SMITH BARNEY INCOME FUNDS
on Behalf of
SMITH BARNEY MUNICIPAL HIGH INCOME FUND
(the "Fund")
Supplement dated October 8, 1998
to the Prospectus dated November 28, 1997
The following replaces the information in the Prospectus
under "Investment Objective and Management Policies - Certain
Investment Strategies - When Issued Securities "
When-Issued, Delayed Delivery, and Forward Commitment
Transactions. The Fund may purchase or sell securities on a when-
issued, delayed delivery or forward commitment basis. These
transactions involve a commitment by the Fund to purchase or sell
securities for a predetermined price or yield, with payment or
delivery taking place more than seven days in the future, or
after a period longer than the customary settlement period for
that type of security. The Fund will establish a segregated
account with the Trust's custodian, PNC Bank, National
Association ("PNC Bank") consisting of cash, U.S. government
securities, equity securities or debt securities of any grade
having a value equal to or greater than the Fund's purchase
commitments provided that such securities have been determined by
MMC to be liquid and unencumbered and are marked to market daily
pursuant to guidelines established by the Trustees. Placing
securities rather than cash in the segregated account may have a
leveraging effect on the Fund's net asset value per share.
Typically, no income accrues on securities a Fund has committed
to purchase prior to the time of delivery of the securities is
made, although the Fund may earn income on securities it has
segregated.
When purchasing a security on a when-issued, delayed delivery, or
forward commitment basis, the Fund assumes the rights and risks
of ownership of the security, including the risk of price and
yield fluctuations, and takes such fluctuations into account when
determining its net asset value. Because the Fund is not
required to pay for the security until the delivery date, these
risks are in addition to the risks associated with the Fund's
other investments. If the Fund remains substantially fully
invested at a time when when-issued, delayed delivery or forward
commitment purchases are outstanding, the purchases may result in
a form of leverage.
When the Fund has sold a security on a when-issued, delayed
delivery, or forward commitment basis, the Fund does not
participate in future gains or losses with respect to the
security. If the other party to a transaction fails to deliver
or pay for the securities, the Fund could miss a favorable price
or yield opportunity or could suffer a loss. The Fund may
dispose of or renegotiate a transaction after it is entered into,
and may sell when-issued or forward commitment securities before
they are delivered, which may result in a capital gain or loss.
Purchasing these securities can involve the additional risk that
the yield available in the market when the delivery takes place
may be higher than that obtained in the transaction itself.
FD 01560
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