[front cover]
[SBMF logo]
SMITH BARNEY
OREGON MUNICIPALS FUND
SPECIAL DISCIPLINE
SERIES
ANNUAL REPORT
APRIL 30, 2000
[Smith Barney Mutual Funds logo]
NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
<PAGE>
Smith Barney [Photo of Heath B. McLendon
Oregon Chairman]
Municipals
Fund [Photo of Peter M. Coffey
Vice President]
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Oregon
Municipals Fund ("Fund") for the year ended April 30, 2000. In this report, we
summarize the period's prevailing economic and market conditions and outline our
portfolio strategy.(1) A detailed summary of the Fund's performance can be found
in the appropriate sections that follow. We hope you find this report to be
useful and informative.
Performance and Investment Strategy Update
For the year ended April 30, 2000, the Class A, B and L shares of the Fund,
without sales charges, reported negative total returns of 3.01%, 3.52% and
3.55%, respectively. The Class A, B and L shares of the Fund, with sales
charges, reported negative total returns of 6.87%, 7.66% and 5.43%,
respectively. By comparison, the Fund's Lipper, Inc. peer group average posted
a return of negative 3.16% for the same period. (Lipper, Inc. is a major
fund-tracking organization.). Additional performance information can be found
on pages five and six.
Over the twelve months covered by this report, the Fund distributed income
dividends totaling $0.50 per Class A share. (Please note a portion of the
income from the Fund may be subject to the Alternative Minimum Tax ("AMT").)
As of April 30, 2000, 85.1% of the Fund's holdings were rated investment grade.
In addition, 31.7% of the Fund's portfolio was rated Aaa/AAA, the
highest-quality bond rating by Moody's Investors Service, Inc. or Standard &
Poor's Ratings Service, two major credit rating agencies.
Municipal Bond Market and Economic Overview
The bond markets have changed dramatically over the past several years. In our
view, one central theme of this change, which began following the Asian crisis
in 1997, is that the capital markets can no longer rely on the U.S. Treasury
markets
-----------------
(1) The information provided represents the opinion of the manager and is not
intended to be a forecast of future events, a guarantee of future results
nor investment advice. Further, there is no assurance that certain
securities will remain in or out of the portfolio.
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 1
<PAGE>
to provide a near-perfect "benchmark" of trends in interest rates. Before the
Asian crisis, the capital markets relied on the U.S. Treasury market as a
measure to determine what bonds "should" yield.
Under these changing conditions, it may therefore be more difficult for the
Federal Reserve Board ("Fed") to moderate the growth of the economy, since
long-term interest rates may not rise as the Fed puts upward pressure on
short-term rates. The shape of the U.S. Treasury curve just six months ago was
fairly "normal." (The yield curve is a graphical depiction of the relationship
between the yield on bonds of the same credit quality but different maturities.
A normal yield curve depicts a relationship whereby bonds with longer
maturities have higher yields than bonds with shorter maturities.) Usually,
long-term bonds are more volatile than short-term bonds because more risk is
associated with those bonds with longer maturities.
As of this writing, yields on longer bonds are depressed by a growing bond
shortage, as well as by expectations that the Fed may ultimately be successful
in slowing the economy and diffusing inflationary pressures. The result is a
negatively sloped yield curve for U.S. Treasuries -- instead of the usual
upward-sloping curve. This unusual yield curve results from yields that rise
steadily along with the maturity of Treasury bonds, the highest yields being
associated with the shorter-term bonds.
The U.S. economy continues to generate remarkable non-inflationary growth.
During the Fund's fiscal year, the Fed has increased short-term interest rates
five times in the last ten months by a total of 125 basis points. (A basis
point is 0.01% or one-hundredth of a percent.) At the Federal Open Market
Committee meeting on May 16, 2000, the Fed raised interest rates an additional
50 basis points, with an indication of future rate increases to come if need
be. (The Federal Open Market Committee is the committee that sets interest
rates and credit policies for the Federal Reserve System.) The Fed remains
committed to keeping pressure on borrowing costs until the U.S. economy slows
to levels that keep inflation from accelerating.
During the period covered by this report, the municipal bond market performed
competitively, particularly in comparison with non-U.S. Treasury taxable bond
sectors. While municipals are unable to keep pace with decline in yield on U.S.
Treasuries, they are clearly less volatile than many non-U.S. Treasury taxable
bonds which are more susceptible to credit problems and capital market
liquidity issues. In our view, the chief problem with municipal securities
continues to be extremely tight supply. In fact, new issue volume in January
2000 was less than half of that sold in January 1999.
--------------------------------------------------------------------------------
2 2000 Annual Report to Shareholders
<PAGE>
While no guarantees can be given, we believe that short-term and
intermediate-term municipal yields are likely to increase slightly because of:
o The expected continuing increases in the federal funds rate which would put
upward pressure on all short-term yields. (The federal funds rate is the
interest rate that banks with excess reserves at a Federal Reserve district
bank charge other banks that need overnight loans.);
o A likely increase in municipal bond supply, which would be felt most
dramatically in the supply of the short end of the yield curve; and
o The yield on municipal bonds with longer maturities are not nearly as
attractive as yields offered by short- and intermediate-term taxable bonds.
The last factor is particularly important in terms of the Fund's current
investment strategy. While the U.S. Treasury yield curve has an inverted shape,
with the highest yields in five years, the municipal yield curve has maintained
a sharp positive slope. In fact, the difference in yield between 20-year and
30-year municipal bonds is only 10 basis points as of this writing.
Oregon Economic Highlights(2)
Our outlook for the state of Oregon is optimistic based on low levels of tax-
supported debt and vibrant economic growth for the past several years.
Moreover, this growth has helped the state to accommodate a mandated shift in
school funding. Although Oregon's economic growth has slowed recently due in
large part to the reduction of exports to Asia, we believe that growth should
strengthen in the months and years ahead.
We think Oregon's financial condition should also remain strong. The state has
continued to diversify its economy, effectively minimizing its past reliance on
the lumber and wood industries. Growth is particularly evident in the high
technology and trade and services areas and construction has been strong. For
several years, the state has outperformed the nation in both employment and
personal income. Oregon's rising standard of living has also attracted large
numbers of new residents which in turn has helped the state to add to its
strategic reserves.
Municipal Bond Market Outlook
In light of recent investor confusion and volatility in the bond markets,
long-term municipal bond yields have not changed much in several months. We
believe that the relative stability of many municipal bonds may offer investors
stability in a highly volatile bond market (as well as the higher volatility
that may be associated with other capital markets). Of course, no guarantees
can be given that this relative stability will continue.
-----------------
(2) Source: Fitch IBCA, Inc., an internationally recognized rating organization
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 3
<PAGE>
We also believe that Fed monetary policy action should be sufficient to slow
the economy without triggering higher inflation. The good news is that the
economy's "soft landing" is likely to be at a higher annual growth rate than
was previously thought possible due to the possible emergence of a New Economy
where technological advances can spur growth without inflationary pressures.
In our opinion, the recent rise in interest rates has created several buying
opportunities. We believe that we can maintain a competitive level of
tax-exempt income in the Fund consistent with prudent investing and careful
assessment of credit quality. Yields on municipal securities have risen quite
substantially and the long end of the yield curve continues to favor municipal
bonds.
Although the bond markets remain unsettled, we maintain our positive long-term
outlook for municipal securities for the following reasons:
o Longer intermediate and long maturity yields remain very high relative to
taxable counterparts. For example, some bonds are yielding roughly 95% to
100% of similar maturity U.S. Treasuries;
o The municipal yield curve remains very steeply sloped, even as the U.S.
Treasury yield curve is inverted; and
o When the capital markets begin to believe that the Fed has achieved its
goal of easing growth down to non-inflationary levels, bonds could rally
and shortages of bonds with the best coupon structures and call provisions
could eventually surface.
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 in the new century.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
-------------------- --------------------
Heath B. McLendon Peter M. Coffey
Chairman Vice President
May 18, 2000
--------------------------------------------------------------------------------
4 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/30/00 $10.87 $10.02 $0.50 $0.02 (3.01)%
--------------------------------------------------------------------------------------------------
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 $3.08 $0.32
--------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/30/00 $10.85 $10.00 $0.45 $0.02 3.52)%
--------------------------------------------------------------------------------------------------
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 $2.79 $0.32
--------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class L 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>
4/30/00 $10.86 $10.01 $0.45 $0.02 (3.55)%
--------------------------------------------------------------------------------------------------
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 $2.30 $0.32
--------------------------------------------------------------------------------------------------
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 5
<PAGE>
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charges(1)
-----------------------------------------
Class A Class B Class L
-------------------------------------------------------------------------
<S> <C> <C> <C>
Year Ended 4/30/00 (3.01)% (3.52)% (3.55)%
------------------------------------------------------------------------
Five Years Ended 4/30/00 5.55 4.99 N/A
------------------------------------------------------------------------
Inception* through 4/30/00 6.51++ 5.96++ 4.57
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges(2)
------------------------------------------
Class A Class B Class L
-------------------------------------------------------------------------
<S> <C> <C> <C>
Year Ended 4/30/00 (6.87)% (7.66)% (5.43)%
-------------------------------------------------------------------------
Five Years Ended 4/30/00 4.69 4.82 N/A
-------------------------------------------------------------------------
Inception* through 4/30/00 5.78++ 5.96++ 4.37
-------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charges(1)
-------------------------------------------------------------------------
<S> <C>
Class A (Inception* through 4/30/00) 45.50%++
-------------------------------------------------------------------------
Class B (Inception* through 4/30/00) 41.06++
-------------------------------------------------------------------------
Class L (Inception* through 4/30/00) 24.84
-------------------------------------------------------------------------
</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) 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 also 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
--------------------------------------------------------------------------------
<S> <C> <C>
Inception* through 4/30/95 6.23% 5.55%
--------------------------------------------------------------------------------
Inception* through 4/30/00:
Average Annual Total Return Without Sales Charges 5.94% 5.31%
Average Annual Total Return With Sales Charges 5.21 5.31
--------------------------------------------------------------------------------
Cumulative Total Return 40.88% 35.99%
--------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
6 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A and B Shares of
Smith Barney Oregon Municipals Fund vs.
the Lehman Brothers Municipal Bond Index+
--------------------------------------------------------------------------------
May 1994 -- April 2000
[tabular representation of mountain chart]
<TABLE>
<CAPTION>
SB Oregon SB Oregon Lehman Brothers
Municipals Fund Municipals Fund Municipal
Class A Shares Class B Shares Bond Index
<S> <C> <C> <C>
5/23/94 $ 9,598 $10,000 $10,000
4/95 9,822 9,762 9,830
4/96 10,662 10,609 10,574
4/97 11,389 11,385 11,289
4/98 11,483 11,442 11,414
4/99 12,062 12,109 11,932
4/30/00 13,965* 14,106* 14,099
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A and B shares on May
23, 1994 (inception date), assuming deduction of the maximum 4.00% sales
charge at the time of investment for Class A shares and the deduction of the
maximum 4.50% CDSC for Class B shares, 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.
It also assumes reinvestment of dividends and capital gains, if any, at net
asset value through April 30, 2000. 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.
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 7
<PAGE>
--------------------------------------------------------------------------------
Portfolio Highlights (unaudited) April 30, 2000
--------------------------------------------------------------------------------
Portfolio Breakdown
[tabular representation of pie chart]
Housing 28.2%
Transportation 11.7%
Life Care Systems 5.0%
Hospitals 11.4%
Water and Sewer 6.4%
Industrial Development 5.7%
General Obligation 4.0%
Utilities 6.7%
Education 11.3%
Tax Allocation 0.4%
Miscellaneous 9.2%
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 31.7%
Aa AA 21.2
A A 13.5
Baa BBB 18.7
NR NR 14.9
-----
100.0%
=====
</TABLE>
--------------------------------------------------------------------------------
8 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments April 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Education -- 11.3%
$1,000,000 AAA Columbia County School District No. 502, FGIC-Insured,
zero coupon due 6/1/18 $ 348,750
600,000 NR Multnomah County Educational Facilities Revenue,
(University of Portland Project), 6.000% due 4/1/25 573,750
750,000 Aaa* Oregon Health Sciences, University Revenue, Capital
Appreciation, Series A, MBIA-Insured,
zero coupon due 7/1/21 213,750
Oregon State Health, Housing, Educational & Cultural
Facilities Authority, Series A:
500,000 Baa1* Linfield College Project, 5.500% due 10/1/18 458,125
430,000 Aa3* Oak Tree Foundation Project, 6.100% due 5/1/15 432,687
Western State Chiropractic, ACA-Insured:
665,000 A 6.350% due 12/1/20 677,470
545,000 A 6.350% due 12/1/25 548,406
500,000 A University of Virgin Islands, Refunding & Improvement
Bonds, Series A, ACA-Insured, 6.250% due 12/1/29 503,125
100,000 AAA Washington County School District No. 088J, (Sherwood
Project), FSA-Insured, 6.100% due 6/1/12 103,125
----------------------------------------------------------------------------------------------
3,859,188
----------------------------------------------------------------------------------------------
General Obligation -- 4.0%
500,000 AAA Lane County Bethel, GO, School District No. 052,
FGIC-Insured, 6.400% due 12/1/09 533,125
1,000,000 AAA Puerto Rico Commonwealth, GO, Public Improvement
Refunding Bonds, AMBAC-Insured, 4.500% due 7/1/23 817,500
----------------------------------------------------------------------------------------------
1,350,625
----------------------------------------------------------------------------------------------
Hospitals -- 11.4%
Clackamas County Hospital Facility Authority Revenue:
1,000,000 A Kaiser Permanente Foundation, Series A,
5.375% due 4/1/14 937,500
1,000,000 Baa1* Williamette Falls Hospital Project, 6.000% due 4/1/19 903,750
595,000 BBB+ Klamath Falls Inter-Community Hospital Authority
Revenue, (Gross-Merle West Medical Center Project),
7.100% due 9/1/24 600,950
500,000 BBB- Puerto Rico Industrial Tourist Education, Medical &
Environmental Control Facilities, (Ryder Memorial
Hospital Project), Series A, 6.700% due 5/1/24 481,250
1,000,000 Aa3* Umatilla County Hospital Facility Authority Revenue,
Catholic Health Initiatives, Series A,
5.750% due 12/1/20 966,250
----------------------------------------------------------------------------------------------
3,889,700
----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 9
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) April 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Housing: Multi-Family -- 18.9%
$ 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 $ 220,644
Portland Housing Authority, Multi-Family Revenue:
500,000 AA Columbia Street Apartments Project, Series B, Asset
Guaranty, 5.500% due 12/1/21 (b) 458,125
Series A:
500,000 Aa1* Cherry Blossom Apartments, GNMA-Collateralized,
6.100% due 12/20/26 (b) 505,625
1,000,000 Aa3* Cherry Ridge Project, 6.250% due 5/1/12 (b) 1,011,250
300,000 AAA Sr. Lien Revenue, (Fairview Woods Project),
Pre-Refunded -- Escrowed with U.S. government
securities to 8/1/04 Call @ 100,
6.875% due 8/1/14 (c) 320,625
270,000 AAA Portland Multi-Family Revenue, Collins Circle Apartments,
FNMA-Collateralized, 5.125% due 6/1/21 (b) 240,300
Washington County Housing Authority,
Multi-Family Revenue:
1,000,000 NR Affordable Housing Pool, Series A,
6.000% due 7/1/20 911,250
1,000,000 Aa3* Bethany Meadows Project, 6.250% due 8/1/13 (b) 1,008,750
850,000 AAA Terrace View Project, FNMA-Collateralized,
5.500% due 12/1/17 (b) 796,875
1,000,000 AAA Tualatin Meadows Project, FNMA-Collateralized,
5.900% due 11/1/18 (b) 985,000
----------------------------------------------------------------------------------------------
6,458,444
----------------------------------------------------------------------------------------------
Housing: Single-Family -- 9.3%
Oregon State Housing & Community Services, Mortgage
Revenue Bonds, Single-Family Mortgage Program:
Series B:
1,000,000 Aa2* 6.875% due 7/1/28 1,032,500
1,000,000 Aa2* 6.250% due 7/1/29 (b) 998,750
585,000 Aa2* Series D, 6.500% due 7/1/24 (b) 593,775
315,000 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) 318,544
240,000 AAA Virgin Islands HFA, Single-Family Mortgage Revenue,
Program A, GNMA-Collateralized,
6.450% due 3/1/16 (b) 245,100
----------------------------------------------------------------------------------------------
3,188,669
----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
10 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) April 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial Development -- 5.7%
Oregon State EDR:
$ 1,000,000 Baa2* Georgia-Pacific Corp., Series CVLII,
6.350% due 8/1/25 (b) $ 963,750
1,000,000 Baa1* USG Corp. Project, Solid Waste Disposal, Series 192,
6.400% due 12/1/29 (b) 981,250
----------------------------------------------------------------------------------------------
1,945,000
----------------------------------------------------------------------------------------------
Life Care Systems -- 5.0%
400,000 NR Albany Hospital Facilities Authority Revenue, Mennonite
Home of Albany Inc., 5.900% due 10/1/20 345,000
Clackamas County Hospital Facility Authority Revenue:
500,000 NR Robison Jewish Home Project, 6.250% due 10/1/28 441,875
1,000,000 NR Senior Living Facility Mary's Woods at Marylhurst,
Series A, 6.625% due 5/15/29 913,750
----------------------------------------------------------------------------------------------
1,700,625
----------------------------------------------------------------------------------------------
Miscellaneous -- 9.2%
110,000 A3* Deschutes County COP, 5.000% due 6/1/16 99,550
345,000 NR Lebanon Urban Renewal Agency, 5.500% due 6/1/14 331,631
Oregon State Bond Bank Revenue, Economic
Development Department, Series 1:
50,000 A2* 6.700% due 1/1/15 52,312
550,000 A2* Pre-Refunded -- Escrowed with U.S. government
securities to 1/1/03 Call @ 102,
6.700% due 1/1/15 (c) 583,000
500,000 Aaa* Oregon State Department of Administrative Services,
COP, Series A, AMBAC-Insured, 6.250% due 5/1/17 526,250
Virgin Islands Public Finance Authority Revenue,
Series A:
1,000,000 BBB- Gross Receipts Taxes, 6.500% due 10/1/24 1,000,000
500,000 A Refunding Bonds, Sr. Lien, ACA-Insured,
5.500% due 10/1/18 450,625
100,000 NR Western Generation Agency, (Wauna Cogeneration
Project), Series B, 7.250% due 1/1/09 (b) 103,000
----------------------------------------------------------------------------------------------
3,146,368
----------------------------------------------------------------------------------------------
Tax Allocation -- 0.4%
125,000 A- Medford Urban Renewal Agency, Tax Revenue, Series A,
5.875% due 9/1/10 126,406
----------------------------------------------------------------------------------------------
Transportation -- 11.7%
Port Portland Airport Revenue, Portland International
Airport:
500,000 AAA Series 12C, FGIC-Insured, 5.000% due 7/1/18 (b) 445,625
1,000,000 AAA Series B, AMBAC-Insured, 5.500% due 7/1/18 (b) 957,500
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 11
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) April 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING (a) SECURITY VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation -- 11.7% (continued)
Puerto Rico Commonwealth Highway & Transportation
Authority, MBIA-Insured:
$ 1,500,000 AAA Highway Revenue, Series Y, 5.000% due 7/1/36 $ 1,306,875
1,000,000 Aaa* Transportation Revenue, Series A,
4.750% due 7/1/38 816,250
500,000 Baa2* Puerto Rico Port Authority Revenue, Special Facilities,
(American Airlines Project), Series A,
6.250% due 6/1/26 (b) 486,250
----------------------------------------------------------------------------------------------
4,012,500
----------------------------------------------------------------------------------------------
Utilities -- 6.7%
Guam Power Authority Revenue, Series A:
500,000 BBB 6.300% due 10/1/22 526,875
1,000,000 Aaa* MBIA-Insured, 5.250% due 10/1/34 890,000
1,000,000 NR Klamath Falls Electric Revenue Refunding, Sr. Lien,
Klamath Cogeneration, 6.000% due 1/1/25 863,750
----------------------------------------------------------------------------------------------
2,280,625
----------------------------------------------------------------------------------------------
Water and Sewer -- 6.4%
250,000 A+ Beavertown Water Revenue, Series 1994,
6.125% due 6/1/14 255,938
360,000 A+ Clackamas County Service District No. 001, Sewer
Revenue, 6.375% due 10/1/14 374,850
1,000,000 Aaa* Klamath Falls Wastewater Revenue, AMBAC-Insured,
5.500% due 6/1/25 953,750
600,000 NR Port Umatilla Water Revenue, 6.650% due 8/1/22 (b) 616,500
----------------------------------------------------------------------------------------------
2,201,038
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost--$34,460,213**) $34,159,188
----------------------------------------------------------------------------------------------
</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 Investors
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 are considered
by the investment advisor to be triple-A rated even if the issuer has not
applied for new ratings.
** The cost for Federal income tax purposes is $34,266,657.
See pages 13 and 14 for definitions of ratings and certain security
descriptions.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
12 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
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)
--------------------------------------------------------------------------------
<TABLE>
<S> <C><C>
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a
plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature--VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
</TABLE>
--------------------------------------------------------------------------------
Security Descriptions (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C><C>
ABAG -- Association of Bay Area
Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance
Company
CHFCLI -- California Health Facility
Construction Loan Insurance
CONNIE -- College Construction Loan
LEE Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
EDR -- Economic Development Revenue
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance
Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage
Corporation
FLAIRS -- Floating Adjustable Interest
Rate Securities
FNMA -- Federal National Mortgage
Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financing Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage
Association
GO -- General Obligation
HDC -- Housing Development
Corporation
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
</TABLE>
--------------------------------------------------------------------------------
14 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities April 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $34,460,213) $34,159,188
Interest receivable 606,820
Receivable for Fund shares sold 344
--------------------------------------------------------------------------------
Total Assets 34,766,352
--------------------------------------------------------------------------------
LIABILITIES:
Payable to bank 1,095,586
Administration fees payable 57,266
Dividends payable 57,212
Distribution fees payable 18,191
Investment advisory fees payable 14,594
Payable for Fund shares purchased 7,005
Accrued expenses 48,726
--------------------------------------------------------------------------------
Total Liabilities 1,298,580
--------------------------------------------------------------------------------
Total Net Assets $33,467,772
--------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 3,344
Capital paid in excess of par value 34,528,189
Undistributed net investment income 44,807
Accumulated net realized loss from security transactions (807,543)
Net unrealized depreciation of investments (301,025)
--------------------------------------------------------------------------------
Total Net Assets $33,467,772
--------------------------------------------------------------------------------
Shares Outstanding:
Class A 1,424,673
--------------------------------------------------------------------------------
Class B 1,619,625
--------------------------------------------------------------------------------
Class L 299,284
--------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $10.02
--------------------------------------------------------------------------------
Class B * $10.00
--------------------------------------------------------------------------------
Class L ** $10.01
--------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $10.44
--------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $10.11
--------------------------------------------------------------------------------
</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 For the Year Ended April 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 2,115,616
--------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 4) 161,794
Investment advisory fees (Note 4) 108,347
Administration fees (Note 4) 72,231
Audit and legal 31,002
Shareholder and system servicing fees 26,550
Shareholder communications 26,503
Trustees' fees 15,102
Pricing service fees 7,204
Registration fees 6,501
Custody 2,100
Other 9,099
--------------------------------------------------------------------------------
Total Expenses 466,433
Less: Investment advisory and administration fee waivers (Note 4) (54,173)
--------------------------------------------------------------------------------
Net Expenses 412,260
--------------------------------------------------------------------------------
Net Investment Income 1,703,356
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 5):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 30,733,707
Cost of securities sold 31,587,270
--------------------------------------------------------------------------------
Net Realized Loss (853,563)
--------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of Investments:
Beginning of year 1,898,002
End of year (301,025)
--------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (2,199,027)
--------------------------------------------------------------------------------
Net Loss on Investments (3,052,590)
--------------------------------------------------------------------------------
Decrease in Net Assets From Operations $(1,349,234)
--------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
16 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended April 30,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,703,356 $ 1,463,042
Net realized gain (loss) (853,563) 136,136
Increase in net unrealized appreciation (depreciation) (2,199,027) 430,108
-------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (1,349,234) 2,029,286
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (1,661,721) (1,479,516)
Net realized gains (54,215) (282,224)
-------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (1,715,936) (1,761,740)
-------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 4,082,910 9,452,267
Net asset value of shares issued for reinvestment of dividends 1,086,644 1,169,668
Cost of shares reacquired (7,620,619) (3,077,154)
-------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (2,451,065) 7,544,781
-------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (5,516,235) 7,812,327
NET ASSETS:
Beginning of year 38,984,007 31,171,680
-------------------------------------------------------------------------------------------------
End of year* $33,467,772 $38,984,007
-------------------------------------------------------------------------------------------------
* Includes undistributed net investment income: $ 44,807 $ 1,019
-------------------------------------------------------------------------------------------------
</TABLE>
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 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, 2000, 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 gain and undistributed net investment income in the
amounts of $46,020 and $2,153, 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.
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
--------------------------------------------------------------------------------
18 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
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
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), which, in
turn, is a subsidiary of Citigroup Inc. ("Citigroup") 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 $32,504 of the investment
advisory fees for the Fund for the year ended April 30, 2000.
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 $21,669 of
its administration fees for the year ended April 30, 2000.
Effective October 1999, Citi Fiduciary Trust Company ("CFTC"), another
subsidiary of Citigroup, acts as the Fund's transfer agent and PFPC Global Fund
Services ("PFPC") acts as the Fund's sub-transfer agent. CFTC receives account
fees and asset-based fees that vary according to the account size and type of
account. PFPC is responsible for shareholder recordkeeping and financial
processing for all shareholder accounts and is paid by CFTC. During the period
October 1, 1999 through April 30, 2000, the Fund paid transfer agent fees of
$6,523 to CFTC.
CFBDS, Inc. acts as the Fund's distributor. Salomon Smith Barney Inc. ("SSB"),
another subsidiary of SSBH, as well as certain other broker-dealers, continues
to sell Fund shares to the public as members of the selling group.
There are maximum initial sales charges of 4.00% and 1.00% for Class A and L
shares, respectively. There is a contingent deferred sales charge ("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. Class L shares also
have a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase.
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 19
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
For the year ended April 30, 2000, SSB and CFBDS received sales charges of
$13,000 and $7,000 on sales of the Fund's Class A and L shares, respectively.
In addition, CDSCs paid to SSB were approximately $43,000 and $4,000 for Class
B and L shares, respectively.
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, 2000, total Distribution Plan fees
incurred were:
<TABLE>
<CAPTION>
Class A Class B Class L
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Distribution Plan Fees $22,390 $115,959 $23,445
--------------------------------------------------------------------------------
</TABLE>
All officers and one Trustee of the Fund are employees of SSB.
5. Investments
During the year ended April 30, 2000, 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 $29,263,351
--------------------------------------------------------------------------------
Sales 30,733,707
--------------------------------------------------------------------------------
</TABLE>
At April 30, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
<TABLE>
<CAPTION>
<S> <C>
--------------------------------------------------------------------------------
Gross unrealized appreciation $ 611,849
Gross unrealized depreciation (719,318)
--------------------------------------------------------------------------------
Net unrealized depreciation $(107,469)
--------------------------------------------------------------------------------
</TABLE>
6. 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
--------------------------------------------------------------------------------
20 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
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, 2000, the Fund had no open futures contracts.
7. Capital Loss Carryforward
At April 30, 2000, the Fund had, for Federal income tax purposes, approximately
$435,000 of unused capital loss carryforwards available to offset future
capital gains expiring April 30, 2008. To the extent that these carryforward
losses are used to offset capital gains, it is probable that the gains so
offset will not be distributed.
8. Shares of Beneficial Interest
At April 30, 2000, the Fund had an unlimited number of shares of beneficial
interest authorized with par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents
an identical interest and has the same rights, except that each class bears
certain direct expenses, including those specifically related to the
distribution of its shares.
At April 30, 2000, 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 $14,641,518 $16,670,430 $3,219,585
--------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 21
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
April 30, 2000 April 30, 1999
-------------------------- --------------------------
Shares Amount Shares Amount
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold 116,692 $ 1,210,347 340,767 $ 3,725,265
Shares issued on reinvestment 47,284 481,813 45,010 491,631
Shares reacquired (210,943) (2,175,344) (63,742) (698,280)
------------------------------------------------------------------------------------------------
Net Increase (Decrease) (46,967) $ (483,184) 322,035 $ 3,518,616
------------------------------------------------------------------------------------------------
Class B
Shares sold 195,654 $ 2,010,892 395,222 $ 4,317,774
Shares issued on reinvestment 47,547 484,029 53,382 582,138
Shares reacquired (451,127) (4,587,119) (173,824) (1,903,362)
------------------------------------------------------------------------------------------------
Net Increase (Decrease) (207,926) $(2,092,198) 274,780 $ 2,996,550
------------------------------------------------------------------------------------------------
Class L+
Shares sold 82,012 $ 861,671 128,930 $ 1,409,228
Shares issued on reinvestment 11,849 120,802 8,787 95,899
Shares reacquired (85,135) (858,156) (43,294) (475,512)
------------------------------------------------------------------------------------------------
Net Increase 8,726 $ 124,317 94,423 $ 1,029,615
------------------------------------------------------------------------------------------------
</TABLE>
+ On June 12, 1998, Class C shares were renamed Class L shares.
--------------------------------------------------------------------------------
22 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended April 30:
<TABLE>
<CAPTION>
Class A Shares 2000(1) 1999(1) 1998 1997 1996
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 10.87 $ 10.76 $ 10.27 $10.26 $10.09
------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(2) 0.51 0.49 0.53 0.54 0.55
Net realized and
unrealized gain (loss) (0.84) 0.20 0.48 0.16 0.22
------------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations (0.33) 0.69 1.01 0.70 0.77
------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.50) (0.49) (0.52) (0.54) (0.54)
Net realized gains (0.02) (0.09) -- (0.13) (0.06)
In excess of net realized gains -- -- -- (0.02) --
------------------------------------------------------------------------------------------------------------
Total Distributions (0.52) (0.58) (0.52) (0.69) (0.60)
------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 10.02 $ 10.87 $ 10.76 $10.27 $10.26
------------------------------------------------------------------------------------------------------------
Total Return (3.01)% 6.56% 9.97% 7.01% 7.70%
------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $14,272 $15,994 $12,371 $9,769 $7,520
------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.83% 0.87% 0.65% 0.65% 0.66%
Net investment income 5.02 4.49 4.96 5.21 5.21
------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 81% 28% 49% 37% 75%
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The investment adviser and administrator waived all or part of their fees
for the five years ended April 30, 2000. In addition, the investment
adviser has reimbursed the Fund for $53,166 and $85,446 in expenses for
the years ended April 30, 1997 and 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
--------------------------------------------- -------------------------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.02 $0.01 $0.05 $0.07 $0.11 0.98% 0.99% 1.12% 1.41% 1.75%
</TABLE>
--------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Class B Shares 2000(1) 1999(1) 1998 1997 1996
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 10.85 $ 10.75 $ 10.26 $ 10.25 $10.09
------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(2) 0.46 0.43 0.48 0.48 0.49
Net realized and
unrealized gain (loss) (0.84) 0.20 0.48 0.17 0.22
------------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations (0.38) 0.63 0.96 0.65 0.71
------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.45) (0.44) (0.47) (0.49) (0.49)
Net realized gains (0.02) (0.09) -- (0.13) (0.06)
In excess of net realized gains -- -- -- (0.02) --
------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.53) (0.47) (0.64) (0.55)
------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 10.00 $ 10.85 $ 10.75 $ 10.26 $10.25
------------------------------------------------------------------------------------------------------------
Total Return (3.52)% 5.94% 9.43% 6.48% 7.09%
------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $16,199 $19,833 $16,691 $13,184 $9,861
------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.35% 1.39% 1.17% 1.17% 1.21%
Net investment income 4.49 3.97 4.44 4.69 4.62
------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 81% 28% 49% 37% 75%
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The investment adviser and administrator waived all or part of their fees
for the five years ended April 30, 2000. In addition, the investment
adviser has reimbursed the Fund for $53,166 and $85,446 in expenses for
the years ended April 30, 1997 and 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
--------------------------------------------- -------------------------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class B $0.02 $0.01 $0.05 $0.07 $0.11 1.49% 1.51% 1.63% 1.93% 2.29%
</TABLE>
--------------------------------------------------------------------------------
2000 Annual Report to Shareholders
24
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended April 30:
<TABLE>
<CAPTION>
Class L Shares 2000(1) 1999(1)(2) 1998 1997 1996(3)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $10.86 $10.76 $10.27 $10.26 $10.28
------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(4) 0.46 0.43 0.47 0.47 0.45
Net realized and unrealized gain (loss) (0.84) 0.20 0.48 0.17 0.06
------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.38) 0.63 0.95 0.64 0.51
------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.45) (0.44) (0.46) (0.48) (0.47)
Net realized gains (0.02) (0.09) -- (0.13) (0.06)
In excess of net realized gains -- -- -- (0.02) --
------------------------------------------------------------------------------------------------------------
Total Distributions (0.47) (0.53) (0.46) (0.63) (0.53)
------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.01 $10.86 $10.76 $10.27 $10.26
------------------------------------------------------------------------------------------------------------
Total Return (3.55)% 5.90% 9.38% 6.43% 4.99%++
------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $2,997 $3,157 $2,110 $913 $614
------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(4) 1.39% 1.43% 1.21% 1.21% 1.25%+
Net investment income 4.46 3.94 4.39 4.66 4.80 +
------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 81% 28% 49% 37% 75%
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(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 four years ended April 30, 2000, 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
--------------------------------------------- ---------------------------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class L $0.02 $0.01 $0.04 $0.06 $0.10 1.53% 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.
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund
25
<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, 2000, 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
five-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.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2000, 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, 2000, 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 five-year period then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
New York, New York
June 12, 2000
--------------------------------------------------------------------------------
26 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
April 30, 2000:
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 $49,576.
--------------------------------------------------------------------------------
Smith Barney Oregon Municipals Fund 27
<PAGE>
[back cover]
[Salomon Smith Barney 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
Anthony Pace
Controller
Christina T. Sydor
Secretary
Investment Adviser
and Administrator
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PFPC Trust Company
Transfer Agent
Citi Fiduciary Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of the shareholders of
Smith Barney Oregon Municipals Fund, but it may also be used as sales literature
when proceeded or accompanied by the current Prospectus, which gives details
about charges, expenses, investment objectives and operating policies of the
Fund. If used as sales material after July 31, 2000, this report must be
accompanied by performance information for the most recently completed calendar
quarter.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Oregon Municipals Fund
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD0955 6/00
