UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7149
Smith Barney Oregon Municipals Fund
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: April 30
Date of reporting period: April 30, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Annual Report to Stockholders is filed herewith.
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SMITH BARNEY
OREGON MUNICIPALS FUND
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CLASSIC SERIES | ANNUAL REPORT | APRIL 30, 2004
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed.(R) is a registered
service mark of Citigroup Global Markets Inc.
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NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
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WHAT'S INSIDE
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Letter from the Chairman ................................................... 1
Manager Overview ........................................................... 3
Fund Performance ........................................................... 9
Historical Performance ..................................................... 10
Schedule of Investments .................................................... 11
Statement of Assets and Liabilities ........................................ 19
Statement of Operations .................................................... 20
Statements of Changes in Net Assets ........................................ 21
Notes to Financial Statements .............................................. 22
Financial Highlights ....................................................... 30
Report of Independent Registered Public Accounting Firm .................... 33
Additional Information ..................................................... 34
Tax Information ............................................................ 38
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LETTER FROM THE CHAIRMAN
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[PHOTO OMITTED]
R. JAY GERKEN, CFA
Chairman, President and
Chief Executive Officer
Dear Shareholder,
The pronounced pick-up(1) in the economy during the past year from its sluggish
state in early 2003 triggered a sea change in the bond markets over the 12
months ended April 30, 2004.
The U.S. economy's quarterly pace of growth, which advanced over the recent two
quarters at a moderate pace, vastly improved since early last year. The
acceleration in the national economy also trickled down to a state level to an
extent. Even the U.S. labor market, which generated lackluster results
throughout much of the past year, grew significantly this past March by some
measures.(i) Although interest rates were on the decline earlier in the period,
the changing landscape in the economy and perceptions of the interest rate
environment triggered volatility in the bond markets and bond yields spiraled
upward, particularly toward the end of the period.
Given that the fund's manager had anticipated that the U.S. economy could begin
to pick up, the manager maintained a more defensive posture in the fund's
exposure to interest rate sensitivity versus prior periods when rates were
declining. Although this approach detracted from the fund's performance during
times when bond prices rose, it diminished some of the downward pricing
pressures on the portfolio when prices retreated and yields rose, such as in
April.
Please read on for a more detailed look at prevailing economic and market
conditions during the fund's fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected fund
performance.
(1) Source: Based upon gross domestic product data from the Bureau of Economic
Analysis (January 30, 2004). Gross domestic product is a market value of
goods and services produced by labor and property in a given country.
1 Smith Barney Oregon Municipals Fund | 2004 Annual Report
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The regulators appear to be
examining, among other things, the fund's response to market timing and
shareholder exchange activity, including compliance with prospectus disclosure
related to these subjects. The fund has been informed that the Adviser and its
affiliates are responding to those information requests, but are not in a
position to predict the outcome of these requests and investigations.
As always, thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
May 7, 2004
2 Smith Barney Oregon Municipals Fund | 2004 Annual Report
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MANAGER OVERVIEW
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[PHOTO OMITTED]
PETER M. COFFEY
Vice President and
Investment Officer
Special Shareholder Notice
Effective April 29, 2004, Smith Barney Class L shares were renamed Class C
shares. On February 2, 2004, initial sales charges on these shares were
eliminated.
Performance Review
For the 12 months ended April 30, 2004, Class A shares of the Smith Barney
Oregon Municipals Fund, excluding sales charges, returned 4.74%. In comparison
the unmanaged broad-based Lehman Brothers Municipal Bond Index(ii) returned
2.68% and its Oregon municipal bond component sub-index returned 1.10% for the
same period.(iii) The fund's Lipper peer group of Oregon municipal debt funds
category average returned 2.27% for the 12-month period, and the fund ranked
second among 22 funds in this category over the period.(1)
Certain investors may be subject to the federal Alternative Minimum Tax, and
state and local taxes may apply. Capital gains, if any, are fully taxable.
Please consult your personal tax adviser.
Market Snapshot
The municipal bond markets got off to a relatively strong start last spring
(2003) as the economy was still in a sluggish state. To help boost economic
activity, the Fed reduced its target for the federal funds rate(iv) in June,
which dropped to a four-decade low. However, bond prices retreated through the
early summer following comments from the Fed about its monetary policy and data
suggesting a pick-up in economic activity, which led to concerns about rising
interest rates (bond prices move opposite to anticipated interest rate
movements). When the summer came to a close, the broader bond markets stabilized
somewhat in response to the Fed's concerns about the lack of growth in
employment and lingering disinflation, and the Fed appeared to be in a holding
pattern.
(1) Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 12-month period ended April 30 2004, calculated
among the 22 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any, and excluding sales
charges.
3 Smith Barney Oregon Municipals Fund | 2004 Annual Report
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PERFORMANCE SNAPSHOT
AS OF APRIL 30, 2004
(excluding sales charges)
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6 Months 12 Months
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Class A Shares 1.72% 4.74%
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Lehman Brothers Municipal Bond Index 1.19% 2.68%
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Lipper Oregon Municipal Debt Funds
Category Average 0.92% 2.27%
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The performance shown represents past performance. Past performance is no
guarantee of future results and current performance may be higher or lower than
the performance shown above. Performance figures may reflect fee waivers and/or
expense reimbursements, if any. In the absence of fee waivers and/or
reimbursements, if any, the total return would be reduced. Principal value and
investment returns will fluctuate and investors' shares, when redeemed may be
worth more or less than their original cost. To obtain performance data current
to the most recent month-end, please visit our website at
www.smithbarneymutualfunds.com.
Class A share returns assume the reinvestment of income dividends and capital
gains distributions at net asset value and the deduction of all fund expenses.
Returns have not been adjusted to include sales charges that may apply when
shares are purchased or the deduction of taxes that a shareholder would pay on
fund distributions. Excluding sales charges, Class B shares returned 1.43% and
Class C shares returned 1.34% over the six months ended April 30, 2004.
Excluding sales charges, Class B shares returned 4.25% and Class C shares
returned 4.15% over the 12 months ended April 30, 2004.
Effective April 29, 2004, Smith Barney Class L shares were renamed Class C
shares. On February 2, 2004, initial sales charges on these shares were
eliminated.
All index performance reflects no deduction for fees, expenses or taxes. The
Lehman Brothers Municipal Bond Index is a broad measure of the municipal bond
market with maturities of at least one year. Please note that an investor cannot
invest directly in an index.
Lipper, Inc. is a major independent mutual-fund tracking organization. Returns
are based on the period ended April 30, 2004, calculated among the 23 funds for
the six-month period and among the 22 funds for the 12-month period, in the
fund's Lipper category including the reinvestment of dividends and capital
gains, if any, and excluding sales charges.
Certain investors may be subject to the federal Alternative Minimum Tax, and
state and local taxes may apply. Capital gains, if any, are fully taxable.
Please consult your personal tax adviser.
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Annual growth of real gross domestic product ("GDP")(v) for the fourth calendar
quarter of last year was below the spike we witnessed in the third quarter.
However, the fourth-quarter result significantly exceeded GDP levels early last
year. Despite the momentum behind the U.S. economy, during this quarter prices
of municipal bonds remained in a fairly narrow trading range as inflation
remained contained and the Fed appeared to be in a holding pattern.
4 Smith Barney Oregon Municipals Fund | 2004 Annual Report
Although the labor market has experienced protracted weakness over the past
year, strides were also even made on this front. Although the unemployment rate
did not change significantly this past March from February's level, U.S. job
growth for March considerably improved by some measures(i) as well as in April.
For the first calendar quarter of this year, according to preliminary estimates,
annual real GDP growth was in line with the strong fourth-quarter 2003 results
although below many investors' estimates.(v)
Like many other states, Oregon continued to face budgetary challenges, although
Standard & Poor's recent rating on the Commonwealth's long-term debt obligations
was "AA-" with a "stable" outlook.(vi)
2004: Investors Question the Fed's Patience
Bond investors spent the first quarter of 2004 dissecting language from the Fed,
which stated in late January that it "believes that it can be patient in
removing its policy accommodation."(vii) However, the fact that the Fed did not
include the phrase "considerable period" in this statement as it had before led
many investors to question when the Fed's patience would run out and that it
would seek to raise interest rates. Furthermore, in his recent testimony,(viii)
Federal Reserve Chairman Alan Greenspan said the federal funds rate "must rise
at some point to prevent pressures on price inflation from eventually emerging."
However, in the testimony, the Fed Chairman noted, "... the protracted period of
monetary accommodation has not fostered an environment in which broad-based
inflation pressures appear to be building." Investors' reaction to the Fed's
comments exerted downward pressure on bond prices, resulting in the sharp rise
in yields during April, the last month of the reporting period.(ix)
Factors Influencing Fund Performance
While the Fed's recent comments about rates may have been a wakeup call to more
aggressively positioned bond investors, many of the thoughts conveyed by the Fed
have been in line with our thinking for some time. Over the period, we continued
to position the funds we manage accordingly. For example, to help mitigate the
effects of a possible rise in interest rates, we structured the portfolio
defensively in terms of the fund's duration (a measure of a portfolio's
sensitivity to interest rate movements). As of the period's close, the fund's
average maturity was approximately 17.72 years, while its average
life/call-adjusted effective maturity, which is adjusted to account for the
shorter call dates on our premium bonds (rather than the longer final maturity
dates on these callable issues), was 7.97 years.(x)
5 Smith Barney Oregon Municipals Fund | 2004 Annual Report
In rising-rate environments, the prices of shorter-term fixed-income obligations
have typically held up better than those on longer-term bonds. Rather than
commit a substantial portion of the fund's assets to low-yielding, short-term
instruments, the fund maintained an emphasis on longer-term, premium-priced
higher-coupon callable bonds for their favorable income streams and the reduced
market sensitivity provided by their above-market level coupons and shorter
effective maturities. The fund also continued to hold a short position in U.S.
Treasury futures to help hedge the portfolio against some of the effects of a
potential rise in interest rates.(xi) Although our conservative approach at
times limited the fund's full participation in market rallies, it helped reduce
the negative impact on the fund during times when bond prices declined, such as
during April.
The fund's assets were concentrated in revenue bonds, which are backed by
revenue streams of specific public works. In general, given their yields during
the period, we favored revenue bonds to many comparable-maturity state-backed
general obligation bonds because revenue bonds looked more attractive on a
risk-reward basis, in our opinion. Bonds in the corporate-backed industrial
development revenue and transportation (airline) sectors were among the
contributors to the fund's performance over the period. Although some isolated
security-specific factors somewhat detracted from the fund's returns, there
weren't any specific sectors that we could single out as significant detractors
to performance. The fund maintained more exposure to the education, hospitals,
general obligation, and transportation sectors, as well as significant exposure
to housing: multi-family and life care systems sectors, in comparison to other
sectors. However, rather than target specific industries, we invested in bonds
that we felt offered better overall relative values after taking into account
their yields in accordance with their credit risk.
We have maintained the view that the key to pursuing an effective offensive is
to develop a strong defense. Therefore, while no one can say for sure where
interest rates will head and bond prices fluctuate, given the recent economic
picture, as of the end of the period we continued to maintain a defensive
posture in regard to interest rate risk.
6 Smith Barney Oregon Municipals Fund | 2004 Annual Report
Thank you for your investment in the Smith Barney Oregon Municipals Fund. We
appreciate that you have entrusted us to manage your money and value our
relationship with you.
Sincerely,
/s/ Peter M. Coffey
Peter M. Coffey
Vice President and Investment Officer
May 7, 2004
7 Smith Barney Oregon Municipals Fund | 2004 Annual Report
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of April 30, 2004 and are subject to
change. Please refer to pages 11 through 15 for a list and percentage breakdown
of the fund's holdings.
The mention of sector breakdowns is for informational purposes only and should
not be construed as a recommendation to purchase or sell any securities. The
information provided regarding such sectors is not a sufficient basis upon which
to make an investment decision. Investors seeking financial advice regarding the
appropriateness of investing in any securities or investment strategies
discussed should consult their financial professional. Portfolio holdings are
subject to change at any time and may not be representative of the portfolio
manager's current or future investments. The fund's top five sector holdings as
of April 30, 2004 were: Education 19.3%; Hospitals 15.9%; General Obligations
15.4%; Transportation 10.6%; Housing: Multi-Family 8.8%. The fund's portfolio
composition is subject to change at any time.
RISKS: Keep in mind, the fund's investments are subject to interest rate and
credit risks. Lower-rated, higher yielding bonds known as "junk bonds" are
subject to greater credit risk, including the risk of default, than higher-rated
obligations. High-yield bonds involve greater credit and liquidity risks than
investment grade bonds. As a non-diversified fund, it can invest a larger
percentage of its assets in fewer issues than a diversified fund. This may
magnify the fund's losses from events affecting a particular issuer. The fund
may use derivatives, such as options and futures, which can be illiquid, may
disproportionately increase losses, and have a potentially large impact on fund
performance.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
(i) Based upon data released on April 1, 2004 from the U.S. Department of
Labor.
(ii) The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year.
(iii) Source: Lehman Brothers. This subindex is a broad measure of the market
for Oregon municipal bonds with maturities of at least one year.
(iv) The federal funds rate is the interest rate that banks with excess
reserves at a Federal Reserve district bank charge other banks that
need overnight loans.
(v) Source: Based upon gross domestic product data from the Bureau of
Economic Analysis (January 30, 2004). Gross domestic product is a
market value of goods and services produced by labor and property in a
given country.
(vi) Source: Standard & Poor's (Public Finance Report Card, April 2004).
(vii) Source: Federal Reserve (January 28, 2004).
(viii) Source: Testimony from Federal Reserve Chairman Alan Greenspan before
the Joint Economic Committee, U.S. Senate on April 21, 2004.
(ix) Source: Based upon data reflecting average yields on a universe of
general obligation municipal bonds derived via Bloomberg LLP.
(x) Although average life is adjusted to account for the shorter call dates
on our premium-priced callable bonds (rather than final maturity dates
as in the case with non-callable issues held in the fund), there are no
assurances that callable bonds will be called/redeemed on their call
dates prior to maturity.
(xi) Derivatives, such as options and futures, can be illiquid and harder to
value, especially in declining markets. A small investment in certain
derivatives may have a potentially large impact on the fund's
performance. Derivatives can disproportionately increase losses as
stated in the prospectus.
8 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Average Annual Total Returns+ (unaudited)
================================================================================
Without Sales Charges(1)
--------------------------------------
Class A Class B Class C(2)
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Twelve Months Ended 4/30/04 4.74% 4.25% 4.15%
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Five Years Ended 4/30/04 4.78 4.22 4.18
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Inception* through 4/30/04++ 6.64 6.08 5.30
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With Sales Charges(3)
--------------------------------------
Class A Class B Class C(2)
================================================================================
Twelve Months Ended 4/30/04 0.51% (0.25)% 3.16%
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Five Years Ended 4/30/04 3.93 4.06 4.18
- --------------------------------------------------------------------------------
Inception* through 4/30/04++ 6.20 6.08 5.30
================================================================================
================================================================================
Cumulative Total Returns+ (unaudited)
================================================================================
Without Sales Charges(1)
================================================================================
Class A (Inception* through 4/30/04)++ 89.42%
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Class B (Inception* through 4/30/04)++ 79.78
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Class C (Inception* through 4/30/04)(2) 58.85
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(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charge with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) On April 29, 2004, Class L shares were renamed as Class C shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 4.00%; Class B shares reflect the
deduction of a 4.50% CDSC, which applies if shares are redeemed within one
year from purchase payment. This CDSC declines by 0.50% the first year
after purchase and thereafter by 1.00% per year until no CDSC is incurred.
Class C shares also reflect the deduction of a 1.00% CDSC, which applies
if shares are redeemed within one year of purchase payment. The 1.00%
initial sales charge on Class C shares is no longer imposed effective
February 2, 2004.
* The inception dates for Class A, B and C shares are May 23, 1994, May 23,
1994 and May 16, 1995, respectively.
+ All figures represent past performance and are not a guarantee of future
results. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares. In the absence of fee waivers and/or
expense reimbursements, the total return would be reduced.
++ Total return includes the effect of the cash contribution to capital from
the investment adviser which was made on October 24, 1994. Without this
cash contribution the total returns would have been as follows:
Class A Class B
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Inception* through 4/30/04
Average Annual Total Returns Without Sales Charges 6.42% 5.81%
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Average Annual Total Returns With Sales Charges 5.98 5.81
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Cumulative Total Returns (Inception* through 4/30/04) 85.59% 75.40%
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9 Smith Barney Oregon Municipals Fund | 2004 Annual Report
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Historical Performance (unaudited)
================================================================================
Value of $10,000 Invested in Class A and B Shares of
Smith Barney Oregon Municipals Fund vs.
Lehman Brothers Municipal Bond Index and the Lipper Oregon
Municipal Debt Funds Average+
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May 1994 -- April 2004
[The following table was depicted as a line chart in the printed material.]
Smith Smith
Barney Barney Lipper
Oregon Oregon Lehman Oregon
Municipals Municipals Brothers Municipal
Fund -- Fund -- Municipal Debt
Class A Class B Bond Funds
Shares Shares Index Average
------- ------- ------- --------
5/23/94 9598 10000 10000 10000
4/95 10662 11059 10574 10577
4/96 11483 11843 11414 11254
4/97 12288 12610 12172 11908
4/98 13512 13799 13305 12935
4/99 14398 14620 14230 13693
4/00 13965 14106 14099 13327
4/01 15169 15242 15561 14515
4/02 16332 16342 17373 15449
4/03 17358 17246 18848 16543
4/30/04 18181 17978 19353 16919
+ Hypothetical illustration of $10,000 invested in Class A and B shares on
May 23, 1994 (inception date), assuming deduction of the maximum 4.00%
initial sales charge at the time of investment for Class A shares. It also
assumes reinvestment of dividends and capital gains, if any, at net asset
value through April 30, 2004. The Lehman Brothers Municipal Bond Index is
a broad based, total return index comprised of investment-grade, fixed
rate municipal bonds selected from issues larger than $50 million issued
since January 1991. The index is unmanaged and is not subject to the same
management and trading expenses as a mutual fund. The Lipper Oregon
Municipal Debt Funds Average is composed of an average of the Fund's peer
group of 22 mutual funds investing in Oregon municipal securities as of
April 30, 2004. Please note that an investor cannot invest directly in an
index. The performance of the Fund's other class of shares may be greater
or less than Class A and B shares' performance indicated on this chart,
depending on whether higher or lower sales charges and fees were incurred
by shareholders investing in the other class.
All figures represent past performance and are not a guarantee of future
results. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. The returns shown do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or
the redemption of fund shares. In the absence of fee waivers and/or
expense reimbursements, the total return would be reduced.
10 Smith Barney Oregon Municipals Fund | 2004 Annual Report
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Schedule of Investments April 30, 2004
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FACE
AMOUNT RATING(a) SECURITY VALUE
===========================================================================================================
Education -- 20.1%
Clackamas County GO:
$ 500,000 AA- Canby School District No. 86, School Board Guaranty,
5.250% due 6/15/20 (b) $ 527,740
500,000 Aaa* Lake Oswego School District No. 7J, MBIA-Insured,
5.000% due 6/1/26 (b) 504,425
300,000 Aaa* Deschutes County GO, Administrative School District No. 1,
Series A, FSA-School Board Guaranty, 5.500% due 6/15/18 (b) 325,860
850,000 AA Forest Grove, Campus Improvement & Refunding Revenue,
Pacific University, Radian-Insured, 6.300% due 5/1/25 (b) 940,330
500,000 AAA Jackson County GO, Central Point School District No. 6,
FGIC-School Board Guaranty, 5.250% due 6/15/20 (b) 521,990
500,000 AAA Jefferson County GO, School District No. 509J,
FGIC-School Board Guaranty, 5.250% due 6/15/16 (b) 540,030
500,000 Aaa* Multnomah-Clackamas Counties GO, Centennial School
District No. 28-302, FGIC-School Board Guaranty,
5.000% due 6/15/21 513,820
600,000 BBB+ Multnomah County, Educational Facilities Revenue,
(University of Portland Project), 6.000% due 4/1/25 628,140
500,000 AA- Multnomah County GO, Reynolds School District No. 7,
School Board Guaranty, 5.125% due 6/15/20 520,975
500,000 AAA Oregon State Department of Administrative Services, COP,
Series A, AMBAC-Insured, (Call 5/1/10 @ 101),
6.250% due 5/1/17 (c)+ 586,945
Oregon State Health, Housing, Educational & Cultural Facilities
Authority, Series A:
1,000,000 Baa1* Linfield College Project, 6.625% due 10/1/20 1,089,630
430,000 NR Oak Tree Foundation Project, (Call 5/1/05 @ 101),
6.100% due 5/1/15 (c) 454,458
Western States Chiropractic, ACA-Insured:
785,000 A 6.350% due 12/1/20 861,153
545,000 A 6.350% due 12/1/25 587,543
500,000 AAA Tillamook County GO, School District No. 9, FSA-School Board
Guaranty, 5.250% due 6/15/22 524,530
500,000 A University of the Virgin Islands, Refunding & Improvement Bonds,
Series A, ACA-Insured, 6.250% due 12/1/29 533,605
500,000 Aaa* Washington County GO, Forest Grove School District No. 15,
FSA-School Board Guaranty, 5.000% due 6/15/21 512,294
- -----------------------------------------------------------------------------------------------------------
10,173,468
- -----------------------------------------------------------------------------------------------------------
Finance -- 2.2%
1,000,000 BBB Virgin Islands, Public Finance Authority Revenue, Series A,
Gross Receipts Taxes, 6.500% due 10/1/24 1,103,030
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See Notes to Financial Statements.
11 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Schedule of Investments (continued) April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
===========================================================================================================
General Obligation -- 16.0%
Lane County GO:
$ 500,000 AAA Bethel School District No. 52, FGIC-Insured,
(Call 12/1/06 @ 100), 6.400% due 12/1/09 (c) $ 556,215
2,000,000 Aaa* School District No.4J, Eugene, FSA-Insured,
5.000% due 7/1/17 (b) 2,084,160
500,000 NR Northern Mariana Islands Commonwealth, Series A,
7.375% due 6/1/30 514,570
1,000,000 A-1+ Oregon State GO, Series 73 E, 1.060% due 12/1/16 (d) 1,000,000
315,000 AA Oregon State, Veterans Welfare, Series 80A,
5.700% due 10/1/32 319,819
2,000,000 AAA Puerto Rico Commonwealth, RITES-PA 931, XLCA-Insured,
9.702% due 7/1/17 (e) 2,469,640
1,135,000 Aaa* Washington, Multnomah & Yamhill Counties GO, School
District No. 1J, MBIA-Insured, 5.125% due 6/1/17 1,189,423
- -----------------------------------------------------------------------------------------------------------
8,133,827
- -----------------------------------------------------------------------------------------------------------
Hospitals -- 16.5%
Clackamas County, Hospital Facility Authority Revenue:
500,000 AA Gross-Williamette Falls Hospital Project, Radian-Insured,
5.500% due 4/1/22 (b) 523,780
Legacy Health System:
500,000 AA 5.750% due 5/1/16 (b) 540,470
1,000,000 AA 5.250% due 5/1/21 (b) 1,027,560
1,000,000 Baa2* Williamette Falls Hospital Project, 6.000% due 4/1/19 (b) 1,033,200
1,000,000 AA Hillsboro Hospital Facility Authority Revenue, (Tuality Healthcare
Project), Radian-Insured, 5.375% due 10/1/31 (b) 1,022,920
Klamath Falls, Inter-Community Hospital Authority Revenue:
595,000 BBB+++ Gross-Merle West Medical Center Project, (Call 9/1/04 @ 102),
7.100% due 9/1/24 (b)(c) 618,497
1,000,000 BBB+++ Merle West Medical Center Project, 6.250% due 9/1/31 (b) 1,030,500
1,000,000 BBB- Puerto Rico Industrial, Tourist, Educational, Medical &
Environmental Ryder Memorial Hospital Project,
6.700% due 5/1/24 1,009,030
Umatilla County Hospital Facility Authority Revenue,
Catholic Health Initiatives, Series A:
1,000,000 AA 5.750% due 12/1/20 1,044,780
500,000 AA 5.500% due 3/1/22 517,500
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8,368,237
- -----------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
12 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Schedule of Investments (continued) April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
===========================================================================================================
Housing: Multi-Family -- 9.1%
$ 470,000 NR Multi-Family Housing Revenue Bond Pass-Through Certificates
Beneficial Ownership, Pacific Tower Apartments, Series 6,
6.050% due 11/1/34 (f) $ 447,454
200,000 Aa2* Oregon State Housing & Community Services Department,
Housing Finance Revenue, Assisted or Insured Multi-Unit,
Series A, FHA-Insured, 6.800% due 7/1/13 200,084
Portland Housing Authority, Multi-Family Revenue:
850,000 Aa2* Cherry Ridge Project, LOC-U.S. Bank Trust N.A.,
6.250% due 5/1/12 (f) 863,481
Series A:
500,000 Aaa* Cherry Blossom Apartments, GNMA-Collateralized,
6.100% due 12/20/26 (f) 523,155
300,000 AAA Fairview Woods Project, Sr. Lien, (Call 8/1/04 @ 100),
6.875% due 8/1/14 (c) 304,224
Washington County Housing Authority, Multi-Family Revenue:
1,000,000 NR Affordable Housing Pool, Series A, 6.125% due 7/1/29 1,024,850
1,000,000 Aa2* Bethany Meadows Project, LOC-U.S. Bank N.A.,
6.250% due 8/1/13 (f) 1,035,280
220,000 AAA Terrace View Project, FNMA-Collateralized,
5.500% due 12/1/17 (f) 224,748
- -----------------------------------------------------------------------------------------------------------
4,623,276
- -----------------------------------------------------------------------------------------------------------
Housing: Single-Family -- 1.9%
455,000 Aa2* Oregon State Housing & Community Services Department,
Mortgage Revenue, Single-Family Mortgage Program,
Series F, 5.550% due 7/1/30 459,245
295,000 AAA Puerto Rico Housing Bank & Finance Agency, Single-Family
Mortgage Revenue, Affordable Housing Mortgage-Portfolio I,
GNMA/FNMA/FHLMC-Collateralized, 6.250% due 4/1/29 (f) 303,611
185,000 AAA Virgin Islands HFA, Single-Family Revenue Bonds, GNMA
Mortgage-Backed Securities Program, Series A,
GNMA-Collateralized, 6.450% due 3/1/16 (f) 190,110
- -----------------------------------------------------------------------------------------------------------
952,966
- -----------------------------------------------------------------------------------------------------------
Industrial Development -- 1.9%
1,000,000 BB+ Oregon State EDR, Georgia-Pacific Corp., Series CLVII,
6.350% due 8/1/25 (f) 984,990
- -----------------------------------------------------------------------------------------------------------
Life Care Systems -- 7.0%
Clackamas County, Hospital Facility Authority Revenue:
2,000,000 NR Mary's Woods at Marylhurst Inc., Sr. Living Facility, Series A,
6.625% due 5/15/29 (b) 2,059,240
500,000 NR Robison Jewish Home Project, 6.250% due 10/1/28 500,735
1,000,000 NR Yamhill County Hospital Authority, Friendsview Retirement
Community, 7.000% due 12/1/34 962,830
- -----------------------------------------------------------------------------------------------------------
3,522,805
- -----------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
13 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Schedule of Investments (continued) April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
===========================================================================================================
Miscellaneous -- 1.7%
$ 300,000 NR Lebanon Urban Renewal Agency, 5.500% due 6/1/14 $ 319,896
500,000 A Virgin Islands, Public Finance Authority Revenue,
Sr. Lien, Series A, ACA/CBI-Insured, 5.500% due 10/1/18 524,890
- -----------------------------------------------------------------------------------------------------------
844,786
- -----------------------------------------------------------------------------------------------------------
Public Facilities -- 1.0%
500,000 AAA Oregon State Bond Bank Revenue, Economic & Community
Development Department, Series B, MBIA-Insured,
5.500% due 1/1/26 520,570
- -----------------------------------------------------------------------------------------------------------
Solid Waste -- 4.0%
1,975,000 NR Wasco County Solid Waste Disposal Revenue,
(Waste Connections Inc. Project), 7.250% due 3/1/21 (f) 2,050,544
- -----------------------------------------------------------------------------------------------------------
Transportation -- 11.0%
Oregon State Department of Transportation, Highway User
Tax Revenue:
500,000 AA+ 5.375% due 11/15/20 534,705
Series A:
1,000,000 AA+ 5.500% due 11/15/18 1,100,640
1,000,000 AA+ 5.500% due 11/15/20 1,084,900
1,000,000 AAA Port of Portland Airport Revenue, Portland International Airport,
Series B, AMBAC-Insured, 5.500% due 7/1/18 (f) 1,040,100
945,000 A Puerto Rico Commonwealth Highway & Transportation
Authority Revenue, Series H, 5.000% due 7/1/28 931,893
500,000 CCC Puerto Rico Port Authority Revenue, Special Facilities,
American Airlines Inc., Series A, 6.250% due 6/1/26 (f) 358,065
500,000 AA+ Tri-County Metropolitan Transportation District Revenue,
Series A, 5.375% due 8/1/20 531,915
- -----------------------------------------------------------------------------------------------------------
5,582,218
- -----------------------------------------------------------------------------------------------------------
Utilities -- 2.1%
1,000,000 BB+++ Klamath Falls Electric Revenue, Klamath Cogeneration,
Sr. Lien, 6.000% due 1/1/25 (b) 969,990
100,000 NR Western Generation Agency, Cogeneration Project Revenue,
(Wauna Cogeneration Project), Series B, 7.250% due 1/1/09 (f) 102,206
- -----------------------------------------------------------------------------------------------------------
1,072,196
- -----------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
14 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Schedule of Investments (continued) April 30, 2004
================================================================================
FACE
AMOUNT RATING(a) SECURITY VALUE
===========================================================================================================
Water and Sewer -- 5.5%
$ 360,000 AA- Clackamas County Service District No. 1, Sewer
Revenue, (Call 10/1/06 @ 100), 6.375% due 10/1/14 (b)(c) $ 397,699
500,000 AAA Eugene Water Revenue, Utility System, FSA-Insured,
5.875% due 8/1/30 (b) 546,660
1,000,000 AAA Klamath Falls Wastewater Revenue, AMBAC-Insured,
5.500% due 6/1/25 (b) 1,047,170
600,000 Aa1* Port of Umatilla Water Revenue, LOC-ABN AMRO Bank N.V.,
6.650% due 8/1/22 (f) 607,068
175,000 AAA Puerto Rico Commonwealth, Aqueduct & Sewer Authority
Revenue, 10.250% due 7/1/09 (g) 213,353
- -----------------------------------------------------------------------------------------------------------
2,811,950
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $48,585,040**) $50,744,863
===========================================================================================================
(a) All ratings are by Standard & Poor's Ratings Service, except for those
which are identified by an asterisk (*), are rated by Moody's Investors
Service and those identified by a double dagger (++), are rated by Fitch
Ratings.
(b) All or a portion of this security is segregated for open futures contracts
and extended settlements.
(c) Pre-Refunded bonds are escrowed with U.S. government securities and are
considered by the manager to be triple-A rated even if the issuer has not
applied for new ratings.
(d) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(e) Inverse floating rate security -- coupon varies inversely with level of
short-term tax-exempt interest rates.
(f) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(g) Bonds are escrowed to maturity with U.S. government securities and are
considered by the manager to be triple-A rated even if the issuer has not
applied for new ratings.
+ All or a portion of this security is held as collateral for open futures
contracts.
** Aggregate cost for Federal income tax purposes is $48,430,353.
See pages 16 to 18 for definitions of ratings and abbreviations.
See Notes to Financial Statements.
15 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Bond Ratings (unaudited)
================================================================================
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"CCC" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differs from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB, B, -- Bonds rated "BB" "B", "CCC", "CC" and "C" are regarded, on balance,
CCC, as predominantly speculative with respect to capacity to pay interest
CC and repay principal in accordance with the terms of the obligation.
and C "BB" represents the lowest degree of speculation and "C" 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.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may be
applied to each generic rating from "Aa" to "Caa," where 1 is the highest and 3
the lowest ranking within its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
B -- Bonds that are rated "B" generally lack characteristics of desirable
investments. 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 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.
16 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Bond Ratings (unaudited) (continued)
================================================================================
Fitch Ratings ("Fitch") -- Ratings from "BBB" to "BB" may be modified by the
addition of a plus (+) or minus (-) sign to show relative standings with the
major rating categories.
AAA -- Bonds rated AAA by Fitch have the lowest expectation of credit risk.
The obligor has an exceptionally strong capacity for timely payment
of financial commitments which is highly unlikely to be adversely
affected by foreseeable events.
BBB -- Bonds rated BBB by Fitch currently have a lower expectation of credit
risk. The capacity for timely payment of financial commitments is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to impair this capacity. This
is the lowest investment grade category assigned by Fitch.
BB -- Bonds rated BB by Fitch carry the possibility of credit risk
developing, particularly as the result of adverse economic change
over time. Business or financial alternatives may, however, be
available to allow financial commitments to be met. Securities rated
in this category are not considered by Fitch to be investment grade.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
================================================================================
Short-Term Security Ratings (unaudited)
================================================================================
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
================================================================================
Abbreviations* (unaudited)
================================================================================
ABAG -- Association of Bay Area Governments
ACA -- American Capital Assurance
AIG -- American International Guaranty
AMBAC -- Ambac Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CBI -- Certificate of Bond Insurance
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
CONNIE LEE -- College Construction Loan Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development Authority
EDR -- Economic Development Revenue
ETM -- Escrowed To Maturity
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financing Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
17 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Abbreviations* (unaudited) (continued)
================================================================================
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MFH -- Multi-Family Housing
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PSF -- Permanent School Fund
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
TAN -- Tax Anticipation Notes
TECP -- Tax-Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
SYCC -- Structured Yield Curve Certificate
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
XLCA -- XL Capital Assurance Inc.
- --------
* Abbreviations may or may not appear in the schedule of investments.
18 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Statement of Assets and Liabilities April 30, 2004
================================================================================
ASSETS:
Investments, at value (Cost -- $48,585,040) $ 50,744,863
Cash 952,292
Interest receivable 938,222
Receivable for Fund shares sold 290,446
Receivable for securities sold 168,693
- --------------------------------------------------------------------------------------------------
Total Assets 53,094,516
- --------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares reacquired 105,900
Dividends payable 76,456
Payable to broker -- variation margin 75,000
Investment advisory fee payable 9,106
Distribution plan fees payable 8,513
Deferred compensation payable 6,903
Administration fee payable 6,071
Accrued expenses 39,312
- --------------------------------------------------------------------------------------------------
Total Liabilities 327,261
- --------------------------------------------------------------------------------------------------
Total Net Assets $ 52,767,255
==================================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 4,949
Capital paid in excess of par value 51,407,818
Undistributed net investment income 65,905
Accumulated net realized loss from investment transactions and futures contracts (1,518,896)
Net unrealized appreciation of investments and futures contracts 2,807,479
- --------------------------------------------------------------------------------------------------
Total Net Assets $ 52,767,255
- --------------------------------------------------------------------------------------------------
Shares Outstanding:
Class A 2,623,664
-----------------------------------------------------------------------------------------------
Class B 1,228,396
-----------------------------------------------------------------------------------------------
Class C 1,096,543
-----------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 10.69
-----------------------------------------------------------------------------------------------
Class B * $ 10.63
-----------------------------------------------------------------------------------------------
Class C * $ 10.64
-----------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.17% of net asset value per share) $ 11.14
==================================================================================================
* Redemption price is NAV of Class B and C shares reduced by 4.50% and 1.00%
CDSC, respectively, if shares are redeemed within one year from purchase
payment (See Note 4).
See Notes to Financial Statements.
19 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Statement of Operations For the Year Ended April 30, 2004
================================================================================
INVESTMENT INCOME:
Interest $ 2,984,476
- --------------------------------------------------------------------------------------------
EXPENSES:
Distribution plan fees (Note 7) 213,060
Investment advisory fee (Note 4) 161,062
Administration fee (Note 4) 107,375
Audit and legal 53,061
Shareholder communications (Note 7) 24,947
Custody 22,226
Transfer agency services (Note 7) 17,303
Trustees' fees 13,303
Registration fees 2,690
Other 4,865
- --------------------------------------------------------------------------------------------
Total Expenses 619,892
Less: Investment advisory and administration fee waivers (Note 4) (80,531)
- --------------------------------------------------------------------------------------------
Net Expenses 539,361
- --------------------------------------------------------------------------------------------
Net Investment Income 2,445,115
- --------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 5 AND 6):
Realized Gain (Loss) From:
Investment transactions 278,031
Futures contracts (416,145)
- --------------------------------------------------------------------------------------------
Net Realized Loss (138,114)
- --------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of year 2,756,820
End of year 2,807,479
- --------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 50,659
- --------------------------------------------------------------------------------------------
Net Loss on Investments and Futures Contracts (87,455)
- --------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 2,357,660
============================================================================================
See Notes to Financial Statements.
20 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Statements of Changes in Net Assets For the Years Ended April 30,
================================================================================
2004 2003
=========================================================================================================
OPERATIONS:
Net investment income $ 2,445,115 $ 2,390,463
Net realized loss (138,114) (561,167)
Increase in net unrealized appreciation 50,659 1,044,157
- ---------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 2,357,660 2,873,453
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTES 3 AND 8):
Net investment income (2,389,110) (2,380,361)
In excess of net investment income -- (40,392)
- ---------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (2,389,110) (2,420,753)
- ---------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 7,097,910 13,939,846
Net asset value of shares issued for reinvestment of dividends 1,426,138 1,380,720
Cost of shares reacquired (9,832,724) (8,843,569)
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (1,308,676) 6,476,997
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (1,340,126) 6,929,697
NET ASSETS:
Beginning of year 54,107,381 47,177,684
- ---------------------------------------------------------------------------------------------------------
End of year* $ 52,767,255 $ 54,107,381
=========================================================================================================
* Includes undistributed net investment income of: $ 65,905 $ 9,610
=========================================================================================================
See Notes to Financial Statements.
21 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
Smith Barney Oregon Municipals Fund ("Fund"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company.
The following are significant accounting policies consistently followed by the
Fund and are in conformity with generally accepted accounting principles
("GAAP"): (a) security transactions are accounted for on trade date; (b)
securities are valued at the mean between the quoted bid and asked prices
provided by an independent pricing service; (c) securities for which market
quotations are not available will be valued in good faith at fair value by or
under the direction of the Board of Trustees; (d) securities maturing within 60
days are valued at cost plus accreted discount or minus amortized premium, which
approximates value; (e) gains or losses on the sale of securities are calculated
by using the specific identification method; (f) interest income, adjusted for
amortization of premium and accretion of discount, is recorded on an accrual
basis; (g) class specific expenses are charged to the Fund and each class;
investment advisory, administration fees and general Fund expenses are allocated
on the basis of relative net assets by class or on another reasonable basis; (h)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (i) the character of income and gains to be distributed is determined in
accordance with income tax regulations which may differ from U.S. generally
accepted accounting principles. At April 30, 2004, reclassifications were made
to the Fund's capital accounts to reflect permanent book/tax differences and
income and gains available for distributions under income tax regulations.
Accordingly, a portion of accumulated net realized loss and undistributed net
investment income amounting to $6,692 and $290, respectively, has been
reclassified to paid-in capital. Net investment income, net realized gains and
net assets were not affected by this change; (j) the Fund intends to comply with
the applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; and (k) estimates and assumptions are required to be made
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
22 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
2. Fund Concentration
Since the Fund invests primarily in obligations of issuers within Oregon, it is
subject to possible concentration risks associated with economic, political or
legal developments or industrial or regional matters specifically affecting
Oregon.
3. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from municipal
securities, which is exempt from regular Federal income tax and from designated
state income taxes, to retain such tax-exempt status when distributed to the
shareholders of the Fund.
It is the Fund's policy to distribute dividends monthly. Capital gains
distributions, if any, are taxable to shareholders, and are declared and paid at
least annually. Additional taxable distributions may be made if necessary to
avoid a Federal excise tax.
4. Investment Advisory Agreement, Administration Agreement and Affiliated
Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment adviser to the Fund. The
Fund pays SBFM an investment advisory fee calculated at an annual rate of 0.30%
of the Fund's average daily net assets. This fee is calculated daily and paid
monthly. SBFM waived $48,319 of its investment advisory fee for the year ended
April 30, 2004.
SBFM also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the Fund's average daily net assets up
to $500 million and 0.18% of the Fund's average daily net assets in excess of
$500 million. This fee is calculated daily and paid monthly. SBFM voluntarily
waived $32,212 of its administration fee for the year ended April 30, 2004.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Fund's transfer agent. PFPC Inc. ("PFPC") acts as the Fund's sub-transfer agent.
CTB receives account fees and asset-based fees that vary according to the size
and type of account. PFPC is responsible for shareholder recordkeeping and
financial processing for all shareholder accounts and is paid by CTB. For the
year ended April 30, 2004, the Fund paid transfer agent fees of $12,943 to CTB.
23 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
Citigroup Global Markets Inc. ("CGM"), another indirect wholly-owned subsidiary
of Citigroup, acts as the Fund's distributor.
On April 29, 2004, Class L shares were renamed as Class C shares. On February 2,
2004, initial sales charges on these shares were eliminated.
There is a maximum initial sales charge of 4.00% for Class A shares. There is a
contingent deferred sales charge ("CDSC") of 4.50% on Class B shares, which
applies if redemption occurs within one year from purchase payment. This CDSC
declines by 0.50% the first year after purchase and thereafter by 1.00% per year
until no CDSC is incurred. Class C shares also have a 1.00% CDSC, which applies
if redemption occurs within one year from purchase payment. In certain cases,
Class A shares have a 1.00% CDSC, which applies if redemption occurs within one
year from purchase payment. This CDSC only applies to those purchases of Class A
shares, which, when combined with current holdings of Class A shares, equal or
exceed $500,000 in the aggregate. These purchases do not incur an initial sales
charge.
For the year ended April 30, 2004, CGM received sales charges of approximately
$40,000 and $13,000 on sales of the Fund's Class A and C shares, respectively.
In addition, for the year ended April 30, 2004, CDSCs paid to CGM were
approximately $26,000 for Class B shares.
All officers and one Trustee of the Fund are employees of Citigroup or its
affiliates.
5. Investments
During the year ended April 30, 2004, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, of long-term
investments, but excluding short-term investments) were as follows:
================================================================================
Purchases $ 7,372,178
- --------------------------------------------------------------------------------
Sales 10,958,545
================================================================================
At April 30, 2004, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
================================================================================
Gross unrealized appreciation $2,541,198
Gross unrealized depreciation (226,688)
- --------------------------------------------------------------------------------
Net unrealized appreciation $2,314,510
================================================================================
24 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
6. Futures Contracts
Securities or cash equal to the initial margin amount are either deposited with
the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the current market
value of the futures contracts. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts typically
to hedge a portion of its portfolio. The Fund bears the market risk that arises
from changes in the value of the financial instruments and securities indices.
At April 30, 2004, the Fund had the following open futures contracts:
Number of Basis Market Unrealized
Contracts Expiration Value Value Gain
==========================================================================================================
To Sell:
20 year, 6.000%
U.S. Treasury Bond 150 6/04 $16,711,719 $16,064,063 $647,656
=========================================================================================================
7. Class Specific Expenses
Pursuant to a Rule 12b-1 Distribution Plan, the fund pays a service fee with
respect to its Class A, B and C shares calculated at an annual rate of 0.15% of
the average daily net assets for each respective class. In addition, the Fund
pays a distribution fee with respect to its Class B and C shares calculated at
an annual rate of 0.50% and 0.55% of the average daily net assets of each class,
respectively. For the year ended April 30, 2004, total Rule 12b-1 Distribution
Plan fees, which are accrued daily and paid monthly, were as follows:
Class A Class B Class C
================================================================================
Rule 12b-1 Distribution Plan Fees $42,417 $93,900 $76,743
================================================================================
25 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
For the year ended April 30, 2004, total Transfer Agency Service expenses were
as follows:
Class A Class B Class C
================================================================================
Transfer Agency Service Expenses $7,387 $6,080 $3,836
================================================================================
For the year ended April 30, 2004, total Shareholder Communication expenses were
as follows:
Class A Class B Class C
================================================================================
Shareholder Communication Expenses $10,743 $6,790 $7,414
================================================================================
8. Distributions Paid to Shareholders by Class
Year Ended Year Ended
April 30, 2004 April 30, 2003
================================================================================
Class A
Net investment income $1,332,160 $ 1,295,296
In excess of net investment income -- 21,980
- --------------------------------------------------------------------------------
Total $1,332,160 $ 1,317,276
================================================================================
Class B
Net investment income $ 598,268 $ 709,417
In excess of net investment income -- 12,038
- --------------------------------------------------------------------------------
Total $ 598,268 $ 721,455
================================================================================
Class C+
Net investment income $ 458,682 $ 375,648
In excess of net investment income -- 6,374
- --------------------------------------------------------------------------------
Total $ 458,682 $ 382,022
================================================================================
+ On April 29, 2004, Class L shares were renamed as Class C shares.
9. Shares of Beneficial Interest
At April 30, 2004, the Fund had an unlimited amount of shares of beneficial
interest authorized with a par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest and has the same rights, except that each class bears certain
direct expenses, including those specifically related to the distribution of its
shares. Effective April 29, 2004, the Fund renamed Class L shares as Class C
shares.
26 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
Transactions in shares of each class were as follows:
Year Ended Year Ended
April 30, 2004 April 30, 2003
----------------------- -----------------------
Shares Amount Shares Amount
========================================================================================
Class A
Shares sold 353,925 $ 3,820,603 494,295 $ 5,307,517
Shares issued on reinvestment 73,132 787,878 67,546 722,152
Shares reacquired (404,533) (4,370,388) (245,716) (2,628,613)
- ----------------------------------------------------------------------------------------
Net Increase 22,524 $ 238,093 316,125 $ 3,401,056
========================================================================================
Class B
Shares sold 81,417 $ 875,212 323,629 $ 3,453,713
Shares issued on reinvestment 31,973 342,497 38,971 414,147
Shares reacquired (363,261) (3,887,510) (501,978) (5,322,004)
- ----------------------------------------------------------------------------------------
Net Decrease (249,871) $(2,669,801) (139,378) $(1,454,144)
========================================================================================
Class C+
Shares sold 223,427 $ 2,402,095 483,186 $ 5,178,616
Shares issued on reinvestment 27,569 295,763 22,960 244,421
Shares reacquired (146,661) (1,574,826) (83,771) (892,952)
- ----------------------------------------------------------------------------------------
Net Increase 104,335 $ 1,123,032 422,375 $ 4,530,085
========================================================================================
+ On April 29, 2004, Class L shares were renamed as Class C shares.
10. Capital Loss Carryforward
At April 30, 2004, the Fund had, for Federal income tax purposes, approximately
$871,000 of unused capital loss carryforwards available to offset future capital
gains, if any. To the extent that these carryforward losses are used to offset
capital gains, it is probable that the gains so offset will not be distributed.
The amount and expiration of the carryforwards are indicated below.
Expiration occurs on April 30 of the year indicated:
2008 2009 2011 2012
================================================================================
Carryforward amounts $279,000 $238,000 $345,000 $9,000
================================================================================
11. Income Tax Information and Distributions to Shareholders
At April 30, 2004, the tax basis components of distributable earnings were:
================================================================================
Undistributed tax-exempt income $ 130,420
- --------------------------------------------------------------------------------
Accumulated capital losses (871,240)
- --------------------------------------------------------------------------------
Unrealized appreciation 2,314,510
================================================================================
27 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
The difference between book basis and tax basis unrealized appreciation and
depreciation is attributable primarily to mark to market of derivative contracts
and the treatment of amortization of premiums and accretion of discounts.
The tax character of distributions paid during the years ended April 30, was:
2004 2003
================================================================================
Tax-exempt income $2,387,065 $2,376,688
Ordinary income 2,045 44,065
- --------------------------------------------------------------------------------
Total $2,389,110 $2,420,753
================================================================================
12. Additional Information
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue guarantee
agreement with this sub-contractor providing that the sub-contractor would
guarantee certain benefits to CAM or its affiliates (the "Revenue Guarantee
Agreement"). In connection with the subsequent purchase of the sub-contractor's
business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by
CAM on many of the funds it manages, this Revenue Guarantee Agreement was
amended eliminating those benefits in exchange for arrangements that included a
one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. CAM also plans an
independent review to verify that the transfer agency fees charged by CAM were
28 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Notes to Financial Statements (continued)
================================================================================
fairly priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
13. Legal Matters
Class action lawsuits have been filed against Citigroup Global Markets Inc. (the
"Distributor") and a number of its affiliates, including Smith Barney Fund
Management LLC and Salomon Brothers Asset Management Inc (the "Advisers"),
substantially all of the mutual funds managed by the Advisers (the "Funds"), and
directors or trustees of the Funds. The complaints allege, among other things,
that the Distributor created various undisclosed incentives for its brokers to
sell Smith Barney and Salomon Brothers funds. In addition, according to the
complaints, the Advisers caused the Funds to pay excessive brokerage commissions
to the Distributor for steering clients towards proprietary funds. The
complaints also allege that the defendants breached their fiduciary duty to the
Funds by improperly charging Rule 12b-1 fees and by drawing on Fund assets to
make undisclosed payments of soft dollars and excessive brokerage commissions.
The complaints seek injunctive relief and compensatory and punitive damages,
rescission of the Funds' contracts with the Advisers, recovery of all fees paid
to the Advisers pursuant to such contracts and an award of attorneys' fees and
litigation expenses. Citigroup Asset Management believes that the suits are
without merit and intends to defend the cases vigorously.
Additional lawsuits arising out of these circumstances and presenting similar
allegations and requests for relief may be filed against the defendants in the
future. Neither Citigroup Asset Management nor the Funds believe that any of the
pending actions will have a material adverse effect on the Funds or the ability
of the Distributor or the Advisers to perform under their respective contracts
with the Funds.
29 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Financial Highlights
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year ended April 30, unless otherwise noted:
Class A Shares 2004(1) 2003(1) 2002(1) 2001(1) 2000(1)
==================================================================================================================
Net Asset Value, Beginning of Year $ 10.70 $ 10.57 $ 10.33 $ 10.02 $ 10.87
- ------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(2)(3) 0.52 0.52 0.53 0.54 0.51
Net realized and unrealized gain (loss)(3) (0.02) 0.13 0.25 0.31 (0.84)
- ------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.50 0.65 0.78 0.85 (0.33)
- ------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.51) (0.51) (0.54) (0.54) (0.50)
Net realized gains -- -- -- -- (0.02)
In excess of net investment income -- (0.01) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.51) (0.52) (0.54) (0.54) (0.52)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 10.69 $ 10.70 $ 10.57 $ 10.33 $ 10.02
- ------------------------------------------------------------------------------------------------------------------
Total Return(4) 4.74% 6.29% 7.67% 8.62% (3.01)%
- ------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 28,041 $ 27,820 $ 24,163 $ 16,657 $ 14,272
- ------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 0.74% 0.81% 0.77% 0.82% 0.83%
Net investment income(3) 4.82 4.85 4.98 5.23 5.02
- ------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 19% 20% 35% 81%
==================================================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The investment adviser and administrator voluntarily waived all or part of
their fees for the five years ended April 30, 2004. If such fees were not
waived and expenses were not reimbursed, the per share effect on the net
investment income and the ratios of expenses to average net assets would
have been as follows:
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------ -------------------
2004 2003 2002 2001 2000 2004 2003 2002 2001 2000
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Class A $0.02 $0.02 $0.02 $0.02 $0.02 0.89% 0.96% 0.92% 0.97% 0.98%
(3) Effective May 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended April 30, 2002,
the ratio of net investment income to average net assets would have been
4.99%. Per share, ratios and supplemental data for the periods prior to
May 1, 2001 have not been restated to reflect this change in presentation.
In addition, the impact of this change to net investment income and net
realized and unrealized gain was less than $0.01.
(4) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
30 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year ended April 30, unless otherwise noted:
Class B Shares 2004(1) 2003(1) 2002(1) 2001(1) 2000(1)
==================================================================================================================
Net Asset Value, Beginning of Year $ 10.63 $ 10.52 $ 10.29 $ 10.00 $ 10.85
- ------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(2)(3) 0.46 0.45 0.47 0.48 0.46
Net realized and unrealized gain (loss)(3) (0.01) 0.12 0.26 0.31 (0.84)
- ------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.45 0.57 0.73 0.79 (0.38)
- ------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.45) (0.45) (0.50) (0.50) (0.45)
Net realized gains -- -- -- -- (0.02)
In excess of net investment income -- (0.01) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.46) (0.50) (0.50) (0.47)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 10.63 $ 10.63 $ 10.52 $ 10.29 $ 10.00
- ------------------------------------------------------------------------------------------------------------------
Total Return(4) 4.25% 5.53% 7.21% 8.06% (3.52)%
- ------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 13,057 $ 15,718 $ 17,014 $ 16,572 $ 16,199
- ------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.27% 1.39% 1.29% 1.35% 1.35%
Net investment income(3) 4.29 4.26 4.46 4.72 4.49
- ------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 19% 20% 35% 81%
==================================================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) The investment adviser and administrator voluntarily waived all or part of
their fees for the five years ended April 30, 2004. If such fees were not
waived and expenses were not reimbursed, the per share effect on the net
investment income and the ratios of expenses to average net assets would
have been as follows:
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------ -------------------
2004 2003 2002 2001 2000 2004 2003 2002 2001 2000
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Class B $0.02 $0.02 $0.02 $0.02 $0.02 1.42% 1.54% 1.44% 1.49% 1.49%
(3) Effective May 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended April 30, 2002,
the ratio of net investment income to average net assets would have been
4.47%. Per share, ratios and supplemental data for the periods prior to
May 1, 2001 have not been restated to reflect this change in presentation.
In addition, the impact of this change to net investment income and net
realized and unrealized gain was less than $0.01.
(4) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
31 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year ended April 30, unless otherwise noted:
Class C Shares(1) 2004(2) 2003(2) 2002(2) 2001(2) 2000(2)
==================================================================================================================
Net Asset Value, Beginning of Year $ 10.65 $ 10.53 $ 10.31 $ 10.01 $ 10.86
- ------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3)(4) 0.45 0.46 0.46 0.48 0.46
Net realized and unrealized gain (loss)(4) (0.01) 0.12 0.26 0.32 (0.84)
- ------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.44 0.58 0.72 0.80 (0.38)
- ------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.45) (0.45) (0.50) (0.50) (0.45)
Net realized gains -- -- -- -- (0.02)
In excess of net investment income -- (0.01) -- -- --
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.45) (0.46) (0.50) (0.50) (0.47)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 10.64 $ 10.65 $ 10.53 $ 10.31 $ 10.01
- ------------------------------------------------------------------------------------------------------------------
Total Return(5) 4.15% 5.57% 7.05% 8.10% (3.55)%
- ------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 11,669 $ 10,569 $ 6,001 $ 3,724 $ 2,997
- ------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(3) 1.33% 1.39% 1.35% 1.39% 1.39%
Net investment income(4) 4.23 4.28 4.39 4.67 4.46
- ------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 19% 20% 35% 81%
==================================================================================================================
(1) On April 29, 2004, Class L shares were renamed as Class C shares.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) The investment adviser and administrator voluntarily waived all or part of
their fees for the five years ended April 30, 2004. If such fees were not
waived and expenses were not reimbursed, the per share effect on the net
investment income and the ratios of expenses to average net assets would
have been as follows:
Expense Ratios
Per Share Decreases Without Fee Waivers
to Net Investment Income and Reimbursements
------------------------ -------------------
2004 2003 2002 2001 2000 2004 2003 2002 2001 2000
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Class C $0.02 $0.02 $0.02 $0.02 $0.02 1.48% 1.54% 1.50% 1.54% 1.53%
(4) Effective May 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended April 30, 2002,
net investment income, net realized and unrealized gain and the ratio of
net investment income to average net assets would have been $0.47, $0.25
and 4.40%, respectively. Per share, ratios and supplemental data for the
periods prior to May 1, 2001 have not been restated to reflect this change
in presentation
(5) Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
32 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Report of Independent Registered Public Accounting Firm
================================================================================
To the Shareholders and Board of Trustees of
Smith Barney Oregon Municipals Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Smith Barney Oregon Municipals Fund as of
April 30, 2004, and the related statement of operations for the year then ended,
the statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of April 30, 2004, by correspondence with the custodian and
broker. As to securities sold but not yet delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Smith Barney Oregon Municipals Fund as of April 30, 2004, and the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
June 18, 2004
33 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Additional Information (unaudited)
================================================================================
Information about Trustees and Officers
The business and affairs of the Smith Barney Oregon Municipals Fund ("Fund") are
managed under the direction of the Board of Trustees. Information pertaining to
the Trustees and Officers of the Fund is set forth below. The Statement of
Additional Information includes additional information about the Fund's Trustees
and is available, without charge, upon request by calling the Fund's transfer
agent (Citicorp Trust Bank, fsb. at 1-800-451-2010).
Number of
Term of Portfolios
Office* and Principal in Fund Other Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen Held by
and Age Fund Served Five Years by Trustee Trustee
============================================================================================================
Non-Interested Trustees:
Dwight B. Crane Trustee Since Professor -- Harvard 49 None
Harvard Business School 1994 Business School
Soldiers Field
Morgan Hall #375
Boston, MA 02163
Age 66
Burt N. Dorsett Trustee Since President of Dorsett 27 None
The Stratford #702 1994 McCabe Capital
5601 Turtle Bay Drive Management Inc.;
Naples, FL 34108 Chief Investment
Age 73 Officer of Leeb Capital
Management, Inc.
(since 1999)
Elliot S. Jaffe Trustee Since Chairman of The 27 The Dress
The Dress Barn Inc. 1994 Dress Barn, Inc. Barn, Inc.
Executive Office
30 Dunnigan Drive
Suffern, NY 10901
Age 77
Stephen E. Kaufman Trustee Since Attorney 55 None
Stephen E. Kaufman PC 1994
277 Park Avenue
47th Floor
New York, NY10172
Age 72
Joseph J. McCann Trustee Since Retired 28 None
200 Oak Park Place 1994
Suite One
Pittsburgh, PA 15243
Age 74
Cornelius C. Rose, Jr. Trustee Since Chief Executive 27 None
Meadowbrook Village 1994 Officer of Performance
Building 1, Apt. 6 Learning Systems
West Lebanon, NH 03784
Age 71
34 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios
Office* and Principal in Fund Other Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen Held by
and Age Fund Served Five Years by Trustee Trustee
============================================================================================================
Interested Trustee:
R. Jay Gerken, CFA** Chairman, Since Managing Director of 221 None
Citigroup Asset President 2002 Citigroup Global
Management ("CAM") and Chief Markets Inc. ("CGM");
399 Park Avenue Executive Chairman, President
4th Floor Officer and Chief Executive
New York, NY 10022 Officer of Smith Barney
Age 52 Fund Management LLC
("SBFM"), Travelers
Investment Adviser, Inc.
("TIA") and Citi Fund
Management Inc.
("CFM"); President
and Chief Executive
Officer of certain
mutual funds
associated with
Citigroup Inc.
("Citigroup"); Formerly
Portfolio Manager
of Smith Barney
Allocation Series Inc.
(from 1996 to 2001)
and Smith Barney
Growth and Income
Fund (from 1996 to
2000)
Officers:
Andrew B. Shoup Senior Vice Since Director of CAM; Senior N/A N/A
CAM President 2003 Vice President and
125 Broad Street and Chief Chief Administrative
11th Floor Administrative Officer of mutual funds
New York, NY 10004 Officer associated with
Age 47 Citigroup; Treasurer of
certain mutual funds
associated with
Citigroup; Head of
International Funds
Administration of
CAM (from 2001 to
2003); Director of
Global Funds
Administration of CAM
(from 2000 to 2001);
Head of U.S. Citibank
Funds Administration
of CAM (from 1998 to
2000)
35 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios
Office* and Principal in Fund Other Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen Held by
and Age Fund Served Five Years by Trustee Trustee
============================================================================================================
Peter M. Coffey Vice Since Managing Director of N/A N/A
CAM President 1989 CGM; Investment
399 Park Avenue and Officer of SBFM
4th Floor Investment
New York, NY 10022 Officer
Age 59
Andrew Beagley Chief Anti- Since Director of CGM (since N/A N/A
CAM Money 2002 2000); Director of
399 Park Avenue Laundering Compliance, North
4th Floor Compliance America, CAM (since
New York, NY 10022 Officer 2000); Chief Anti-
Age 41 Money Laundering
Compliance Officer and
Vice President of
certain mutual funds
associated with
Citigroup; Director of
Compliance, Europe,
the Middle East and
Africa, CAM (from
1999 to 2000);
Compliance Officer,
Salomon Brothers Asset
Management Limited,
Smith Barney Global
Capital Management
Inc., Salomon Brothers
Asset Management
Asia Pacific Limited
(from 1997 to 1999)
Kaprel Ozsolak Controller Since Vice President of CGM; N/A N/A
CAM 2002 Controller of certain
125 Broad Street mutual funds
11th Floor associated with
New York, NY 10004 Citigroup
Age 38
36 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Additional Information (unaudited) (continued)
================================================================================
Number of
Term of Portfolios
Office* and Principal in Fund Other Board
Position(s) Length Occupation(s) Complex Memberships
Name, Address Held with of Time During Past Overseen Held by
and Age Fund Served Five Years by Trustee Trustee
============================================================================================================
Robert I. Frenkel Secretary Since Managing Director and N/A N/A
CAM and Chief 2003 General Counsel of
300 First Stamford Place Legal Officer Global Mutual Funds
4th Floor for CAM and its
Stamford, CT 06902 predecessor (since
Age 48 1994); Secretary of
CFM; Secretary and
Chief Legal Officer of
mutual funds associated
with Citigroup
- --------
* Each Trustee and officer serves until his or her respective successor has
been duly elected and qualified.
** Mr. Gerken is an "interested person" of the Fund as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is an
officer of SBFM and certain of its affiliates.
37 Smith Barney Oregon Municipals Fund | 2004 Annual Report
================================================================================
Tax Information (unaudited)
================================================================================
For the year ended April 30, 2004, 99.91% of the dividends paid by the Fund from
net investment income were tax-exempt for regular Federal income tax and Oregon
state income tax purposes.
38 Smith Barney Oregon Municipals Fund | 2004 Annual Report
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(This page intentionally left blank.)
- --------------------------------------------------------------------------------
SMITH BARNEY
OREGON MUNICIPALS FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES
Dwight B. Crane
Burt N. Dorsett
R. Jay Gerken, CFA
Chairman
Elliott S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Cornelius C. Rose, Jr.
OFFICERS
R. Jay Gerken, CFA
President and Chief
Executive Officer
Andrew B. Shoup
Senior Vice President and
Chief Administrative Officer
Peter M. Coffey
Vice President and
Investment Officer
Andrew Beagley
Chief Anti-Money
Laundering Compliance
Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer
INVESTMENT
ADVISER
Smith Barney Fund
Management LLC
DISTRIBUTOR
Citigroup Global Markets Inc.
CUSTODIAN
State Street Bank and
Trust Company
TRANSFER AGENT
Citicorp Trust Bank, fsb.
125 Broad Street, 11th Floor
New York, New York 10004
SUB-TRANSFER AGENT
PFPC Inc.
P.O. Box 9699
Providence, Rhode Island
02940-9699
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Smith Barney Oregon Municipals Funds
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the Fund (toll-free) at 1-800-451-2010 and by
visiting the SEC's web site at www.sec.gov.
This report is submitted for general information of the shareholders of Smith
Barney Oregon Municipals Fund, but it may also be used as sales literature when
preceded or accompanied by the current Prospectus, which gives details about
charges, expenses, investment objectives and operating policies of the Fund.
SMITH BARNEY OREGON MUNICIPALS FUND
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
This document must be preceded or accompanied by a free prospectus. Investors
should consider the fund's investment objectives, risks, charges and expenses
carefully before investing. The prospectus contains this and other important
information about the fund. Please read the prospectus carefully before you
invest or send money.
www.smithbarneymutualfunds.com
(C)2004 Citigroup Global Markets Inc.
Member NASD, SIPC
FD0955 6/04 04-6753
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Directors of the registrant has determined that Dwight B.
Crane, Chairman of the Board's Audit Committee, possesses the technical
attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to
qualify as an "audit committee financial expert," and has designated
Mr. Crane as the Audit Committee's financial expert. Mr. Crane is an
"independent" Director pursuant to paragraph (a)(2) of Item 3 to Form
N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees for Smith Barney Oregon Municipals Fund were $13,500
and $13,000 for the years ended 4/30/04 and 4/30/03.
(b) Audit-Related Fees for Smith Barney Oregon Municipals Fund were
$0 and $0 for the years ended 4/30/04 and 4/30/03.
(c) Tax Fees for Smith Barney Oregon Municipals Fund were $2,000 and
$2,000 for the years ended 4/30/04 and 4/30/03. These amounts
represent aggregate fees paid for tax compliance, tax advice and
tax planning services, which include (the filing and amendment of
federal, state and local income tax returns, timely RIC
qualification review and tax distribution and analysis planning)
rendered by the Accountant to Smith Barney Oregon Municipals Fund
(d) There were no all other fees for Smith Barney Oregon Municipals
Fund for the years ended 4/30/04 and 4/30/03.
(e) (1) Audit Committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
The Charter for the Audit Committee (the "Committee") of the
Board of each registered investment company (the "Fund") advised
by Smith Barney Fund Management LLC or Salomon Brothers Asset
Management Inc or one of their affiliates (each, an "Adviser")
requires that the Committee shall approve (a) all audit and
permissible non-audit services to be provided to the Fund and (b)
all permissible non-audit services to be provided by the Fund's
independent auditors to the Adviser and any Covered Service
Providers if the engagement relates directly to the operations
and financial reporting of the Fund. The Committee may implement
policies and procedures by which such services are approved other
than by the full Committee.
The Committee shall not approve non-audit services that the
Committee believes may impair the independence of the auditors.
As of the date of the approval of this Audit
Committee Charter, permissible non-audit services include any
professional services (including tax services), that are not
prohibited services as described below, provided to the Fund by
the independent auditors, other than those provided to the Fund
in connection with an audit or a review of the financial
statements of the Fund. Permissible non-audit services may not
include: (i) bookkeeping or other services related to the
accounting records or financial statements of the Fund; (ii)
financial information systems design and implementation; (iii)
appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (iv) actuarial services; (v)
internal audit outsourcing services; (vi) management functions or
human resources; (vii) broker or dealer, investment adviser or
investment banking services; (viii) legal services and expert
services unrelated to the audit; and (ix) any other service the
Public Company Accounting Oversight Board determines, by
regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount of
all such permissible non-audit services provided to the Fund, the
Adviser and any service providers controlling, controlled by or
under common control with the Adviser that provide ongoing
services to the Fund ("Covered Service Providers") constitutes
not more than 5% of the total amount of revenues paid to the
independent auditors during the fiscal year in which the
permissible non-audit services are provided to (a) the Fund, (b)
the Adviser and (c) any entity controlling, controlled by or
under common control with the Adviser that provides ongoing
services to the Fund during the fiscal year in which the services
are provided that would have to be approved by the Committee;
(ii) the permissible non-audit services were not recognized by
the Fund at the time of the engagement to be non-audit services;
and (iii) such services are promptly brought to the attention of
the Committee and approved by the Committee (or its delegate(s))
prior to the completion of the audit.
(f) N/A
(g) Non-audit fees billed - $100,000 and $1.2 million for the years
ended 12/31/2003 and 12/31/2002.
(h) Yes. The Smith Barney Oregon Municipals Fund Audit Committee has
considered whether the provision of non-audit services that were
rendered to Service Affiliates which were not pre-approved (not
requiring pre-approval) is compatible with maintaining the
Accountant's independence. All services provided by the
Accountant to the Smith Barney Oregon Municipals Fund or to
Service Affiliates which were required to be pre-approved were
pre-approved as required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an
annual report) that have materially affected, or are likely to
materially affect the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, there unto duly authorized.
Smith Barney Oregon Municipals Fund
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Smith Barney Oregon Municipals Fund
Date: July 8, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Smith Barney Oregon Municipals Fund
Date: July 8, 2004
By: /s/ Andrew B. Shoup
(Andrew B. Shoup)
Chief Administrative Officer of
Smith Barney Oregon Municipals Fund
Date: July 8, 2004