Registration Nos. 33-52643
811-7149
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 10
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940, as amended
[ X ] Amendment No. 13
SMITH BARNEY OREGON MUNICIPALS FUND
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(212) 816-6474
(Registrant's Telephone Number, including Area Code)
Christina T. Sydor
Secretary
Smith Barney Oregon Municipals Fund
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
Continuous
It is proposed that this filing become effective
(check appropriate box):
[ Immediately upon filing pursuant to paragraph
(b)
[ X ] on August 28, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
(1)
[ ] on August 27, 1999 pursuant to paragraph (a)
(1)
[ ] 75 days after filing pursuant to paragraph (a)
(2)
[ ] on (date) pursuant to paragraph (a) (2) of Rule
485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment
SMITH BARNEY OREGON MUNICIPALS FUND
PART A-Prospectus
<PAGE>
[SB] Smith Barney
[MF] Mutual Funds
Your Serious Money. Professionally Managed./SM/
P R O S P E C T U S
Oregon
Municipals Fund
Class A, B, L and Y Shares
----------------------------------------
August 28, 2000
The Securities and Exchange Commission has not
approved or disapproved these
securities or determined whether this prospectus is
accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
Oregon Municipals Fund
Contents
<TABLE>
<S>
<C>
Investments, risks and
performance..........................................
2
More on the fund's
investments...........................................
... 7
Management............................................
...................... 8
Choosing a class of shares to
buy........................................... 9
Comparing the fund's
classes...............................................
. 10
</TABLE>
<TABLE>
<S>
<C>
Sales
charges...............................................
................ 11
More about deferred sales
charges........................................... 13
Buying
shares................................................
............... 14
Exchanging
shares................................................
........... 15
Redeeming
shares................................................
............ 17
Other things to know about share
transactions............................... 19
Dividends, distributions and
taxes.......................................... 21
Share
price.................................................
................ 22
Financial
highlights............................................
............ 23
</TABLE>
You should know: An investment in the fund is not a
bank deposit and is not
insured or guaranteed by the FDIC or any other
government agency.
Smith Barney Mutual Funds
1
<PAGE>
Investments, risks and performance
Investment objective
The fund seeks to provide Oregon investors with as
high a level of dividend
income exempt from federal income tax and Oregon state
personal income tax as
is consistent with prudent investment management and
preservation of capital.
Principal investment strategies
Key investments The fund invests at least 80% of its
net assets in municipal
securities, and at least 65% of the aggregate
principal amount of its invest-
ments in Oregon municipal securities. Oregon municipal
securities include secu-
rities issued by the State of Oregon and certain other
municipal issuers,
political subdivisions, agencies and public
authorities that pay interest which
is exempt from Oregon personal income taxes.
The fund invests primarily in intermediate-term and
long-term investment grade
municipal securities, which have remaining maturities
at the time of purchase
of from three to more than twenty years. Investment
grade securities are rated
in any of the four highest long-term rating
categories, or if unrated, of com-
parable quality. The fund may invest up to 25% of its
assets in below invest-
ment grade securities or unrated securities of
equivalent quality (commonly
known as "junk bonds").
Selection process The manager selects securities
primarily by identifying
undervalued sectors and individual securities, while
also selecting securities
it believes will benefit from changes in market
conditions. In selecting indi-
vidual securities, the manager:
. Uses fundamental credit analysis to estimate the
relative value and attrac-
tiveness of various securities and sectors and to
exploit opportunities in
the municipal bond market
. May trade between general obligation and revenue
bonds and among various rev-
enue bond sectors, such as housing, hospital and
industrial development,
based on their apparent relative values
. Considers the yield available for securities with
different maturities and a
security's maturity in light of the outlook for the
issuer, its sector and
interest rates
. Identifies individual securities with the most
potential for added value,
such as those involving unusual situations, new
issuers, the potential for
credit upgrades, unique structural characteristics
or innovative features
Oregon Municipals Fund
2
<PAGE>
Principal risks of investing in the fund
Investors could lose money on their investment in the
fund, or the fund may not
perform as well as other investments, if:
. Interest rates rise, causing the value of the fund's
portfolio to decline
. The issuer of a security owned by the fund defaults
on its obligation to pay
principal and/or interest or the security's credit
rating is downgraded
. Oregon municipal securities fall out of favor with
investors. The fund will
suffer more than a national municipal fund from
adverse events affecting Ore-
gon municipal issuers
. Unfavorable legislation affects the tax-exempt
status of municipal bonds
. The manager's judgment about the attractiveness,
value or income potential of
a particular security proves to be incorrect
It is possible that some of the fund's income
distributions may be, and distri-
butions of the fund's gains generally will be, subject
to federal and Oregon
state taxation. The fund may realize taxable gains on
the sale of its securi-
ties or on transactions in futures contracts. Some of
the fund's income may be
subject to the federal alternative minimum tax. In
addition, distributions of
the fund's income and gains will be taxable to
investors in states other than
Oregon.
The fund is classified as "non-diversified," which
means it may invest a larger
percentage of its assets in one issuer than a
diversified fund. To the extent
the fund concentrates its assets in fewer issuers, the
fund will be more sus-
ceptible to negative events affecting those issuers.
Who may want to invest The fund may be an appropriate
investment if you are an
Oregon taxpayer and:
. Are in a high federal tax bracket, seeking income
exempt from Oregon and fed-
eral taxation
. Currently have exposure to other asset classes and
are seeking to broaden
your investment portfolio
. Are willing to accept the risks of municipal
securities, including the risks
of concentrating in a single state
Smith Barney Mutual Funds
3
<PAGE>
Risk return bar chart
This bar chart indicates the risks of investing in the
fund by showing changes
in the fund's performance from year to year. Past
performance does not neces-
sarily indicate how the fund will perform in the
future. This bar chart shows
the performance of the fund's Class A shares for each
full calendar year since
the fund's inception. Class B, L and Y shares have
different performance
because of different expenses. The performance
information in the chart does
not reflect sales charges, which would reduce your
return.
Total Return for Class A
Shares
[BAR CHART]
95 19.15%
96 3.87%
97 10.19%
98 5.78%
99 (4.22)%
Calendar years ended December
31
Quarterly returns:
Highest: 7.97% in 1st quarter 1995; Lowest: (2.21)% in
2nd quarter 1999
Year to date: (4.66)% through 6/30/00
Oregon Municipals Fund
4
<PAGE>
Risk return table
This table indicates the risks of investing in the
fund by comparing the aver-
age annual total return of each class for the periods
shown with that of the
Lehman Brothers Municipal Bond Index (the "Lehman
Index"), a broad-based unman-
aged index of municipal bonds and the Lipper Oregon
Municipal Fund Average (the
"Lipper Average"), an average composed of the fund's
peer group of mutual
funds. This table assumes imposition of the maximum
sales charge applicable to
the class, redemption of shares at the end of the
period, and reinvestment of
distributions and dividends.
Average Annual Total Returns
Calendar Years Ended December 31,
1999
<TABLE>
<CAPTION>
Class 1 year 5 years 10 years Since
inception Inception date
<S> <C> <C> <C> <C>
<C>
A (8.02)% 5.80% n/a 5.68%
05/23/94
B (8.82)% 5.98% n/a 5.92%
05/23/94
L (6.60)% n/a n/a 4.22%
05/16/95
Y** n/a n/a n/a n/a
11/07/94
Lehman Index (2.06)% 6.91% n/a 5.91%
*
Lipper Average (4.43)% 5.79% n/a 4.84%
*
</TABLE>
* Index comparisons begin on 5/31/94.
** There were no Class Y shares outstanding for the
calendar year ended Decem-
ber 31, 1999.
Smith Barney Mutual Funds
5
<PAGE>
Fee table
This table sets forth the fees and expenses you will
pay if you invest in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A
Class B Class L Class Y
<S> <C>
<C> <C> <C>
Maximum sales charge (load)
imposed on purchases
(as a % of offering price) 4.00%
None 1.00% None
Maximum deferred sales charge (load)
(as a % of the lower of net asset value at
purchase or redemption) None*
4.50% 1.00% None
Annual fund operating
expenses
<CAPTION>
(expenses deducted from fund assets) Class A
Class B Class L Class Y**
<S> <C>
<C> <C> <C>
Management fee*** 0.50%
0.50% 0.50% 0.50%
Distribution and service (12b-1) fees 0.15%
0.65% 0.70% None
Other expenses 0.33%
0.34% 0.33% 0.33%
----- -
---- ----- -----
Total annual fund operating expenses*** 0.98%
1.49% 1.53% 0.83%
</TABLE>
*You may buy Class A shares in amounts of $500,000 or
more at net asset value
(without an initial sales charge) but if you redeem
those shares within 12
months of their purchase, you will pay a deferred
sales charge of 1.00%.
**For Class Y shares, which had not been offered prior
to April 30, 2000,
"Other expenses" have been estimated for the fiscal
year ending April 30, 2001.
***Because the manager has agreed to limit total
annual fund operating
expenses, actual expenses were:
<TABLE>
<CAPTION>
Class A Class B
Class L
<S> <C> <C>
<C>
Management fee 0.35 0.35
0.35
Total annual fund operating expenses 0.83 1.35
1.39
</TABLE>
Example
This example helps you compare the costs of investing
in the fund with the
costs of investing in other mutual funds. Your actual
costs may be higher or
lower. The example assumes:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without
a sales charge
. The fund's operating expenses remain the same
Number of years you own your
shares
<TABLE>
<CAPTION>
1 year 3 years
5 years 10 years
<S> <C> <C>
<C> <C>
Class A (with or without redemption) $496 $700
$920 $1,553
Class B (redemption at end of period) $602 $771
$913 $1,642
Class B (no redemption) $152 $471
$813 $1,646
Class L (redemption at end of period) $354 $579
$926 $1,905
Class L (no redemption) $254 $579
$926 $1,905
Class Y (with or without redemption) $ 85 $265
$460 $1,025
</TABLE>
Oregon Municipals Fund
6
<PAGE>
More on the fund's investments
Oregon municipal securities Oregon municipal
securities include debt obliga-
tions issued by certain non-Oregon governmental
issuers such as Puerto Rico,
the Virgin Islands and Guam. The interest on Oregon
municipal securities is
exempt from federal income tax and Oregon personal
income tax. As a result, the
interest rate on these bonds normally is lower than it
would be if the bonds
were subject to taxation. The Oregon municipal
securities in which the fund
invests include general obligation bonds, revenue
bonds and municipal leases.
These securities may pay interest at fixed, variable
or floating rates. The
fund may also hold zero coupon securities which pay no
interest during the life
of the obligation but trade at prices below their
stated maturity value. The
fund also may invest up to 20% of its net assets in
municipal securities of
non-Oregon issuers. These will generally be exempt
from federal, but not Ore-
gon, income taxes.
Below investment grade securities Below investment
grade securities, also known
as "junk bonds", are considered speculative with
respect to the issuer's abil-
ity to pay interest and principal, involve a high risk
of loss and are suscep-
tible to default or decline in market value because of
adverse economic and
business developments. The market value for these
securities tends to be very
volatile, and they are less liquid than investment
grade debt securities.
Derivative contracts The fund may, but need not, use
derivative contracts, such
as financial futures and options on financial futures,
for any of the following
purposes:
. To hedge against the economic impact of adverse
changes in the market value
of portfolio securities because of changes in
interest rates
. As a substitute for buying or selling securities
A futures contract will obligate or entitle the fund
to deliver or receive an
asset or cash payment based on the change in value of
one or more securities.
Even a small investment in futures can have a big
impact on a fund's interest
rate exposure. Therefore, using futures can
disproportionately increase losses
and reduce opportunities for gains when interest rates
are changing. The fund
may not fully benefit from or may lose money on
futures if changes in their
value do not correspond accurately to changes in the
value of the fund's hold-
ings. The other parties to certain futures present the
same types of default
risk as issuers of fixed income securities. Futures
can also make a fund less
liquid and harder to value, especially in declining
markets.
Defensive investing The fund may depart from its
principal investment strate-
gies in response to adverse market, economic or
political conditions by taking
temporary defensive positions in all types of money
market and short-term debt
securities. If the fund takes a temporary defensive
position, it may be unable
to achieve its investment goal.
Smith
Barney Mutual Funds
7
<PAGE>
Management
Manager The fund's investment adviser and
administrator is SSB Citi Fund Man-
agement LLC (successor to SSBC Fund Management Inc. ),
an affiliate of Salomon
Smith Barney Inc. The manager's address is 388
Greenwich Street, New York, New
York 10013. The manager selects the fund's investments
and oversees its opera-
tions. The manager and Salomon Smith Barney are
subsidiaries of Citigroup Inc.
Citigroup businesses produce a broad range of
financial services--asset manage-
ment, banking and consumer finance, credit and charge
cards, insurance, invest-
ments, investment banking and trading--and use diverse
channels to make them
available to consumer and corporate customers around
the world.
Peter M. Coffey, investment officer of SSB Citi Fund
Management LLC and manag-
ing director of Salomon Smith Barney Inc., has been
responsible for the day-to-
day management of the fund's portfolio since its
inception. Mr. Coffey has over
31 years of securities business experience.
Management fees During the fiscal year ended April 30,
2000, the manager
received an advisory fee and an administrative fee
equal to 0.21% and 0.14%,
respectively, of the fund's average daily net assets.
Distributor The fund has entered into an agreement
with Salomon Smith Barney
Inc. to distribute the fund's shares.
Distribution plan The fund has adopted a Rule 12b-1
distribution plan for its
Class A, B and L shares. Under the plan, the fund pays
distribution and/or
service fees. These fees are an ongoing expense and,
over time, may cost you
more than other types of sales charges.
The distributor may make payments for distribution
and/or shareholder servicing
activities out of its past profits and other available
sources. The distributor
may also make payments for marketing, promotional or
related expenses to deal-
ers. The amount of these payments is determined by the
distributor and may be
substantial. SSB Citi or an affiliate may make similar
payments under similar
arrangements.
Transfer agent and shareholder servicing agent Citi
Fiduciary Trust Company
serves as the fund's transfer agent and shareholder
servicing agent (the
"transfer agent"). The transfer agent has entered into
a sub-transfer agency
and services agreement with PFPC Global Fund Services
to serve as the fund's
sub-transfer agent (the "sub-transfer agent"). The
sub-transfer agent will per-
form certain functions including shareholder record
keeping and accounting
services.
Oregon Municipals Fund
8
<PAGE>
Choosing a class of shares to buy
You can choose among four classes of shares: Classes
A, B, L and Y. Each class
has different sales charges and expenses, allowing you
to choose the class that
best meets your needs. Which class is more beneficial
to an investor depends on
the amount and intended length of the investment.
. If you plan to invest regularly or in large amounts,
buying Class A shares
may help you reduce sales charges and ongoing
expenses.
. For Class B shares, all of your purchase amount and,
for Class L shares, more
of your purchase amount (compared to Class A shares)
will be immediately
invested. This may help offset the higher expenses
of Class B and Class L
shares, but only if the fund performs well.
. Class L shares have a shorter deferred sales charge
period than Class B
shares. However, because Class B shares convert to
Class A shares, and Class
L shares do not, Class B shares may be more
attractive to long-term invest-
ors.
You may buy shares from:
. A broker-dealer, financial intermediary, financial
institution or a distribu-
tor's financial consultants (each called a "Service
Agent")
. The fund, but only if you are investing through
certain dealer
representatives
Investment minimums Minimum initial and additional
investment amounts vary
depending on the class of shares you buy and the
nature of your investment
account.
<TABLE>
<CAPTION>
Initial Additional
Classes A, B, L
Class Y All Classes
<S> <C>
<C> <C>
General $1,000
$15 million $50
Monthly Systematic Investment Plans $25
n/a $25
Quarterly Systematic Investment Plans $50
n/a $50
Uniform Gift to Minor Accounts $250
$15 million $50
</TABLE>
Smith Barney Mutual Funds
9
<PAGE>
Comparing the fund's classes
Your Service Agent can help you decide which class
meets your goals. The Serv-
ice Agent may receive different compensation depending
upon which class you
choose.
<TABLE>
<CAPTION>
Class A Class B
Class L Class Y
<S> <C> <C> <C>
<C>
Key features .Initial .No initial
.Initial .No initial
sales sales
sales or
charge charge
charge is deferred
.You may .Deferred
lower than sales
qualify sales
Class A charge
for reduc- charge
.Deferred .Must
tion or declines
sales invest at
waiver of over time
charge for least $5
initial .Converts only
1 million
sales to Class A year
.Lower
charge after 8
.Does not annual
.Lower years
convert to expenses
annual .Higher
Class A than the
expenses annual
.Higher other
than Class expenses
annual classes
B and than Class
expenses
Class L A than
Class
A
------------------------------------------------------
------------------
Initial sales charge Up to None 1.00%
None
4.00%;
reduced for
large pur-
chases and
waived for
certain
investors.
No charge
for pur-
chases of
$500,000 or
more
------------------------------------------------------
------------------
Deferred sales charge 1.00% on Up to 4.50% 1.00%
if None
purchases charged you
redeem
of $500,000 when you
within 1
or more if redeem year
of
you redeem shares. The
purchase
within 1 charge is
year of reduced
purchase over time
and there
is no
deferred
sales
charge
after 6
years
------------------------------------------------------
------------------
Annual distribution and 0.15% of 0.65% of 0.70%
of None
service fees average average
average
daily net daily net daily
net
assets assets
assets
------------------------------------------------------
------------------
Exchangeable into* Class A Class B Class
L Class Y
shares of shares of
shares of shares of
most Smith most Smith most
Smith most Smith
Barney Barney
Barney Barney
funds funds funds
funds
------------------------------------------------------
------------------
</TABLE>
*Ask your Service Agent or visit the web site for the
Smith Barney funds avail-
able for exchange.
Oregon Municipals Fund
10
<PAGE>
Sales charges
Class A shares
You buy Class A shares at the offering price, which is
the net asset value plus
a sales charge. You pay a lower sales charge as the
size of your investment
increases to certain levels called breakpoints. You do
not pay a sales charge
on the fund's distributions or dividends you reinvest
in additional Class A
shares.
The table below shows the rate of sales charge you
pay, depending on the amount
you purchase. The table below also shows the amount of
broker/dealer compensa-
tion that is paid out of the sales charge. This
compensation includes commis-
sions and other fees Service Agents that sell shares
of the Fund receive. The
distributor keeps up to approximately 10% of the sales
charge imposed on Class
A shares. Service Agents also will receive the service
fee payable on Class A
shares at an annual rate equal to 0.15% of the average
daily net assets repre-
sented by the Class A shares sold by them
<TABLE>
<CAPTION>
Sales Charge as
a % of:
Dealers'
Reallowance
Net
as % of
Offering amount
offering
Amount of purchase price (%) invested
(%) price
<S> <C> <C>
<C>
Less than $25,000 4.00 4.17
3.60
$25,000 but less than $50,000 3.50 3.63
3.15
$50,000 but less than $100,000 3.00 3.09
2.70
$100,000 but less than $250,000 2.50 2.56
2.25
$250,000 but less than $500,000 1.50 1.52
1.35
$500,000 or more -0- -0-
-0-
</TABLE>
Investments of $500,000 or more You do not pay an
initial sales charge when you
buy $500,000 or more of Class A shares. However, if
you redeem these Class A
shares within one year of purchase, you will pay a
deferred sales charge of 1%.
Qualifying for a reduced Class A sales charge There
are several ways you can
combine multiple purchases of Class A shares of Smith
Barney funds to take
advantage of the breakpoints in the sales charge
schedule.
Accumulation privilege - lets you combine the current
value of Class A shares
owned
. by you, or
. by members of your immediate family,
Smith Barney Mutual Funds
11
<PAGE>
and for which a sales charge was paid, with the amount
of your next purchase of
Class A shares for purposes of calculating the initial
sales charge. Certain
trustees and fiduciaries may be entitled to combine
accounts in determining
their sales charge.
Letter of intent - lets you purchase Class A shares of
the fund and other Smith
Barney funds over a 13-month period and pay the same
sales charge, if any, as
if all shares had been purchased at once. You may
include purchases on which
you paid a sales charge within 90 days before you sign
the letter.
Waivers for certain Class A investors Class A initial
sales charges are waived
for certain types of investors, including:
. Employees of NASD members
. Investors participating in a fee-based program
sponsored by certain broker-
dealers affiliated with Citigroup
. Investors who redeemed Class A shares of a Smith
Barney fund in the past 60
days, if the investor's Service Agent is notified
If you want to learn about additional waivers of Class
A initial sales charges,
contact your Service Agent or consult the Statement of
Additional Information
("SAI").
Class B shares
You buy Class B shares at net asset value without
paying an initial sales
charge. However, if you redeem your Class B shares
within six years of pur-
chase, you will pay a deferred sales charge. The
deferred sales charge
decreases as the number of years since your purchase
increases.
<TABLE>
<CAPTION>
Year after purchase 1st 2nd 3rd 4th 5th 6th
through 8th
<S> <C> <C> <C> <C> <C> <C>
Deferred sales charge 4.5% 4% 3% 2% 1% 0%
</TABLE>
Class B conversion After 8 years, Class B shares
automatically convert into
Class A shares. This helps you because Class A shares
have lower annual
expenses. Your Class B shares will convert to Class A
shares as follows:
<TABLE>
<CAPTION>
Shares issued: Shares issued:
Shares issued:
At initial On
reinvestment of Upon exchange from
purchase dividends and
another Smith
distributions
Barney fund
<S> <C>
<C>
Eight years after the date of purchase In same
proportion On the date the
as the number
of shares originally
Class B shares
acquired would
converting is
to have converted
total Class B
into Class A
shares you own
shares
(excluding
shares
issued as a
divi-
dend)
</TABLE>
Oregon Municipals Fund
12
<PAGE>
Class L shares
You buy Class L shares at the offering price, which is
the net asset value plus
a sales charge of 1% (1.01% of the net amount
invested). In addition, if you
redeem your Class L shares within one year of
purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the
fund and/or other Smith
Barney mutual funds on June 12, 1998, you will not pay
an initial sales charge
on Class L shares you buy before June 22, 2001.
Class Y shares
You buy Class Y shares at net asset value with no
initial sales charge and no
deferred sales charge when you redeem. You must meet
the $15,000,000 initial
investment requirement. You can use a letter of intent
to meet this requirement
by buying Class Y shares of the fund over a 13-month
period. To qualify, you
must initially invest $5,000,000.
More about deferred sales charges
The deferred sales charge is based on the net asset
value at the time of pur-
chase or redemption, whichever is less. Therefore you
do not pay a sales charge
on amounts representing appreciation or depreciation.
In addition, you do not pay a deferred sales charge
on:
. Shares exchanged for shares of another Smith Barney
fund
. Shares representing reinvested distributions and
dividends
. Shares no longer subject to the deferred sales
charge
Each time you place a request to redeem shares, the
fund will first redeem any
shares in your account that are not subject to a
deferred sales charge and then
the shares in your account that have been held the
longest.
If you redeemed shares of a Smith Barney fund in the
past 60 days and paid a
deferred sales charge, you may buy shares of the fund
at the current net asset
value and be credited with the amount of the deferred
sales charge, if you
notify your Service Agent.
The fund's distributor receives deferred sales charges
as partial compensation
for its expenses in selling shares, including the
payment of compensation to
your Service Agent.
Smith Barney Mutual Funds
13
<PAGE>
Service Agents selling Class B shares receive a
commission of up to 4.00% of
the purchase price of the Class B shares they sell,
except for sales exempt
from the deferred sales charge. Service Agents also
receive a service fee at an
annual rate equal to 0.15% of the average daily net
assets represented by the
Class B shares they are servicing.
Service Agents selling Class L shares receive
commissions of up to 1.75% of the
purchase price of the Class L shares they sell.
Deferred sales charge waivers
The deferred sales charge for each share class will
generally be waived:
. On payments made through certain systematic
withdrawal plans
. For involuntary redemptions of small account
balances
. For 12 months following the death or disability of a
shareholder
If you want to learn more about additional waivers of
deferred sales charges,
contact your Service Agent or consult the SAI.
Buying shares
Through a You should contact your Service Agent
to open a brokerage
Service Agent account and make arrangements to buy
shares.
If you do not provide the following
information, your order
will be rejected:
. Class of shares being bought
. Dollar amount or number of shares
being bought
Your Service Agent may charge an
annual account maintenance
fee.
------------------------------------------------------
--------------------------
Through the Certain investors who are clients of
certain Service Agents
fund are eligible to buy shares directly
from the fund.
. Write the fund at the following
address:
Smith Barney Oregon Municipals
Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-
9699
Oregon Municipals Fund
14
<PAGE>
. Enclose a check made payable to the
fund for the shares.
For initial purchases, complete and
send an account
application.
. For more information, call the
transfer agent at 1-800-451-
2010.
Through a
systematic You may authorize your Service Agent
or the sub-transfer
investment agent to transfer funds automatically
from (i) a regular bank
plan account, (ii) cash held in a
brokerage account opened with a
Service Agent or (iii) certain money
market funds, in order
to buy shares on a regular basis.
. Amounts transferred should be at
least: $25 monthly or $50
quarterly
. If you do not have sufficient funds
in your account on a
transfer date, your Service Agent
or the sub-transfer agent
may charge you a fee
For more information, contact your
Service Agent or the
transfer agent or consult the SAI.
Exchanging shares
Smith Barney
offers a You should contact your Service Agent
to exchange into other
distinctive Smith Barney funds. Be sure to read
the prospectus of the
family of Smith Barney fund you are exchanging
into. An exchange is a
funds taxable transaction.
tailored to
help meet the
varying needs
of both large
and small
investors
. You may exchange shares only for
shares of the same class
of another Smith Barney fund. Not
all Smith Barney funds
offer all classes.
. Not all Smith Barney funds may be
offered in your state of
residence. Contact your Service
Agent or the transfer
agent for further information.
. You must meet the minimum
investment amount for each fund
(except for systematic investment
plan exchanges).
. If you hold share certificates, the
transfer agent must
receive the certificates endorsed
for transfer or with
signed stock powers (documents
transferring ownership of
certificates) before the exchange
is effective.
Smith Barney Mutual Funds
15
<PAGE>
. The fund may suspend or terminate
your exchange privilege
if you engage in an excessive
pattern of exchanges.
------------------------------------------------------
--------------------------
Waiver of Your shares will not be subject to an
initial sales charge at
additional the time of the exchange.
sales charges
Your deferred sales charge (if any)
will continue to be mea-
sured from the date of your original
purchase. If the fund
you exchange into has a higher
deferred sales charge, you
will be subject to that charge. If
you exchange at any time
into a fund with a lower charge, the
sales charge will not be
reduced.
------------------------------------------------------
--------------------------
By telephone
If you do not have a brokerage
account with a Service Agent,
you may be eligible to exchange
shares through the fund. You
must complete an authorization form
to authorize telephone
transfers. If eligible, you may make
telephone exchanges on
any day the New York Stock Exchange
is open. Call the trans-
fer agent at 1-800-451-2010 between
9:00 a.m. and 4:00 p.m.
(Eastern time).
You can make telephone exchanges only
between accounts that
have identical registrations.
------------------------------------------------------
--------------------------
By mail
If you do not have a brokerage
account, contact your Service
Agent or write to the sub-transfer
agent at the address on
the following page.
Oregon Municipals Fund
16
<PAGE>
Redeeming shares
Generally
Contact your Service Agent to redeem
shares of the fund.
If you hold share certificates, the
sub-transfer agent must
receive the certificates endorsed for
transfer or with signed
stock powers before the redemption is
effective.
If the shares are held by a fiduciary
or corporation, other
documents may be required.
Your redemption proceeds will be sent
within three business
days after your request is received
in good order. However,
if you recently purchased your shares
by check, your redemp-
tion proceeds will not be sent to you
until your original
check clears, which may take up to 15
days.
If you have a brokerage account with
a Service Agent, your
redemption proceeds will be placed in
your account and not
reinvested without your specific
instruction. In other cases,
unless you direct otherwise, your
redemption proceeds will be
paid by check mailed to your address
of record.
------------------------------------------------------
--------------------------
By mail
For accounts held directly at the
fund, send written requests
to the fund at the following address:
Smith Barney Oregon Municipals
Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-
9699
Your written request must provide the
following:
. The fund and account number
. The class of shares and the dollar
amount or number of
shares to be redeemed
. Signatures of each owner exactly as
the account is regis-
tered
Smith Barney Mutual Funds
17
<PAGE>
------------------------------------------------------
--------------------------
By telephone
If you do not have a brokerage
account, you may be eligible
to redeem shares in amounts up to
$50,000 per day through the
fund. You must complete an
authorization form to authorize
telephone redemptions. If eligible,
you may request redemp-
tions by telephone on any day the New
York Stock Exchange
is open. Call the transfer agent at
1-800-451-2010 between
9:00 a.m. and 4:00 p.m. (Eastern
time).
Your redemption proceeds can be sent
by check to your address
of record or by wire or electronic
transfer (ACH) to a bank
account designated on your
authorization form. You must sub-
mit a new authorization form to
change the bank account des-
ignated to receive wire or electronic
transfers and you may
be asked to provide certain other
documents. The sub-transfer
agent may charge a fee on an
electronic transfer (ACH).
------------------------------------------------------
--------------------------
Automatic You can arrange for the automatic
redemption of a portion of
cash your shares on a monthly or quarterly
basis. To qualify you
withdrawal must own shares of the fund with a
value of at least $10,000
plans and each automatic redemption must be
at least $50. If your
shares are subject to a deferred
sales charge, the sales
charge will be waived if your
automatic payments do not
exceed 1% per month of the value of
your shares subject to a
deferred sales charge.
The following conditions apply:
. Your shares must not be represented
by certificates
. All dividends and distributions
must be reinvested
For more information, contact your
Service Agent or consult
the SAI.
Oregon Municipals Fund
18
<PAGE>
Other things to know about share transactions
When you buy, exchange or redeem shares, your request
must be in good order.
This means you have provided the following
information, without which your
request will not be processed:
.Name of the fund
.Account number
.Class of shares being bought, exchanged or redeemed
.Dollar amount or number of shares being bought,
exchanged or redeemed
.Signature of each owner exactly as the account is
registered
The fund will try to confirm that any telephone
exchange or redemption request
is genuine by recording calls, asking the caller to
provide certain personal
identification information, sending you a written
confirmation or requiring
other confirmation procedures from time to time.
Signature guarantees To be in good order, your
redemption request must include
a signature guarantee if you:
. Are redeeming over $50,000 of shares
. Are sending signed share certificates or stock
powers to the sub-transfer
agent
. Instruct the sub-transfer agent to mail the check to
an address different
from the one on your account
. Changed your account registration
. Want the check paid to someone other than the
account owner(s)
. Are transferring the redemption proceeds to an
account with a different reg-
istration
You can obtain a signature guarantee from most banks,
dealers, brokers, credit
unions and federal savings and loan institutions, but
not from a notary public.
The fund has the right to:
. Suspend the offering of shares
. Waive or change minimum and additional investment
amounts
. Reject any purchase or exchange order
. Change, revoke or suspend the exchange privilege
. Suspend telephone transactions
Smith Barney Mutual Funds
19
<PAGE>
. Suspend or postpone redemptions of shares on any day
when trading on the New
York Stock Exchange is restricted, or as otherwise
permitted by the Securi-
ties and Exchange Commission
. Pay redemption proceeds by giving you securities.
You may pay transaction
costs to dispose of the securities
Small account balances If your account falls below
$500 because of a redemption
of fund shares, the fund may ask you to bring your
account up to $500. If your
account is still below $500 after 60 days, the fund
may close your account and
send you the redemption proceeds.
Excessive exchange transactions The manager may
determine that a pattern of
frequent exchanges is detrimental to the fund's
performance and other share-
holders. If so, the fund may limit additional
purchases and/or exchanges by the
shareholder.
Share certificates The fund does not issue share
certificates unless a written
request signed by all registered owners is made to the
sub-transfer agent. If
you hold share certificates it will take longer to
exchange or redeem shares.
Oregon Municipals Fund
20
<PAGE>
Dividends, distributions and taxes
Dividends The fund pays dividends each month from its
net investment income.
The fund generally makes capital gain distributions,
if any, once a year, typi-
cally in December. The fund may pay additional
distributions and dividends at
other times if necessary for the fund to avoid a
federal tax. Capital gain dis-
tributions and dividends are reinvested in additional
fund shares of the same
class you hold. The fund expects distributions to be
primarily from income. You
do not pay a sales charge on reinvested distributions
or dividends. Alterna-
tively, you can instruct your Service Agent or the
transfer agent to have your
distributions and/or dividends paid in cash. You can
change your choice at any
time to be effective as of the next distribution or
dividend, except that any
change given to the transfer agent less than five days
before the payment date
will not be effective until the next distribution or
dividend.
Taxes In general, redeeming shares, exchanging shares
and receiving distribu-
tions (whether in cash or additional shares) are all
taxable events.
<TABLE>
<CAPTION>
Transaction Federal tax status
Oregon tax status
<S> <C>
<C>
Redemption or exchange Usually capital
Usually capital gain
of shares gain or loss; long-term only
or loss
if shares owned
more than one year
Long-term capital gain Taxable gain
Taxable gain
distributions
Short-term capital gain Ordinary income
Ordinary income
distributions
Dividends Exempt if from
Exempt if from
interest on tax-exempt
interest on Oregon
securities, otherwise
municipal securities,
ordinary income
otherwise ordinary
income
</TABLE>
Any taxable dividends and capital gain distributions
are taxable whether
received in cash or reinvested in fund shares. Long-
term capital gain distribu-
tions are taxable to you as long-term capital gain
regardless of how long you
have owned your shares. You may want to avoid buying
shares when the fund is
about to declare a capital gain distribution or a
taxable dividend, because it
will be taxable to you even though it may actually be
a return of a portion of
your investment.
After the end of each year, the fund will provide you
with information about
the distributions and dividends you received and any
redemptions of
Smith Barney Mutual Funds
21
<PAGE>
shares during the previous year. If you do not provide
the fund with your cor-
rect taxpayer identification number and any required
certifications, you may be
subject to back-up withholding of 31% of your
distributions, dividends, and
redemption proceeds. Because each shareholder's
circumstances are different and
special tax rules may apply, you should consult your
tax adviser about your
investment in the fund.
Share price
You may buy, exchange or redeem shares at their net
asset value, plus any
applicable sales charge, next determined after receipt
of your request in good
order. The fund's net asset value is the value of its
assets minus its liabili-
ties. Net asset value is calculated separately for
each class of shares. The
fund calculates its net asset value every day the New
York Stock Exchange is
open. The Exchange is closed on certain holidays
listed in the SAI. This calcu-
lation is done when regular trading closes on the
Exchange (normally 4:00 p.m.,
Eastern time).
Generally, the fund's investments are valued by an
independent pricing service.
If market quotations or a valuation from the pricing
service is not readily
available or if a security's value has been materially
affected by events
occurring after the close of the Exchange or market on
which the security is
principally traded, that security may be valued by
another method that the
fund's board believes accurately reflects fair value.
A fund that uses fair
value to price securities may value those securities
higher or lower than
another fund using market quotations to price the same
securities. A security's
valuation may differ depending on the method used for
determining fair value.
In order to buy, redeem or exchange shares at that
day's price, you must place
your order with your Service Agent or the fund's sub-
transfer agent before the
New York Stock Exchange closes. If the Exchange closes
early, you must place
your order prior to the actual closing time.
Otherwise, you will receive the
next business day's price.
Service Agents must transmit all orders to buy,
exchange or redeem shares to
the fund's sub-transfer agent before the sub-transfer
agent's close of busi-
ness.
Oregon Municipals Fund
22
<PAGE>
Financial highlights
The financial highlights tables are intended to help
you understand the perfor-
mance of each class for the past 5 years (or since
inception if less than 5
years). Certain information reflects financial results
for a single share.
Total return represents the rate that a shareholder
would have earned (or lost)
on a fund share assuming reinvestment of all dividends
and distributions. The
information in the following tables was audited by
KPMG LLP, independent
accountants, whose report, along with the fund's
financial statements, is
included in the annual report (available upon
request). No information is pres-
ent for Class Y shares because no class Y shares were
outstanding during these
fiscal years.
For a Class A share of capital stock outstanding
throughout each year ended
April 30
<TABLE>
<CAPTION>
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 gain (0.02) (0.09)
-- (0.13) (0.06)
Excess of net realized gain -- --
-- (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
(000)'s $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 had
not been waived and expenses 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 Mutual Funds
23
<PAGE>
For a Class B share of capital stock outstanding
throughout each year ended
April 30:
<TABLE>
<CAPTION>
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)
Capital -- --
-- (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
(000)'s $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 had
not been waived and expenses 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>
Oregon Municipals Fund
24
<PAGE>
For a Class L shares of capital stock outstanding
throughout each year ended
April 30, except where noted:
<TABLE>
<CAPTION>
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 gain (0.02) (0.09)
-- (0.13) (0.06)
Excess of net realized
gain -- --
-- (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
(000)'s $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 had not
been waived and expenses
not reimbursed, the per share effect on the net
investment income and the
ratios of expenses to average net assets would have
been 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 Mutual Funds
25
<PAGE>
[SB] Smith Barney
[MF] Mutual Funds
Your Serious Money. Professionally Managed./SM/
Oregon
Municipals Fund
Shareholder reports Annual and semiannual reports to
shareholders provide addi-
tional information about the fund's investments. These
reports discuss the mar-
ket conditions and investment strategies that affected
the fund's performance.
The fund sends only one report to a household if more
than one account has the
same address. Contact your Service Agent or the
transfer agent if you do not
want this policy to apply to you.
Statement of additional information The statement of
additional information
provides more detailed information about the fund and
is incorporated by refer-
ence into (is legally part of) this prospectus.
You can make inquiries about the fund or obtain
shareholder reports or the
statement of additional information (without charge)
by contacting your Service
Agent at 1-800-451-2010, or by writing to the fund at
Smith Barney Mutual
Funds, 388 Greenwich Street, MF2, New York, New York
10013.
Visit our web site Our web site is located at
www.smithbarney.com
Information about the fund (including the SAI) can be
reviewed and copied at
the Securities and Exchange Commission's (the
"Commission") Public Reference
Room in Washington, D.C. In addition, information on
the operation of the
Public Reference Room may be obtained by calling the
Commission at 1-202-942-
8090. Reports and other information about the funds
are available on the EDGAR
Database on the Commission's Internet site at
http://www.sec.gov. Copies of
this information may be obtained for a duplicating fee
by electronic request at
the following E-mail address: [email protected], or
by writing the Commis-
sion's Public Reference Section, Washington, D.C.
20549-0102.
If someone makes a statement about the fund that is
not in this prospectus, you
should not rely upon that information. Neither the
fund nor the distributor is
offering to sell shares of the fund to any person to
whom the fund may not law-
fully sell its shares.
SMSalomon Smith Barney is a service mark of Salomon
Smith Barney Inc.
(Investment Company Act
file no. 811-7149)
FD0543 8/00
PART B-Statement of Additional Information
August 28, 2000
STATEMENT OF ADDITIONAL INFORMATION
SMITH BARNEY OREGON MUNICIPALS FUND
388 Greenwich Street
New York, New York 10013
(800) 451-2010
This Statement of Additional Information ("SAI") is
not a prospectus and is meant to be read in
conjunction with the Prospectus of the Smith Barney
Oregon Municipals Fund (the "fund") dated August 28,
2000, as amended or supplemented from time to time
(the "prospectus"), and is incorporated by reference
in its entirety into the prospectus. Additional
information about the fund's investments is available
in the fund's annual and semi-annual reports to
shareholders that are incorporated herein by
reference. The prospectus and copies of the reports
may be obtained free of charge by contacting a Salomon
Smith Barney Financial Consultant, or by writing or
calling Salomon Smith Barney Inc. ("Salomon Smith
Barney") at the address or telephone number above.
TABLE OF CONTENTS
Trustees and Executive Officers of the Fund 2
Investment Objective and Management Policies 5
Investment Restrictions.16
Risk Factors.18
Special Considerations Relating to Oregon
Municipal Securities.20
Portfolio Transaction 22
Portfolio Turnover..23
Purchase of Shares 24
Determination of Net Asset Value..29
Redemption of Shares 31
Investment Management and Other Services 34
Valuation of Shares 39
Exchange Privilege 40
Performance Information 41
Dividends, Distributions and Taxes 45
Additional Information 50
Financial Statements 51
Other Informatio.. 51
Appendix A 52
TRUSTEES AND EXECUTIVE OFFICERS OF THE FUND
The names of the trustees of the fund and executive
officers of the fund, together with information as to
their principal business occupations, are set forth
below. The executive officers of the fund are
employees of organizations that provide services to
the fund. Each trustee who is an "interested person"
of the fund, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), is indicated by
an asterisk. Unless otherwise noted, the address of
the "non-interested" directors and executive officers
of the fund is 388 Greenwich Street, New York, New
York 10013.
Herbert Barg (Age 77). Trustee
Private Investor. Director or trustee of 16
investment companies associated with Citigroup Inc.
("Citigroup") His address is 273 Montgomery Avenue,
Bala Cynwyd, Pennsylvania 19004.
*Alfred J. Bianchetti (Age 77). Trustee
Retired; formerly Senior Consultant to Dean Witter
Reynolds Inc. Director or trustee of 11 investment
companies associated with Citigroup. His address is 19
Circle End Drive, Ramsey, New Jersey 07466.
Martin Brody (Age 78). Trustee
Consultant, HMK Associates; Retired Vice Chairman of
the Board of Restaurant Associates Corp. Director or
trustee of 21 investment companies associated with
Citigroup. His address is c/o HMK Associates, 30
Columbia Turnpike, Florham Park, New Jersey 07932.
Dwight B. Crane (Age 62). Trustee
Professor, Harvard Business School. Director or
trustee of 24 investment companies associated with
Citigroup. His address is c/o Harvard Business School,
Soldiers Field Road, Boston, Massachusetts 02163.
Burt N. Dorsett (Age 69). Trustee
Managing Partner of Dorsett McCabe Management. Inc.,
an investment counseling firm; Director of Research
Corporation Technologies, Inc., a nonprofit patent
clearing and licensing firm. Director or trustee of 11
investment companies associated with Citigroup. His
address is 201 East 62nd Street, New York, New York
10021.
Elliot S. Jaffe (Age 74). Trustee
Chairman of the Board and President of The Dress Barn,
Inc. Director or trustee of 13 investment companies
associated with Citigroup. His address is 30 Dunnigan
Drive, Suffern, New York 10901.
Stephen E. Kaufman (Age 68). Trustee
Attorney. Director or trustee of 13 investment
companies associated with Citigroup. His address is
277 Park Avenue, New York, New York 10172.
Joseph J. McCann (Age 69). Trustee
Financial Consultant; Retired Financial Executive,
Ryan Homes, Inc. Director or trustee of 11 investment
companies associated with Citigroup. His address is
200 Oak Park Place, Pittsburgh, Pennsylvania 15243.
*Heath B. McLendon (Age 67). Chairman of the Board,
President and Investment Officer
Managing Director of Salomon Smith Barney; President
of SSB Citi Fund Management LLC ("SSB Citi" or the
"manager") and Travelers Investment Adviser, Inc.
("TIA"); Chairman or Co-Chairman of the Board and
director or trustee of 78 investment companies
associated with Citigroup. His address is 7 World
Trade Center, New York, New York 10048.
Cornelius C. Rose, Jr. (Age 66). Trustee
President, Cornelius C. Rose Associates, Inc.,
financial consultants, and Chairman and Director of
Performance Learning Systems, an educational
consultant. Director or trustee of 11 investment
companies associated with Citigroup. His address is
Meadowbrook Village, Building 4, Apt 6, West Lebanon,
New Hampshire 03784.
Lewis E. Daidone (Age 43). Senior Vice President and
Treasurer
Managing Director of Salomon Smith Barney; Senior Vice
President or Executive Vice President and Treasurer of
61 investment companies associated with Citigroup, and
Director and Senior Vice President of the manager and
TIA. His address is 125 Broad Street, New York, New
York 10004.
Peter M. Coffey (Age 56) Vice President and Investment
Officer
Vice President of SSB Citi; Managing Director of
Salomon Smith Barney and Investment Officer of SSB
Citi; Investment Officer of 5 investment companies
associated with Salomon Smith Barney. His address is
7 World Trade Center, New York, New York 10048.
Anthony Pace, (Age 35). Controller
Director of Salomon Smith Barney; Controller or
Assistant Treasurer of various investment companies
associated with Citigroup since 1999. His address is
125 Broad Street, New York, New York 10004.
Christina T. Sydor (Age 49). Secretary
Managing Director of Salomon Smith Barney and
Secretary of 61 investment companies affiliated with
Citigroup; Secretary and General Counsel of the
manager and TIA. Her address is 388 Greenwich Street,
New York, NY 10013.
As of August 1, 2000, the trustees and officers of the
fund, as a group, owned less than 1% of the
outstanding
shares of beneficial interest of the fund.
To the best knowledge of the trustees, as of August 1,
2000, the following shareholders or "groups" (as such
term is defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) owned beneficially
or of record more than 5% of the shares of the
following classes:
Shareholder
Class
Shares Held
John S. Caughell and
V. Rowene Caughell JTWROS
5354 Norma Ave SE
Salem, OR 97306-1596
L
Owned 26,030.778
9.07 % of shares
Roy E. Holbrook and
Luanna Holbrook Trustee FBO
Roy E and Luanna Holbrook Rev Liv Trust
U/A/D 10/11/90
Box 42
Mehama, OR 97384-0842
L
Owned 195,627.22
6.66 % of shares
Mahlon P. Goodwin and N. Ruth
Goodwin Ttee Mahlon P. Goodwin and
N. Ruth Goodwin Family Trust
U/A/D 10/03/91
2016 Manorview Circle
Salem, OR 97304-4469
L
Owned 192,355.91
6.55 % of shares
No officer, director or employee of Salomon Smith
Barney or any of its affiliates receives any
compensation from the fund for serving as an officer
of the funds or trustee of the fund. The fund pays
each trustee who is not an officer, director or
employee of Salomon Smith Barney or any of its
affiliates a fee of $1,000 per annum plus $100 per in-
person meeting and $100 per telephonic meeting. Each
trustee emeritus who is not an officer, director or
employee of Salomon Smith Barney or its affiliates
receives a fee of $500 per annum plus $50 per in-
person meeting and $50 per telephonic meeting. All
trustees are reimbursed for travel and out-of-pocket
expenses incurred to attend such meetings. For the
calendar year ended December 31, 1999, the trustees
were reimbursed in the aggregate, $14, 438 for travel
and out-of-pocket expenses.
For the fiscal year ended April 30, 2000, the trustees
of the fund were paid the following compensation:
Name of Person
Aggregate
Compensati
on
from Fund
Total
Pension or
Retirement
Benefits
Accrued
As part of
Fund
Expenses
Compensati
on
From Fund
And Fund
Complex
Paid to
Trustees
Number of
Funds for
Which
Trustees
Serve Within
Fund Complex
Herbert Barg **
$1,400
0
$114,288
16
Alfred
Bianchetti * **
1,300
0
53,900
11
Martin Brody **
1,200
0
138,600
21
Dwight B. Crane
**
1,300
0
155,363
24
Burt N. Dorsett
**
1,400
0
57,950
11
Elliot S. Jaffe
**
1,300
0
45,100
11
Stephen E.
Kaufman **
1,400
0
110,650
13
Joseph J. McCann
**
1,400
0
58,050
11
Heath B.
McLendon *
0
0
0
78
Cornelius C.
Rose, Jr. **
1,400
0
53,500
11
* Designates an "interested" trustee.
** Designates member of Audit Committee.
Upon attainment of age 80, fund trustees are
required to change to emeritus status. Trustees
emeritus are entitled to serve in emeritus
status for a maximum of 10 years. A trustee
emeritus may attend meetings but has no voting
rights. During the fund's last fiscal year,
aggregate compensation paid by the fund to
trustees achieving emeritus status totaled $650.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The prospectus discusses the fund's investment
objective and the policies it employs to achieve its
objective. For purposes of this SAI, obligations of
non-Oregon municipal issuers, the interest on which is
at least exempt from federal income taxation ("Other
Municipal Securities"), and obligations of the State
of Oregon and its political subdivisions, agencies and
public authorities (together with certain municipal
issuers such as the Commonwealth of Puerto Rico, the
Virgin Islands and Guam) that pay interest which is
excluded from gross income for federal income tax
purposes and exempt from Oregon personal income taxes
("Oregon Municipal Securities") are collectively
referred to as "Municipal Bonds." SSB Citi serves as
investment manager and administrator to the fund.
The fund will operate subject to an investment policy
providing that, under normal market conditions, the
fund will invest at least 80% of its net assets in
Municipal Securities, and at least 65% of the
aggregate principal amount of the fund's investment in
Oregon Municipal Securities, which pay interest which
is excluded from gross income for federal income tax
purposes and which is exempt from Oregon state
personal income tax. The fund may invest up to 20% of
its net assets in municipal securities of non-Oregon
municipal issuers, the interest on which is excluded
from gross income for federal income tax purposes (not
including the possible applicability of a federal
alternative minimum tax), but which is subject to
Oregon state personal income tax. When the manager
believes that market conditions warrant adoption of a
temporary defensive investment posture, the fund may
invest without limit in non-Oregon municipal issuers
and in "Temporary Investments" as described below.
Non-Diversified Classification
The fund is classified as a non-diversified fund under
the 1940 Act, which means the fund is not limited by
the Act in the proportion of its assets it may invest
in the obligations of a single issuer. The fund
intends to conduct its operations, however, so as to
qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which will relieve the fund of
any liability for Federal income tax and Oregon
franchise tax, as applicable, to the extent its
earnings are distributed to shareholders. To qualify
as a regulated investment company, the fund will,
among other things, limit its investments so that, at
the close of each quarter of the taxable year (a) not
more than 25% of the market value of the fund's total
assets will be invested in the securities of a single
issuer and (b) with respect to 50% of the market value
of its total assets, not more than 5% of the market
value of its total assets will be invested in the
securities of a single issuer and the fund will not
own more than 10% of the outstanding voting securities
of a single issuer.
As a result of the fund's non-diversified status, an
investment in the fund may present greater risks to
investors than an investment in a diversified fund.
The investment return on a non-diversified fund
typically is dependent upon the performance of a
smaller number of securities relative to the number of
securities held in a diversified fund. The fund's
assumption of large positions in the obligations of a
small number of issuers will affect the value of its
portfolio to a greater extent than that of a
diversified fund in the event of changes in the
financial condition, or in the market's assessment, of
the issuers.
The identification of the issuer of Exempt Obligations
generally depends upon the terms and conditions of the
security. When the assets and revenues of an agency,
authority, instrumentality or other political
subdivision are separate from those of the government
creating the issuing entity and the security is backed
only by the assets and revenues of such entity, such
entity would be deemed to be the sole issuer.
Similarly, in the case of a private activity bond, if
that bond is backed only by the assets and revenues of
the nongovernmental user, then such nongovernmental
user is deemed to be the sole issuer. If in either
case, however, the creating government or some other
entity guarantees a security, such a guarantee would
be considered a separate security and would be treated
as an issue of such government or other entity.
Use of Ratings as Investment Criteria
In general, the ratings of Moody's Investors Service,
Inc. ("Moody's") and Standard & Poor's Ratings Group
("S&P") and other nationally recognized statistical
ratings organizations ("NRSROs") represent the
opinions of those agencies as to the quality of the
Municipal Bonds and short-term investments which they
rate. It should be emphasized, however, that such
ratings are relative and subjective, are not absolute
standards of quality and do not evaluate the market
risk of securities. These ratings will be used by the
fund as initial criteria for the selection of
portfolio securities, but the fund also will rely upon
the independent advice of the manager to evaluate
potential investments. Among the factors that will be
considered are the long-term ability of the issuer to
pay principal and interest and general economic
trends. To the extent the fund invests in lower-rated
and comparable unrated securities, the fund's
achievement of its investment objective may be more
dependent on the manager's credit analysis of such
securities than would be the case for a portfolio
consisting entirely of higher-rated securities. The
Appendix contains further information concerning the
ratings of Moody's and S&P and other NRSROs and their
significance.
Subsequent to its purchase by the fund, an issue of
Municipal Bonds may cease to be rated or its rating
may be reduced below the rating given at the time the
securities were acquired by the fund. Neither event
will require the sale of such Municipal Bonds by the
fund, but the manager will consider such event in its
determination of whether the fund should continue to
hold such Municipal Bonds. In addition, to the extent
the ratings change as a result of changes in such
organizations, in their rating systems or because of a
corporate restructuring of Moody's, S&P or any NRSRO,
the fund will attempt to use comparable ratings as
standards for its investments in accordance with its
investment objective and policies.
The fund generally will invest at least 75% of its
total assets in investment grade debt obligations
rated no lower than Baa, MIG 3 or Prime-1 by Moody's
or BBB, SP-2 or A-1 by S&P, or have the equivalent
rating by any NRSRO or in unrated obligations of
comparable quality. Unrated obligations will be
considered to be of investment grade if deemed by the
manager to be comparable in quality to instruments so
rated, or if other outstanding obligations of the
issuers thereof are rated Baa or better by Moody's or
BBB or better by S&P. The balance of the fund's
assets may be invested in securities rated as low as C
by Moody's or D by S&P or have the equivalent rating
by any NRSRO, or deemed by the manager to be
comparable unrated securities, which are sometimes
referred to as "junk bonds." Securities in the fourth
highest rating category, though considered to be
investment grade, have speculative characteristics.
Securities rated as low as D are extremely speculative
and are in actual default of interest and/or principal
payments. It should be emphasized that ratings are
relative and subjective and are not absolute standards
of quality. Although these ratings are initial
criteria for selection of portfolio investments, the
fund also will make its own evaluation of these
securities. Among the factors that will be considered
are the long-term ability of the issuers to pay
principal and interest and general economic trends.
The value of debt securities varies inversely to
changes in the direction of interest rates. When
interest rates rise, the value of debt securities
generally falls, and when interest rates fall, the
value of debt securities generally rises.
Low and Comparable Unrated Securities. While the
market values of low-rated and comparable unrated
securities tend to react less to fluctuations in
interest rate levels than the market values of higher
rated securities, the market values of certain low-
rated and comparable unrated municipal securities also
tend to be more sensitive than higher-rated securities
to short-term corporate and industry developments and
changes in economic conditions (including recession)
in specific regions or localities or among specific
types of issuers. In addition, low-rated securities
and comparable unrated securities generally present a
higher degree of credit risk. During an economic
downturn or a prolonged period of rising interest
rates, the ability of issuers of low-rated and
comparable unrated securities to service their payment
obligations, meet projected goals or obtain additional
financing may be impaired. The risk of loss because
of default by such issuers is significantly greater
because low-rated and comparable unrated securities
generally are unsecured and frequently are
subordinated to the prior payment of senior
indebtedness. The fund may incur additional expenses
to the extent it is required to seek recovery upon a
default in payment of principal or interest on its
portfolio holdings.
While the market for municipal securities is
considered to be generally adequate, the existence of
limited markets for particular low-rated and
comparable unrated securities may diminish the fund's
ability to (a) obtain accurate market quotations for
purposes of valuing such securities and calculating
its net asset value and (b) sell the securities at
fair value either to meet redemption requests or to
respond to changes in the economy or in the financial
markets. The market for certain low-rated and
comparable unrated securities has not fully weathered
a major economic recession. Any such recession,
however, would likely disrupt severely the market for
such securities and adversely affect the value of the
securities and the ability of the issuers of such
securities to repay principal and pay interest
thereon.
Fixed-income securities, including low-rated
securities and comparable unrated securities,
frequently have call or buy-back features that permit
their issuers to call or repurchase the securities
from their holders, such as the fund. If an issuer
exercises these rights during periods of declining
interest rates, the fund may have to replace the
security with a lower yielding security, thus
resulting in a decreased return to the fund.
Municipal Bonds. tc " Municipal Bonds." Municipal
Bonds generally are understood to include debt
obligations issued to obtain funds for various public
purposes, including construction of a wide range of
public facilities, refunding of outstanding
obligations, payment of general operating expenses and
extensions of loans to public institutions and
facilities. Private activity bonds issued by or on
behalf of public authorities to finance various
privately operated facilities are included within the
term Municipal Bonds if the interest paid thereon
qualifies as excluded from gross income (but not
necessarily from alternative minimum taxable income)
for federal income tax purposes in the opinion of bond
counsel to the issuer.
The yield on Municipal Bonds is dependent on a variety
of factors, including general economic and monetary
conditions, general money market factors, general
conditions of the Municipal Bond market, the financial
condition of the issuer, the size of a particular
offering, maturity of the obligation offered and the
rating of the issue.
Municipal Bonds also may be subject to the provisions
of bankruptcy, insolvency and other laws affecting the
rights and remedies of creditors, such as the federal
Bankruptcy Code, and laws, if any, which may be
enacted by Congress or state legislatures extending
the time for payment of principal or interest, or
both, or imposing other constraints upon enforcement
of such obligations or upon the ability of
municipalities to levy taxes. The possibility also
exists that, as a result of litigation or other
conditions, the power or ability of any one or more
issuers to pay, when due, the principal of and
interest on its or their Municipal Bonds may be
materially and adversely affected.
Municipal Leases. The fund may invest without limit in
"municipal leases", which are obligations issued by
state and local governments or authorities to finance
the acquisition of equipment or facilities. The
interest on such obligations is, in the opinion of
counsel to the issuers, excluded from gross income for
federal income tax purposes. Although lease
obligations do not constitute general obligations of
the municipality for which the municipality's taxing
power is pledged, a lease obligation is ordinarily
backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease
obligation. However, certain lease obligations
contain "non-appropriation" clauses which provide that
the municipality has no obligation to make lease or
installment purchase payments in future years unless
money is appropriated for such purpose on a yearly
basis. In addition to the "non-appropriation" risk,
these securities represent a relatively new type of
financing that has not yet developed the depth of
marketability associated with more conventional bonds.
Although "non-appropriation" lease obligations are
often secured by the underlying property, disposition
of the property in the event of foreclosure might
prove difficult. There is no limitation on the
percentage of the fund's assets that may be invested
in municipal lease obligations. In evaluating
municipal lease obligations, the manager will consider
such factors as it deems appropriate, which may
include: (a) whether the lease can be canceled; (b)
the ability of the lease obligee to direct the sale of
the underlying assets; (c) the general
creditworthiness of the lease obligor; (d) the
likelihood that the municipality will discontinue
appropriating funding for the leased property in the
event such property is no longer considered essential
by the municipality; (e) the legal recourse of the
lease obligee in the event of such a failure to
appropriate funding; (f) whether the security is
backed by a credit enhancement such as insurance; and
(g) any limitations which are imposed on the lease
obligor's ability to utilize substitute property or
services rather than those covered by the lease
obligation.
The fund may invest without limit in debt obligations
which are repayable out of revenue streams generated
from economically-related projects or facilities or
debt obligations whose issuers are located in the same
state. Sizeable investments in such obligations could
involve an increased risk to the fund should any of
the related projects or facilities experience
financial difficulties.
Private Activity Bonds. The fund may invest without
limit in private activity bonds. Interest income on
certain types of private activity bonds issued after
August 7, 1986 to finance non-governmental activities
is a specific tax preference item for purposes of the
federal individual and corporate alternative minimum
taxes. Individual and corporate shareholders may be
subject to a federal alternative minimum tax to the
extent the fund's dividends are derived from interest
on those bonds. Dividends derived from interest income
on Oregon Municipal Securities are a component of the
"current earnings" adjustment item for purposes of the
federal corporate alternative minimum tax.
Zero Coupon Bonds. The fund may also invest in zero
coupon bonds. Zero coupon securities are debt
obligations which do not entitle the holder to any
periodic payments of interest prior to maturity or a
specified cash payment date when the securities begin
paying current interest (the "cash payment date") and
therefore are issued and traded at a discount from
their face amounts or par values. The discount varies
depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of
the security and the perceived credit quality of the
issuer. The discount, in the absence of financial
difficulties of the issuer, decreases as the final
maturity or cash payment date of the security
approaches. The market prices of zero coupon
securities generally are more volatile than the market
prices of other debt securities that pay interest
periodically and are likely to respond to changes in
interest rates to a greater degree than do debt
securities having similar maturities and credit
quality. The credit risk factors pertaining to low-
rated securities also apply to low-rated zero coupon
bonds. Such zero coupon bonds carry an additional
risk in that, unlike bonds which pay interest
throughout the period to maturity, the fund will
realize no cash until the cash payment date unless a
portion of such securities is sold and, if the issuer
defaults, the fund may obtain no return at all on its
investment.
When-Issued Securities. The fund may purchase
Municipal Bonds on a "when-issued" basis (i.e., for
delivery beyond the normal settlement date at a stated
price and yield). The payment obligation and the
interest rate that will be received on the Municipal
Bonds purchased on a when-issued basis are each fixed
at the time the buyer enters into the commitment.
Although the fund will purchase Municipal Bonds on a
when-issued basis only with the intention of actually
acquiring the securities, the fund may sell these
securities before the settlement date if it is deemed
advisable as a matter of investment strategy.
Municipal Bonds are subject to changes in value based
upon the public's perception of the creditworthiness
of the issuers and changes, real or anticipated, in
the level of interest rates. In general, Municipal
Bonds tend to appreciate when interest rates decline
and depreciate when interest rates rise. Purchasing
Municipal Bonds on a when-issued basis, therefore, can
involve the risk that the yields available in the
market when the delivery takes place may actually be
higher than those obtained in the transaction itself.
To account for this risk, a separate account of the
fund consisting of cash or liquid debt securities
equal to the amount of the when-issued commitments
will be established on the fund's books. For the
purpose of determining the adequacy of the securities
in the account, the deposited securities will be
valued at market or fair value. If the market or fair
value of such securities declines, additional cash or
securities will be placed in the account on a daily
basis so the value of the account will equal the
amount of such commitments by the fund. Placing
securities rather than cash in the segregated account
may have a leveraging effect on the fund's net assets.
That is, to the extent the fund remains substantially
fully invested in securities at the same time it has
committed to purchase securities on a when-issued
basis, there will be greater fluctuations in its net
assets than if it had set aside cash to satisfy its
purchase commitments. Upon the settlement date of the
when-issued securities, the fund will meet obligations
from then-available cash flow, sale of securities held
in the segregated account, sale of other securities
or, although it normally would not expect to do so,
from the sale of the when-issued securities themselves
(which may have a value greater or less than the
fund's payment obligations). Sales of securities to
meet such obligations may involve the realization of
capital gains, which are not exempt from federal
income taxes or Oregon state personal income tax.
When the fund engages in when-issued transactions, it
relies on the seller to consummate the trade. Failure
of the seller to do so may result in the fund's
incurring a loss or missing an opportunity to obtain a
price considered advantageous.
Repurchase Agreements. The fund may agree to purchase
securities from a bank or recognized securities dealer
and simultaneously commit to resell the securities to
the bank or dealer at an agreed-upon date and price
reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities
("repurchase agreements"). The fund would maintain
custody of the underlying securities prior to their
repurchase; thus, the obligation of the bank or dealer
to pay the repurchase price on the date agreed to
would be, in effect, secured by such securities. If
the value of such securities were less than the
repurchase price, plus interest, the other party to
the agreement would be required to provide additional
collateral so that at all times the collateral is at
least 102% of the repurchase price plus accrued
interest. Default by or bankruptcy of a seller would
expose the fund to possible loss because of adverse
market action, expenses and/or delays in connection
with the disposition of the underlying obligations.
The financial institutions with which the fund may
enter into repurchase agreements will be banks and
non-bank dealers of U.S. government securities that
are on the Federal Reserve Bank of New York's list of
reporting dealers, if such banks and non-bank dealers
are deemed creditworthy by the fund's manager. The
manager will continue to monitor creditworthiness of
the seller under a repurchase agreement, and will
require the seller to maintain during the term of the
agreement the value of the securities subject to the
agreement to equal at least 102% of the repurchase
price (including accrued interest). In addition, the
manager will require that the value of this
collateral, after transaction costs (including loss of
interest) reasonably expected to be incurred on a
default, be equal to 102% or greater than the
repurchase price (including accrued premium) provided
in the repurchase agreement or the daily amortization
of the difference between the purchase price and the
repurchase price specified in the repurchase
agreement. The manager will mark-to-market daily the
value of the securities.
Lending of Portfolio Securities. Consistent with
applicable regulatory requirements, the fund may lend
portfolio securities to brokers, dealers and other
financial organizations that meet capital and other
credit requirements or other criteria established by
the Board. Loans of portfolio securities will be
collateralized by cash, liquid securities, which are
maintained at all times in an amount equal to at least
102% of the current market value of the loaned
securities. Any gain or loss in the market price of
the securities loaned that might occur during the term
of the loan would be for the account of the fund.
From time to time, the fund may return a part of the
interest earned from the investment of collateral
received for securities loaned to the borrower and/or
a third party that is unaffiliated with the fund and
that is acting as a "finder."
By lending its securities, the fund can increase its
income by continuing to receive interest and any
dividends on the loaned securities as well as by
either investing the collateral received for
securities loaned in short-term instruments or
obtaining yield in the form of interest paid by the
borrower when U.S. government securities are used as
collateral. Income received could be used to pay the
fund's expenses and would increase an investor's total
return. The fund will adhere to the following
conditions whenever its portfolio securities are
loaned: (i) the fund must receive at least 102% cash
collateral or equivalent securities of the type
discussed in the preceding paragraph from the
borrower; (ii) the borrower must increase such
collateral whenever the market value of the securities
rises above the level of such collateral; (iii) the
fund must be able to terminate the loan at any time;
(iv) the fund must receive reasonable interest on the
loan, as well as any dividends, interest or other
distributions on the loaned securities and any
increase in market value; (v) the fund may pay only
reasonable custodian fees in connection with the loan;
and (vi) voting rights on the loaned securities may
pass to the borrower, provided, however, that if a
material event adversely affecting the investment
occurs, the Board must terminate the loan and regain
the right to vote the securities. Loan agreements
involve certain risks in the event of default or
insolvency of the other party including possible
delays or restrictions upon a Fund's ability to
recover the loaned securities or dispose of the
collateral for the loan.
Temporary Investments. Under normal market
conditions, the fund may hold up to 20% of its total
assets in cash or money market instruments, including
taxable money market instruments. When the fund is
maintaining a defensive position, the fund may invest
in short-term investments ("Temporary Investments")
consisting of: (a) tax-exempt securities in the form
of notes of municipal issuers having, at the time of
purchase, a rating within the three highest grades of
Moody's, S&P or the equivalent rating from an NRSRO
or, if not rated, having an issue of outstanding
Municipal Bonds rated within the three highest grades
by Moody's, S&P or the equivalent rating from an
NRSRO; and (b) the following taxable securities:
obligations of the United States government, its
agencies or instrumentalities ("U.S. government
securities"), repurchase agreements, other debt
securities rated within the three highest grades by
Moody's, S&P or the equivalent rating from an NRSRO,
commercial paper rated in the highest grade by any of
such rating services, and certificates of deposit of
domestic banks with assets of $1 billion or more. The
fund may invest in Temporary Investments for defensive
reasons in anticipation of a market decline. At no
time will more than 20% of the fund's total assets be
invested in Temporary Investments unless the fund has
adopted a defensive investment policy. The fund
intends, however, to purchase tax-exempt Temporary
Investments pending the investment of the proceeds of
the sale of portfolio securities or shares of the
fund's common stock, or in order to have highly liquid
securities available to meet anticipated redemptions.
Financial Futures and Options Transactions. The fund
may enter into financial futures contracts and invest
in options on financial futures contracts that are
traded on a domestic exchange or board of trade. Such
investments, if any, by the fund will be made solely
for the purpose of hedging against changes in the
value of portfolio securities due to anticipated
changes in interest rates and market conditions and
where the transactions are economically appropriate to
the reduction of risks inherent in the management of
the fund. The futures contracts or options on futures
contracts that may be entered into by the fund will be
restricted to those that are either based on a
municipal bond index or related to debt securities,
the prices of which are anticipated by the manager to
correlate with the prices of the Oregon Municipal
Securities owned or to be purchased by the fund.
In entering into a financial futures contract, the
fund will be required to deposit with the broker
through which it undertakes the transaction an amount
of cash or cash equivalents equal to approximately 5%
of the contract amount. This amount, which is known
as "initial margin," is subject to change by the
exchange or board of trade may charge a higher amount.
Initial margin is in the nature of a performance bond
or good faith deposit on the contract that is returned
to the fund upon termination of the futures contract,
assuming all contractual obligations have been
satisfied. In accordance with a process known as
"marking-to-market," subsequent payments, known as
"variation margin," to and from the broker will be
made daily as the price of the index or securities
underlying the futures contract fluctuates, making the
long and short positions in the futures contract more
or less valuable. At any time prior to the expiration
of a futures contract, the fund may elect to close the
position by taking an opposite position, which will
operate to terminate the fund's existing position in
the contract.
A financial futures contract provides for the future
sale by one party and the purchase by the other party
of a certain amount of a specified property at a
specified price, date, time and place. Unlike the
direct investment in a futures contract, an option on
a financial futures contract gives the purchaser the
right, in return for the premium paid, to assume a
position in the financial futures contract at a
specified exercise price at any time prior to the
expiration date of the option. Upon exercise of an
option, the delivery of the futures position by the
writer of the option to the holder of the option will
be accompanied by delivery of the accumulated balance
in the writer's futures margin account, which
represents the amount by which the market price of the
futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of
the option in the futures contract. The potential
loss related to the purchase of an option on financial
futures contracts is limited to the premium paid for
the option (plus transaction costs). The value of the
option may change daily and that change would be
reflected in the net asset value of the fund.
Regulations of the Commodity Futures Trading
Commission applicable to the fund require that its
transactions in financial futures contracts and
options on financial futures contracts be engaged in
for bona fide hedging purposes, or if the fund enters
into futures contracts for speculative purposes, that
the aggregate initial margin deposits and premiums
paid by the fund will not exceed 5% of the market
value of its assets. In addition, the fund will, with
respect to its purchases of financial futures
contracts, establish a segregated account consisting
of cash or cash equivalents in an amount equal to the
total market value of the futures contracts, less the
amount of initial margin on a deposit for the
contracts.
Municipal Bond Index Futures Contracts. A municipal
bond index futures contract is an agreement pursuant
to which two parties agree to take or make delivery of
an amount of cash equal to a specific dollar amount
multiplied by the difference between the value of the
index at the close of the last trading day of the
contract and the price at which the index contract was
originally written. No physical delivery of the
underlying municipal bonds in the index is made.
Municipal bond index futures contracts based on an
index of 40 tax-exempt, long-term municipal bonds with
an original issue size of at least $50 million and a
rating of A- or higher by S&P or A or higher by
Moody's began trading in mid-1985. The purpose of the
acquisition or sale of a municipal bond index futures
contract by the fund, as the holder of long-term
municipal securities, is to protect the fund from
fluctuations in interest rates on tax-exempt
securities without actually buying or selling long-
term municipal securities.
There are several risks in connection with the use of
futures contracts as a hedging device. Successful use
of futures contracts by the fund is subject to the
manager's ability to predict correctly movements in
the direction of interest rates. Such predictions
involve skills and techniques which may be different
from those involved in the management of a long-term
municipal bond portfolio. In addition, there can be no
assurance that there will be a correlation between
movements in the price of the municipal bond index and
movements in the price of the Municipal Bonds which
are the subject of the hedge. The degree of
imperfection of correlation depends upon various
circumstances, such as variations in speculative
market demand for futures contracts and municipal
securities, technical influences on futures trading,
and differences between the municipal securities being
hedged and the municipal securities underlying the
futures contracts, in such respects as interest rate
levels, maturities and creditworthiness of issuers. A
decision of whether, when and how to hedge involves
the exercise of skill and judgment and even a well-
conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected trends in
interest rates.
Although the fund intends to purchase or sell futures
contracts only if there is an active market for such
contracts, there is no assurance that a liquid market
will exist for the contracts at any particular time.
Most domestic futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily
limit establishes the maximum amount the price of a
futures contract may vary either up or down from the
previous day's settlement price at the end of a
trading session. Once the daily limit has been
reached in a particular contract, no trades may be
made that day at a price beyond that limit. The daily
limit governs only price movement during a particular
trading day and, therefore, does not limit potential
losses because the limit may prevent the liquidation
of unfavorable positions. It is possible that futures
contract prices could move to the daily limit for
several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders
to substantial losses. In such event, it will not be
possible to close a futures position and, in the event
of adverse price movements, the fund would be required
to make daily cash payments of variation margin. In
such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may
partially or completely offset losses on the futures
contract. As described above, however, there is no
guarantee that the price of Municipal Bonds will, in
fact, correlate with the price movements in the
municipal bond index futures contract and thus provide
an offset to losses on a futures contract.
If the fund has hedged against the possibility of an
increase in interest rates adversely affecting the
value of the Municipal Bonds held in its portfolio and
rates decrease instead, the fund will lose part or all
of the benefit of the increased value of the Municipal
Bonds it has hedged because it will have offsetting
losses in its futures positions. In addition, in such
situations, if the fund has insufficient cash, it may
have to sell securities to meet daily variation margin
requirements. Such sales of securities may, but will
not necessarily, be at increased prices which reflect
the decline in interest rates. The fund may have to
sell securities at a time when it may be
disadvantageous to do so.
When the fund purchases municipal bond index futures
contracts, an amount of cash and U.S. government
securities or other high grade debt securities equal
to the market value of the futures contracts will be
deposited in a segregated account with the fund's
custodian (and/or such other persons as appropriate)
to collateralize the positions and thereby insure that
the use of such futures contracts is not leveraged. In
addition, the ability of the fund to trade in
municipal bond index futures contracts and options on
interest rate futures contracts may be materially
limited by the requirements of the Code applicable to
a regulated investment company. See "Taxes."
Options on Financial Futures Contracts. The fund may
purchase put and call options on futures contracts
which are traded on a domestic exchange or board of
trade as a hedge against changes in interest rates,
and may enter into closing transactions with respect
to such options to terminate existing positions. The
fund will sell put and call options on interest rate
futures contracts only as part of closing sale
transactions to terminate its options positions. There
is no guarantee that such closing transactions can be
effected.
Options on futures contracts, as contrasted with the
direct investment in such contracts, gives the
purchaser the right, in return for the premium paid,
to assume a position in futures contracts at a
specified exercise price at any time prior to the
expiration date of the options. Upon exercise of an
option, the delivery of the futures position by the
writer of the option to the holder of the option will
be accompanied by delivery of the accumulated balance
in the writer's futures contract margin account, which
represents the amount by which the market price of the
futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of
the option on the futures contract. The potential loss
related to the purchase of an option on interest rate
futures contracts is limited to the premium paid for
the option (plus transaction costs). Because the value
of the option is fixed at the point of sale, there are
no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the
option does change daily and that change would be
reflected in the net asset value of the fund
There are several risks relating to options on futures
contracts. The ability to establish and close out
positions on such options will be subject to the
existence of a liquid market. In addition, the fund's
purchase of put or call options will be based upon
predictions as to anticipated interest rate trends by
the manager, which could prove to be inaccurate. Even
if the manager's expectations are correct there may be
an imperfect correlation between the change in the
value of the options and of the fund's portfolio
securities.
Other Investments. The fund may invest up to an
aggregate of 15% of its total assets in securities
with contractual or other restrictions on resale and
other instruments which are not readily marketable.
The fund also is authorized to borrow an amount of up
to 10% of its total assets (including the amount
borrowed) valued at market less liabilities (not
including the amount borrowed) in order to meet
anticipated redemptions and to pledge its assets to
the same extent in connection with the borrowings.
INVESTMENT RESTRICTIONS
The fund has adopted the following investment
restrictions for the protection of shareholders.
Restrictions 1 through 6 cannot be changed without
approval by the holders of a majority of the
outstanding shares of the fund, defined as the lesser
of (a) 67% of the fund's shares present at a meeting
if the holders of more than 50% of the outstanding
shares of the fund are present or represented by proxy
or (b) more than 50% of the fund's outstanding shares.
The remaining restrictions may be changed by the
board of trustees at any time. The fund may not:
1. Issue "senior securities" as defined in the 1940
Act and the rules, regulations and orders
thereunder, except as permitted under the 1940
Act and the rules, regulations and orders
thereunder
2. Invest more than 25% of its total assets in
securities, the issuers of which are in the same
industry. For purposes of this limitation, U.S.
government securities and securities of state or
municipal governments and their political
subdivisions are not considered to be issued by
members of any industry.
3. Borrow money, except that (a) the fund may
borrow from banks for temporary or emergency
(not leveraging) purposes, including the meeting
of redemption requests which might otherwise
require the untimely disposition of securities,
and (b) the fund may, to the extent consistent
with its investment policies, enter into reverse
repurchase agreements, forward roll transactions
and similar investment strategies and
techniques. To the extent that it engages in
transactions described in (a) and (b), the fund
will be limited so that no more than 33 1/3% of
the value of its total assets (including the
amount borrowed), valued at the lesser of cost
or market, less liabilities (not including the
amount borrowed), is derived from such
transactions.
4. Make loans. This restriction does not apply
to: (a) the purchase of debt obligations in
which the fund may invest consistent with its
investment objectives and policies; (b)
repurchase agreements; and (c) loans of its
portfolio securities, to the fullest extent
permitted under the 1940 Act.
5. Engage in the business of underwriting
securities issued by other persons, except to
the extent that the fund may technically be
deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of
portfolio securities.
6. Purchase or sell real estate, real estate
mortgages, commodities or commodity contracts,
but this restriction shall not prevent the fund
from (a) investing in securities of issuers
engaged in the real estate business or the
business of investing in real estate (including
interests in limited partnerships owning or
otherwise engaging in the real estate business
or the business of investing in real estate) and
securities which are secured by real estate or
interests therein; (b) holding or selling real
estate received in connection with securities it
holds or held; (c) trading in futures contracts
and options on futures contracts (including
options on currencies to the extent consistent
with the fund's investment objective and
policies); or (d) investing in real estate
investment trust securities.
7. Purchase any securities on margin (except for
such short-term credits as are necessary for the
clearance of purchases and sales of portfolio
securities) or sell any securities short (except
"against the box"). For purposes of this
restriction, the deposit or payment by the fund
of underlying securities and other assets in
escrow and collateral agreements with respect to
initial or maintenance margin in connection with
futures contracts and related options and
options on securities, indexes or similar items
is not considered to be the purchase of a
security on margin.
8. Purchase or otherwise acquire any security if,
as a result, more than 15% of its net assets
would be invested in securities that are
illiquid.
9. Purchase or sell oil and gas interests.
10. Invest more than 5% of the value of its total
assets in the securities of issuers having a
record, including predecessors, of less than
three years of continuous operation, except U.S.
government securities. (For purposes of this
restriction, issuers include predecessors,
sponsors, controlling persons, general partners,
guarantors and originators of underlying
assets.)
11. Invest in companies for the purpose of
exercising control.
12. Invest in securities of other investment
companies, except as they may be acquired as
part of a merger, consolidation or acquisition
of assets and except to the extent permitted by
Section 12 of the 1940 Act (currently, up to 5%
of the total assets of the fund and no more than
3% of the total outstanding voting stock of any
one investment company).
13. Engage in the purchase or sale of put, call,
straddle or spread options or in the writing of
such options, except that the fund may engage in
transactions involving municipal bond index and
interest rate futures contracts and options
thereon after approval of these investment
strategies by the board of trustees and notice
thereof to the fund's shareholders.
Certain restrictions listed above permit the fund to
engage in investment practices the fund does not
currently pursue. The fund has no present intention
of altering its current investment practices as
otherwise described in the prospectus and this SAI and
any future change in those practices would require
Board approval and appropriate notice to shareholders.
If a percentage restriction is complied with at the
time of an investment, a later increase or decrease in
the percentage of assets resulting from a change in
the values of portfolio securities or in the amount of
the fund's assets will not constitute a violation of
such restriction.
RISK FACTORS
Alternative Minimum Tax
Under current federal income tax law, (1) interest on
tax-exempt municipal securities issued after August 7,
1986 which are "specified private activity bonds," and
the proportionate share of any exempt-interest
dividend paid by a regulated investment company which
receives interest from such specified private activity
bonds, will be treated as an item of tax preference
for purposes of the alternative minimum tax ("AMT")
imposed on individuals and corporations, though for
regular Federal income tax purposes such interest will
remain fully tax-exempt, and (2) interest on all tax-
exempt obligations will be included in "adjusted
current earnings" of corporations for AMT purposes.
Such private activity bonds ("AMT-Subject bonds"),
which include industrial development bonds and bonds
issued to finance such projects as airports, housing
projects, solid waste disposal facilities, student
loan programs and water and sewage projects, have
provided, and may continue to provide, somewhat higher
yields than other comparable municipal securities.
Investors should consider that, in most instances, no
state, municipality or other governmental unit with
taxing power will be obligated with respect to AMT-
Subject bonds. AMT-Subject bonds are in most cases
revenue bonds and do not generally have the pledge of
the credit or the taxing power, if any, of the issuer
of such bonds. AMT-Subject bonds are generally
limited obligations of the issuer supported by
payments from private business entities and not by the
full faith and credit of a state or any governmental
subdivision. Typically the obligation of the issuer
of AMT-Subject bonds is to make payments to bond
holders only out of and to the extent of, payments
made by the private business entity for whose benefit
the AMT-Subject bonds were issued. Payment of the
principal and interest on such revenue bonds depends
solely on the ability of the user of the facilities
financed by the bonds to meet its financial
obligations and the pledge, if any, of real and
personal property so financed as security for such
payment. It is not possible to provide specific
detail on each of these obligations in which Fund
assets may be invested.
Risk of Concentration In a Single State
The primary purpose of investing in a portfolio of a
single state's municipal securities is the special tax
treatment accorded the state's resident individual
investors. However, payment of interest and
preservation of principal is dependent upon the
continuing ability of the state's issuers and/or
obligors on state, municipal and public authority debt
obligations to meet their obligations thereunder.
Investors should be aware of certain factors that
might affect the financial condition of issuers of
municipal securities, consider the greater risk of the
concentration of a fund versus the safety that comes
with a less concentrated investment portfolio and
compare yields available in portfolios of the relevant
state's issues with those of more diversified
portfolios, including out-of-state issues, before
making an investment decision.
Municipal securities in which a fund's assets are
invested may include debt obligations of the
municipalities and other subdivisions of the relevant
state issued to obtain funds for various public
purposes, including the construction of a wide range
of public facilities such as airports, bridges,
highways, schools, streets and water and sewer works.
Other purposes for which municipal securities may be
issued include the obtaining of funds to lend to
public or private institutions for the construction of
facilities such as educational, hospital, housing, and
solid waste disposal facilities. The latter,
including most AMT-Subject bonds, are generally
payable from private sources which, in varying
degrees, may depend on local economic conditions, but
are not necessarily affected by the ability of the
state and its political subdivisions to pay their
debts. It is not possible to provide specific details
on each of these obligations in which fund assets may
be invested. However, all such securities, the payment
of which is not a general obligation of an issuer
having general taxing power, must satisfy, at the time
of an acquisition by the fund, the minimum rating(s).
See "Appendix A: Bond and Commercial Paper Ratings"
for a description of ratings and rating criteria.
Some municipal securities may be rated based on a
"moral obligation" contract which allows the
municipality to terminate its obligation by deciding
not to make an appropriation. Generally, no legal
remedy is available against the municipality that is a
party to the "moral obligation" contract in the event
of such non-appropriation.
Municipal Market Volatility. Municipal securities can
be significantly affected by political changes as well
as uncertainties in the municipal market related to
taxation, legislative changes, or the rights of
municipal security holders. Because many municipal
securities are issued to finance similar projects,
especially those relating to education, health care,
transportation and utilities, conditions in those
sectors can affect the overall municipal market. In
addition, changes in the financial condition of an
individual municipal insurer can affect the overall
municipal market.
Interest Rate Changes. Debt securities have varying
levels of sensitivity to changes in interest rates. In
general, the price of a debt security can fall when
interest rates rise and can rise when interest rates
fall. Securities with longer maturities can be more
sensitive to interest rate changes. In other words,
the longer the maturity of a security, the greater the
impact a change in interest rates could have on the
security's price. In addition, short-term and long-
term interest rates do not necessarily move in the
same amount or the same direction. Short-term
securities tend to react to changes in short-term
interest rates, and long-term securities tend to react
to changes in long-term interest rates.
Issuer-Specific Changes. Changes in the financial
condition of an issuer, changes in specific economic
or political conditions that affect a particular type
of security or issuer, and changes in general economic
or political conditions can affect the credit quality
or value of an issuer's securities. Lower-quality debt
securities (those of less than investment-grade
quality) tend to be more sensitive to these changes
than higher-quality debt securities. Entities
providing credit support or a maturity-shortening
structure also can be affected by these types of
changes. Municipal securities backed by current or
anticipated revenues from a specific project or
specific assets can be negatively affected by the
discontinuance of the taxation supporting the project
or assets or the inability to collect revenues for the
project or from the assets. If the Internal Revenue
Service determines an issuer of a municipal security
has not complied with applicable tax requirements,
interest from the security could become taxable and
the security could decline significantly in value. In
addition, if the structure of a security fails to
function as intended, interest from the security could
become taxable or the security could decline in value.
SPECIAL CONSIDERATIONS RELATING TO OREGON MUNICIPAL
SECURITIES
Since the fund mainly invests in the municipal
securities of the State of Oregon, its performance is
closely tied to the ability of issuers of municipal
securities in the State of Oregon to continue to make
principal and interest payments on their securities.
The issuers' ability to do this is in turn dependent
on economic, political and other conditions within the
State of Oregon. Below is a discussion of certain
conditions that may affect municipal issuers in the
State of Oregon. It is not a complete analysis of
every material fact that may affect the ability of
issuers of municipal securities to meet their debt
obligations or the economic or political conditions
within any state and is subject to change. The
information below is based on data available to the
fund from historically reliable sources, but the fund
has not independently verified it. The ability of
issuers of municipal securities to continue to make
principal and interest payments is dependent in large
part on their ability to raise revenues, primarily
through taxes, and to control spending. Many factors
can affect a state's revenues including the rate of
population growth, unemployment rates, personal income
growth, federal aid, and the ability to attract and
keep successful businesses. A number of factors can
also affect a state's spending including the need for
infrastructure improvements, increased costs for
education and other services, current debt levels, and
the existence of accumulated budget deficits. The
following gives more information about the risks of
investing in the fund.
Oregon's economy has experienced strong growth,
primarily in its hi-tech manufacturing and housing
construction sectors. Growth has slowed recently,
however, due to economic troubles in Asia. Future
growth is likely to be dependent on the continued
strength of the national economy, as well as the
strength of the state's hi-tech industries, and the
performance of Pacific Rim economies. Economic growth
may be hampered, however, by the state's rising labor
and housing costs, which have lessened Oregon's
competitive position in attracting new businesses. The
strength of Oregon's economy has helped the state
maintain positive financial results. Recently,
however, voter initiatives have limited the state's
financial flexibility. In November 1990, voters
approved Measure 5, which limited local property taxes
and required the state to provide replacement revenues
to schools. The state has been successful in meeting
the requirements of Measure 5, which has increased
state spending for schools from 33% of the general
fund budget to more than 50%. On May 20, 1997, voters
passed Measure 50,which has placed some pressure on
the state's budget. This measure could negatively
impact the revenue-raising flexibility of the state
and make it more vulnerable to an economic downturn.
SPECIAL CONSIDERATIONS REGARDING PUERTO RICO
The following highlights some of the more significant
financial trends and problems affecting the
Commonwealth of Puerto Rico (the "Commonwealth" or
"Puerto Rico"), and is based on information drawn from
official statements and prospectuses relating to the
securities offerings of Puerto Rico, its agencies and
instrumentalities, as available on the date of this
SAI. SSB Citi has not independently verified any of
the information contained in such official statements,
prospectuses, and other publicly available documents,
but is not aware of any fact that would render such
information materially inaccurate.
Puerto Rico has a diversified economy dominated by the
manufacturing and service sectors. The North American
Free Trade Agreement ("NAFTA"), which became effective
January 1, 1994, has led to loss of lower wage jobs
such as textiles, but economic growth in other areas,
particularly tourism, construction and the high
technology areas have compensated for that loss.
Puerto Rico's economy expanded in the 1990's in step
with the U.S. economy.
The Commonwealth of Puerto Rico differs from the
states in its relationship with the federal
government. Most federal taxes, except those such as
social security taxes that are imposed by mutual
consent, are not levied in Puerto Rico. Moreover,
Under Section 936 of the Internal Revenue Code 1986,
as amended (the "Code") U.S. companies enjoyed an
effective 100% federal tax exemption for operating and
qualifying investment income from Puerto Rico sources.
However, in conjunction with the 1993 U.S. budget
plan, Section 936 was amended and provided for two
alternative limitations to the Section 936 credit. The
first option limited the credit against such income to
40% of the credit allowable under then current law,
with a five year phase-in period starting at 60% of
the allowable credit. The second option was a wage and
depreciation based credit. Additional amendments to
Section 936 in 1996 imposed caps on these credits,
beginning in 1998 for the first option and beginning
in 2002 for the second option. More importantly, the
1996 amendments eliminated both options for taxable
years beginning in 2006.
Also in 1996, a new Section 30A was added to the Code.
Section 30A permits a "qualifying domestic
corporation" that meets certain gross income tests to
claim a credit against the federal income tax imposed
on taxable income derived from sources outside the
United States from the active conduct of a trade or
business in Puerto Rico or from the sale of
substantially all the assets used in such a business.
Section 30A will be phased out by January 1, 2006. The
Governor of Puerto Rico has proposed that Congress
permanently extend Section 30A until the Puerto Rican
economy achieves certain economic improvements.
Similarly, President Clinton proposed permanent
extension of the Section 30A in both his 1998 and 1999
budgets. To date, however, no action has been taken.
The eventual elimination of tax benefits to those U.S.
companies with operations in Puerto Rico may lead to
slower growth in the future. There can be no assurance
that this will not lead to a weakened economy, a lower
rating on Puerto Rico's debt or lower prices for
Puerto Rican bonds that may be held by the fund in the
long-term. The government of Puerto Rico has enacted
its own tax incentive programs for both industrial and
tourist activities.
Puerto Ricans have periodically considered conversion
to statehood and such a vote is likely again in the
future. The statehood proposal was defeated in
December, 1998.
PORTFOLIO TRANSACTIONS
Newly issued securities normally are purchased
directly from the issuer or from an underwriter acting
as principal. Other purchases and sales usually are
placed with those dealers from which it appears that
the best price or execution will be obtained; those
dealers may be acting as either agents or principals.
The purchase price paid by the fund to underwriters
of newly issued securities usually includes a
concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers
normally are executed at a price between the bid and
asked prices. For the 1998, 1999 and 2000 fiscal
years, the fund has paid no brokerage commissions.
Allocation of transactions, including their frequency,
to various dealers is determined by the manager in its
best judgment and in a manner deemed fair and
reasonable to shareholders. The primary
considerations are availability of the desired
security and the prompt execution of orders in an
effective manner at the most favorable prices.
Subject to these considerations, dealers that provide
supplemental investment research and statistical or
other services to the manager may receive orders for
portfolio transactions by the fund. Information so
received is in addition to, and not in lieu of,
services required to be performed by the manager, and
the fees of the manager are not reduced as a
consequence of its use of such supplemental
information. Such information may be useful to the
manager in serving both the fund and other clients
and, conversely, supplemental information obtained by
the placement of business of other clients may be
useful to the manager in carrying out its obligations
to the fund.
The fund will not purchase Municipal Obligations
during the existence of any underwriting or selling
group relating thereto of which Salomon Smith Barney
is a member, except to the extent permitted by the
SEC. Under certain circumstances, the fund may be at a
disadvantage because of this limitation in comparison
with other investment companies which have a similar
investment objective but which are not subject to such
limitation. The fund also may execute portfolio
transactions through Salomon Smith Barney and its
affiliates in accordance with rules promulgated by the
SEC.
While investment decisions for the fund are made
independently from those of the other accounts managed
by the manager, investments of the type the fund may
make also may be made by those other accounts. When
the fund and one or more other accounts managed by the
manager are prepared to invest in, or desire to
dispose of, the same security, available investments
or opportunities for sales will be allocated in a
manner believed by the manager to be equitable to
each. In some cases, this procedure may adversely
affect the price paid or received by the fund or the
size of the position obtained or disposed of by the
fund.
PORTFOLIO TURNOVER
The fund's portfolio turnover rate (the lesser of
purchases or sales of portfolio securities during the
year, excluding purchases or sales of short-term
securities, divided by the monthly average value of
portfolio securities) generally is not expected to
exceed 100%, but the portfolio turnover rate will not
be a limiting factor whenever the fund deems it
desirable to sell or purchase securities. Securities
may be sold in anticipation of a rise in interest
rates (market decline) or purchased in anticipation of
a decline in interest rates (market rise) and later
sold. In addition, a security may be sold and another
security of comparable quality may be purchased at
approximately the same time in order to take advantage
of what the fund believes to be a temporary disparity
in the normal yield relationship between the two
securities. These yield disparities may occur for
reasons not directly related to the investment quality
of particular issues or the general movement of
interest rates, such as changes in the overall demand
for or supply of various types of tax-exempt
securities. For the 1999 and 2000 fiscal years, the
fund's portfolio turnover rates were 28% and 81%,
respectively.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
PURCHASE OF SHARES
Sales Charge Alternatives
The following classes of shares are available for
purchase. See the prospectus for a discussion of
factors to consider in selecting which Class of shares
to purchase.
Class A Shares. Class A shares are sold to investors
at the public offering price, which is the net asset
value plus an initial sales charge as follows:
Amount of
Investment
Sales Charge as
a %
Of Transaction
Sales Charge as
a %
of Amount
Invested
Dealers'
Reallowance as %
of Offering Price
Less than $25,000
4.00%
4.17%
3.60%
$ 25,000 - 49,999
3.50
3.63
3.15
50,000 - 99,999
3.00
3.09
2.70
100,000 - 249,999
2.50
2.56
2.25
250,000 - 499,999
1.50
1.52
1.35
500,000 and over
*
*
*
* Purchases of Class A shares of $500,000 or more
will be made at net asset value without any initial
sales charge, but will be subject to a deferred
sales charge of 1.00% on redemptions made within 12
months of purchase. The deferred sales charge on
Class A shares is payable to Salomon Smith Barney,
which compensates Salomon Smith Barney Financial
Consultants and other dealers whose clients make
purchases of $500,000 or more. The deferred sales
charge is waived in the same circumstances in which
the deferred sales charge applicable to Class B and
Class L shares is waived. See "Purchase of Shares-
Deferred Sales Charge Alternatives" and "Purchase of
Shares-Waivers of Deferred Sales Charge."
Members of the selling group may receive up to 90% of
the sales charge and may be deemed to be underwriters
of the fund as defined in the Securities Act of 1933.
The reduced sales charges shown above apply to the
aggregate of purchases of Class A shares of the fund
made at one time by "any person," which includes an
individual and his or her immediate family, or a
trustee or other fiduciary of a single trust estate or
single fiduciary account.
Class B Shares. Class B shares are sold without an
initial sales charge but are subject to a deferred
sales charge payable upon certain redemptions. See
"Deferred sales charge Provisions" below.
Class L Shares. Class L shares are sold with an
initial sales charge of 1.00% (which is equal to 1.01%
of the amount invested) and are subject to a deferred
sales charge payable upon certain redemptions. See
"Deferred Sales Charge Provisions" below. Until June
22, 2001 purchases of Class L shares by investors who
were holders of Class C shares of the fund and/or
other Smith Barney mutual funds on June 12, 1998 will
not be subject to the 1% initial sales charge.
Class Y Shares. Class Y shares are sold without an
initial sales charge or deferred sales charge and are
available only to investors investing a minimum of
$15,000,000 (except purchases of Class Y shares by
Smith Barney Concert Allocation Series Inc., for which
there is no minimum purchase amount).
General
Investors may purchase shares from a broker-dealer,
financial intermediary, financial institution or a
distributor's financial consultants (each called a
"Service Agent"). In addition, certain investors may
purchase shares directly from the fund. When
purchasing shares of the fund, investors must specify
whether the purchase is for Class A, Class B, Class L
or Class Y shares. Service Agents may charge their
customers an annual account maintenance fee in
connection with a brokerage account through which an
investor purchases or holds shares. Accounts held
directly at PFPC Global Fund Services ("PFPC" or
"sub-transfer agent") are not subject to a maintenance
fee.
Investors in Class A, Class B and Class L shares may
open an account in the fund by making an initial
investment of at least $1,000 for each account.
Investors in Class Y shares may open an account by
making an initial investment of $15,000,000.
Subsequent investments of at least $50 may be made for
all Classes. For shareholders purchasing shares of the
fund through the Systematic Investment Plan on a
monthly basis, the minimum initial investment
requirement for Class A, Class B and Class L shares
and subsequent investment requirement for all Classes
is $25. For shareholders purchasing shares of the fund
through the Systematic Investment Plan on a quarterly
basis, the minimum initial investment required for
Class A, Class B and Class L shares and the subsequent
investment requirement for all Classes is $50. There
are no minimum investment requirements for Class A
shares for employees of Citigroup and its
subsidiaries, including Salomon Smith Barney,
unitholders who invest distributions from a unit
investment trust ("UIT") sponsored by Salomon Smith
Barney, and Directors/Trustees of any of the Smith
Barney mutual funds, and their spouses and children.
The fund reserves the right to waive or change
minimums, to decline any order to purchase its shares
and to suspend the offering of shares from time to
time. Shares purchased will be held in the
shareholder's account by the sub-transfer agent.
Share certificates are issued only upon a
shareholder's written request to the sub-transfer
agent. It is not recommended that the Fund be used as
a vehicle for Keogh, IRA or other qualified retirement
plans.
Purchase orders received by the fund, or a Salomon
Smith Barney Financial Consultant or a Service Agent
prior to the close of regular trading on The New York
Stock Exchange Inc. (the "NYSE"), on any day the fund
calculates its net asset value, are priced according
to the net asset value determined on that day (the
''trade date''). Orders received by a Service Agent
prior to the close of regular trading on the NYSE on
any day the fund calculates its net asset value, are
priced according to the net asset value determined on
that day, provided the order is received by the fund
or the fund's agent prior to its close of business.
For shares purchased through Salomon Smith Barney or a
Service Agent purchasing through Salomon Smith Barney,
payment for shares of the fund is due on the third
business day after the trade date. In all other cases,
payment must be made with the purchase order.
Systematic Investment Plan. Shareholders may make
additions to their accounts at any time by purchasing
shares through a service known as the Systematic
Investment Plan. Under the Systematic Investment
Plan, Salomon Smith Barney or the sub-transfer agent
is authorized through preauthorized transfers of at
least $25 on a monthly basis or at least $50 on a
quarterly basis to charge the shareholder's account
held with a bank or other financial institution on a
monthly or quarterly basis as indicated by the
shareholder, to provide for systematic additions to
the shareholder's fund account. A shareholder who has
insufficient funds to complete the transfer will be
charged a fee of up to $25 by Salomon Smith Barney or
the sub-transfer agent. The Systematic Investment
Plan also authorizes Salomon Smith Barney to apply
cash held in the shareholder's Salomon Smith Barney
brokerage account or redeem the shareholder's shares
of a Smith Barney money market fund to make additions
to the account. Additional information is available
from the fund or a Salomon Smith Barney Financial
Consultant or a Service Agent.
Sales Charge Waivers and Reductions
Initial Sales Charge Waivers. Purchases of Class A
shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales to
(i) Board Members and employees of Citigroup and its
subsidiaries and any Citigroup affiliated funds
including the Smith Barney mutual funds (including
retired Board Members and employees); the immediate
families of such persons (including the surviving
spouse of a deceased Board Member or employee); and to
a pension, profit-sharing or other benefit plan for
such persons and (ii) employees of members of the
National Association of Securities Dealers, Inc.,
provided such sales are made upon the assurance of the
purchaser that the purchase is made for investment
purposes and that the securities will not be resold
except through redemption or repurchase; (b) offers of
Class A shares to any other investment company to
effect the combination of such company with the fund
by merger, acquisition of assets or otherwise;
(c) purchases of Class A shares by any client of a
newly employed Salomon Smith Barney Financial
Consultant (for a period up to 90 days from the
commencement of the Financial Consultant's employment
with Salomon Smith Barney), on the condition the
purchase of Class A shares is made with the proceeds
of the redemption of shares of a mutual fund which (i)
was sponsored by the Financial Consultant's prior
employer, (ii) was sold to the client by the Financial
Consultant and (iii) was subject to a sales charge;
(d) purchases by shareholders who have redeemed Class
A shares in the fund (or Class A shares of another
Smith Barney mutual fund that is offered with a sales
charge) and who wish to reinvest their redemption
proceeds in the fund, provided the reinvestment is
made within 60 calendar days of the redemption; (e)
purchases by accounts managed by registered investment
advisory subsidiaries of Citigroup; (f) investments of
distributions from a UIT sponsored by Salomon Smith
Barney; and (g) purchases by investors participating
in a Salomon Smith Barney fee-based arrangement. In
order to obtain such discounts, the purchaser must
provide sufficient information at the time of purchase
to permit verification that the purchase would qualify
for the elimination of the sales charge.
Right of Accumulation. Class A shares of the fund may
be purchased by ''any person'' (as defined above) at a
reduced sales charge or at net asset value determined
by aggregating the dollar amount of the new purchase
and the total net asset value of all Class A shares of
the fund and of other Smith Barney mutual funds that
are offered with a sales charge as currently listed
under ''Exchange Privilege'' then held by such person
and applying the sales charge applicable to such
aggregate. In order to obtain such discount, the
purchaser must provide sufficient information at the
time of purchase to permit verification that the
purchase qualifies for the reduced sales charge. The
right of accumulation is subject to modification or
discontinuance at any time with respect to all shares
purchased thereafter.
Letter of Intent - Class A Shares. A Letter of Intent
for an amount of $50,000 or more provides an
opportunity for an investor to obtain a reduced sales
charge by aggregating investments over a 13 month
period, provided the investor refers to such Letter
when placing orders. For purposes of a Letter of
Intent, the ''Amount of Investment'' as referred to in
the preceding sales charge table includes (i) all
Class A shares of the fund and other Smith Barney
mutual funds offered with a sales charge acquired
during the term of the letter plus (ii) the value of
all Class A shares previously purchased and still
owned. Each investment made during the period
receives the reduced sales charge applicable to the
total amount of the investment goal. If the goal is
not achieved within the period, the investor must pay
the difference between the sales charges applicable to
the purchases made and the charges previously paid, or
an appropriate number of escrowed shares will be
redeemed. The term of the Letter will commence upon
the date the Letter is signed, or at the option of the
investor, up to 90 days before such date. Please
contact a Salomon Smith Barney Financial Consultant or
Citi Fiduciary Trust Company (the "transfer agent") to
obtain a Letter of Intent application.
Letter of Intent - Class Y Shares. A Letter of Intent
may also be used as a way for investors to meet the
minimum investment requirement for Class Y shares
(except purchases of Class Y shares by Smith Barney
Concert Allocation Series Inc., for which there is no
minimum purchase amount). Such investors must make an
initial minimum purchase of $5,000,000 in Class Y
shares of the fund and agree to purchase a total of
$15,000,000 of Class Y shares of the fund within 13
months from the date of the Letter. If a total
investment of $15,000,000 is not made within the 13-
month period, all Class Y shares purchased to date
will be transferred to Class A shares, where they will
be subject to all fees (including a service fee of
0.15%) and expenses applicable to the fund's Class A
shares, which may include a deferred sales charge of
1.00%. Please contact a Salomon Smith Barney Financial
Consultant or the transfer agent for further
information.
Deferred Sales Charge Provisions
''Deferred sales charge shares'' are: (a) Class B
shares; (b) Class L shares; and (c) Class A shares
purchased without an initial sales charge but subject
to a deferred sales charge. A deferred sales charge
may be imposed on certain redemptions of these shares.
Any applicable deferred sales charge will be assessed
on an amount equal to the lesser of the original cost
of the shares being redeemed or their net asset value
at the time of redemption. Deferred sales charge
Shares that are redeemed will not be subject to a
deferred sales charge to the extent the value of such
shares represents: (a) capital appreciation of fund
assets; (b) reinvestment of dividends or capital gain
distributions; (c) with respect to Class B shares,
shares redeemed more than five years after their
purchase; or (d) with respect to Class L shares and
Class A shares that are Deferred sales charge Shares,
shares redeemed more than 12 months after their
purchase.
Class L shares and Class A shares that are Deferred
sales charge Shares are subject to a 1.00% deferred
sales charge if redeemed within 12 months of purchase.
In circumstances in which the deferred sales charge is
imposed on Class B shares, the amount of the charge
will depend on the number of years since the
shareholder made the purchase payment from which the
amount is being redeemed. Solely for purposes of
determining the number of years since a purchase
payment, all purchase payments made during a month
will be aggregated and deemed to have been made on the
last day of the preceding Salomon Smith Barney
statement month. The following table sets forth the
rates of the charge for redemptions of Class B shares
by shareholders.
Year Since Purchase Payment Was
Made
Deferred sales charge
First
4.50%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth and thereafter
0.00
Class B shares will convert automatically to Class A
shares eight years after the date on which they were
purchased and thereafter will no longer be subject to
any distribution fees. There will also be converted at
that time such proportion of Class B Dividend Shares
owned by the shareholders as the total number of his
or her Class B shares converting at the time bears to
the total number of outstanding Class B shares (other
than Class B Dividend Shares) owned by the
shareholder.
In determining the applicability of any deferred sales
charge, it will be assumed that a redemption is made
first of shares representing capital appreciation,
next of shares representing the reinvestment of
dividends and capital gain distributions and finally
of other shares held by the shareholder for the
longest period of time. The length of time deferred
sales charge Shares acquired through an exchange have
been held will be calculated from the date the shares
exchanged were initially acquired in one of the other
Smith Barney mutual funds, and fund shares being
redeemed will be considered to represent, as
applicable, capital appreciation or dividend and
capital gain distribution reinvestments in such other
funds. For Federal income tax purposes, the amount of
the deferred sales charge will reduce the gain or
increase the loss, as the case may be, on the amount
realized on redemption. The amount of any deferred
sales charge will be paid to Salomon Smith Barney.
To provide an example, assume an investor purchased
100 Class B shares of the fund at $10 per share for a
cost of $1,000. Subsequently, the investor acquired 5
additional shares of the fund through dividend
reinvestment. During the fifteenth month after the
purchase, the investor decided to redeem $500 of his
or her investment. Assuming at the time of the
redemption the net asset value had appreciated to $12
per share, the value of the investor's shares would be
$1,260 (105 shares at $12 per share). The deferred
sales charge would not be applied to the amount which
represents appreciation ($200) and the value of the
reinvested dividend shares ($60). Therefore, $240 of
the $500 redemption proceeds ($500 minus $260) would
be charged at a rate of 4.00% (the applicable rate for
Class B shares) for a total deferred sales charge of
$9.60.
Waivers of Deferred Sales Charge
The deferred sales charge will be waived on: (a)
exchanges (see ''Exchange Privilege''); (b) automatic
cash withdrawals in amounts equal to or less than
1.00% per month of the value of the shareholder's
shares at the time the withdrawal plan commences (see
''Automatic Cash Withdrawal Plan'') (however,
automatic cash withdrawals in amounts equal to or less
than 2.00% per month of the value of the shareholder's
shares will be permitted for withdrawal plans
established prior to November 7, 1994); (c)
redemptions of shares within 12 months following the
death or disability of the shareholder; (d)
involuntary redemptions; and (e) redemptions of shares
to effect a combination of the fund with any
investment company by merger, acquisition of assets or
otherwise. In addition, a shareholder who has redeemed
shares from other Smith Barney mutual funds may, under
certain circumstances, reinvest all or part of the
redemption proceeds within 60 days and receive pro
rata credit for any deferred sales charge imposed on
the prior redemption.
Deferred sales charge waivers will be granted subject
to confirmation (by Salomon Smith Barney in the case
of shareholders who are also Salomon Smith Barney
clients or by the transfer agent in the case of all
other shareholders) of the shareholder's status or
holdings, as the case may be.
Volume Discounts
The schedule of sales charges on Class A shares
described in the prospectus applies to purchases made
by any "purchaser," which is defined to include the
following: (a) an individual; (b) an individual's
spouse and his or her children purchasing shares for
their own account; (c) a trustee or other fiduciary
purchasing shares for a single trust estate or single
fiduciary account; and (d) a trustee or other
professional fiduciary (including a bank, or an
investment adviser registered with the SEC under the
Investment Advisers Act of 1940, as amended)
purchasing shares of the fund for one or more trust
estates or fiduciary accounts. Purchasers who wish to
combine purchase orders to take advantage of volume
discounts on Class A shares should contact a Salomon
Smith Barney Financial Consultant.
DETERMINATION OF NET ASSET VALUE
Each Class' net asset value per share is calculated on
each day, Monday through Friday, except days on which
the NYSE is closed. The NYSE currently is scheduled
to be closed on New Year's Day, Martin Luther King,
Jr.'s Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and
Christmas, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday
or Sunday, respectively. Because of the differences
in distribution fees and class-specific expenses, the
per share net asset value of each class may differ.
The following is a description of the procedures used
by the fund in valuing its assets.
Generally, the fund's investments are valued at market
value or, in the absence of a market value with
respect to any securities, at fair value as determined
by or under the direction of the Board of Directors. A
security that is primarily traded on a domestic or
foreign exchange is valued at the last sale price on
that exchange or, if there were no sales during the
day, at the mean between the bid and asked price.
Over-the-counter securities are valued at the mean
between the bid and asked price. If market quotations
for those securities are not readily available, they
are valued at fair value, as determined in good faith
by the fund's board of trustees. An option is
generally valued at the last sale price or, in the
absence of a last sale price, the last offer price.
U.S. government securities will be valued at the mean
between the closing bid and asked prices on each day,
or, if market quotations for those securities are not
readily available, at fair value, as determined in
good faith by the fund's board of trustees.
Short-term investments maturing in 60 days or less are
valued at amortized cost whenever the board of
trustees determines that amortized cost reflects fair
value of those investments. Amortized cost valuation
involves valuing an instrument at its cost initially
and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the
effect of fluctuating interest rates on the market
value of the instrument.
All other securities and other assets of the fund will
be valued at fair value as determined in good faith by
the fund's board of trustees.
Determination of Public Offering Price
The fund offers its shares to the public on a
continuous basis. The public offering price per Class
A and Class Y share of the fund is equal to the net
asset value per share at the time of purchase plus,
for Class A shares, an initial sales charge based on
the aggregate amount of the investment. The public
offering price per Class B and Class L share (and
Class A share purchases, including applicable rights
of accumulation, equaling or exceeding $500,000) is
equal to the net asset value per share at the time of
purchase and no sales charge is imposed at the time of
purchase. The method of computing the public offering
price is shown in the fund's financial statements,
incorporated by reference in their entirety into this
SAI.
REDEMPTION OF SHARES
The fund is required to redeem the shares of the fund
tendered to it, as described below, at a redemption
price equal to their net asset value per share next
determined after receipt of a written request in
proper form at no charge other than any applicable
deferred sales charge. Redemption requests received
after the close of regular trading on the NYSE are
priced at the net asset value next determined.
If a shareholder holds shares in more than one Class,
any request for redemption must specify the Class
being redeemed. In the event of a failure to specify
which Class, or if the investor owns fewer shares of
the Class than specified, the redemption request will
be delayed until the transfer agent receives further
instructions from Salomon Smith Barney, or if the
shareholder's account is not with Salomon Smith
Barney, from the shareholder directly. The redemption
proceeds will be remitted on or before the third
business day following receipt of proper tender,
except on any days on which the NYSE is closed or as
permitted under the 1940 Act in extraordinary
circumstances. Generally, if the redemption proceeds
are remitted to a Salomon Smith Barney brokerage
account, these funds will not be invested for the
shareholder's benefit without specific instruction and
Salomon Smith Barney will benefit from the use of
temporarily uninvested funds. Redemption proceeds for
shares purchased by check, other than a certified or
official bank check, will be remitted upon clearance
of the check, which may take up to fifteen days or
more.
Shares held by Salomon Smith Barney as custodian must
be redeemed by submitting a written request to a
Salomon Smith Barney Financial Consultant. Shares
other than those held by Salomon Smith Barney as
custodian may be redeemed through an investor's
Financial Consultant, Service Agent or by submitting a
written request for redemption to:
Smith Barney Oregon Municipals Fund
Class A, B, L or Y (please specify)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
A written redemption request must (a) state the Class
and number or dollar amount of shares to be redeemed,
(b) identify the shareholder's account number and (c)
be signed by each registered owner exactly as the
shares are registered. If the shares to be redeemed
were issued in certificate form, the certificates must
be endorsed for transfer (or be accompanied by an
endorsed stock power) and must be submitted to the
transfer agent together with the redemption request.
Any signature appearing on a share certificate, stock
power or written redemption request in excess of
$10,000 must be guaranteed by an eligible guarantor
institution, such as a domestic bank, savings and loan
institution, domestic credit union, member bank of the
Federal Reserve System or member firm of a national
securities exchange. Written redemption requests of
$10,000 or less do not require a signature guarantee
unless more than one such redemption request is made
in any 10-day period. Redemption proceeds will be
mailed to an investor's address of record. The
transfer agent may require additional supporting
documents for redemptions made by corporations,
executors, administrators, trustees or guardians. A
redemption request will not be deemed properly
received until the transfer agent receives all
required documents in proper form.
Automatic Cash Withdrawal Plan. The fund offers
shareholders an automatic cash withdrawal plan, under
which shareholders who own shares with a value of at
least $10,000 may elect to receive cash payments of at
least $50 monthly or quarterly. Retirement plan
accounts are eligible for automatic cash withdrawal
plans only where the shareholder is eligible to
receive qualified distributions and has an account
value of at least $5,000. The withdrawal plan will be
carried over on exchanges between Classes of a fund.
Any applicable deferred sales charge will not be
waived on amounts withdrawn by a shareholder that
exceed 1.00% per month of the value of the
shareholder's shares subject to the deferred sales
charge at the time the withdrawal plan commences.
(With respect to withdrawal plans in effect prior to
November 7, 1994, any applicable deferred sales charge
will be waived on amounts withdrawn that do not exceed
2.00% per month of the value of the shareholder's
shares subject to the deferred sales charge.) For
further information regarding the automatic cash
withdrawal plan, shareholders should contact a Salomon
Smith Barney Financial Consultant.
Telephone Redemption and Exchange Program.
Shareholders who do not have a brokerage account may
be eligible to redeem and exchange shares by
telephone. To determine if a shareholder is entitled
to participate in this program, he or she should
contact the transfer agent at 1-800-451-2010. Once
eligibility is confirmed, the shareholder must
complete and return a Telephone/Wire Authorization
Form, along with a signature guarantee, that will be
provided by the transfer agent upon request.
(Alternatively, an investor may authorize telephone
redemptions on the new account application with the
applicant's signature guarantee when making his/her
initial investment in a fund.)
Redemptions. Redemption requests of up to $50,000 of
any Class or Classes of shares of a fund may be made
by eligible shareholders by calling the transfer agent
at 1-800-451-2010. Such requests may be made between
9:00 a.m. and 4:00 p.m. (Eastern Time) on any day the
NYSE is open. Redemptions of shares (i) by retirement
plans or (ii) for which certificates have been issued
are not permitted under this program.
A shareholder will have the option of having the
redemption proceeds mailed to his/her address of
record or wired to a bank account predesignated by the
shareholder. Generally, redemption proceeds will be
mailed or wired, as the case may be, on the next
business day following the redemption request. In
order to use the wire procedures, the bank receiving
the proceeds must be a member of the Federal Reserve
System or have a correspondent relationship with a
member bank. The fund reserves the right to charge
shareholders a nominal fee for each wire redemption.
Such charges, if any, will be assessed against the
shareholder's account from which shares were redeemed.
In order to change the bank account designated to
receive redemption proceeds, a shareholder must
complete a new Telephone/Wire Authorization Form and,
for the protection of the shareholder's assets, will
be required to provide a signature guarantee and
certain other documentation.
Exchanges. Eligible shareholders may make exchanges
by telephone if the account registration of the shares
of the fund being acquired is identical to the
registration of the shares of the fund exchanged.
Such exchange requests may be made by calling the
transfer agent at 1-800-451-2010 between 9:00 a.m. and
4:00 p.m. (Eastern time) on any day on which the NYSE
is open.
Additional Information Regarding Telephone Redemption
and Exchange Program. Neither the fund nor its
agents will be liable for following instructions
communicated by telephone that are reasonably believed
to be genuine. The fund and its agents will employ
procedures designed to verify the identity of the
caller and legitimacy of instructions (for example, a
shareholder's name and account number will be required
and phone calls may be recorded). The fund reserves
the right to suspend, modify or discontinue the
telephone redemption and exchange program or to impose
a charge for this service at any time following at
least seven (7) days' prior notice to shareholders.
Redemptions in Kind. In conformity with applicable
rules of the SEC, redemptions may be paid in portfolio
securities, in cash or any combination of both, as the
board of trustees may deem advisable; however,
payments shall be made wholly in cash unless the board
of trustees believes economic conditions exist that
would make such a practice detrimental to the best
interests of the fund and its remaining shareholders.
If redemption is paid in portfolio securities, such
securities will be valued in accordance with the
procedures described under "Determination of Net Asset
Value" in the Prospectus and a shareholder would incur
brokerage expenses if these securities were then
converted to cash.
Distributions in Kind
If the fund's board of trustees determines that it
would be detrimental to the best interests of the
remaining shareholders of the fund to make a
redemption payment wholly in cash, the fund may pay,
in accordance with SEC rules, any portion of a
redemption in excess of the lesser of $250,000 or
1.00% of the fund's net assets by a distribution in
kind of portfolio securities in lieu of cash.
Securities issued as a distribution in kind may incur
brokerage commissions when shareholders subsequently
sell those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal
Plan") is available to shareholders who own shares
with a value of at least $10,000 and who wish to
receive specific amounts of cash monthly or quarterly.
Withdrawals of at least $50 may be made under the
Withdrawal Plan by redeeming as many shares of the
fund as may be necessary to cover the stipulated
withdrawal payment. Any applicable deferred sales
charge will not be waived on amounts withdrawn by
shareholders that exceed 1.00% per month of the value
of a shareholder's shares at the time the Withdrawal
Plan commences. (With respect to Withdrawal Plans in
effect prior to November 7, 1994, any applicable
deferred sales charge will be waived on amounts
withdrawn that do not exceed 2.00% per month of the
value of a shareholder's shares at the time the
Withdrawal Plan commences.) To the extent withdrawals
exceed dividends, distributions and appreciation of a
shareholder's investment in the fund, there will be a
reduction in the value of the shareholder's
investment, and continued withdrawal payments will
reduce the shareholder's investment and may ultimately
exhaust it. Withdrawal payments should not be
considered as income from investment in the fund.
Furthermore, as it generally would not be advantageous
to a shareholder to make additional investments in the
fund at the same time he or she is participating in
the Withdrawal Plan, purchases by such shareholder in
amounts of less than $5,000 ordinarily will not be
permitted.
Shareholders who wish to participate in the Withdrawal
Plan and who hold their shares in certificate form
must deposit their share certificates with the sub-
transfer agent as agent for Withdrawal Plan members.
All dividends and distributions on shares in the
Withdrawal Plan are reinvested automatically at net
asset value in additional shares of the fund. For
additional information, shareholders should contact a
Salomon Smith Barney Financial Consultant. Withdrawal
Plans should be set up with a Salomon Smith Barney
Financial Consultant. A shareholder who purchases
shares directly through the sub-transfer agent may
continue to do so and applications for participation
in the Withdrawal Plan must be received by the sub-
transfer agent no later than the eighth day of the
month to be eligible for participation beginning with
that month's withdrawals. For additional information,
shareholders should contact a Salomon Smith Barney
Financial Consultant.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Adviser and Administrator - SSB Citi
(Manager)
SSB Citi (successor to SSBC Fund Mutual Management
Inc.) serves as investment adviser to the fund
pursuant to an investment advisory agreement (the
"Investment Advisory Agreement") with the trust which
was approved by the board of trustees, including a
majority of trustees who are not "interested persons"
of the fund or the manager. The manager is a wholly
owned subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings"), which in turn, is a wholly owned
subsidiary of Citigroup. Subject to the supervision
and direction of the fund's board of trustees, the
manager manages the fund's portfolio in accordance
with the fund's stated investment objective and
policies, makes investment decisions for the fund,
places orders to purchase and sell securities, and
employs professional portfolio managers and securities
analysts who provide research services to the fund.
The manager pays the salary of any officer and
employee who is employed by both it and the fund. The
manager bears all expenses in connection with the
performance of its services. SSB Citi (through its
predecessor entities) has been in the investment
counseling business since 1968 and renders investment
advice to a wide variety of individual, institutional
and investment company clients that had aggregate
assets under management as of June 30, 2000
approximately of $191 billion.
The fund pays the manager an investment advisory fee
at an annual rate of 0.30% of the value of its average
daily net assets. This fee is calculated daily and
paid monthly. For the fiscal years ended April 30,
2000 and 1999, the fund incurred investment advisory
fees of $108,347 and $112,082, respectively, of which
$27,883 and $32,504 was waived, respectively. For the
fiscal year ended April 30, 1998, the fund incurred
investment advisory fees in the amount of $84,332, all
of which was waived.
SSB Citi also serves as administrator to the fund
pursuant to a written agreement (the "Administration
Agreement"). As administrator SSB Citi: (a) assists in
supervising all aspects of the Fund's operations; b)
supplies the fund with office facilities (which may be
in SSB Citi's own offices), statistical and research
data, data processing services, clerical, accounting
and bookkeeping services, including, but not limited
to, the calculation of (i) the net asset value of
shares of the fund, (ii) applicable contingent
deferred sales charges and similar fees and charges
and (iii) distribution fees, internal auditing and
legal services, internal executive and administrative
services, and stationary and office supplies; and (c)
prepares reports to shareholders of the fund, tax
returns and reports to and filings with the SEC and
state blue sky authorities.
As compensation for administrative services rendered
to the fund, SSB Citi receives a fee paid at the
following annual rates: 0.20% of average daily net
assets up to $500 million; and 0.18% of average daily
net assets in excess of $500 million. This fee is
computed daily and paid monthly. For the fiscal years
ended April 30, 2000 and 1999, respectively, the fund
incurred administration fees in the amount of $72,231
and $62,846, of which $21,669 and $15,027 was waived,
respectively. For the fiscal year ended April 30,
1998, the fund incurred administration fees in the
amount of $56,221, all of which was waived.
The fund bears expenses incurred in its operations
including: taxes, interest, brokerage fees and
commissions, if any; fees of trustees of the fund who
are not officers, directors, shareholders or employees
of Salomon Smith Barney or the manager; SEC fees and
state Blue Sky notice fees; charges of custodians;
transfer and dividend disbursing agent's fees; certain
insurance premiums; outside auditing and legal
expenses; costs of maintaining corporate existence;
costs of investor services (including allocated
telephone and personnel expenses); costs of preparing
and printing of prospectuses for regulatory purposes
and for distribution to existing shareholders; costs
of shareholders' reports and shareholder meetings; and
meetings of the officers or board of trustees of the
fund.
Counsel
Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York 10019, serves as counsel to the fund.
Stroock, Stroock & Lavan, 180 Maiden Lane, New York,
New York, 10038 serves as counsel to the directors who
are not "interested persons" of the fund.
Auditors
KPMG LLP, independent auditors, 757 Third Avenue, New
York, New York 10017, has been selected to serve as
the fund's independent auditors and to render an
opinion on the fund's financial statements for the
fiscal year ended April 30, 2001.
Custodian, Transfer Agent and Sub-Transfer Agent
PNC Bank, National Association, located at 17th and
Chestnut Streets, Philadelphia, Pennsylvania 19103,
serves as the fund's custodian. Under the custody
agreement, PNC holds the fund's portfolio securities
and keeps all necessary accounts and records. For its
services, PNC receives a monthly fee based upon the
month-end market value of securities held in custody
and also receives securities transaction charges. The
assets of the fund are held under bank custodianship
in compliance with the 1940 Act.
Citi Fiduciary Trust Company, located at 125 Broad
Street, New York, New York 10004, serves as the
fund's transfer agent. Under the transfer agency
agreement, the transfer agent maintains the
shareholder account records for the fund, handles
certain communications between shareholders and the
fund, and distributes dividends and distributions
payable by the fund. For these services, the transfer
agent receives a monthly fee computed on the basis of
the number of shareholder accounts it maintains for
the fund during the month, and is reimbursed for out-
of-pocket expenses.
PFPC Global Fund Services, located at P.O. Box 9699
Providence, R.I. 02940-9699 serves as the fund's sub-
transfer agent to render certain shareholder record
keeping and accounting services functions. Under the
transfer agency agreement, PFPC maintains the
shareholder account records for the fund, handles
certain communications between shareholders and the
fund, and distributes dividends and distributions
payable by the fund. For these services, PFPC
receives a monthly fee computed on the basis of the
number of shareholder accounts it maintains for the
fund during the month, and is reimbursed for out-of-
pocket expenses.
Distributor
Effective June 5, 2000, Salomon Smith Barney replaced
CFBDS, Inc. as the fund's distributor. Prior to June
5, 2000, CFBDS, Inc., located at 20 Milk Street,
Boston, Massachusetts 02109-5408 served as the fund's
distributor pursuant to a written agreement dated
October 8, 1998 (the "Distribution Agreement") which
was approved by the fund's board of trustees,
including a majority of the independent trustees on
July 15, 1998. Prior to the merger of Travelers
Group, Inc. and Citicorp Inc. on October 8, 1998,
Salomon Smith Barney served as the fund's distributor.
For the 1998 fiscal year, Salomon Smith Barney,
received $37,000 in sales charges from the sale of
Class A shares, and did not reallow any portion
thereof to dealers. For the period April 30, 1998
through October 7, 1998 the aggregate dollar amount of
sales charges on Class A shares was $18,000 all of
which was paid to Salomon Smith Barney. For the
period October 8, 1998 through April 30, 1999 the
aggregate dollar amount of sales charges on Class A
shares was $57,000, $51,300 of which was paid to
Salomon Smith Barney. For the fiscal year ended April
30, 2000 the aggregate amount of initial sales charges
on Class A shares was $13,000, $11,700 of which was
paid of Salomon Smith Barney.
For the period June 12, 1998 through October 7, 1998
the aggregate dollar amount of sales charges on Class
L shares was $2,000, all of which was paid to Salomon
Smith Barney. For the period October 8, 1998 through
April 30, 1999 the aggregate dollar amount of sales
charges on Class L shares was $7,000, $6,300 of which
was paid to Salomon Smith Barney. For the fiscal year
ended April 30, 2000 the aggregate amount of initial
sales charges on Class L shares was $7,000, $6,300 of
which was paid of Salomon Smith Barney.
For the fiscal years ended April 30, 1998, 1999, and
2000 Salomon Smith Barney or its predecessor received
from shareholders $23,000, $24,000 and $43,000,
respectively, in deferred sales charges on the
redemption of Class B shares. For the fiscal years
ended April 30, 1998, 1999 and 2000, Salomon Smith
Barney or its predecessor received from shareholders
$0, $1,000 and $4,000, respectively, in deferred sales
charges on redemption of Class L shares.
When payment is made by the investor before the
settlement date, unless otherwise noted by the
investor, the funds will be held as a free credit
balance in the investor's brokerage account and
Salomon Smith Barney may benefit from the temporary
use of the funds. The fund's board of trustees has
been advised of the benefits to Salomon Smith Barney
resulting from these settlement procedures and will
take such benefits into consideration when reviewing
the Investment Advisory Agreement for continuance.
Distribution Arrangements. To compensate Salomon
Smith Barney for the service it provides and for the
expense it bears, the fund has adopted a services and
distribution plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act. Under the Plan, the fund pays
Salomon Smith Barney a service fee, accrued daily and
paid monthly, calculated at the annual rate of 0.15%
of the value of the fund's average daily net assets
attributable to the Class A, Class B and Class L
shares. In addition, the fund pays Salomon Smith
Barney a distribution fee with respect to Class B and
Class L shares primarily intended to compensate
Salomon Smith Barney for its initial expense of paying
Financial Consultants a commission upon sales of those
shares. The Class B and Class L distribution fee is
calculated at the annual rate of 0.50% and 0.55%,
respectively, of the value of the fund's average net
assets attributable to the shares of each Class.
For the fiscal year ended April 30, 2000, Salomon
Smith Barney incurred distribution expenses totaling
$192,915 consisting of $10,811 for advertising, $1,475
for printing and mailing of prospectuses, $74,103 for
support services, $102,984 to Salomon Smith Barney
Financial Consultants, and $3,542 in accruals for
interest on the excess of Salomon Smith Barney
expenses incurred in distributing the fund's shares
over the sum of the distribution fees and deferred
sales charge received by Salomon Smith Barney from the
fund.
The following service and distribution fees were
incurred pursuant to a Distribution Plan during the
periods indicated:
Distribution Plan Fees
Fiscal Year
Ended
4/30/00
Fiscal Year
Ended 4/30/99
Fiscal Year
Ended 4/30/98
Class A
$ 23,390
$ 21,206
$ 16,841
Class B
$ 115,959
$ 119,330
$ 99,462
Class L*
$ 23,445
$ 17,378
$ 10,930
* Class L shares were called Class C shares
until June 12, 1998.
Under its terms, the Plan continues from year to year,
provided such continuance is approved annually by vote
of the board of trustees, including a majority of the
independent trustees. The Plan may not be amended to
increase the amount of the service and distribution
fees without shareholder approval, and all material
amendments of the Plan also must be approved by the
trustees and independent trustees in the manner
described above. The Plan may be terminated with
respect to a Class of the fund at any time, without
penalty, by vote of a majority of the independent
trustees or by a vote of a majority of the outstanding
voting securities of the Class (as defined in the 1940
Act). Pursuant to the Plan, Salomon Smith Barney will
provide the fund's board of trustees with periodic
reports of amounts expended under the Plan and the
purpose for which such expenditures were made.
Code of Ethics
Pursuant to Rule 17j-1 of the 1940 Act, the fund, its
investment adviser and principal underwriter has
adopted a code of ethics that permits personnel to
invest in securities for their own accounts, including
securities that may be purchased or held by the fund.
All personnel must place the interests of clients
first and avoid activities, interests and
relationships that might interfere with the duty to
make decisions in the best interests of the clients.
All personal securities transactions by employees must
adhere to the requirements of the code and must be
conducted in such a manner as to avoid any actual or
potential conflict of interest, the appearance of such
a conflict, or the abuse of an employee's position of
trust and responsibility.
A copy of the fund's code of ethics is on file with
the Securities and Exchange Commission.
VALUATION OF SHARES
The fund's net asset value per share is determined as
of close of regular trading on the NYSE, on each day
that the NYSE is open, by dividing value of the fund's
net assets attributable to each Class by the total
number of shares of that Class outstanding.
When, in the judgment of the pricing service, quoted
bid prices for investments are readily available and
are representative of the bid side of the market,
these investments are valued at the mean between the
quoted bid and asked prices. Investments for which,
in the judgment of the pricing service, there is no
readily obtainable market quotation (which may
contribute a majority of the portfolio securities) are
carried at fair value of securities of similar type,
yield and maturity. Pricing services generally
determine value by reference to transactions in
municipal obligations, quotations from municipal bond
dealers, market transactions in comparable securities
and various relationships between securities. Short-
term investments that mature in 60 days or less are
valued at amortized cost whenever the board of
trustees determines that amortized cost is fair value.
Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter,
assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the
instrument. Securities and other assets that are not
priced by a pricing service and for which market
quotations are not available will be valued in good
faith at fair value by or under the direction of the
fund's board of trustees.
EXCHANGE PRIVILEGE
Shares of each Class of the fund may be exchanged for
shares of the same Class of certain Smith Barney
mutual funds, to the extent shares are offered for
sale in the shareholder's state of residence.
Exchanges of Class A, Class B and Class L shares are
subject to minimum investment requirements and all
shares are subject to the other requirements of the
fund into which exchanges are made.
Class B Exchanges. If a Class B shareholder wishes to
exchange all or a portion of his or her shares in any
of the funds imposing a higher deferred sales charge
than that imposed by the fund, the exchanged Class B
shares will be subject to the higher applicable
deferred sales charge. Upon an exchange, the new Class
B shares will be deemed to have been purchased on the
same date as the Class B shares of the fund that have
been exchanged.
Class L Exchanges. Upon an exchange, the new Class L
shares will be deemed to have been purchased on the
same date as the Class L shares of the fund that have
been exchanged.
Class A and Class Y Exchanges. Class A and Class Y
shareholders of the fund who wish to exchange all or a
portion of their shares for shares of the respective
Class in any of the funds identified above may do so
without imposition of any charge.
Additional Information Regarding the Exchange
Privilege. Although the exchange privilege is an
important benefit, excessive exchange transactions can
be detrimental to the fund's performance and its
shareholders. The manager may determine that a pattern
of frequent exchanges is excessive and contrary to the
best interests of the fund's other shareholders. In
this event, the fund may, at its discretion, decide to
limit additional purchases and/or exchanges by the
shareholder. Upon such a determination, the fund will
provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the
exchange privilege and during the 15 day period the
shareholder will be required to (a) redeem his or her
shares in the fund or (b) remain invested in the fund
or exchange into any of the funds of the Smith Barney
mutual funds ordinarily available, which position the
shareholder would be expected to maintain for a
significant period of time. All relevant factors will
be considered in determining what constitutes an
abusive pattern of exchanges.
Certain shareholders may be able to exchange shares by
telephone. See ''Redemption of Shares-Telephone
Redemptions and Exchange Program.'' Exchanges will be
processed at the net asset value next determined.
Redemption procedures discussed below are also
applicable for exchanging shares, and exchanges will
be made upon receipt of all supporting documents in
proper form. If the account registration of the
shares of the fund being acquired is identical to the
registration of the shares of the fund exchanged, no
signature guarantee is required. An exchange involves
a taxable redemption of shares, subject to the tax
treatment described in "Dividends, Distributions and
Taxes" below, followed by a purchase of shares of a
different fund. Before exchanging shares, investors
should read the current prospectus describing the
shares to be acquired. The fund reserves the right to
modify or discontinue exchange privileges upon 60
days' prior notice to shareholders.
Additional Information Regarding Telephone Redemption
and Exchange Program
Neither the fund nor its agents will be liable for
instructions communicated by telephone that are
reasonably believed to be genuine. The fund or its
agents will employ procedures designed to verify the
identity of the caller and legitimacy of instructions
(for example, a shareholder's name and account number
will be required and phone calls may be recorded).
The fund reserves the right to suspend, modify or
discontinue the telephone redemption and exchange
program or to impose a charge for this service at any
time following at least seven (7) days' prior notice
to shareholders.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
PERFORMANCE INFORMATION
From time to time, the fund may quote total return of
a class in advertisements or in reports and other
communications to shareholders. The fund may include
comparative performance information in advertising or
marketing the fund's shares. Such performance
information may include data from the following
industry and financial publications: Barron's,
Business Week, CDA Investment Technologies, Inc.,
Changing Times, Forbes, Fortune, Institutional
Investor, Investor's Business Daily, Money,
Morningstar Mutual Fund Values, The New York Times,
USA Today and The Wall Street Journal.
Yield and Equivalent Taxable Yield
A Class' 30-day yield figure described below is
calculated according to a formula prescribed by the
SEC. The formula can be expressed as follows:
YIELD =2 [(a-b +1)6-1]
cd
Where: a = dividends and interest earned
during the period.
b = expenses accrued for the
period (net of reimbursement).
c = the average daily number of
shares outstanding during the
period that were entitled to
receive dividends.
d = the maximum offering price per
share on the last day of the period.
For the purpose of determining the interest earned
(variable "a'' in the formula) on debt obligations
that were purchased by the fund at a discount or
premium, the formula generally calls for amortization
of the discount or premium. The amortization schedule
will be adjusted monthly to reflect changes in the
market values of the debt obligations.
The fund's equivalent taxable 30-day yield for a Class
of shares is computed by dividing that portion of the
Class' 30-day yield which is tax-exempt by one minus a
stated income tax rate and adding the product to that
portion, if any, of the Class' yield that is not tax-
exempt.
The yields on municipal securities are dependent upon
a variety of factors, including general economic and
monetary conditions, conditions of the municipal
securities market, size of a particular offering,
maturity of the obligation offered and rating of the
issue. Investors should recognize that in periods of
declining interest rates the fund's yield for each
Class of shares will tend to be somewhat higher than
prevailing market rates, and in periods of rising
interest rates the fund's yield for each Class of
shares will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new
money to the fund from the continuous sale of its
shares will likely be invested in portfolio
instruments producing lower yields than the balance of
the fund's portfolio, thereby reducing the current
yield of the fund. In periods of rising interest
rates, the opposite can be expected to occur.
The fund's yield for Class A, Class B and Class L
shares for the 30-day period ended April 30, 2000 was
5.22%, 4.90% and 4.80%, respectively. The equivalent
taxable yield for Class A, Class B and Class L shares
for that same period was 9.50%, 8.91% and 8.73%,
respectively, assuming the payment of Federal income
taxes at a rate of 39.6%.
Average Annual Total Return
"Average annual total return," as described below, is
computed according to a formula prescribed by the SEC.
The formula can be expressed as follows:
P (1+T)n = ERV
Where: P = a hypothetical
initial payment of $1,000.
T = average annual total
return.
n = number of years.
ERV = Ending Redeemable Value
of a hypothetical $1,000
investment made at the
beginning of a 1-, 5-,
or 10-year period at the
end of a 1-, 5-, or 10-
year period (or
fractional portion
thereof), assuming
reinvestment of all
dividends and
distributions.
The fund's average annual total return for Class A
shares assuming the maximum applicable sales charge
was as follows for the periods indicated (reflecting
the waiver of the fund's investment advisory and
administration fees and reimbursement of expenses):
(6.87)% for the one-year period ended April 30,
2000.
4.69% for the five-year period ended April 30,
2000.
5.78% per annum during the period from the
fund's commencement of operations on
May 23, 1994 through April 30, 2000.
A Class' average annual total return assumes that the
maximum applicable sales charge or deferred sales
charge assessed by the fund has been deducted from the
hypothetical investment. If the maximum 4.00% sales
charge had not been deducted, Class A's average annual
total return would have been (3.01)%, 5.55%, and
6.51%, respectively, for those same periods.
The fund's average annual total return for Class B
shares assuming the maximum applicable deferred sales
charge was as follows for the periods indicated
(reflecting the waiver of the fund's investment
advisory and administration fees and reimbursement of
expenses):
(7.66)% for the one-year period ended April 30,
2000.
4.82 for the five-year period ended April 30,
2000.
5.96% per annum during the period from the
fund's commencement of operations on
May 23, 1994 through April 30, 2000.
If the maximum applicable deferred sales charge had
not been deducted at the time of redemption, Class B's
average annual total return would have been (3.52)%,
4.99%, and 5.96%, respectively, for the same periods.
The fund's average annual total return for Class L
shares assuming the maximum applicable deferred sales
charge was as follows for the periods indicated
(reflecting the waiver of the fund's investment
advisory and administration fees and reimbursement of
expenses):
(5.43)% for the one-year period ended April 30,
2000.
4.37% per annum during the period from the
fund's commencement of operations on
May 16, 1995 through April 30, 2000.
If the maximum applicable deferred sales charge had
not been deducted at the time of redemption, Class L's
average annual total return would have been (3.55)%
and 4.57%, respectively, for the same periods.
There is no performance information for Class Y shares
because none were outstanding for the periods
presented.
Aggregate Total Return
"Aggregate total return" represents the cumulative
change in the value of an investment in the Class for
the specified period and is computed by the following
formula:
ERV-P
P
Where: P = a hypothetical initial payment
of $10,000.
ERV = Ending Redeemable Value of a
hypothetical $10,000
investment made at the
beginning of a 1-, 5-, or 10-
year period at the end of a 1-
, 5-, or 10-year period (or
fractional portion thereof),
assuming reinvestment of all
dividends and distributions.
The fund's aggregate total return for Class A shares
was as follows for the periods indicated (reflecting
the waiver of the fund's investment advisory and
administration fees and reimbursement of expenses):
(6.87)% for the one-year period ended April 30,
2000.
25.75% for the five-year period ended April 30,
2000.
39.65% for the period from the fund's
commencement of operations on May 23, 1994
through April 30, 2000.
Class A's aggregate total return assumes that the
maximum applicable sales charge or maximum applicable
deferred sales charge has been deducted from the
investment. If the maximum sales charge had not been
deducted at the time of purchase, Class A's aggregate
total return for the same periods would have been
(3.01)%, 30.98%, and 45.50%, respectively.
The fund's aggregate total return for Class B shares
was as follows for the periods indicated (reflecting
the waiver of the fund's investment advisory and
administration fees and reimbursement of expenses):
(7.66)% for the one-year period ended April 30,
2000.
26.56% for the five-year period ended April 30,
2000.
41.06% for the period from commencement of
operations on May 23, 1994 through April 30,
2000.
If the maximum applicable deferred sales charge had
not been deducted at the time of redemption, Class B's
aggregate total return for the same periods would have
been (3.52)%, 27.55% and 41.06%, respectively.
The fund's aggregate total return for Class L shares
was as follows for the period indicated (reflecting
the waiver of the fund's investment advisory and
administration fees and reimbursement of expenses):
(5.43)% for the one-year period ended April 30,
2000.
23.64% for the period from commencement of
operations on May 16, 1995 through
April 30, 2000.
If the maximum applicable deferred sales charge had
not been deducted at the time of redemption, Class L's
aggregate total return for the same periods would have
been (3.55)% and 24.84%, respectively.
There is no performance information for Class Y shares
because none were outstanding for the periods
presented.
Performance will vary from time to time depending on
market conditions, the composition of the fund's
portfolio and operating expenses and the expenses
exclusively attributable to the Class. Consequently,
any given performance quotation should not be
considered as representative of the Class' performance
for any specified period in the future. Because
performance will vary, it may not provide a basis for
comparing an investment in the Class with certain bank
deposits or other investments that pay a fixed yield
for a stated period of time. Investors comparing a
Class' performance with that of other mutual funds
should give consideration to the quality and maturity
of the respective investment companies' portfolio
securities.
It is important to note that the total return figures
set forth above are based on historical earnings and
are not intended to indicate future performance. Each
Class' net investment income changes in response to
fluctuations in interest rates and the expenses of the
fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. The fund's policy is to
declare and pay exempt-interest dividends monthly.
Dividends from net realized capital gains, if any,
will be distributed annually. The fund may also pay
additional dividends shortly before December 31 from
certain amounts of undistributed ordinary income and
capital gains, in order to avoid a Federal excise tax
liability. If a shareholder does not otherwise
instruct, exempt-interest dividends and capital gain
distributions will be reinvested automatically in
additional shares of the same Class at net asset
value, with no additional sales charge or deferred
sales charge.
The per share amounts of the exempt-interest dividends
on Class B and Class L shares will be lower than on
Class A and Class Y shares, mainly as a result of the
distribution fees applicable to Class B and Class L
shares. Similarly, the per share amounts of exempt-
interest dividends on Class A shares may be lower than
on Class Y shares, as a result of the service fee
attributable to Class A shares. Capital gain
distributions, if any, will be the same across all
Classes of fund shares (A, B, L and Y).
Taxes. The following is a summary of the material
United States federal income tax considerations
regarding the purchase, ownership and disposition of
shares of the fund. Each prospective shareholder is
urged to consult his own tax adviser with respect to
the specific federal, state and local consequences of
investing in the fund. The summary is based on the
laws in effect on the date of this SAI, which are
subject to change.
The fund and its investments
As described in the fund's prospectus, the fund is
designed to provide shareholders with current income
which is excluded from gross income for federal income
tax purposes and which is exempt from Oregon personal
income taxes. The fund is not intended to constitute
a balanced investment program and is not designed for
investors seeking capital gains or maximum tax-exempt
income irrespective of fluctuations in principal.
Investment in the fund would not be suitable for tax-
exempt institutions, qualified retirement plans, H.R.
10 plans and individual retirement accounts because
such investors would not gain any additional tax
benefit from the receipt of tax-exempt income.
The fund intends to continue to qualify to be treated
as a regulated investment company each taxable year
under the Code. To so qualify, the fund must, among
other things: (a) derive at least 90% of its gross
income in each taxable year from dividends, interest,
payments with respect to securities loans, and gains
from the sale or other disposition of stock or
securities or foreign currencies, or other income
(including, but not limited to, gains from options,
futures or forward contracts) derived with respect to
its business of investing in such stock, securities or
currencies; and (b) diversify its holdings so that, at
the end of each quarter of the fund's taxable year,
(i) at least 50% of the market value of the fund's
assets is represented by cash, securities of other
regulated investment companies, United States
government securities and other securities, with such
other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's
assets and not greater than 10% of the outstanding
voting securities of such issuer and (ii) not more
than 25% of the value of its assets is invested in the
securities (other than United States government
securities or securities of other regulated investment
companies) of any one issuer or any two or more
issuers that the fund controls and which are
determined to be engaged in the same or similar trades
or businesses or related trades or businesses.
As a regulated investment company, the fund will not
be subject to United States federal income tax on its
net investment income i.e., income other than its net
realized long- and short-term capital gain) and its
net realized long- and short-term capital gains, if
any, that it distributes to its shareholders, provided
an amount equal to at least 90% of its investment
company taxable income i.e., 90% of its taxable income
minus the excess, if any, of its net realized long-
term capital gains over its net realized short-term
capital losses (including any capital loss
carryovers), plus or minus certain other adjustments
as specified in the Code) and 90% of its net tax-
exempt income for the taxable year is distributed in
compliance with the Code's timing and other
requirements but will be subject to tax at regular
corporate rates on any taxable income or gains it does
not distribute.
At April 30, 2000, the unused capital loss carryovers
of the fund were approximately $435,000. For federal
income tax purposes, these amounts are available to be
applied against future realized capital gains, if any.
The carryovers expire as follows:
April 30, 2008
Carryforward Amount $435,000
The Code imposes a 4% nondeductible excise tax on the
fund to the extent it does not distribute by the end
of any calendar year at least 98% of its net
investment income for that year and 98% of the net
amount of its capital gains (both long-and short-term)
for the one-year period ending, as a general rule, on
October 31 of that year. For this purpose, however,
any income or gain retained by the fund that is
subject to corporate income tax will be considered to
have been distributed by year-end. In addition, the
minimum amounts that must be distributed in any year
to avoid the excise tax will be increased or decreased
to reflect any underdistribution or overdistribution,
as the case may be, from the previous year. The fund
anticipates it will pay such dividends and will make
such distributions as are necessary in order to avoid
the application of this tax.
If, in any taxable year, the fund fails to qualify as
a regulated investment company under the Code or fails
to meet the distribution requirement, it would be
taxed in the same manner as an ordinary corporation
and distributions to its shareholders would not be
deductible by the fund in computing its taxable
income. In addition, in the event of a failure to
qualify, the fund's distributions, to the extent
derived from the fund's current or accumulated
earnings and profits, would constitute dividends
(eligible for the corporate dividends-received
deduction) which are taxable to shareholders as
ordinary income, even though those distributions might
otherwise (at least in part) have been treated in the
shareholders' hands as tax-exempt interest. If the
fund fails to qualify as a regulated investment
company in any year, it must pay out its earnings and
profits accumulated in that year in order to qualify
again as a regulated investment company. In addition,
if the fund failed to qualify as a regulated
investment company for a period greater than one
taxable year, the fund may be required to recognize
any net built-in gains with respect to certain of its
assets (the excess of the aggregate gains, including
items of income, over aggregate losses that would have
been realized if it had been liquidated) in order to
qualify as a regulated investment company in a
subsequent year.
The fund's transactions in municipal bond index and
interest rate futures contracts and options on these
futures contracts (collectively "section 1256
contracts") will be subject to special provisions of
the Code (including provisions relating to "hedging
transactions" and "straddles") that, among other
things, may affect the character of gains and losses
realized by the fund (i.e., may affect whether gains
or losses are ordinary or capital), accelerate
recognition of income to the fund and defer fund
losses. These rules could therefore affect the
character, amount and timing of distributions to
shareholders. These provisions also (a) will require
the fund to mark-to-market certain types of positions
in its portfolio (i.e., treat them as if they were
closed out) and (b) may cause the fund to recognize
income without receiving cash with which to pay
dividends or make distributions in amounts necessary
to satisfy the distribution requirements for avoiding
income and excise taxes. The fund will monitor its
transactions, will make the appropriate tax elections
and will make the appropriate entries in its books and
records when it engages in these transactions in order
to mitigate the effect of these rules and prevent
disqualification of the fund as a regulated investment
company.
All section 1256 contracts held by the fund at the end
of its taxable year are required to be marked to their
market value, and any unrealized gain or loss on those
positions will be included in the fund's income as if
each position had been sold for its fair market value
at the end of the taxable year. The resulting gain or
loss will be combined with any gain or loss realized
by the fund from positions in section 1256 contracts
closed during the taxable year. Provided such
positions were held as capital assets and were not
part of a "hedging transaction" nor part of a
"straddle," 60% of the resulting net gain or loss will
be treated as long-term capital gain or loss, and 40%
of such net gain or loss will be treated as short-term
capital gain or loss, regardless of the period of time
the positions were actually held by the fund.
Taxation of Shareholders
Because the fund will distribute exempt-interest
dividends, interest on indebtedness incurred by a
shareholder to purchase or carry fund shares is not
deductible for Federal income tax purposes and Oregon
personal income tax purposes. If a shareholder
receives exempt-interest dividends with respect to any
share and if such share is held by the shareholder for
six months or less, then, for Federal income tax
purposes, any loss on the sale or exchange of such
share will, to the extent of exempt-interest
dividends, be disallowed. In addition, the Code may
require a shareholder, if he or she receives exempt-
interest dividends, to treat as Federal taxable income
a portion of certain otherwise non-taxable social
security and railroad retirement benefit payments.
Furthermore, that portion of any exempt-interest
dividend paid by the fund which represents income
derived from private activity bonds held by the fund
may not retain its Federal tax-exempt status in the
hands of a shareholder who is a "substantial user" of
a facility financed by such bonds or a "related
person" thereof. Moreover, some or all of the fund's
dividends may be a specific preference item, or a
component of an adjustment item, for purposes of the
Federal individual and corporate alternative minimum
taxes. In addition, the receipt of the fund's
dividends and distributions may affect a foreign
corporate shareholder's Federal "branch profits" tax
liability and Federal "excess net passive income" tax
liability of a shareholder of a Subchapter S
corporation. Shareholders should consult their own tax
advisors to determine whether they are (a) substantial
users with respect to a facility or related persons to
such users within the meaning of the Code or (b)
subject to a federal alternative minimum tax, the
Federal branch profits tax or the Federal "excess net
passive income" tax.
The fund does not expect to realize a significant
amount of capital gains. Net realized short-term
capital gains are taxable to a United States
shareholder as ordinary income, whether paid in cash
or in shares. Distributions of net-long-term capital
gains, if any, that the fund designates as capital
gains dividends are taxable as long-term capital
gains, whether paid in cash or in shares and
regardless of how long a shareholder has held shares
of the fund.
Upon the sale or exchange of his shares, a shareholder
will realize a taxable gain or loss equal to the
difference between the amount realized and his basis
in his shares. Such gain or loss will be treated as
capital gain or loss, if the shares are capital assets
in the shareholder's hands, and will be long-term
capital gain or loss if the shares are held for more
than one year and short-term capital gain or loss if
the shares are held for one year or less. Any loss
realized on a sale or exchange will be disallowed to
the extent the shares disposed of are replaced,
including replacement through the reinvesting of
dividends and capital gains distributions in the fund,
within a 61-day period beginning 30 days before and
ending 30 days after the disposition of the shares. In
such a case, the basis of the shares acquired will be
increased to reflect the disallowed loss. Any loss
realized by a shareholder on the sale of a fund share
held by the shareholder for six months or less (to the
extent not disallowed pursuant to the six-month rule
described above relating to exempt-interest dividends)
will be treated for Federal income tax purposes as a
long-term capital loss to the extent of any
distributions or deemed distributions of long-term
capital gains received by the shareholder with respect
to such share.
If a shareholder incurs a sales charge in acquiring
shares of the fund, disposes of those shares within 90
days and then acquires shares in a mutual fund for
which the otherwise applicable sales charge is reduced
by reason of a reinvestment right (e.g., an exchange
privilege), the original sales charge will not be
taken into account in computing gain or loss on the
original shares to the extent the subsequent sales
charge is reduced. Instead, the disregarded portion
of the original sales charge will be added to the tax
basis in the newly acquired shares. Furthermore, the
same rule also applies to a disposition of the newly
acquired shares made within 90 days of the second
acquisition. This provision prevents a shareholder
from immediately deducting the sales charge by
shifting his or her investment in a family of mutual
funds.
Backup Withholding. The fund may be required to
withhold, for United States Federal income tax
purposes, 31% of (a) taxable dividends and
distributions and (b) redemption proceeds payable to
shareholders who fail to provide the fund with their
correct taxpayer identification number or to make
required certifications, or who have been notified by
the IRS that they are subject to backup withholding.
Certain shareholders are exempt from backup
withholding. Backup withholding is not an additional
tax and any amount withheld may be credited against a
shareholder's United States federal income tax
liabilities.
Notices. Shareholders will be notified annually by
the fund as to the Federal income tax and Oregon
personal income tax status of the dividends and
distributions made by the fund to its shareholders.
These statements also will designate the amount of
exempt-interest dividends that is a preference item
for purposes of the Federal individual and corporate
alternative minimum taxes. The dollar amount of
dividends from gross income for Federal income tax
purposes and exempt from Oregon personal income
taxation and the dollar amount of dividends subject to
Federal income taxation and Oregon personal income
taxation, if any, will vary for each shareholder
depending upon the size and duration of each
shareholder's investment in the fund. To the extent
the fund earns taxable net investment income, it
intends to designate as taxable dividends the same
percentage of each day's dividend as its taxable net
investment income bears to its total net investment
income earned on that day.
The foregoing is only a summary of certain material
tax consequences affecting the fund and its
shareholders. Shareholders are advised to consult
their own tax advisers with respect to the particular
tax consequences to them of an investment in the fund.
ADDITIONAL INFORMATION
The Fund is a business trust established under the
laws of the Commonwealth of Massachusetts pursuant to
a Master Trust Agreement dated May 10, 1994. The Fund
commenced operations on May 23, 1994 under the name
Smith Barney Shearson Oregon Municipals Fund. On
October 14, 1994, the Fund changed its name to Smith
Barney Oregon Municipals Fund.
Under Massachusetts's law, shareholders could, under
certain circumstances, be held personally liable for
the obligations of the fund. The Master Trust
Agreement disclaims shareholder liability for acts or
obligations of the fund, however, and requires that
notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by
the fund or a trustee. The Master Trust Agreement
provides for indemnification from fund property for
all losses and expenses of any shareholder held
personally liable for the obligations of the fund.
Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to
circumstances in which the fund itself would be unable
to meet its obligations, a possibility which
management of the fund believes is remote. Upon
payment of any liability incurred by the fund, a
shareholder paying such liability will be entitled to
reimbursement from the general assets of the fund.
The trustees intend to conduct the operation of the
fund in such ways so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities
of the fund.
Description of Shares
The Master Trust Agreement of the fund permits the
trustees of the fund to issue an unlimited number of
full and fractional shares of a class and to divide or
combine the shares into a greater or lesser number of
shares without thereby changing the proportionate
beneficial interests in the fund. Each share in the
fund represents an equal proportional interest in the
fund with each other share. Shareholders of the fund
are entitled upon its liquidation to share pro rata in
its net assets available for distribution. No
shareholder of the fund has any preemptive or
conversion rights. Shares of the fund are fully paid
and non-assessable.
Pursuant to the Master Trust Agreement, the fund's
trustees may authorize the creation of additional
series of shares (the proceeds of which would be
invested in separate, independently managed
portfolios) and additional classes of shares within
any series (which would be used to distinguish among
the rights of different categories of shareholders, as
might be required by future regulations or other
unforeseen circumstances).
Voting Rights
The shareholders of the fund are entitled to a full
vote for each full share held (and a fractional vote
for any fractional share held). The trustees of the
fund have the power to alter the number and the terms
of office of the trustees, and have terms of unlimited
duration (subject to certain removal procedures) and
may appoint their own successors, provided at least a
majority of the trustees at all times have been
elected by the shareholders of the fund. The voting
rights of the shareholders of the fund are not
cumulative, so that the holders of more than 50% of
the shares can, if they choose, elect all of the
trustees of the fund; the holders of the remaining
shares of the fund would be unable to elect any of the
trustees.
FINANCIAL STATEMENTS
The fund's annual report for the fiscal year ended
April 30, 2000 is incorporated herein by reference in
its entirety. The annual report was filed on July 7,
2000, Accession Number 50146-00-5711.
OTHER INFORMATION
In an industry where the average portfolio manager has
seven years of experience (source: ICI, 1998), the
portfolio managers of Smith Barney mutual funds
average 21 years in the industry and 15 years with the
firm.
Smith Barney mutual funds offers more than 60 mutual
funds. We understand that many investors prefer an
active role in allocating the mix of funds in their
portfolio, while others want the asset allocation
decisions to be made by experienced managers.
That's why we offer four "styles" of fund management
that can be tailored to suit each investor's unique
financial goals.
Style Pure Series
Our Style Pure Series funds stay fully invested
within their asset class and investment style,
enabling investors to make asset allocation
decisions in conjunction with their Salomon
Smith Barney Financial Consultant.
Classic Investor Series
Our Classic Investor Series funds offer a range
of equity and fixed income strategies that seek
to capture opportunities across asset classes
and investment styles using disciplined
investment approaches.
The Concert Allocation Series
As a fund of funds, investors can select a
Concert Portfolio that may help their investment
needs. As needs change, investors can easily
choose another long-term, diversified investment
from our Concert family.
Special Discipline Series
Our Special Discipline Series funds are designed
for investors who are looking beyond more
traditional market categories: from natural
resources to a roster of state-specific
municipal funds.
APPENDIX A
Description of S&P and Moody's ratings:
S&P Ratings for Municipal Bonds
S&P's Municipal Bond ratings cover obligations of
states and political subdivisions. Ratings are
assigned to general obligation and revenue bonds.
General obligation bonds are usually secured by all
resources available to the municipality and the
factors outlined in the rating definitions below are
weighed in determining the rating. Because revenue
bonds in general are payable from specifically pledged
revenues, the essential element in the security for a
revenue bond is the quantity and quality of the
pledged revenues available to pay debt service.
Although an appraisal of most of the same factors that
bear on the quality of general obligation bond credit
is usually appropriate in the rating analysis of a
revenue bond, other factors are important, including
particularly the competitive position of the municipal
enterprise under review and the basic security
covenants. Although a rating reflects S&P's judgment
as to the issuer's capacity for the timely payment of
debt service, in certain instances it may also reflect
a mechanism or procedure for an assured and prompt
cure of a default, should one occur, i.e., an
insurance program, Federal or state guarantee or the
automatic withholding and use of state aid to pay the
defaulted debt service.
AAA
Prime - These are obligations of the highest quality.
They have the strongest capacity for timely payment
of debt service.
General Obligation Bonds - In a period of economic
stress, the issuers will suffer the smallest declines
in income and will be least susceptible to autonomous
decline. Debt burden is moderate. A strong revenue
structure appears more than adequate to meet future
expenditure requirements. Quality of management
appears superior.
Revenue Bonds - Debt service coverage has been, and is
expected to remain, substantial. Stability of the
pledged revenues is also exceptionally strong, due to
the competitive position of the municipal enterprise
or to the nature of the revenues. Basic security
provisions (including rate covenant, earnings test for
issuance of additional bonds, and debt service reserve
requirements) are rigorous. There is evidence of
superior management.
AA
High Grade - The investment characteristics of general
obligation and revenue bonds in this group are only
slightly less marked than those of the prime quality
issues. Bonds rated "AA'' have the second strongest
capacity for payment of debt service.
A
Good Grade - Principal and interest payments on bonds
in this category are regarded as safe. This rating
describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings
because:
General Obligation Bonds - There is some weakness,
either in the local economic base, in debt burden, in
the balance between revenues and expenditures, or in
quality of management. Under certain adverse
circumstances, any one such weakness might impair the
ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds - Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could
show some variations because of increased competition
or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent.
Management performance appears adequate.
BBB
Medium Grade - Of the investment grade ratings, this
is the lowest.
General Obligation Bonds - Under certain adverse
conditions, several of the above factors could
contribute to a lesser capacity for payment of debt
service. The difference between "A'' and "BBB"
ratings is that the latter shows more than one
fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only
one deficiency among the factors considered.
Revenue Bonds - Debt coverage is only fair. Stability
of the pledged revenues could show substantial
variations, with the revenue flow possibly being
subject to erosion over time. Basic security
provisions are no more than adequate. Management
performance could be stronger.
BB, B, CCC and CC
Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominately speculative with respect to
capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the
highest degree of speculation. While such bonds will
likely have some quality and protective
characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse
conditions.
C
The rating C is reserved for income bonds on which no
interest is being paid.
D
Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition
of a plus or a minus sign, which is used to show
relative standing within the major rating categories,
except in the AAA-Prime Grade category.
S&P Ratings for Municipal Notes
Municipal notes with maturities of three years or less
are usually given note ratings (designated SP-1, -2 or
-3) by S&P to distinguish more clearly the credit
quality of notes as compared to bonds. Notes rated
SP-1 have a very strong or strong capacity to pay
principal and interest. Those issues determined to
possess overwhelming safety characteristics are given
the designation of SP-1+. Notes rated SP-2 have a
satisfactory capacity to pay principal and interest.
Moody's Ratings for Municipal Bonds
Aaa
Bonds that are Aaa are judged to be of the best
quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge.''
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure.
While the various protective elements are likely to
change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position
of such issues.
Aa
Bonds that are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds
because margins of protection may not be as large as
in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be
other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A
Bonds that are rated A possess many favorable
investment attributes and are to be considered as
upper medium-grade obligations. Factors giving
security to principal and interest are considered
adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa
Bonds that are rated Baa are considered as medium-
grade obligations, i.e., they are neither highly
protected nor poorly secured; interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Ba
Bonds that are rated Ba are judged to have speculative
elements; their future cannot be considered as well
assured. Often the protection of interest and
principal payments may be very moderate and thereby
not well safeguarded during both good and bad times
over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds that are rated B generally lack characteristics
of the desirable investment. Assurance of interest
and principal payments or of maintenance of other
terms of the contract over any long period of time may
be small.
Caa
Bonds that are rated Caa are of poor standing. These
issues may be in default or present elements of danger
may exist with respect to principal or interest.
Ca
Bonds that are rated Ca represent obligations that are
speculative in a high degree. These issues are often
in default or have other marked short-comings.
C
Bonds that are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
Moody's Ratings for Municipal Notes
Moody's ratings for state and municipal notes and
other short-term loans are designated Moody's
Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment
Grade (VMIG). This distinction is in recognition of
the differences between short- and long-term credit
risk. Loans bearing the designation MIG 1 or VMIG 1
are of the best quality, enjoying strong protection by
established cash flows of funds for their servicing,
from established and broad-based access to the market
for refinancing, or both. Loans bearing the
designation MIG 2 or VMIG 2 are of high quality, with
margins of protection ample although not as large as
the preceding group. Loans bearing the designation
MIG 3 or VMIG 3 are of favorable quality, with all
security elements accounted for but lacking the
undeniable strength of the preceding grades.
Liquidity and cash flow may be narrow and market
access for refinancing is likely to be less well
established.
Description of S&P A-1+ and A-1 Commercial Paper
Rating
The rating A-1+ is the highest, and A-1 the second
highest, commercial paper rating assigned by S&P.
Paper rated A-1+ must have either the direct credit
support of an issuer or guarantor that possesses
excellent long-term operating and financial strengths
combined with strong liquidity characteristics
(typically, such issuers or guarantors would display
credit quality characteristics which would warrant a
senior bond rating of "AA-'' or higher), or the direct
credit support of an issuer or guarantor that
possesses above-average long-term fundamental
operating and financing capabilities combined with
ongoing excellent liquidity characteristics. Paper
rated A-1 by S&P has the following characteristics:
liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated "A'' or
better; the issuer has access to at least two
additional channels of borrowing; basic earnings and
cash flow have an upward trend with allowance made for
unusual circumstances; typically, the issuer's
industry is well established and the issuer has a
strong position within the industry; and the
reliability and quality of management are
unquestioned.
Description of Moody's Prime-1 Commercial Paper Rating
The rating Prime-1 is the highest commercial paper
rating assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's
industry or industries and an appraisal of
speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products
in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term
debt; (6) trend of earnings over a period of ten
years; (7) financial strength of a parent company and
the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may
be present or may arise as a result of public interest
questions and preparations to meet such obligations.
SMITH BARNEY OREGON MUNICIPALS FUND
Statement of
Additional
Information
August 28,2000
Smith Barney Oregon Municipals Fund
388 Greenwich Street
New York, NY 10013
SALOMON
SMITH BARNEY
A
Member of Citigroup [Symbol]
2
PART C-Other Information
Item 23. Exhibits
All references are to the Registrant's registration
statement on Form N-1A as filed with the Securities
and Exchange Commission ("SEC") on March 11, 1994 (the
"Registration Statement") (File Nos. 33-52643 and 811-
07149).
(a) (1) Registrant's Master Trust Agreement, dated
March 10, 1994, is incorporated by reference to the
Registration Statement.
(a) (2) Amendments to Master Trust Agreement dated
October 14, 1994 and November 7, 1994, respectively,
are incorporated by reference to Post-Effective
Amendment No. 3 as filed with the SEC on November 23,
1994 ("Post-Effective Amendment No. 3").
(a) (3) Amendment to Registrant's Master Trust
Agreement dated June 12, 1998, is incorporated by
reference to Post-Effective Amendment No. 7 as filed
with the SEC on August 28, 1998 ("Post-Effective
Amendment No.7").
(b) (1) Registrant's By-Laws, dated March 10,
1994, are incorporated by reference to the
Registration Statement.
(c) Registrant's forms of stock certificates are
incorporated by reference to Pre-Effective Amendment
No. 3 as filed with the SEC on May 23, 1994 ("Pre-
Effective Amendment No. 3").
(d) (1) Investment Advisory Agreement between the
Registrant and Greenwich Street Advisors, dated May
23, 1994, is incorporated by reference to Pre-
Effective Amendment No. 3.
(d) (2) Transfer and Assignment of Investment
Advisory Agreement between the Registrant and Smith
Barney Mutual Funds Management Inc., dated November 7,
1994, is incorporated by reference to Post-Effective
Amendment No. 4 as filed with the SEC on July 6, 1995
("Post-Effective Amendment No. 4").
(e) (1) Distribution Agreement between the
Registrant and Smith Barney Shearson Inc., dated May
23, 1994, is incorporated by reference to Pre-
Effective Amendment No. 3.
(e) (2) Form of Distribution Agreement between the
Registrant and CFBDS, Inc. is incorporated by
reference to Post-Effective Amendment No. 8 as filed
with the SEC on June 18, 1999 ("Post-Effective
Amendment No. 8")
(e) (3) Broker Dealer Contract is incorporated by
reference to Post-Effective Amendment No. 8.
(e)(4)Form of Distribution Agreement with Salomon
Smith Barney Inc. is filed herein.
(f) Not Applicable.
(g) Form of Custody Agreement between the Registrant
and PNC Bank, National Association, is incorporated by
reference to Post-Effective Amendment No. 4.
(h) (1) Administration Agreement between the
Registrant and Smith, Barney Advisers, Inc., dated May
23, 1994, is incorporated by reference to Pre-
Effective Amendment No. 3.
(h) (2) Transfer Agency Agreement between the
Registrant and First Data Investor Services Group,
Inc. (formerly known as The Shareholder Services
Group, Inc.), dated May 23, 1994, is incorporated by
reference to Pre-Effective Amendment No. 3.
(h)(3) Transfer Agency Agreement dated October 1, 1999
between the Registrant and Citi Fiduciary Trust
Company f/k/a Smith Barney Private Trust Company) is
filed herein.
(h)(4) Sub-Transfer Agency Agreement dated October 1,
1999 between Citi Fiduciary Trust Company ( f/k/a
Smith Barney Private Trust Company) and PFPC Global
Fund Services (f/k/a First Data Investor Services
Group, Inc.) is filed herein.
(i) Not Applicable.
(j) Consent of Independent Auditors is filed herein.
(k) Not Applicable.
(l) Purchase Agreement between the Registrant and
Smith Barney Shearson Inc. is incorporated by
reference to Pre-Effective Amendment No. 3.
(m) (1) Amended Services and Distribution Plan
pursuant to Rule 12b-1 between the Registrant and
Smith Barney, Inc. is incorporated by reference to
Post-Effective Amendment No. 3.
(m)(2) Form of Amended Service and Distribution
Plan pursuant to Rule 12b-1 between the Registrant and
Salomon Smith Barney Inc. is incorporated by reference
to Post-Effective Amendment No. 8.
(m)(3) Form of Amended and Restated Shareholder
Services and Distribution Plan pursuant to Rule 12b-1
of Registrant is filed herein.
(n) Financial Data Schedule is filed herein.
(o) Form of Registrant's Amended Rule 18f-3(d)
Multiple Class Plan is incorporated by reference to
Post-Effective Amendment No. 7.
(p) Code of Ethics - North America is filed herein.
Item 24. Persons Controlled by or Under Common
Control with Registrant
None.
Item 25. Indemnification
The response to this item is incorporated by
reference to Pre-Effective Amendment No. 1.
Item 26. Business and Other Connections of
Investment Adviser
Investment Adviser - - SSB Citi Fund Management LLC
(Successor to SSBC Fund Management Inc.)
SSB Citi Fund Management LLC ("SSB Citi")
(Successor to SSBC Fund Management Inc. formerly known
as
Mutual Management Corp.) was incorporated in December
1968
under the laws of the State of Delaware and converted
to a
Delaware limited liability company in 1999. SSB Citi
is a wholly
owned subsidiary of Salomon Smith Barney Holdings Inc.
(formerly known as Smith Barney Holdings Inc.), which
in
turn is a wholly owned subsidiary of Citigroup Inc.
SSB Citi is registered as an investment adviser
under the Investment Advisers Act of 1940 (the
"Advisers
Act") and has, through its predecessors, been in the
investment counseling business since 1968.
The list required by this Item 26 of the officer and
directors of SSB Citi together with information as to
any other
business, profession, vocation or employment of a
substantial nature engaged in by such officer and
directors
during the past two fiscal years, is incorporated by
reference to Schedules A and D of Form ADV filed by
SSB Citi
pursuant to the Advisers Act (SEC File No. 801-8314).
Item 27. Principal Underwriters
(a)
Salomon Smith Barney, Inc., ("Salomon Smith Barney")
the Registrant's Distributor,
is also the distributor for the following Smith Barney
funds: Concert Investment Series, Consulting Group
Capital
Markets Funds, Greenwich Street Series Fund, Smith
Barney
Adjustable Rate Government Income Fund, Smith Barney
Aggressive Growth Fund Inc., Smith Barney Appreciation
Fund
Inc., Smith Barney Arizona Municipals Fund Inc., Smith
Barney California Municipals Fund Inc., Smith Barney
Concert
Allocation Series Inc., Smith Barney Equity Funds,
Smith
Barney Fundamental Value Fund Inc., Smith Barney
Funds,
Inc., Smith Barney Income Funds, Smith Barney
Institutional
Cash Management Fund, Inc., Smith Barney Investment
Funds
Inc., Smith Barney Investment Trust, Smith Barney
Managed
Governments Fund Inc., Smith Barney Massachusetts
Municipals Fund,
Smith Barney Money Funds, Inc., Smith Barney Muni
Funds, Smith
Barney Municipal Money Market Fund, Inc., Smith Barney
New
Jersey Municipals Fund Inc., Smith Barney Oregon
Municipals
Fund Inc., Smith Barney Principal Return Fund,
Smith Barney Sector Series Inc., Smith Barney
Small Cap Blend Fund, Inc., Smith Barney
Telecommunications
Trust, Smith Barney Variable Account Funds, Smith
Barney
World Funds, Inc., Travelers Series Fund Inc., and
various
series of unit investment trusts.
In addition, Salomon Smith Barney is also the
distributor for the Centurion Funds, Inc.
(b) The information required by
this Item 27 with respect to each director, officer
and partner
of Salomon Smith Barney is incorporated by reference
to Schedule A of FORM BD filed by Salomon Smith Barney
pursuant to
the Securities Exchange Act of 1934 (SEC File No. 812-
8510).
(c) Not applicable.
Item 28. Location of Accounts and Records
(1) Smith Barney Oregon Municipals Fund
388 Greenwich Street
New York, New York 10013
(2) SSB Citi Fund Management LLC
388 Greenwich Street
New York, New York 10013
(3) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
(4) Citi Fiduciary Trust Company
388 Greenwich Street
New York, New York 10013
(5) PFPC Global Fund Services
P. O. Box 9699
Providence, RI 02940-9699
(6) Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933 and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized,
in the City of New York and State of New York, on the
23rd day of August, 2000.
SMITH BARNEY OREGON
MUNICIPALS FUND
By: /s/Heath B. McLendon
Health B. McLendon
Chairman of the Board
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Amendment to the
Registration Statement and the above Power of Attorney
has been signed below by the following persons in the
capacities and as of the dates indicated.
Signature Title
Date
/s/ Heath B. McLendon Chairman of the Board,
August 23, 2000
Heath B. McLendon President and Chief
Executive Officer
/s/Lewis E. Daidone Senior Vice President and
August 23, 2000
Lewis E. Daidone Treasurer, Chief Financial
and Accounting Officer
/s/Herbert Barg* Trustee
August 23, 2000
Herbert Barg
/s/Alfred J. Bianchetti*
Trustee
August 23, 2000
Alfred J. Bianchetti
/s/Martin Brody*
Trustee
August 23, 2000
Martin Brody
/s/Dwight B. Crane*
Trustee
August 23, 2000
Dwight B. Crane
/s/Burt N. Dorsett* Trustee
August 23, 2000
Burt N. Dorsett
/s/Elliot S. Jaffe* Trustee
August 23, 2000
Elliot S. Jaffe
/s/Stephen E. Kaufman* Trustee
August 23, 2000
Stephen E. Kaufman
/s/Joseph J. McCann* Trustee
August 23, 2000
Joseph J. McCann
/s/Cornelius C. Rose, Jr.*
Trustee
August 23, 2000
Cornelius C. Rose, Jr.
* Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant to power of attorney dated
August 14, 1996.
/s/ Heath B. McLendon
Heath B. McLendon
We, the undersigned, hereby severally constitute and
appoint Heath B. McLendon, Christina T. Sydor, Lewis
E. Daidone and Michael Kocur and each of them
individually, our true and lawful attorneys, with full
power to them and each of them to sign for us, and in
our hands and in the capacities indicated below, any
and all Registration Statements on behalf of the Smith
Barney Oregon Municipals Fund including any and all
Amendments thereto and to file the same, with all
exhibits thereto, and other documents therewith, with
the Securities and Exchange Commission, granting unto
said attorneys and each of them, acting alone, full
authority and power to do and perform each and every
act and thing requisite or necessary to be done in the
premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and
confirming all that said attorneys or any of them may
lawfully do or cause to be done by virtue thereof.
WITNESS our hands on the date set forth below.
Pursuant to the requirements of the Securities Act of
1933, as amended, this Power of Attorney has been
signed below by the following persons in the
capacities and as of the dates indicated.
Signature:
Title:
Date:
/s/ Heath B. McLendon
Chairman of the
Board
August 23, 2000
Heath B. McLendon
(Chief Executive
Officer)
/s/ Lewis E. Daidone
Senior Vice
President and
August 23, 2000
Lewis E. Daidone
Treasurer (Chief
Financial
and Accounting
Officer)
Signature:
Title:
Date:
/s/ Herbert Barg
Trustee
August 23, 2000
Herbert Barg
/s/ Alfred J.
Bianchetti
Trustee
August 23, 2000
Alfred J. Bianchetti
/s/ Martin Brody
Trustee
August 23, 2000
Martin Brody
/s/ Dwight B. Crane
Trustee
August 23, 2000
Dwight B. Crane
/s/ Burt N. Dorsett
Trustee
August 23, 2000
Burt N. Dorsett
/s/ Elliot S. Jaffe
Trustee
August 23, 2000
Elliot S. Jaffe
/s/ Stephen E.
Kaufman
Trustee
August 23, 2000
Stephen E. Kaufman
/s/ Joseph J. McCann
Trustee
August 23, 2000
Joseph J. McCann
/s/ Cornelius C.
Rose, Jr.
Trustee
August 23, 2000
Cornelius C. Rose,
Jr.
EXHIBIT INDEX
Exhibit No. Exhibit
(e)(4) Form of Distribution Agreement with
Salomon Smith Barney Inc.
(h)(3) Form of Transfer Agency Agreement
(h)(4) Form of Sub-Transfer Agency
Agreement
(j) Consent of KPMG LLP
(m)(3) Form of Amended and Restated
Shareholder Services and
Distribution Plan
(n) Financial Data Schedule
(p) Code of Ethics
Cover
