Independent Accountants'
Report
To the Board of Trustees of Smith Barney Adjustable Rate
Government
Income Fund and Securities and Exchange Commission:
We have examined management's assertion about Smith Barney
Adjustable Rate Government Income Fund's (the "Fund") compliance
with the requirements of subsection (b) and (c) of Rule 17f-2
under the Investment Company Act of 1940 as of September 30, 1997
and for the period from May 31, 1997 (the date of our last
examination) through September 30, 1997, included in the
accompanying Management Statement regarding Compliance with
Certain Provisions of the Investment Company Act of 1940.
Management is responsible for the Fund['s compliance with those
requirements. Our responsibility is to express an opinion on
management's assertion about the Fund's compliance based on our
examination.
Our examination was made in accordance with standards established
by the American Institute of Certified Public Accountants and,
accordingly, included examining, on a test basis, evidence about
the Fund's compliance with those requirements and performing such
other procedures as we considered necessary in the circumstances.
Included among our procedures were the following tests performed
as of September 30, 1997 and for the period from May 31, 1997
through September 30, 1997, with respect to securities
transactions, without prior notice to management:
Count and inspection of all securities located in the vault
of Bankers Trust in New York without prior notice to management.
Agreement of all securities reported by the Fund's records
to PNC Bank (the "Custodian") records as of September 30, 1997;
Confirmation of all short sales, futures and reverse
repurchase agreements shown on the Fund's accounting records as
of September 30, 1997 with respective counterparties and
agreement of underlying collateral with Custodian records;
Confirmation of all trades shown as pending on the Fund's
accounting records as of September 30, 1997 with respective
counterparties and verification of such trades with Custodian
records;
Review of PNC Bank's Report on Policies and Procedures
Placed in Operation and Tests of Operating Effectiveness
Pertaining to Custody Services ("SAS 70 Report") for the period
January 1, 1996 to December 31, 1996 and noted no exceptions
reported in the areas of Asset Safekeeping, Security Transaction
Processing, Asset Maintenance and Computerized Information
Systems;
Representation from the Custodian that all control policies
and procedures as detailed in PNC Bank SAS 70 Report identified
in the prior paragraph, have remained in operation and functioned
adequately from January 1, 1997 through September 30, 1997; and
Tests of selected security transactions since the date of
our last report.
We believe that our examination provides a reasonable basis for
our opinion. Our examination does not provide a legal
determination on the Fund's compliance with the specified
requirements.
In our opinion, management's assertion that Smith Barney
Adjustable Rate Government Income Fund was in compliance with the
above mentioned provisions of Rule 17f-2 of the Investment
Company Act of 1940 as of September 30, 1997 and for the period
from May 31, 1997 through September 30, 1997 is fairly stated, in
all material respects.
This report is intended solely for the information and use of
management of the Smith Barney Adjustable Rate Government Income
Fund and the Securities and Exchange Commission and should not be
used for any other purpose.
November 12, 1997
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
388 Greenwich Street, New York, New York 10013
November 12, 1997
Management Statement Regarding Compliance with
Certain Provisions of the Investment Company Act of 1940
We, as members of management of Smith Barney Adjustable Rate
Government Income Fund ("the Fund") are responsible for complying
with the requirements of subsections (b) and (c) of Rule 17f-2,
"Custody of Investments by Registered Management Investment
Companies", of the Investment Company Act of 1940. We are also
responsible for establishing and maintaining an effective
internal control structure over compliance with Rule 17f-2
requirements. We have performed an evaluation of the Fund'
s
compliance with the requirements of subsections (b) and (c) of
Rule 17f-2 as of September 30, 1997 and for the period from May
31, 1997 through September 30, 1997.
Based on this evaluation, we assert that the Fund was in
compliance with the requirements of subsections (b) and (c) of
Rule 17f-2 of the Investment Company Act of 1940 as of September
30, 1997 and for the period from May 31, 1997 through September
30, 1997, with respect to securities reflected in the investment
accounts of the Fund.
Smith Barney Adjustable Rate Government Income Fund
Thomas M. Reynolds
Controller
