SMITH BARNEY SHEARSON INVESTMENT FUNDS INC, 485APOS, 1999-11-24

SMITH BARNEY SHEARSON INVESTMENT FUNDS INC
485APOS, 1999-11-24

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Registration No. 2-74288
811-3275

U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933

[ ] Pre-Effective Amendment No.

[X] Post-Effective Amendment No. 67

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940,
Amendment No. 69

SMITH BARNEY INVESTMENT FUNDS INC.
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(800)-451-2010
(Registrant's Telephone Number, including Area Code:)
Christina T. Sydor
388 Greenwich Street, New York, New York 10013(22nd
Floor)
(Name and Address of Agent For Service)
Continuous
(Approximate Date of Proposed Public Offering)

It is proposed that this filing will become effective:
immediately upon filing pursuant to Paragraph (b) of
Rule 485
On (date) pursuant to paragraph (b) of Rule
485
60 days after filing pursuant to paragraph (a)(1) of
Rule 485
XXX On January 28, 2000 pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of
Rule 485
On (date) pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:

This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.

Title of Securities Being Registered: Shares of Common
Stock

PART A

<PAGE>

Draft 11/19/99

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[Logo]

Smith Barney Mutual Funds

Investing for your future.
- --------------------------

Prospectus Smith Barney
Mutual Funds

- --------------------------------------------------------------------------------

January 28, 2000 Small Cap Value Fund

Class A, B, L and Y Shares

The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>

Small Cap Value Fund

Contents

<TABLE>
<S> <C>
Investments, risks and performance......................................... 4

More on the fund's investments............................................. 8

Management................................................................. 9

Choosing a class of shares to buy.......................................... 10

Comparing the fund's classes............................................... 11

Sales charges.............................................................. 12

More about deferred sales charges.......................................... 15

Buying shares.............................................................. 16

Exchanging shares.......................................................... 17

Redeeming shares........................................................... 18

Other things to know about share transactions.............................. 20

Smith Barney 401(k) and ExecChoice(TM) programs............................ 22

Dividends, distributions and taxes......................................... 23

Share price................................................................ 24

Financial highlights....................................................... 24
</TABLE>

You should know:

An investment in the fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government agency.

-1-
<PAGE>

Fund goal and strategies

Investment objective

The fund seeks long-term capital growth.

Key investments

The fund invests primarily in common stocks and other equity securities of
smaller capitalized U.S. companies. Smaller capitalized companies are those
whose market capitalization at the time of investment is no greater than the
market capitalization of companies in the Russell 2000 Value Index. The size of
companies in the index changes with market conditions and the composition of the
index. As of [November 30, 1998], the largest market capitalization of a
company in the index was [$2.51 billion]. Equity securities include exchange
traded and over-the-counter common stocks and preferred shares, debt securities
convertible into equity securities and warrants and rights relating to equity
securities.

Selection process

The manager emphasizes individual security selection while spreading the fund's
investments among industries and sectors. The manager uses both quantitative
and fundamental methods to identify stocks of smaller capitalization companies
it believes have a high probability of outperforming other stocks in the same
industry or sector.

The manager uses quantitative parameters to select a universe of smaller
capitalized companies that fit the fund's general investment criteria. In
selecting individual securities from within this range, the manager looks for
"value" attributes, such as:

. Low stock price relative to earnings, book value and cash flow
. High return on invested capital

The manager also uses quantitative methods to identify catalysts and trends that
might influence the fund's industry or sector focus, or the manager's individual
security selection.

- -2-
<PAGE>

Risks, performance and expenses

Principal risks of investing in the fund

Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if:

. Stock prices decline generally
. Smaller capitalized companies fall out of favor with investors
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect
. A particular product or service developed by a company in which the fund
invests is unsuccessful, the company does not meet earnings expectations or
other events depress the value of the company's stock

Compared to mutual funds that focus on large capitalization companies, the
fund's share price may be more volatile because of its focus on smaller
capitalized companies. These companies are more likely to have:

. More limited product lines
. Fewer capital resources
. Less depth of management

Further, securities of smaller capitalized companies are more likely to:

. Experience sharper swings in market values
. Be harder to sell at times and prices the manager believes appropriate
. Offer greater potential for gains and losses

Who may want to invest

The fund may be an appropriate investment if you:

. Are seeking to participate in the long term growth potential of smaller
capitalized companies
. Currently have exposure to fixed income investments and the stocks commonly
held by large capitalization oriented mutual funds and wish to broaden your
investment portfolio
. Are willing to accept the risks of the stock market and the special risks
of investing in smaller companies with
limited track records

-3-
<PAGE>

Total return and performance

The fund's total return will vary from year to year, and its performance will
vary compared with that of unmanaged small-cap stock indices. Although
variations in the fund's performance are an indication of the risks of investing
in the fund, past performance does not necessarily indicate how the fund will
perform in the future.

- -4-
<PAGE>

Fees table

This table sets forth the fees and expenses you will pay if you invest in fund
shares.

<TABLE>
<CAPTION>
Shareholder fees
(fees paid directly from your investment) Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on purchases
(as a % of offering price) 5.00% None 1.00% None

Maximum deferred sales charge (load) (as a % of the
lower of net asset value at purchase or redemption) None* 5.00% 1.00% None

Annual fund operating expenses
(expenses deducted from fund assets)

Management fee 0.75% 0.75% 0.75% 0.75%

Distribution and service (12b-1) fee 0.25% 1.00% 1.00% None

Other expenses
---- ---- ---- ----
Total annual fund operating expenses
==== ==== ==== ====
</TABLE>

*You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial sales charge) but if you redeem those shares within 12
months of their purchase, you will pay a deferred sales charge of 1.00%.

Example
This example helps you compare the costs of investing in the fund with the costs
of investing in other mutual funds. Your actual costs may be higher or lower.
The example assumes:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a sales charge
. The fund's operating expenses remain the same

<TABLE>
<CAPTION>
Number of years you own your shares 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A (with or without redemption) $ $ $ $

Class B (redemption at end of period) $ $ $ $

Class B (no redemption) $ $ $ $

Class L (redemption at end of period) $ $ $ $

Class L (no redemption) $ $ $ $

Class Y (with or without redemption) $ $ $ $
</TABLE>

-5-
<PAGE>

More on the fund's investments

Derivative contracts. The fund may, but need not, use derivative contracts,
such as futures and options on securities, securities indices, interest rates or
currencies, or options on these futures, for any of the following purposes:

. As a cash flow management technique
. As a substitute for buying or selling securities

A derivative contract will obligate or entitle the fund to deliver or receive
an asset or cash payment based on the change in value of one or more securities
or indices. Even a small investment in derivative contracts can have a big
impact on a fund's stock, interest rate or currency exposure. Therefore, using
derivatives can disproportionately increase losses and reduce opportunities for
gains when interest rates, exchange rates or securities markets are changing.
The fund may not fully benefit from or may lose money on derivatives if changes
in their value do not correspond accurately to changes in the value of the
fund's holdings. The other parties to certain derivative contracts present the
same types of default risk as issuers of fixed income securities. Derivatives
can also make a fund less liquid and harder to value, especially in declining
markets.

Foreign investments. The fund may invest up to 10% of its assets (at the time of
investment) in foreign securities. The fund may invest directly in foreign
issuers or invest in depositary receipts. The fund's investments in securities
of foreign issuers involve greater risk than investments in securities of U.S.
issuers. Because the value of a depositary receipt is dependent upon the market
price of an underlying foreign security, depositary receipts are subject to
most of the risks associated with investing in foreign securities directly.
Foreign countries generally have markets that are less liquid and more volatile
than markets in the U.S. In some foreign countries, less information is avail-
able about foreign issuers and markets because of less rigorous accounting and
regulatory standards than in the U.S. Currency fluctuations could erase invest-
ment gains or add to investment losses.

Debt Securities. The fund's policy is to be as fully invested in equity
securities as practicable at all times. The fund may, however, maintain a
portion of its assets (normally not more than 10%) in U.S. government
securities, money market obligations and cash.

Defensive investing. The fund may depart from its principal investment
strategies in response to adverse market, economic or political conditions by
taking temporary defensive positions in all types of money market and short-term
debt securities. If the fund takes a temporary defensive position, it may be
unable to achieve its investment goal.

- -6-
<PAGE>

Management

Manager. The fund's investment manager is SSB Citi Fund Management LLC, an
affiliate of Salomon Smith Barney Inc. The manager's address is 388 Greenwich
Street, New York, New York 10013. The manager selects the fund's investments
and oversees its operations. The manager and Salomon Smith Barney are
subsidiaries of Citigroup Inc. Citigroup businesses produce a broad range of
financial services -- asset management, banking and consumer finance, credit and
charge cards, insurance, investments, investment banking and trading -- and use
diverse channels to make them available to consumer and corporate customers
around the world.

Peter Hable, investment officer of the manager, managing director of Salomon
Smith Barney, and president of Davis Skaggs Investment Management, a division of
the manager, has been responsible for the day-to-day management of the fund's
portfolio since inception. John Goode, investment officer of the manager,
managing director of Salomon Smith Barney, and chief investment officer of Davis
Skaggs, assists in managing the fund's portfolio.

Management fee. For its services, the manager received a fee during the fund's
last fiscal year equal to 0.75% of the fund's average daily net assets.

Distributor. The fund has entered into an agreement with CFBDS, Inc. to
distribute the fund's shares. A selling group consisting of Salomon Smith
Barney and other broker-dealers sells fund shares to the public.

Distribution plans. The fund has adopted Rule 12b-1 distribution plans for its
Class A, B and L shares. Under each plan, the fund pays distribution and
service fees. These fees are an ongoing expense and, over time, may cost you
more than other types of sales charges.

Year 2000 issue. Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the fund. The cost of addressing the Year 2000 issue, if
substantial, could adversely affect companies and governments that issue
securities held by the fund. The manager and Salomon Smith Barney are
addressing the Year 2000 issue for their systems. The fund has been informed by
other service providers that they are taking similar measures. Although the
fund does not expect the Year 2000 issue to adversely affect it, the fund cannot
guarantee that the efforts of the fund, which are limited to requesting and
receiving reports from its service providers), or the efforts of its service
providers to correct the problem will be successful.

-7-
<PAGE>

Choosing a class of shares to buy

You can choose among four classes of shares: Classes A, B, L and Y. Each class
has different sales charges and expenses, allowing you to choose the class that
best meets your needs. Which class is more beneficial to an investor depends on
the amount and intended length of the investment.

. If you plan to invest regularly or in large amounts, buying Class A shares
may help you reduce sales charges and ongoing expenses.
. For Class B shares, all of your purchase price and, for Class L shares, more
of your purchase amount (compared to Class A shares) will be immediately
invested. This may help offset the higher expenses of Class B and Class L
shares, but only if the fund performs well.
. Class L shares have a shorter deferred sales charge period than Class B
shares. However, because Class B shares convert to Class A shares, and Class L
shares do not, Class B shares may be more attractive to long-term investors.

You may buy shares from:
. A Salomon Smith Barney Financial Consultant
. An investment dealer in the selling group or a broker that clears through
Salomon Smith Barney -- a dealer representative
. The fund, but only if you are investing through certain qualified plans or
certain dealer representatives

Investment minimums. Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Initial Additional
----------------------------------------------
Classes A, B, L Class Y All Classes
<S> <C> <C> <C>
General $1,000 $15 million $50

IRAs, Self Employed Retirement Plans, Uniform Gift to $ 250 $15 million $50
Minor Accounts

Qualified Retirement Plans $ 25 $15 million $25

Simple IRAs $ 1 n/a $ 1

Monthly Systematic Investment Plans $ 25 n/a $25

Quarterly Systematic Investment Plans $ 50 n/a $50
- ----------------------------------------------------------------------------------------------------------
</TABLE>

Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k) plans

- -8-
<PAGE>

Comparing the fund's classes

Your Salomon Smith Barney Financial Consultant or dealer representative can help
you decide which class meets your goals. They may receive different
compensation depending upon which class you choose.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Key features . Initial sales charge . No initial sales . Initial sales . No initial or
. You may qualify charge charge is lower deferred sales charge
for reduction or . Deferred sales than Class A . Must invest at
waiver of initial charge declines . Deferred sales least $15 million
sales charge over time charge for only 1 . Lower annual
. Lower annual . Converts to year expenses than the
expenses than Class B Class A after 8 . Does not other classes
and Class L years convert to Class A
. Higher annual . Higher annual
expenses than expenses than
Class A Class A

Initial sales Up to 5.00%; None 1.00% None
charge reduced for large
purchases and
waived for certain
investors. No
charge for
purchases of
$500,000 or more

Deferred 1% on purchases of Up to 5.00% 1% if you redeem None
sales charge $500,000 or more if charged when you within 1 year of
you redeem within redeem shares. purchase
1 year of purchase The charge is
reduced over time
and there is no
deferred sales
charge after 6 years

Annual 0.25% of average 1% of average 1% of average None
distribution daily net assets daily net assets daily net assets
and service
fees

Exchange- Class A shares of Class B shares of Class L shares of Class Y shares of
able into* most Smith Barney most Smith Barney most Smith most Smith Barney
funds funds Barney funds funds
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

*Ask your Salomon Smith Barney Financial Consultant or dealer representative or
visit the web site for the Smith Barney funds available for exchange.

-9-
<PAGE>

Sales charges

Class A shares

You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge
on the fund's distributions or dividends you reinvest in additional Class A
shares.

<TABLE>
<CAPTION>
-----------------------------------------------------------------
Sales Charge as a % of
Offering Net amount
Amount of purchase price (%) invested (%)
<S> <C> <C>
Less than $25,000 5.00 5.26

$25,000 but less than $50,000 4.00 4.17

$50,000 but less than $100,000 3.50 3.63

$100,000 but less than $250,000 3.00 3.09

$250,000 but less than $500,000 2.00 2.04

$500,000 or more -0- -0-
-----------------------------------------------------------------
</TABLE>

Investments of $500,000 or more. You do not pay an initial sales charge when
you buy $500,000 or more of Class A shares. However, if you redeem these Class
A shares within one year of purchase, you will pay a deferred sales charge of
1%.

Qualifying for a reduced Class A sales charge. There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.

Accumulation privilege - lets you combine the current value of Class A shares
owned

. by you, or
. by members of your immediate family,

and for which a sales charge was paid, with the amount of your next purchase of
Class A shares for purposes of calculating the initial sales charge. Certain
trustees and fiduciaries may be entitled to combine accounts in determining
their sales charge.

- -10-
<PAGE>

Letter of intent - lets you purchase Class A shares of the fund and other Smith
Barney funds over a 13-month period and pay the same sales charge, if any, as if
all shares had been purchased at once. You may include purchases on which you
paid a sales charge within 90 days before you sign the letter.

Waivers for certain Class A investors. Class A initial sales charges are waived
for certain types of investors, including:

. Employees of members of the NASD

. 403(b) or 401(k) retirement plans, if certain conditions are met

. Clients of newly employed Salomon Smith Barney Financial Consultants, if
certain conditions are met

. Investors who redeemed Class A shares of a Smith Barney fund in the past 60
days, if the investor's Salomon Smith Barney Financial Consultant or dealer
representative is notified

If you want to learn about additional waivers of Class A initial sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the Statement of Additional Information ("SAI").

-11-
<PAGE>

Class B shares

You buy Class B shares at net asset value without paying an initial sales
charge. However, if you redeem your Class B shares within six years of
purchase, you will pay a deferred sales charge. The deferred sales charge
decreases as the number of years since your purchase increases.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
6th and
Year after purchase 1st 2nd 3rd 4th 5th over
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Deferred sales charge 5% 4% 3% 2% 1% 0%
- --------------------------------------------------------------------------------
</TABLE>

Class B conversion. After 8 years, Class B shares automatically convert into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as follows:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Shares issued: Shares issued: Shares issued:
At initial On reinvestment of Upon exchange from
purchase dividends and another Smith Barney
distributions fund
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Eight years after the In same proportion as the On the date the shares
date of purchase number of Class B shares originally
converting is to total Class B acquired would have converted
shares you own into Class A shares
- -----------------------------------------------------------------------------------------
</TABLE>

Class L shares

You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund on June 12, 1998,
you will not pay an initial sales charge on Class L shares you buy before June
22, 2001.

Class Y shares

You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can use a letter of intent to meet this requirement
by buying Class Y shares of the fund over a 6-month period. To qualify, you
must initially invest $5,000,000.

- -12-
<PAGE>

More about deferred sales charges

The deferred sales charge is based on the net asset value at the time of
purchase or redemption, whichever is less, and therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.

In addition, you do not pay a deferred sales charge on:

. Shares exchanged for shares of another Smith Barney fund
. Shares representing reinvested distributions and dividends
. Shares no longer subject to the deferred sales charge

If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net asset
value and be credited with the amount of the deferred sales charge, if you
notify your Salomon Smith Barney Financial Consultant or dealer representative.

Salomon Smith Barney receives deferred sales charges as partial compensation for
its expenses in selling shares, including the payment of compensation to your
Salomon Smith Barney Financial Consultant or dealer representative.

Deferred sales charge waivers

The deferred sales charge for each share class will generally be waived:

. On payments made through certain systematic withdrawal plans
. On certain distributions from a retirement plan
. For involuntary redemptions of small account balances
. For 12 months following the death or disability of a shareholder

If you want to learn about additional waivers of deferred sales charges, contact
your Salomon Smith Barney Financial Consultant or dealer representative or
consult the SAI.

-13-
<PAGE>

Buying shares

Through a Salomon Smith Barney Financial Consultant or dealer representative

You should contact your Salomon Smith Barney Financial Consultant or dealer
representative to open a brokerage account and make arrangements to buy shares.

If you do not provide the following information, your order will be rejected:

. Class of shares being bought
. Dollar amount or number of shares being bought

You should pay for your shares through your brokerage account no later than the
third business day after you place your order. Salomon Smith Barney or your
dealer representative may charge an annual account maintenance fee.

- --------------------------------------------------------------------------------

Through the fund's transfer agent

Qualified retirement plans and certain other investors who are clients of the
selling group are eligible to buy shares directly from the fund.

. Write the transfer agent at the following address:

Smith Barney Investment Funds, Inc.
Smith Barney Small Cap Value Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 9699
Providence, Rhode Island 02940-9699

. Enclose a check to pay for the shares. For initial purchases, complete and
send an account application.

. For more information, call the transfer agent at 1-800-451-2010.

- --------------------------------------------------------------------------------

Through a systematic investment plan

You may authorize Salomon Smith Barney, your dealer representative or the
transfer agent to transfer funds automatically from a regular bank account, cash
held in a Salomon Smith Barney brokerage account or Smith Barney money market
fund to buy shares on a regular basis.

. Amounts transferred should be at least: $25 monthly or $50 quarterly

. If you do not have sufficient funds in your account on a transfer date,
Salomon Smith Barney, your dealer representative or the transfer agent may
charge you a fee

For more information, contact your Salomon Smith Barney Financial Consultant,
dealer representative or the transfer agent or consult the SAI.

- -14-
<PAGE>

Exchanging shares

Smith Barney offers a distinctive family of funds tailored to help meet the
varying needs of both large and small investors.

You should contact your Salomon Smith Barney Financial Consultant or dealer
representative to exchange into other Smith Barney funds. Be sure to read the
prospectus of the Smith Barney fund you are exchanging into. An exchange is a
taxable transaction.

. You may exchange shares only for shares of the same class of another Smith
Barney fund. Not all Smith Barney funds offer all classes.

. Not all Smith Barney funds may be offered in your state of residence.
Contact your Smith Barney Financial Consultant, dealer representative or the
transfer agent.

. You must meet the minimum investment amount for each fund.

. If you hold share certificates, the transfer agent must receive the
certificates endorsed for transfer or with signed stock powers (documents
transferring ownership of certificates) before the exchange is effective.

. The fund may suspend or terminate your exchange privilege if you engage in
an excessive pattern of exchanges.

- --------------------------------------------------------------------------------

Waiver of additional sales charges

Your shares will not be subject to an initial sales charge at the time of the
exchange.

Your deferred sales charge (if any) will continue to be measured from the date
of your original purchase. If the fund you exchange into has a higher deferred
sales charge, you will be subject to that charge. If you exchange at any time
into a fund with a lower charge, the sales charge will not be reduced.

- --------------------------------------------------------------------------------

By telephone

If you do not have a brokerage account, you may be eligible to exchange shares
through the transfer agent. You must complete an authorization form to authorize
telephone transfers. If eligible, you may make telephone exchanges on any day
the New York Stock Exchange is open. Call the transfer agent at 1-800-451-2010
between 9:00 a.m. and 5:00 p.m. (Eastern time). Requests received after the
close of regular trading on the Exchange are priced at the net asset value next
determined.

You can make telephone exchanges only between accounts that have identical
registrations.

- --------------------------------------------------------------------------------

By mail

If you do not have a Salomon Smith Barney brokerage account, contact your dealer
representative or write to the transfer agent at the address on the opposite
page.

-15-
<PAGE>

Redeeming shares

Generally

Contact your Salomon Smith Barney Financial Consultant or dealer representative
to redeem shares of the fund.

If you hold share certificates, the transfer agent must receive the certificates
endorsed for transfer or with signed stock powers before the redemption is
effective.

If the shares are held by a fiduciary or corporation, other documents may be
required.

Your redemption proceeds will be sent within three business days after your
request is received in good order. However, if you recently purchased your
shares by check, your redemption proceeds will not be sent to you until your
original check clears, which may take up to 15 days.

If you have a Salomon Smith Barney brokerage account, your redemption proceeds
will be placed in your account and not reinvested without your specific
instruction. In other cases, unless you direct otherwise, your redemption
proceeds will be paid by check mailed to your address of record.

- --------------------------------------------------------------------------------

By mail

For accounts held directly at the fund, send written requests to the transfer
agent at the following address:

Smith Barney Equity Funds
Smith Barney Large Cap Blend Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 9699
Providence, Rhode Island 02940-9699

Your written request must provide the following:

. Your account number

. The class of shares and the dollar amount or number of shares to be
redeemed

. Signatures of each owner exactly as the account is registered

- -16-
<PAGE>

By telephone

If you do not have a brokerage account, you may be eligible to redeem shares
(except those held in retirement plans) in amounts up to $10,000 per day through
the transfer agent. You must complete an authorization form to authorize
telephone redemptions. If eligible, you may request redemptions by telephone on
any day the New York Stock Exchange is open. Call the transfer agent at 1-800-
451-2010 between 9:00 a.m. and 5:00 p.m. (Eastern time). Requests received
after the close of regular trading on the Exchange are priced at the net asset
value next determined.

Your redemption proceeds can be sent by check to your address of record or by
wire transfer to a bank account designated on your authorization form. You must
submit a new authorization form to change the bank account designated to receive
wire transfers and you may be asked to provide certain other documents.

- --------------------------------------------------------------------------------

Automatic cash withdrawal plans

You can arrange for the automatic redemption of a portion of your shares on a
monthly or quarterly basis. To qualify you must own shares of the fund with a
value of at least $10,000 ($5,000 for retirement plans) and each automatic
redemption must be at least $50. If your shares are subject to a deferred sales
charge, the sales charge will be waived if your automatic payments do not exceed
1% per month of the value of your shares subject to a deferred sales charge.

The following conditions apply:

. Your shares must not be represented by certificates

. All dividends and distributions must be reinvested

For more information, contact your Salomon Smith Barney Financial Consultant or
dealer representative or consult the SAI.

-17-
<PAGE>

Other things to know about share transactions

When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed:

. Name of the fund
. Account number
. Class of shares being bought, exchanged or redeemed
. Dollar amount or number of shares being bought, exchanged or
redeemed
. Signature of each owner exactly as the account is registered

The transfer agent will try to confirm that any telephone exchange or redemption
request is genuine by recording calls, asking the caller to provide a personal
identification number for the account, sending you a written confirmation or
requiring other confirmation procedures from time to time.

Signature guarantees. To be in good order, your redemption request must include
a signature guarantee if you:

. Are redeeming over $10,000 of shares

. Are sending signed share certificates or stock powers to the transfer agent

. Instruct the transfer agent to mail the check to an address different from
the one on your account

. Changed your account registration

. Want the check paid to someone other than the account owner(s)

. Are transferring the redemption proceeds to an account with a different
registration

You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.

- -18-
<PAGE>

The fund has the right to:

. Suspend the offering of shares

. Waive or change minimum and additional investment amounts

. Reject any purchase or exchange order

. Change, revoke or suspend the exchange privilege

. Suspend telephone transactions

. Suspend or postpone redemptions of shares on any day when trading on the
New York Stock Exchange is restricted, or as otherwise permitted by the
Securities and Exchange Commission

. Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities

Small account balances. If your account falls below $500 because of a
redemption of fund shares, the fund may ask you to bring your account up to
$500. If your account is still below $500 after 60 days, the fund may close
your account and send you the redemption proceeds.

Excessive exchange transactions. The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other
shareholders. If so, the fund may limit additional purchases and/or exchanges
by the shareholder.

Share certificates. The fund does not issue share certificates unless a written
request signed by all registered owners is made to the transfer agent. If you
hold share certificates it will take longer to exchange or redeem shares.

-19-
<PAGE>

Smith Barney 401(k) and ExecChoice programs

You may be eligible to participate in the Smith Barney 401(k) program or the
Smith Barney ExecChoice(TM) program. The fund offers Class A and Class L shares
to participating plans as investment alternatives under the programs. You can
meet minimum investment and exchange amounts by combining the plan's investments
in any of the Smith Barney mutual funds.

There are no sales charges when you buy or sell shares and the class of shares
you may purchase depends on the amount of your initial investment. Once a class
of shares is chosen, all additional purchases must be of that class.

. Class A shares may be purchased by plans investing at least $1 million.

. Class L shares may be purchased by plans investing less than $1 million.
Class L shares are eligible to exchange into Class A shares not later than 8
years after the plan joined the program. They are eligible for exchange sooner:

If the account was opened on or after June 21, 1996 and an aggregate
of $1 million is invested in Smith Barney Funds Class L shares (other
than money market funds), all Class L shares are eligible for exchange
after the plan is in the program 5 years.

If the account was opened before June 21, 1996 and $500,000 in the
aggregate is invested in Smith Barney Funds Class L shares (other than
money market funds), all Class L shares are eligible for exchange on
each December 31 and the exchange will occur no later than March 31 of
the following year.

For more information, call your Salomon Smith Barney Financial Consultant or the
transfer agent, or consult the SAI.

- -20-
<PAGE>

Dividends, distributions and taxes

Dividends. The fund generally makes capital gain distributions and pays
dividends, if any, once a year, typically in December. The fund may pay
additional distributions and dividends at other times if necessary for the fund
to avoid a federal tax. Capital gain distributions and dividends are reinvested
in additional fund shares of the same class you hold. The fund expects
distributions to be primarily from capital gain. You do not pay a sales charge
on reinvested distributions or dividends. Alternatively, you can instruct your
Salomon Smith Barney Financial Consultant, dealer representative or the transfer
agent to have your distributions and/or dividends paid in cash. You can change
your choice at any time to be effective as of the next distribution or dividend,
except that any change given to the transfer agent less than five days before
the payment date will not be effective until the next distribution or dividend
is paid.

Taxes. In general, redeeming shares, exchanging shares and receiving
distributions (whether in cash or additional shares) are all taxable events.

- --------------------------------------------------------------------------------

Transaction Federal tax status

Redemption or exchange of shares Usually capital gain or loss; long-term
only if shares owned more than one year

Long-term capital gain distributions Long-term capital gain

Short-term capital gain distributions Ordinary income

Dividends Ordinary income

- --------------------------------------------------------------------------------

Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the fund is about to declare a capital gain distribution or a
dividend, because it will be taxable to you even though it may actually be a
return of a portion of your investment.

After the end of each year, the fund will provide you with information about the
distributions and dividends you received and any redemptions of shares during
the previous year. If you do not provide the fund with your correct taxpayer
identification number and any required certifications, you may be subject to
back-up withholding of 31% of your distributions, dividends, and redemption
proceeds. Because each shareholder's circumstances are different and special
tax rules may apply, you should consult your tax adviser about your investment
in the fund.

-21-
<PAGE>

Share price

You may buy, exchange or redeem shares at their net asset value, plus any
applicable sales charge, next determined after receipt of your request in good
order. The fund's net asset value is the value of its assets minus its
liabilities. Net asset value is calculated separately for each class of shares.
The fund calculates its net asset value every day the New York Stock Exchange is
open. The Exchange is closed on certain holidays listed in the SAI. This
calculation is done when regular trading closes on the Exchange (normally 4:00
p.m., Eastern time).

The fund generally values its fund securities based on market prices or
quotations. The fund's currency conversions are done when the London stock
exchange closes, which is 12 noon Eastern time. When reliable market prices or
quotations are not readily available, or when the value of a security has been
materially affected by events occurring after a foreign exchange closes, the
fund may price those securities at fair value. Fair value is determined in
accordance with procedures approved by the fund's board. A fund that uses fair
value to price securities may value those securities higher or lower than
another fund using market quotations to price the same securities.

In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer
representative before the New York Stock Exchange closes. If the New York Stock
Exchange closes early, you must place your order prior to the actual closing
time. Otherwise, you will receive the next business day's price.

Salomon Smith Barney or members of the selling group must transmit all orders to
buy, exchange or redeem shares to the fund's agent before the agent's close of
business.

Financial highlights

The financial highlights tables are intended to help you understand the
performance of each class since inception. Certain information reflects
financial results for a single share. Total return represents the rate that a
shareholder would have earned (or lost) on a fund share assuming reinvestment of
all dividends and distributions. The information in the following tables was
audited by KPMG LLP, independent accountants, whose report, along with the
fund's financial statements, is included in the annual report (available upon
request).

- -22-
<PAGE>

For a Class A share of capital stock outstanding throughout each year ended
September 30:

---------------------------------------------------------------------------
1999(1)
---------------------------------------------------------------------------
Net asset value, beginning of year $
---------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss)
Net realized and unrealized gain (loss)
---------------------------------------------------------------------------
Total income (loss) from operations
---------------------------------------------------------------------------
Less distributions from:
Net investment income
Net realized gain
---------------------------------------------------------------------------
Total distributions
---------------------------------------------------------------------------
Net asset value, end of year
---------------------------------------------------------------------------
Total return
---------------------------------------------------------------------------
Net assets, end of year (000)'s
---------------------------------------------------------------------------
Ratios to average net assets:
Expenses
Net investment income
---------------------------------------------------------------------------
Portfolio turnover rate
---------------------------------------------------------------------------

(1) For the period from ______ 1999 (inception date) to December 31, 1999.
(2) Not annualized.
(3) Annualized.

-23-
<PAGE>

For a Class B share of capital stock outstanding throughout each year ended
September 30:

---------------------------------------------------------------------------
1999(1)
---------------------------------------------------------------------------
Net asset value, beginning of year $
---------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss)
Net realized and unrealized gain (loss)
---------------------------------------------------------------------------
Total income (loss) from
---------------------------------------------------------------------------
Less distributions from:
Net investment income
Net realized gain
---------------------------------------------------------------------------
Total distributions
---------------------------------------------------------------------------
Net asset value, end of year
---------------------------------------------------------------------------
Total return
---------------------------------------------------------------------------
Net assets, end of year (000)'s
---------------------------------------------------------------------------
Ratios to average net assets:
Expenses
Net investment income
---------------------------------------------------------------------------
Portfolio turnover rate
---------------------------------------------------------------------------

(1) For the period from ________ 1999 (inception date) December 31, 1999.
(2) Not annualized.
(3) Annualized.

- -24-
<PAGE>

For a Class L share of capital stock outstanding throughout each year ended
September 30:

(1) For the period from ________ 1999 (inception date) December 31, 1999.
(2) Not annualized.
(3) Annualized.

-25-
<PAGE>

For a Class Y share of capital stock outstanding throughout each year ended
September 30:

(1) For the period from ________ 1999 (inception date) to December 31, 1999.
(2) Not annualized.
(3) Annualized.

- -26-

<PAGE>

Salomon Smith Barney(SM)
a member of citigroup [Symbol]

Small Cap Value Fund
- --an investment portfolio of Smith Barney Investment Funds Inc.

Shareholder reports. Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market conditions and investment strategies that affected the fund's
performance.

The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.

Statement of additional information. The statement of additional information
provides more detailed information about the fund and is incorporated by
reference into (is legally part of) this prospectus.

You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salomon
Smith Barney Financial Consultant or dealer representative, by calling the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual Funds, 388
Greenwich Street, MF2, New York, New York 10013.

Visit our web site. Our web site is located at www.smithbarney.com

You can also review and copy the fund's shareholder reports, prospectus and
statement of additional information at the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. You can get copies of these materials
for a duplicating fee by writing to the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. Information about the public reference
room may be obtained by calling 1-800-SEC-0330. You can get the same information
free from the Commission's Internet web site at http:www.sec.gov

If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. Neither the fund nor the distributor is
offering to sell shares of the fund to any person to whom the fund may not
lawfully sell its shares.

(SM) Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.

PART B

Smith Barney Small Cap Value Fund
388 Greenwich Street
New York, NY 10013

Statement of Additional Information
January __, 2000

This Statement of Additional Information (the 'SAI') expands upon
and supplements the information contained in the current prospectus
of the Smith Barney Small Cap Value Fund dated January __, 2000, as
amended or supplemented from time to time, and should be read in
conjunction with the prospectus. The fund is a series of Smith
Barney Investment Funds Inc. (the 'Company'). Additional
information about the fund's investments is available in the fund's
annual and semi-annual reports to shareholders. The fund's
prospectus may be obtained free of charge from your Salomon Smith
Barney Financial Consultant or by writing or calling the fund at
the address or telephone number set forth above. This SAI,
although not in itself a prospectus, is incorporated by reference
into the prospectus in its entirety.

TABLE OF CONTENTS
P
a
g
e

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 2
DIRECTORS AND OFFICERS OF THE COMPANY 14
DISTRIBUTION 16
PURCHASE OF SHARES 18
REDEMPTION OF SHARES 23
VALUATION OF SHARES 24
EXCHANGE PRIVILEGE 24
PERFORMANCE DATA 26
TAXES 28
ADDITIONAL INFORMATION 29
FINANCIAL STATEMENTS 30

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The prospectus discusses the fund's investment objective and
policies. The following discussion supplements the description of
the fund's investment policies in its prospectus. SSB Citi Fund
Management LLC ('SSBC' or the 'Manager') serves as investment
manager and administrator to the fund.

The fund attempts to achieve its investment objective by investing,
under normal market conditions, substantially all of its assets in
equity securities and at least 65% of its total assets in equity
securities of smaller capitalized companies. Companies whose
capitalization falls outside the small capitalization range after
purchase continue to be considered smaller capitalized companies
for purposes of the 65% policy. Investments in smaller capitalized
companies may offer greater opportunities for growth of capital
than larger, more established companies, but may also involve
certain risks because smaller capitalized companies often have
limited market or financial resources and may be dependent on one
or two people for management. In addition, shares of smaller
capitalized companies have limited liquidity and more volatility
which could result in significant fluctuations in the price of
their shares.

The fund will normally invest in all types of equity securities,
including common stocks, preferred stocks, securities that are
convertible into common or preferred stocks, such as warrants and
convertible bonds, and depository receipts for those securities.
It is the policy of the fund to be as fully invested in equity
securities as practicable at all times. Under certain
circumstances, the fund may maintain a portion of its assets, which
will usually not exceed 10%, in U.S. Government securities, money
market obligations, and in cash to provide for payment of the
fund's expenses and to meet redemption requests. The fund reserves
the right, as a defensive measure, to hold money market securities,
including repurchase agreements or cash, in such proportions as, in
the opinion of management, prevailing market or economic conditions
warrant.

The fund may invest up to 10% of its total assets in foreign
securities, including both direct investments and investments made
through depository receipts. The fund may also invest in real
estate investment trusts; purchase or sell securities on a when-
issued or delayed-delivery basis; enter into forward commitments to
purchase securities; lend portfolio securities; purchase and sell
put and call options; invest in illiquid securities; and enter into
interest rate futures contracts, stock index futures contracts and
related options.

The different types of securities and investment techniques used by
the fund all involve risks of varying degrees. For example, with
respect to common stock, there can be no assurance of capital
appreciation, and there is a risk of market decline. With respect
to debt securities, including money market instruments, there is
the risk that the issuer of a security may not be able to meet its
obligation to make scheduled interest or principal payments.

Convertible Securities. Convertible securities are generally
preferred securities or fixed-income securities that are
convertible into common stock at either a stated price or stated
rate. The price of the convertible security will normally vary in
some proportion to changes in the price of the underlying common
stock because of this conversion feature. A convertible security
will normally also provide a fixed income stream. For this reason,
the convertible security may not decline in price as rapidly as the
underlying common stock. Convertible securities rank senior to
common stocks in an issuer's capital structure and consequently
entail less risk than the issuer's common stock. The manager will
select convertible securities to be purchased by the fund based
primarily upon its evaluation of the fundamental investment
characteristics and growth prospects of the issuer of the security.
As a fixed income security, a convertible security tends to
increase in market value when interest rates decline and decrease
in value when interest rates rise. While convertible securities
generally offer lower interest or dividend yields than
non-convertible fixed income securities of similar quality, their
value tends to increase as the market value of the underlying stock
increases and to decrease when the value of the underlying stock
decreases.

Foreign Securities. The fund has the authority to invest up to 10%
of its assets in foreign securities. In addition to direct
investment in securities of foreign issuers, the fund may also
invest in securities of foreign issuers in the form of sponsored
and unsponsored American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs) or
other similar securities convertible into securities of foreign
issuers. These securities may not necessarily be denominated in
the same currency as the securities into which they may be
converted. The fund also may invest in securities denominated in
European Currency Units (ECUs). An ECU is a 'basket' consisting of
a specified amount of currencies of certain of the twelve member
states of the European Community. In addition, the fund may invest
in securities denominated in other currency 'baskets.'

There are certain risks involved in investing in securities of
companies and governments of foreign nations that are in addition
to the usual risks inherent in domestic investments. These risks
include those resulting from revaluation of currencies, future
adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign
governmental laws or restrictions, reduced availability of public
information concerning issuers and the lack of uniform accounting,
auditing and financial reporting standards or of other regulatory
practices and requirements comparable to those applicable to
domestic companies. The yield of the fund may be adversely
affected by fluctuations in value of one or more foreign currencies
relative to the U.S. dollar. Moreover, securities of many foreign
companies and their markets may be less liquid and their prices
more volatile than those of securities of comparable domestic
companies. In addition, with respect to certain foreign countries,
there is the possibility of expropriation, nationalization,
confiscatory taxation and limitations on the use or removal of
funds or other assets of the fund, including the withholding of
dividends. Foreign securities may be subject to foreign government
taxes that could reduce the yield on such securities. Because the
fund may invest in securities denominated or quoted in currencies
other than the U.S. dollar, changes in foreign currency exchange
rates may adversely affect the value of portfolio securities and
the appreciation or depreciation of investments. Investment in
foreign securities also may result in higher expenses due to the
cost of converting foreign currency to U.S. dollars, the payment of
fixed brokerage commissions on foreign exchanges, which generally
are higher than commissions on domestic exchanges, and the expense
of maintaining securities with foreign custodians, and the
imposition of transfer taxes or transaction charges associated with
foreign exchanges.

Real Estate Investment Trusts ('REITs'). The fund may invest in
REITs, which are pooled investment vehicles that invest primarily
in either real estate or real estate related loans. The value of a
REIT is affected by changes in the value of the properties owned by
the REIT or securing mortgage loans held by the REIT. REITs are
dependent upon cash flow from their investments to repay financing
costs and the management skill of the REIT's manager. REITs are
also subject to risks generally associated with investments in real
estate. The fund will indirectly bear its proportionate share of
any expenses, including management fees, paid by a REIT in which it
invests.

Debt Securities. Debt securities in which the fund may invest
include notes, bills, commercial paper, obligations issued or
guaranteed by the government or any of its political subdivisions,
agencies or instrumentalities, and certificates of deposit. Debt
securities represent money borrowed that obligates the issuer
(e.g., a corporation, municipality, government, government agency)
to repay the borrowed amount at maturity (when the obligation is
due and payable) and usually to pay the holder interest at specific
times.

All debt securities are subject to market risk and credit risk.
Market risk relates to market-induced changes in a security=s
value, usually as a result of changes in interest rates. The value
of the fund=s investments in debt securities will change as the
general levels of interest rates fluctuate. During periods of
falling interest rates, the value of the fund's debt securities
will generally rise. Conversely, during periods of rising interest
rates, the value of the fund=s debt securities will generally
decline. Credit risk relates to the ability of the issuer to make
payments of principal and interest. The fund has no restrictions
with respect to the maturities or duration of the debt securities
it holds. The fund=s investments in fixed income securities with
longer terms to maturity or greater duration are subject to greater
volatility than the fund=s shorter-term securities.

Money Market Instruments. As stated in the prospectus, the fund
may invest for defensive purposes in corporate and government bonds
and notes and money market instruments. Short-term instruments in
which the fund may invest include obligations of banks having at
least $1 billion in assets (including certificates of deposit, time
deposits and bankers= acceptances of domestic or foreign banks,
domestic savings and loan associations and similar institutions);
commercial paper rated no lower than A-2 by Standard & Poor=s
Ratings Group or Prime-2 by Moody=s Investors Service, Inc. or the
equivalent from another nationally recognized statistical rating
organization or, if unrated, of an issuer having an outstanding,
unsecured debt issue then rated within the two highest rating
categories; and repurchase agreements with respect to any of the
foregoing entered into with banks and non-bank dealers approved by
the Company=s Board of Directors.

The following is a more detailed description of such money market
instruments.

Bank Obligations. Certificates of deposits ('CDs') are short-term,
negotiable obligations of commercial banks. Time deposits ('TDs')
are non-negotiable deposits maintained in banking institutions for
specified periods of time at stated interest rates. Bankers'
acceptances are time drafts drawn on commercial banks by borrowers,
usually in connection with international transactions.

Domestic commercial banks organized under federal law are
supervised and examined by the Comptroller of the Currency and are
required to be members of the Federal Reserve System and to be
insured by the Federal Deposit Insurance Corporation (the 'FDIC').
Domestic banks organized under state law are supervised and
examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. Most state
banks are insured by the FDIC (although such insurance may not be
of material benefit to the fund, depending upon the principal
amount of CDs of each bank held by the fund) and are subject to
federal examination and to a substantial body of federal law and
regulation. As a result of governmental regulations, domestic
branches of domestic banks are, among other things, generally
required to maintain specified levels of reserves, and are subject
to other supervision and regulation designed to promote financial
soundness.

Obligations of foreign branches of domestic banks, such as CDs and
TDs, may be general obligations of the parent bank in addition to
the issuing branch, or may be limited by the terms of a specific
obligation and governmental regulation. Such obligations are
subject to different risks than are those of domestic banks or
domestic branches of foreign banks. These risks include foreign
economic and political developments, foreign governmental
restrictions that may adversely affect payment of principal and
interest on the obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign branches
of domestic banks are not necessarily subject to the same or
similar regulatory requirements that apply to domestic banks, such
as mandatory reserve requirements, loan limitations, and
accounting, auditing and financial recordkeeping requirements. In
addition, less information may be publicly available about a
foreign branch of a domestic bank than about a domestic bank. CDs
issued by wholly owned Canadian subsidiaries of domestic banks are
guaranteed as to repayment of principal and interest (but not as to
sovereign risk) by the domestic parent bank.

Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation and by
governmental regulation as well as governmental action in the
country in which the foreign bank has its head office. A domestic
branch of a foreign bank with assets in excess of $1 billion may or
may not be subject to reserve requirements imposed by the Federal
Reserve System or by the state in which the branch is located if
the branch is licensed in that state. In addition, branches
licensed by the Comptroller of the Currency and branches licensed
by certain states ('State Branches') may or may not be required to:
(a) pledge to the regulator by depositing assets with a designated
bank within the state, an amount of its assets equal to 5% of its
total liabilities; and (b) maintain assets within the state in an
amount equal to a specified percentage of the aggregate amount of
liabilities of the foreign bank payable at or through all of its
agencies or branches within the state. The deposits of State
Branches may not necessarily be insured by the FDIC. In addition,
there may be less publicly available information about a domestic
branch of a foreign bank than about a domestic bank.

In view of the foregoing factors associated with the purchase of
CDs and TDs issued by foreign branches of domestic banks or by
domestic branches of foreign banks, the manager will carefully
evaluate such investments on a case-by-case basis.

Savings and loans associations whose CDs may be purchased by the
fund are supervised by the Office of Thrift Supervision and are
insured by the Savings Association Insurance Fund which is
administered by the FDIC and is backed by the full faith and credit
of the United States government. As a result, such savings and
loan associations are subject to regulation and examination.

U.S. Government Securities. The fund may invest in U.S. Government
securities. Generally, these securities include U.S. Treasury
obligations and obligations issued or guaranteed by U.S. Government
agencies, instrumentalities or sponsored enterprises. U.S.
Government securities also include Treasury receipts and other
stripped U.S. Government securities, where the interest and
principal components of stripped U.S. Government securities are
traded independently. The fund may also invest in zero coupon U.S.
Treasury securities and in zero coupon securities issued by
financial institutions, which represent a proportionate interest in
underlying U.S. Treasury securities. A zero coupon security pays
no interest to its holder during its life and its value consists of
the difference between its face value at maturity and its cost.
The market values of zero coupon securities generally are more
volatile than the market prices of securities that pay interest
periodically.

Repurchase Agreements. The fund may enter into repurchase
agreements in order to earn income on available cash or as a
temporary defensive measure. Under a repurchase agreement, the
fund acquires securities subject to the seller=s agreement to
repurchase at a specified time and price. If the seller becomes
subject to a proceeding under the bankruptcy laws or its assets are
otherwise subject to a stay order, the fund=s right to liquidate
the securities may be restricted (during which time the value of
the securities could decline). As discussed in the SAI, the fund
has adopted certain procedures intended to minimize the risks of
investing in repurchase agreements.

Lending of Portfolio Securities. Consistent with applicable
Regulatory Requirements and for cash management purposes, the fund
has the ability to lend securities from its portfolio to brokers,
dealers and other financial organizations. Such loans, if and when
made, will be consistent with applicable regulatory requirements.
The fund may not lend its portfolio securities to Salomon Smith
Barney or its affiliates unless it has applied for and received
specific authority from the SEC. Loans of portfolio securities by
the fund will be collateralized by cash, letters of credit or
securities issued or guaranteed by the United States government,
its agencies or instrumentalities ('U.S. government securities')
which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities.

In lending its portfolio securities, the fund can increase its
income by continuing to receive interest on the loaned securities
as well as by either investing the cash collateral in short-term
instruments or obtaining yield in the form of interest paid by the
borrower when government securities are used as collateral.
Requirements of the SEC, which may be subject to future
modifications, currently provide that the following conditions must
be met whenever portfolio securities are loaned: (a) the fund must
receive at least 100% cash collateral or equivalent securities from
the borrower; (b) the borrower must increase such collateral
whenever the market value of the securities rises above the level
of such collateral; (c) the fund must be able to terminate the loan
at any time; (d) the fund must receive reasonable interest on the
loan, as well as an amount equal to any dividends, interest or
other distributions on the loaned securities, and any increase in
market value; (e) the fund may pay only reasonable custodian fees
in connection with the loan; and (f) voting rights on the loaned
securities may pass to the borrower; however, if a material event
adversely affecting the investment occurs, the fund's Board of
Directors must terminate the loan and regain the right to vote the
securities. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delay in
receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms deemed by
the manager to be of good standing and will not be made unless, in
the judgment of the manager the consideration to be earned from
such loans would justify the risk.

Reverse Repurchase Agreements. The fund may enter into reverse
repurchase agreements. A reverse repurchase agreement involves the
sale of a money market instrument by the fund and its agreement to
repurchase the instrument at a specified time and price. The fund
will maintain a segregated account consisting of U.S. government
securities or cash or cash equivalents to cover its obligations
under reverse repurchase agreements with broker-dealers and other
financial institutions. The fund will invest the proceeds in other
money market instruments or repurchase agreements maturing not
later than the expiration of the reverse repurchase agreement.
Under the Investment Company Act of 1940, as amended, reverse
repurchase agreements may be considered borrowing by the seller.

Reverse repurchase agreements create opportunities for increased
returns to the shareholders of the fund but, at the same time,
create special risk considerations. Although the principal or
stated value of such borrowings will be fixed, the fund's assets
may change in value during the time the borrowing is outstanding.
To the extent the income or other gain derived from securities
purchased with borrowed funds exceeds the interest or dividends the
fund will have to pay in respect thereof, the fund's net income or
other gain will be greater than if this type of investment
technique had not been used. Conversely, if the income or other
gain from the incremental assets is not sufficient to cover this
cost, the net income or other gain of the fund will be less than if
the reverse repurchase agreement had not been used.

The fund currently intends to invest not more than 33% of its net
assets in reverse repurchase agreements.

Options, Futures and Currency Strategies. The fund may use forward
currency contracts and certain options and futures strategies to
attempt to hedge its portfolio, i.e., reduce the overall level of
investment risk normally associated with the fund. There can be no
assurance that such efforts will succeed.

In order to assure that the fund will not be deemed to be a
'commodity pool' for purposes of the Commodity Exchange Act,
regulations of the Commodity Futures Trading Commission ('CFTC')
require that the fund enter into transactions in futures contracts
and options on futures only (i) for bona fide hedging purposes (as
defined in CFTC regulations), or (ii) for non-hedging purposes,
provided that the aggregate initial margin and premiums on such
non-hedging positions do not exceed 5% of the liquidation value of
the fund's assets. To attempt to hedge against adverse movements in
exchange rates between currencies, the fund may enter into forward
currency contracts for the purchase or sale of a specified currency
at a specified future date. Such contracts may involve the purchase
or sale of a foreign currency against the U.S. dollar or may
involve two foreign currencies. The fund may enter into forward
currency contracts either with respect to specific transactions or
with respect to its portfolio positions. For example, when the
investment adviser anticipates making a purchase or sale of a
security, it may enter into a forward currency contract in order to
set the rate (either relative to the U.S. dollar or another
currency) at which the currency exchange transaction related to the
purchase or sale will be made ('transaction hedging'). Further,
when the investment adviser believes that a particular currency may
decline compared to the U.S. dollar or another currency, the fund
may enter into a forward contract to sell the currency the manager
expects to decline in an amount approximating the value of some or
all of the fund's securities denominated in that currency, or when
the manager believes that one currency may decline against a
currency in which some or all of the portfolio securities held by
the fund are denominated, it may enter into a forward contract to
buy the currency expected to decline for a fixed amount ('position
hedging'). In this situation, the fund may, in the alternative,
enter into a forward contract to sell a different currency for a
fixed amount of the currency expected to decline where the manager
believes that the value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the value
of the currency in which portfolio securities of the fund are
denominated ('cross hedging'). The fund's custodian places (i)
cash, (ii) U.S. Government securities or (iii) equity securities or
debt securities (of any grade) in certain currencies provided such
assets are liquid, unencumbered and marked to market daily, or
other high-quality debt securities denominated in certain
currencies in a separate account of the fund having a value equal
to the aggregate account of the fund's commitments under forward
contracts entered into with respect to position hedges and
cross-hedges. If the value of the securities placed in a separate
account declines, additional cash or securities are placed in the
account on a daily basis so that the value of the amount will equal
the amount of the fund's commitments with respect to such
contracts.

For hedging purposes, the fund may write covered call options and
purchase put and call options on currencies to hedge against
movements in exchange rates and on debt securities to hedge against
the risk of fluctuations in the prices of securities held by the
fund or which the manager intends to include in its portfolio. The
fund also may use interest rates futures contracts and options
thereon to hedge against changes in the general level in interest
rates.

The fund may write call options on securities and currencies only
if they are covered, and such options must remain covered so long
as the fund is obligated as a writer. A call option written by the
fund is 'covered' if the fund owns the securities or currency
underlying the option or has an absolute and immediate right to
acquire that security or currency without additional cash
consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of
other securities or currencies held in its portfolio. A call option
is also covered if the fund holds on a share-for-share basis a call
on the same security or holds a call on the same currency as the
call written where the exercise price of the call held is equal to
less than the exercise price of the call written or greater than
the exercise price of the call written if the difference is
maintained by the fund in cash, Treasury bills or other high-grade,
short-term obligations in a segregated account with its custodian.

Although the portfolio might not employ the use of forward currency
contracts, options and futures, the use of any of these strategies
would involve certain investment risks and transaction costs to
which it might not otherwise be subject. These risks include:
dependence on the investment adviser's ability to predict movements
in the prices of individual debt securities, fluctuations in the
general fixed-income markets and movements in interest rates and
currency markets, imperfect correlation between movements in the
price of currency, options, futures contracts or options thereon
and movements in the price of the currency or security hedged or
used for cover; the fact that skills and techniques needed to trade
options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the
securities in which the fund invests; lack of assurance that a
liquid market will exist for any particular option, futures
contract or options thereon at any particular time and possible
need to defer or accelerate closing out certain options, futures
contracts and options thereon in order to continue to qualify for
the beneficial tax treatment afforded 'regulated investment
companies' under the Internal Revenue Code of 1986, as amended (the
'Code').

Options on Securities. As discussed more generally above,
the fund may engage in the writing of covered call options. The
fund may also purchase put options and enter into closing
transactions.

The principal reason for writing covered call options on securities
is to attempt to realize, through the receipt of premiums, a
greater return than would be realized on the securities alone. In
return for a premium, the writer of a covered call option forfeits
the right to any appreciation in the value of the underlying
security above the strike price for the life of the option (or
until a closing purchase transaction can be effected).
Nevertheless, the call writer retains the risk of a decline in the
price of the underlying security. Similarly, the principal reason
for writing covered put options is to realize income in the form of
premiums. The writer of a covered put option accepts the risk of a
decline in the price of the underlying security. The size of the
premiums the fund may receive may be adversely affected as new or
existing institutions, including other investment companies, engage
in or increase their option-writing activities.

Options written by the fund will normally have expiration dates
between one and six months from the date written. The exercise
price of the options may be below, equal to, or above the current
market values of the underlying securities at the times the options
are written. In the case of call options, these exercise prices are
referred to as 'in-the-money,' 'at-the-money' and
'out-of-the-money,' respectively.

The fund may write (a) in-the-money call options when the manager
expects the price of the underlying security to remain flat or
decline moderately during the option period, (b) at-the-money call
options when the manager expects the price of the underlying
security to remain flat or advance moderately during the option
period and (c) out-of-the-money call options when the manager
expects that the price of the security may increase but not above a
price equal to the sum of the exercise price plus the premiums
received from writing the call option. In any of the preceding
situations, if the market price of the underlying security declines
and the security is sold at this lower price, the amount of any
realized loss will be offset wholly or in part by the premium
received. Out-of-the-money, at-the-money and in-the-money put
options (the reverse of call options as to the relation of exercise
price to market price) may be utilized in the same market
environments as such call options are used in equivalent
transactions.

So long as the obligation of the fund as the writer of an option
continues, the fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring it to
deliver, in the case of a call, or take delivery of, in the case of
a put, the underlying security against payment of the exercise
price. This obligation terminates when the option expires or the
fund effects a closing purchase transaction. The fund can no longer
effect a closing purchase transaction with respect to an option
once it has been assigned an exercise notice. To secure its
obligation to deliver the underlying security when it writes a call
option, or to pay for the underlying security when it writes a put
option, the fund will be required to deposit in escrow the
underlying security or other assets in accordance with the rules of
the Options Clearing Corporation ('Clearing Corporation') or
similar clearing corporation and the securities exchange on which
the option is written.

An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized
securities exchange or in the over-the-counter market. The fund
expects to write options only on national securities exchanges or
in the over-the-counter market. The fund may purchase put options
issued by the Clearing Corporation or in the over-the-counter
market.

The fund may realize a profit or loss upon entering into a closing
transaction. In cases in which a fund has written an option, it
will realize a profit if the cost of the closing purchase
transaction is less than the premium received upon writing the
original option and will incur a loss if the cost of the closing
purchase transaction exceeds the premium received upon writing the
original option. Similarly, when the fund has purchased an option
and engages in a closing sale transaction, whether it recognizes a
profit or loss will depend upon whether the amount received in the
closing sale transaction is more or less than the premium the fund
initially paid for the original option plus the related transaction
costs.

Although the fund generally will purchase or write only those
options for which the manager believes there is an active secondary
market so as to facilitate closing transactions, there is no
assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options
no such secondary market may exist. A liquid secondary market in an
option may cease to exist for a variety of reasons. In the past,
for example, higher than anticipated trading activity or order
flow, or other unforeseen events, have at times rendered certain of
the facilities of the Clearing Corporation and national securities
exchanges inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain
types of orders or trading halts or suspensions in one or more
options. There can be no assurance that similar events, or events
that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be
possible to effect closing transactions in particular options. If,
as a covered call option writer, the fund is unable to effect a
closing purchase transaction in a secondary market, it will not be
able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise.

Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class which
may be held or written, or exercised within certain periods, by an
investor or group of investors acting in concert (regardless of
whether the options are written on the same or different securities
exchanges or are held, written or exercised in one or more accounts
or through one or more brokers). It is possible that the fund and
other clients of the manager and certain of their affiliates may be
considered to be such a group. A securities exchange may order the
liquidation of positions found to be in violation of these limits,
and it may impose certain other sanctions.

In the case of options written by the fund that are deemed covered
by virtue of the fund's holding convertible or exchangeable
preferred stock or debt securities, the time required to convert or
exchange and obtain physical delivery of the underlying common
stocks with respect to which the fund has written options may
exceed the time within which the fund must make delivery in
accordance with an exercise notice. In these instances, the fund
may purchase or temporarily borrow the underlying securities for
purposes of physical delivery. By so doing, the fund will not bear
any market risk because a fund will have the absolute right to
receive from the issuer of the underlying security an equal number
of shares to replace the borrowed stock, but the fund may incur
additional transaction costs or interest expenses in connection
with any such purchase or borrowing.

Although the manager will attempt to take appropriate measures to
minimize the risks relating to the fund's writing of call options
and purchasing of put and call options, there can be no assurance
that the fund will succeed in its option-writing program.

Stock Index Options. As described generally above, the fund may
purchase put and call options and write call options on domestic
stock indexes listed on domestic exchanges in order to realize its
investment objective of capital appreciation or for the purpose of
hedging its portfolio. A stock index fluctuates with changes in the
market values of the stocks included in the index. Some stock index
options are based on a broad market index such as the New York
Stock Exchange Composite Index or the Canadian Market Portfolio
Index, or a narrower market index such as the Standard & Poor's
100. Indexes also are based on an industry or market segment such
as the American Stock Exchange Oil and Gas Index or the Computer
and Business Equipment Index.

Options on stock indexes are generally similar to options on stock
except that the delivery requirements are different. Instead of
giving the right to take or make delivery of stock at a specified
price, an option on a stock index gives the holder the right to
receive a cash 'exercise settlement amount' equal to (a) the
amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of
exercise, multiplied by (b) a fixed 'index multiplier.' Receipt of
this cash amount will depend upon the closing level of the stock
index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the exercise
price of the option. The amount of cash received will be equal to
such difference between the closing price of the index and the
exercise price of the option expressed in dollars or a foreign
currency, as the case may be, times a specified multiple. The
writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset
its position in stock index options prior to expiration by entering
into a closing transaction on an exchange or it may let the option
expire unexercised.

The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price
movements in the portion of the securities portfolio of the fund
correlate with price movements of the stock index selected. Because
the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, whether the
fund will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain
indexes, in an industry or market segment, rather than movements in
the price of a particular stock. Accordingly, successful use by the
fund of options on stock indexes will be subject to the manager's
ability to predict correctly movements in the direction of the
stock market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the
price of individual stocks.

Futures Contracts and Options on Futures Contracts. As
described generally above, the fund may invest in stock index
futures contracts and options on futures contracts that are traded
on a domestic exchange or board of trade.

The purpose of entering into a futures contract by the fund is to
protect the fund from fluctuations in the value of securities
without actually buying or selling the securities. For example, in
the case of stock index futures contracts, if the fund anticipates
an increase in the price of stocks that it intends to purchase at a
later time, the fund could enter into contracts to purchase the
stock index (known as taking a 'long' position) as a temporary
substitute for the purchase of stocks. If an increase in the market
occurs that influences the stock index as anticipated, the value of
the futures contracts increases and thereby serves as a hedge
against the fund's not participating in a market advance. The fund
then may close out the futures contracts by entering into
offsetting futures contracts to sell the stock index (known as
taking a 'short' position) as it purchases individual stocks. The
fund can accomplish similar results by buying securities with long
maturities and selling securities with short maturities. But by
using futures contracts as an investment tool to reduce risk, given
the greater liquidity in the futures market, it may be possible to
accomplish the same result more easily and more quickly.

No consideration will be paid or received by the fund upon the
purchase or sale of a futures contract. Initially, the fund will be
required to deposit with the broker an amount of cash or cash
equivalents equal to approximately 1% to 10% of the contract amount
(this amount is subject to change by the exchange or board of trade
on which the contract is traded and brokers or members of such
board of trade may charge a higher amount). This amount is known as
'initial margin' and is in the nature of a performance bond or good
faith deposit on the contract which is returned to the fund, upon
termination of the futures contract, assuming all contractual
obligations have been satisfied. Subsequent payments, known as
'variation margin,' to and from the broker, will be made daily as
the price of the index or securities underlying the futures
contract fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as
'marking-to-market.' In addition, when the fund enters into a long
position in a futures contract or an option on a futures contract,
it must deposit into a segregated account with the fund's custodian
an amount of cash or cash equivalents equal to the total market
value of the underlying futures contract, less amounts held in the
fund's commodity brokerage account at its broker. At any time prior
to the expiration of a futures contract, the fund may elect to
close the position by taking an opposite position, which will
operate to terminate the fund's existing position in the contract.

There are several risks in connection with the use of futures
contracts as a hedging device. Successful use of futures contracts
by the fund is subject to the ability of the manager to predict
correctly movements in the stock market or in the direction of
interest rates. These predictions involve skills and techniques
that may be different from those involved in the management of
investments in securities. In addition, there can be no assurance
that there will be a perfect correlation between movements in the
price of the securities underlying the futures contract and
movements in the price of the securities that are the subject of
the hedge. A decision of whether, when and how to hedge involves
the exercise of skill and judgment, and even a well-conceived hedge
may be unsuccessful to some degree because of market behavior or
unexpected trends in market behavior or interest rates.

Positions in futures contracts may be closed out only on the
exchange on which they were entered into (or through a linked
exchange) and no secondary market exists for those contracts. In
addition, although the fund intends to enter into futures contracts
only if there is an active market for the contracts, there is no
assurance that an active market will exist for the contracts at any
particular time. Most futures exchanges and boards of trade limit
the amount of fluctuation permitted in futures contract prices
during a single trading day. Once the daily limit has been reached
in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices
could move to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to
substantial losses. In such event, and in the event of adverse
price movements, the fund would be required to make daily cash
payments of variation margin; in such circumstances, an increase in
the value of the portion of the portfolio being hedged, if any, may
partially or completely offset losses on the futures contract. As
described above, however, no assurance can be given that the price
of the securities being hedged will correlate with the price
movements in a futures contract and thus provide an offset to
losses on the futures contract.

When-Issued Securities and Delayed Delivery Transactions. In order
to secure what the manager considers to be an advantageous price or
yield, the fund may purchase U.S. government securities on a
when-issued basis or purchase or sell U.S. government securities
for delayed delivery. The fund will enter into such purchase
transactions for the purpose of acquiring portfolio securities and
not for the purpose of leverage. Delivery of the securities in such
cases occurs beyond the normal settlement periods, but no payment
or delivery is made by the fund prior to the reciprocal delivery or
payment by the other party to the transaction. In entering into a
when-issued or delayed-delivery transaction, the fund relies on the
other party to consummate the transaction and may be disadvantaged
if the other party fails to do so.

U.S. government securities normally are subject to changes in value
based upon changes, real or anticipated, in the level of interest
rates and, to a lesser extent, the public's perception of the
creditworthiness of the issuers. In general, U.S. government
securities tend to appreciate when interest rates decline and
depreciate when interest rates rise. Purchasing U.S. government
securities on a when-issued basis or delayed-delivery basis,
therefore, can involve the risk that the yields available in the
market when the delivery takes place may actually be higher than
those obtained in the transaction itself. Similarly, the sale of
U.S. government securities for delayed delivery can involve the
risk that the prices available in the market when the delivery is
made may actually be higher than those obtained in the transaction
itself.

A fund will at times maintain in a segregated account at PNC cash
or liquid securities equal to the amount of the fund's when-issued
or delayed-delivery commitments. For the purpose of determining the
adequacy of the securities in the account, the deposited securities
will be valued at market or fair value. If the market or fair value
of such securities declines, additional cash or securities will be
placed in the account on a daily basis so that the value of the
account will equal the amount of such commitments by the fund.
Placing securities rather than cash in the account may have a
leveraging effect on the fund's assets. That is, to the extent that
the fund remains substantially fully invested in securities at the
time that it has committed to purchase securities on a when-issued
basis, there will be greater fluctuation in its net asset value
than if it had set aside cash to satisfy its purchase commitments.
On the settlement date, the fund will meet its obligations from
then available cash flow, the sale of securities held in the
separate account, the sale of other securities or, although it
normally would not expect to do so, from the sale of the
when-issued or delayed-delivery securities themselves (which may
have a greater or lesser value than the fund's payment
obligations).

Portfolio Transactions. Decisions to buy and sell securities for
the fund are made by the manager, subject to the overall review of
the Company's Board of Directors. Although investment decisions
for the fund are made independently from those of the other
accounts managed by the manager, investments of the type that the
fund may make also may be made by those other accounts. When the
fund and one or more other accounts managed by the manager are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated
in a manner believed by the manager to be equitable to each. In
some cases, this procedure may adversely affect the price paid or
received by the fund or the size of the position obtained or
disposed of by the fund.

Allocation of transactions on behalf of the fund, including their
frequency, to various dealers is determined by the manager in its
best judgment and in a manner deemed fair and reasonable to the
fund's shareholders. The primary considerations of the manager in
allocating transactions are availability of the desired security
and the prompt execution of orders in an effective manner at the
most favorable prices. Subject to these considerations, dealers
that provide supplemental investment research and statistical or
other services to the manager may receive orders for portfolio
transactions by the fund. Information so received is in addition
to, and not in lieu of, services required to be performed by the
manager, and the fees of the manager are not reduced as a
consequence of their receipt of the supplemental information. The
information may be useful to the manager in serving both the fund
and other clients, and conversely, supplemental information
obtained by the placement of business of other clients may be
useful to the manager in carrying out its obligations to the fund.

The fund will not purchase securities during the existence of any
underwriting or selling group relating to the securities, of which
the manager is a member, except to the extent permitted by the SEC.
Under certain circumstances, the fund may be at a disadvantage
because of this limitation in comparison with other funds that have
similar investment objectives but that are not subject to a similar
limitation.

Even though investment decisions for the fund are made
independently from those of the other accounts managed by the
manager, investments of the kind made by the fund also may be made
by those other accounts. When the fund and one or more accounts
managed by the manager are prepared to invest in, or desire to
dispose of, the same security, available investments or
opportunities for sale will be allocated in a manner believed by
the manager to be equitable. In some cases, this procedure may
adversely affect the price paid or received by the fund or the size
of the position obtained for or disposed of by the fund.

Portfolio Turnover. The fund's portfolio turnover rate (the lesser
of purchases or sales of portfolio securities during the year,
excluding purchases or sales of short-term securities, divided by
the monthly average value of portfolio securities) is generally not
expected to exceed 150%. The rate of turnover will not be a
limiting factor, however, when the fund deems it desirable to sell
or purchase securities. This policy should not result in higher
brokerage commissions to the fund, as purchases and sales of
portfolio securities are usually affected as principal
transactions. Securities may be sold in anticipation of a rise in
interest rates (market decline) or purchased in anticipation of a
decline in interest rates (market rise) and later sold. In
addition, a security may be sold and another security of comparable
quality purchased at approximately the same time to take advantage
of what the fund believes to be a temporary disparity in the normal
yield relationship between the two securities. These yield
disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of
interest rates, such as changes in the overall demand for, or
supply of, various types of tax-exempt securities.

Investment Restrictions

The fund has adopted the following investment restrictions for the
protection of shareholders. Restrictions 1 through 7 cannot be
changed without approval by the holders of a majority of the
outstanding shares of the fund, defined as the lesser of (a) 67% or
more of the fund's shares present at a meeting, if the holders of
more than 50% of the outstanding shares are present in person or by
proxy or (b) more than 50% of the fund's outstanding shares. The
remaining restrictions may be changed by the Board of Directors at
any time. The fund may not:

1. Invest in a manner that would cause it to fail to be a
'diversified company' under the 1940 Act and the rules,
regulations and orders thereunder.

2. Issue 'senior securities' as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as
permitted under the 1940 Act and the rules, regulations and
orders thereunder.

3. Invest more than 25% of its total assets in securities, the
issuers of which conduct their principal business
activities in the same industry. For purposes of this
limitation, securities of the U.S. government (including
its agencies and instrumentalities) and securities of state
or municipal governments and their political subdivisions
are not considered to be issued by members of any industry.

4. Borrow money except that (a) the fund may borrow from banks
for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might
otherwise require the untimely disposition of securities,
and (b) the fund may, to the extent consistent with its
investment policies, enter into reverse repurchase
agreements, forward roll transactions and similar
investment strategies and techniques. To the extent that
it engages in transactions described in (a) and (b), the
fund will be limited so that no more than 33-1/3% of the
value of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities
(not including the amount borrowed) valued at the time the
borrowing is made, is derived from such transactions.

5. Make loans. This restriction does not apply to: (a) the
purchase of debt obligations in which the fund may invest
consistent with its investment objective and policies; (b)
repurchase agreements and; (c) loans of its portfolio
securities, to the fullest extent permitted under the 1940
Act.

6. Engage in the business of underwriting securities issued by
other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the
Securities Act of 1933, as amended, in disposing of
portfolio securities.

7. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction
shall not prevent the fund from: (a) investing in
securities of issuers engaged in the real estate business
or the business of investing in real estate (including
interests in limited partnerships owning or otherwise
engaging in the real estate business or the business of
investing in real estate) and securities which are secured
by real estate or interests therein; (b) holding or selling
real estate received in connection with securities it holds
or held; (c) trading in futures contracts and options on
futures contracts (including options on currencies to the
extent consistent with the funds investment objective and
policies); or (d) investing in real estate investment trust
securities.

8. Purchase any securities on margin (except for such short-
term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except 'against the box'). For purposes
of this restriction, the deposit or payment by the fund of
underlying securities and other assets in escrow and
collateral agreements with respect to initial or
maintenance margin in connection with futures contracts and
related options and options on securities, indexes or
similar items is not considered to be the purchase of a
security on margin.

9. Invest in oil, gas or other mineral exploration programs.

10. Purchase or otherwise acquire any security if, as a result,
more than 15% of its net assets would be invested in
securities that are illiquid.

11. Invest in companies for the purpose of exercising
management or control.

12. Invest in securities of an issuer which, together with any
predecessor, has been in operation for less than three
years if, as a result, more than 5% of the total assets of
the fund would then be invested in such securities (for
purposes of this restriction, issuers include predecessors,
sponsors, controlling persons, general guarantors and
originators of underlying assets).

Certain restrictions listed above permit the fund without
shareholder approval to engage in investment practices that the
fund does not currently pursue. The fund has no present intention
of altering its current investment practices as otherwise described
in the prospectus and this SAI and any future change in these
practices would require Board approval. If any percentage
restriction described above is complied with at the time of an
investment, a later increase or decrease in percentage resulting
from a change in values or assets will not constitute a violation
of such restriction.

Directors and Executive Officers of the Company

The Directors and executive officers of the Company, together with
information as to their principal business occupations during the
past five years, are shown below. Each Director who is an
'interested person' of the Fund, as defined in the Investment
Company Act of 1940, as amended (the '1940 Act'), is indicated by
an asterisk.

Paul R. Ades, Director (Age 59). Partner in the law firm of Murov
& Ades. Director of 5 investment companies associated with
Citigroup Inc. His address is 272 South Wellwood Avenue, P.O. Box
504, Lindenhurst, New York 11757.

Herbert Barg, Director (Age 76). Private investor. Director of 16
investment companies associated with Citigroup Inc. His address is
273 Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.

Dwight B. Crane, Director (Age 61). Professor, Graduate School of
Business Administration, Harvard University; Director of 22
investment companies associated with Citigroup Inc. His address is
Graduate School of Business Administration, Harvard University,
Boston, Massachusetts 02163.

Frank G. Hubbard, Director (Age 61). Vice President, S&S
Industries; Former Corporate Vice President, Materials Management
and Marketing Services of Huls America, Inc.; Director of 5
investment companies associated with Citigroup Inc. His address is
80 Centennial Avenue P.O. Box 456, Piscataway, New Jersey 08855-
0456.

*Heath B. McLendon, Chairman of the Board, President and Chief
Executive Officer (Age 66). Managing Director of Salomon Smith
Barney Inc. ('Salomon Smith Barney'); Director and President of SSB
Citi and Travelers Investment Adviser, Inc. ('TIA'); and formerly
Chairman of the Board of Smith Barney Strategy Advisers Inc. Mr.
McLendon is a director of 64 investment companies associated with
Citigroup Inc. His address is 388 Greenwich Street, New York, New
York 10013.

Jerome Miller, Director (Age 60). Retired, Former President, Asset
Management Group of Shearson Lehman Brothers. Director of 5
investment companies associated with Citigroup Inc. His address is
27 Hemlock Road, Manhasset, New York, NY 11030.

Ken Miller, Director (Age 57). President of Young Stuff Apparel
Group, Inc. Director of 5 investment companies associated with
Citigroup Inc. His address is 1411 Broadway, New York, New York
10018.

Lewis E. Daidone, Senior Vice President and Treasurer (Age 42).
Managing Director of Salomon Smith Barney, Director and Senior Vice
President of SSB Citi and TIA. Treasurer of 59 investment companies
associated with Citigroup. His address is 388 Greenwich Street, New
York, New York 10013.

Peter Hable, Vice President and Investment Officer (Age ).
Managing Director of Salomon Smith Barney, President of Davis
Skaggs Investment Management, a division of Salomon Smith Barney.
His address is 1 Sansome Street, Suite 3850, San Francisco,
California 94104.

Paul Brook, Controller (Age 45). Director of Salomon Smith Barney;
Controller or Assistant Treasurer of 43 investment companies
associated with Citigroup; from 1997-1998 Managing Director of AMT
Capital Services Inc.; prior to 1997 Partner with Ernst & Young
LLP; His address is 388 Greenwich Street, New York, New York 10013.

Christina T. Sydor, Secretary (Age 48). Managing Director of
Salomon Smith Barney; General Counsel and Secretary of SSB Citi and
TIA. Secretary of 59 investment companies associated with
Citigroup. Her address is 388 Greenwich Street, New York, New York
10013.

No officer, director or employee of Salomon Smith Barney or any
parent or subsidiary receives any compensation from the Company for
serving as an officer or Director of the Company. The Company pays
each Director who is not an officer, director or employee of
Salomon Smith Barney or any of its affiliates a fee of $22,500 per
annum plus $2,900 per meeting attended and reimburses travel and
out-of-pocket expenses. For the fiscal year ended September 30,
1999, the Directors of the Company were paid the following
compensation:

Name of Person

Aggregate
Compensation
from Fund
Total Pension or
Retirement
Benefits Accrued
as part of Fund
Expenses
Compensation
from Fund and
Fund Complex
Paid to
Directors
Number of Funds
for Which
Director Serves
Within Fund
Complex

Paul R. Ades
$0
$0
$49,000
5
Herbert Barg
0
0
101,600
16
Dwight B. Crane
0
0
133,850
22
Frank G. Hubbard
0
0
52,000
5
Heath B. McLendon
0
0
0
64
Jerome Miller
0
0
12,400
5
Ken Miller
0
0
52,000
5

Upon attainment of age 80, Directors are required to change to
emeritus status. Directors Emeritus are entitled to serve in
emeritus status for a maximum of 10 years during which time they
are paid 50% of the annual retainer fee and meeting fees otherwise
applicable to the Fund Directors together with reasonable out-of-
pocket expenses for each meeting attended.

Investment Manager

SSB Citi Fund Management LLC serves as investment manager to the
fund pursuant to a written agreement (the 'Advisory Agreement').
The services provided by the manager under the Advisory Agreement
are described in the prospectus under 'Management.' The manager
pays the salary of any officer and employee who is employed by both
it and the fund. The manager bears all expenses in connection with
the performance of its services. The manager is a wholly owned
subsidiary of Citigroup Inc. ('Citigroup').

As compensation for investment advisory services, the fund pays the
manager a fee computed daily and paid monthly at an annual rate of
0.75% of the fund's average daily net assets. Since the fund's
inception on ______, 1999, the fund incurred $_______ in investment
advisory fees.

The fund bears expenses incurred in its operation, including:
taxes, interest, brokerage fees and commissions, if any; fees of
Directors who are not officers, directors, shareholders or
employees of Salomon Smith Barney, or manager, Securities and
Exchange Commission (the 'SEC') fees and state Blue Sky
qualification fees; charges of custodians; transfer and dividend
disbursing agent's fees; certain insurance premiums; outside
auditing and legal expenses; costs of maintenance of corporate
existence; investor services (including allocated telephone and
personnel expenses); and costs of preparation and printing of
prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders,
shareholders' reports and corporate meetings.

The manager has voluntarily agreed to waive its fees if in any
fiscal year the aggregate expenses of any Class of the following
funds, exclusive of 12b-1 fees, taxes brokerage, interest and
extraordinary expenses, such as litigation costs, exceed the
indicated percentage of the fund's average net assets for that
fiscal year.

Counsel and Auditors

Wilkie Farr & Gallagher serves as counsel to the Company. The
Directors who are not 'interested persons' of the Company have
selected Stroock & Stroock & Lavan LLP to serve as their legal
counsel.

KPMG LLP, independent accountants, 345 Park Avenue, New York, New
York 10154, serve as auditors of the fund and will render an
opinion on the fund's financial statements for the fiscal year
ending September 30, 2000.

DISTRIBUTION

Distributor. CFBDS, Inc., located at 20 Milk Street, Boston, MA
02109-5408, serves as the fund's distributor on a best efforts
basis pursuant to a distribution agreement dated [October 8, 1998]
(the 'Distribution Agreement'), which was approved by the Company's
Board of Directors. Prior to the merger of Travelers Group, Inc.
and Citicorp on October 8, 1998, Salomon Smith Barney served as the
fund's distributor.

For the 1999 fiscal year, Salomon Smith Barney served as
distributor and received $________ in sales charges for the sale of
Class A shares, and did not reallow any portion thereof to dealers.
For the 1999 fiscal year, Salomon Smith Barney received $______ in
sales charges for the sale of Class L shares, and did not reallow
any portion thereof to dealers.

For the 1999 fiscal year, Salomon Smith Barney received from
shareholders $________ in CDSC on the redemption of Class A shares.
For the 1999 fiscal year, Salomon Smith Barney received from
shareholders $_______ in CDSC on the redemption of Class B shares.
For the 1999 fiscal year, Salomon Smith Barney received from
shareholders $__________ in CDSC on the redemption of Class L
shares.

When payment is made by the investor before settlement date, unless
otherwise directed by the investor, the funds will be held as a
free credit balance in the investor's brokerage account and Salomon
Smith Barney may benefit from the temporary use of the funds. The
investor may designate another use for the funds prior to
settlement date, such as an investment in a money market fund
(other than Smith Barney Exchange Reserve Fund) of the Smith Barney
Mutual Funds. If the investor instructs Salomon Smith Barney to
invest the funds in a Smith Barney money market fund, the amount of
the investment will be included as part of the average daily net
assets of both the fund and the Smith Barney money market fund, and
affiliates of Salomon Smith Barney that serve the funds in an
investment advisory capacity or administrative capacity will
benefit form the fact that they are receiving fees from both such
investment companies for managing these assets computed on the
basis of their average daily net assets. The fund's Board of
Directors has been advised of the benefits to Salomon Smith Barney
resulting from these settlement procedures and will take such
benefits into consideration when reviewing the Advisory and
Administration Agreements for continuance.

For the fiscal year ended September 30, 1999, Salomon Smith Barney
incurred distribution expenses totaling approximately $________,
consisting of approximately $________ for advertising, $_______ for
printing and mailing prospectuses, $_________for support services
and overhead expenses, $_______ to Salomon Smith Barney to
compensate financial consultants and $______ for accruals for
interest on the excess of Salomon Smith Barney expenses incurred in
distribution of the fund's shares over the sum of the distribution
fees and CDSC received by Salomon Smith Barney.

Services and Distribution Plan

To compensate Salomon Smith Barney for the services it provides and
for the expense it bears, the fund has adopted a services and
distribution plan (the 'Plan') pursuant to Rule 12b-1 under the
1940 Act. Under the Plan, the fund pays Salomon Smith Barney a
service fee, accrued daily and paid monthly, calculated at the
annual rate of 0.25% of the value of the fund's average daily net
assets attributable to the Class A, Class B and Class L shares. In
addition, the fund pays Salomon Smith Barney a distribution fee
with respect to Class B and Class L shares primarily intended to
compensate Salomon Smith Barney for its initial expense of paying
Financial Consultants a commission upon sales of those shares. The
Class B and Class L distribution fee is calculated at the annual
rate of 0.75% of the value of the fund's average net assets
attributable to the shares of the respective Class.

For the fiscal year ended September 30, 1999 the fund incurred
$__________, for Class A shares, $__________, in Class B shares and
$_________, in Class L shares, respectively, in distribution plan
fees.

Under its terms, the Plans continues from year to year, provided
such continuance is approved annually by vote of the Board of
Directors, including a majority of the Directors who are not
interested persons of the fund and who have no director indirect
financial interested in the operation of the Plan or in the
Distribution Agreement (the 'Independent Directors'). The Plan may
not be amended to increase the amount of the service and
distribution fees without shareholder approval, and all material
amendments of the Plan also must be approved by the Directors and
Independent Directors in the manner described above. The Plan may
be terminated with respect to a Class of the fund at any time,
without penalty, by vote of a majority of the Independent Directors
or by vote of a majority of the outstanding voting securities of
the Class (as defined in the 1940 Act). Pursuant to the Plan,
Salomon Smith Barney will provide the fund's Board of Directors
with periodic reports of amounts expended under the Plan and the
purpose for which such expenditures were made.

PURCHASE OF SHARES

The following classes of shares are available for purchase. See
the prospectus for a discussion of factors to consider in selecting
which Class of shares to purchase.

Class A Shares. Class A shares are sold to investors at the public
offering price, which is the net asset value plus an initial sales
charge as follows:

Amount of Investment

Sales Charge as a %
Of Transaction

Sales Charge as a %
of Amount Invested
Dealers'
Reallowance as %
Of Offering Price
Less than $25,000
5.00%
5.26%
4.50%
$ 25,000 - 49,999
4.00%
4.17%
3.60%
50,000 - 99,999
3.50%
3.63%
3.15%
100,000 - 249,999
3.00%
3.09%
2.70%
250,000 - 499,999
2.00%
2.04%
1.80%
500,000 and over
*
*
*

* Purchases of Class A shares of $500,000 or more will be made at
net asset value without any initial sales charge, but will be
subject to a deferred sales charge of 1.00% on redemptions made
within 12 months of purchase. The deferred sales charge on Class
A shares is payable to Salomon Smith Barney, which compensates
Salomon Smith Barney Financial Consultants and other dealers
whose clients make purchases of $500,000 or more. The deferred
sales charge is waived in the same circumstances in which the
deferred sales charge applicable to Class B and Class L shares is
waived. See 'Purchase of Shares-Deferred Sales Charge
Alternatives' and 'Purchase of Shares-Waivers of Deferred Sales
Charge.'

Members of a selling group may receive up to 90% of the sales
charge and may be deemed to be underwriters of a fund as defined in
the Securities Act of 1933. The reduced sales charges shown above
apply to the aggregate of purchases of Class A shares of a fund
made at one time by 'any person,' which includes an individual and
his or her immediate family, or a director or other fiduciary of a
single trust estate or single fiduciary account.

Class B Shares. Class B shares are sold without an initial sales
charge but are subject to a deferred sales charge payable upon
certain redemptions. See 'Deferred Sales Charge Provisions' below.

Class L Shares. Class L shares are sold with an initial sales
charge of 1.00% (which is equal to 1.01% of the amount invested)
and are subject to a deferred sales charge payable upon certain
redemptions. See 'Deferred Sales Charge Provisions' below. Until
June 22, 2001 purchases of Class L shares by investors who were
holders of Class C shares of the fund on June 12, 1998 will not be
subject to the 1% initial sales charge.

Class Y Shares. Class Y shares are sold without an initial sales
charge or deferred sales charge and are available only to investors
investing a minimum of $15,000,000 (except purchases of Class Y
shares by Smith Barney Concert Allocation Series Inc., for which
there is no minimum purchase amount).

General

Investors may purchase shares from a Salomon Smith Barney Financial
Consultant or a Dealer Representative. In addition, certain
investors, including qualified retirement plans purchasing through
certain Dealer Representatives, may purchase shares directly from a
fund. When purchasing shares of a fund, investors must specify
which class is being purchased. Salomon Smith Barney and Dealer
Representatives may charge their customers an annual account
maintenance fee in connection with a brokerage account through
which an investor purchases or holds shares. Accounts held
directly at First Data Investor Services Group, Inc. ('First Data'
or 'transfer agent') are not subject to a maintenance fee.

Investors in Class A, Class B and Class L shares may open an
account in a fund by making an initial investment of at least
$1,000 for each account, in the fund. Investors in Class Y shares
may open an account by making an initial investment of $15,000,000.
Subsequent investments of at least $50 may be made for all Classes.
For shareholders purchasing shares of a fund through the Systematic
Investment Plan on a monthly basis, the minimum initial investment
requirement for Class A, Class B and Class L shares and subsequent
investment requirement for all Classes is $25. For shareholders
purchasing shares of a fund through the Systematic Investment Plan
on a quarterly basis, the minimum initial investment required for
Class A, Class B and Class L shares and the subsequent investment
requirement for all Classes is $50. There are no minimum
investment requirements for Class A shares for employees of
Citigroup and its subsidiaries, including Salomon Smith Barney,
unitholders who invest distributions from a Unit Investment Trust
('UIT') sponsored by Salomon Smith Barney, and Directors/Directors
of any of the Smith Barney Mutual Funds, and their spouses and
children. The fund reserves the right to waive or change minimums,
to decline any order to purchase its shares and to suspend the
offering of shares from time to time. Shares purchased will be held
in the shareholder's account by First Data. Share certificates are
issued only upon a shareholder's written request to First Data.

Purchase orders received by the fund or a Salomon Smith Barney
Financial Consultant prior to the close of regular trading on the
NYSE, on any day the fund calculates its net asset value, are
priced according to the net asset value determined on that day (the
''trade date''). Orders received by a Dealer Representative prior
to the close of regular trading on the NYSE on any day a fund
calculates its net asset value, are priced according to the net
asset value determined on that day, provided the order is received
by a fund or the fund's agent prior to its close of business. For
shares purchased through Salomon Smith Barney or a Dealer
Representative purchasing through Salomon Smith Barney, payment for
shares of the fund is due on the third business day after the trade
date. In all other cases, payment must be made with the purchase
order.

Systematic Investment Plan. Shareholders may make additions to
their accounts at any time by purchasing shares through a service
known as the Systematic Investment Plan. Under the Systematic
Investment Plan, Salomon Smith Barney or First Data is authorized
through preauthorized transfers of at least $25 on a monthly basis
or at least $50 on a quarterly basis to charge the shareholder's
account held with a bank or other financial institution on a
monthly or quarterly basis as indicated by the shareholder, to
provide for systematic additions to the shareholder's fund account.
A shareholder who has insufficient funds to complete the transfer
will be charged a fee of up to $25 by Salomon Smith Barney or First
Data. The Systematic Investment Plan also authorizes Salomon Smith
Barney to apply cash held in the shareholder's Salomon Smith Barney
brokerage account or redeem the shareholder's shares of a Smith
Barney money market fund to make additions to the account.
Additional information is available from the fund or a Salomon
Smith Barney Financial Consultant or a Dealer Representative.

Sales Charge Waivers and Reductions

Initial Sales Charge Waivers. Purchases of Class A shares may be
made at net asset value without a sales charge in the following
circumstances: (a) sales to (i) Board Members and employees of
Citigroup and its subsidiaries and any Citigroup affiliated funds
including the Smith Barney Mutual Funds (including retired Board
Members and employees); the immediate families of such persons
(including the surviving spouse of a deceased Board Member or
employee); and to a pension, profit-sharing or other benefit plan
for such persons and (ii) employees of members of the National
Association of Securities Dealers, Inc., provided such sales are
made upon the assurance of the purchaser that the purchase is made
for investment purposes and that the securities will not be resold
except through redemption or repurchase; (b) offers of Class A
shares to any other investment company to effect the combination of
such company with the fund by merger, acquisition of assets or
otherwise; (c) purchases of Class A shares by any client of a newly
employed Salomon Smith Barney Financial Consultant (for a period up
to 90 days from the commencement of the Financial Consultant's
employment with Salomon Smith Barney), on the condition the
purchase of Class A shares is made with the proceeds of the
redemption of shares of a mutual fund which (i) was sponsored by
the Financial Consultant's prior employer, (ii) was sold to the
client by the Financial Consultant and (iii) was subject to a sales
charge; (d) purchases by shareholders who have redeemed Class A
shares in the fund (or Class A shares of another Smith Barney
Mutual Fund that is offered with a sales charge) and who wish to
reinvest their redemption proceeds in the fund, provided the
reinvestment is made within 60 calendar days of the redemption; (e)
purchases by accounts managed by registered investment advisory
subsidiaries of Citigroup; (f) purchases by a separate account used
to fund certain unregistered variable annuity contracts; (g)
investments of distributions from a UIT sponsored by Salomon Smith
Barney; and (h) purchases by investors participating in a Salomon
Smith Barney fee-based arrangement. In order to obtain such
discounts, the purchaser must provide sufficient information at the
time of purchase to permit verification that the purchase would
qualify for the elimination of the sales charge.

Right of Accumulation. Class A shares of the fund may be purchased
by ''any person'' (as defined above) at a reduced sales charge or
at net asset value determined by aggregating the dollar amount of
the new purchase and the total net asset value of all Class A
shares of the fund and of other Smith Barney Mutual Funds that are
offered with a sales charge as currently listed under ''Exchange
Privilege'' then held by such person and applying the sales charge
applicable to such aggregate. In order to obtain such discount,
the purchaser must provide sufficient information at the time of
purchase to permit verification that the purchase qualifies for the
reduced sales charge. The right of accumulation is subject to
modification or discontinuance at any time with respect to all
shares purchased thereafter.

Letter of Intent - Class A Shares. A Letter of Intent for an
amount of $50,000 or more provides an opportunity for an investor
to obtain a reduced sales charge by aggregating investments over a
13 month period, provided that the investor refers to such Letter
when placing orders. For purposes of a Letter of Intent, the
'Amount of Investment'' as referred to in the preceding sales
charge table includes (i) all Class A shares of the fund and other
Smith Barney Mutual Funds offered with a sales charge acquired
during the term of the letter plus (ii) the value of all Class A
shares previously purchased and still owned. Each investment made
during the period receives the reduced sales charge applicable to
the total amount of the investment goal. If the goal is not
achieved within the period, the investor must pay the difference
between the sales charges applicable to the purchases made and the
charges previously paid, or an appropriate number of escrowed
shares will be redeemed. The term of the Letter will commence upon
the date the Letter is signed, or at the options of the investor,
up to 90 days before such date. Please contact a Salomon Smith
Barney Financial Consultant or First Data to obtain a Letter of
Intent application.

Letter of Intent - Class Y Shares. A Letter of Intent may also be
used as a way for investors to meet the minimum investment
requirement for Class Y shares (except purchases of Class Y shares
by Smith Barney Concert Allocation Series Inc., for which there is
no minimum purchase amount). Such investors must make an initial
minimum purchase of $5,000,000 in Class Y shares of the fund and
agree to purchase a total of $15,000,000 of Class Y shares of the
fund within thirteen months from the date of the Letter. If a
total investment of $15,000,000 is not made within the 13-month
period, as applicable, all Class Y shares purchased to date will be
transferred to Class A shares, where they will be subject to all
fees (including a service fee of 0.25%) and expenses applicable to
the fund's Class A shares, which may include a deferred sales
charge of 1.00%. Please contact a Salomon Smith Barney Financial
Consultant or First Data for further information.

Deferred Sales Charge Provisions

'Deferred Sales Charge Shares'' are: (a) Class B shares; (b) Class
L shares; and (c) Class A shares that were purchased without an
initial sales charge but are subject to a deferred sales charge. A
deferred sales charge may be imposed on certain redemptions of
these shares.

Any applicable deferred sales charge will be assessed on an amount
equal to the lesser of the original cost of the shares being
redeemed or their net asset value at the time of redemption.
Deferred Sales Charge Shares that are redeemed will not be subject
to a deferred sales charge to the extent the value of such shares
represents: (a) capital appreciation of fund assets; (b)
reinvestment of dividends or capital gain distributions; (c) with
respect to Class B shares, shares redeemed more than five years
after their purchase; or (d) with respect to Class L shares and
Class A shares that are Deferred Sales Charge Shares, shares
redeemed more than 12 months after their purchase.

Class L shares and Class A shares that are Deferred Sales Charge
Shares are subject to a 1.00% deferred sales charge if redeemed
within 12 months of purchase. In circumstances in which the
deferred sales charge is imposed on Class B shares, the amount of
the charge will depend on the number of years since the shareholder
made the purchase payment from which the amount is being redeemed.
Solely for purposes of determining the number of years since a
purchase payment, all purchase payments made during a month will be
aggregated and deemed to have been made on the last day of the
preceding Salomon Smith Barney statement month. The following table
sets forth the rates of the charge for redemptions of Class B
shares by shareholders.

Year Since Purchase Payment Was Made

Deferred sales charge

First

5.00%

Second

4.00

Third

3.00

Fourth

2.00

Fifth

1.00

Sixth and thereafter

0.00

Class B shares will convert automatically to Class A shares eight
years after the date on which they were purchased and thereafter
will no longer be subject to any distribution fees. There will also
be converted at that time such proportion of Class B Dividend
Shares owned by the shareholders as the total number of his or her
Class B shares converting at the time bears to the total number of
outstanding Class B shares (other than Class B Dividend Shares)
owned by the shareholder.

The length of time that Deferred Sales Charge Shares acquired
through an exchange have been held will be calculated from the date
the shares exchanged were initially acquired in one of the other
Smith Barney Mutual Funds, and fund shares being redeemed will be
considered to represent, as applicable, capital appreciation or
dividend and capital gain distribution reinvestments in such other
funds. For Federal income tax purposes, the amount of the deferred
sales charge will reduce the gain or increase the loss, as the case
may be, on the amount realized on redemption. The amount of any
deferred sales charge will be paid to Salomon Smith Barney.

To provide an example, assume an investor purchased 100 Class B
shares of the fund at $10 per share for a cost of $1,000.
Subsequently, the investor acquired 5 additional shares of the fund
through dividend reinvestment. During the fifteenth month after
the purchase, the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the net asset
value had appreciated to $12 per share, the value of the investor's
shares would be $1,260 (105 shares at $12 per share). The deferred
sales charge would not be applied to the amount which represents
appreciation ($200) and the value of the reinvested dividend shares
($60). Therefore, $240 of the $500 redemption proceeds ($500 minus
$260) would be charged at a rate of 4.00% (the applicable rate for
Class B shares) for a total deferred sales charge of $9.60.

Waivers of Deferred Sales Charge

The deferred sales charge will be waived on: (a) exchanges (see
''Exchange Privilege''); (b) automatic cash withdrawals in amounts
equal to or less than 1.00% per month of the value of the
shareholder's shares at the time the withdrawal plan commences (see
''Automatic Cash Withdrawal Plan'') (however, automatic cash
withdrawals in amounts equal to or less than 2.00% per month of the
value of the shareholder's shares will be permitted for withdrawal
plans established prior to November 7, 1994); (c) redemptions of
shares within 12 months following the death or disability of the
shareholder; (d) redemptions of shares made in connection with
qualified distributions from retirement plans or IRAs upon the
attainment of age 591/2; (e) involuntary redemptions; and
(f) redemptions of shares to effect a combination of the fund with
any investment company by merger, acquisition of assets or
otherwise. In addition, a shareholder who has redeemed shares from
other Smith Barney Mutual Funds may, under certain circumstances,
reinvest all or part of the redemption proceeds within 60 days and
receive pro rata credit for any deferred sales charge imposed on
the prior redemption.

Deferred sales charge waivers will be granted subject to
confirmation (by Salomon Smith Barney in the case of shareholders
who are also Salomon Smith Barney clients or by First Data in the
case of all other shareholders) of the shareholder's status or
holdings, as the case may be.

Volume Discounts

The schedule of sales charges on Class A shares described in the
prospectus applies to purchases made by any 'purchaser,' which is
defined to include the following: (a) an individual; (b) an
individual's spouse and his or her children purchasing shares for
their own account; (c) a director or other fiduciary purchasing
shares for a single trust estate or single fiduciary account; and
(d) a director or other professional fiduciary (including a bank,
or an investment adviser registered with the SEC under the
Investment Advisers Act of 1940, as amended) purchasing shares of
the fund for one or more trust estates or fiduciary accounts.
Purchasers who wish to combine purchase orders to take advantage of
volume discounts on Class A shares should contact a Salomon Smith
Barney Financial Consultant.

Determination of Public Offering Price

The fund offers its shares to the public on a continuous basis.
The public offering price for a Class A, and Class Y share of a
fund is equal to the net asset value per share at the time of
purchase, plus for Class A shares an initial sales charge based on
the aggregate amount of the investment. The public offering price
for a Class L share includes a 1.00% initial sales charge. Class A
share purchases, including applicable rights of accumulation,
equaling or exceeding $500,000 is equal to the net asset value per
share at the time of purchase and no sales charge is imposed at the
time of purchase. A contingent deferred sales charge ('CDSC'),
however, is imposed on certain redemptions of Class L shares, and
Class A shares when purchased in amounts exceeding $500,000. The
method of computation of the public offering price is shown in the
fund's financial statements, incorporated by reference in their
entirety into this SAI.

REDEMPTION OF SHARES

The right of redemption may be suspended or the date of payment
postponed (a) for any period during which the New York Stock
Exchange, Inc. ('NYSE') is closed (other than for customary weekend
and holiday closings), (b) when trading in the markets the fund
normally utilizes is restricted, or an emergency exists, as
determined by the SEC, so that disposal of the fund's investments
or determination of net asset value is not reasonably practicable
or (c) for such other periods as the SEC by order may permit for
protection of the fund's shareholders.

If the shares to be redeemed were issued in certificate form, the
certificates must be endorsed for transfer (or be accompanied by an
endorsed stock power) and must be submitted to First Data together
with the redemption request. Any signature appearing on a share
certificate, stock power or written redemption request in excess of
$10,000 must be guaranteed by an eligible guarantor institution
such as a domestic bank, savings and loan institution, domestic
credit union, member bank of the federal Reserve System or member
firm of a national securities exchange. Written redemption
requests of $10,000 or less do not require a signature guarantee
unless more than one such redemption request is made in any 10-day
period or the redemption proceeds are to be sent to an address
other than the address of record. Unless otherwise directed,
redemption proceeds will be mailed to an investor's address of
record. First Data may require additional supporting documents for
redemptions made by corporations, executors, administrators,
directors or guardians. A redemption request will not be deemed
properly received until First Data receives all required documents
in proper form.

If a shareholder holds shares in more than one Class, any request
for redemption must specify the Class being redeemed. In the event
of a failure to specify which Class, or if the investor owns fewer
shares of the Class than specified, the redemption request will be
delayed until the Transfer Agent receives further instructions from
Salomon Smith Barney, or if the shareholder's account is not with
Salomon Smith Barney, form the shareholder directly. The
redemption proceeds will be remitted on or before the third
business day following receipt of proper tender, except on any days
on which the NYSE is closed or as permitted under the 1940 Act, in
extraordinary circumstances. Generally, if the redemption proceeds
are remitted to a Salomon Smith Barney brokerage account, these
funds will not be invested for the shareholder's benefit without
specific instruction and Salomon Smith Barney will benefit from the
use of temporarily uninvested funds. Redemption proceeds for
shares purchased by check, other than a certified or official bank
check, will be remitted upon clearance of the check, which may take
up to ten days or more.

Distributions in Kind

If the Board of Directors of the fund determines that it would be
detrimental to the best interests of the remaining shareholders to
make a redemption payment wholly in cash, each fund may pay, in
accordance with SEC rules, any portion of a redemption in excess of
the lesser of $250,000 or 1.00% of the fund's net assets by a
distribution in kind of fund securities in lieu of cash. Securities
issued as a distribution in kind may incur brokerage commissions
when shareholders subsequently sell those securities.

Automatic Cash Withdrawal Plan

An automatic cash withdrawal plan (the 'Withdrawal Plan') is
available to shareholders who own shares with a value of at least
$10,000 and who wish to receive specific amounts of cash monthly or
quarterly. Withdrawals of at least $50 may be made under the
Withdrawal Plan by redeeming as many shares of the fund as may be
necessary to cover the stipulated withdrawal payment. Any
applicable CDSC will not be waived on amounts withdrawn by
shareholders that exceed 1.00% per month of the value of a
shareholder's shares at the time the Withdrawal Plan commences.
(With respect to Withdrawal Plans in effect prior to November 7,
1994, any applicable CDSC will be waived on amounts withdrawn that
do not exceed 2.00% per month of the value of the shareholder's
shares that are subject to a CDSC). To the extent withdrawals
exceed dividends, distributions and appreciation of a shareholder's
investment in the fund, there will be a reduction in the value of
the shareholder's investment, and continued withdrawal payments may
reduce the shareholder's investment and ultimately exhaust it.
Withdrawal payments should not be considered as income from
investment in the fund. Furthermore, as it generally would not be
advantageous to a shareholder to make additional investments in the
fund at the same time he or she is participating in the Withdrawal
Plan, purchases by such shareholder in amounts of less than $5,000
ordinarily will not be permitted.

Shareholders who wish to participate in the Withdrawal Plan and who
hold their shares in certificate form must deposit their share
certificates with the Transfer Agent as agent for Withdrawal Plan
members. For additional information, shareholders should contact a
Salomon Smith Barney Financial Consultant or their Financial
Consultant, the Introducing Broker or dealer in the selling group.
A shareholder who purchases shares directly through the Transfer
Agent may continue to do so and applications for participation in
the Withdrawal Plan must be received by the Transfer Agent no later
than the eighth day of the month to be eligible for participation
beginning with that month's withdrawal.

VALUATION OF SHARES

The prospectus states that the net asset value of the fund's
Classes of shares will be determined on any date that the New York
Stock Exchange ('NYSE') is open. The NYSE is closed on the
following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.

Securities listed on a national securities exchange will be valued
on the basis of the last sale on the date on which the valuation is
made or, in the absence of sales, at the mean between the closing
bid and asked prices. Over-the-counter securities will be valued
on the basis of the bid price at the close of business on each day,
or, if market quotations for these securities are not readily
available, at fair value, as determined in good faith by the fund's
Board of Directors. Short-term obligations with maturities of 60
days or less are valued at amortized cost, which constitutes fair
value as determined by the fund's Board of Directors. Amortized
cost involve valuing an instrument at its original cost to the fund
and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the effect of fluctuating
interest rates on the market value of the instrument. All other
securities and other assets of the fund will be valued at fair
value as determined in good faith by the fund's Board of Directors.

EXCHANGE PRIVILEGE

Except as noted below, shareholders of certain Smith Barney Mutual
Funds may exchange all or part of their shares for shares of the
same class of other Smith Barney Mutual Funds, to the extent such
shares are offered for sale in the shareholder's state of
residence, on the basis of relative net asset value per share at
the time of exchange as follows:

A. Class A and Class Y shareholders of the fund who
wish to exchange all or a portion of their shares for shares of the
respective Class in any of the funds of the Smith Barney Mutual
Fund Complex may do so without imposition of any charge.

B. Class B shares of the fund exchanged for Class B
shares of another fund will be subject to the higher applicable
CDSC of the two funds. Upon an exchange, the new Class B shares
will be deemed to have been purchased on the same date as the Class
B shares of the fund that have been exchanged.

C. Upon exchange, the new Class L shares will be deemed
to have been purchased on the same date as the Class L shares of
the fund that have been exchanged.

The exchange privilege enables shareholders to acquire shares of
the same Class in a fund with different investment objectives when
they believe that a shift between funds is an appropriate
investment decision. This privilege is available to shareholders
residing in any state in which the fund shares being acquired may
legally be sold. Prior to any exchange, the shareholder should
obtain and review a copy of the current prospectus of each fund
into which an exchange is being considered. prospectuses may be
obtained from a Smith Barney Financial Consultant.

Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-
current net asset value and, subject to any applicable CDSC, the
proceeds immediately invested, at a price as described above, in
shares of the fund being acquired. Smith Barney reserves the right
to reject any exchange request. The exchange privilege may be
modified or terminated at any time after written notice to
shareholders.

Additional Information Regarding the Exchange Privilege. Although
the exchange privilege is an important benefit, excessive exchange
transactions can be detrimental to either fund's performance and
its shareholders. The manager may determine that a pattern of
frequent exchanges is excessive and contrary to the best interests
of the fund's other shareholders. In this event, each fund may, at
its discretion, decide to limit additional purchases and/or
exchanges by a shareholder. Upon such a determination, the fund
will provide notice in writing or by telephone to the shareholder
at least 15 days prior to suspending the exchange privilege and
during the 15 day period the shareholder will be required to
(a) redeem his or her shares in the fund or (b) remain invested in
the fund or exchange into any of the funds of the Smith Barney
Mutual funds ordinarily available, which position the shareholder
would be expected to maintain for a significant period of time.
All relevant factors will be considered in determining what
constitutes an abusive pattern of exchanges.

Additional Information Regarding Telephone Redemption and Exchange
Program.

Neither the fund nor its agents will be liable for following
instructions communicated by telephone that are reasonably believed
to be genuine. The fund and its agents will employ procedures
designed to verify the identity of the caller and legitimacy of
instructions (for example, a shareholder's name and account number
will be required and phone calls may be recorded). The fund
reserves the right to suspend, modify or discontinue the telephone
redemption and exchange program or to impose a charge for this
service at any time following at least sever (7) days prior notice
to shareholders.

PERFORMANCE DATA

From time to time, the fund may quote yield or total return of a
Class in advertisements or in reports and other communications to
shareholders. The fund may include comparative performance
information in advertising or marketing the fund's shares. Such
performance information may be included in the following financial
publications: Barron's, Business Week, CDA Investment Technologies,
Inc., Changing Times, Forbes, Fortune, Institutional Investor,
Investors Daily, Money, Morningstar Mutual Fund Values, The New
York Times, USA Today and The Wall Street Journal. To the extent
any advertisement or sales literature of the fund describes the
expenses or performance of any Class, it will also disclose such
information for the other Classes.

Average Annual Total Return

'Average annual total return' figures are computed according to a
formula prescribed by the SEC. The formula can be expressed as
follows:

P(1 + T)n = ERV
Where P = a hypothetical initial payment of
$1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a
hypothetical $1,000 investment made
at the beginning of a 1-, 5- or 10-
year period at the end of the 1-, 5-
or 10-year period (or fractional
portion thereof), assuming
reinvestment of all dividends and
distributions.

The ERV assumes complete redemption of the hypothetical investment
at the end of the measuring period. A fund's net investment income
changes in response to fluctuations in interest rates and the
expenses of the fund.

Average Annual Total Return

Class of Shares
1-Year
Life of fund
Inception date
Class A

Class B

Class L

Class Y

Average annual total return figures calculated in accordance with
the above formula assume that the maximum 5.00% sales charge has
been deducted from the investment at the time of purchase.

Aggregate Total Return

'Aggregate total return' figures represent the cumulative change in
the value of an investment in the Class for the specified period
and are computed by the following formula:

ERV - P
P

Where: P = a hypothetical initial payment of
$10,000
ERV = Ending Redeemable Value of a
hypothetical $10,000 investment made
at the beginning of a 1-, 5- or 10-
year period at the end of the 1-, 5-
or 10-year period (or fractional
portion thereof), assuming
reinvestment of all dividends and
distributions.

The ERV assumes complete redemption of the hypothetical investment
at the end of the measuring period.

Average Annual Total Return

Class of Shares
1-Year
Life of fund
Inception date
Class A1

Class B2

Class L3

Class Y4

_______________________

1 The aggregate total return figures do not assume the maximum
5.00% sales charge has been deducted from the investment at the
time of purchase. If the maximum sales charge had been
deducted, the aggregate total return for Class A shares for the
same period would have been [ ]%.

2 The aggregate total return figures do not assume the maximum
applicable CDSC has been deducted from the investment at the
time of redemption. If the maximum CDSC had been deducted, the
aggregate total return for Class B shares for the same period
would have been [ ]%.

3 The aggregate total return figures do not assume the maximum
1.00% sales charge has been deducted from the investment at the
time of redemption. If the maximum sales charge had been
deducted, the aggregate total return for Class L shares for the
same period would have been [ ]%.

4 Class Y shares do not incur sales charges nor CDSCs.

Performance will vary from time to time depending upon market
conditions, the composition of the fund's portfolio and operating
expenses and the expenses exclusively attributable to the Class.
Consequently, any given performance quotation should not be
considered representative of the Class' performance for any
specified period in the future. Because the performance will vary,
it may not provide a basis for comparing an investment in the Class
with certain bank deposits or other investments that pay a fixed
yield for a stated period of time. Investors comparing a Class'
performance with that of other mutual funds should give
consideration to the quality and maturity of the respective
investment companies' portfolio securities.

It is important to note that the total return figures set forth
above are based on historical earnings and are not intended to
indicate future performance. Each Class' net investment income
changes in response to fluctuation in interest rates and the
expenses of the fund.

TAXES

The following is a summary of certain federal income tax
considerations that may affect the fund and its shareholders. The
summary is not intended as a substitute for individual tax advice
and investors are urged to consult their own tax advisers as to the
tax consequences of an investment in the fund.

The Company intends to qualify each year as a regulated investment
company under the Code. If the fund (a) qualifies as a regulated
investment company and (b) distributes to its shareholders at least
90% of its net investment income (including, for this purpose, its
net realized short-term capital gains), the fund will not be liable
for Federal income taxes to the extent that its net investment
income and its net realized long- and short-term capital gains, if
any, are distributed to its shareholders.

As described above, the fund may invest in futures contracts and
options on futures contracts that are traded on a U.S. exchange or
board of trade. As a general rule, these investment activities
will increase or decrease the amount of long-term and short-term
capital gains or losses realized by the fund and, thus, will affect
the amount of capital gains distributed to the fund's shareholder.

For federal income tax purposes, gain or loss on the futures and
options described above (collectively referred to as 'Section 1256
Contracts') would, as a general rule, be taxed pursuant to a
special 'mark-to-market system.' Under the mark-to-market system,
the fund may be treated as realizing a greater or lesser amount of
gains or losses than actually realized. As a general rule, gain or
loss on Section 1256 Contracts is treated as 60% long-term capital
gain or loss and 40% short-term capital losses taxable to the fund
and the amount of distributions taxable to a shareholder.
Moreover, if the fund invests in both Section 1256 and offsetting
positions in those contracts, then the fund may not be able to
receive the benefit of certain realized losses for an indeterminate
period of time. The fund expects that its activities with respect
to Section 1256 Contracts and offsetting position in those
Contracts (1) will not cause it or its shareholders to be treated
as receiving a materially greater amount of capital gains or
distributions than actually realized or received and (2) will
permit it to use substantially all of its losses for the fiscal
years in which the losses actually occur.

Gains or losses on the sales of stock or securities by the fund
generally will be long-term capital gains or losses if a fund has
held the stock or securities for more than one year. Gains or
losses on sales of stock or securities held for not more than one
year generally will be short-term capital gains or losses.

Foreign countries may impose withholding and other taxes on
dividends and interest paid to the fund with respect to investments
in foreign securities. However, certain foreign countries have
entered into tax conventions with the United States to reduce or
eliminate such taxes. Distributions of long-term capital gains
will be taxable to shareholders as such, whether paid in cash or
reinvested in additional shares and regardless of the length of
time that the shareholder has held his or her interest in the fund.
If a shareholder receives a distribution taxable as long-term
capital gain with respect to his or her investment in the fund and
redeems or exchanges the shares before he or she has held them for
more than six months, any loss on the redemption or exchange that
is less than or equal to the amount of the distribution will be
treated as a long-term capital loss.

Any net long-term capital gains realized by the fund will be
distributed annually as described in the prospectus. Such
distributions ('capital gain dividends') will be taxable to
shareholders as long-term capital gains, regardless of how long a
shareholder has held fund shares, and will be designated as capital
gain dividends in a written notice mailed by the fund to
shareholders after the close of the fund's prior taxable year. If
a shareholder receives a capital gain dividend with respect to any
share and if the share has been held by the shareholder for six
months or less, then any loss on the sale or exchange of such share
will be treated as a long-term capital loss to the extent of the
capital gain dividend.

Investors considering buying shares of the fund on or just prior to
a record date for a taxable dividend or capital gain distribution
should be aware that, regardless of whether the price of the fund
shares to be purchased reflects the amount of the forthcoming
dividend or distribution payment, any such payment will be a
taxable dividend or distribution payment.

If a shareholder fails to furnish a correct taxpayer identification
number, fails to report dividend and interest income in full, or
fails to certify that he or she has provided a correct taxpayer
identification number and that he or she is not subject to such
withholding, the shareholder may be subject to a 31% 'backup
withholding' tax with respect to (a) any taxable dividends and
distributions and (b) any proceeds of any redemption of fund
shares. An individual's taxpayer identification number is his or
her social security number. The backup withholding tax is not an
additional tax and may be credited against a shareholder's regular
federal income tax liability.

The foregoing is only a summary of certain tax considerations
generally affecting the fund and its shareholders and is not
intended as a substitute for careful tax planning. Shareholders are
urged to consult their tax advisers with specific reference to
their own tax situations, including their state and local tax
liabilities.

ADDITIONAL INFORMATION

The Company was organized as a Maryland corporation pursuant to
Articles of incorporation dated September 29, 1981, as amended from
time to time. The fund offers shares of common stock currently
classified into four Classes, A, B, L and Y, with a par value of
$.001 per share. Each Class represents an identical interest in
the fund's investment portfolio. As a result, the Classes have the
same rights, privileges and preferences, except with respect to:
(a) the designation of each Class; (b) the effect of the respective
sales charges for each Class; (c) the distribution and/or service
fees borne by each Class pursuant to the Plan; (d) the expenses
allocable exclusively to each Class; (e) voting rights on matters
exclusively affecting a single Class; (f) the exchange privilege of
each Class; and (g) the conversion feature of the Class B shares.
The Board of Directors does not anticipate that there will be any
conflicts among the interests of the holders of the different
Classes. The Directors, on an ongoing basis, will consider whether
any such conflict exists and, if so, take appropriate action.

The Company does not hold annual shareholder meetings. There
normally will be no meeting of shareholders for the purpose of
electing Directors unless and until such time as less than a
majority of the Directors holding office have been elected by
shareholders. The Directors will call a meeting for any purpose
upon written request of shareholders holding at least 10% of the
Company's outstanding shares and the Company will assist
shareholders in calling such a meeting as required by the 1940 Act.
When matters are submitted for shareholders vote, shareholders of
each Class will have one vote for each full share owned and a
proportionate, fractional share vote for any fractional share held
of that Class. Generally, shares of the Company will be voted on a
Company-wide basis on all matters except matters affecting only the
interests of one fund or one Class of shares.

The fund sends its shareholders a semi-annual report and an audited
annual report, which include a list of the investment securities
held by the fund at the end of the reporting period. In an effort
to reduce the fund's printing and mailing costs, the Company plans
to consolidate the mailing of its semi-annual and annual reports by
household. This consolidation means that a household having
multiple accounts with the identical address of record will receive
a single copy of each report. Shareholders who do not want this
consolidation to apply to their accounts should contact their
Salomon Smith Barney Financial Consultant or the Fund's Transfer
Agent.

The Company was incorporated on September 29, 1981 under the name
Hutton Investment Series, Inc. The Company's corporate name was
changed on December 29, 1988, July 30, 1993 and October 28, 1994 to
SLH Investment Portfolios Inc., Smith Barney Shearson investment
Fund Inc., and Smith Barney Investment Fund Inc., respectively.

PNC Bank, National Association, located at 17th and Chestnut
Streets, Philadelphia, Pennsylvania 19103, serves as the custodian
of the Company on behalf of the fund. Under the custody agreement
with the Company on behalf of the fund, PNC holds the fund's
portfolio securities and keeps all necessary accounts and records.
For its services, PNC receives a monthly fee based upon the month-
end market value of securities held in custody and also receives
certain securities transaction charges. The assets of the fund are
held under bank custodianship in compliance with the 1940 Act.

First Data, located at Exchange Place, Boston, Massachusetts 02109,
serves as the Transfer Agent of the fund. Under the transfer agency
agreement, the Transfer Agent maintains the shareholder account
records for the fund, handles certain communications between
shareholders and the fund and distributes dividends and
distributions payable by the fund. For these services, the Transfer
Agent receives a monthly fee computed on the basis of the number of
shareholder accounts it maintains for the fund during the month,
and is reimbursed for certain out-of-pocket expenses.

As of [December 31], 1999, the following shareholders beneficially
owned 5% or more of a class of shares of the fund:

FINANCIAL STATEMENTS

The fund's Annual Report to Shareholders for the fiscal year ended
September 30, 1999 is incorporated by reference in its entirety
into this statement of additional information.

PART C - OTHER INFORMATION

Item 23. Exhibits

All references are to the Registrant's registration
statement on Form N-1A (the "Registration Statement")
as filed with the SEC on October 2, 1981(File Nos. 2-
74288 and 811-3275).

(a) Articles of Restatement dated September 17, 1993
to Registrant's Articles of Incorporation dated
September 28, 1981, Articles of Amendment dated
October 14, 1994, Articles Supplementary, Articles of
Amendment dated October 14, 1994, Articles
Supplementary, Articles of Amendments and Certificates
of Correction dated November 7, 1994, are incorporated
by reference to Post-Effective Amendment No. 37 to the
Registration Statement filed on November 7, 1994.
Articles of Amendment dated October 23, 1997 are
incorporated by reference to Post-Effective Amendment
No. 46 filed on October 23, 1997("Post-Effective
Amendment No.46"). Articles of Amendment dated
February 27, 1998 are incorporated by reference
to Post-Effective Amendment No. 48 dated April 29, 1998.
Articles of Amendment dated June 1, 1998 are incorporated
by reference to Post-Effective Amendment No. 49 filed on
July
16, 1998 ("Post-Effective Amendment No. 49").

(b) Registrant's By-Laws, as amended on September 30,
1992 are incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement filed
on April 30, 1993.

(c) Registrant's form of stock certificate for Smith
Barney Hansberger Global Value Fund ("Global Value
Fund") and Smith Barney Hansberger Global Value Small
Cap Fund ("Small Cap Fund") is incorporated by
reference to Post Effective Amendment 46.

(d)(1) Investment Advisory Agreement dated July 30,
1993, between the Registrant on behalf of Smith Barney
Investment Grade Bond Fund, Smith Barney Government
Securities Fund and Smith Barney Special Equities
Fund and Greenwich Street Advisors is incorporated by
reference to the Registration Statement filed on Form
N-14 on September 2, 1993, File No. 33-50153.

(d)(2) Investment Advisory Agreements on behalf of
Smith Barney Growth Opportunity Fund and Smith Barney
Managed Growth Fund is incorporated by reference to
Post-Effective Amendment No. 40 filed on June 27,
1995. ("Post-Effective Amendment No.40")

(d)(3) Investment Management Agreements on behalf of
Global Value Fund and Global Small Cap Fund between
Registrant and Smith Barney Mutual Funds Management
Inc. is incorporated by reference to Post-Effective
Amendment No. 46.

(d)(4) Sub-Advisory Agreement on behalf of Global
Value Fund and Global Small Cap Fund between MMC and
Hansberger Global Investors Inc. is
incorporated by reference to Post-Effective
Amendment No. 46.

(d)(5)Investment Management Agreements on behalf of
Smith Barney Small Cap Growth Fund and Smith Barney
Small Cap Value Fund between Registrant and
Mutual Management Corp. is incorporated by reference
To Post-Effective Amendment No. 49.

(e)(1) Distribution Agreement dated July 30, 1993,
between the Registrant and Smith Barney Shearson Inc.
is incorporated by reference to the registration
statement filed on Form N-14 on September 2, 1993.
File 33-50153.

(e)(2) Form of Distribution Agreement between the
Registrant and PFS Distributors on behalf of Smith
Barney Investment Funds Inc. is incorporated by
reference to Post-Effective Amendment No. 40 filed on
June 27, 1995.

(e)(3) Form of Distribution Agreement between the
Registrant and CFBDS, Inc. is incorporated by reference
to Post-Effective Amendment No. 49.

(e)(4) Selling Group Agreement
is incorporated by reference
to Post-Effective Amendment No.56 filed on
February 26, 1999.

(f) Not Applicable.

(g)(1) Custodian Agreement with PNC Bank, National
Association is incorporated by reference to Post -
Effective Amendment No. 44 filed on April 29, 1997.

(g)(2) Custodian Agreement with Chase Manhattan Bank
is incorporated by reference to Post-Effective
Amendment No. 46.

(h)(1) Transfer Agency and Registrar Agreement dated
August 5, 1993 with First Data Investor Services
Group, Inc. (formerly The Shareholder Services Group,
Inc.) is incorporated by reference to Post-Effective
Amendment No. 31 as filed on December 22, 1993 (Post-
Effective Amendment No. 31").

(h)(2)Sub-Transfer Agency Agreement between the
Registrant and PFS Shareholders Services on behalf of
Smith Barney Investment Funds Inc. is incorporated by
reference to Post-Effective Amendment No. 40.

(i) Opinion of Robert A. Vegliante, Deputy General
Counsel of Smith Barney Mutual Funds Management Inc.
filed with the Registrant's rule 24-f2 Notice
(Accession No. 000091155-97-000104) is incorporated by
reference.

(j) To be filed by amendment.

(k) Not Applicable

(l) Not Applicable

(m)(1) Amended Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on behalf
of Smith Barney Investment Grade Bond Fund, Smith
Barney Government Securities Fund, Smith Barney Special
Equities Fund and Smith Barney European Fund and Smith
Barney, Inc. ("Smith Barney") are incorporated by
reference to Post-Effective Amendment No. 37 filed on
November 3, 1994 ("Post-Effective Amendment No. 37")

(m)(2) Form of Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on
behalf of Smith Barney Growth Opportunity Fund and
Smith Barney Managed Growth Fund is incorporated by
reference to Post-Effective Amendment No. 40.

(m)(3) Form of Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on
behalf of the Global Value Fund and Small Cap Fund is
incorporated by reference to Post-Effective Amendment
No. 46.

(m)(4) Form of Amended and Restated Shareholder Services
and
Distribution Plan pursuant to Rule 12b-1 between
the Registrant on behalf of each of its series
is incorporated by reference to Post-Effective Amendment
No. 49.

(n) To be filed by amendment.

(o) Form of Plan pursuant to Rule 18f-3 is incorporated by
reference to Post-Effective Amendment No.50 to
Registration Statement.

Item 24.

None.

Item 25. Indemnification

The response to this item is incorporated by
reference to Pre-Effective Amendment No. 1 to the
registration statement filed on Form N-14 on October
8, 1993 (File No. 33-50153).

Item 26. Business and Other Connections of Investment Adviser

Investment Adviser - - SSB Citi Fund Management LLC ("SSB Citi")
formerly known as SSBC Fund Management Inc. ("SSBC")

SSBC was incorporated in December 1968 under the laws
of the State of Delaware. On September 21, 1999, SSBC
was converted into a Delaware Limited Liability Company.
SSB Citi is a wholly owned subsidiary of Salomon Smith Barney
Holdings Inc. ("Holdings") (formerly known as Smith Barney
Holdings Inc.) which in turn is a wholly owned subsidiary
of Citigroup Inc. ("Citigroup"). SSB Citi is registered
as an investment adviser under the Investment Advisers Act
of 1940 (the "Advisers Act").

The list required by this Item 26 of officers and
directors of SSB Citi together with information as to
any other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors during
the past two years, is incorporated by reference to Schedules A and D
of FORM ADV filed by SSBC pursuant to the Advisers Act
(SEC File No. 801-8314).

Item 27. Principal Underwriters
(a) CFBDS, Inc. the Registrant's Distributor, is also
the distributor for
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio, CitiFundsSM
Large Cap
Growth
Portfolio, CitiFundsSM Intermediate Income Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash
Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM
Institutional U.S.
Treasury Reserves, CitiFundsSM Institutional Liquid
Reserves,
SM Institutional Cash Reserves, CitiFundsSM Tax Free
Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves, CitiFundsSM
Balanced Portfolio,
CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth &
Income
Portfolio,
CitiFundsSM Small Cap Growth Portfolio, CitiFundsSM
National
Tax Free Income Portfolio, CitiFundsSM New York Tax Free
Income
Portfolio,
CitiSelect VIP Folio 200, Citiselect VIP Folio 300,
CitiSelect (VIP Folio 400, CitiSelect (VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect
(Folio 200,
CitiSelect (Folio 300, CitiSelect (Folio 400, and
CitiSelect (Folio
500.
CFBDS is also the placement agent for Large Cap Value
Portfolio,
International Portfolio, Foreign Bond Portfolio,
Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves
Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves
Portfolio.

CFBDS, Inc. is also the distributor for the following
Smith Barney Mutual Fund registrants:
Concert Investment Series
Consulting Group Capital Markets Funds
Greenwich Street Series Fund
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Investment Trust
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Travelers Series Fund Inc.
And various series of unit investment trusts.

CFBDS, Inc. is also the distributor for the following
Salomon Brothers funds;
Salomon Brothers Opportunity Fund Inc
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
Salomon Brothers Series Funds Inc
Salomon Brothers Institutional Series Funds Inc
Salomon Brothers Variable Series Funds Inc

The information required by this Item 27 with respect
to each director, officer and partner of CFBDS, Inc.
is incorporated by reference to Schedule A of Form BD
filed by CFBDS, Inc. pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-32417).

Item 28. Location of Accounts and Records

(1) Smith Barney Investment Funds Inc.
388 Greenwich Street
New York, New York 10013

(2) SSB Citi Fund Management LLC
388 Greenwich Street
New York, New York 10013

(3) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA

(4) The Chase Manhattan Bank
Chase Metrotech Center
Brooklyn, New York 11245

(5) First Data Investor Services Group, Inc.
P.O. Box 9699
Providence, RI 02940-9699

(6) CFBDS Inc.
21 Milk Street, 5th floor
Boston, Massachusetts 02109

Item 29. Management Services

Not Applicable.

Item 30. Undertakings

Not applicable

SIGNATURES

Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of
1940, as amended, the Registrant, SMITH BARNEY
INVESTMENT FUNDS INC., has duly caused this Amendment
to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized,
all in the City of New York, State of New York on the
24th day of November, 1999.

SMITH BARNEY INVESTMENT FUNDS INC.

By: /s/ Heath B. McLendon*
Heath B. McLendon
Chief Executive Officer

WITNESS our hands on the date set forth below.

Pursuant to the requirements of the Securities
Act of 1933, as amended, this Post-Effective Amendment
to the Registration Statement has been signed below by
the following persons in the capacities and on the
dates indicated.

Signature Title Date

/s/ Heath B. McLendon Chairman of the Board
11/24/99
Heath B. McLendon (Chief Executive Officer)

/s/ Lewis E. Daidone Senior Vice President
Lewis E. Daidone and Treasurer
11/24/99
(Chief Financial
and Accounting Officer)

/s/ Paul R. Ades * Director
11/24/99
Paul R. Ades

/s/ Herbert Barg* Director
11/24/99
Herbert Barg

/s/ Dwight B. Crane* Director
11/24/99
Dwight B. Crane

/s/ Frank Hubbard* Director
11/24/99
Frank Hubbard

/s/ Jerome Miller** Director
11/24/99
Jerome Miller

/s/ Ken Miller* Director
11/24/99
Ken Miller

*Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant
to power of attorney dated November 3, 1994.

**Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant
to power of attorney dated April 15, 1998.

/s/ Heath B. McLendon
Heath B. McLendon

EXHIBITS

Exhibit No. Description of Exhibit

Cover