[Smith Barney Logo]
Smith Barney
Oregon
Municipals
Fund
S E M I - A N N U A L R E P O R T
October 31, 1998
[Smith Barney Logo]
Smith Barney Mutual Funds
Investing for your future.
Every day.(SM)
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Smith Barney
Oregon
Municipals
Fund
HEATH B.
MCLENDON
Chairman
PETER M.
COFFEY
Vice President
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Oregon
Municipals Fund ("Fund") for the period ended October 31, 1998. In this report,
we summarize the period's prevailing economic and market conditions and outline
our portfolio strategy. A detailed summary of the Fund's performance can be
found in the appropriate sections that follow.
Performance and Investment Strategy Update
For the six months ended October 31, 1998, the Fund's Class A shares returned
4.59% before the deduction of any sales charges. In comparison, the Fund's
Lipper Analytical Services, Inc. ("Lipper") peer group average had a total
return of 4.46% during the same period. (Lipper is an independent fund-tracking
organization.) Performance information for the Fund's other share classes can
be found beginning on page five.
Based on its net asset value ("NAV") of $11.00 as of October 31, 1998 and the
current monthly income distribution rate of $0.04 for Class A shares, the
Fund's annualized distribution rate is 4.42%. For an Oregon investor in a
combined federal and state tax bracket of 41.76%, the Fund's tax-exempt yield
of 4.42% is equivalent to a taxable yield of 7.59%. (This figure assumes an
investor is in a federal income tax bracket of 36%.)
We continue to maintain a fairly long average life in the Fund because we see
little inflation risk over the medium term. In addition, the bulk of the Fund's
assets remain in quality, high coupon issues. We believe this strategy should
boost the Fund's performance potential and help provide a steadier long-term
income when interest rates are low.
As of October 31, 1998, the Fund's average call-adjusted life was about 9 years
and 95% of the Fund's holdings were rated investment grade. In addition, 36% of
the Fund's portfolio was rated AAA, the highest quality bond rating.
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Smith Barney Oregon Municipals Fund 1
<PAGE>
Oregon Economic Highlights
Like many other parts of the country, Oregon's booming economy has started to
slow down. Oregon's economic growth has been extraordinary in recent years,
outpacing the national average gains in both employment growth and personal
income. Moreover, Oregon has been successful in further diversifying its
economy from one reliant on timber and agriculture to larger investments in
high technology and services companies. Oregon's rising standard of living has
attracted large numbers of new residents. Thanks to economic success and
prudent debt management, Oregon continues to enjoy high marks from nationally
recognized credit rating agencies.
However, many Asian nations are major trading partners with the State and
ongoing weakness in that region has already begun to affect its economy. For
example, Oregon's exports to Asian countries were down 17.9% in the first
quarter of 1998 compared to the same period last year. Overall exports in the
State were down 6.6% in the first quarter of 1998. Nevertheless, we believe
that Oregon is well positioned for future prosperity. We remain positive on its
long-term economic outlook.
Municipal Bond Market and Economic Overview
Bond market performance was shaped primarily by surging demand for U.S.
Treasury securities and a massive issuance of municipal bonds in the past six
months. During the reporting period, municipal bond prices remained relatively
flat with coupon interest providing most of the returns for municipal bonds.
Troubled financial markets abroad and a strengthening U.S. dollar further
exacerbated an already dramatic flight of capital from foreign countries into
U.S. markets. The U.S. Treasury bond, considered to be the global benchmark for
credit quality, was the chief beneficiary of these capital inflows. The large
flows of money into U.S. Treasury securities drove their prices upward and
their yields lower. On September 30, 1998, the yield of the bellwether 30-year
U.S. Treasury bond fell to 4.95%, the lowest level for long-term government
debt since 1967. Since then, long-term U.S. Treasury yields fell even further
before drifting upward in recent days.
Up until July, many bond investors had been focused on any signs of the
reappearance of inflation. However, developments in the Pacific Rim, such as
Japan's failure to shore up its ailing banking system and Russia's unexpected
devaluation of its currency, altered that view considerably. Moreover, a number
of speculators who found themselves caught in highly unusual market conditions
added to the growing uncertainty in U.S. capital markets.
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2 1998 Semi-Annual Report to Shareholders
<PAGE>
In response to global tumult, the Federal Reserve Board ("Fed") signaled a
shift in policy from vigilance against inflation toward concerns of global
deflation by cutting short-term interest rates 0.25% at its September 1998
meeting. The rate cut was the first action by the Fed since March 1997. Shortly
afterwards, the Fed took an extraordinary and unexpected action by cutting
short-term interest rates again by another 0.25% on October 15, 1998. This
latest action brings the federal-funds rate to 5.0% and the largely symbolic
discount rate to 4.75%.* (The federal-funds rate is the interest rate banks
charge each other for overnight loans and a closely watched indicator of the
direction of interest rates. The discount rate is the interest rate the Federal
Reserve charges its member banks for loans.)
Foreign investors, who do not benefit from the tax-exempt status of municipal
bonds, have been large buyers of U.S. Treasury securities. As a result, yields
for U.S. Treasury securities have declined further than those of municipal
bonds. Municipal bond yields are currently yielding as much as 100% of
equivalent maturity U.S. Treasury bonds. Municipal bonds are considered by many
investors to be a good value when they yield about 85% of U.S. Treasury bonds.
At their present levels, we believe that tax-exempt bonds can now provide a
competitive income stream for risk-averse investors of almost any income tax
bracket.
In contrast to the diminishing U.S. Treasury security supply, municipal bond
issuance continued at record levels. This disparity in supply and demand
between U.S. Treasury bonds and municipal bonds is a primary reason for
municipal bond underperformance relative to U.S. Treasurys.
Municipal Bond Market Outlook
As noted above, we believe that municipal bonds represent competitive values
under the current market conditions. With the stock market's recent volatility,
many investors may be looking to reallocate their existing portfolios. In our
opinion, this may be a timely opportunity for many of these investors to
consider further diversifying their portfolios with municipal bonds.
We believe that economic conditions should remain supportive for the municipal
bond market over the near term. The relatively high yield ratio between
municipal bonds and U.S. Treasury bonds should slow the rate of advance
refundings and help alleviate the oversupply of municipal bonds. Moreover, the
U.S. economy remains sound despite the widely reported economic distress of
many other countries. Although U.S. economic growth will likely slow over the
coming months, we expect the economy to expand modestly. Despite recent remarks
by Fed chairman Alan Greenspan, we expect that the Fed will be forced to
continue to gradually lower short-term interest rates and that in turn should
help correct some of the imbalances that exist in the overall bond market
today.
- --------
* The Fed reduced the federal-funds rate for the third time in seven weeks on
November 17, 1998, after this letter was written.
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Smith Barney Oregon Municipals Fund 3
<PAGE>
We would like to take this opportunity to encourage you to visit our new
Internet Web site at www.smithbarney.com after you review this semi-annual
report.
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,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President
November 12, 1998
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4 1998 Semi-Annual Report to Shareholders
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Historical Performance -- Class A Shares
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<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/31/98 $ 10.76 $ 11.00 $ 0.25 $ 0.00 4.59%+
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4/30/98 10.27 10.76 0.52 0.00 9.97
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4/30/97 10.26 10.27 0.54 0.15 7.01
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4/30/96 10.09 10.26 0.54 0.06 7.70
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Inception*-4/30/95++ 9.55 10.09 0.49 0.00 11.08+
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Total $ 2.34 $ 0.21
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Historical Performance -- Class B Shares
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</TABLE>
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10/31/98 $ 10.75 $ 10.99 $ 0.22 $ 0.00 4.34%+
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4/30/98 10.26 10.75 0.47 0.00 9.43
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4/30/97 10.25 10.26 0.49 0.15 6.48
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4/30/96 10.09 10.25 0.49 0.06 7.09
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Inception*-4/30/95++ 9.55 10.09 0.45 0.00 10.59+
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Total $ 2.12 $ 0.21
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</TABLE>
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Historical Performance -- Class L Shares(2)
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<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
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<S> <C> <C> <C> <C> <C>
10/31/98 $ 10.76 $ 11.00 $ 0.22 $ 0.00 4.32%+
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4/30/98 10.27 10.76 0.46 0.00 9.38
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4/30/97 10.26 10.27 0.48 0.15 6.43
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Inception*-4/30/96 10.28 10.26 0.47 0.06 4.99+
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Total $ 1.63 $ 0.21
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</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
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Average Annual Total Return
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<TABLE>
<CAPTION>
Without Sales Charge(1)
---------------------------------------
Class A Class B Class L(2)
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<S> <C> <C> <C>
Six Months Ended 10/31/98+ 4.59% 4.34% 4.32%
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Year Ended 10/31/98 7.50 6.98 6.94
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Inception* through 10/31/98 9.10++ 8.55++ 7.27
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</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(3)
-----------------------------------------
Class A Class B Class L(2)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Six Months Ended 10/31/98+ 0.39% (0.16)% 2.26%
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Year Ended 10/31/98 3.17 2.48 4.85
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Inception* through 10/31/98 8.09++ 8.38 ++ 6.97
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</TABLE>
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Cumulative Total Return
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<TABLE>
<CAPTION>
Without Sales Charge(1)
--------------------------
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<S> <C>
Class A (Inception* through 10/31/98) 47.25%++
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Class B (Inception* through 10/31/98) 43.98++
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Class L (Inception* through 10/31/98)(2) 27.50
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</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A 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.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
* The inception date for Class A and B shares is May 23, 1994 and May 16, 1995
for Class 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:
<TABLE>
<CAPTION>
Class A Class B
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<S> <C> <C>
Inception*through 4/30/95 6.23% 5.55%
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Inception* through 10/31/98:
Average Annual Total Return Without Sales Charge 8.33 7.69
Average Annual Total Return With Sales Charge 7.33 7.51
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Cumulative Total Return 42.68 38.98
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</TABLE>
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6 1998 Semi-Annual Report to Shareholders
<PAGE>
Historical Performance (unaudited)
Growth of $10,000 Invested in Class A and B Shares of
Smith Barney Oregon Municipals Fund vs.
the Lehman Brothers Municipal Bond Index+
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May 1994 -- October 1998
[Line Chart]
SB Oregon Municipals SB Oregon Municipals Lehman Brothers
Fund Class A Shares Fund Class B Shares Municipal Bond Index
5/23/94 9598 10000 10000
10/94 9822 9762 9830
4/95 10662 11033 10574
10/95 11389 11385 11289
4/96 11483 11543 11414
10/96 12062 12109 11932
4/97 12287 12595 12172
10/97 13146 13259 12946
4/98 13512 13941 13305
10/31/98 14133 14298 13985
+ Hypothetical illustration of $10,000 invested in Class A shares at inception
on May 23, 1994, assuming deduction of the maximum 4.00% sales charge at the
time of investment and reinvestment of dividends and capital gains, if any,
at net asset value through October 31, 1998. In addition, there is an
hypothetical illustration of $10,000 invested in Class B shares at inception
on May 23, 1994, assuming deduction of a 4.50% CDSC, which applies if shares
are redeemed within one year from 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>
Portfolio Highlights (unaudited) October 31, 1998
Portfolio Breakdown
[Pie Chart]
Pollution Control 1.4%
Miscellaneous 7.4%
Tax Allocation 0.8%
Education 13.8%
Utilities 7.1%
General Obligation 20.7%
Industrial Development 3.1%
Short Term 0.3%
Water and Sewer 8.5%
Hospitals 7.9%
Life Care Systems 2.7%
Transportation 7.3%
Housing 19.0%
Summary of Investments by Combined Ratings
<TABLE>
<CAPTION>
Standard & Percentage of
Moody's and/or Poor's Total Investments
- ----------------------------------------------------------
<S> <C> <C> <C>
Aaa AAA 36.4%
Aa AA 14.7
A A 29.8
Baa BBB 14.6
NR NR 4.3
P-1/VMIG1 A-1 0.2
-----
100.0%
=====
</TABLE>
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8 1998 Semi-Annual Report to Shareholders
<PAGE>
Schedule of Investments (unaudited) October 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Education -- 13.8%
$ 1,000,000 AAA Marion County School District No. 103C, Woodburn
Deferred Interest, Series B, FGIC-Insured, zero coupon
due 11/1/12 $ 537,500
500,000 AAA Multnomah County Educational Facilities Revenue,
(University of Portland Project), Refunding Bonds,
AMBAC-Insured, 5.000% due 4/1/18 503,750
1,000,000 AAA Oregon Health Sciences, University Revenue, Series A,
MBIA-Insured, zero coupon due 7/1/13 500,000
1,000,000 AA Oregon State Board Higher Education, Series A,
6.000% due 8/1/26 1,097,500
Oregon State Health, Housing, Educational & Cultural
Facilities Authority, Series A:
500,000 Baa1* Linfield College Project, 5.500% due 10/1/18 511,250
430,000 A1* Oak Tree Foundation Project, 6.100% due 5/1/15 457,413
500,000 AAA Southwestern Oregon Community College District,
AMBAC-Insured, 5.600% due 6/1/16 529,375
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 6/1/12 450,500
100,000 AAA 6.100% due 6/1/12 110,875
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4,698,163
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General Obligation -- 20.7%
450,000 AAA Chemeketa Community College District, GO,
FGIC-Insured, 5.800% due 6/1/12 504,000
1,000,000 AAA Clackamas & Washington Counties School District
No. 003 JT, FGIC-Insured, 5.000% due 6/1/16 1,008,750
500,000 AAA Lane County Bethel, GO, School District No. 052,
FGIC-Insured, 6.400% due 12/1/09 575,000
500,000 AAA Lincoln County School District, GO, Series 95,
FGIC-Insured, 5.250% due 6/15/12 530,000
Oregon State Veterans Welfare, GO:
500,000 AA Series 76A, 5.900% due 10/1/17 543,750
500,000 AA Series 77, 5.200% due 10/1/18 506,875
Puerto Rico Commonwealth, GO:
1,500,000 A Capital Appreciation, Public Improvement, zero
coupon due 7/1/14 714,375
1,000,000 A Public Improvement Refunding Bonds, 5.500%
due 7/1/13 1,067,500
1,000,000 Aa3* Washington, Multnomah & Yamhill Counties, School
District No. 1J, Refunding Bonds, 5.000% due 11/1/14 1,042,500
500,000 AAA Yamhill County School District No. 040, FGIC-Insured,
5.600% due 6/1/16 530,625
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7,023,375
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</TABLE>
See Notes to Financial Statements.
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Smith Barney Oregon Municipals Fund 9
<PAGE>
Schedule of Investments (unaudited) (continued) October 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hospitals -- 7.9%
$ 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(b) 657,475
1,000,000 AAA Medford Hospital Facility Authority Revenue, Asante
Health Systems, Series A, MBIA-Insured, 5.000%
due 8/15/18 1,002,500
500,000 BBB Puerto Rico Industrial Tourist Education, Medical &
Environmental Control Facilities, (Ryder Memorial
Hospital Project), Series A, 6.700% due 5/1/24 543,750
- ------------------------------------------------------------------------------------------------
2,702,475
- ------------------------------------------------------------------------------------------------
Housing: Multi-Family -- 11.0%
215,000 Aa2* Oregon State Housing & Community Services, Housing
& Finance Revenue Bonds, Assisted or Insured Multi-
Unit Mortgages, Series A, FHA-Insured,
6.800% due 7/1/13 227,631
Portland Housing Authority, Multi-Family Revenue,
Series A:
500,000 Aa1* Cherry Blossom Apartments, GNMA-Collateralized,
6.100% due 12/20/26(c) 541,250
1,000,000 A1* Cherry Ridge Project, 6.250% due 5/1/12(b) 1,056,250
300,000 NR Sr. Lien Revenue, (Fairview Woods Project),
6.875% due 8/1/14 310,125
555,000 AAA Portland Multi-Family Revenue, Collins Circle Apartments,
FNMA-Collateralized, 5.125% due 6/1/21 549,450
1,000,000 A1* Washington County Housing Authority, Multi-Family
Revenue, (Bethany Meadows Project),
6.250% due 8/1/13(c) 1,062,500
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3,747,206
- ------------------------------------------------------------------------------------------------
Housing: Single-Family -- 8.0%
Oregon State Housing & Community Services, Mortgage
Revenue Bonds, Single-Family Mortgage Program:
1,000,000 Aa2* Series B, 6.875% due 7/1/28(b) 1,065,000
475,000 Aa2* Series D, 6.500% due 7/1/24(b)(c) 504,687
500,000 A Portland Housing Authority Revenue, Pooled Housing,
Series A, 5.000% due 1/1/19 498,125
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(c) 352,688
</TABLE>
See Notes to Financial Statements.
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1998 Semi-Annual Report to Shareholders 10
<PAGE>
Schedule of Investments (unaudited) (continued) October 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Housing: Single-Family -- 8.0% (continued)
$ 270,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
Program A, GNMA-Collateralized,
6.450% due 3/1/16(c) $ 286,875
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2,707,375
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Industrial Development -- 3.1%
1,000,000 Baa2* Oregon State EDR, Georgia-Pacific Corp., Series CVLII,
6.350% due 8/1/25(c) 1,065,000
- -------------------------------------------------------------------------------------------------
Life Care Systems -- 2.7%
400,000 NR Albany Hospital Facilities Authority Revenue, Mennonite
Home of Albany Inc., 5.900% due 10/1/20 406,500
500,000 NR Clackamus County Hospital Facilities Authority Revenue,
(Robison Jewish Home Project), 6.250% due 10/1/28 528,750
- -------------------------------------------------------------------------------------------------
935,250
- -------------------------------------------------------------------------------------------------
Miscellaneous -- 7.4%
600,000 A2* Oregon State Bond Bank Revenue, Economic
Development Department, Series 1, 6.700%
due 1/1/15 662,250
500,000 AAA Oregon State Department of Administrative Services,
COP, Series A, AMBAC-Insured, 5.800% due 5/1/24 545,000
500,000 BBB Puerto Rico Housing Bank & Finance Agency, Kidder,
7.500% due 12/1/06 593,750
500,000 BBB- Virgin Islands Public Finance Authority Revenue, Sr. Lien,
Series A, 5.500% due 10/1/18 506,250
200,000 NR Western Generation Agency, (Wauna Cogeneration
Project), Series B, 7.250% due 1/1/09(c) 214,750
- -------------------------------------------------------------------------------------------------
2,522,000
- -------------------------------------------------------------------------------------------------
Pollution Control -- 1.4%
450,000 A3* Port Umpqua Pollution Control, (International Paper Co.
Projects), Series A, 5.050% due 6/1/09 462,375
- -------------------------------------------------------------------------------------------------
Short-Term (d) -- 0.3%
100,000 VMIG1* Puerto Rico Commonwealth, Government Development
Bank, 2.750% due 12/1/15 100,000
- -------------------------------------------------------------------------------------------------
Tax Allocation -- 0.8%
250,000 A- Medford Urban Renewal Agency, Tax Revenue, Series A,
5.875% due 9/1/10 266,562
- -------------------------------------------------------------------------------------------------
Transportation -- 7.3%
400,000 AAA Port Portland Airport Revenue, Portland International
Airport, Series 10, FGIC-Insured, 5.750% due 7/1/25(c) 425,500
1,500,000 A Puerto Rico Commonwealth Highway & Transportation
Authority, Highway Revenue, Series Y,
5.000% due 7/1/36 1,505,625
</TABLE>
See Notes to Financial Statements.
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Smith Barney Oregon Municipals Fund 11
<PAGE>
Schedule of Investments (unaudited) (continued) October 31, 1998
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation -- 7.3% (continued)
$ 500,000 Baa2* Puerto Rico Port Authority Revenue, Special Facilities,
American Airlines, Series A, 6.250% due 6/1/26(c) $ 545,625
- --------------------------------------------------------------------------------------------------
2,476,750
- --------------------------------------------------------------------------------------------------
Utilities -- 7.1%
500,000 AAA Eugene Electric Utility Revenue, FSA-Insured,
4.850% due 8/1/15 502,500
500,000 BBB Guam Power Authority Revenue, Series A,
6.300% due 10/1/22 531,875
1,440,000 AAA Puerto Rico Electric Power Authority, Series EE,
4.500% due 7/1/18 1,368,000
- --------------------------------------------------------------------------------------------------
2,402,375
- --------------------------------------------------------------------------------------------------
Water and Sewer -- 8.5%
250,000 A+ Beavertown Water Revenue, Series 1994,
6.125% due 6/1/14(b) 268,125
360,000 A+ Clackamas County Service District No. 001, Sewer
Revenue, 6.375% due 10/1/14 399,600
500,000 AAA Klamath Falls Water Revenue, FSA-Insured,
5.600% due 7/1/16 529,375
600,000 Aa1* Port Umatilla Water Revenue, 6.650% due 8/1/22(c) 650,250
1,000,000 AAA Tualatin Valley Water District, FSA-Insured,
5.100% due 6/1/14 1,027,500
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2,874,850
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
$31,874,458**) $33,983,756
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings service ("Standard & Poor's")
with the exception of those identified by an asterisk (*), which are rated
by Moody's Investor Service, Inc. ("Moody's").
(b) Security segregated by Custodian for open purchase commitments.
(c) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(d) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 13 and 14 for definition of ratings and certain security description.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
Bond Ratings (unaudited)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
<TABLE>
<S> <C>
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.
<CAPTION>
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.
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 13
<PAGE>
Short-Term Security Ratings (unaudited)
<TABLE>
<S> <C>
SP-1 -- Standard & Poor's highest rating indicating very strong or strong capacity to pay principal
and interest; those issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand obligation
(VRDO) rating indicating that the degree of safety regarding timely payment is either
overwhelming or very strong; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature--VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the advent of the
VMIG 1 rating.
</TABLE>
- --------------------------------------------------------------------------------
Security Descriptions (unaudited)
<TABLE>
<S> <C>
ABAG -- Association of Bay Area
Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance
Company
CHFCLI -- California Health Facility
Construction Loan Insurance
CONNIE -- College Construction Loan
LEE Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
EDR -- Economic Development Revenue
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance
Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage
Corporation
FLAIRS -- Floating Adjustable Interest
Rate Securities
FNMA -- Federal National Mortgage
Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financing Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage
Association
GO -- General Obligation
HDC -- Housing Development
Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development
Authority
IDB -- Industrial Development Board
IDR -- Industrial Development
Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors
Assurance Corporation
MVRICS -- Municipal Variable Rate lnverse
Coupon Security
PCR -- Pollution Control Revenue
PSF -- Permanent School Fund
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt
Securities
TAN -- Tax Anticipation Notes
TECP -- Tax-Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation
Notes
SYCC -- Structured Yield Curve
Certificate
VA -- Veterans Administration
VRDD -- Variable Rate Daily
Demand
VRWE -- Variable Rate Wednesday
Demand
</TABLE>
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
Statement of Assets and Liabilities (unaudited) October 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $31,874,458) $33,983,756
Interest receivable 566,812
Receivable for Fund shares sold 63,484
Deferred organization costs 1,411
- -------------------------------------------------------------------- -----------
Total Assets 34,615,463
- -------------------------------------------------------------------- -----------
LIABILITIES:
Payable for securities purchased 508,715
Dividends payable 116,423
Investment advisory fees payable 25,426
Administration fees payable 16,951
Payable to bank 11,665
Distribution fees payable 3,369
Accrued expenses 38,293
- -------------------------------------------------------------------- -----------
Total Liabilities 720,842
- -------------------------------------------------------------------- -----------
Total Net Assets $33,894,621
- -------------------------------------------------------------------- -----------
NET ASSETS:
Par value of shares of beneficial interest $ 3,083
Capital paid in excess of par value 31,525,212
Overdistributed net investment income (5,842)
Accumulated net realized gain from security transactions 262,870
Net unrealized appreciation of investments 2,109,298
- -------------------------------------------------------------------- -----------
Total Net Assets $33,894,621
- -------------------------------------------------------------------- -----------
Shares Outstanding:
Class A 1,232,592
- ------------------------------------------------------------------------------
Class B 1,635,558
- ------------------------------------------------------------------------------
Class L 214,508
- ------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $11.00
- ------------------------------------------------------------------------------
Class B* $10.99
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Class L** $11.00
- ------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $11.46
- ------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $11.11
- -------------------------------------------------------------------- -----------
</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 (unaudited)
For the Six Months Ended October 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 894,028
- ----------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 4) 75,456
Investment advisory fees (Note 4) 49,972
Administration fees (Note 4) 33,314
Audit and legal 15,650
Shareholder and system servicing fees 12,785
Shareholder communications 12,500
Trustees' fees 7,550
Amortization of deferred organization costs 4,052
Pricing service fees 3,550
Registration fees 3,250
Custody 1,050
Other 2,500
- ----------------------------------------------------------------------------------
Total Expenses 221,629
Less: Investment advisory and administration fee waivers (Note 4) (15,411)
- ----------------------------------------------------------------------------------
Net Expenses 206,218
- ----------------------------------------------------------------------------------
Net Investment Income 687,810
- ----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 5):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 99,984
Future contracts (4,826)
- ----------------------------------------------------------------------------------
Net Realized Gain 95,158
- ----------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 1,467,894
End of period 2,109,298
- ----------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 641,404
- ----------------------------------------------------------------------------------
Net Gain on Investments 736,562
- ----------------------------------------------------------------------------------
Increase in Net Assets From Operations $1,424,372
- ----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
Statements of Changes in Net Assets
For the Six Months Ended October 31, 1998 (unaudited)
and the Year Ended April 30, 1998
<TABLE>
<CAPTION>
October 31, April 30,
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 687,810 $ 1,305,551
Net realized gain 95,158 167,712
Increase in net unrealized appreciation 641,404 992,126
- ----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,424,372 2,465,389
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (707,099) (1,284,672)
- ----------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (707,099) (1,284,672)
- ----------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares 3,675,581 7,708,928
Net asset value of shares issued for reinvestment of dividends 377,487 834,873
Cost of shares reacquired (2,047,400) (2,418,872)
- ----------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 2,005,668 6,124,929
- ----------------------------------------------------------------------------------------------------
Increase in Net Assets 2,722,941 7,305,646
NET ASSETS:
Beginning of period 31,171,680 23,866,034
- ----------------------------------------------------------------------------------------------------
End of period* $33,894,621 $31,171,680
- ----------------------------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net investment income: $ (5,842) $ 13,447
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 17
<PAGE>
Notes to Financial Statements (unaudited)
1. Significant Accounting Policies
Smith Barney Oregon Municipals Fund ("Fund"), a Massachusetts business trust,
is registered under the Investment Company Act of 1940, as amended, as a non-
diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are
valued at the mean between the quoted bid and ask prices provided by an
independent pricing service; (c) securities maturing within 60 days are valued
at cost plus accreted discount or minus amortized premium, which approximates
value; (d) gains or losses on the sale of securities are calculated by using
the specific identification method; (e) interest income, adjusted for
amortization of premium and accretion of original issue discount, is recorded
on an accrual basis; market discount is recognized upon the disposition of the
security; (f) direct expenses are charged to the Fund and each class;
investment advisory, administration fees and general fund expenses are
allocated on the basis of relative net assets by class; (g) dividends and
distributions to shareholders are recorded on the ex-dividend date; (h) the
Fund intends to comply with the applicable provisions of the Internal Revenue
Code of 1986, as amended, pertaining to regulated investment companies and to
make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; (i) the character of income
and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles; and
(j) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
In addition, organization costs have been deferred and are being amortized on a
straight-line method over a five-year period, beginning with the commencement
of the Fund's operations in May 1994.
2. Fund Concentration
Since the Fund invests primarily in obligations of issuers within Oregon, it is
subject to possible concentration risks associated with economic, political or
legal developments or industrial or regional matters specifically affecting
Oregon.
3. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax and from designated
state income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (unaudited) (continued)
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually. Additional taxable distributions may be
made if necessary to avoid a Federal excise tax.
4. Investment Advisory Agreement, Administration Agreement and Affiliated
Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment adviser to the Fund. The Fund pays MMC an
investment advisory fee calculated at an annual rate of 0.30% of the Fund's
average daily net assets. This fee is calculated daily and paid monthly. MMC
waived $9,247 of the investment advisory fees for the Fund for the six months
ended October 31, 1998.
MMC also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets up to
$500 million and 0.18% of the average daily net assets in excess of $500
million. This fee is calculated daily and paid monthly. MMC waived $6,164 of
its administration fees for the six months ended October 31, 1998.
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 six months ended October 31, 1998, SSB received sales charges of
$22,000 and $3,000 on sales of the Fund's Class A and Class L shares,
respectively. In addition, CDSCs paid to SSB for Class B shares were
approximately $20,000.
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 19
<PAGE>
Notes to Financial Statements (unaudited) (continued)
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
its Class A, B and 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 six months ended October 31, 1998, total Distribution
Plan fees incurred were:
<TABLE>
<CAPTION>
Class A Class B Class L
- -----------------------------------------------------------
<S> <C> <C> <C>
Distribution Plan Fees $9,821 $57,582 $8,053
- -----------------------------------------------------------
</TABLE>
All officers and one Trustee of the Fund are employees of SSB.
5. Investments
During the six months ended October 31, 1998, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<S> <C>
Purchases $7,600,638
- ------------------------
Sales 5,242,360
- ------------------------
</TABLE>
At October 31, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were as follows:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation $2,116,098
Gross unrealized depreciation (6,800)
- ---------------------------------------------
Net unrealized appreciation $2,109,298
- ---------------------------------------------
</TABLE>
6. Shares of Beneficial Interest
At October 31, 1998, the Fund had an unlimited number of shares of beneficial
interest authorized with par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents
an identical interest and has the same rights, except that each class bears
certain direct expenses, including those specifically related to the
distribution of its shares. Effective June 12, 1998, the Fund adopted the
renaming of existing Class C shares as Class L shares.
At October 31, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class L
-------------- -------------- -------------
<S> <C> <C> <C>
Total Paid-in Capital $12,546,267 $16,708,793 $2,273,235
- ----------------------- ----------- ----------- ----------
</TABLE>
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
Notes to Financial Statements (unaudited) (continued)
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
October 31, 1998 April 30, 1998
------------------------------ ------------------------------
Shares Amount Shares Amount
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Class A
Shares sold 102,439 $ 1,119,378 227,196 $ 2,433,102
Shares issued on reinvestment 14,674 160,580 32,120 344,459
Shares redeemed (34,126) (374,507) (61,216) (654,241)
- ------------------------------- ------- ------------ ------- ------------
Net Increase 82,987 $ 905,451 198,100 $ 2,123,320
- ------------------------------- ------- ------------ ------- ------------
Class B
Shares sold 192,905 $ 2,107,931 358,803 $ 3,835,768
Shares issued on reinvestment 17,276 188,780 40,875 437,701
Shares redeemed (127,394) (1,396,994) (132,271) (1,424,718)
- ------------------------------- -------- ------------ -------- ------------
Net Increase 82,787 $ 899,717 267,407 $ 2,848,751
- ------------------------------- -------- ------------ -------- ------------
Class L+
Shares sold 40,918 $ 448,272 133,622 $ 1,440,058
Shares issued on reinvestment 2,572 28,127 4,905 52,713
Shares redeemed (25,117) (275,899) (31,329) (339,913)
- ------------------------------- -------- ------------ -------- ------------
Net Increase 18,373 $ 200,500 107,198 $ 1,152,858
- ------------------------------- -------- ------------ -------- ------------
</TABLE>
+ On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
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 1998(1) 1998 1997 1996 1995(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.76 $ 10.27 $ 10.26 $ 10.09 $ 9.55
- --------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.24 0.53 0.54 0.55 0.49
Net realized and unrealized gain 0.25 0.48 0.16 0.22 0.54
- --------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.49 1.01 0.70 0.77 1.03
- --------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income ( 0.25) ( 0.52) ( 0.54) ( 0.54) ( 0.49)
Net realized gains -- -- ( 0.13) ( 0.06) --
Excess of net realized gains -- -- ( 0.02) -- --
- --------------------------------------------------------------------------------------------------------------
Total Distributions ( 0.25) ( 0.52) ( 0.69) ( 0.60) ( 0.49)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 11.00 $ 10.76 $ 10.27 $ 10.26 $ 10.09
- --------------------------------------------------------------------------------------------------------------
Total Return(4) 4.59%++ 9.97% 7.01% 7.70% 11.08%++
- --------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 13,562 $12,371 $ 9,769 $ 7,520 $ 6,323
- --------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 0.93%+ 0.65% 0.65% 0.66% 0.82%+
Net investment income 4.44 + 4.96 5.21 5.21 5.28 +
- --------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 49% 37% 75% 30%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended October 31, 1998 (unaudited)
(2) For the period from May 23, 1994 (inception date) to April 30, 1995.
(3) The investment adviser and administrator waived all or part of their fees
for the six months ended October 31, 1998 and the years ended April 30,
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
----------------------------------------------------- ----------------------------------------------------------
1998(1) 1998 1997 1996 1995 1998(1) 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 1.01%+ 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 1998 Semi-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 1998(1) 1998 1997 1996 1995(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.75 $ 10.26 $ 10.25 $ 10.09 $ 9.55
- --------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.22 0.48 0.48 0.49 0.44
Net realized and unrealized gain 0.24 0.48 0.17 0.22 0.55
- --------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.46 0.96 0.65 0.71 0.99
- --------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income ( 0.22) ( 0.47) ( 0.49) ( 0.49) ( 0.45)
Net realized gains -- -- ( 0.13) ( 0.06) --
Excess of net realized gains -- -- ( 0.02) -- --
- --------------------------------------------------------------------------------------------------------------
Total Distributions ( 0.22) ( 0.47) ( 0.64) ( 0.55) ( 0.45)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 10.99 $ 10.75 $ 10.26 $ 10.25 $ 10.09
- --------------------------------------------------------------------------------------------------------------
Total Return(4) 4.34%++ 9.43% 6.48% 7.09% 10.59%++
- --------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 17,973 $16,691 $13,184 $ 9,861 $ 6,558
- --------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.44%+ 1.17% 1.17% 1.21% 1.38%+
Net investment income 3.93 + 4.44 4.69 4.62 4.74 +
- --------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 49% 37% 75% 30%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended October 31, 1998 (unaudited)
(2) For the period from May 23, 1994 (inception date) to April 30, 1995.
(3) The investment adviser and administrator waived all or part of their fees
for the six months ended October 31, 1998 and the years ended April 30,
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
----------------------------------------------------- ----------------------------------------------------------
1998(1) 1998 1997 1996 1995 1998(1) 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 1.53%+ 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) 1998(2) 1998 1997 1996(3)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.76 $ 10.27 $ 10.26 $ 10.28
- ------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(4) 0.22 0.47 0.47 0.45
Net realized and unrealized gain 0.24 0.48 0.17 0.06
- ------------------------------------------------------------------------------------------------
Total Income From Operations 0.46 0.95 0.64 0.51
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income ( 0.22) ( 0.46) ( 0.48) ( 0.47)
Net realized gains -- -- ( 0.13) ( 0.06)
Excess of net realized gains -- -- ( 0.02) --
- ------------------------------------------------------------------------------------------------
Total Distributions ( 0.22) ( 0.46) ( 0.63) ( 0.53)
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 11.00 $ 10.76 $ 10.27 $ 10.26
- ------------------------------------------------------------------------------------------------
Total Return 4.32%++ 9.38% 6.43% 4.99%++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 2,360 $ 2,110 $ 913 $ 614
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.48%+ 1.21% 1.21% 1.25%+
Net investment income 3.89 + 4.39 4.66 4.80 +
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 16% 49% 37% 75%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended October 31, 1998 (unaudited)
(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 six months ended October 31, 1998 and the years ended April 30,
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
------------------------------------------------ -----------------------------------------------------
1998(2) 1998 1997 1996 1998(2) 1998 1997 1996
--------- ---------- ---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class L(1) $ 0.01 $ 0.04 $ 0.06 $ 0.10 1.57%+ 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 1998 Semi-Annual Report to Shareholders
<PAGE>
[Back Cover]
SALOMON SMITH BARNEY
A member of citigroup [Umbrella Logo]
Trustees
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliott S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr.
James J. Crisona, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser
and Administrator
Mutual Management Corp.
Distributor
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
FD0820 12/98
