SMITH BARNEY SHEARSON
ADJUSTABLE RATE GOVERNMENT INCOME FUND
Supplement to Prospectus
Dated July 30, 1994
The following information expands the disclosure in the Fund's
Prospectus under "Management of the Fund":
On June 16, 1994, BlackRock Financial Management L.P., the Fund's
sub-investment adviser ("BlackRock"), entered into an agreement under which
PNC Bank N.A. ("PNC Bank") will acquire all of the outstanding equity
interests in BlackRock (the "Transaction"). The Transaction is expected to
close in the fourth quarter of 1994, subject to the prior satisfaction of
various conditions, including the approval of certain Federal bank
regulatory authorities. All members of BlackRock's management team have
agreed to sign long-term employment contracts with PNC Bank; therefore,
shareholders should experience minimal change in the management of the Fund
as a result of the Transaction.
PNC Bank is a wholly-owned indirect subsidiary of PNC Bank Corp.
("PNC"), a publicly owned multibank holding company incorporated under the
laws of the Commonwealth of Pennsylvania in 1983 and registered under the
Federal Bank Holding Company Act of 1956. PNC's banking subsidiaries are
located in Pennsylvania, Kentucky, Delaware, Ohio, Indiana and
Massachusetts. As of June 30, 1994, PNC was ranked the eleventh largest
bank holding company in the U.S. based on total assets of $64 billion. PNC
provides a comprehensive range of financial products and services. Through
its banking subsidiaries, PNC provides retail banking, commercial banking,
trust banking, investment management and other financial services and
securities related activities. PNC's financial services related
subsidiaries provide a broad range of services including investment
advisory, securities brokerage, mortgage banking, credit card processing,
credit-related insurance underwriting, leasing and data processing.
Following the closing of the Transaction, BlackRock will become a wholly-
owned subsidiary of a holding company which will be created for all of
PNC's asset management businesses.
The Fund's current sub-investment advisory agreement (the "Existing
Agreement") among the Fund, BlackRock and Smith Barney Strategy Advisers
Inc., the Fund's investment adviser ("SBSA"), provides for its automatic
termination in the event of an assignment defined by reference to the
Investment Company Act of 1940, as amended (the "1940 Act"). At the
closing of the Transaction, PNC Bank will have acquired all of BlackRock's
outstanding equity interests, thus giving rise to an assignment of the
Existing Agreement within the meaning of the 1940 Act. The Board of
Trustees on behalf of the Fund has approved a new sub-investment advisory
agreement with SBSA and BlackRock (the "New Agreement"), identical in all
material respects to the Existing Agreement, to take effect upon the
closing of the Transaction. The Trustees have recommended that
shareholders vote to approve the New Agreement at a meeting to be called
for that purpose by the end of 1994.
Supplement dated: September 22, 1994
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