SMITH BARNEY INCOME FUNDS
on Behalf of
SMITH BARNEY PREMIUM TOTAL RETURN FUND
(the "Fund")
Supplement dated August 14, 1998
to the Prospectus dated April 29, 1998
The following supplements the information in
the Prospectus under "Investment Objective and
Policies - Additional Investments."
Foreign Securities and American Depositary
Receipts. The Fund may invest up to 20% of its assets
in foreign securities and American Depositary
Receipts ("ADRs"). ADRs are U.S. dollar-denominated
receipts issued generally by domestic banks and
representing the deposit with the bank of a security
of a foreign issuer. ADRs are publicly traded on
exchanges or over the counter in the United States.
Investing in the securities of foreign
companies involves special risks and considerations
not typically associated with investing in U.S.
companies. These risks include differences in
accounting, auditing and financial reporting
standards, generally higher commission rates on
foreign portfolio transactions, the possibility of
expropriation or confiscatory taxation, adverse
changes in investment or exchange control
regulations, political instability which could affect
U.S. investments in foreign countries and potential
restrictions on the flow of international capital.
Additionally, dividends payable on foreign securities
may be subject to foreign taxes withheld prior to
distribution. Foreign securities often trade with
less frequency and volume than domestic securities
and therefore may exhibit greater price volatility.
Changes in foreign exchange rates will affect the
value of those securities which are denominated or
quoted in currencies other than U.S. dollars. Many
of the foreign securities held by the Fund will not
be registered with, nor will the issuers thereof be
subject to the reporting requirements of, the SEC.
Accordingly, there may be less publicly available
information about the securities and the foreign
company or government issuing them than is available
about a domestic company or government entity.
Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payment positions.
FD 01537
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