SMITH BARNEY PRINCIPAL RETURN FUND
(the "Trust")
Supplement Dated June 290, 1998
to Prospectus Dated March 30, 1998
The following information supplements, and to the extent
inconsistent therewith replaces, the information set forth in the
Prospectus under "Investment Objectives and Management Policies-
Additional Investments and Investment Techniques: Lending
Securities and the first paragraph under Money Market Instruments."
Lending Securities. Consistent with applicable regulatory
requirements, each Series is authorized to lend securities it holds
to brokers, dealers and other financial organizations. A Series'
loans of securities will be collateralized by cash, letters of
credit or U.S. government securities that are maintained at all
times in a segregated account with the Trust's custodian in an
amount at least equal to the current market value of the loaned
securities. By lending its portfolio securities, a Series will
seek to generate income by continuing to receive interest on the
loaned securities, by investing the cash collateral in short-term
instruments or by obtaining yield in the form of interest paid by
the borrower when U.S. government securities are used as
collateral. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delays 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
MMC to be of good standing and will not be made unless, in the
judgement of MMC, the consideration to be earned from such loans
would justify the risk.
Money Market Instruments. Each Series may hold at any time
up to 10% of the value of its assets in cash and money market
instruments in order to cover the Series' expenses, anticipated
redemptions, cash payments of dividends and distributions and to
meet settlement requirements for securities. In addition, when MMC
believes that, with respect to its equity portfolio, a temporary
defensive investment posture is warranted, a Series may invest
without limitation in cash and money market instruments. To the
extent that it holds cash or invests in money market instruments, a
Series will not achieve its investment objective of long-term
appreciation of capital. Money market instruments in which the
Series may invest are: U.S. government securities; bank obligations
(including certificates of deposit, time deposits and bankers'
acceptances of domestic or foreign banks, domestic savings and loan
associations and other banking institutions having total assets in
excess of $500 million); commercial paper rated no lower than A-2
by Standard & Poor's Rating Group or Prime-2 by Moody's Investors
Service, Inc. or the equivalent from another nationally recognized
statistical rating organization ("NRSRO") or, if unrated, of an
issuer having an outstanding, unsecured debt issue then rated
within the three highest rating categories of an NRSRO; and
repurchase agreements. At no time will a Series' investments in
bank obligations, including time deposits, exceed 25% of its
assets. In addition, a Series will not invest in time deposits
maturing in more than seven days if, as a result, its holdings of
those time deposits would exceed 5% of Security and Growth Fund's
or Series 1998's net assets and 10% of Series 2000's net assets.
FD01500
