Smith Barney
Oregon
Municipals
Fund
A N N U A L R E P O R T
A p r i l 3 0, 1 9 9 9
Smith Barney
Oregon
Municipals
Fund
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Oregon
Municipals Fund ("Fund") for the year ended April 30, 1999. In this report, we
summarize the period's prevailing economic and market conditions and outline our
portfolio strategy. A detailed summary of the Fund's performance can be found in
the appropriate sections that follow.
Performance and Investment Strategy Update
The Smith Barney Oregon Municipals 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.
For the year ended April 30, 1999, the Fund's Class A shares returned 6.56%
before the deduction of any sales charges and outperformed the average total
return for Oregon municipal bond funds of 5.90% during the same period
according to Lipper, Inc. (Lipper is an independent fund-tracking
organization.) Performance information for the Fund's other share classes can
be found on page five.
Based on its net asset value ("NAV") of $10.87 as of April 30, 1999 and the
current distribution rate of $0.049 for Class A shares, the Fund's annualized
distribution rate is 5.41%. For an Oregon investor in a combined federal and
state tax bracket of 41.76%, the Fund's tax-exempt yield of 5.41% is equivalent
to a taxable yield of 9.29%. (This figure assumes an investor in a federal
income tax bracket of 36%.)
In keeping with the Fund's objective, we have continued to emphasize high
current income in our bond selections. The Fund's credit quality remained very
strong during the fiscal year, with 90.8% of its bonds rated investment grade
or better. Moreover, 34.2% of the Fund's holdings were rated AAA, the highest
bond rating. During the period, we have continued to lengthen the Fund's
maturity structure. As of April 30, 1999, the weighted average life of the
Portfolio was 11.5 years.
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Smith Barney Oregon Municipals Fund 1
<PAGE>
HEATH B. PETER M.
MCLENDON COFFEY
Chairman Vice President
In addition, we have maintained broad diversification over a range of different
kinds of bonds. We continue to emphasize select hospital bonds because we
believe that these bonds offer slightly higher yields than similarly-rated
bonds of other categories. As of April 30, 1999, the Portfolio's assets were
concentrated in general obligation bonds (18.0%), education bonds (15.8%) and
multi-family housing bonds (11.1%).
Oregon Economic Highlights
After slowing somewhat in 1998, Oregon's economy gained momentum in recent
months, led primarily by strong consumer spending. Like other Pacific Coast
states, Oregon has increasingly relied on Asian markets to fuel economic
growth. As Asian nations progress towards their own economic recovery, Oregon's
economy has likewise benefited, especially in the tech-heavy manufacturing
industries. However, Oregon's job growth continues to lag its neighbors,
particularly California and Washington. In addition, its timber industry has
also suffered in the midst of falling prices for many natural resources.
Oregon state officials remain optimistic on the Beaver State's future economic
prospects. According to a recent report issued by Oregon's Office of Economic
Analysis, its economy is predicted to surpass U.S. economic growth over the
next two years, but mild in comparison to Oregon's boom years of the early
1990s. We agree with this official assessment of Oregon's future fiscal health
and believe that Oregon's economy and debt structure remain fundamentally
sound.
Municipal Bond Market and Economic Overview
During much of the past year, the municipal bond market was an oasis of
stability compared to the significant turmoil experienced by other fixed-income
markets. In the wake of Russia's loan default, growing numbers of creditors
became increasingly risk averse. In response, the Federal Reserve Board ("Fed")
lowered short-term interest-rates by 0.75% in three separate actions over the
course of several weeks. These interest rate cuts helped lift bond markets. In
the midst of the turmoil, many investors fled to the relative safe haven of
U.S. Treasury bonds, sparking a sharp rally which sent long-term government
interest rates to their lowest level in more than thirty years. The 30-year
U.S. Treasury bond yield fluctuated approximately 1.36% from March 31, 1998 to
March 31, 1999. In contrast, municipal bond yields (as measured by the Bond
Buyers 25 Revenue Index) were far less volatile and remained confined to a much
narrower range of roughly 0.41% during the same period.
Despite jittery financial markets, the U.S. economy continued to expand
vigorously, defying the expectations of many economists. The domestic economy
grew at an annual rate of 3.5% in the first quarter of 1999, coming off the
heels of a brisk 6% annual growth rate for the fourth quarter of 1998. The
unemployment rate hovered just above 4.2% in March 1999, a 29-year low. Yet,
inflationary pressures have been well contained. The Consumer Price Index
("CPI") rose a mere 0.2% in January 1999 and an even more modest 0.1% in
February 1999.
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2 1999 Annual Report to Shareholders
<PAGE>
In our view, inflationary pressures have been held in check by a fortunate
combination of ongoing economic weakness abroad, added cost controls in health
care and the expanding role of technology. Economic recessions in many parts of
the world have helped keep import prices down, especially in key commodities
such as food and energy. In addition, the cost controls introduced by managed
health-care companies have begun to bring down medical costs and the growing
use of technology has not only boosted worker productivity, but has also made
many consumer goods companies much more cost competitive.
Municipal bonds, along with many other financial assets, have benefited from
the high-growth, low-inflation U.S. economy. Similar to other types of bonds,
municipal bond yields have declined but their real rate of return (i.e. the
rate of return after subtracting the effects of inflation) has remained
historically high. Moreover, long-term municipal bonds currently yield
approximately 90% of long-term U.S. Treasury bond yields. Typically, municipal
bonds are considered a good relative value when they yield approximately 85% of
comparable-maturity U.S. Treasury bonds.
A strong U.S. economy and low interest rates have encouraged many municipalities
to issue more bonds and refinance more expensive existing debt. We believe the
ability of the market to absorb the unusually heavy municipal bond issuance last
year is an indication of the health of the municipal bond market. This steady
equilibrium of supply and demand is one reason that municipal bond prices have
remained stable compared to other fixed-income assets.
Municipal Bond Market Outlook
Over the near term, we remain largely positive on the prospects for municipal
bonds. In our judgement, Fed monetary policy will likely remain on hold until
signs of inflation surface. However, while we believe that inflation should
remain subdued, continued strong momentum in the U.S. economy has raised
inflation concerns. While the Fed has elected to leave short-term interest
rates unchanged, a much stronger than expected jump in the CPI in April
prompted the Fed to change its bias toward tightening monetary policy. This
increases the likelihood that the Fed will raise short-term interest rates at
its next Federal Open Market Committee meeting on June 30, 1999 if the economy
continues to exhibit signs of increasing inflationary pressures. However, the
fundamental conditions underpinning the currently benign inflationary
environment, (i.e., weak foreign economies with excess capacity and tepid
demand coupled with strong productivity gains in our economy) appear to remain
in place.
After a period of substantial volatility, we expect that U.S. Treasury bonds
will fluctuate within a fairly narrow trading range in the coming months.
Moreover, new municipal bond issuance volume for 1999 is down significantly
from last year. If this pattern holds, it could set the stage for a municipal
bond rally later in the year.
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Smith Barney Oregon Municipals Fund 3
<PAGE>
In closing, we would like to thank you for your investment in the Smith Barney
Oregon Municipals Fund. We look forward to helping you achieve your financial
goals.
Sincerely,
Heath B. McLendon Peter M. Coffey
Chairman Vice President
May 25, 1999
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4 1999 Annual Report to Shareholders
<PAGE>
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Historical Performance -- Class A Shares
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
- ---------------------- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
4/30/99 $ 10.76 $ 10.87 $ 0.49 $ 0.09 6.56%
- ------------------ ------- ------- ------ ------ -----
4/30/98 10.27 10.76 0.52 0.00 9.97
- ------------------ ------- ------- ------ ------ -----
4/30/97 10.26 10.27 0.54 0.15 7.01
- ------------------ ------- ------- ------ ------ -----
4/30/96 10.09 10.26 0.54 0.06 7.70
- ------------------ ------- ------- ------ ------ -----
Inception*-4/30/95++ 9.55 10.09 0.49 0.00 11.08+
- ------------------ ------- ------- ------ ------ -----
Total $ 2.58 $ 0.30
- ------------------ ------ ------
</TABLE>
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Historical Performance -- Class B Shares
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
- ---------------------- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
4/30/99 $ 10.75 $ 10.85 $ 0.44 $ 0.09 5.94%
- ------------------ ------- ------- ------ ------ -----
4/30/98 10.26 10.75 0.47 0.00 9.43
- ------------------ ------- ------- ------ ------ -----
4/30/97 10.25 10.26 0.49 0.15 6.48
- ------------------ ------- ------- ------ ------ -----
4/30/96 10.09 10.25 0.49 0.06 7.09
- ------------------ ------- ------- ------ ------ -----
Inception*-4/30/95++ 9.55 10.09 0.45 0.00 10.59+
- ------------------ ------- ------- ------ ------ -----
Total $ 2.34 $ 0.30
- ------------------ ------ ------
</TABLE>
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Historical Performance -- Class L Shares(2)
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
- -------------------- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
4/30/99 $ 10.76 $ 10.86 $ 0.44 $ 0.09 5.90%
- ------------------ ------- ------- ------ ------ -----
4/30/98 10.27 10.76 0.46 0.00 9.38
- ------------------ ------- ------- ------ ------ -----
4/30/97 10.26 10.27 0.48 0.15 6.43
- ------------------ ------- ------- ------ ------ -----
Inception*-4/30/96 10.28 10.26 0.47 0.06 4.99+
- ------------------ ------- ------- ------ ------ -----
Total $ 1.85 $ 0.30
- ------------------ ------ ------
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
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Smith Barney Oregon Municipals Fund 5
<PAGE>
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Average Annual Total Return
Without Sales Charge(1)
---------------------------------------
Class A Class B Class L(2)
----------- ----------- -----------
Year Ended 4/30/99 6.56% 5.94% 5.90%
- ---------------------------- ---- ---- -----
Inception* through 4/30/99 8.56++ 7.99++ 6.73
- ---------------------------- ---- ---- -----
With Sales Charge(3)
---------------------------------------
Class A Class B Class L(2)
----------- ----------- -----------
Year Ended 4/30/99 2.28% 1.44% 3.83%
- ---------------------------- ---- ---- -----
Inception* through 4/30/99 7.66++ 7.84++ 6.47
- ---------------------------- ---- ---- -----
- --------------------------------------------------------------------------------
Cumulative Total Return
Without Sales Charge(1)
--------------------------
Class A (Inception* through 4/30/99) 50.02%++
- ----------------------------------------- --------
Class B (Inception* through 4/30/99) 46.20++
- ----------------------------------------- --------
Class L (Inception* through 4/30/99)(2) 29.44
- ----------------------------------------- --------
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 4.00% and 1.00%,
respectively. Class B shares reflect the deduction of a 4.50% CDSC, which
applies if shares are redeemed within one year from purchase. This CDSC
declines by 0.50% the first year after purchase and thereafter by 1.00%
per year until no CDSC is incurred. Class L shares reflect the deduction
of a 1.00% CDSC, which applies if shares are redeemed within the first
year of purchase.
* The inception date for Class A and B shares is May 23, 1994 and May 16, 1995
for Class L shares.
++ Total return includes the effect of the cash contribution to capital from
the investment adviser which was made on October 24, 1994. Without this
cash contribution the total returns would have been:
Class A Class B
--------- ----------
Inception*through 4/30/95 6.23% 5.55%
- ------------------------------------------------------ ----- -----
Inception* through 4/30/99:
Average Annual Total Return Without Sales Charge 7.88 7.24
Average Annual Total Return With Sales Charge 6.99 7.08
- ------------------------------------------------------ ----- -----
Cumulative Total Return 45.48% 41.22%
- ------------------------------------------------------ ----- -----
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6 1999 Annual Report to Shareholders
<PAGE>
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Historical Performance (unaudited)
Growth of $10,000 Invested in Class A and B Shares of
Smith Barney Oregon Municipals Fund vs.
the Lehman Brothers Municipal Bond Index+
- --------------------------------------------------------------------------------
May 1994 -- April 1999
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on May 23, 1994, assuming deduction of the maximum 4.00% sales charge at the
time of investment and reinvestment of dividends and capital gains, if any,
at net asset value through April 30, 1999. In addition, there is an
hypothetical illustration of $10,000 invested in Class B shares at inception
on May 23, 1994, assuming deduction of a 4.50% CDSC, which applies if shares
are redeemed within one year from purchase. This CDSC declines by 0.50% the
first year after purchase and thereafter by 1.00% per year until no CDSC is
incurred. The Lehman Brothers Municipal Bond Index is a broad based, total
return index comprised of investment grade, fixed rate municipal bonds
selected from issues larger than $50 million issued since January 1991. The
index is unmanaged and is not subject to the same management and trading
expenses as a mutual fund. The performance of the Fund's other class of
shares may be greater or less than Class A and B shares' performance
indicated on this chart, depending on whether greater or lesser sales
charges and fees were incurred by shareholders investing in the other class.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
* This figure includes the effect of the cash contribution to capital from the
investment adviser.
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Smith Barney Oregon Municipals Fund 7
<PAGE>
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Portfolio Highlights (unaudited) April 30, 1999
Portfolio Breakdown
Summary of Investments by Combined Ratings
Standard & Percentage of
Moody's and/or Poor's Total Investments
- --------- -------- ------------ ------------------
Aaa AAA 34.2%
Aa AA 19.8
A A 24.1
Baa BBB 12.7
NR NR 9.2
-----
100.0%
=====
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8 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments April 30, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
- -------------- ------------ ----------------------------------------------------------- --------------
Education -- 15.8%
<S> <C> <C> <C>
$ 1,000,000 AAA Clackamas County School District No. 12, FGIC-Insured,
5.250% due 6/1/15 $ 1,037,500
1,000,000 AAA Columbia County School District No. 502, FGIC-Insured,
zero coupon due 6/1/18 383,750
1,000,000 AAA Marion County School District No. 103C, Woodburn Deferred
Interest, Series B, FGIC-Insured, zero coupon due 11/1/12 536,250
500,000 AAA Multnomah County Educational Facilities Revenue,
(University of Portland Project), Refunding Bonds,
AMBAC-Insured, 5.000% due 4/1/18 495,000
1,000,000 AAA Oregon Health Sciences, University Revenue, Series A,
MBIA-Insured, zero coupon due 7/1/13 506,250
1,000,000 AA Oregon State Board Higher Education, Series A, 6.000%
due 8/1/26 1,123,750
Oregon State Health, Housing, Educational & Cultural
Facilities Authority, Series A:
500,000 Baa1* Linfield College Project, 5.500% due 10/1/18 503,125
430,000 A3* Oak Tree Foundation Project, 6.100% due 5/1/15 453,650
500,000 AAA Southwestern Oregon Community College District,
AMBAC-Insured, 5.600% due 6/1/16 526,250
Washington County School District No. 088J, (Sherwood
Project), FSA-Insured:
400,000 AAA Pre-Refunded--Escrowed with U.S. government
securities to 6/1/05 Call @ 100, 6.100%
due 6/1/12 444,000
100,000 AAA 6.100% due 6/1/12 109,750
------------- ------------ ----------------------------------------------------------- -----------
6,119,275
-----------
General Obligation -- 18.0%
450,000 AAA Chemeketa Community College District, GO,
FGIC-Insured, 5.800% due 6/1/12 495,563
500,000 AAA Lane County Bethel, GO, School District No. 052,
FGIC-Insured, 6.400% due 12/1/09 566,250
500,000 AAA Lincoln County School District, GO, Series 95,
FGIC-Insured, 5.250% due 6/15/12 523,750
Oregon State Veterans Welfare, GO:
500,000 AA Series 76A, 5.900% due 10/1/17 550,625
500,000 AA Series 77, 5.200% due 10/1/18 505,625
Puerto Rico Commonwealth, GO:
1,500,000 A Capital Appreciation, Public Improvement, zero
coupon due 7/1/14 721,875
Public Improvement Refunding Bonds:
1,000,000 AAA AMBAC-Insured, 4.500% due 7/1/23 923,750
1,000,000 A 5.500% due 7/1/13 1,083,750
1,000,000 Aa3* Washington, Multnomah & Yamhill Counties, School
District No. 1J, Refunding Bonds, 5.000% due 11/1/14 1,028,750
</TABLE>
See Notes to Financial Statements.
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Smith Barney Oregon Municipals Fund 9
<PAGE>
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Schedule of Investments (continued) April 30, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
- ------------ ------------ ---------------------------------------------------------- --------------
General Obligation -- 18.0% (continued)
<S> <C> <C> <C>
$ 500,000 AAA Yamhill County School District No. 040, FGIC-Insured,
- ------------ ------------ ----------------------------------------------
5.600% due 6/1/16 $ 538,125
---------------------------------------------------------- -----------
6,938,063
-----------
Hospitals -- 6.9%
500,000 A Benton County Hospital Facility Authority Revenue,
(Samaritan Health Services Project), 5.200% due
10/1/17 498,750
595,000 BBB+ Klamath Falls Intercommunity Hospital Authority
Revenue, (Gross-Merle West Medical Center Project),
7.100% due 9/1/24 649,294
1,000,000 AAA Medford Hospital Facility Authority Revenue, Asante
Health Systems, Series A, MBIA-Insured, 5.000%
due 8/15/18 982,500
500,000 BBB Puerto Rico Industrial Tourist Education, Medical &
- ------------ ------------ ----------------------------------------------
Environmental Control Facilities, (Ryder Memorial
Hospital Project), Series A, 6.700% due 5/1/24 541,250
---------------------------------------------------------- -----------
2,671,794
-----------
Housing: Multi-Family -- 11.1%
215,000 Aa2* Oregon State Housing & Community Services, Housing
& Finance Revenue Bonds, Assisted or Insured
Multi-Unit Mortgages, Series A, FHA-Insured,
6.800% due 7/1/13 226,556
Portland Housing Authority, Multi-Family Revenue:
500,000 AA Columbia Street Apartments Project, Series B, 5.500%
due 12/1/21(b) 507,500
Series A:
500,000 Aa1* Cherry Blossom Apartments, GNMA-Collateralized,
6.100% due 12/20/26(b) 540,000
1,000,000 Aa3* Cherry Ridge Project, 6.250% due 5/1/12(b) 1,051,250
300,000 NR Sr. Lien Revenue, (Fairview Woods Project), 6.875%
due 8/1/14 341,625
555,000 AAA Portland Multi-Family Revenue, Collins Circle Apartments,
FNMA-Collateralized, 5.125% due 6/1/21(b) 546,675
1,000,000 A1* Washington County Housing Authority, Multi-Family
- ------------ ------------ ----------------------------------------------
Revenue, (Bethany Meadows Project), 6.250%
due 8/1/13(b) 1,057,500
---------------------------------------------------------- -----------
4,271,106
-----------
Housing: Single-Family -- 8.4%
Oregon State Housing & Community Services, Mortgage
Revenue Bonds, Single-Family Mortgage Program:
1,500,000 Aa2* Series B, 6.875% due 7/1/28 1,601,250
475,000 Aa2* Series D, 6.500% due 7/1/24(b) 499,937
500,000 A Portland Housing Authority Revenue, Pooled Housing,
Series A, 5.000% due 1/1/19 495,625
</TABLE>
See Notes to Financial Statements.
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10 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) April 30, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
- ------------ ------------ ----------------------------------------------------------- --------------
Housing: Single-Family -- 8.4% (continued)
<S> <C> <C> <C>
$ 330,000 AAA Puerto Rico Housing Bank & Finance Agency, Single-
Family Mortgage Revenue, Affordable Housing
Mortgage-Portfolio I, GNMA/FNMA/FHLMC-
Collateralized, 6.250% due 4/1/29(b) $ 352,275
270,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
- ------------ ------------ ------------------------------------------------
Program A, GNMA-Collateralized, 6.450% due 3/1/16(b) 285,525
----------------------------------------------------------- -----------
3,234,612
-----------
Industrial Development -- 2.7%
1,000,000 Baa2* Oregon State EDR, Georgia-Pacific Corp., Series CVLII,
- ------------ ------------ ------------------------------------------------
6.350% due 8/1/25(b) 1,055,000
----------------------------------------------------------- -----------
Life Care Systems -- 5.1%
400,000 NR Albany Hospital Facilities Authority Revenue, Mennonite
Home of Albany Inc., 5.900% due 10/1/20 406,000
Clackamas County Hospital Facilities Authority Revenue:
1,000,000 A Kaiser Permanente, Series A, 5.375% due 4/1/14 1,031,250
500,000 NR Robison Jewish Home Project, 6.250% due 10/1/28 527,500
- ------------ ------------ ----------------------------------------------------------- -----------
1,964,750
-----------
Miscellaneous -- 8.7%
435,000 A3* Deschutes County, COP, 5.000% due 6/1/16 426,844
Oregon State Bond Bank Revenue, Economic
Development Department, Series 1:
550,000 A2* Pre-Refunded-Escrowed with U.S. government
securities to 1/1/03 Call @ 102, 6.700%
due 1/1/15(c) 613,250
50,000 A2* 6.700% due 1/1/15 55,938
500,000 AAA Oregon State Department of Administrative Services,
COP, Series A, AMBAC-Insured, 5.800% due 5/1/24 556,250
500,000 BBB Puerto Rico Housing Bank & Finance Agency, Kidder,
7.500% due 12/1/06 583,750
Virgin Islands Public Finance Authority Revenue, Sr. Lien:
500,000 BBB- Series A, 5.500% due 10/1/18 509,375
500,000 NR Series E, 5.750% due 10/1/13 517,500
100,000 NR Western Generation Agency, (Wauna Cogeneration
- ------------ ------------ ------------------------------------------------
Project), Series B, 7.250% due 1/1/09(b) 108,250
----------------------------------------------------------- -----------
3,371,157
-----------
Pollution Control -- 1.2%
450,000 A3* Port Umpqua Pollution Control, (International Paper Co.
- ------------ ------------ ------------------------------------------------
Projects), Series A, 5.050% due 6/1/09 462,937
----------------------------------------------------------- -----------
Tax Allocation -- 0.7%
250,000 A- Medford Urban Renewal Agency, Tax Revenue, Series A,
- ------------ ------------ ------------------------------------------------
5.875% due 9/1/10 263,750
----------------------------------------------------------- -----------
</TABLE>
See Notes to Financial Statements.
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Smith Barney Oregon Municipals Fund 11
<PAGE>
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Schedule of Investments (continued) April 30, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
- ------------ ------------ ------------------------------------------------------------ --------------
Transportation -- 7.5%
<S> <C> <C> <C>
Port Portland Airport Revenue, Portland International
Airport, FGIC-Insured:
$ 400,000 AAA Series 10, 5.750% due 7/1/25(b) $ 421,500
500,000 AAA Series 12C, 5.000% due 7/1/18(b) 488,125
1,500,000 A Puerto Rico Commonwealth Highway & Transportation
Authority, Highway Revenue, Series Y, 5.000%
due 7/1/36 1,471,875
500,000 Baa2* Puerto Rico Port Authority Revenue, Special Facilities,
- ------------ ------------ ----------------------------------------------
American Airlines, Series A, 6.250% due 6/1/26(b) 535,625
------------------------------------------------------------ -----------
2,917,125
-----------
Utilities -- 6.5%
500,000 BBB Guam Power Authority Revenue, Series A, 6.300%
due 10/1/22 536,875
1,000,000 NR Klamath Falls Electric Revenue, Sr. Lien, 5.875%
due 1/1/16 1,010,000
1,000,000 AAA Puerto Rico Electric Power Authority, Series EE, 4.500%
- ------------ ------------ ----------------------------------------------
due 7/1/18 945,000
------------------------------------------------------------ -----------
2,491,875
-----------
Water and Sewer -- 7.4%
250,000 A+ Beavertown Water Revenue, Series 1994, 6.125%
due 6/1/14 266,250
360,000 A+ Clackamas County Service District No. 001, Sewer
Revenue, 6.375% due 10/1/14 396,450
500,000 AAA Klamath Falls Water Revenue, FSA-Insured, 5.600%
due 7/1/16 526,250
600,000 NR Port Umatilla Water Revenue, 6.650% due 8/1/22(b) 640,500
1,000,000 AAA Tualatin Valley Water District, FSA-Insured, 5.100%
- ------------ ------------ ----------------------------------------------
due 6/1/14 1,023,750
------------------------------------------------------------ -----------
2,853,200
-----------
TOTAL INVESTMENTS -- 100%
$36,716,642**) $38,614,644
----------- -----------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings service with the exception of
those identified by an asterisk (*), which are rated by Moody's Investor
Service, Inc.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Pre-Refunded bonds escrowed with U.S. government securities and bonds
escrowed to maturity with U.S. government securities are considered by the
investment adviser to be triple-A rated even if the issuer has not applied
for new ratings.
** The cost for Federal income tax purposes is $36,474,915.
See pages 13 and 14 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
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12 1999 Annual Report to Shareholders
<PAGE>
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Bond Ratings (unaudited)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"BBB" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differs from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3
may be applied to each generic rating from "Aa" to "Baa," where 1 is the
highest and 3 the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large in Aaa securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A -- Bonds rated "A" possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Short-Term Security Ratings (unaudited)
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined
to possess overwhelming safety characteristics are denoted with a
plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of
safety regarding timely payment is either overwhelming or very
strong; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature--VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior
to the advent of the VMIG 1 rating.
- --------------------------------------------------------------------------------
Security Descriptions (unaudited)
ABAG -- Association of Bay Area
Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance
Company
CHFCLI -- California Health Facility
Construction Loan Insurance
CONNIE -- College Construction Loan
LEE Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
EDR -- Economic Development Revenue
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance
Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage
Corporation
FLAIRS -- Floating Adjustable Interest
Rate Securities
FNMA -- Federal National Mortgage
Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financing Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage
Association
GO -- General Obligation
HDC -- Housing Development
Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development
Authority
IDB -- Industrial Development Board
IDR -- Industrial Development
Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors
Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse
Coupon Security
PCR -- Pollution Control Revenue
PSF -- Permanent School Fund
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt
Securities
TAN -- Tax Anticipation Notes
TECP -- Tax-Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation
Notes
SYCC -- Structured Yield Curve
Certificate
VA -- Veterans Administration
VRDD -- Variable Rate Daily
Demand
VRWE -- Variable Rate Wednesday
Demand
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities April 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $36,716,642) $38,614,644
Interest receivable 600,208
Receivable for Fund shares sold 42,486
- --------------------------------------------------------------------------------- -----------
Total Assets 39,257,338
- --------------------------------------------------------------------------------- -----------
LIABILITIES:
Payable to bank 91,100
Dividend payable 49,241
Administration fees payable 45,396
Investment advisory fees payable 28,721
Payable for Fund shares purchased 8,264
Distribution fees payable 6,860
Accrued expenses 43,749
- --------------------------------------------------------------------------------- -----------
Total Liabilities 273,331
- --------------------------------------------------------------------------------- -----------
Total Net Assets $38,984,007
- --------------------------------------------------------------------------------- -----------
NET ASSETS:
Par value of shares of beneficial interest $ 3,590
Capital paid in excess of par value 37,027,181
Undistributed net investment income 1,019
Accumulated net realized gain from security transactions and futures contracts 54,215
Net unrealized appreciation of investments 1,898,002
- --------------------------------------------------------------------------------- -----------
Total Net Assets $38,984,007
- --------------------------------------------------------------------------------- -----------
Shares Outstanding:
Class A 1,471,640
- ------------------------------------------------------------------------------
Class B 1,827,551
- ------------------------------------------------------------------------------
Class L 290,558
- ------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 10.87
- ------------------------------------------------------------------------------
Class B* $ 10.85
- ------------------------------------------------------------------------------
Class L** $ 10.86
- ------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $ 11.32
- ------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $ 10.97
- --------------------------------------------------------------------------------- -----------
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within one year from purchase (See Note 4).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended April 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,876,216
- -------------------------------------------------------------------- ----------
EXPENSES:
Distribution fees (Note 4) 157,914
Investment advisory fees (Note 4) 112,082
Administration fees (Note 4) 62,846
Audit and legal 30,166
Shareholder and system servicing fees 26,609
Shareholder communications 25,679
Trustees' fees 15,060
Pricing service fees 7,132
Registration fees 6,483
Amortization of deferred organization costs 6,332
Custody 2,094
Other 3,687
- -------------------------------------------------------------------- ----------
Total Expenses 456,084
Less: Investment advisory and administration fee waivers (Note 4) (42,910)
- -------------------------------------------------------------------- ----------
Net Expenses 413,174
- -------------------------------------------------------------------- ----------
Net Investment Income 1,463,042
- -------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 5 AND 7):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 148,225
Futures contracts (12,089)
- -------------------------------------------------------------------- ----------
Net Realized Gain 136,136
- -------------------------------------------------------------------- ----------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 1,467,894
End of year 1,898,002
- -------------------------------------------------------------------- ----------
Increase in Net Unrealized Appreciation 430,108
- -------------------------------------------------------------------- ----------
Net Gain on Investments and Futures Contracts 566,244
- -------------------------------------------------------------------- ----------
Increase in Net Assets From Operations $2,029,286
- -------------------------------------------------------------------- ----------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended April 30,
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,463,042 $ 1,305,551
Net realized gain+ 136,136 167,712
Increase in net unrealized appreciation 430,108 992,126
- ----------------------------------------------------------------- ------------ ------------
Increase in Net Assets From Operations 2,029,286 2,465,389
- ----------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (1,479,516) (1,284,672)
Net realized gains (282,224) --
- ----------------------------------------------------------------- ------------ ------------
Decrease in Net Assets From Distributions to Shareholders (1,761,740) (1,284,672)
- ----------------------------------------------------------------- ------------ ------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 9,452,267 7,708,928
Net asset value of shares issued for reinvestment of dividends 1,169,668 834,873
Cost of shares reacquired (3,077,154) (2,418,872)
- ----------------------------------------------------------------- ------------ ------------
Increase in Net Assets From Fund Share Transactions 7,544,781 6,124,929
- ----------------------------------------------------------------- ------------ ------------
Increase in Net Assets 7,812,327 7,305,646
NET ASSETS:
Beginning of year 31,171,680 23,866,034
- ----------------------------------------------------------------- ------------ ------------
End of year* $38,984,007 $31,171,680
- ----------------------------------------------------------------- ------------ ------------
* Includes undistributed net investment income: $ 1,019 $ 13,447
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
+Due to a prior period's cash contribution, net realized gains for Federal
income tax purposes were $149,479 and $186,960 for the years ended April 30,
1999 and 1998.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
1. Significant Accounting Policies
Smith Barney Oregon Municipals Fund ("Fund"), a Massachusetts business trust,
is registered under the Investment Company Act of 1940, as amended, as a non-
diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are
valued at the mean between the quoted bid and ask prices provided by an
independent pricing service; (c) securities maturing within 60 days are valued
at cost plus accreted discount or minus amortized premium, which approximates
value; (d) gains or losses on the sale of securities are calculated by using
the specific identification method; (e) interest income, adjusted for
amortization of premium and accretion of original issue discount, is recorded
on an accrual basis; market discount is recognized upon the disposition of the
security; (f) direct expenses are charged to the Fund and each class;
investment advisory, administration fees and general fund expenses are
allocated on the basis of relative net assets by class; (g) dividends and
distributions to shareholders are recorded on the ex-dividend date; (h) the
Fund intends to comply with the applicable provisions of the Internal Revenue
Code of 1986, as amended, pertaining to regulated investment companies and to
make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; (i) the character of income
and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles. At
April 30, 1999, reclassifications were made to the capital accounts of the Fund
to reflect permanent book/tax differences and income and gains available for
distribution under income tax regulations. Accordingly, reclassifications were
made from total paid-in capital to accumulated net realized gains and
overdistributed net investment income in the amounts of $32,591 and $4,046,
respectively. Net investment income, net realized gains and net assets were not
affected by this change; and (j) estimates and assumptions are required to be
made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
In addition, organization costs have been deferred and amortized on a
straight-line method over a five-year period, beginning with the commencement
of the Fund's operations in May 1994. As of April 30, 1999, deferred
organization costs have been fully amortized.
2. Fund Concentration
Since the Fund invests primarily in obligations of issuers within Oregon, it is
subject to possible concentration risks associated with economic, political or
legal developments or industrial or regional matters specifically affecting
Oregon.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
3. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax and from designated
state income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually. Additional taxable distributions may be
made if necessary to avoid a Federal excise tax.
4. Investment Advisory Agreement, Administration Agreement and Affiliated
Transactions
SSBC Fund Management Inc. ("SSBC"), formerly known as Mutual Management Corp.,
a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
adviser to the Fund. The Fund pays SSBC an investment advisory fee calculated
at an annual rate of 0.30% of the Fund's average daily net assets. This fee is
calculated daily and paid monthly. SSBC waived $27,883 of the investment
advisory fees for the Fund for the year ended April 30, 1999.
SSBC also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets up to
$500 million and 0.18% of the average daily net assets in excess of $500
million. This fee is calculated daily and paid monthly. SSBC waived $15,027 of
its administration fees for the year ended April 30, 1999.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB"), was the Fund's distributor. SSB, as
well as certain other broker-dealers, continues to sell Fund shares to the
public as members of the selling group.
On June 12, 1998, the Portfolio's existing Class C shares were renamed Class L
shares. Effective June 15, 1998, Class L shares are being sold at net asset
value plus a maximum initial sales charge of 1.00%. Class L shares also have a
1.00% contingent deferred sales charge ("CDSC"), which applies if redemption
occurs within the first year of purchase.
There is also a CDSC of 4.50% on Class B shares, which applies if redemption
occurs within one year from purchase. This CDSC declines by 0.50% the first
year after purchase and thereafter by 1.00% per year until no CDSC is incurred.
For the year ended April 30, 1999, SSB and CFBDS received sales charges of
$75,000 and $9,000 on sales of the Fund's Class A and Class L shares,
respectively. In addition, CDSCs paid to SSB and CFBDS for Class B and Class L
shares were approximately $24,000 and $1,000 respectively.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
its Class A, B and L shares calculated at an annual rate of 0.15% of the
average daily net assets for each respective class. In addition, the Fund pays
a distribution fee with respect to its Class B and L shares calculated at the
annual rates of 0.50% and 0.55% of the average daily net assets for each class,
respectively. For the year ended April 30, 1999, total Distribution Plan fees
incurred were:
Class A Class B Class L
--------- ----------- ----------
Distribution Plan Fees $21,206 $119,330 $17,378
- ------------------------ ------- -------- -------
All officers and one Trustee of the Fund are employees of SSB.
5. Investments
During the year ended April 30, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
Purchases $17,070,228
- ----------- -----------
Sales 9,860,820
- ----------- -----------
At April 30, 1999, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
Gross unrealized appreciation $2,186,159
Gross unrealized depreciation (46,430)
- ------------------------------- ----------
Net unrealized appreciation $2,139,729
- ------------------------------- ----------
6. Shares of Beneficial Interest
At April 30, 1999, the Fund had an unlimited number of shares of beneficial
interest authorized with par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents
an identical interest and has the same rights, except that each class bears
certain direct expenses, including those specifically related to the
distribution of its shares. Effective June 12, 1998, the Fund adopted the
renaming of existing Class C shares as Class L shares.
At April 30, 1999, total paid-in capital amounted to the following for each
class:
Class A Class B Class L
-------------- -------------- -------------
Total Paid-in Capital $15,144,635 $18,786,399 $3,099,737
- ----------------------- ----------- ----------- ----------
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
April 30, 1999 April 30, 1998
------------------------------ ------------------------------
Shares Amount Shares Amount
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Class A
Shares sold 340,767 $ 3,725,265 227,196 $ 2,433,102
Shares issued on reinvestment 45,010 491,631 32,120 344,459
Shares reacquired (63,742) (698,280) (61,216) (654,241)
- ------------------------------- ------- ------------ ------- ------------
Net Increase 322,035 $ 3,518,616 198,100 $ 2,123,320
- ------------------------------- ------- ------------ ------- ------------
Class B
Shares sold 395,222 $ 4,317,774 358,803 $ 3,835,768
Shares issued on reinvestment 53,382 582,138 40,875 437,701
Shares reacquired (173,824) (1,903,362) (132,271) (1,424,718)
- ------------------------------- -------- ------------ -------- ------------
Net Increase 274,780 $ 2,996,550 267,407 $ 2,848,751
- ------------------------------- -------- ------------ -------- ------------
Class L+
Shares sold 128,930 $ 1,409,228 133,622 $ 1,440,058
Shares issued on reinvestment 8,787 95,899 4,905 52,713
Shares reacquired (43,294) (475,512) (31,329) (339,913)
- ------------------------------- -------- ------------ -------- ------------
Net Increase 94,423 $ 1,029,615 107,198 $ 1,152,858
- ------------------------------- -------- ------------ -------- ------------
</TABLE>
+ On June 12, 1998, Class C shares were renamed Class L shares.
7. Futures Contracts
Initial margin deposits are made upon entering into futures contracts and are
recognized as assets. Securities equal to the initial margin amount are
segregated by the custodian in the name of the broker. Additional securities
are also segregated up to the current market value of the futures contracts.
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to market" on
a daily basis to reflect the market value of the contract at the end of each
day's trading. Variation margin payments are received or made and recognized as
assets due from or liabilities due to broker, depending upon whether unrealized
gains or losses are incurred. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or
cost of) the closing transactions and the Fund's basis in the contract.
The Fund enters into such contracts to hedge a portion of its portfolio. The
Fund bear the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At April 30, 1999, the Fund had no open futures contracts.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
For a share of each class of beneficial interest outstanding throughout each
year ended April 30, except where noted:
<TABLE>
<CAPTION>
Class A Shares 1999(1) 1998 1997 1996 1995(2)(4)
- ------------------------------------ ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 10.76 $ 10.27 $ 10.26 $ 10.09 $ 9.55
- ------------------------------------ ------- ------- ------- ------- --------
Income From Operations:
Net investment income(3) 0.49 0.53 0.54 0.55 0.49
Net realized and unrealized gain 0.20 0.48 0.16 0.22 0.54
- ------------------------------------ ------- ------- ------- ------- --------
Total Income From Operations 0.69 1.01 0.70 0.77 1.03
- ------------------------------------ ------- ------- ------- ------- --------
Less Distributions From:
Net investment income (0.49) (0.52) (0.54) (0.54) (0.49)
Net realized gains (0.09) -- (0.13) (0.06) --
Excess of net realized gains -- -- (0.02) -- --
- ------------------------------------ ------- ------- -------- -------- --------
Total Distributions (0.58) (0.52) (0.69) (0.60) (0.49)
- ------------------------------------ ------- ------- -------- -------- --------
Net Asset Value, End of Year $ 10.87 $ 10.76 $ 10.27 $ 10.26 $ 10.09
- ------------------------------------ ------- ------- -------- -------- --------
Total Return 6.56% 9.97% 7.01% 7.70% 11.08%++
- ------------------------------------ ------- ------- -------- -------- --------
Net Assets, End of Year (000s) $15,994 $12,371 $ 9,769 $ 7,520 $ 6,323
- ------------------------------------ ------- ------- -------- -------- --------
Ratios to Average Net Assets:
Expenses(3) 0.87% 0.65% 0.65% 0.66% 0.82%+
Net investment income 4.49 4.96 5.21 5.21 5.28+
- ------------------------------------ ------- ------- -------- -------- --------
Portfolio Turnover Rate 28% 49% 37% 75% 30%
- ------------------------------------ ------- ------- -------- -------- --------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from May 23, 1994 (inception date) to April 30, 1995.
(3) The investment adviser and administrator waived all or part of their fees
for the years ended April 30, 1999, 1998, 1997, 1996 and the period ended
April 30, 1995. In addition, the investment adviser has reimbursed the
Fund for $53,166, $85,446 and $64,336 in expenses for the years ended
April 30, 1997, 1996 and the period ended April 30, 1995, respectively. If
such fees were not waived and expenses were not reimbursed, the per share
effect on the net investment income and the ratios of expenses to average
net assets would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------------------------------------ ---------------------------------------------------------
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $ 0.01 $ 0.05 $ 0.07 $ 0.11 $ 0.12 0.99% 1.12% 1.41% 1.75% 2.05%+
</TABLE>
(4) Total return for Class A shares for the period ended April 30, 1995
includes the effect of the cash contribution from the adviser which was
made on October 24, 1994. The total amount of this contribution was
$251,349. Without this cash contribution the total return would have been
6.23%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
For a share of each class of beneficial interest outstanding throughout each
year ended April 30, except where noted:
<TABLE>
<CAPTION>
Class B Shares 1999(1) 1998 1997 1996 1995(2)(4)
- ------------------------------------ ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 10.75 $ 10.26 $ 10.25 $ 10.09 $ 9.55
- ------------------------------------ ------- ------- ------- ------- --------
Income From Operations:
Net investment income(3) 0.43 0.48 0.48 0.49 0.44
Net realized and unrealized gain 0.20 0.48 0.17 0.22 0.55
- ------------------------------------ ------- ------- ------- ------- --------
Total Income From Operations 0.63 0.96 0.65 0.71 0.99
- ------------------------------------ ------- ------- ------- ------- --------
Less Distributions From:
Net investment income (0.44) (0.47) (0.49) (0.49) (0.45)
Net realized gains (0.09) -- (0.13) (0.06) --
Excess of net realized gains -- -- (0.02) -- --
- ------------------------------------ ------- ------- ------- -------- --------
Total Distributions (0.53) (0.47) (0.64) (0.55) (0.45)
- ------------------------------------ ------- ------- ------- -------- --------
Net Asset Value, End of Year $ 10.85 $ 10.75 $ 10.26 $ 10.25 $ 10.09
- ------------------------------------ ------- ------- ------- -------- --------
Total Return 5.94% 9.43% 6.48% 7.09% 10.59%++
- ------------------------------------ ------- ------- ------- -------- --------
Net Assets, End of Year (000s) $19,833 $16,691 $13,184 $ 9,861 $ 6,558
- ------------------------------------ ------- ------- ------- -------- --------
Ratios to Average Net Assets:
Expenses(3) 1.39% 1.17% 1.17% 1.21% 1.38%+
Net investment income 3.97 4.44 4.69 4.62 4.74+
- ------------------------------------ ------- ------- ------- -------- --------
Portfolio Turnover Rate 28% 49% 37% 75% 30%
- ------------------------------------ ------- ------- ------- -------- --------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from May 23, 1994 (inception date) to April 30, 1995.
(3) The investment adviser and administrator waived all or part of their fees
for the years ended April 30, 1999, 1998, 1997, 1996 and the period ended
April 30, 1995. In addition, the investment adviser has reimbursed the
Fund for $53,166, $85,446 and $64,336 in expenses for the years ended
April 30, 1997, 1996 and the period ended April 30, 1995, respectively. If
such fees were not waived and expenses were not reimbursed, the per share
effect on the net investment income and the ratios of expenses to average
net assets would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------------------------------------ ---------------------------------------------------------
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class B $ 0.01 $ 0.05 $ 0.07 $ 0.11 $ 0.11 1.51% 1.63% 1.93% 2.29% 2.59%+
</TABLE>
(4) Total return for Class B shares for the period ended April 30, 1995
includes the effect of the cash contribution from the adviser which was
made on October 24, 1994. The total amount of this contribution was
$221,558. Without this cash contribution the total return would have been
5.55%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
For a share of each class of beneficial interest outstanding throughout each
year ended April 30, except where noted:
<TABLE>
<CAPTION>
Class L Shares(1) 1999(2) 1998 1997 1996(3)
- ------------------------------------ ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 10.76 $ 10.27 $ 10.26 $ 10.28
- ------------------------------------ -------- ------- ------- --------
Income From Operations:
Net investment income(4) 0.43 0.47 0.47 0.45
Net realized and unrealized gain 0.20 0.48 0.17 0.06
- ------------------------------------ -------- ------- ------- --------
Total Income From Operations 0.63 0.95 0.64 0.51
- ------------------------------------ -------- ------- ------- --------
Less Distributions From:
Net investment income (0.44) (0.46) (0.48) (0.47)
Net realized gains (0.09) -- (0.13) (0.06)
Excess of net realized gains -- -- (0.02) --
- ------------------------------------ -------- -------- -------- --------
Total Distributions (0.53) (0.46) (0.63) (0.53)
- ------------------------------------ -------- -------- -------- --------
Net Asset Value, End of Year $ 10.86 $ 10.76 $ 10.27 $ 10.26
- ------------------------------------ -------- -------- -------- --------
Total Return 5.90% 9.38% 6.43% 4.99%++
- ------------------------------------ -------- -------- -------- --------
Net Assets, End of Year (000s) $ 3,157 $ 2,110 $ 913 $ 614
- ------------------------------------ -------- -------- -------- --------
Ratios to Average Net Assets:
Expenses(4) 1.43% 1.21% 1.21% 1.25%+
Net investment income 3.94 4.39 4.66 4.80+
- ------------------------------------ -------- -------- -------- --------
Portfolio Turnover Rate 28% 49% 37% 75%
- ------------------------------------ -------- -------- -------- --------
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from May 16, 1995 (inception date) to April 30, 1996.
(4) The investment adviser and administrator waived all or part of their fees
for the years ended April 30, 1999, 1998, 1997 and the period ended April
30, 1996. In addition, the investment adviser has reimbursed the Fund for
$53,166 and $85,446 in expenses for the year ended April 30, 1997 and the
period ended April 30, 1996, respectively. If such fees were not waived
and expenses were not reimbursed, the per share effect on the net
investment income and the ratios of expenses to average net assets would
have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------------------------------- ---------------------------------------------------
1999 1998 1997 1996 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class L(1) $ 0.01 $ 0.04 $ 0.06 $ 0.10 1.55% 1.67% 1.96% 2.38%+
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
To the Shareholders and Board of Trustees
of the Smith Barney Oregon Municipals Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Smith Barney Oregon Municipals Fund as of
April 30, 1999, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the years in the two-year
period then ended and financial highlights for each of the years in the
four-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the period from May 23, 1994
(commencement of operations) to April 30, 1995, were audited by other auditors
whose report thereon, dated June 19, 1995, expressed an unqualified opinion on
those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
April 30, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Smith Barney Oregon Municipals Fund as of April 30, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended and financial highlights for each
of the years in the four-year period then ended, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
New York, New York
June 14, 1999
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 25
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
For Federal tax purposes the Fund hereby designates for the fiscal year ended
April 30, 1999:
o 100% of the dividends paid by the fund from net investment income as tax
exempt for regular Federal income tax purposes.
o Long-term capital gain distributions paid of $170,951.
- --------------------------------------------------------------------------------
26 1999 Annual Report to Shareholders
<PAGE>
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<PAGE>
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<PAGE>
SALOMON SMITH BARNEY
A member of citigroup
Trustees
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliott S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr.
James J. Crisona, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President and
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Adviser
and Administrator
SSBC Fund Management Inc.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Transfer Agent
First Data Investors Services
Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Oregon Municipals Fund. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current Prospectus for
the Fund, which contains information concerning the Fund's investment policies
and expenses as well as other pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Oregon Municipals Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD0955 6/99
