increase in
gross product of 27.7% from fiscal 1993 to 1997 (13.0% in
1992 prices).

Puerto Rico's economic expansion, which has lasted over ten
years, continued throughout the five-year period from fiscal
1993 through fiscal 1997. Almost every sector of the economy
participated, and record levels of employment were achieved.
Factors behind the continued expansion included Government-
sponsored economic development programs, periodic declines
in the exchange value of the U.S. dollar, increases in the
level of federal transfers, and the relatively low cost of
borrowing funds during the period.

Average employment increased from 999,000 in fiscal 1993 to
1,128,300 in fiscal 1997. Unemployment, although at
relatively low historical levels, remains above the U.S.
average. Average unemployment decreased from 16.8% in fiscal
1993 to 13.1% in fiscal 1997.

Manufacturing is the largest sector in the economy
accounting for $19.8 billion or 41.2% of gross domestic
product in fiscal 1997. The manufacturing sector employed
153,273 workers as of March 1997. Manufacturing in Puerto
Rico is now more diversified than during earlier phases of
industrial development. In the last two decades industrial
development has tended to be more capital intensive and
dependent on skilled labor. This gradual shift is best
exemplified by heavy investment in pharmaceuticals,
scientific instruments, computers, microprocessors, and
electrical products over the last decade. The service
sector, which includes wholesale and retail trade and
finance, insurance, real estate, hotels and related
services, and other services, ranks second in its
contribution to gross domestic product and is the sector
that employs the greatest number of people.

In fiscal 1997, the service sector generated $18.4 billion
in gross domestic product or 38.2% of the total. Employment
in this sector grew from 467,000 in fiscal 1993 to 551,000
in fiscal 1997, a cumulative increase of 17.8%. This
increase was greater than the 12.9% cumulative growth in
employment over the same period providing 48% of total
employment. The Government sector of the Commonwealth plays
an important role in the economy of the island. In fiscal
year 1997, the Government accounted for $5.2 billion of
Puerto Rico's gross domestic product and provided 10.9% of
the total employment. The construction industry has
experienced real growth since fiscal 1987. In fiscal 1997,
investment in construction rose to $4.7 billion, an increase
of 14.7% as compared to $4.1 billion for fiscal 1996.
Tourism also contributes significantly to the island
economy, accounting for $2.0 billion of gross domestic
product in fiscal 1997.

The present administration has developed and is implementing
a new economic development program based on the premise that
the private sector should provide the primary impetus for
economic development and growth. This new program, which is
referred to as the New Economic Model, promotes changing the
role of the Government from one of being a provider of most
basic services to that of a facilitator for private sector
initiatives and encourages private sector investment by
reducing Government-imposed regulatory restraints.

The New Economic Model contemplates the development of
initiatives that will foster private investment in, and
private management of, sectors that are served more
efficiently and effectively by private enterprise. One of
these initiatives has been the adoption of a new tax code
intended to expand the tax base, reduce top personal and
corporate tax rates, and simplify the tax system. Another
initiative is the improvement and expansion of Puerto Rico's
infrastructure to facilitate private sector development and
growth, such as the construction of the water pipeline and
cogeneration facilities described below and the construction
of a light rail system for the San Juan metropolitan area.

The New Economic Model also seeks to identify and promote
areas in which Puerto Rico can compete more effectively in
the global markets. Tourism has been identified as one such
area because of its potential for job creation and
contribution to the gross product. In 1993, a new Tourism
Incentives Act and a Tourism Development Fund were
implemented in order to provide special tax incentives and
financing for the development of new hotel projects and the
tourism industry. As a result of these initiatives, new
hotels have been constructed or are under construction which
have increased the number of hotel rooms on the island from
8,415 in fiscal 1992 to 10,877 at the end of fiscal 1997 and
to a projected 11,972 by the end of fiscal 1998.

The New Economic Model also seeks to reduce the size of the
Government's direct contribution to gross domestic product.
As part of this goal, the Government has transferred certain
Governmental operations and sold a number of its assets to
private parties. Among these are: (i) the Government sold
the assets of the Puerto Rico Maritime Authority; (ii) the
Government executed a five-year management agreement for the
operation and management of the Aqueducts and Sewer
Authority by a private company; (iii) the Aqueducts and
Sewer Authority executed a construction and operating
agreement with a private consortium for the design,
construction, and operation of an approximately 75 million
gallon per day water pipeline to the San Juan metropolitan
area from the Dos Bocas reservoir in Utuado; (iv) the
Electric Power Authority executed power purchase contracts
with private power producers under which two cogeneration
plants (with a total capacity of 800 megawatts) will be
constructed; (v) the Corrections Administration entered into
operating agreements with two private companies for the
operation of three new correctional facilities; (vi) the
Government entered into a definitive agreement to sell
certain assets of a pineapple juice processing business and
sold certain mango growing operations; (vii) the Government
is in the process of transferring to local sugar cane
growers certain sugar processing facilities; (viii) the
Government sold two hotel properties and is currently
negotiating the sale of a complex consisting of two hotels
and a convention center; and (ix) the Government has
announced its intention to sell the Puerto Rico Telephone
Company and is currently involved in the sale process.

One of the goals of the Rossello administration is to change
Puerto Rico's public health care system from one in which
the Government provides free health services to low income
individuals through public health facilities owned and
administered by the Government to one in which all medical
services are provided by the private sector and the
Government provides comprehensive health insurance coverage
for qualifying (generally low income) Puerto Rico residents.
Under this new system, the Government selects, through a
bidding system, one private health insurance company in each
of several designated regions of the island and pays such
insurance company the insurance premium for each eligible
beneficiary within such region. This new health insurance
system is now covering 61 municipalities out of a total of
78 on the island. It is expected that 11 municipalities will
be added by the end of fiscal 1998 and 5 more by the end of
fiscal 1999. The total cost of this program will depend on
the number of municipalities included in the program, the
number of participants receiving coverage, and the date
coverage commences. As of December 31, 1997, over 1.1
million persons were participating in the program at an
estimated annual cost to Puerto Rico for fiscal 1998 of
approximately $672 million. In conjunction with this
program, the operation of certain public health facilities
has been transferred to private entities. The Government's
current privatization plan for health facilities provides
for the transfer of ownership of all health
facilities to private entities. The Government sold six
health facilities to private companies and is currently in
negotiations with other private companies for the sale of
thirteen health facilities to such companies.

One of the factors assisting the development of the
manufacturing sector in Puerto Rico has been the federal and
Commonwealth tax incentives available, particularly those
under the Puerto Rico Industrial Incentives Program and
Sections 30A and 936 of the Code.

Since 1948, Puerto Rico has promulgated various industrial
incentives laws designed to stimulate industrial investment.
Under these laws, companies engaged in manufacturing and
certain other designated activities were eligible to receive
full or partial exemption from income, property, and other
taxes. The most recent of these laws is Act No. 135 of
December 2, 1997 (the "1998 Tax Incentives Law").

The benefits provided by the 1998 Tax Incentives Law are
available to new companies as well as companies currently
conducting tax-exempt operations in Puerto Rico that choose
to renegotiate their existing tax exemption grant.
Activities eligible for tax exemption include manufacturing,
certain services performed for markets outside Puerto Rico,
the production of energy from local renewable sources for
consumption in Puerto Rico, and laboratories for scientific
and industrial research. For companies qualifying
thereunder, the 1998 Tax Incentives Law imposes income tax
rates ranging from 2% to 7%. In addition, it grants 90%
exemption from property taxes, 100% exemption from municipal
license taxes during the first eighteen months of operation
and between 80% and 60% thereafter, and 100% exemption from
municipal excise taxes. The 1998 Tax Incentives Law also
provides various special deductions designated to stimulate
employment and productivity, research and development, and
capital investment in Puerto Rico.

Under the 1998 Tax Incentives Law, companies are able to
repatriate or distribute their profits free of tollgate
taxes. In addition, passive income derived from designated
investments will continue to be fully exempt from income and
municipal license taxes. Individual shareholders of an
exempted business will be allowed a credit against their
Puerto Rico income taxes equal to 30% of their proportionate
share in the exempted business' income tax liability. Gain
from the sale or exchange of shares of an exempted business
by its shareholders during the exemption period will be
subject to a 4% income tax rate.

For many years, U.S. companies operating in Puerto Rico
enjoyed a special tax credit that was available under
Section 936 of the Code. Originally, the credit provided an
effective 100% federal tax exemption for operating and
qualifying investment income from Puerto Rico sources.
Amendments to Section 936 made in 1993 (the "1993
Amendments") instituted two alternative methods for
calculating the tax credit and limited the amount of the
credit that a qualifying company could claim. These
limitations are based on a percentage of qualifying income
(the "percentage of income limitation") and on qualifying
expenditures on wages and other wage related benefits (the
"economic activity limitation", also known as the "wage
credit limitation"). As a result of amendments incorporated
in the Small Business Job Protection Act of 1996 enacted by
the U.S. Congress and signed into law by President Clinton
on August 20, 1996 (the "1996 Amendments"), the tax credit,
as described below, is now being phased out over a ten-year
period for existing claimants and is no longer available for
corporations that established operations in Puerto Rico
after October 13, 1995 (including existing Section 936
Corporations (as defined below) to the extent substantially
new operations are established in Puerto Rico). The 1996
Amendments also moved the credit based on the economic
activity limitation to Section 30A of the Code and phased it
out over 10 years. In addition, the 1996 Amendments
eliminated the credit previously available for income
derived from certain qualified investments in Puerto Rico.
The Section 30A credit and the remaining Section 936 credit
are discussed below.

Section 30A. The 1996 Amendments added a new Section 30A to
the Code. Section 30A permits a "qualifying domestic
corporation" ("QDC") that meets certain gross income tests
(which are similar to the 80% and 75% gross income tests of
Section 936 of the Code discussed below) to claim a credit
(the "Section 30A credit") against the federal income tax
imposed on taxable income derived from sources outside the
United States from the active conduct of a trade or business
in Puerto Rico or from the sale of substantially all the
assets used in such business ("possession income").

A QDC is a U.S. corporation which (i) was actively
conducting a trade or business in Puerto Rico on October 13,
1995, (ii) had a Section 936 election in effect for its
taxable year that included October 13, 1995, (iii) does not
have in effect an election to use the percentage limitation
of Section 936(a)(4)(B) of the Code, and (iv) does not add a
"substantial new line of business."

The Section 30A credit is limited to the sum of (i) 60% of
qualified possession wages as defined in the Code, which
includes wages up to 85% of the maximum earnings subject to
the OASDI portion of Social Security taxes plus an allowance
for fringe benefits of 15% of qualified possession wages,
(ii) a specified percentage of depreciation deductions
ranging between 15% and 65%, based on the class life of
tangible property, and (iii) a portion of Puerto Rico income
taxes paid by the QDC, up to a 9% effective tax rate (but
only if the QDC does not elect the profit-split method for
allocating income from intangible property).

A QDC electing Section 30A of the Code may compute the
amount of its active business income, eligible for the
Section 30A Credit, by using either the cost sharing
formula, the profit-split formula, or the cost-plus formula,
under the same rules and guidelines prescribed for such
formulas as provided under Section 936 (see discussion
below). To be eligible for the first two formulas, the QDC
must have a significant presence in Puerto Rico.

In the case of taxable years beginning after December 31,
2001, the amount of possession income that would qualify for
the Section 30A credit would be subject to a cap based on
the QDC's possession income for an average adjusted base
period ending before October 14, 1995.

Section 30A applies only to taxable years beginning after
December 31, 1995 and before January 1, 2006.
Section 936. Under Section 936 of the Code, as amended by
the 1996 Amendments, and as an alternative to the Section
30A credit, U.S. corporations that meet certain requirements
and elect its application ("Section 936 Corporations") are
entitled to credit against their U.S. corporate income tax,
the portion of such tax attributable to income derived from
the active conduct of a trade or business within Puerto Rico
("active business income") and from the sale or exchange of
substantially all assets used in the active conduct of such
trade or business. To qualify under Section 936 in any given
taxable year, a corporation must derive for the three-year
period immediately preceding the end of such taxable year
(i) 80% or more of its gross income from sources within
Puerto Rico and (ii) 75% or more of its gross income from
the active conduct of a trade or business in Puerto Rico.

Under Section 936, a Section 936 Corporation may elect to
compute its active business income, eligible for the Section
936 credit, under one of three formulas: (A) a cost-sharing
formula, whereby it is allowed to claim all profits
attributable to manufacturing intangibles, and other
functions carried out in Puerto Rico, provided it
contributes to the research and development expenses of its
affiliated group or pays certain royalties; (B) a profit-
split formula, whereby it is allowed to claim 50% of the net
income of its affiliated group from the sale of products
manufactured in Puerto Rico; or (C) a cost-plus formula,
whereby it is allowed to claim a reasonable profit on the
manufacturing costs incurred in Puerto Rico. To be eligible
for the first two formulas, the Section 936 Corporation must
have a significant business presence in Puerto Rico for
purposes of the Section 936 rules.

As a result of the 1993 Amendments and the 1996 Amendments,
the Section 936 credit is only available to companies that
elect the percentage of income limitation and is limited in
amount to 40% of the credit allowable prior to the 1993
Amendments, subject to a five-year phase-in period from 1994
to 1998 during which period the percentage of the allowable
credit is reduced from 60% to 40%.

In the case of taxable years beginning on or after 1998, the
possession income subject to the Section 936 credit will be
subject to a cap based on the Section 936 Corporation's
possession income for an average adjusted base period ending
on October 14, 1995. The Section 936 credit is eliminated
for taxable years beginning in 2006.

Proposal to Extend the Phaseout of Section 30A. During 1997,
the Government of Puerto Rico proposed to Congress the
enactment of a new permanent federal incentive program
similar to that provided under Section 30A. Such a program
would provide U.S. companies a tax credit based on
qualifying wages paid and other wage-related expenses, such
as fringe benefits, as well as depreciation expenses for
certain tangible assets and research and development
expenses. Under the Governor's proposal, the credit granted
to qualifying companies would continue in effect until
Puerto Rico shows, among other things, substantial economic
improvements in terms of certain economic parameters. The
fiscal 1998 budget submitted by President Clinton to
Congress in February 1997 included a proposal to modify
Section 30A to (i) extend the availability of the Section
30A credit indefinitely; (ii) make it available to companies
establishing operations in Puerto Rico after October 13,
1995; and (iii) eliminate the income cap. Although this
proposal, was not included in the final fiscal 1998 federal
budget, President Clinton's fiscal 1999 budget submitted to
Congress again included these modifications to Section 30A.
While the Government of Puerto Rico plans to continue
lobbying for this proposal, it is not possible at this time
to predict whether the Section 30A credit will be so
modified.

Outlook. It is not possible at this time to determine the
long-term effect on the Puerto Rico economy of the enactment
of the 1996 Amendments. The Government of Puerto Rico does
not believe there will be short-term or medium-term material
adverse effects on Puerto Rico's economy as a result of the
enactment of the 1996 Amendments. The Government of Puerto
Rico further believes that during the phase-out period
sufficient time exists to implement additional incentive
programs to safeguard Puerto Rico's competitive

PORTFOLIO TRANSACTIONS

Newly issued securities normally are purchased directly from
the issuer or from an underwriter acting as principal.
Other purchases and sales usually are placed with those
dealers from which it appears that the best price or
execution will be obtained; those dealers may be acting as
either agents or principals. The purchase price paid by the
fund to underwriters of newly issued securities usually
includes a concession paid by the issuer to the underwriter,
and purchases of after-market securities from dealers
normally are executed at a price between the bid and asked
prices. For the 1997, 1998 and 1999 fiscal years, the fund
has paid no brokerage commissions.

Allocation of transactions, including their frequency, to
various dealers is determined by the manager in its best
judgment and in a manner deemed fair and reasonable to
shareholders. The primary considerations are availability
of the desired security and the prompt execution of orders
in an effective manner at the most favorable prices.
Subject to these considerations, dealers that provide
supplemental investment research and statistical or other
services to the manager may receive orders for portfolio
transactions by the fund. Information so received is in
addition to, and not in lieu of, services required to be
performed by the manager, and the fees of the manager are
not reduced as a consequence of its use of such supplemental
information. Such information may be useful to the manager
in serving both the fund and other clients and, conversely,
supplemental information obtained by the placement of
business of other clients may be useful to the manager in
carrying out its obligations to the fund.

The fund will not purchase Municipal Obligations during the
existence of any underwriting or selling group relating
thereto of which Salomon Smith Barney is a member, except to
the extent permitted by the SEC. Under certain
circumstances, the fund may be at a disadvantage because of
this limitation in comparison with other investment
companies which have a similar investment objective but
which are not subject to such limitation. The fund also may
execute portfolio transactions through Salomon Smith Barney
and its affiliates in accordance with rules promulgated by
the SEC.

While investment decisions for the fund are made
independently from those of the other accounts managed by
the manager, investments of the type the fund may make also
may be made by those other accounts. When the fund and one
or more other accounts managed by the manager are prepared
to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be
allocated in a manner believed by the manager to be
equitable to each. In some cases, this procedure may
adversely affect the price paid or received by the fund or
the size of the position obtained or disposed of by the
fund.

PORTFOLIO TURNOVER

The fund's portfolio turnover rate (the lesser of purchases
or sales of portfolio securities during the year, excluding
purchases or sales of short-term securities, divided by the
monthly average value of portfolio securities) generally is
not expected to exceed 100%, but the portfolio turnover rate
will not be a limiting factor whenever the fund deems it
desirable to sell or purchase securities. Securities may be
sold in anticipation of a rise in interest rates (market
decline) or purchased in anticipation of a decline in
interest rates (market rise) and later sold. In addition, a
security may be sold and another security of comparable
quality may be purchased at approximately the same time in
order to take advantage of what the fund believes to be a
temporary disparity in the normal yield relationship between
the two securities. These yield disparities may occur for
reasons not directly related to the investment quality of
particular issues or the general movement of interest rates,
such as changes in the overall demand for or supply of
various types of tax-exempt securities. For the 1997, 1998
and 1999 fiscal years, the fund's portfolio turnover rates
were %, % and %, respectively.

PURCHASE OF SHARES

Sales Charge Alternatives

The following classes of shares are available for purchase.
See the prospectus for a discussion of factors to consider
in selecting which Class of shares to purchase.

Class A Shares. Class A shares are sold to investors at the
public offering price, which is the net asset value plus an
initial sales charge as follows:

Amount of
Investment

Sales Charge as
a %
Of Transaction

Sales Charge as
a %
of Amount
Invested
Dealers'
Reallowance as %
of Offering Price
Less than $25,000
4.00%
4.17%
3.60%
$ 25,000 - 49,999
3.50
3.63
3.15
50,000 - 99,999
3.00
3.09
2.70
100,000 - 249,999
2.50
2.56
2.25
250,000 - 499,999
1.50
1.52
1.35
500,000 and over
*
*
*

* Purchases of Class A shares of $500,000 or more will be
made at net asset value without any initial sales charge,
but will be subject to a deferred sales charge of 1.00% on
redemptions made within 12 months of purchase. The
deferred sales charge on Class A shares is payable to
Salomon Smith Barney, which compensates Salomon Smith
Barney Financial Consultants and other dealers whose
clients make purchases of $500,000 or more. The deferred
sales charge is waived in the same circumstances in which
the deferred sales charge applicable to Class B and Class
L shares is waived. See "Purchase of Shares-Deferred
Sales Charge Alternatives" and "Purchase of Shares-
Waivers of Deferred Sales Charge."
Members of the selling group may receive up to 90% of the
sales charge and may be deemed to be underwriters of the
fund as defined in the Securities Act of 1933. The reduced
sales charges shown above apply to the aggregate of
purchases of Class A shares of the fund made at one time by
"any person," which includes an individual and his or her
immediate family, or a trustee or other fiduciary of a
single trust estate or single fiduciary account.

Class B Shares. Class B shares are sold without an initial
sales charge but are subject to a deferred sales charge
payable upon certain redemptions. See "Deferred Sales
Charge Provisions" below.

Class L Shares. Class L shares are sold with an initial
sales charge of 1.00% (which is equal to 1.01% of the amount
invested) and are subject to a deferred sales charge payable
upon certain redemptions. See "Deferred Sales Charge
Provisions" below. Until June 22, 2001 purchases of Class L
shares by investors who were holders of Class C shares of
the fund on June 12, 1998 will not be subject to the 1%
initial sales charge.

Class Y Shares. Class Y shares are sold without an initial
sales charge or deferred sales charge and are available only
to investors investing a minimum of $15,000,000 (except
purchases of Class Y shares by Smith Barney Concert
Allocation Series Inc., for which there is no minimum
purchase amount).

General

Investors may purchase shares from a Salomon Smith Barney
Financial Consultant or a Dealer Representative. In
addition, certain investors, including qualified retirement
plans purchasing through certain Dealer Representatives, may
purchase shares directly from the fund. When purchasing
shares of the fund, investors must specify whether the
purchase is for Class A, Class B, Class L or Class Y shares.
Salomon Smith Barney and Dealer Representatives may charge
their customers an annual account maintenance fee in
connection with a brokerage account through which an
investor purchases or holds shares. Accounts held directly
at First Data Investor Services Group, Inc. ("First Data" or
"transfer agent") are not subject to a maintenance fee.

Investors in Class A, Class B and Class L shares may open an
account in the fund by making an initial investment of at
least $1,000 for each account, in the fund. Investors in
Class Y shares may open an account by making an initial
investment of $15,000,000. Subsequent investments of at
least $50 may be made for all Classes. For shareholders
purchasing shares of the fund through the Systematic
Investment Plan on a monthly basis, the minimum initial
investment requirement for Class A, Class B and Class L
shares and subsequent investment requirement for all Classes
is $25. For shareholders purchasing shares of the fund
through the Systematic Investment Plan on a quarterly basis,
the minimum initial investment required for Class A, Class B
and Class L shares and the subsequent investment requirement
for all Classes is $50. There are no minimum investment
requirements for Class A shares for employees of Citigroup
and its subsidiaries, including Salomon Smith Barney,
unitholders who invest distributions from a Unit Investment
Trust ("UIT") sponsored by Salomon Smith Barney, and
Directors/Trustees of any of the Smith Barney Mutual Funds,
and their spouses and children. The fund reserves the right
to waive or change minimums, to decline any order to
purchase its shares and to suspend the offering of shares
from time to time. Shares purchased will be held in the
shareholder's account by First Data. Share certificates are
issued only upon a shareholder's written request to First
Data.

Purchase orders received by the fund or a Salomon Smith
Barney Financial Consultant prior to the close of regular
trading on the NYSE, on any day the fund calculates its net
asset value, are priced according to the net asset value
determined on that day (the ''trade date''). Orders
received by a Dealer Representative prior to the close of
regular trading on the NYSE on any day the fund calculates
its net asset value, are priced according to the net asset
value determined on that day, provided the order is received
by the fund or the fund's agent prior to its close of
business. For shares purchased through Salomon Smith Barney
or a Dealer Representative purchasing through Salomon Smith
Barney, payment for shares of the fund is due on the third
business day after the trade date. In all other cases,
payment must be made with the purchase order.

Systematic Investment Plan. Shareholders may make additions
to their accounts at any time by purchasing shares through a
service known as the Systematic Investment Plan. Under the
Systematic Investment Plan, Salomon Smith Barney or First
Data is authorized through preauthorized transfers of at
least $25 on a monthly basis or at least $50 on a quarterly
basis to charge the shareholder's account held with a bank
or other financial institution on a monthly or quarterly
basis as indicated by the shareholder, to provide for
systematic additions to the shareholder's fund account. A
shareholder who has insufficient funds to complete the
transfer will be charged a fee of up to $25 by Salomon Smith
Barney or First Data. The Systematic Investment Plan also
authorizes Salomon Smith Barney to apply cash held in the
shareholder's Salomon Smith Barney brokerage account or
redeem the shareholder's shares of a Smith Barney money
market fund to make additions to the account. Additional
information is available from the fund or a Salomon Smith
Barney Financial Consultant or a Dealer Representative.

Sales Charge Waivers and Reductions

Initial Sales Charge Waivers. Purchases of Class A shares
may be made at net asset value without a sales charge in the
following circumstances: (a) sales to (i) Board Members and
employees of Citigroup and its subsidiaries and any
Citigroup affiliated funds including the Smith Barney Mutual
Funds (including retired Board Members and employees); the
immediate families of such persons (including the surviving
spouse of a deceased Board Member or employee); and to a
pension, profit-sharing or other benefit plan for such
persons and (ii) employees of members of the National
Association of Securities Dealers, Inc., provided such sales
are made upon the assurance of the purchaser that the
purchase is made for investment purposes and that the
securities will not be resold except through redemption or
repurchase; (b) offers of Class A shares to any other
investment company to effect the combination of such company
with the fund by merger, acquisition of assets or otherwise;
(c) purchases of Class A shares by any client of a newly
employed Salomon Smith Barney Financial Consultant (for a
period up to 90 days from the commencement of the Financial
Consultant's employment with Salomon Smith Barney), on the
condition the purchase of Class A shares is made with the
proceeds of the redemption of shares of a mutual fund which
(i) was sponsored by the Financial Consultant's prior
employer, (ii) was sold to the client by the Financial
Consultant and (iii) was subject to a sales charge; (d)
purchases by shareholders who have redeemed Class A shares
in the fund (or Class A shares of another Smith Barney
Mutual Fund that is offered with a sales charge) and who
wish to reinvest their redemption proceeds in the fund,
provided the reinvestment is made within 60 calendar days of
the redemption; (e) purchases by accounts managed by
registered investment advisory subsidiaries of Citigroup;
(f) purchases by a separate account used to fund certain
unregistered variable annuity contracts; (g) investments of
distributions from a UIT sponsored by Salomon Smith Barney;
and (h) purchases by investors participating in a Salomon
Smith Barney fee-based arrangement. In order to obtain such
discounts, the purchaser must provide sufficient information
at the time of purchase to permit verification that the
purchase would qualify for the elimination of the sales
charge.

Right of Accumulation. Class A shares of the fund may be
purchased by ''any person'' (as defined above) at a reduced
sales charge or at net asset value determined by aggregating
the dollar amount of the new purchase and the total net
asset value of all Class A shares of the fund and of other
Smith Barney Mutual Funds that are offered with a sales
charge as currently listed under ''Exchange Privilege'' then
held by such person and applying the sales charge applicable
to such aggregate. In order to obtain such discount, the
purchaser must provide sufficient information at the time of
purchase to permit verification that the purchase qualifies
for the reduced sales charge. The right of accumulation is
subject to modification or discontinuance at any time with
respect to all shares purchased thereafter.

Letter of Intent - Class A Shares. A Letter of Intent for
an amount of $50,000 or more provides an opportunity for an
investor to obtain a reduced sales charge by aggregating
investments over a 13 month period, provided that the
investor refers to such Letter when placing orders. For
purposes of a Letter of Intent, the ''Amount of Investment''
as referred to in the preceding sales charge table includes
(i) all Class A shares of the fund and other Smith Barney
Mutual Funds offered with a sales charge acquired during the
term of the letter plus (ii) the value of all Class A shares
previously purchased and still owned. Each investment made
during the period receives the reduced sales charge
applicable to the total amount of the investment goal. If
the goal is not achieved within the period, the investor
must pay the difference between the sales charges applicable
to the purchases made and the charges previously paid, or an
appropriate number of escrowed shares will be redeemed. The
term of the Letter will commence upon the date the Letter is
signed, or at the option of the investor, up to 90 days
before such date. Please contact a Salomon Smith Barney
Financial Consultant or First Data to obtain a Letter of
Intent application.

Letter of Intent - Class Y Shares. A Letter of Intent may
also be used as a way for investors to meet the minimum
investment requirement for Class Y shares (except purchases
of Class Y shares by Smith Barney Concert Allocation Series
Inc., for which there is no minimum purchase amount). Such
investors must make an initial minimum purchase of
$5,000,000 in Class Y shares of the fund and agree to
purchase a total of $15,000,000 of Class Y shares of the
fund within 13 months from the date of the Letter. If a
total investment of $15,000,000 is not made within the 13-
month period, all Class Y shares purchased to date will be
transferred to Class A shares, where they will be subject to
all fees (including a service fee of 0.25%) and expenses
applicable to the fund's Class A shares, which may include a
deferred sales charge of 1.00%. Please contact a Salomon
Smith Barney Financial Consultant or First Data for further
information.

Deferred Sales Charge Provisions

''Deferred Sales Charge Shares'' are: (a) Class B shares;
(b) Class L shares; and (c) Class A shares that were
purchased without an initial sales charge but are subject to
a deferred sales charge. A deferred sales charge may be
imposed on certain redemptions of these shares.

Any applicable deferred sales charge will be assessed on an
amount equal to the lesser of the original cost of the
shares being redeemed or their net asset value at the time
of redemption. Deferred Sales Charge Shares that are
redeemed will not be subject to a deferred sales charge to
the extent the value of such shares represents: (a) capital
appreciation of fund assets; (b) reinvestment of dividends
or capital gain distributions; (c) with respect to Class B
shares, shares redeemed more than five years after their
purchase; or (d) with respect to Class L shares and Class A
shares that are Deferred Sales Charge Shares, shares
redeemed more than 12 months after their purchase.

Class L shares and Class A shares that are Deferred Sales
Charge Shares are subject to a 1.00% deferred sales charge
if redeemed within 12 months of purchase. In circumstances
in which the deferred sales charge is imposed on Class B
shares, the amount of the charge will depend on the number
of years since the shareholder made the purchase payment
from which the amount is being redeemed. Solely for
purposes of determining the number of years since a purchase
payment, all purchase payments made during a month will be
aggregated and deemed to have been made on the last day of
the preceding Salomon Smith Barney statement month. The
following table sets forth the rates of the charge for
redemptions of Class B shares by shareholders.

Year Since Purchase Payment Was
Made

Deferred sales charge

First

4.50%

Second

4.00

Third

3.00

Fourth

2.00

Fifth

1.00

Sixth and thereafter

0.00

Class B shares will convert automatically to Class A shares
eight years after the date on which they were purchased and
thereafter will no longer be subject to any distribution
fees. There will also be converted at that time such
proportion of Class B Dividend Shares owned by the
shareholders as the total number of his or her Class B
shares converting at the time bears to the total number of
outstanding Class B shares (other than Class B Dividend
Shares) owned by the shareholder.

The length of time Deferred Sales Charge Shares acquired
through an exchange have been held will be calculated from
the date the shares exchanged were initially acquired in one
of the other Smith Barney Mutual Funds, and fund shares
being redeemed will be considered to represent, as
applicable, capital appreciation or dividend and capital
gain distribution reinvestments in such other funds. For
Federal income tax purposes, the amount of the deferred
sales charge will reduce the gain or increase the loss, as
the case may be, on the amount realized on redemption. The
amount of any deferred sales charge will be paid to Salomon
Smith Barney.

To provide an example, assume an investor purchased 100
Class B shares of the fund at $10 per share for a cost of
$1,000. Subsequently, the investor acquired 5 additional
shares of the fund through dividend reinvestment. During
the fifteenth month after the purchase, the investor decided
to redeem $500 of his or her investment. Assuming at the
time of the redemption the net asset value had appreciated
to $12 per share, the value of the investor's shares would
be $1,260 (105 shares at $12 per share). The deferred sales
charge would not be applied to the amount which represents
appreciation ($200) and the value of the reinvested dividend
shares ($60). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of
4.00% (the applicable rate for Class B shares) for a total
deferred sales charge of $9.60.

Waivers of Deferred Sales Charge

The deferred sales charge will be waived on: (a) exchanges
(see ''Exchange Privilege''); (b) automatic cash withdrawals
in amounts equal to or less than 1.00% per month of the
value of the shareholder's shares at the time the withdrawal
plan commences (see ''Automatic Cash Withdrawal Plan'')
(however, automatic cash withdrawals in amounts equal to or
less than 2.00% per month of the value of the shareholder's
shares will be permitted for withdrawal plans established
prior to November 7, 1994); (c) redemptions of shares within
12 months following the death or disability of the
shareholder; (d) redemptions of shares made in connection
with qualified distributions from retirement plans or IRAs
upon the attainment of age 591/2; (e) involuntary redemptions;
and (f) redemptions of shares to effect a combination of the
fund with any investment company by merger, acquisition of
assets or otherwise. In addition, a shareholder who has
redeemed shares from other Smith Barney Mutual Funds may,
under certain circumstances, reinvest all or part of the
redemption proceeds within 60 days and receive pro rata
credit for any deferred sales charge imposed on the prior
redemption.

Deferred sales charge waivers will be granted subject to
confirmation (by Salomon Smith Barney in the case of
shareholders who are also Salomon Smith Barney clients or by
First Data in the case of all other shareholders) of the
shareholder's status or holdings, as the case may be.

Volume Discounts

The schedule of sales charges on Class A shares described in
the prospectus applies to purchases made by any "purchaser,"
which is defined to include the following: (a) an
individual; (b) an individual's spouse and his or her
children purchasing shares for their own account; (c) a
trustee or other fiduciary purchasing shares for a single
trust estate or single fiduciary account; and (d) a trustee
or other professional fiduciary (including a bank, or an
investment adviser registered with the SEC under the
Investment Advisers Act of 1940, as amended) purchasing
shares of the fund for one or more trust estates or
fiduciary accounts. Purchasers who wish to combine purchase
orders to take advantage of volume discounts on Class A
shares should contact a Salomon Smith Barney Financial
Consultant.

DETERMINATION OF NET ASSET VALUE

Each class' net asset value per share is calculated on each
day, Monday through Friday, except days on which the NYSE is
closed. The NYSE currently is scheduled to be closed on New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas, and on the preceding Friday or
subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Because of the
differences in distribution fees and class-specific
expenses, the per share net asset value of each class may
differ. The following is a description of the procedures
used by the fund in valuing its assets.

Generally, the fund's investments are valued at market value
or, in the absence of a market value with respect to any
securities, at fair value as determined by or under the
direction of the Board of Directors. A security that is
primarily traded on a domestic or foreign exchange is valued
at the last sale price on that exchange or, if there were no
sales during the day, at the mean between the bid and asked
price. Over-the-counter securities are valued at the mean
between the bid and asked price. If market quotations for
those securities are not readily available, they are valued
at fair value, as determined in good faith by the fund's
board of trustees. An option is generally valued at the
last sale price or, in the absence of a last sale price, the
last offer price.

U.S. government securities will be valued at the mean
between the closing bid and asked prices on each day, or, if
market quotations for those securities are not readily
available, at fair value, as determined in good faith by the
fund's board of trustees.

Short-term investments maturing in 60 days or less are
valued at amortized cost whenever the board of trustees
determines that amortized cost reflects fair value of those
investments. Amortized cost valuation involves valuing an
instrument at its cost initially and thereafter assuming a
constant amortization to maturity of any discount or
premium, regardless of the effect of fluctuating interest
rates on the market value of the instrument.

All other securities and other assets of the fund will be
valued at fair value as determined in good faith by the
fund's board of trustees.

Determination of Public Offering Price

The fund offers its shares to the public on a continuous
basis. The public offering price per Class A and Class Y
share of the fund is equal to the net asset value per share
at the time of purchase plus, for Class A shares, an initial
sales charge based on the aggregate amount of the
investment. The public offering price per Class B and Class
L share (and Class A share purchases, including applicable
rights of accumulation, equaling or exceeding $500,000) is
equal to the net asset value per share at the time of
purchase and no sales charge is imposed at the time of
purchase. The method of computing the public offering price
is shown in the fund's financial statements, incorporated by
reference in their entirety into this SAI.

REDEMPTION OF SHARES

The fund is required to redeem the shares of the fund
tendered to it, as described below, at a redemption price
equal to their net asset value per share next determined
after receipt of a written request in proper form at no
charge other than any applicable deferred sales charge.
Redemption requests received after the close of regular
trading on the NYSE are priced at the net asset value next
determined.

If a shareholder holds shares in more than one Class, any
request for redemption must specify the Class being
redeemed. In the event of a failure to specify which Class,
or if the investor owns fewer shares of the Class than
specified, the redemption request will be delayed until the
transfer agent receives further instructions from Salomon
Smith Barney, or if the shareholder's account is not with
Salomon Smith Barney, from the shareholder directly. The
redemption proceeds will be remitted on or before the third
business day following receipt of proper tender, except on
any days on which the NYSE is closed or as permitted under
the 1940 Act in extraordinary circumstances. Generally, if
the redemption proceeds are remitted to a Salomon Smith
Barney brokerage account, these funds will not be invested
for the shareholder's benefit without specific instruction
and Salomon Smith Barney will benefit from the use of
temporarily uninvested funds. Redemption proceeds for shares
purchased by check, other than a certified or official bank
check, will be remitted upon clearance of the check, which
may take up to ten days or more.

Shares held by Salomon Smith Barney as custodian must be
redeemed by submitting a written request to a Salomon Smith
Barney Financial Consultant. Shares other than those held by
Salomon Smith Barney as custodian may be redeemed through an
investor's Financial Consultant, Dealer Representative or by
submitting a written request for redemption to:

Smith Barney Oregon Municipals Fund
Class A, B, L or Y (please specify)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128

A written redemption request must (a) state the Class and
number or dollar amount of shares to be redeemed, (b)
identify the shareholder's account number and (c) be signed
by each registered owner exactly as the shares are
registered. If the shares to be redeemed were issued in
certificate form, the certificates must be endorsed for
transfer (or be accompanied by an endorsed stock power) and
must be submitted to the transfer agent together with the
redemption request. Any signature appearing on a share
certificate, stock power or written redemption request in
excess of $10,000 must be guaranteed by an eligible
guarantor institution, such as a domestic bank, savings and
loan institution, domestic credit union, member bank of the
Federal Reserve System or member firm of a national
securities exchange. Written redemption requests of $10,000
or less do not require a signature guarantee unless more
than one such redemption request is made in any 10-day
period. Redemption proceeds will be mailed to an investor's
address of record. The transfer agent may require additional
supporting documents for redemptions made by corporations,
executors, administrators, trustees or guardians. A
redemption request will not be deemed properly received
until the transfer agent receives all required documents in
proper form.

Automatic Cash Withdrawal Plan. The fund offers
shareholders an automatic cash withdrawal plan, under which
shareholders who own shares with a value of at least $10,000
may elect to receive cash payments of at least $50 monthly
or quarterly. Retirement plan accounts are eligible for
automatic cash withdrawal plans only where the shareholder
is eligible to receive qualified distributions and has an
account value of at least $5,000. The withdrawal plan will
be carried over on exchanges between Classes of a fund. Any
applicable deferred sales charge will not be waived on
amounts withdrawn by a shareholder that exceed 1.00% per
month of the value of the shareholder's shares subject to
the deferred sales charge at the time the withdrawal plan
commences. (With respect to withdrawal plans in effect prior
to November 7, 1994, any applicable deferred sales charge
will be waived on amounts withdrawn that do not exceed 2.00%
per month of the value of the shareholder's shares subject
to the deferred sales charge.) For further information
regarding the automatic cash withdrawal plan, shareholders
should contact a Salomon Smith Barney Financial Consultant.

Telephone Redemption and Exchange Program. Shareholders who
do not have a brokerage account may be eligible to redeem
and exchange shares by telephone. To determine if a
shareholder is entitled to participate in this program, he
or she should contact the transfer agent at 1-800-451-2010.
Once eligibility is confirmed, the shareholder must
complete and return a Telephone/Wire Authorization Form,
along with a signature guarantee, that will be provided by
the transfer agent upon request. (Alternatively, an
investor may authorize telephone redemptions on the new
account application with the applicant's signature guarantee
when making his/her initial investment in a fund.)

Redemptions. Redemption requests of up to $10,000 of any
class or classes of shares of a fund may be made by eligible
shareholders by calling the transfer agent at 1-800-451-
2010. Such requests may be made between 9:00 a.m. and 5:00
p.m. (Eastern Time) on any day the NYSE is open. Redemptions
of shares (i) by retirement plans or (ii) for which
certificates have been issued are not permitted under this
program.

A shareholder will have the option of having the redemption
proceeds mailed to his/her address of record or wired to a
bank account predesignated by the shareholder. Generally,
redemption proceeds will be mailed or wired, as the case may
be, on the next business day following the redemption
request. In order to use the wire procedures, the bank
receiving the proceeds must be a member of the Federal
Reserve System or have a correspondent relationship with a
member bank. The fund reserves the right to charge
shareholders a nominal fee for each wire redemption. Such
charges, if any, will be assessed against the shareholder's
account from which shares were redeemed. In order to change
the bank account designated to receive redemption proceeds,
a shareholder must complete a new Telephone/Wire
Authorization Form and, for the protection of the
shareholder's assets, will be required to provide a
signature guarantee and certain other documentation.

Exchanges. Eligible shareholders may make exchanges by
telephone if the account registration of the shares of the
fund being acquired is identical to the registration of the
shares of the fund exchanged. Such exchange requests may be
made by calling the transfer agent at 1-800-451-2010 between
9:00 a.m. and 5:00 p.m. (Eastern time) on any day on which
the NYSE is open.

Additional Information Regarding Telephone Redemption and
Exchange Program. Neither the fund nor its agents will be
liable for following instructions communicated by telephone
that are reasonably believed to be genuine. The fund and
its agents will employ procedures designed to verify the
identity of the caller and legitimacy of instructions (for
example, a shareholder's name and account number will be
required and phone calls may be recorded). The fund
reserves the right to suspend, modify or discontinue the
telephone redemption and exchange program or to impose a
charge for this service at any time following at least seven
(7) days' prior notice to shareholders.

Redemptions in Kind. In conformity with applicable rules of
the SEC, redemptions may be paid in portfolio securities, in
cash or any combination of both, as the board of trustees
may deem advisable; however, payments shall be made wholly
in cash unless the board of directors believes economic
conditions exist that would make such a practice detrimental
to the best interests of the fund and its remaining
shareholders. If redemption is paid in portfolio
securities, such securities will be valued in accordance
with the procedures described under "Determination of Net
Asset Value" in the Prospectus and a shareholder would incur
brokerage expenses if these securities were then converted
to cash.

Distributions in Kind

If the fund's board of directors determines that it would be
detrimental to the best interests of the remaining
shareholders of the fund to make a redemption payment wholly
in cash, the fund may pay, in accordance with SEC rules, any
portion of a redemption in excess of the lesser of $250,000
or 1.00% of the fund's net assets by a distribution in kind
of portfolio securities in lieu of cash. Securities issued
as a distribution in kind may incur brokerage commissions
when shareholders subsequently sell those securities.

Automatic Cash Withdrawal Plan

An automatic cash withdrawal plan (the "Withdrawal Plan") is
available to shareholders who own shares with a value of at
least $10,000 and who wish to receive specific amounts of
cash monthly or quarterly. Withdrawals of at least $50 may
be made under the Withdrawal Plan by redeeming as many
shares of the fund as may be necessary to cover the
stipulated withdrawal payment. Any applicable deferred sales
charge will not be waived on amounts withdrawn by
shareholders that exceed 1.00% per month of the value of a
shareholder's shares at the time the Withdrawal Plan
commences. (With respect to Withdrawal Plans in effect prior
to November 7, 1994, any applicable deferred sales charge
will be waived on amounts withdrawn that do not exceed 2.00%
per month of the value of a shareholder's shares at the time
the Withdrawal Plan commences.) To the extent withdrawals
exceed dividends, distributions and appreciation of a
shareholder's investment in the fund, there will be a
reduction in the value of the shareholder's investment, and
continued withdrawal payments will reduce the shareholder's
investment and may ultimately exhaust it. Withdrawal
payments should not be considered as income from investment
in the fund. Furthermore, as it generally would not be
advantageous to a shareholder to make additional investments
in the fund at the same time he or she is participating in
the Withdrawal Plan, purchases by such shareholder in
amounts of less than $5,000 ordinarily will not be
permitted.

Shareholders who wish to participate in the Withdrawal Plan
and who hold their shares in certificate form must deposit
their share certificates with the Transfer Agent as agent
for Withdrawal Plan members. All dividends and distributions
on shares in the Withdrawal Plan are reinvested
automatically at net asset value in additional shares of the
fund. For additional information, shareholders should
contact a Salomon Smith Barney Financial Consultant.
Withdrawal Plans should be set up with a Salomon Smith
Barney Financial Consultant. A shareholder who purchases
shares directly through the Transfer Agent may continue to
do so and applications for participation in the Withdrawal
Plan must be received by the Transfer Agent no later than
the eighth day of the month to be eligible for participation
beginning with that month's withdrawals. For additional
information, shareholders should contact a Salomon Smith
Barney Financial Consultant.

INVESTMENT MANAGEMENT AND OTHER SERVICES

Investment Adviser and Administrator - SSBC (Manager)

SSBC (formerly known as Mutual Management Corp.) serves as
investment adviser to the fund pursuant to an investment
advisory agreement (the "Investment Advisory Agreement")
with the trust which was approved by the board of trustees,
including a majority of trustees who are not "interested
persons" of the fund or the manager. The manager is a
wholly owned subsidiary of Salomon Smith Barney Holdings
Inc. ("Holdings"), which in turn, is a wholly owned
subsidiary of Citigroup. Subject to the supervision and
direction of the fund's board of trustees, the manager
manages the fund's portfolio in accordance with the fund's
stated investment objective and policies, makes investment
decisions for the fund, places orders to purchase and sell
securities, and employs professional portfolio managers and
securities analysts who provide research services to the
fund. The manager pays the salary of any officer and
employee who is employed by both it and the fund. The
manager bears all expenses in connection with the
performance of its services. SSBC (through its predecessor
entities) has been in the investment counseling business
since 1968 and renders investment advice to a wide variety
of individual, institutional and investment company clients
that had aggregate assets under management as of August
, 1999 in excess of $ billion.

The fund pays the manager an investment advisory fee at an
annual rate of 0.30% of the value of its average daily net
assets. This fee is calculated daily and paid monthly. For
the fiscal year ended April 30, 1999, the fund incurred
investment advisory fees of $84,322, of which a portion was
waived. [For the fiscal years ended April 30, 1997 and 1996,
the fund incurred investment advisory fees in the amount of
$63,124 and $ 50,010, respectively, all of which were
waived.]

The manager also serves as administrator to the fund
pursuant to a written agreement (the "Administration
Agreement"). As administrator SSBC: (a) assists in
supervising all aspects of the Fund's operations; b)
supplies the fund with office facilities (which may be in
SSBC's own offices), statistical and research data, data
processing services, clerical, accounting and bookkeeping
services, including, but not limited to, the calculation of
(i) the net asset value of shares of the fund, (ii)
applicable contingent deferred sales charges and similar
fees and charges and (iii) distribution fees, internal
auditing and legal services, internal executive and
administrative services, and stationary and office supplies;
and (c) prepares reports to shareholders of the fund, tax
returns and reports to and filings with the SEC and state
blue sky authorities.

As compensation for administrative services rendered to the
fund, SSBC receives a fee paid at the following annual
rates: 0.20% of average daily net assets up to $500 million;
and 0.18% of average daily net assets in excess of $500
million. [This fee is computed daily and paid monthly. For
the fiscal year ended April 30, 1999, the fund incurred
administration fees in the amount of $ , of which a
portion was waived. For the fiscal years ended 1997 and
1996, the fund incurred administration fees in the amount of
$42,083 and $30,605, respectively, all of which were waived.
For the fiscal year ended 1997, SSBC had agreed to reimburse
the fund for certain expenses totaling $53,166.]

The fund bears expenses incurred in its operations
including: taxes, interest, brokerage fees and commissions,
if any; fees of trustees of the fund who are not officers,
directors, shareholders or employees of Salomon Smith Barney
or the manager; SEC fees and state Blue Sky notice fees;
charges of custodians; transfer and dividend disbursing
agent's fees; certain insurance premiums; outside auditing
and legal expenses; costs of maintaining corporate
existence; costs of investor services (including allocated
telephone and personnel expenses); costs of preparing and
printing of prospectuses for regulatory purposes and for
distribution to existing shareholders; costs of
shareholders' reports and shareholder meetings; and meetings
of the officers or board of trustees of the fund.

Auditors

KPMG LLP, independent auditors, 345 Park Avenue, New York,
New York 10154, have been selected to serve as auditors of
the fund and to render opinions on the fund's financial
statements for the fiscal year ended April 30, 2000.

Custodian and Transfer Agent

PNC Bank, National Association located at 17th and Chestnut
Streets, Philadelphia, Pennsylvania 19103, serves as the
fund's custodian. Under the custody agreement, PNC holds the
fund's portfolio securities and keeps all necessary accounts
and records. For its services, PNC receives a monthly fee
based upon the month-end market value of securities held in
custody and also receives securities transaction charges.
The assets of the fund are held under bank custodianship in
compliance with the 1940 Act.
First Data Shareholder Services Group Inc., located at
Federal Street, Boston, Massachusetts 02110, serves as the
fund's transfer agent. Under the transfer agency agreement,
First Data maintains the shareholder account records for the
fund, handles certain communications between shareholders
and the fund, and distributes dividends and distributions
payable by the fund. For these services, First Data
receives a monthly fee computed on the basis of the number
of shareholder accounts it maintains for the fund during the
month, and is reimbursed for out-of-pocket expenses.

Distributor

CFBDS, Inc., located at 20 Milk Street, Boston,
Massachusetts 02109-5408 serves as the fund's distributor
pursuant to a written agreement dated October 8, 1998 (the
"Distribution Agreement") which was approved by the fund's
board of trustees, including a majority of the independent
trustees on July 15, 1998. Prior to the merger of Travelers
Group, Inc. and Citicorp Inc. on October 8, 1998, Salomon
Smith Barney served as the fund's distributor. For the 1998
and 1999 fiscal years, Salomon Smith Barney, received $
and $ , respectively, in sales charges from the sale
of Class A shares, and did not reallow any portion thereof
to dealers. For the period April 30, 1998 through October 7,
1998 the aggregate dollar amount of sales charges on Class A
shares was $ all of which was paid to Salomon Smith
Barney. For the period October 8, 1998 through April 30,
1999 the aggregate dollar amount of sales charges on Class A
shares was $ , $ of which was paid to Salomon Smith
Barney.

For the period June 12, 1998 through October 7, 1998 the
aggregate dollar amount of sales charges on Class L shares
was $ , all of which was paid to Salomon Smith Barney. For
the period October 8, 1998 through April 30, 1999 the
aggregate dollar amount of sales charges on Class L shares
was $ , $ of which was paid to Salomon Smith
Barney.

For the fiscal years ended April 30, 1997, 1998 and 1999,
Salomon Smith Barney or its predecessor received from
shareholders $ , $ and $ ,
respectively, in deferred sales charges on the redemption of
Class B shares. For the fiscal years ended April 30, 1997,
1998 and 1999, Salomon Smith Barney or its predecessor
received from $ , $ and $ , respectively, in
deferred sales charges on redemption of Class L shares.

When payment is made by the investor before the settlement
date, unless otherwise noted by the investor, the funds will
be held as a free credit balance in the investor's brokerage
account and Salomon Smith Barney may benefit from the
temporary use of the funds. The fund's board of trustees
has been advised of the benefits to Salomon Smith Barney
resulting from these settlement procedures and will take
such benefits into consideration when reviewing the
Investment Advisory Agreement for continuance.

Distribution Arrangements. To compensate Salomon Smith
Barney for the service it provides and for the expense it
bears, the fund has adopted a services and distribution plan
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act.
Under the Plan, the fund pays Salomon Smith Barney a service
fee, accrued daily and paid monthly, calculated at the
annual rate of 0.15% of the value of the fund's average
daily net assets attributable to the Class A, Class B and
Class L shares. In addition, the fund pays Salomon Smith
Barney a distribution fee with respect to Class B and Class
L shares primarily intended to compensate Salomon Smith
Barney for its initial expense of paying Financial
Consultants a commission upon sales of those shares. The
Class B and Class L distribution fee is calculated at the
annual rate of 0.50% and 0.55%, respectively, of the value
of the fund's average net assets attributable to the shares
of each Class.

For the fiscal year ended April 30, 1999, Salomon Smith
Barney incurred distribution expenses totaling $
consisting of $ for advertising, $ for printing and
mailing of prospectuses, $ for support services, $
to Salomon Smith Barney Financial Consultants, and $376,246
in accruals for interest on the excess of Salomon Smith
Barney expenses incurred in distributing the fund's shares
over the sum of the distribution fees and deferred sales
charge received by Salomon Smith Barney from the fund.

The following service and distribution fees were incurred
pursuant to a Distribution Plan during the periods
indicated:

Distribution Plan Fees

Fiscal Year
Ended
4/30/99

Fiscal Year
Ended 4/30/98

Fiscal Year
Ended 4/30/97

Class A

$ 13,359

$ 9,912

Class B

$ 73,866

$ 54,586

Class L*

$ 5,286

$ 2,444
* Class L shares were called Class C shares until June
12, 1998.

Under its terms, the Plan continues from year to year,
provided such continuance is approved annually by vote of
the board of trustees, including a majority of the
independent trustees. The Plan may not be amended to
increase the amount of the service and distribution fees
without shareholder approval, and all material amendments of
the Plan also must be approved by the trustees and
independent trustees in the manner described above. The
Plan may be terminated with respect to a Class of the fund
at any time, without penalty, by vote of a majority of the
independent trustees or by a vote of a majority of the
outstanding voting securities of the Class (as defined in
the 1940 Act). Pursuant to the Plan, Salomon Smith Barney
will provide the fund's board of trustees with periodic
reports of amounts expended under the Plan and the purpose
for which such expenditures were made.

VALUATION OF SHARES

The fund's net asset value per share is determined as of
close of regular trading on the NYSE, on each day that the
NYSE is open, by dividing value of the fund's net assets
attributable to each Class by the total number of shares of
that Class outstanding.

When, in the judgment of the pricing service, quoted bid
prices for investments are readily available and are
representative of the bid side of the market, these
investments are valued at the mean between the quoted bid
and asked prices. Investments for which, in the judgment of
the pricing service, there is no readily obtainable market
quotation (which may contribute a majority of the portfolio
securities) are carried at fair value of securities of
similar type, yield maturity. Pricing services generally
determine value by reference to transactions in municipal
obligations, quotations from municipal bond dealers, market
transactions in comparable securities and various
relationships between securities. Short-term investments
that mature in 60 days or less are valued at amortized cost
whenever the board of trustees determines that amortized
cost is fair value. Amortized cost valuation involves
valuing an instrument at its cost initially and, thereafter,
assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. Securities and
other assets that are not available will be valued in good
faith at fair value by or under the direction of the fund's
board of trustees.

EXCHANGE PRIVILEGE

Shares of each Class of the fund may be exchanged for shares
of the same Class of certain Smith Barney Mutual Funds, to
the extent shares are offered for sale in the shareholder's
state of residence. Exchanges of Class A, Class B and Class
L shares are subject to minimum investment requirements and
all shares are subject to the other requirements of the fund
into which exchanges are made.

Class B Exchanges. If a Class B shareholder wishes to
exchange all or a portion of his or her shares in any of the
funds imposing a higher deferred sales charge than that
imposed by the fund, the exchanged Class B shares will be
subject to the higher applicable deferred sales charge. Upon
an exchange, the new Class B shares will be deemed to have
been purchased on the same date as the Class B shares of the
fund that have been exchanged.

Class L Exchanges. Upon an exchange, the new Class L shares
will be deemed to have been purchased on the same date as
the Class L shares of the fund that have been exchanged.

Class A and Class Y Exchanges. Class A and Class Y
shareholders of the fund who wish to exchange all or a
portion of their shares for shares of the respective Class
in any of the funds identified above may do so without
imposition of any charge.

Additional Information Regarding the Exchange Privilege.
Although the exchange privilege is an important benefit,
excessive exchange transactions can be detrimental to the
fund's performance and its shareholders. The manager may
determine that a pattern of frequent exchanges is excessive
and contrary to the best interests of the fund's other
shareholders. In this event, the fund may, at its
discretion, decide to limit additional purchases and/or
exchanges by the shareholder. Upon such a determination, the
fund will provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the
exchange privilege and during the 15 day period the
shareholder will be required to (a) redeem his or her shares
in the fund or (b) remain invested in the fund or exchange
into any of the funds of the Smith Barney Mutual Funds
ordinarily available, which position the shareholder would
be expected to maintain for a significant period of time.
All relevant factors will be considered in determining what
constitutes an abusive pattern of exchanges.

Certain shareholders may be able to exchange shares by
telephone. See ''Redemption of Shares-Telephone Redemptions
and Exchange Program.'' Exchanges will be processed at the
net asset value next determined. Redemption procedures
discussed below are also applicable for exchanging shares,
and exchanges will be made upon receipt of all supporting
documents in proper form. If the account registration of
the shares of the fund being acquired is identical to the
registration of the shares of the fund exchanged, no
signature guarantee is required. An exchange involves a
taxable redemption of shares, subject to the tax treatment
described in "Dividends, Distributions and Taxes" below,
followed by a purchase of shares of a different fund.
Before exchanging shares, investors should read the current
prospectus describing the shares to be acquired. The fund
reserves the right to modify or discontinue exchange
privileges upon 60 days' prior notice to shareholders.

Additional Information Regarding Telephone Redemption and
Exchange Program

Neither the fund nor its agents will be liable for
instructions communicated by telephone that are reasonably
believed to be genuine. The fund or its agents will employ
procedures designed to verify the identity of the caller and
legitimacy of instructions (for example, a shareholder's
name and account number will be required and phone calls may
be recorded). The fund reserves the right to suspend,
modify or discontinue the telephone redemption and exchange
program or to impose a charge for this service at any time
following at least seven (7) days' prior notice to
shareholders.

PERFORMANCE INFORMATION

From time to time, the fund may quote total return of a
class in advertisements or in reports and other
communications to shareholders. The fund may include
comparative performance information in advertising or
marketing the fund's shares. Such performance information
may include data from the following industry and financial
publications: Barron's, Business Week, CDA Investment
Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investors Daily, Money, Morningstar
Mutual Fund Values, The New York Times, USA Today and The
Wall Street Journal.

Yield and Equivalent Taxable Yield

A Class' 30-day yield figure described below is calculated
according to a formula prescribed by the SEC. The formula
can be expressed as follows:

YIELD =2 [(a-b +1)6-1]
cd

Where: a = dividends and interest earned during
the period.
b = expenses accrued for the period (net
of reimbursement).
c = the average daily number of shares
outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share
on the last day of the period.

For the purpose of determining the interest earned (variable
"a'' in the formula) on debt obligations that were purchased
by the fund at a discount or premium, the formula generally
calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect
changes in the market values of the debt obligations.

The fund's equivalent taxable 30-day yield for a Class of
shares is computed by dividing that portion of the Class'
30-day yield which is tax-exempt by one minus a stated
income tax rate and adding the product to that portion, if
any, of the Class' yield that is not tax-exempt.

The yields on municipal securities are dependent upon a
variety of factors, including general economic and monetary
conditions, conditions of the municipal securities market,
size of a particular offering, maturity of the obligation
offered and rating of the issue. Investors should recognize
that in periods of declining interest rates the fund's yield
for each Class of shares will tend to be somewhat higher
than prevailing market rates, and in periods of rising
interest rates the fund's yield for each Class of shares
will tend to be somewhat lower. Also, when interest rates
are falling, the inflow of net new money to the fund from
the continuous sale of its shares will likely be invested in
portfolio instruments producing lower yields than the
balance of the fund's portfolio, thereby reducing the
current yield of the fund. In periods of rising interest
rates, the opposite can be expected to occur.

The fund's yield for Class A, Class B and Class L shares for
the 30-day period ended April 30, 1999 was %, % and
%, respectively. The equivalent taxable yield for
Class A, Class B and Class L shares for that same period was
%, % and %, respectively, assuming the
payment of Federal income taxes at a rate of %.

Average Annual Total Return

"Average annual total return," as described below, is
computed according to a formula prescribed by the SEC. The
formula can be expressed as follows:

P (1+T)n = ERV

Where: P = a hypothetical initial
payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a
hypothetical $1,000 investment
made at the beginning of a 1-,
5-, or 10-year period at the
end of a 1-, 5-, or 10-year
period (or fractional portion
thereof), assuming
reinvestment of all dividends
and distributions.

The fund's average annual total return for Class A shares
assuming the maximum applicable sales charge was as follows
for the periods indicated (reflecting the waiver of the
fund's investment advisory and administration fees and
reimbursement of expenses):

% for the one-year period ended April 30, 1999.

% for the five-year period ended April 30, 1999.

% per annum during the period from the fund's
commencement of operations on May 23, 1994 through
April 30, 1999.

A Class' average annual total return assumes that the
maximum applicable sales charge or deferred sales charge
assessed by the fund has been deducted from the hypothetical
investment. Had the maximum 4.00% sales charge had not been
deducted, Class A's average annual total return would have
been %, % and %, respectively, for those same
periods.

The fund's average annual total return for Class B shares
assuming the maximum applicable deferred sales charge was as
follows for the periods indicated (reflecting the waiver of
the fund's investment advisory and administration fees and
reimbursement of expenses):

% for the one-year period ended April 30, 1999.

% for the five-year period ended April 30, 1999.

% per annum during the period from the fund's
commencement of operations on May 23, 1994 through
April 30, 1999.

Had the maximum applicable deferred sales charge had not
been deducted at the time of redemption, Class B's average
annual total return would have been %, % and
%, respectively, for the same periods.

The fund's average annual total return for Class L shares
assuming the maximum applicable deferred sales charge was as
follows for the periods indicated (reflecting the waiver of
the fund's investment advisory and administration fees and
reimbursement of expenses):

% for the one-year period ended April 30, 1999.

% per annum during the period from the fund's
commencement of operations on May 16, 1995 through
April 30, 1999.

Had the maximum applicable deferred sales charge had not
been deducted at the time of redemption, Class L's average
annual total return for the one-year period ended April 30,
1999 would have been %.

Aggregate Total Return

"Aggregate total return" represents the cumulative change in
the value of an investment in the Class for the specified
period and is computed by the following formula:

ERV-P
P

Where: P = a hypothetical initial payment of
$10,000.
ERV = Ending Redeemable Value of a
hypothetical $10,000 investment made
at the beginning of a 1-, 5-, or 10-
year period at the end of a 1-, 5-,
or 10-year period (or fractional
portion thereof), assuming
reinvestment of all dividends and
distributions.

The fund's aggregate total return for Class A shares was as
follows for the periods indicated (reflecting the waiver of
the fund's investment advisory and administration fees and
reimbursement of expenses):

% for the one-year period ended April 30, 1999.

% for the five-year period ended April 30, 1999.

% for the period from the fund's commencement of
operations on May 23, 1994 through April 30, 1999.

Class A's aggregate total return assumes that the maximum
applicable sales charge or maximum applicable deferred sales
charge has been deducted from the investment. If the
maximum sales charge had not been deducted at the time of
purchase, Class A's aggregate total return for the same
periods would have been %, % and %,
respectively.

The fund's aggregate total return for Class B shares was as
follows for the periods indicated (reflecting the waiver of
the fund's investment advisory and administration fees and
reimbursement of expenses):

% for the one-year period ended April 30, 1999.

% for the five-year period ended April 30, 1999.

% for the period from commencement of operations on
May 23, 1994 through April 30, 1999.

If the maximum applicable deferred sales charge had not been
deducted at the time of redemption, Class B's aggregate
total return for the same periods would have been 3.48%,
37.89% and 63.92%, respectively.
The fund's aggregate total return for Class L shares was as
follows for the period indicated (reflecting the waiver of
the fund's investment advisory and administration fees and
reimbursement of expenses):

% for the one-year period ended April 30, 1999.

% for the period from commencement of operations on
May 16, 1995 through April 30, 1999.

If the maximum applicable deferred sales charge had not been
deducted at the time of redemption, Class L's aggregate
total return for the one-year period ended April 30, 1999
would have been
%.

Performance will vary from time to time depending on market
conditions, the composition of the fund's portfolio and
operating expenses and the expenses exclusively attributable
to the Class. Consequently, any given performance quotation
should not be considered as representative of the Class'
performance for any specified period in the future. Because
performance will vary, it may not provide a basis for
comparing an investment in the Class with certain bank
deposits or other investments that pay a fixed yield for a
stated period of time. Investors comparing a Class'
performance with that of other mutual funds should give
consideration to the quality and maturity of the respective
investment companies' portfolio securities.

It is important to note that the total return figures set
forth above are based on historical earnings and are not
intended to indicate future performance. Each Class' net
investment income changes in response to fluctuations in
interest rates and the expenses of the fund.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Dividends and Distributions. The fund's policy is to
declare and pay exempt-interest dividends monthly.
Dividends from net realized capital gains, if any, will be
distributed annually. The fund may also pay additional
dividends shortly before December 31 from certain amounts of
undistributed ordinary income and capital gains, in order to
avoid a Federal excise tax liability. If a shareholder does
not otherwise instruct, exempt-interest dividends and
capital gain distributions will be reinvested automatically
in additional shares of the same Class at net asset value,
with no additional sales charge or deferred sales charge.

The per share amounts of the exempt-interest dividends on
Class B and Class L shares may be lower than on Class A and
Class Y shares, mainly as a result of the distribution fees
applicable to Class B and Class L shares. Similarly, the
per share amounts of exempt-interest dividends on Class A
shares may be lower than on Class Y shares, as a result of
the service fee attributable to Class A shares. Capital
gain distributions, if any, will be the same across all
Classes of fund shares (A, B, L and Y).

Taxes. The following is a summary of the material United
States federal income tax considerations regarding the
purchase, ownership and disposition of shares of the fund.
Each prospective shareholder is urged to consult his own tax
adviser with respect to the specific federal, state and
local consequences of investing in the fund. The summary is
based on the laws in effect on the date of this SAI, which
are subject to change.

The fund and its investments

As described in the fund's prospectus, the fund is designed
to provide shareholders with current income which is
excluded from gross income for federal income tax purposes
and which is exempt from Oregon personal income taxes. The
fund is not intended to constitute a balanced investment
program and is not designed for investors seeking capital
gains or maximum tax-exempt income irrespective of
fluctuations in principal. Investment in the fund would not
be suitable for tax-exempt institutions, qualified
retirement plans, H.R. 10 plans and individual retirement
accounts because such investors would not gain any
additional tax benefit from the receipt of tax-exempt
income.

The fund intends to continue to qualify to be treated as a
regulated investment company each taxable year under the
Code. To so qualify, the fund must, among other things: (a)
derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to
securities loans, and gains from the sale or other
disposition of stock or securities or foreign currencies, or
other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect
to its business of investing in such stock, securities or
currencies; and (b) diversify its holdings so that, at the
end of each quarter of the fund's taxable year, (i) at least
50% of the market value of the fund's assets is represented
by cash, securities of other regulated investment companies,
United States government securities and other securities,
with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's
assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the
value of its assets is invested in the securities (other
than United States government securities or securities of
other regulated investment companies) of any one issuer or
any two or more issuers that the fund controls and are
determined to be engaged in the same or similar trades or
businesses or related trades or businesses.

As a regulated investment company, the fund will not be
subject to United States federal income tax on its net
investment income (i.e., income other than its net realized
long- and short-term capital gains) and its net realized
long- and short-term capital gains, if any, that it
distributes to its shareholders, provided an amount equal to
at least 90% of the sum of its investment company taxable
income (i.e., 90% of its taxable income minus the excess, if
any, of its net realized long-term capital gains over its
net realized short-term capital losses (including any
capital loss carryovers), plus or minus certain other
adjustments as specified in the Code) and its net tax-exempt
income for the taxable year is distributed in compliance
with the Code's timing and other requirements but will be
subject to tax at regular corporate rates on any taxable
income or gains it does not distribute. Furthermore, the
fund will be subject to a United States corporate income tax
with respect to such distributed amounts in any year that it
fails to qualify as a regulated investment company or fails
to meet this distribution requirement.

The Code imposes a 4% nondeductible excise tax on the fund
to the extent it does not distribute by the end of any
calendar year at least 98% of its net investment income for
that year and 98% of the net amount of its capital gains
(both long-and short-term) for the one-year period ending,
as a general rule, on October 31 of that year. For this
purpose, however, any income or gain retained by the fund
that is subject to corporate income tax will be considered
to have been distributed by year-end. In addition, the
minimum amounts that must be distributed in any year to
avoid the excise tax will be increased or decreased to
reflect any underdistribution or overdistribution, as the
case may be, from the previous year. The fund anticipates
it will pay such dividends and will make such distributions
as are necessary in order to avoid the application of this
tax.

If, in any taxable year, the fund fails to qualify as a
regulated investment company under the Code or fails to meet
the distribution requirement, it would be taxed in the same
manner as an ordinary corporation and distributions to its
shareholders would not be deductible by the fund in
computing its taxable income. In addition, in the event of
a failure to qualify, the fund's distributions, to the
extent derived from the fund's current or accumulated
earnings and profits would constitute dividends (eligible
for the corporate dividends-received deduction) which are
taxable to shareholders as ordinary income, even though
those distributions might otherwise (at least in part) have
been treated in the shareholders' hands as tax-exempt
interest. If the fund fails to qualify as a regulated
investment company in any year, it must pay out its earnings
and profits accumulated in that year in order to qualify
again as a regulated investment company. In addition, if the
fund failed to qualify as a regulated investment company for
a period greater than one taxable year, the fund may be
required to recognize any net built-in gains (the excess of
the aggregate gains, including items of income, over
aggregate losses that would have been realized if it had
been liquidated) in order to qualify as a regulated
investment company in a subsequent year.

The fund's transactions in municipal bond index and interest
rate futures contracts and options on these futures
contracts (collectively "section 1256 contracts") will be
subject to special provisions of the Code (including
provisions relating to "hedging transactions" and
"straddles") that, among other things, may affect the
character of gains and losses realized by the fund (i.e.,
may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to the fund and defer fund
losses. These rules could therefore affect the character,
amount and timing of distributions to shareholders. These
provisions also (a) will require the fund to mark-to-market
certain types of the positions in its portfolio (i.e., treat
them as if they were closed out) and (b) may cause the fund
to recognize income without receiving cash with which to pay
dividends or make distributions in amounts necessary to
satisfy the distribution requirements for avoiding income
and excise taxes. The fund will monitor its transactions,
will make the appropriate tax elections and will make the
appropriate entries in its books and records when it engages
in these transactions in order to mitigate the effect of
these rules and prevent disqualification of the fund as a
regulated investment company.

All section 1256 contracts held by the fund at the end of
its taxable year are required to be marked to their market
value, and any unrealized gain or loss on those positions
will be included in the fund's income as if each position
had been sold for its fair market value at the end of the
taxable year. The resulting gain or loss will be combined
with any gain or loss realized by the fund from positions in
section 1256 contracts closed during the taxable year.
Provided such positions were held as capital assets and were
not part of a "hedging transaction" nor part of a
"straddle," 60% of the resulting net gain or loss will be
treated as long-term capital gain or loss, and 40% of such
net gain or loss will be treated as short-term capital gain
or loss, regardless of the period of time the positions were
actually held by the fund.

Taxation of Shareholders

Because the fund will distribute exempt-interest dividends,
interest on indebtedness incurred by a shareholder to
purchase or carry fund shares is not deductible for Federal
income tax purposes and Oregon personal income tax purposes.
If a shareholder receives exempt-interest dividends with
respect to any share and if such share is held by the
shareholder for six months or less, then, for Federal income
tax purposes, any loss on the sale or exchange of such share
may, to the extent of exempt-interest dividends, be
disallowed. In addition, the Code may require a
shareholder, if he or she receives exempt-interest
dividends, to treat as Federal taxable income a portion of
certain otherwise non-taxable social security and railroad
retirement benefit payments. Furthermore, that portion of
any exempt-interest dividend paid by the fund which
represents income derived from private activity bonds held
by the fund may not retain its Federal tax-exempt status in
the hands of a shareholder who is a "substantial user" of a
facility financed by such bonds or a "related person"
thereof. Moreover, some or all of the fund's dividends may
be a specific preference item, or a component of an
adjustment item, for purposes of the Federal individual and
corporate alternative minimum taxes. In addition, the
receipt of the fund's dividends and distributions may affect
a foreign corporate shareholder's Federal "branch profits"
tax liability and Federal "excess net passive income" tax
liability of a shareholder of a Subchapter S corporation.
Shareholders should consult their own tax advisors to
determine whether they are (a) substantial users with
respect to a facility or related to such users within the
meaning of the Code or (b) subject to a federal alternative
minimum tax, the Federal branch profits tax or the Federal
"excess net passive income" tax.

The fund does not expect to realize a significant amount of
capital gains. Net realized short-term capital gains are
taxable to a United States shareholder as ordinary income,
whether paid in cash or in shares. Distributions of net-
long-term capital gains, if any, that the fund designates as
capital gains dividends are taxable as long-term capital
gains, whether paid in cash or in shares and regardless of
how long a shareholder has held shares of the fund.

Upon the sale or exchange of his shares, a shareholder will
realize a taxable gain or loss equal to the difference
between the amount realized and his basis in his shares.
Such gain or loss will be treated as capital gain or loss,
if the shares are capital assets in the shareholder's hands,
and will be long-term capital gain or loss if the shares are
held for more than one year and short-term capital gain or
loss if the shares are held for one year or less. Any loss
realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and capital
gains distributions in the fund, within a 61-day period
beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis of the
shares acquired will be increased to reflect the disallowed
loss. Any loss realized by a shareholder on the sale of a
fund share held by the shareholder for six months or less
(to the extent not disallowed pursuant to the six-month rule
described above relating to exempt-interest dividends) will
be treated for United States federal income tax purposes as
a long-term capital loss to the extent of any distributions
or deemed distributions of long-term capital gains received
by the shareholder with respect to such share.

If a shareholder incurs a sales charge in acquiring shares
of the fund, disposes of those shares within 90 days and
then acquires shares in a mutual fund for which the
otherwise applicable sales charge is reduced by reason of a
reinvestment right (e.g., an exchange privilege), the
original sales charge will not be taken into account in
computing gain or loss on the original shares to the extent
the subsequent sales charge is reduced. Instead, the
disregarded portion of the original sales charge will be
added to the tax basis in the newly acquired shares.
Furthermore, the same rule also applies to a disposition of
the newly acquired shares made within 90 days of the second
acquisition. This provision prevents a shareholder from
immediately deducting the sales charge by shifting his or
her investment in a family of mutual funds.

Backup Withholding. The fund may be required to withhold,
for United States federal income tax purposes, 31% of (a)
taxable dividends and distributions and (b) redemption
proceeds payable to shareholders who fail to provide the
fund with their correct taxpayer identification number or to
make required certifications, or who have been notified by
the IRS that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding. Backup
withholding is not an additional tax and any amount withheld
may be credited against a shareholder's United States
federal income tax liabilities.

Notices. Shareholders will be notified annually by the fund
as to the United States federal income tax and Oregon
personal income tax status of the dividends and
distributions made by the fund to its shareholders. These
statements also will designate the amount of exempt-interest
dividends that is a preference item for purposes of the
Federal individual and corporate alternative minimum taxes.
The dollar amount of dividends excluded or exempt from
Federal income taxation and Oregon personal income taxation
and the dollar amount of dividends subject to Federal income
taxation and Oregon personal income taxation, if any, will
vary for each shareholder depending upon the size and
duration of each shareholder's investment in the fund. To
the extent the fund earns taxable net investment income, it
intends to designate as taxable dividends the same
percentage of each day's dividend as its taxable net
investment income bears to its total net investment income
earned on that day.

The foregoing is only a summary of certain material tax
consequences affecting the fund and its shareholders.
Shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of
an investment in the fund.

ADDITIONAL INFORMATION

The Fund is a business trust established under the laws of
the Commonwealth of Massachusetts pursuant to a Master Trust
Agreement dated May 10, 1994. The Fund commenced operations
on May 23, 1994 under the name Smith Barney Shearson Oregon
Municipals Fund. On October 14, 1994, the Fund changed its
name to Smith Barney Oregon Municipals Fund.

Under Massachusetts's law, shareholders could, under certain
circumstances, be held personally liable for the obligations
of the fund. The Master Trust Agreement disclaims
shareholder liability for acts or obligations of the fund,
however, and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered
into or executed by the fund or a trustee. The Master Trust
Agreement provides for indemnification from fund property
for all losses and expenses of any shareholder held
personally liable for the obligations of the fund. Thus,
the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances
in which the fund itself would be unable to meet its
obligations, a possibility which management of the fund
believes is remote. Upon payment of any liability incurred
by the fund, a shareholder paying such liability will be
entitled to reimbursement from the general assets of the
fund. The trustees intend to conduct the operation of the
fund in such ways so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of
the fund.

Description of Shares

The Master Trust Agreement of the fund permits the trustees
of the fund to issue an unlimited number of full and
fractional shares of a single class and to divide or combine
the shares into a greater or lesser number of shares without
thereby changing the proportionate beneficial interests in
the fund. Each share in the fund represents an equal
proportional interest in the fund with each other share.
Shareholders of the fund are entitled upon its liquidation
to share pro rata in its net assets available for
distribution. No shareholder of the fund has any preemptive
or conversion rights. Shares of the fund are fully paid and
non-assessable.

Pursuant to the Master Trust Agreement, the fund's trustees
may authorize the creation of additional series of shares
(the proceeds of which would be invested in separate,
independently managed portfolios) and additional classes of
shares within any series (which would be used to distinguish
among the rights of different categories of shareholders, as
might be required by future regulations or other unforeseen
circumstances).

Voting Rights

The shareholders of the fund are entitled to a full vote for
each full share held (and a fractional vote for any
fractional share held). The trustees of the fund have the
power to alter the number and the terms of office of the
trustees, and have terms of unlimited duration (subject to
certain removal procedures) and may appoint their own
successors, provided at least a majority of the trustees at
all times have been elected by the shareholders of the fund.
The voting rights of the shareholders of the fund are not
cumulative, so that the holders of more than 50% of the
shares can, if they choose, elect all of the trustees of the
fund; the holders of the remaining shares of the fund would
be unable to elect any of the trustees.

FINANCIAL STATEMENTS

The fund's annual report for the fiscal year ended April 30,
1999 is incorporated herein by reference in its entirety.
The annual report was filed on , 1999, Accession Number

OTHER INFORMATION

In an industry where the average portfolio manager has seven
years of experience (source: ICI, 1998), the portfolio
managers of Smith Barney Mutual Funds average 21 years in
the industry and 15 years with the firm.

Smith Barney Mutual Funds offers more than 60 mutual funds.
We understand that many investors prefer an active role in
allocating the mix of funds in their portfolio, while others
want the asset allocation decisions to be made by
experienced managers.

That's why we offer four "styles" of fund management that
can be tailored to suit each investor's unique financial
goals.

Style Pure Series
Our Style Pure Series funds stay fully invested within
their asset class and investment style, enabling
investors to make asset allocation decisions in
conjunction with their Salomon Smith Barney Financial
Consultant.

Classic Investor Series
Our Classic Investor Series funds offer a range of
equity and fixed income strategies that seek to
capture opportunities across asset classes and
investment styles using disciplined investment
approaches.

The Concert Allocation Series
As a fund of funds, investors can select a Concert
Portfolio that may help their investment needs. As
needs change, investors can easily choose another
long-term, diversified investment from our Concert
family.

Special Discipline Series
Our Special Discipline Series funds are designed for
investors who are looking beyond more traditional
market categories: from natural resources to a roster
of state-specific municipal funds.

APPENDIX A

Description of S&P and Moody's ratings:

S&P Ratings for Municipal Bonds

S&P's Municipal Bond ratings cover obligations of states and
political subdivisions. Ratings are assigned to general
obligation and revenue bonds. General obligation bonds are
usually secured by all resources available to the
municipality and the factors outlined in the rating
definitions below are weighed in determining the rating.
Because revenue bonds in general are payable from
specifically pledged revenues, the essential element in the
security for a revenue bond is the quantity and quality of
the pledged revenues available to pay debt service.

Although an appraisal of most of the same factors that bear
on the quality of general obligation bond credit is usually
appropriate in the rating analysis of a revenue bond, other
factors are important, including particularly the
competitive position of the municipal enterprise under
review and the basic security covenants. Although a rating
reflects S&P's judgment as to the issuer's capacity for the
timely payment of debt service, in certain instances it may
also reflect a mechanism or procedure for an assured and
prompt cure of a default, should one occur, i.e., an
insurance program, Federal or state guarantee or the
automatic withholding and use of state aid to pay the
defaulted debt service.

AAA

Prime - These are obligations of the highest quality. They
have the strongest capacity for timely payment of debt
service.

General Obligation Bonds - In a period of economic stress,
the issuers will suffer the smallest declines in income and
will be least susceptible to autonomous decline. Debt
burden is moderate. A strong revenue structure appears more
than adequate to meet future expenditure requirements.
Quality of management appears superior.

Revenue Bonds - Debt service coverage has been, and is
expected to remain, substantial. Stability of the pledged
revenues is also exceptionally strong, due to the
competitive position of the municipal enterprise or to the
nature of the revenues. Basic security provisions
(including rate covenant, earnings test for issuance of
additional bonds, and debt service reserve requirements) are
rigorous. There is evidence of superior management.

High Grade - The investment characteristics of general
obligation and revenue bonds in this group are only slightly
less marked than those of the prime quality issues. Bonds
rated "AA'' have the second strongest capacity for payment
of debt service.

Good Grade - Principal and interest payments on bonds in
this category are regarded as safe. This rating describes
the third strongest capacity for payment of debt service.
It differs from the two higher ratings because:

General Obligation Bonds - There is some weakness, either in
the local economic base, in debt burden, in the balance
between revenues and expenditures, or in quality of
management. Under certain adverse circumstances, any one
such weakness might impair the ability of the issuer to meet
debt obligations at some future date.

Revenue Bonds - Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show
some variations because of increased competition or economic
influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance
appears adequate.

BBB

Medium Grade - Of the investment grade ratings, this is the
lowest.

General Obligation Bonds - Under certain adverse conditions,
several of the above factors could contribute to a lesser
capacity for payment of debt service. The difference
between "A'' and "BBB" ratings is that the latter shows more
than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one
deficiency among the factors considered.

Revenue Bonds - Debt coverage is only fair. Stability of
the pledged revenues could show substantial variations, with
the revenue flow possibly being subject to erosion over
time. Basic security provisions are no more than adequate.
Management performance could be stronger.

BB, B, CCC and CC

Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominately speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of
the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties
or major risk exposures to adverse conditions.

The rating C is reserved for income bonds on which no
interest is being paid.

Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.

S&P's letter ratings may be modified by the addition of a
plus or a minus sign, which is used to show relative
standing within the major rating categories, except in the
AAA-Prime Grade category.

S&P Ratings for Municipal Notes

Municipal notes with maturities of three years or less are
usually given note ratings (designated SP-1, -2 or -3) by
S&P to distinguish more clearly the credit quality of notes
as compared to bonds. Notes rated SP-1 have a very strong
or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety
characteristics are given the designation of SP-1+. Notes
rated SP-2 have a satisfactory capacity to pay principal and
interest.

Moody's Ratings for Municipal Bonds

Aaa

Bonds that are 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.

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 as 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.

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
sometime 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.

Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract
over any long period of time may be small.

Caa

Bonds that are rated Caa are of poor standing. These issues
may be in default or present elements of danger may exist
with respect to principal or interest.

Bonds that are rated Ca represent obligations that are
speculative in a high degree. These issues are often in
default or have other marked short-comings.

Bonds that are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

Moody's Ratings for Municipal Notes

Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade
(MIG) and for variable rate demand obligations are
designated Variable Moody's Investment Grade (VMIG). This
distinction is in recognition of the differences between
short- and long-term credit risk. Loans bearing the
designation MIG 1 or VMIG 1 are of the best quality,
enjoying strong protection by established cash flows of
funds for their servicing, from established and broad-based
access to the market for refinancing, or both. Loans
bearing the designation MIG 2 or VMIG 2 are of high quality,
with margins of protection ample although not as large as
the preceding group. Loans bearing the designation MIG 3 or
VMIG 3 are of favorable quality, with all security elements
accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow may be narrow and
market access for refinancing is likely to be less well
established.

Description of S&P A-1+ and A-1 Commercial Paper Rating

The rating A-1+ is the highest, and A-1 the second highest,
commercial paper rating assigned by S&P. Paper rated A-1+
must have either the direct credit support of an issuer or
guarantor that possesses excellent long-term operating and
financial strengths combined with strong liquidity
characteristics (typically, such issuers or guarantors would
display credit quality characteristics which would warrant a
senior bond rating of "AA-'' or higher), or the direct
credit support of an issuer or guarantor that possesses
above-average long-term fundamental operating and financing
capabilities combined with ongoing excellent liquidity
characteristics. Paper rated A-1 by S&P has the following
characteristics: liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated "A'' or better;
the issuer has access to at least two additional channels of
borrowing; basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances; typically,
the issuer's industry is well established and the issuer has
a strong position within the industry; and the reliability
and quality of management are unquestioned.

Description of Moody's Prime-1 Commercial Paper Rating

The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by
Moody's in assigning ratings are the following: (1)
evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6)
trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which
exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such
obligations.

SMITH BARNEY OREGON MUNICIPALS FUND

Statement of

Additional
Information

August 27, 1999

Smith Barney Oregon Municipals Fund
388 Greenwich Street
New York, NY 10013
SALOMON SMITH
BARNEY
A Member of
Citigroup [Symbol]

82
FUNDACCOUNTING\LEGAL\FUNDS\ORMU\ORMU SAI 1999

PART C-Other Information

Item 23. Exhibits

All references are to the Registrant's registration
statement on Form N-1A as filed with the Securities and
Exchange Commission ("SEC") on March 11, 1994 (the
"Registration Statement") (File Nos. 33-52643 and 811-
07149).

(a) (1) Registrant's Master Trust Agreement, dated March
10, 1994, is incorporated by reference to the Registration
Statement.

(a) (2) Amendments to Master Trust Agreement dated
October 14, 1994 and November 7, 1994, respectively, are
incorporated by reference to Post-Effective Amendment No. 3
as filed with the SEC on November 23, 1994 ("Post-Effective
Amendment No. 3").

(a) (3) Amendment to Registrant's Master Trust Agreement
dated June 12, 1998, is incorporated by reference to Post-
Effective Amendment No. 7 as filed with the SEC on August
28, 1998 ("Post-Effective Amendment No.7").

(b) (1) Registrant's By-Laws, dated March 10, 1994, are
incorporated by reference to the Registration Statement.

(c) Registrant's forms of stock certificates are
incorporated by reference to Pre-Effective Amendment No. 3
as filed with the SEC on May 23, 1994 ("Pre-Effective
Amendment No. 3").

(d) (1) Investment Advisory Agreement between the
Registrant and Greenwich Street Advisors, dated May 23,
1994, is incorporated by reference to Pre-Effective
Amendment No. 3.

(d) (2) Transfer and Assignment of Investment Advisory
Agreement between the Registrant and Smith Barney Mutual
Funds Management Inc., dated November 7, 1994, is
incorporated by reference to Post-Effective Amendment No. 4
as filed with the SEC on July 6, 1995 ("Post-Effective
Amendment No. 4").

(e) (1) Distribution Agreement between the Registrant
and Smith Barney Shearson Inc., dated May 23, 1994, is
incorporated by reference to Pre-Effective Amendment No. 3.

(e) (2) Form of Distribution Agreement between the
Registrant and CFBDS, Inc. is filed herein.

(e) (3) Broker Dealer Contract is filed herein.

(f) Not Applicable.

(g) Form of Custody Agreement between the Registrant and
PNC Bank, National Association, is incorporated by reference
to Post-Effective Amendment No. 4.

(h) (1) Administration Agreement between the Registrant
and Smith, Barney Advisers, Inc., dated May 23, 1994, is
incorporated by reference to Pre-Effective Amendment No. 3.

(h) (2) Transfer Agency Agreement between the Registrant
and First Data Investor Services Group, Inc. (formerly known
as The Shareholder Services Group, Inc.), dated May 23,
1994, is incorporated by reference to Pre-Effective
Amendment No. 3.

(i) Not Applicable.

(j) Consent of Independent Auditors to be filed by
amendment.

(k) Not Applicable.

(l) Purchase Agreement between the Registrant and Smith
Barney Shearson Inc. is incorporated by reference to Pre-
Effective Amendment No. 3.

(m) (1) Amended Services and Distribution Plan pursuant
to Rule 12b-1 between the Registrant and Smith Barney, Inc.
is incorporated by reference to Post-Effective Amendment No.
3.

(m)(2) Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant and Salomon
Smith Barney Inc. is filed herein.

(n) Financial Data Schedule to be filed by amendment.

(o) Form of Registrant's Amended Rule 18f-3(d) Multiple
Class Plan is incorporated by reference to Post-Effective
Amendment No. 7.

Item 24. Persons Controlled by or Under Common Control
with Registrant

None.

Item 25. Indemnification

The response to this item is incorporated by reference
to Pre-Effective Amendment No. 1.

Item 26. Business and Other Connections of
Investment Adviser

Investment Adviser - - SSBC Fund Management Inc.
("SSBC")(formerly know as Mutual Management Corp.)

SSBC was incorporated in December 1968 under the laws of the
State of Delaware. SSBC is a wholly owned subsidiary of
Salomon Smith Barney Holdings Inc. ("Holdings"), which in
turn is a wholly owned subsidiary of Travelers Group Inc.
("Travelers"). SSBC is registered as an investment adviser
under the Investment Advisers Act of 1940 (the "Advisers
Act").

The list required by this Item 26 of officers and directors
of SSBC together with information as to any other business,
profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two
years, is incorporated by reference to Schedules A and D of
FORM ADV filed by SSBC pursuant to the Advisers Act (SEC File
No. 801-8314).

Item 27. Principal Underwriters

(a) CFBDS, Inc., ("CFBDS") the Registrant's Distributor, is
also
the distributor for the following Smith Barney funds:
Concert
Investment Series, Consulting Group Capital Markets Funds,
Greenwich
Street Series Fund, Smith Barney Adjustable Rate Government
Income
Fund, Smith Barney Aggressive Growth Fund Inc., Smith Barney
Appreciation Fund Inc., Smith Barney Arizona Municipals Fund
Inc.,
Smith Barney California Municipals Fund Inc., Smith Barney
Concert
Allocation Series Inc., Smith Barney Equity Funds, Smith
Barney
Fundamental Value Fund Inc., Smith Barney Funds, Inc., Smith
Barney
Income Funds, Smith Barney Institutional Cash Management
Fund, Inc.,
Smith Barney Investment Funds Inc., Smith Barney Investment
Trust,
Smith Barney Managed Governments Fund Inc., Smith Barney
Managed
Municipals Fund Inc., Smith Barney Massachusetts Municipals
Fund,
Smith Barney Money Funds, Inc., Smith Barney Muni Funds,
Smith Barney
Municipal Money Market Fund, Inc., Smith Barney
Natural Resources Fund Inc., Smith Barney New Jersey
Municipals
Fund Inc., Smith Barney Principal Return Fund, Smith Barney
Small Cap Blend Fund, Inc., Smith Barney Telecommunications
Trust, Smith Barney Variable Account Funds,
Smith Barney World Funds, Inc., Travelers Series Fund Inc.,
and
various series of unit investment trusts.

CFBDS also serves as the distributor for the following
funds: The
Travelers Fund UL for Variable Annuities, The Travelers Fund
VA for
Variable Annuities, The Travelers Fund BD for Variable
Annuities, The
Travelers Fund BD II for Variable Annuities, The Travelers
Fund BD
III for Variable Annuities, The Travelers Fund BD IV for
Variable
Annuities, The Travelers Fund ABD for Variable Annuities,
The
Travelers Fund ABD II for Variable Annuities, The Travelers
Separate
Account PF for Variable Annuities, The Travelers Separate
Account PF
II for Variable Annuities, The Travelers Separate Account QP
for
Variable Annuities, The Travelers Separate Account TM for
Variable
Annuities, The Travelers Separate Account TM II for Variable
Annuities, The Travelers Separate Account Five for Variable
Annuities, The Travelers Separate Account Six for Variable
Annuities,
The Travelers Separate Account Seven for Variable Annuities,
The
Travelers Separate Account Eight for Variable Annuities, The
Travelers Fund UL for Variable Annuities, The Travelers Fund
UL II
for Variable Annuities, The Travelers Variable Life
Insurance
Separate Account One, The Travelers Variable Life Insurance
Separate
Account Two, The Travelers Variable Life Insurance Separate
Account
Three, The Travelers Variable Life Insurance Separate
Account Four,
The Travelers Separate Account MGA, The Travelers Separate
Account
MGA II, The Travelers Growth and Income Stock Account for
Variable
Annuities, The Travelers Quality Bond Account for Variable
Annuities,
The Travelers Money Market Account for Variable Annuities,
The
Travelers Timed Growth and Income Stock Account for Variable
Annuities, The Travelers Timed Short-Term Bond Account for
Variable
Annuities, The Travelers Timed Aggressive Stock Account for
Variable
Annuities, The Travelers Timed Bond Account for Variable
Annuities.

In addition, CFBDS, the Registrant's Distributor, is also
the
distributor for CitiFunds Multi-State Tax Free Trust,
CitiFunds
Premium Trust, CitiFunds Institutional Trust, CitiFunds Tax
Free
Reserves, CitiFunds Trust I, CitiFunds Trust II, CitiFunds
Trust III,
CitiFunds International Trust, CitiFunds Fixed Income Trust,
CitiSelect VIP Folio 200, CitiSelect VIP Folio 300,
CitiSelect VIP
Folio 400, CitiSelect VIP Folio 500, CitiFunds Small Cap
Growth VIP
Portfolio. CFBDS is also the placement agent for Large Cap
Value
Portfolio, Small Cap Value Portfolio, International
Portfolio,
Foreign Bond Portfolio, Intermediate Income Portfolio,
Short-Term
Portfolio, Growth & Income Portfolio, U.S. Fixed Income
Portfolio,
Large Cap Growth Portfolio, Small Cap Growth Portfolio,
International
Equity Portfolio, Balanced Portfolio, Government Income
Portfolio,
Tax Free Reserves Portfolio, Cash Reserves Portfolio and
U.S.
Treasury Reserves Portfolio.

In addition, CFBDS is also the distributor for the following
Salomon
Brothers funds: Salomon Brothers Opportunity Fund Inc.,
Salomon
Brothers Investors Fund Inc., Salomon Brothers Capital Fund
Inc.,
Salomon Brothers Series Funds Inc., Salomon Brothers
Institutional
Series Funds Inc., Salomon Brothers Variable Series Funds
Inc.

In addition, CFBDS is also the distributor for the Centurion
Funds,
Inc.

(b) The information required by this Item 27 with respect
to each
director and officer of CFBDS is incorporated by reference
to
Schedule A of Form BD filed by CFBDS pursuant to the
Securities and
Exchange Act of 1934 (File No. 8-32417).

Item 28. Location of Accounts and Records

(1) Smith Barney Oregon Municipals Fund
388 Greenwich Street
New York, New York 10013

(2) SSBC Fund Management Inc.
388 Greenwich Street
New York, New York 10013

(3) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103

(4) First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109

(5) CFBDS, Inc.
21 Milk Street
Boston, MA 02109

Item 29. Management Services

Not Applicable.

Item 30. Undertakings

Not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, as amended, the
Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New
York and State of New York, on the 18th day of June, 1999.

SMITH BARNEY OREGON MUNICIPALS
FUND

By: /s/Heath B. McLendon
Health B. McLendon
Chairman of the Board

Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration
Statement and the above Power of Attorney has been signed
below by the following persons in the capacities and as of
the dates indicated.

Signature Title Date

/s/ Heath B. McLendon Chairman of the Board, June
18, 1999
Heath B. McLendon President and Chief
Executive Officer

/s/Lewis E. Daidone Senior Vice President and June
18, 1999
Lewis E. Daidone Treasurer, Chief Financial
and Accounting Officer

/s/Herbert Barg* Trustee June 18,
1999
Herbert Barg

/s/Alfred J. Bianchetti* Trustee
June 18, 1999
Alfred J. Bianchetti

/s/Martin Brody* Trustee
June 18, 1999
Martin Brody

/s/Dwight B. Crane* Trustee
June 18, 1999
Dwight B. Crane

/s/Burt N. Dorsett* Trustee June 18,
1999
Burt N. Dorsett

/s/Elliot S. Jaffe* Trustee June 18,
1999
Elliot S. Jaffe

/s/Stephen E. Kaufman* Trustee June 18,
1999
Stephen E. Kaufman

/s/Joseph J. McCann* Trustee June 18,
1999
Joseph J. McCann

/s/Cornelius C. Rose, Jr.* Trustee
June 18, 1999
Cornelius C. Rose, Jr.

* Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant to power of attorney dated August
14, 1996.

/s/ Heath B. McLendon
Heath B. McLendon

R>
EXHIBIT INDEX

Exhibit No. Exhibit

(e) (2) Form of Distribution
Agreement between Registrant and CFBDS,
Inc.

(e) (3) Broker Dealer Contract

(j) Consent of KPMG Peat Markwick LLP*

(m) (2) Form of Amended 12b-1 Plan

(n) Financial Data Schedule*

Cover page

*to be filed by further amendment

SMITH BARNEY OREGON MUNICIPALS FUND
DISTRIBUTION AGREEMENT

October 8, 1998

CFBDS, Inc.
21 Milk Street
Boston, MA 02109

Dear Sirs:

This is to confirm that, in consideration of the
agreements hereinafter contained, the above-named investment
company (the "Fund") has agreed that you shall be, for the
period of this Agreement, the non-exclusive principal
underwriter and distributor of shares of the Fund and each
Series of the Fund set forth on Exhibit A hereto, as such
Exhibit may be revised from time to time (each, including
any shares of the Fund not designated by series, a
"Series"). For purposes of this Agreement, the term
"Shares" shall mean shares of the each Series, or one or
more Series, as the context may require.

1. Services as Principal Underwriter and
Distributor

1.1 You will act as agent for the distribution
of Shares covered by, and in accordance with, the
registration statement, prospectus and statement of
additional information then in effect under the Securities
Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"), and will
transmit or cause to be transmitted promptly any orders
received by you or those with whom you have sales or
servicing agreements for purchase or redemption of Shares to
the Transfer and Dividend Disbursing Agent for the Fund of
which the Fund has notified you in writing.

1.2 You agree to use your best efforts to
solicit orders for the sale of Shares. It is contemplated
that you will enter into sales or servicing agreements with
registered securities brokers and banks and into servicing
agreements with financial institutions and other industry
professionals, such as investment advisers, accountants and
estate planning firms. In entering into such agreements,
you will act only on your own behalf as principal
underwriter and distributor. You will not be responsible
for making any distribution plan or service fee payments
pursuant to any plans the Fund may adopt or agreements it
may enter into.

1.3 You shall act as the non-exclusive
principal underwriter and distributor of Shares in
compliance with all applicable laws, rules, and regulations,
including, without limitation, all rules and regulations
made or adopted from time to time by the Securities and
Exchange Commission (the "SEC") pursuant to the 1933 Act
or the 1940 Act or by any securities association registered
under the Securities Exchange Act of 1934, as amended.

1.4 Whenever in their judgment such action is
warranted for any reason, including, without limitation,
market, economic or political conditions, the Fund's
officers may decline to accept any orders for, or make any
sales of, any Shares until such time as those officers deem
it advisable to accept such orders and to make such sales
and the Fund shall advise you promptly of such
determination.

2. Duties of the Fund

2.1 The Fund agrees to pay all costs and
expenses in connection with the registration of Shares under
the 1933 Act, and all expenses in connection with
maintaining facilities for the issue and transfer of Shares
and for supplying information, prices and other data to be
furnished by the Fund hereunder, and all expenses in
connection with the preparation and printing of the Fund's
prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders;
provided however, that nothing contained herein shall be
deemed to require the Fund to pay any costs of advertising
or marketing the sale of Shares.

2.2 The Fund agrees to execute any and all
documents and to furnish any and all information and
otherwise to take any other actions that may be reasonably
necessary in the discretion of the Fund's officers in
connection with the qualification of Shares for sale in such
states and other U.S. jurisdictions as the Fund may approve
and designate to you from time to time, and the Fund agrees
to pay all expenses that may be incurred in connection with
such qualification. You shall pay all expenses connected
with your own qualification as a securities broker or dealer
under state or Federal laws and, except as otherwise
specifically provided in this Agreement, all other expenses
incurred by you in connection with the sale of Shares as
contemplated in this Agreement.

2.3 The Fund shall furnish you from time to
time, for use in connection with the sale of Shares, such
information reports with respect to the Fund or any relevant
Series and the Shares as you may reasonably request, all of
which shall be signed by one or more of the Fund's duly
authorized officers; and the Fund warrants that the
statements contained in any such reports, when so signed by
the Fund's officers, shall be true and correct. The Fund
also shall furnish you upon request with (a) the reports of
the annual audits of the financial statements of the Fund
for each Series made by independent certified public
accountants retained by the Fund for such purpose; (b)
semi-annual unaudited financial statements pertaining to
each Series; (c) quarterly earnings statements prepared by
the Fund for any Series; (d) a monthly itemized list of the
securities in each Series' portfolio; (e) monthly balance
sheets as soon as practicable after the end of each month;
(f) the current net asset value and offering price per
share for each Series on each day such net asset value is
computed and (g) from time to time such additional
information regarding the financial condition of each Series
of the Fund as you may reasonably request.

3. Representations and Warranties

The Fund represents to you that all registration
statements, prospectuses and statements of additional
information filed by the Fund with the SEC under the 1933
Act and the 1940 Act with respect to the Shares have been
prepared in conformity with the requirements of said Acts
and the rules and regulations of the SEC thereunder. As
used in this Agreement, the terms "registration statement",
"prospectus" and "statement of additional information" shall
mean any registration statement, prospectus and statement of
additional information filed by the Fund with the SEC and
any amendments and supplements thereto filed by the Fund
with the SEC. The Fund represents and warrants to you that
any such registration statement, prospectus and statement of
additional information, when such registration statement
becomes effective and as such prospectus and statement of
additional information are amended and supplemented,
includes at the time of such effectiveness, amendment or
supplement all statements required to be contained therein
in conformance with the 1933 Act, the 1940 Act and the rules
and regulations of the SEC; that all statements of material
fact contained in any registration statement, prospectus or
statement of additional information will be true and correct
when such registration statement becomes effective; and that
neither any registration statement nor any prospectus or
statement of additional information when such registration
statement becomes effective will include an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading to a purchaser of the Fund's Shares.
The Fund may, but shall not be obligated to, propose from
time to time such amendment or amendments to any
registration statement and such supplement or supplements to
any prospectus or statement of additional information as, in
the light of future developments, may, in the opinion of the
Fund, be necessary or advisable. If the Fund shall not
propose such amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Fund of
a written request from you to do so, you may, at your
option, terminate this Agreement or decline to make offers
of the Fund's Shares until such amendments are made. The
Fund shall not file any amendment to any registration
statement or supplement to any prospectus or statement of
additional information without giving you reasonable notice
thereof in advance; provided, however, that nothing
contained in this Agreement shall in any way limit the
Fund's right to file at any time such amendments to any
registration statement and/or supplements to any prospectus
or statement of additional information, of whatever
character, as the Fund may deem advisable, such right being
in all respects absolute and unconditional.

4. Indemnification

4.1 The Fund authorizes you to use any
prospectus or statement of additional information furnished
by the Fund from time to time, in connection with the sale
of Shares. The Fund agrees to indemnify, defend and hold
you, your several officers and directors, and any person who
controls you within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or
liabilities and any such counsel fees incurred in connection
therewith) which you, your officers and directors, or any
such controlling person, may incur under the 1933 Act or
under common law or otherwise, arising out of or based upon
any untrue statement, or alleged untrue statement, of a
material fact contained in any registration statement, any
prospectus or any statement of additional information or
arising out of or based upon any omission, or alleged
omission, to state a material fact required to be stated in
any registration statement, any prospectus or any statement
of additional information or necessary to make the
statements in any of them not misleading; provided, however,
that the Fund's agreement to indemnify you, your officers or
directors, and any such controlling person shall not be
deemed to cover any claims, demands, liabilities or expenses
arising out of any statements or representations made by you
or your representatives or agents other than such statements
and representations as are contained in any prospectus or
statement of additional information and in such financial
and other statements as are furnished to you pursuant to
paragraph 2.3 of this Agreement; and further provided that
the Fund's agreement to indemnify you and the Fund's
representations and warranties herein before set forth in
paragraph 3 of this Agreement shall not be deemed to cover
any liability to the Fund or its shareholders to which you
would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your
obligations and duties under this Agreement. The Fund's
agreement to indemnify you, your officers and directors, and
any such controlling person, as aforesaid, is expressly
conditioned upon the Fund's being notified of any action
brought against you, your officers or directors, or any such
controlling person, such notification to be given by letter
or by telegram addressed to the Fund at its principal office
in New York, New York and sent to the Fund by the person
against whom such action is brought, within ten days after
the summons or other first legal process shall have been
served. The failure so to notify the Fund of any such
action shall not relieve the Fund from any liability that
the Fund may have to the person against whom such action is
brought by reason of any such untrue, or alleged untrue,
statement or omission, or alleged omission, otherwise than
on account of the Fund's indemnity agreement contained in
this paragraph 4.1. The Fund will be entitled to assume the
defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall
be conducted by counsel of good standing chosen by the Fund.
In the event the Fund elects to assume the defense of any
such suit and retains counsel of good standing, the
defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them;
but if the Fund does not elect to assume the defense of any
such suit, the Fund will reimburse you, your officers and
directors, or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable
fees and expenses of any counsel retained by you or them.
The Fund's indemnification agreement contained in this
paragraph 4.1 and the Fund's representations and warranties
in this Agreement shall remain operative and in full force
and effect regardless of any investigation made by or on
behalf of you, your officers and directors, or any
controlling person, and shall survive the delivery of any of
the Fund's Shares. This agreement of indemnity will inure
exclusively to your benefit, to the benefit of your several
officers and directors, and their respective estates, and to
the benefit of the controlling persons and their successors.
The Fund agrees to notify you promptly of the commencement
of any litigation or proceedings against the Fund or any of
its officers or Board members in connection with the
issuance and sale of any of the Fund's Shares.

4.2 You agree to indemnify, defend and hold
the Fund, its several officers and Board members, and any
person who controls the Fund within the meaning of Section
15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including
the costs of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection
therewith) that the Fund, its officers or Board members or
any such controlling person may incur under the 1933 Act, or
under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its officers
or Board members, or such controlling person resulting from
such claims or demands shall arise out of or be based upon
any untrue, or alleged untrue, statement of a material fact
contained in information furnished in writing by you to the
Fund and used in the answers to any of the items of the
registration statement or in the corresponding statements
made in the prospectus or statement of additional
information, or shall arise out of or be based upon any
omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by you
to the Fund and required to be stated in such answers or
necessary to make such information not misleading. Your
agreement to indemnify the Fund, its officers or Board
members, and any such controlling person, as aforesaid, is
expressly conditioned upon your being notified of any action
brought against the Fund, its officers or Board members, or
any such controlling person, such notification to be given
by letter or telegram addressed to you at your principal
office in Boston, Massachusetts and sent to you by the
person against whom such action is brought, within ten days
after the summons or other first legal process shall have
been served. You shall have the right to control the
defense of such action, with counsel of your own choosing,
satisfactory to the Fund, if such action is based solely
upon such alleged misstatement or omission on your part or
with the Fund's consent, and in any event the Fund, its
officers or Board members or such controlling person shall
each have the right to participate in the defense or
preparation of the defense of any such action with counsel
of its own choosing reasonably acceptable to you but shall
not have the right to settle any such action without your
consent, which will not be unreasonably withheld. The
failure to so notify you of any such action shall not
relieve you from any liability that you may have to the
Fund, its officers or Board members, or to such controlling
person by reason of any such untrue, or alleged untrue,
statement or omission, or alleged omission, otherwise than
on account of your indemnity agreement contained in this
paragraph 4.2. You agree to notify the Fund promptly of the
commencement of any litigation or proceedings against you or
any of your officers or directors in connection with the
issuance and sale of any of the Fund's Shares.

5. Effectiveness of Registration

No Shares shall be offered by either you or the Fund
under any of the provisions of this Agreement and no orders
for the purchase or sale of such Shares under this Agreement
shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect
or any necessary amendments thereto shall be suspended under
any of the provisions of the 1933 Act, or if and so long as
a current prospectus as required by Section 5(b) (2) of the
1933 Act is not on file with the SEC; provided, however,
that nothing contained in this paragraph 5 shall in any way
restrict or have any application to or bearing upon the
Fund's obligation to repurchase its Shares from any
shareholder in accordance with the provisions of the Fund's
prospectus, statement of additional information or charter
documents, as amended from time to time.

6. Offering Price

Shares of any class of any Series of the Fund offered
for sale by you shall be offered for sale at a price per
share (the "offering price") equal to (a) their net asset
value (determined in the manner set forth in the Fund's
charter documents and the then-current prospectus and
statement of additional information) plus (b) a sales
charge, if applicable, which shall be the percentage of the
offering price of such Shares as set forth in the Fund's
then-current prospectus relating to such Series. In
addition to or in lieu of any sales charge applicable at the
time of sale, Shares of any class of any Series of the Fund
offered for sale by you may be subject to a contingent
deferred sales charge as set forth in the Fund's then-
current prospectus and statement of additional information.
You shall be entitled to receive any sales charge levied at
the time of sale in respect of the Shares without remitting
any portion to the Fund. Any payments to a broker or dealer
through whom you sell Shares shall be governed by a separate
agreement between you and such broker or dealer and the
Fund's then-current prospectus and statement of additional
information. Any payments to any provider of services to
you shall be governed by a separate agreement between you
and such service provider.

7. Notice to You

The Fund agrees to advise you immediately in writing:

(a) of any request by the
SEC for amendments to the
registration statement,
prospectus or statement of
additional information then in
effect or for additional
information;

(b) in the event of the
issuance by the SEC of any stop
order suspending the
effectiveness of the registration
statement, prospectus or
statement of additional
information then in effect or the
initiation of any proceeding for
that purpose;

(c) of the happening of
any event that makes untrue any
statement of a material fact made
in the registration statement,
prospectus or statement of
additional information then in
effect or that requires the
making of a change in such
registration statement,
prospectus or statement of
additional information in order
to make the statements therein
not misleading; and

(d) of all actions of the
SEC with respect to any amendment
to the registration statement, or
any supplement to the prospectus
or statement of additional
information which may from time
to time be filed with the SEC.

8. Term of the Agreement

This Agreement shall become effective on the date
hereof, shall have an initial term of one year from the date
hereof, and shall continue for successive annual periods
thereafter so long as such continuance is specifically
approved at least annually by (a) the Fund's Board or (b) by
a vote of a majority (as defined in the 1940 Act) of the
Fund's outstanding voting securities, provided that in
either event the continuance is also approved by a majority
of the Board members of the Fund who are not interested
persons (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. This Agreement is
terminable with or without cause, without penalty, on 60
days' notice by the Fund's Board or by vote of holders of a
majority of the relevant Series outstanding voting
securities, or on 90 days' notice by you. This Agreement
will also terminate automatically, as to the relevant
Series, in the event of its assignment (as defined in the
1940 Act and the rules and regulations thereunder).

9. Arbitration

Any claim, controversy, dispute or deadlock
arising under this Agreement (collectively, a "Dispute")
shall be settled by arbitration administered under the rules
of the American Arbitration Association ("AAA") in New
York, New York. Any arbitration and award of the
arbitrators, or a majority of them, shall be final and the
judgment upon the award rendered may be entered in any state
or federal court having jurisdiction. No punitive damages
are to be awarded.

10. Miscellaneous

So long as you act as a principal underwriter and
distributor of Shares, you shall not perform any services
for any entity other than investment companies advised or
administered by Citigroup Inc. or its subsidiaries. The
Fund recognizes that the persons employed by you to assist
in the performance of your duties under this Agreement may
not devote their full time to such service and nothing
contained in this Agreement shall be deemed to limit or
restrict the persons employed by you or any of your
affiliates right to engage in and devote time and attention
to other businesses or to render services of whatever kind
or nature, provided, however, that in conducting such
business or rendering such services your employees and
affiliates would take reasonable steps to assure that the
other parties involved are put on notice as to the legal
entity with which they are dealing. This Agreement and the
terms and conditions set forth herein shall be governed by,
and construed in accordance with, the laws of the State of
New York without giving effect to its conflict of interest
principles.

If the foregoing is in accordance with your
understanding, kindly indicate your acceptance of this
Agreement by signing and returning to us the enclosed copy,
whereupon this Agreement will become binding on you.

Very truly yours,

SMITH BARNEY OREGON
MUNICIPALS FUND

By:
_____________________
Authorized
Officer

Accepted:

CFBDS, INC.

By: __________________________
Authorized Officer

Page: 3

SMITH BARNEY MUTUAL FUNDS

BROKER DEALER CONTRACT
CFBDS, Inc.
21 Milk Street
Boston, Massachusetts 02109

Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

We, CFBDS, Inc. ("CFBDS"), have agreements with
certain investment companies for which Mutual Management
Corp. serves as investment adviser and/or administrator
(each a "Fund") pursuant to which we act as nonexclusive
principal underwriter and distributor for the sale of shares
of capital stock ("shares") of the various series of such
Funds, and as such have the right to distribute shares for
resale. Each Fund is an open-end investment company
registered under the Investment Company Act of 1940, as
amended (the "1940 Act") and the shares being offered to the
public are registered under the Securities Act of 1933, as
amended (the "1933 Act"). Each series of each Fund covered
by a Distribution Agreement from time to time is referred to
in this agreement as a "Series" and collectively as the
"Series." The term "Prospectus", as used herein, refers to
the prospectus and related statement of additional
information (the "Statement of Additional Information")
incorporated therein by reference (as amended or
supplemented) on file with the Securities and Exchange
Commission at the time in question. As a broker in the
capacity of principal underwriter and distributor for the
Trust, we offer to sell to you, as a broker or dealer,
shares of each Fund upon the following terms and conditions:

1. PRIVATE In all sales to the public you
shall act as broker for your customers or as dealer for your
own account, and in no transaction shall you have any
authority to act as agent for the Trust, for us or for any
other dealer. tc " In all sales to the public you shall act
as dealer for your own account, and in no transaction shall
you have any authority to act as agent for the Fund, for us
or for any other dealer."

2. PRIVATE Orders received from you will be
accepted through us only at the public offering price per
share (i.e. the net asset value per share plus the
applicable front-end sales charge, if any) applicable to
each order, and all orders for redemption of any shares
shall be executed at the net asset value per share less any
contingent deferred sales charge, if any, in each case as
set forth in the Prospectus. You will be entitled to
receive and retain any contingent deferred sales charge
amounts in partial consideration of your payment to
financial consultants of commission amounts at the time of
sale and we will obligate any other brokers with whom we
enter into similar agreements to pay such amounts directly
to you. The procedure relating to the handling of orders
shall be subject to paragraph 4 hereof and instructions
which we or the Fund shall forward from time to time to you.
All orders are subject to acceptance or rejection by the
applicable Fund or us in the sole discretion of either. The
minimum initial purchase and the minimum subsequent purchase
of any shares shall be as set forth in the Prospectus
pertaining to the relevant Series. tc " Orders received
from you will be accepted through us only at the public
offering price per share (i.e. the net asset value per share
plus the applicable sales charge, if any) applicable to
each order, and all orders for redemption of any Fund shares
shall be executed at the net asset value per share less any
contingent deferred sales charge, if any, in each case as
set forth in the Prospectus. The procedure relating to the
handling of orders shall be subject to paragraph 4 hereof
and instructions which we or the Fund shall forward from
time to time to you. All orders are subject to acceptance
or rejection by Salomon or the Fund in the sole discretion
of either. The minimum initial purchase and the minimum
subsequent purchase shall be as set forth in the Prospectus
of the Fund."

3. PRIVATE You shall not place orders for
any shares unless you have already received purchase orders
for those shares at the applicable public offering price and
subject to the terms hereof. You agree that you will not
offer or sell any shares except under circumstances that
will result in compliance with the applicable Federal and
state securities laws, the applicable rules and regulations
thereunder and the rules and regulations of applicable
regulatory agencies or authorities and that in connection
with sales and offers to sell shares you will furnish to
each person to whom any such sale or offer is made, a copy
of the Prospectus and, upon request, the Statement of
Additional Information, and will not furnish to any person
any information relating to shares which is inconsistent in
any respect with the information contained in the Prospectus
or Statement of Additional Information (as then amended or
supplemented). You shall not furnish or cause to be
furnished to any person or display or publish any
information or materials relating to the shares (including,
without limitation, promotional materials and sales
literature, advertisements, press releases, announcements,
statements, posters, signs or other similar material),
except such information and materials as may be furnished to
you by or on behalf of us or the Funds, and such other
information and materials as may be approved in writing by
or on behalf of us or the Funds. tc " You shall not place
orders for any shares unless you have already received
purchase orders for those shares at the applicable public
offering price and subject to the terms hereof and of the
Distribution Contract. You agree that you will not"

4. PRIVATE As a broker dealer, you are
hereby authorized (i) to place orders directly with the
applicable Fund or Series for shares subject to the
applicable terms and conditions governing the placement of
orders by us set forth in the Prospectus and (ii) to tender
shares directly to each Fund or its agent for redemption
subject to the applicable terms and conditions governing the
redemption of shares applicable to us set forth in the
Prospectus. tc " As a dealer, you are hereby authorized (i)
to place orders directly with the Fund for shares to be
resold by us to you subject to the applicable terms and
conditions governing the placement of orders by us set forth
in the Prospectus and the Distribution Contract and (ii) to
tender shares directly to the Fund or its agent for
redemption subject to the applicable terms and conditions
governing the redemption of shares applicable to us set
forth in the Prospectus and the Distribution Agreement."

5. PRIVATE You shall not withhold placing
orders received from your customers so as to profit yourself
as a result of such withholding, e.g., by a change in the
"net asset value" from that used in determining the offering
price to your customers. tc " You shall not withhold
placing orders received from your customers so as to profit
yourself as a result of such withholding, e.g., by a change
in the \"net asset value\" from that used in determining the
offering price to your customers."
6. PRIVATE In determining the amount of any
sales concession payable to you hereunder, we reserve the
right to exclude any sales which we reasonably determine are
not made in accordance with the terms of the Prospectus and
the provisions of this Agreement. Unless at the time of
transmitting an order we advise you or the transfer agent to
the contrary, the shares ordered will be deemed to be the
total holdings of the specified investor. tc " In
determining the amount of any sales concession payable to
you hereunder, we reserve the right to exclude any sales
which we reasonably determine are not made in accordance
with the terms of the Prospectus and the provisions of this
Agreement. Unless at the time of transmitting an order we
advise you or the transfer agent to the contrary, the shares
ordered will be deemed to be the total holdings of the
specified investor."

7. PRIVATE (a) You agree that payment for
orders from you for the purchase of shares will be made in
accordance with the terms of the Prospectus. On or before
the business day following the settlement date of each
purchase order for shares, you shall transfer same day funds
to an account designated by us with the transfer agent in an
amount equal to the public offering price on the date of
purchase of the shares being purchased less your sales
concession, if any, with respect to such purchase order
determined in accordance with the Prospectus. If payment
for any purchase order is not received in accordance with
the terms of the Prospectus, we reserve the right, without
notice, to cancel the sale and to hold you responsible for
any loss sustained as a result thereof. tc " (a) You agree
that payment for orders from you for the purchase of shares
will be made in accordance with the terms of the Prospectus.
On or before the business day following the settlement date
of each purchase order for shares, you shall transfer same
day funds to an account designated by us with the transfer
agent an amount equal to the public offering price on the
date of purchase of the shares being purchased less your
sales concession, if any, with respect to such purchase
order determined in accordance with the Prospectus. If
payment for any purchase order is not received in accordance
with the terms of the Prospectus, we reserve the right,
without notice, to cancel the sale and to hold you
responsible for any loss sustained as a result thereof."

(b) PRIVATE If any shares sold under the terms
of this Agreement are sold with a sales charge and are
redeemed or are tendered for redemption within seven (7)
business days after confirmation of your purchase order for
such shares: (i) you shall forthwith refund to us the full
sales concession received by you on the sale; and (ii) we
shall forthwith pay to the applicable Series our portion of
the sales charge on the sale which has been retained by us,
if any, and shall also pay to the applicable Series the
amount refunded by you. tc " If any shares sold under the
terms of this Agreement are sold with a sales charge and are
redeemed or are tendered for redemption within seven (7)
business days after confirmation of your purchase order for
such shares\: (i) you shall forthwith refund to us the full
sales concession received by you on the sale; and (ii) we
shall forthwith pay to the applicable Series our portion of
the sales charge on the sale which has been retained by us,
if any, and shall also pay to the Series the amount refunded
by you."

(c) PRIVATE We will not be obligated to pay or
cause to be paid to you any ongoing trail commission or
shareholder service fees with respect to shares of the
Series purchased through you and held by or for your
customers, which you shall collect directly from the
Funds. tc " We will pay you an ongoing trail commission
with respect to holdings by you of shares of the Funds at
such rates and in such manner as may be described in the
Prospectus."

(d) PRIVATE Certificates evidencing shares
shall be available only upon request. Upon payment for
shares in accordance with paragraph 7(a) above, the transfer
agent will issue and transmit to you or your customer a
confirmation statement evidencing the purchase of such
shares. Any transaction in uncertificated shares, including
purchases, transfers, redemptions and repurchases, shall be
effected and evidenced by book-entry on the records of the
transfer agent. tc " Certificates evidencing shares shall
be available only upon request. Upon payment for shares in
accordance with paragraph 7(a) above, the transfer agent
will issue and transmit to you a confirmation statement
evidencing the purchase of such shares. Any transaction in
uncertificated shares, including purchases, transfers,
redemptions and repurchases, shall be effected and evidenced
by book-entry on the records of the transfer agent."

8. PRIVATE No person is authorized to make
any representations concerning shares except those contained
in the current Prospectus and Statement of Additional
Information and in printed information subsequently issued
by us or the Funds as information supplemental to the
Prospectus and the Statement of Additional Information. In
purchasing or offering shares pursuant to this Agreement you
shall rely solely on the representations contained in the
Prospectus, the Statement of Additional Information and the
supplemental information above mentioned. tc " No person is
authorized to make any representations concerning shares
except those contained in the current Prospectus and
Statement of Additional Information and in printed
information subsequently issued by us or the Fund as
information supplemental to the Prospectus and the Statement
of Additional Information. In purchasing sor offering
shares pursuant to this Agreement you shall rely solely on
the representations contained in the Prospectus, the
Statement of Additional Information and the supplemental
information above mentioned."

9. PRIVATE You agree to deliver to each
purchaser making a purchase of shares from or through you a
copy of the Prospectus at or prior to the time of offering
or sale, and, upon request, the Statement of Additional
Information. You may instruct the transfer agent to
register shares purchased in your name and account as
nominee for your customers. You agree thereafter to deliver
to any purchaser whose shares you or your nominee are
holding as record holder copies of the annual and interim
reports and proxy solicitation materials and any other
information and materials relating to the Trust and prepared
by or on behalf of us, the Funds or the investment adviser,
custodian, transfer agent or dividend disbursing agent for
distribution to beneficial holders of shares. The Funds
shall be responsible for the costs associated with
forwarding such reports, materials and other information and
shall reimburse you in full for such costs. You further
agree to make reasonable efforts to endeavor to obtain
proxies from such purchasers whose shares you or your
nominee are holding as record holder. You further agree to
obtain from each customer to whom you sell shares any
taxpayer identification number certification required under
Section 3406 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated
thereunder, and to provide us or our designee with timely
written notice of any failure to obtain such taxpayer
identification number certification in order to enable the
implementation of any required backup withholding in
accordance with Section 3406 of the Code and the regulations
thereunder. Additional copies of the Prospectus, Statement
of Additional Information, annual or interim reports, proxy
solicitation materials and any such other information and
materials relating to the Trust will be supplied to you in
reasonable quantities upon request. tc " You agree to
deliver to each purchaser making a purchase of shares from
you a copy of the Prospectus at or prior to the time of
offering or sale, and, upon request, the Statement of
Additional Information. You may instruct the transfer agent
to register shares purchased in your name and account as
nominee for your customers. You agree thereafter to deliver
to any purchaser whose shares you are holding as record
holder copies of the annual and interim reports and proxy
solicitation materials and any other information and
materials relating to the Fund and prepared by or on behalf
of us, the Fund or its investment adviser, custodian,
transfer agent or dividend disbursing agent for distribution
to such customer. The Fund shall be responsible for the
costs associated with forwarding such reports, materials and
other information and shall reimburse you in full for such
costs. You further agree to make reasonable efforts to
endeavor to obtain proxies from such purchasers whose shares
you are holding as record holder. You further agree to
obtain from each customer to whom you sell shares any
taxpayer identification number certification required under
Section 3406 of the Internal Revenue Code of 1986, as
amended (the \"Code\"), and the regulations promulgated
thereunder, and to provide us or our designee with timely
written notice of any failure to obtain such taxpayer
identification number certification in order to enable the
implementation of any required backup withholding in
accordance with Section 3406 of the Code and the regulations
thereunder. Additional copies of the Prospectus, Statement
of Additional Information, annual or interim reports, proxy
solicitation materials and any such other information and
materials relating to the Fund will be supplied to you in
reasonable quantities upon request."

10. PRIVATE (a) In accordance with the terms
of the Prospectus, a reduced sales charge may be available
to customers, depending on the amount of the investment or
proposed investment. In each case where a reduced sales
charge is applicable, you agree to furnish to the transfer
agent sufficient information to permit confirmation of
qualification for a reduced sales charge, and acceptance of
the purchase order is subject to such confirmation. Reduced
sales charges may be modified or terminated at any time in
the sole discretion of each Fund. tc " (a) In accordance
with the terms of the Prospectus, a reduced sales charge may
be available to customers, depending on the amount of the
investment. In each case where a reduced sales charge is
applicable, you agree to furnish to the transfer agent
sufficient information to permit confirmation of
qualification for a reduced sales charge, and acceptance of
the purchase order is subject to such confirmation. Reduced
sales charges may be modified or terminated at any time in
the sole discretion of the Fund."

(b) PRIVATE You acknowledge that certain
classes of investors may be entitled to purchase shares at
net asset value without a sales charge as provided in the
Prospectus and Statement of Additional Information. tc "
You acknowledge that certain classes of investors may be
entitled to purchase shares at net asset value without a
sales charge as provided in the Prospectus and Statement of
Additional Information."

(c) PRIVATE You agree to advise us promptly
as to the amount of any and all sales by you qualifying for
a reduced sales charge or no sales charge. tc " You agree
to advise us promptly as to the amount of any and all sales
by you qualifying for a reduced sales charge or no sales
charge."

(d) PRIVATE Exchanges (i.e., the investment
of the proceeds from the liquidation of shares of one Series
in the shares of another Series, each of which is managed by
the same or an affiliated investment adviser) shall, where
available, be made in accordance with the terms of each
Prospectus. tc " Exchanges (i.e., the investment of the
proceeds from the liquidation of shares of one fund in the
shares of another fund, each of which is managed by the
Fund's investment adviser) shall, where available, be made
in accordance with the terms of each Prospectus."

11. PRIVATE We and each Fund reserve the
right in our discretion, without notice, to suspend sales or
withdraw the offering of any shares entirely. Each party
hereto has the right to cancel the portions of this
Agreement to which it is party upon notice to the other
parties; provided, however, that no cancellation shall
affect any party's obligations hereunder with respect to any
transactions or activities occurring prior to the effective
time of cancellation. We reserve the right to amend this
Agreement in any respect effective on notice to you. tc "
We reserve the right in our discretion, without notice, to
suspend sales or withdraw the offering of shares entirely.
Each party hereto has the right to cancel this agreement
upon notice to the other part parties; provided; however,
that no cancellation shall affect any party's obligations
hereunder with respect to any transactions or activities
occurring prior to the effective time of cancellation. We
reserve the right to amend this Agreement in any respect
effective on notice to you."

12. PRIVATE We shall have full authority to take
such action as we may deem advisable in respect of all matters
pertaining to the continuous offering of shares. We shall be
under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained
in this paragraph 12 is intended to operate as, and the
provisions of this paragraph 12 shall not in any way whatsoever
constitute a waiver by you of compliance with, any provisions
of the 1933 Act or of the rules and regulations of the
Securities and Exchange Commission issued thereunder. tc "
We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the
continuous offering of shares. We shall be under no liability
to you except for lack of good faith and for obligations
expressly assumed by us herein. Nothing contained in this
paragraph 12 is intended to operate as, and the provisions of
this paragraph 12 shall not in any way whatsoever constitute a
waiver by you of compliance with, any provisions of the 1933
Act or of the rules and regulations of the Securities and
Exchange Commission issued thereunder."

13. PRIVATE You agree that: (a) you shall
not effect any transactions (including, without limitation,
any purchases and tc " You agree that\: (a) you shall not
effect any transactions (including, without limitation, any
purchases and" redemptions) in any shares registered in the
name of, or beneficially owned by, any customer unless such
customer has granted you full right, power and authority to
effect such transactions on his behalf, (b) we shall have
full authority to act upon your express instructions to
sell, repurchase or exchange shares through us on behalf of
your customers under the terms and conditions provided in
the Prospectus and (c) we, the Funds, the investment
adviser, the administrator, the transfer agent and our and
their respective officers, directors or trustees, agents,
employees and affiliates shall not be liable for, and shall
be fully indemnified and held harmless by you from and
against, any and all claims, demands, liabilities and
expenses (including, without limitation, reasonable
attorneys' fees) which may be incurred by us or any of the
foregoing persons entitled to indemnification from you
hereunder arising out of or in connection with (i) the
execution of any transactions in shares registered in the
name of, or beneficially owned by, any customer in reliance
upon any oral or written instructions believed to be genuine
and to have been given by or on behalf of you, (ii) any
statements or representations that you or your employees or
representatives make concerning the Funds that are
inconsistent with the applicable Fund's Prospectus, (iii)
any written materials used by you or your employees or
representatives in connection with making offers or sales of
shares that were not furnished by us, the Funds or the
investment adviser or an affiliate thereof and (iv) any sale
of shares of a Fund where the Fund or its shares were not
properly registered or qualified for sale in any state, any
U.S. territory or the District of Columbia, when we have
indicated to you that the Fund or its shares were not
properly registered or qualified. The indemnification
agreement contained in this Paragraph 13 shall survive the
termination of this Agreement.

14. PRIVATE You represent that: (a) you are a
member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"), or, if a foreign
dealer who is not eligible for membership in the NASD, that
(i) you will not make any sales of shares in, or to
nationals of, the United States of America, its territories
or its possessions, and (ii) in making any sales of shares
you will comply with the NASD's Conduct Rules and (b) you
are a member in good standing of the Securities Investor
Protection Corporation ("SIPC"). You agree that you will
provide us with timely written notice of any change in your
NASD or SIPC status. tc " You represent that you are a
member in good standing of the National Association of
Securities Dealers, Inc. (the \"NASD\"), or, if a foreign
dealer who is not eligible for membership in the NASD, that
(a) you will not make any sales of shares in, or to
nationals of, the United States of America, its territories
or its possessions, and (b) in making any sales of shares
you will comply with the NASD's Rules of Fair Practice."

15. PRIVATE We shall inform you as to the
states or other jurisdictions in which the Fund has advised
us that shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities
laws of such states, but we assume no responsibility or
obligation as to your qualification to sell shares in any
jurisdiction.

16. Any claim, controversy, dispute or deadlock
arising under this Agreement (collectively, a "Dispute")
shall be settled by arbitration administered under the rules
of the American Arbitration Association ("AAA") in New
York, New York. Any arbitration and award of the
arbitrators, or a majority of them, shall be final and the
judgment upon the award rendered may be entered in any state
or federal court having jurisdiction. No punitive damages
are to be awarded.

17. PRIVATE All communications to us should
be sent, postage prepaid, to 21 Milk Street, Boston,
Massachusetts 02109 Attention: Philip Coolidge. Any notice
to you shall be duly given if mailed, telegraphed or
telecopied to you at the address specified by you below.
Communications regarding placement of orders for shares
should be sent, postage prepaid, to First Data Investor
Services Group, Inc., P.O. Box 5128, Westborough,
Massachusetts 01581-5128. tc " All communications to us
should be sent, postage prepaid, to 7 World Trade Center,
New York, New York 10048. Attention\: Robert J. Leonard.
Any notice to you shall be duly given if mailed, telegraphed
or telecopied to you at the address specified by you below.
Communications regarding placement of orders for shares
should be sent, postage prepaid, to The Shareholder Services
Group, Inc., P.O. Box 9109, Boston, Massachusetts
02205-9109."

18. PRIVATE This Agreement shall be binding
upon both parties hereto when signed by us and accepted by
you in the space provided below tc " This Agreement shall
be binding upon both parties hereto when signed by us and
accepted by you in the space provided below until July 14,
1995 or such earlier date upon negotiation of section 3 and
12 of this agreement. " .

19. PRIVATE This Agreement and the terms
and conditions set forth herein shall be governed by, and
construed in accordance with, the laws of the State of New
York. tc " This Agreement and the terms and conditions set
forth herein shall be governed by, and construed in
accordance with, the laws of the State of New York."

CFBDS, INC.

By:

(Authorized Signature)

Accepted:

Firm Name:

Address:

Accepted By (signature):

Name (print):

Title: Date:

u:\legal\general\forms\agreemts\dist12b-1\dealerag1.doc

FORM OF
AMENDED AND RESTATED
SHAREHOLDER SERVICES AND DISTRIBUTION PLAN PRIVATE

This Amended and Restated Shareholder Services and
Distribution Plan (the "Plan") is adopted in accordance with
Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), by Smith Barney Oregon
Municipals Fund, a business trust organized under the laws
of the Commonwealth of Massachusetts (the "Trust") on behalf
of its sub-trust (the "Fund"), subject to the following
terms and conditions:

Section 1. Annual Fee.

(a) Service Fee for Class A shares. The Trust will pay
to Salomon Smith Barney Inc., a corporation
organized under the laws of the State of Delaware
("Salomon Smith Barney"), a service fee under the
Plan at an annual rate of 0.15% of the average
daily net assets of the Fund attributable to the
Class A shares sold and not redeemed (the "Class A
Service Fee").

(b) Service Fee for Class B shares. The Trust will pay
to Salomon Smith Barney a service fee under the
Plan at the annual rate of 0.15% of the average
daily net assets of the Fund attributable to the
Class B shares sold and not redeemed (the "Class B
Service Fee").

(c) Distribution Fee for Class B shares. In addition to
the Class B Service Fee, the Trust will pay Salomon
Smith Barney a distribution fee under the Plan at
the annual rate of 0.50% of the average daily net
assets of the Fund attributable to the Class B
shares sold and not redeemed (the "Class B
Distribution Fee").

(d) Service Fee for Class L shares. The Trust will
pay to Salomon Smith Barney a service fee under the
plan at the annual rate of 0.15% of the average
daily net assets of the Fund attributable to the
Class L shares sold and not redeemed (the "Class L
Service Fee").

(e) Distribution Fee for Class L shares. In addition
to the Class L Service Fee, the Trust will pay
Salomon Smith Barney a distribution fee under the
Plan at the annual rate of 0.55% of the average
daily net assets of the Fund attributable to the
Class L shares sold and not redeemed (the "Class L
Distribution Fee").

(f) Payment of Fees. The Service Fees and Distribution
Fees will be calculated daily and paid monthly by
the Trust with respect to the foregoing classes of
the Fund's shares (each a "Class" and together, the
"Classes") at the annual rates indicated above.

Section 2. Expenses Covered by the Plan.

With respect to expenses incurred by each Class, its
respective Service Fee and/or Distribution Fee may be used
by Salomon Smith Barney for: (a) costs of printing and
distributing the Trust's prospectuses, statements of
additional information and reports to prospective investors
in the Trust; (b) costs involved in preparing, printing and
distributing sales literature pertaining to the Trust; (c)
an allocation of overhead and other branch office
distribution-related expenses of Salomon Smith Barney; (d)
payments made to, and expenses of, Salomon Smith Barney's
financial consultants and other persons who provide support
services to Trust shareholders in connection with the
distribution of the Trust's shares, including but not
limited to, office space and equipment, telephone
facilities, answering routine inquires regarding the Trust
and its operation, processing shareholder transactions,
forwarding and collecting proxy material, changing dividend
payment elections and providing any other shareholder
services not otherwise provided by the Trust's transfer
agent; and (e) accruals for interest on the amount of the
foregoing expenses that exceed the Distribution Fee for that
Class and, in the case of Class B and Class L shares, any
contingent deferred sales charges received by Salomon Smith
Barney; provided, however, that (i) the Distribution Fee for
a particular Class may be used by Salomon Smith Barney only
to cover expenses primarily intended to result in the sale
of shares of that Class, including, without limitation,
payments to the financial consultants of Salomon Smith
Barney and other persons as compensation for the sale of the
shares, and (ii) the Service Fees are intended to be used by
Salomon Smith Barney primarily to pay its financial
consultants for servicing shareholder accounts, including a
continuing fee to each such financial consultant, which fee
shall begin to accrue immediately after the sale of such
shares.

Section 3. Approval by Shareholders.

The Plan will not take effect, and no fees will be
payable in accordance with Section 1 of
the Plan, with respect to a Class until the Plan has been
approved by a vote of at least a majority
of the outstanding voting securities of the Class. The Plan
will be deemed to have been approved
with respect to a Class so long as a majority of the
outstanding voting securities of the Class votes for the
approval of the Plan, notwithstanding that: (a) the Plan
has not been approved by a majority of the outstanding
voting securities of any other Class, or (b) the Plan has
not been
approved by a majority of the outstanding voting securities
of the Trust.

Section 4. Approval by Trustees.

Neither the Plan nor any related agreements will take
effect until approved by a majority vote of both (a) the
Board of Trustees and (b) those Trustees who are not
interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or
in any agreements related to it (the "Qualified Trustees"),
cast in person at a meeting called for the purpose of voting
on the Plan and the related agreements.

Section 5. Continuance of the Plan.

The Plan will continue in effect with respect to each
Class until October 8, 1999 and thereafter for successive
twelve-month periods with respect to each Class; provided,
however, that such continuance is specifically approved at
least annually by the Trustees of the Trust and by a
majority of the Qualified Trustees.

Section 6. Termination.

The Plan may be terminated at any time with respect to a
Class (i) by the Trust without the payment of any penalty,
by the vote of a majority of the outstanding voting
securities of such Class or (ii) by a majority vote of the
Qualified Trustees. The Plan may remain in effect with
respect to a particular Class even if the Plan has been
terminated in accordance with this Section 6 with respect to
any other Class.

Section 7. Amendments.

The Plan may not be amended with respect to any Class so
as to increase materially the amounts of the fees described
in Section 1 above, unless the amendment is approved by a
vote of holders of at least a majority of the outstanding
voting securities of that Class. No material amendment to
the Plan may be made unless approved by the Trust's Board of
Trustees in the manner described in Section 4 above.

Section 8. Selection of Certain Trustees.

While the Plan is in effect, the selection and nomination
of the Trust's Trustees who are not interested persons of
the Trust will be committed to the discretion of the
Trustees then in office who are not interested persons of
the Trust.

Section 9. Written Reports

In each year during which the Plan remains in effect, any
person authorized to direct the disposition of monies paid
or payable by the Fund pursuant to the Plan or any related
agreement will prepare and furnish to the Trust's Board of
Trustees and the Board will review, at least quarterly,
written reports complying with the requirements of the Rule,
which set out the amounts expended under the Plan and the
purposes for which those expenditures were made.

Section 10. Preservation of Materials.

The Trust will preserve copies of the Plan, any agreement
relating to the Plan and any report made pursuant to Section
9 above, for a period of not less than six years (the first
two years in an easily accessible place) from the date of
the Plan, agreement or report.

Section 11. Meanings of Certain Terms.

As used in the Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be
deemed to have the same meaning that those terms have under
the rules and regulations under the 1940 Act, subject to any
exemption that may be granted to the Trust under the 1940
Act, by the Securities and Exchange Commission.

Section 12. Limitation of Liability.

The obligations of the Trust under this Agreement
shall not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past,
present or future, of the Trust, individually, but are
binding only upon the assets and property of the Trust, as
provided in the Master Trust Agreement. The execution of
this Plan has been authorized by the Trustees and signed by
an authorized officer of the Trust, acting as such, and
neither such authorization by such Trustees nor such
execution by such officer shall be deemed to have been made
by any of them individually or to impose any liability on
any of them personally, but shall bind only the trust
property of the Trust as provided in its Master Trust
Agreement.

IN WITNESS WHEREOF, the Fund has executed the Plan as of
October 8, 1998.

SMITH BARNEY OREGON
MUNICIPALS FUND

By:
____________________________________
Heath B. McLendon
Chairman of the Board
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