SMITH BARNEY APPRECIATION FUND INC, 485APOS, 1999-02-25

SMITH BARNEY APPRECIATION FUND INC
485APOS, 1999-02-25

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Registration Nos. 2-34576
811-1940

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No.

Post-Effective Amendment No. 44 X

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 X

Amendment No. 31 X

SMITH BARNEY APPRECIATION FUND INC.
(Exact name of Registrant as specified in Charter)

388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)

(212) 816-6474
(Registrant's telephone number, including Area Code)

Christina T. Sydor
Secretary

Smith Barney Appreciation Fund Inc.
388 Greenwich Street
New York, New York 10013
(22nd Floor)
(Name and address of agent for service)

Approximate Date of Proposed Public Offering: Continuous

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) of Rule 485

on (date) pursuant to paragraph (b) of Rule 485

60 days after filing pursuant to paragraph (a)(i) of Rule 485

XXX on April 30, 1999 pursuant to paragraph (a)(i) of Rule 485

75 days after filing pursuant to paragraph (a)(ii) of Rule 485

on (date) pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.

<PAGE>

[Logo]

Smith Barney Mutual Funds

Investing for your future.

Every day.

PROSPECTUS SMITH BARNEY
MUTUAL FUNDS

- --------------------------------------------------------------------------------

April 30, 1999 APPRECIATION FUND

Class A, B, L and Y Shares

The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>

Contents

<TABLE>
<CAPTION>
<S> <C>
Fund goal and strategies.............................................. 4

Risks, performance and expenses....................................... 5

More on the fund's investments........................................ 8

Management............................................................ 9

Choosing a class of shares to buy..................................... 10

Comparing the fund's classes.......................................... 11

Sales charges......................................................... 12

More about deferred sales charges..................................... 15

Buying shares......................................................... 16

Exchanging shares..................................................... 17

Redeeming shares...................................................... 18

Other things to know about
share transactions................................................... 20

Smith Barney 401(k) and
ExecChoiceTM programs................................................ 22

Dividends, distributions and
taxes................................................................ 23

Share price........................................................... 24

Financial highlights.................................................. 24
</TABLE>

YOU SHOULD KNOW:
An investment in the fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government agency.

Appreciation Fund -1-
<PAGE>

FUND GOAL AND STRATEGIES

INVESTMENT OBJECTIVE
The fund seeks long-term appreciation of shareholders' capital.

KEY INVESTMENTS

The fund invests primarily in equity securities of U.S. companies. The fund
typically invests in medium and large capitalization companies but may also
invest in small capitalization companies. Equity securities include exchange
traded and over-the-counter common stocks and preferred stocks, debt securities
convertible into equity securities, and warrants and rights relating to equity
securities.

SELECTION PROCESS

The manager's investment strategy consists of individual company selection and
management of cash reserves. The manager looks for investments among a strong
core of growth stocks, consisting primarily of blue chip companies dominant in
their industries. The fund may also invest in companies with prospects for
sustained earnings growth and/or a cyclical earnings record.

In selecting individual companies for the fund's portfolio, the manager looks
for the following:

. Strong or rapidly improving balance sheets
. Recognized industry leadership
. Effective management teams that exhibit a desire to earn consistent returns
for shareholders

In addition, the manager considers the following characteristics:

. Past growth records
. Future earnings prospects
. Technological innovation
. General market and economic factors
. Current yield or potential for dividend growth

- -2-
<PAGE>

Generally, companies in the fund's portfolio fall into one of the following
categories:

. Undervalued companies: companies with assets or earning power that are
either unrecognized or undervalued. The manager generally looks for a catalyst
that will unlock these values. The manager also looks for companies that are
expected to have unusual earnings growth or whose stocks appear likely to go up
in value due to marked changes in the way they do business (for example, a
corporate restructuring).

. Growth at a reasonable price: companies with superior demonstrated and
expected growth characteristics whose stocks are available at a reasonable
price. Typically, there is strong recurring demand for these companies'
products.

The manager adjusts the amount held in cash reserves depending on the manager's
outlook for the stock market. The manager will increase the fund's allocation
to cash when, in the manager's opinion, market valuation levels become
excessive. The manager may sometimes hold a [significant] portion of the fund's
assets in cash while waiting for buying opportunities or to provide a hedge
against stock market declines.

RISKS, PERFORMANCE AND EXPENSES

PRINCIPAL RISKS OF INVESTING IN THE FUND

Investing in equity securities can bring added benefits, but it may also involve
additional risks. Investors could lose money on their investment in the fund,
or the fund may not perform as well as other investments, if:

. The U.S. stock market declines
. Large and medium capitalization stocks or growth stocks are temporarily out
of favor
. An adverse event depresses the value of a company's stock
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular stock or about the amount to hold in cash reserves
proves to be incorrect

WHO MAY WANT TO INVEST
The fund may be an appropriate investment if you:
. Are seeking to participate in the long term capital appreciation potential of
the stock market
. Are willing to accept the risks of investing in the stock market
. Are planning for a long term goal and can tolerate periods of market
volatility

Appreciation Fund -3-
<PAGE>

TOTAL RETURN

The bar chart indicates the risks of investing in the fund by showing changes in
the fund's performance from year to year. Past performance does not necessarily
indicate how the fund will perform in the future.

[BAR CHART APPEARS HERE]

The bar chart shows the performance of the fund's Class A shares for each of the
past 10 calendar years. Class B, L and Y shares would have different
performance because of their different expenses. The performance information in
the chart does not reflect sales charges, which would reduce your return.

QUARTERLY RETURNS: Highest: xx% in ___ quarter 199X; Lowest: xx% in ___
quarter 199X

COMPARATIVE PERFORMANCE

The table indicates the risks of investing in the fund by comparing the average
annual total return of each class for the periods shown with that of the
Standard & Poor's 500 Index (S&P 500 Index), a broad-based unmanaged index of
widely held stocks traded on the New York Stock Exchange. This table assumes
imposition of the maximum sales charge applicable to the class, redemption of
shares at the end of the period, and reinvestment of distributions and
dividends.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CALENDAR YEARS ENDED DECEMBER 31, 1998
Class 1 year 5 years 10 years Since inception Inception Date
<S> <C> <C> <C> <C> <C>
A 03/10/70
B n/a 11/06/92
L n/a 02/04/93
Y n/a 01/30/96
S&P 500 * n/a
</TABLE>

* Index comparison begins on 03/10/70.

- -4-
<PAGE>

FEES AND EXPENSES
This table sets forth the fees and expenses you will pay if you invest in fund
shares.

<TABLE>
<CAPTION>
SHAREHOLDER FEES
(paid directly from your investment) Class A Class B Class L Class Y
<S> <C> <C> <C> <C>
Maximum sales charge on purchases (as a % of offering price) 5.00% None 1.00% None

Maximum deferred sales charge on redemptions (as a % of the lower None* 5.00% 1.00% None
of net asset value at purchase or redemption)

ANNUAL FUND OPERATING EXPENSES (PAID BY THE FUND AS A % OF NET
ASSETS)

Management fees 0.59% 0.59% 0.59% 0.59%

Distribution and service (12b-1) fee 0.25% 1.00% 1.00% None
Other expenses
Total annual fund operating expenses
</TABLE>

*You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial charge) but if you redeem those shares within 12 months of
their purchase, you will pay a deferred sales charge of 1.00%.

Example
This example helps you compare the costs of investing in the fund with the costs
of investing in other mutual funds. Your actual costs may be higher or lower.
The example assumes:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a sales charge
. The fund's operating expenses remain the same

<TABLE>
<CAPTION>
NUMBER OF YEARS YOU OWN YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A (with or without redemption) $ $ $ $
Class B (redemption at end of period) $ $ $ $
Class B (no redemption) $ $ $ $
Class L (redemption at end of period) $ $ $ $
Class L (no redemption) $ $ $ $
Class Y (with or without redemption) $ $ $ $
</TABLE>

Appreciation Fund -5-
<PAGE>

MORE ON THE FUND'S INVESTMENTS

. To hedge against the economic impact of adverse changes in the market
value of its securities, because of changes in stock market prices
. As a substitute for buying or selling securities

- -7-
<PAGE>

MANAGEMENT

Manager. The fund's investment adviser and administrator (the manager) is
SSBC Fund Management Inc., an affiliate of Salomon Smith Barney Inc. The
manager's address is 388 Greenwich Street, New York, New York 10013. The
manager selects the fund's investments and oversees its operations. The manager
and Salomon Smith Barney are subsidiaries of Citigroup Inc. Citigroup
businesses produce a broad range of financial services -- asset management,
banking and consumer finance, credit and charge cards, insurance, investments,
investment banking and trading -- and use diverse channels to make them
available to consumer and corporate customers around the world.

Harry D. Cohen, investment officer of SSBC Fund Management Inc. and managing
director of Salomon Smith Barney, has been responsible for the day to day
management of the fund since 1979.

MANAGEMENT FEE. During the fiscal year ended December 31, 1998, the manager
received an advisory fee and an administration fee equal to ___% and ___%,
respectively, of the fund's average daily net assets.

DISTRIBUTOR. The fund has entered into an agreement with CFBDS, Inc. to
distribute the fund's shares. [A selling group consisting of Salomon Smith
Barney and other broker-dealers sells fund shares to the public].

YEAR 2000 ISSUE. Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the fund. The cost of addressing the Year 2000 issue, if
substantial, could adversely affect companies and governments that issue
securities held by the fund. The manager and Salomon Smith Barney are addressing
the Year 2000 issue for their systems. The fund has been informed by its other
service providers that they are taking similar measures. Although the fund does
not expect the Year 2000 issue to adversely affect it, the fund cannot guarantee
that the efforts of the fund or its service providers to correct the problem
will be successful.

Appreciation Fund -- Class Z Shares -8-
<PAGE>

BUYING, SELLING AND EXCHANGING CLASS Z SHARES

Through a You may buy, sell or exchange Class Z shares only through a
qualified "qualified plan." A qualified plan is a tax-exempt employee
plan benefit or retirement plan of Salomon Smith Barney, Inc. or one
of its affiliates.

There are no minimum investment requirements for Class Z shares.
However, the fund reserves the right to change this policy at any
time.

Buying Orders to buy Class Z shares must be made in accordance with the
terms of a qualified plan or certain unit investment trusts
sponsored by Salomon Smith Barney Inc.
or any of its affiliates. If you are a participant in a
qualified plan, you may place an order with your plan to buy
Class Z shares at net asset value, without any sales charge.
Payment is due to Salomon Smith Barney on settlement date, which
is the third business day after your order is accepted. If you
make payment prior to this date, you may designate a temporary
investment (such as a money market fund of the Smith Barney
funds) for payment until settlement date. The fund reserves the
right to reject any order to buy shares and to suspend the
offering of shares for a period of time.

Selling Qualified plans may redeem their shares on any day on which the
fund calculates its net asset value. You should consult the terms
of your qualified plan for special redemption provisions.

Exchanging You should consult your qualified plan for information about
available exchange options.

- -9-
<PAGE>

SHARE PRICE

Qualified plans may buy, exchange or redeem Class Z shares of the fund at the
net asset value next determined after receipt of your request in good order.
The fund's net asset value is the value of its assets minus its liabilities.
Net asset value is calculated separately for each class of shares. The fund
calculates its net asset value every day the New York Stock Exchange is open.
The Exchange is closed on certain holidays listed in the Statement of Additional
Information. This calculation is done when regular trading closes on the
Exchange (normally 4:00 p.m., Eastern time).

The fund generally values its fund securities based on market prices or
quotations. The fund's currency conversions are done when the London stock
exchange closes, which is 12 noon Eastern time. When reliable market prices are
not readily available, or when the value of a security has been materially
affected by events occurring after a foreign exchange closes, the fund may price
those securities at fair value. Fair value is determined in accordance with
procedures approved by the fund's board. A fund that uses fair value to price
securities may value those securities higher or lower than another fund that
uses market quotations to price the same securities.

International markets may be open on days when U.S. markets are closed and the
value of foreign securities owned by the fund could change on days when your
qualified plan cannot buy or redeem shares.

In order to buy, redeem or exchange shares at that day's price, you must place
your order with your qualified plan before the New York Stock Exchange closes.
If the New York Stock Exchange closes early, you must place your order with your
qualified plan prior to the actual closing time. Otherwise, you will receive
the next business day's price.

Your qualified plan must transmit all orders to buy, exchange or redeem shares
to the fund's agent before the agent's close of business.

Appreciation Fund -- Class Z Shares -10-
<PAGE>

DISTRIBUTIONS, DIVIDENDS AND TAXES

An investment in the fund will have the following consequences
for a qualified plan as the owner of shares in the fund. Qualified plan
participants should consult their plan document or tax advisors about the
tax consequences of participating in a qualified plan.

Dividends. The fund generally makes capital gain distributions and pays
dividends, if any, once a year, typically in December. The fund may pay
additional distributions and dividends at other times if necessary for the
fund to avoid a federal tax. Capital gain distributions and dividends are
reinvested in addition Class Z shares. The fund expects distributions to be
primarily from capital gains. No sales charge is imposed on reinvested
distributions or dividends. Alternatively, a qualified plan can instruct its
Salomon Smith Barney Financial Consultant, dealer representative or the
transfer agent to have distributions and/or dividends paid in cash. It can
change that choice at any time to be effective as of the next distribtion
or dividend, except that any change given to the transfer
agent less than five days before the payment date will not be
effective until the next distribution or dividend is paid.

Taxes. Provided that a qualified plan has not borrowed to finance its
investment in the fund, it will not be taxable on the receipt of dividends
and distributions from the fund.

Dividends and interest received by the fund from investing in foreign
securities may give rise to withholding and other taxes imposed by foreign
countries. Tax conventions between certain countries and the United States
may reduce or eliminate such taxes. The fund's foreign tax payments will
reduce the amount of its dividends and distributions.

- -11-
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand the
performance of Class Z shares for the past 5 years. Certain information
reflects financial results for a single share. Total return represents the rate
that a shareholder would have earned (or lost) on a fund share assuming
reinvestment of all dividends and distributions. The information in the
following tables was audited by KPMG LLP, independent accountants, whose report,
along with the fund's financial statements, are included in the annual report
(available upon request).

FOR A CLASS Z SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED
DECEMBER 31:

NET ASSET VALUE, BEGINNING OF YEAR $ 12.87 $ 11.91 $ 10.16 $ 11.02
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(loss) 0.24 0.24 0.23 0.20
Net realized and unrealized gain 3.18 2.09 2.75 (0.24)
(loss)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS 3.42 2.33 2.98 (0.04)
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.26) (0.23) (0.23) (0.22)
Net realized gains (2.09) (1.14) (1.00) (0.60)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.35) (1.37) (1.23) (0.82)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 13.94 $ 12.87 $ 11.91 $ 10.16
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 26.72% 19.66% 29.52% (0.41)%
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000)'S $194,070 $153,034 $131,357 $101,532
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.59% 0.64% 0.77% 0.64%
Net investment income (loss) 1.82 1.88 1.96 1.99
- --------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 57% 62% 57% 52%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Per share amounts calculated using the monthly average shares method.

Appreciation Fund -- Class Z Shares -12-
<PAGE>

SALOMON SMITH BARNEY(SM)
A MEMBER OF CITIGROUP [SYMBOL]

APPRECIATION FUND

The fund sends only one report to a household if more than one account has the
same address. Contact your qualified plan or the transfer agent if you do not
want this policy to apply to you.

You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your
qualified plan, [by calling the fund at 1-800-451-2010, or by writing to the
fund at Smith Barney Mutual Funds, 388 Greenwich Street, MF2, New York, New York
10013].

VISIT OUR WEB SITE. Our web site is located at www.smithbarney.com

. Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.

Investment Company Act File No. 811-01940

April 30, 1999

STATEMENT OF ADDITIONAL INFORMATION

SMITH BARNEY APPRECIATION FUND INC.
388 Greenwich Street
New York, New York 10013
(800) 451-2010

This Statement of Additional Information ("SAI") is meant to be read in
conjunction with the prospectus of the Smith Barney Appreciation Fund Inc.
(the "fund") dated April 30, 1999, as amended or supplemented from time to
time (the "prospectus"), and is incorporated by reference in its
entirety into the prospectus. Additional information about the fund's
investments is available in the fund's annual and semi-annual reports to
shareholders which are incorporated herein by reference. The prospectus
and copies of the reports may be obtained free of charge by contacting a
Salomon Smith Barney Financial Consultant, or by writing or calling
Salomon Smith Barney Inc. at the address or telephone number above.

CONTENTS

Directors and Executive Officers of The Fund 2
Investment Objectives and Management Policies 5
Risk Factors 10
Investment Restrictions 13
Portfolio Turnover 14
Portfolio Transactions 15
Purchase of Shares 16
IRA and Other Prototype Retirement Plans 24
Redemption of Shares 25
Exchange Privilege 27
Taxes 28
Performance Data 32
Valuation of Shares 35
Investment Management and Other Services 36
Additional Information About The Fund 39
Financial Statements 40

DIRECTORS AND EXECUTIVE OFFICERS OF THE FUND

Overall responsibility for management and supervision of the fund rests
with the fund's Board of Directors. The directors approve all significant
agreements between the fund and the companies that furnish services to the
fund, including agreements with the fund's distributor, investment
adviser, custodian and transfer agent. The day-to-day operations of the
fund are delegated to the fund's manager, SSBC Fund Management Inc.
("SSBC" or the "Manager"). .

The directors and executive officers of the fund, together with
information as to their principal business occupations during the past
five years, are shown below. The executive officers of the fund are
employees of organizations that provide services to the fund. Each
director who is an "interested person" of the fund, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), is indicated
by an asterisk. The address of the "non-interested" directors and
executive officers of the fund is 388 Greenwich Street, New York, New York
10013.

HERBERT BARG (Age 75). Private Investor. His address is 273 Montgomery
Avenue, Bala Cynwyd, Pennsylvania, 19004.

*ALFRED J. BIANCHETTI (Age 76). Retired; formerly Senior Consultant to
Dean Witter Reynolds Inc. His address is 19 Circle End Drive, Ramsey, New
Jersey 07466.

MARTIN BRODY (Age 77). Consultant, HMK Associates. Retired Vice Chairman
of the Board of Restaurant Associates Corp. His address is c/o HMK
Associates, 30 Columbia Turnpike, Florham Park, New Jersey 07932.

DWIGHT B. CRANE (Age 61). Professor, Harvard Business School. His
address is c/o Harvard Business School, Soldiers Field Road, Boston,
Massachusetts 02163.

BURT N. DORSETT (Age 68). Managing Partner of the investment counseling
firm Dorsett McCabe Management, Inc. Director of Research Corporation
Technologies, Inc., a nonprofit patent clearing and licensing firm. His
address is 201 East 62nd Street, New York, New York 10021.

ELLIOT S. JAFFE (Age 72). Chairman of the Board and President of The
Dress Barn, Inc. His address is 30 Dunnigan Drive, Suffern, New York
10021.

STEPHEN E. KAUFMAN (Age 67). Attorney. His address is 277 Park Avenue,
New York, New York 10172.

JOSEPH J. McCANN (Age 68). Financial Consultant. Retired Financial
Executive, Ryan Homes, Inc. His address is 200 Oak Park Place,
Pittsburgh, Pennsylvania 15243.

*HEATH B. McLENDON, Chairman of the Board and Investment Officer (Age 65).
Managing Director of Salomon Smith Barney Inc. ("Salomon Smith
Barney"), Chairman of the Board of Smith Barney Strategy Advisers Inc.
and President of SSBC. and Travelers Investment Adviser, Inc. ("TIA");
Chairman or Co-Chairman of the Board and Director of 59 investment
companies associated with Salomon Smith Barney.

CORNELIUS C. ROSE, JR. (Age 65). President, Cornelius C. Rose Associates,
Inc., financial consultants, and Chairman and Director of Performance
Learning Systems, an educational consultant. His address is Meadowbrook
Village, Building 4, Apt. 6, West Lebanon, New Hampshire 03784.

LEWIS E. DAIDONE, Senior Vice President and Treasurer (Age 41). Managing
Director of Salomon Smith Barney, Chief Financial Officer of the Smith
Barney Mutual Funds; Director and Senior Vice President of SSBC and TIA.

HARRY D. COHEN, Vice President and Investment Officer (Age 56).
Managing Director of Salomon Smith Barney; Executive Vice President of
Salomon Smith Barney;
Investment Officer of SSBC.

SCOTT GLASSER, Vice President and Investment Officer (Age 32).
Director of Salomon Smith Barney; Investment Officer of SSBC.

PAUL BROOK, Controller (Age 45)
Director, Salomon Smith Barney; Managing Director of AMT Capital Services
Inc. from 1997-1998; Prior to 1997, Partner, Ernst & Young LLP.

CHRISTINA T. SYDOR, Secretary (Age 48). Managing Director of Salomon
Smith Barney; General Counsel and Secretary of SSBC and TIA.

As of March , 1999, the directors and officers of the fund, as a
group, owned less than 1% of the outstanding shares of beneficial interest
of the fund.

To the best knowledge of the directors, as of March , 1999, the
following shareholders or "groups" (as such term is defined in Section
13(d) of the Securities Exchange Act of 1934, as amended) owned
beneficially or of record more than 5% of the shares of the following
classes:

Shareholder

Class

Percent Ownership

Citibank NA Cust. Smith Barney
Shearson 401K Savings Plan
Smith Barney Account
111 Wall Street
New York, New York 10043

Class Z

Smith Barney Concert Allocation Series
Inc.
Balanced Portfolio
PNC Bank NA
200 Stevens Drive
Lester, PA 19113-1522

Class Y

Smith Barney Concert Allocation Series
Inc.
Conservative Portfolio
PNC Bank NA
200 Stevens Drive
Lester, PA 19113-1522

Class Y

Smith Barney Concert Allocation Series
Inc.
Select Balanced Portfolio
PNC Bank NA
200 Stevens Drive
Lester, PA 19113-1522

Class Y

Smith Barney Concert Allocation Series
Inc.
Income Portfolio
PNC Bank NA
200 Stevens Drive
Lester, PA 19113-1522

Class Y

The following table shows the compensation paid by the fund and other
Smith Barney Mutual Funds to each director during the fund's last fiscal
year. None of the officers of the fund received any compensation from the
fund for such period. The fund does not pay retirement benefits to its
directors and officers. Officers and interested directors of the fund are
compensated by Salomon Smith Barney

For the calendar year ended December 31, 1998, the directors of the fund
were paid the following compensation.

Name of Person

Aggregate
Compensat
ion
from Fund

Total
Pension or
Retirement
Benefits
Accrued
as part of
Fund
Expenses

Compensation
from Fund
and Fund
Complex
Paid to
Directors

Number of
Funds for Which DirecD
Director Serves Within
Fund Complex

Herbert Barg**
Alfred
Bianchetti* **
Martin Brody**
Dwight B.
Crane**
Burt N.
Dorsett**
Elliot S.
Jaffe**
Stephen E.
Kaufman**
Joseph J.
McCann**
Heath B.
McLendon*
Cornelius C.
Rose, Jr.**

$0
0
0
0
0
0
0
0
0
0

18
13
21
24
13
13
15
13
59
13

* Designates an "interested" Director.
** Designates member of Audit Committee.

Upon attainment of age 80, fund Directors are required to change to
emeritus status. Directors Emeritus are entitled to serve in emeritus
status for a maximum of 10 years, during which time they are paid 50% of
the annual retainer fee and meeting fees otherwise applicable to fund
Directors, together with reasonable out-of-pocket expenses for each
meeting attended. Directors Emeritus may attend meetings but have no
voting rights. During the fund's last fiscal year, aggregate compensation
paid by the fund to Directors Emeritus was $1,500.

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The fund is an open-end, diversified, management investment company. The
prospectus discusses the fund's investment objective and the policies it
employs to achieve its objective. This section contains supplemental
information concerning the types of securities and other instruments in
which the fund may invest, the investment policies and portfolio
strategies the fund may utilize and certain risks attendant to such
investments, policies and strategies.

Common Stock. The fund may invest in common stocks. Common stocks are
shares of a corporation or other entity entitling the holder to a pro rata
share of the profits of the corporation, if any, without preference over
any other shareholder or class of shareholders, including holders of the
entity's preferred stock and other senior equity. Common stock usually
carries with it the right to vote and frequently an exclusive right to do
so.

Preferred Stock. Preferred stocks, like debt obligations, are generally
fixed-income securities. Shareholders of preferred stocks normally have
the right to receive dividends at a fixed rate when and as declared by the
issuer's board of directors, but do not participate in other amounts
available for distribution by the issuing corporation. Dividends on
preferred stock may be cumulative, and all cumulative dividends usually
must be paid prior to common shareholders receiving any dividends.
Preferred stock dividends must be paid before common stock dividends and,
for that reason, preferred stocks generally entail less risk than common
stocks. Upon liquidation, preferred stocks are entitled to a specified
liquidation preference, which is generally the same as the par or stated
value, and are senior in right of payment to common stock. Preferred
stocks are, however, equity securities in the sense they do not represent
a liability of the issuer and, therefore, do not offer as great a degree
of protection of capital or assurance of continued income as investments
in corporate debt securities. In addition, preferred stocks are
subordinated in right of payment to all debt obligations and creditors of
the issuer, and convertible preferred stocks may be subordinated to other
preferred stock of the same issuer.

Warrants. The fund may invest up to 5% of its assets in warrants.
Warrants acquired entitle the fund to buy common stock from the issuer at
a specified price and time. Warrants are subject to the same market risks
as stocks, but may be more volatile in price. The fund's investment in
warrants will not entitle it to receive dividends or exercise voting
rights and will become worthless if the warrants cannot be profitably
exercised before the expiration dates.

Convertible Securities. Convertible securities in which the fund may
invest, including both convertible debt and convertible preferred stock,
may be converted at either a stated price or stated rate into underlying
shares of common stock. Because of this feature, convertible securities
enable an investor to benefit from increases in the market price of the
underlying common stock. Convertible securities provide higher yields than
the underlying equity securities, but generally offer lower yields than
non-convertible securities of similar quality. Like bonds, the value of
convertible securities fluctuates in relation to changes in interest rates
and, in addition, also fluctuates in relation to the underlying common
stock.
Foreign Securities. The fund may invest in securities of foreign issuers
in the form of American Depository Receipts ("ADRs"), European Depository
Receipts ("EDRs") or similar securities representing interests in the
common stock for foreign issuers. The manager intends to limit the
fund's investment in these types of securities to 10% of the fund's net
assets. ADRs are receipts, typically issued by a U.S. bank or trust
company, which evidence ownership of underlying securities issued by a
foreign corporation. EDRs are receipts issued in Europe which evidence a
similar ownership arrangement. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets and EDRs are designed for
use in European securities markets. The underlying securities are not
always denominated in the same currency as the ADRs or EDRs. Although
investment in the form of ADRs or EDRs facilitates trading in foreign
securities, it does not mitigate the risks associated with investing in
foreign securities.

Investments in foreign securities incur higher costs than investments in
U.S. securities, including higher costs in making securities transactions
as well as foreign government taxes which may reduce the investment return
of the fund. In addition, foreign investments may include additional
risks associated with currency exchange rates, less complete financial
information about individual companies, less market liquidity and
political instability.

Money Market Instruments. The fund may invest for temporary defensive
purposes in corporate and government bonds and notes and money market
instruments. Money market instruments include: obligations issued or
guaranteed by the United States government, its agencies or
instrumentalities ("U.S. government securities"); certificates of deposit,
time deposits and bankers' acceptances issued by domestic banks (including
their branches located outside the United States and subsidiaries located
in Canada), domestic branches of foreign banks, savings and loan
associations and similar institutions; high grade commercial paper; and
repurchase agreements with respect to the foregoing types of instruments.
Certificates of deposit ("CDs") are short-term, negotiable obligations of
commercial banks. Time deposits ("TDs") are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates. Bankers' acceptances are time drafts drawn on commercial
banks by borrowers, usually in connection with international transactions.
The fund may invest in cash and in short-term instruments, and it may hold
cash and short-term instruments without limitation when the manager
determines that it is appropriate to maintain a temporary defensive
posture. Short-term instruments in which the fund may invest include: (a)
obligations issued or guaranteed as to principal and interest by the
United States government, its agencies or instrumentalities (including
repurchase agreements with respect to such securities); (b) bank
obligations (including certificates of deposit, time deposits and bankers'
acceptances of domestic or foreign banks, domestic savings and loan
associations and similar institutions); (c) floating rate securities and
other instruments denominated in U.S. dollars issued by international
development agencies, banks and other financial institutions, governments
and their agencies or instrumentalities and corporations located in
countries that are members of the Organization for Foreign Cooperation and
Development; and (d) commercial paper rated no lower than A-2 by Standard
& Poor's Ratings Group ("S&P") or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") or the equivalent from another major rating service or,
if unrated, of an issuer having an outstanding, unsecured debt issue then
rated within the three highest rating categories.

INVESTMENT PRACTICES

In attempting to achieve its investment objective, the fund may employ,
among others, the following portfolio strategies.

Repurchase Agreements. The fund may agree to purchase securities from a
bank or recognized securities dealer and simultaneously commit to resell
the securities to the bank or dealer at an agreed-upon date and price
reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities ("repurchase agreements"). The fund
would maintain custody of the underlying securities prior to their
repurchase; thus, the obligation of the bank or dealer to pay the
repurchase price on the date agreed to would be, in effect, secured by
such securities. If the value of such securities were less than the
repurchase price, plus interest, the other party to the agreement would be
required to provide additional collateral so at all times the collateral
is at least 102% of the repurchase price plus accrued interest. Default
by or bankruptcy of a seller would expose the fund to possible loss
because of adverse market action, expenses and/or delays in connection
with the disposition of the underlying obligations. The financial
institutions with which the fund may enter into repurchase agreements will
be banks and non-bank dealers of U.S. Government securities on the Federal
Reserve Bank of New York's list of reporting dealers, if such banks and
non-bank dealers are deemed creditworthy by the fund's manager. The
manager will continue to monitor creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain during the
term of the agreement the value of the securities subject to the agreement
to equal at least 102% of the repurchase price (including accrued
interest). In addition, the manager will require the value of this
collateral, after transaction costs (including loss of interest)
reasonably expected to be incurred on a default, be equal to 102% or
greater than the repurchase price (including accrued premium) provided in
the repurchase agreement or the daily amortization of the difference
between the purchase price and the repurchase price specified in the
repurchase agreement. The manager will mark-to-market daily the value of
the securities. Repurchase agreements are considered to be loans by the
fund under the 1940 Act.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the fund may lend portfolio securities to brokers, dealers
and other financial organizations meeting capital and other credit
requirements or other criteria established by the Board. The fund will
not lend portfolio securities to affiliates of the manager unless they
have applied for and received specific authority to do so from the
Securities Exchange Commission. Loans of portfolio securities will be
collateralized by cash, letters of credit or U.S. Government Securities,
which are maintained at all times in an amount equal to at least 102% of
the current market value of the loaned securities. Any gain or loss in
the market price of the securities loaned occurring during the term of the
loan would be for the account of the fund. From time to time, the fund
may return a part of the interest earned from the investment of collateral
received for securities loaned to the borrower and/or a third party
unaffiliated with the fund and acting as a "finder."
By lending its securities, the fund can increase its income by continuing
to receive interest and any dividends on the loaned securities as well as
by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield in the form of interest paid by
the borrower when U.S. Government Securities are used as collateral.
Although the generation of income is not the primary investment goal of
the fund, income received could be used to pay the fund's expenses and
would increase an investor's total return. The fund will adhere to the
following conditions whenever its portfolio securities are loaned:
(i) the fund must receive at least 102% cash collateral or equivalent
securities of the type discussed in the preceding paragraph from the
borrower; (ii) the borrower must increase such collateral whenever the
market value of the securities rises above the level of such collateral;
(iii) the fund must be able to terminate the loan at any time; (iv) the
fund must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities and
any increase in market value; (v) the fund may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on the
loaned securities may pass to the borrower, provided, however, that if a
material event adversely affecting the investment occurs, the Board must
terminate the loan and regain the right to vote the securities. Loan
agreements involve certain risks in the event of default or insolvency of
the other party including possible delays or restrictions upon a fund's
ability to recover the loaned securities or dispose of the collateral for
the loan.
DERIVATIVES TRANSACTIONS

Options on Securities. The fund may write (sell) covered put and call
options on securities ("options") and purchase put and call options
traded on foreign or U.S. securities exchanges and over the counter. The
fund will write such options for the purpose of increasing its return
and/or protecting the value of its portfolio. In particular, where the
fund writes an option expiring unexercised or is closed out by the fund at
a profit, it will retain the premium paid for the option, which will
increase its gross income and will offset in part the reduced value of a
portfolio security in connection with which the option may have been
written or the increased cost of portfolio securities to be acquired.
However, the writing of options constitutes only a partial hedge, up to
the amount of the premium, less any transaction costs. In contrast, if
the price of the security underlying the option moves adversely to the
fund's position, the option may be exercised and the fund will be required
to purchase or sell the security at a disadvantageous price, resulting in
losses that may only be partially offset by the amount of the premium.
The fund may also write combinations of put and call options on the same
security, known as "straddles." Such transactions generate additional
premium income but also present increased risk.

The fund may purchase put and call options in anticipation of declines in
the value of portfolio securities or increases in the value of securities
to be acquired. In the event the expected changes occur, the fund may be
able to offset the resulting adverse effect on its portfolio, in whole or
in part, through the options purchased. The risk assumed by the fund in
connection with such transactions is limited to the amount of the premium
and related transaction costs associated with the option, although the
fund may be required to forfeit such amounts in the event the prices of
securities underlying the options do not move in the direction or to the
extent anticipated. The fund can invest up to 5% of its total assets in
put and call options on securities.

Stock Index Options. The fund may purchase and write exchange-listed and
OTC put and call options on stock indexes. A stock index measures the
movement of a certain group of stocks by assigning relative values to the
common stocks included in the index, fluctuating with changes in the
market values of the stocks included in the index. Some stock index
options are based on a broad market index, such as the NYSE Composite
Index, or a narrower market index such as the Standard & Poor's 100.
Indexes may also be based on a particular industry or market segment.
Options on stock indexes are similar to options on stock except that (i)
the expiration cycles of stock index options are monthly, while those of
stock options are currently quarterly, and (ii) the delivery requirements
are different. Instead of giving the right to take or make delivery of
stock at a specified price, an option on a stock index gives the holder
the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing
value of the underlying index on the date of exercise, multiplied by (b) a
fixed "index multiplier." Receipt of this cash amount will depend upon
the closing level of the stock index upon which the option is based being
greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the index and the exercise price of the option times
a specified multiple. The writer of the option is obligated, in return
for the premium received, to make delivery of this amount. Stock index
options may be offset by entering into closing transactions as described
above for securities options.
The fund will engage in stock index options transactions only when
determined by SSBC to be consistent with the fund's efforts to control
risk. There can be no assurance that such judgment will be accurate or
that the use of these portfolio strategies will be successful. The fund
can invest up to 5% of its total assets in put and call options on
domestic and foreign stock indexes.

Options, Futures and Currency Strategies. The fund may use forward
currency contracts and certain options and futures strategies to attempt
to hedge its portfolio, i.e., reduce the overall level of investment risk
normally associated with the fund. There can be no assurance that such
efforts will succeed.

In order to assure that the fund will not be deemed to be a "commodity
pool" for purposes of the Commodity Exchange Act, regulations of the
Commodity Futures Trading Commission ("CFTC") require that the fund enter
into transactions in futures contracts and options on futures only (i) for
bona fide hedging purposes (as defined in CFTC regulations), or (ii) for
non-hedging purposes, provided that the aggregate initial margin and
premiums on such non-hedging positions do not exceed 5% of the liquidation
value of the fund's assets. To attempt to hedge against adverse movements
in exchange rates between currencies, the fund may enter into forward
currency contracts for the purchase or sale of a specified currency at a
specified future date. Such contracts may involve the purchase or sale of
a foreign currency against the U.S. dollar or may involve two foreign
currencies. The fund may enter into forward currency contracts either
with respect to specific transactions or with respect to its portfolio
positions. For example, when the manager anticipates making a purchase or
sale of a security, it may enter into a forward currency contract in order
to set the rate (either relative to the U.S. dollar or another currency)
at which the currency exchange transaction related to the purchase or sale
will be made ("transaction hedging"). Further, when the manager believes
that a particular currency may decline compared to the U.S. dollar or
another currency, the fund may enter into a forward contract to sell the
currency the manager expects to decline in an amount approximating the
value of some or all of the fund's securities denominated in that
currency, or when the manager believes that one currency may decline
against a currency in which some or all of the portfolio securities held
by the fund are denominated, it may enter into a forward contract to buy
the currency expected to decline for a fixed amount ("position hedging").
In this situation, the fund may, in the alternative, enter into a forward
contract to sell a different currency for a fixed amount of the currency
expected to decline where the investment manager believes that the value
of the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the value of the currency in which
portfolio securities of the fund are denominated ("cross hedging"). The
fund will maintain on it's books (i) cash, (ii) U.S. Government securities
or (iii) equity securities or debt securities (of any grade) in certain
currencies provided such assets are liquid, unencumbered and marked to
market daily, or other high-quality debt securities denominated in certain
currencies in a separate account of the fund having a value equal to the
aggregate account of the fund's commitments under forward contracts
entered into with respect to position hedges and cross-hedges. If the
value of the securities placed in a separate account declines, additional
cash or securities are placed in the account on a daily basis so that the
value of the amount will equal the amount of the fund's commitments with
respect to such contracts.

For hedging purposes, the fund may write covered call options and purchase
put and call options on currencies to hedge against movements in exchange
rates and on debt securities to hedge against the risk of fluctuations in
the prices of securities held by the fund or which the manager intends to
include in its portfolio. The fund also may use interest rates futures
contracts and options thereon to hedge against changes in the general
level in interest rates.

The fund may write call options on securities and currencies only if they
are covered, and such options must remain covered so long as the fund is
obligated as a writer. A call option written by the fund is "covered" if
the fund owns the securities or currency underlying the option or has an
absolute and immediate right to acquire that security or currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other securities or currencies held in its portfolio. A call option is
also covered if the fund holds on a share-for-share basis a call on the
same security or holds a call on the same currency as the call written
where the exercise price of the call held is equal to less than the
exercise price of the call written or greater than the exercise price of
the call written if the difference is maintained by the fund in cash,
Treasury bills or other high-grade, short-term obligations in a segregated
account on the fund's books.

Although the portfolio might not employ the use of forward currency
contracts, options and futures, the use of any of these strategies would
involve certain investment risks and transaction costs to which it might
not otherwise be subject. These risks include: dependence on the
manager's ability to predict movements in the prices of individual debt
securities, fluctuations in the general fixed-income markets and movements
in interest rates and currency markets, imperfect correlation between
movements in the price of currency, options, futures contracts or options
thereon and movements in the price of the currency or security hedged or
used for cover; the fact that skills and techniques needed to trade
options, futures contracts and options thereon or to use forward currency
contracts are different from those needed to select the securities in
which the fund invests; lack of assurance that a liquid market will exist
for any particular option, futures contract or options thereon at any
particular time and possible need to defer or accelerate closing out
certain options, futures contracts and options thereon in order to
continue to qualify for the beneficial tax treatment afforded "regulated
investment companies" under the Internal Revenue Code of 1986, as amended
(the "Code").

Over-the-counter options in which the fund may invest differ from exchange
traded options in that they are two-party contracts, with price and other
terms negotiated between buyer and seller, and generally do not have as
much market liquidity as exchange-traded options. The fund may be
required to treat as illiquid over-the-counter options purchased and
securities being used to cover certain written over-the-counter options.

Options on Securities. As discussed more generally above, the fund may
engage in the writing of covered call options. The fund may also purchase
put options and enter into closing transactions.

The principal reason for writing covered call options on securities is to
attempt to realize, through the receipt of premiums, a greater return than
would be realized on the securities alone. In return for a premium, the
writer of a covered call option forfeits the right to any appreciation in
the value of the underlying security above the strike price for the life
of the option (or until a closing purchase transaction can be effected).
Nevertheless, the call writer retains the risk of a decline in the price
of the underlying security. Similarly, the principal reason for writing
covered put options is to realize income in the form of premiums. The
writer of a covered put option accepts the risk of a decline in the price
of the underlying security. The size of the premiums the fund may receive
may be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing
activities.

Options written by the fund will normally have expiration dates between
one and six months from the date written. The exercise price of the
options may be below, equal to or above the current market values of the
underlying securities at the times the options are written. In the case of
call options, these exercise prices are referred to as "in-the-money,"
"at-the-money" and "out-of-the-money," respectively.

The fund may write (a) in-the-money call options when the manager expects
the price of the underlying security to remain flat or decline moderately
during the option period, (b) at-the-money call options when the manager
expects the price of the underlying security to remain flat or advance
moderately during the option period and (c) out-of-the-money call options
when the manager expects that the price of the security may increase but
not above a price equal to the sum of the exercise price plus the premiums
received from writing the call option. In any of the preceding situations,
if the market price of the underlying security declines and the security
is sold at this lower price, the amount of any realized loss will be
offset wholly or in part by the premium received. Out-of-the-money, at-
the-money and in-the-money put options (the reverse of call options as to
the relation of exercise price to market price) may be utilized in the
same market environments as such call options are used in equivalent
transactions.

So long as the obligation of the fund as the writer of an option
continues, the fund may be assigned an exercise notice by the broker-
dealer through which the option was sold, requiring it to deliver, in the
case of a call, or take delivery of, in the case of a put, the underlying
security against payment of the exercise price. This obligation terminates
when the option expires or the fund effects a closing purchase
transaction. The fund can no longer effect a closing purchase transaction
with respect to an option once it has been assigned an exercise notice. To
secure its obligation to deliver the underlying security when it writes a
call option, or to pay for the underlying security when it writes a put
option, the fund will be required to deposit in escrow the underlying
security or other assets in accordance with the rules of the Options
Clearing Corporation ("Clearing Corporation") or similar clearing
corporation and the securities exchange on which the option is written.

An option position may be closed out only where there exists a secondary
market for an option of the same series on a recognized securities
exchange or in the over-the-counter market. The fund expects to write
options only on national securities exchanges or in the over-the-counter
market. The fund may purchase put options issued by the Clearing
Corporation or in the over-the-counter market.

The fund may realize a profit or loss upon entering into a closing
transaction. In cases in which the fund has written an option, it will
realize a profit if the cost of the closing purchase transaction is less
than the premium received upon writing the original option and will incur
a loss if the cost of the closing purchase transaction exceeds the premium
received upon writing the original option. Similarly, when the fund has
purchased an option and engages in a closing sale transaction, whether it
recognizes a profit or loss will depend upon whether the amount received
in the closing sale transaction is more or less than the premium the fund
initially paid for the original option plus the related transaction costs.

Although the fund generally will purchase or write only those options for
which the manager believes there is an active secondary market so as to
facilitate closing transactions, there is no assurance that sufficient
trading interest to create a liquid secondary market on a securities
exchange will exist for any particular option or at any particular time,
and for some options no such secondary market may exist. A liquid
secondary market in an option may cease to exist for a variety of reasons.
In the past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, have at times rendered certain of
the facilities of the Clearing Corporation and national securities
exchanges inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can
be no assurance that similar events, or events that may otherwise
interfere with the timely execution of customers' orders, will not recur.
In such event, it might not be possible to effect closing transactions in
particular options. If, as a covered call option writer, the fund is
unable to effect a closing purchase transaction in a secondary market, it
will not be able to sell the underlying security until the option expires
or it delivers the underlying security upon exercise.

Securities exchanges generally have established limitations governing the
maximum number of calls and puts of each class which may be held or
written, or exercised within certain periods, by an investor or group of
investors acting in concert (regardless of whether the options are written
on the same or different securities exchanges or are held, written or
exercised in one or more accounts or through one or more brokers). It is
possible that the fund and other clients of the manager and certain of
their affiliates may be considered to be such a group. A securities
exchange may order the liquidation of positions found to be in violation
of these limits, and it may impose certain other sanctions.

In the case of options written by the fund that are deemed covered by
virtue of the fund's holding convertible or exchangeable preferred stock
or debt securities, the time required to convert or exchange and obtain
physical delivery of the underlying common stocks with respect to which
the fund has written options may exceed the time within which the fund
must make delivery in accordance with an exercise notice. In these
instances, the fund may purchase or temporarily borrow the underlying
securities for purposes of physical delivery. By so doing, the fund will
not bear any market risk because the fund will have the absolute right to
receive from the issuer of the underlying security an equal number of
shares to replace the borrowed stock, but the fund may incur additional
transaction costs or interest expenses in connection with any such
purchase or borrowing.

Although the manager will attempt to take appropriate measures to minimize
the risks relating to the fund's writing of call options and purchasing of
put and call options, there can be no assurance the fund will succeed in
its option-writing program.

Futures Contracts and Options on Futures Contracts. As described
generally above, the fund may invest in stock index futures contracts and
options on futures contracts traded on a domestic exchange or board of
trade. Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific security at
a specified future time and at a specified price. The primary purpose of
entering into a futures contract by the fund is to protect the fund from
fluctuations in the value of securities without actually buying or selling
the securities. The fund may enter into futures contracts and options on
futures to seek higher investment returns when a futures contract is
priced more attractively than stocks comprising a benchmark index, to
facilitate trading or to reduce transaction costs. The fund will only
enter into futures contracts and options on futures contracts that are
traded on a domestic exchange and board of trade. Assets committed to
futures contracts will be segregated on the fund's books to the extent
required by law.

The purpose of entering into a futures contract by the fund is to protect
the fund from fluctuations in the value of securities without actually
buying or selling the securities. For example, in the case of stock index
futures contracts, if the fund anticipates an increase in the price of
stocks it intends to purchase at a later time, the fund could enter into
contracts to purchase the stock index (known as taking a "long" position)
as a temporary substitute for the purchase of stocks. If an increase in
the market occurs influences the stock index as anticipated, the value of
the futures contracts increases and thereby serves as a hedge against the
fund's not participating in a market advance. The fund then may close out
the futures contracts by entering into offsetting futures contracts to
sell the stock index (known as taking a "short" position) as it purchases
individual stocks. The fund can accomplish similar results by buying
securities with long maturities and selling securities with short
maturities. But by using futures contracts as an investment tool to reduce
risk, given the greater liquidity in the futures market, it may be
possible to accomplish the same result more easily and more quickly.

No consideration will be paid or received by the fund upon the purchase or
sale of a futures contract. Initially, the fund will be required to
deposit with the broker an amount of cash or cash equivalents equal to
approximately 1% to 10% of the contract amount (this amount is subject to
change by the exchange or board of trade on which the contract is traded
and brokers or members of such board of trade may charge a higher amount).
This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract which is returned
to the fund, upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker, will be made daily as the
price of the index or securities underlying the futures contract
fluctuates, making the long and short positions in the futures contract
more or less valuable, a process known as "marking-to-market." In
addition, when the fund enters into a long position in a futures contract
or an option on a futures contract, it must deposit into a segregated
account with the fund's custodian an amount of cash or cash equivalents
equal to the total market value of the underlying futures contract, less
amounts held in the fund's commodity brokerage account at its broker. At
any time prior to the expiration of a futures contract, the fund may elect
to close the position by taking an opposite position, which will operate
to terminate the fund's existing position in the contract.

RISK FACTORS

General. There can be no assurance that the fund's investment objective
will be achieved. The value of the fund's investments will fluctuate in
response to changes in market and economic conditions, as well as the
financial condition and prospects of issuers in which the fund invests.
Foreign Investments. Investments in foreign securities incur higher costs
than investments in U.S. securities, including higher costs in making
securities transactions as well as foreign government taxes which may
reduce the investment return of the fund. In addition, foreign
investments may include additional risks associated with currency exchange
rates, less complete financial information about individual companies,
less market liquidity and political instability.

Futures Contracts and Related Options. There are several risks in
connection with the use of futures contracts as a hedging device.
Successful use of futures contracts by the fund is subject to the ability
of the manager to predict correctly movements in the stock market or in
the direction of interest rates. These predictions involve skills and
techniques that may be different from those involved in the management of
investments in securities. In addition, there can be no assurance that
there will be a perfect correlation between movements in the price of the
securities underlying the futures contract and movements in the price of
the securities that are the subject of the hedge. A decision of whether,
when and how to hedge involves the exercise of skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
market behavior or unexpected trends in market behavior or interest rates.

Positions in futures contracts may be closed out only on the exchange on
which they were entered into (or through a linked exchange) and no
secondary market exists for those contracts. In addition, although the
fund intends to enter into futures contracts only if there is an active
market for the contracts, there is no assurance that an active market will
exist for the contracts at any particular time. Most futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a
price beyond that limit. It is possible that futures contract prices could
move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses. In such event,
and in the event of adverse price movements, the fund would be required to
make daily cash payments of variation margin; in such circumstances, an
increase in the value of the portion of the portfolio being hedged, if
any, may partially or completely offset losses on the futures contract. As
described above, however, no assurance can be given that the price of the
securities being hedged will correlate with the price movements in a
futures contract and thus provide an offset to losses on the futures
contract.

Stock Index Options. As described generally above, the fund may purchase
put and call options and write call options on domestic stock indexes
listed on domestic exchanges in order to realize its investment objective
of capital appreciation or for the purpose of hedging its portfolio.

The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in
the portion of the securities portfolio of the fund correlate with price
movements of the stock index selected. Because the value of an index
option depends upon movements in the level of the index rather than the
price of a particular stock, whether the fund will realize a gain or loss
from the purchase or writing of options on an index depends upon movements
in the level of stock prices in the stock market generally or, in the case
of certain indexes, in an industry or market segment, rather than
movements in the price of a particular stock. Accordingly, successful use
by the fund of options on stock indexes will be subject to the manager's
ability to predict correctly movements in the direction of the stock
market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual
stocks.

INVESTMENT RESTRICTIONS

The fund has adopted the following fundamental investment restrictions for
the protection of shareholders. These restrictions cannot be changed
without approval by the holders of a majority of the outstanding shares of
the fund, defined as the lesser of (a) 67% or more of the fund's shares
present at a meeting, if the holders of more than 50% of the outstanding
shares are present in person or by proxy or (b) more than 50% of the
fund's outstanding shares. In accordance with these restrictions, the
fund will not:

1. Invest in a manner that would cause it to fail to be a "diversified
company" under the 1940 Act and the rules, regulations and orders
thereunder.

2. Issue "senior securities" as defined in the 1940 Act and the rules,
regulations and orders thereunder, except as permitted under the
1940 Act and the rules, regulations and orders thereunder.

3. Invest more than 25% of its total assets in securities, the issuers
of which are in the same industry. For purposes of this limitation,
U.S. government securities and securities of state or municipal
governments and their political subdivisions are not considered to
be issued by members of any industry.

4. Borrow money, except that (a) the fund may borrow from banks for
temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests which might otherwise require the
untimely disposition of securities, and (b) the fund may, to the
extent consistent with its investment policies, enter into reverse
repurchase agreements, forward roll transactions and similar
investment strategies and techniques. To the extent that it engages
in transactions described in (a) and (b), the fund will be limited
so that no more than 33 1/3% of the value of its total assets
(including the amount borrowed), valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) valued
at the time the borrowing is made, is derived from such
transactions.

5. Make loans. This restriction does not apply to: (a) the purchase of
debt obligations in which the fund may invest consistent with its
investment objectives and policies; (b) repurchase agreements; and
(c) loans of its portfolio securities, to the fullest extent
permitted under the 1940 Act.

6. Engage in the business of underwriting securities issued by other
persons, except to the extent that the fund may technically be
deemed to be an underwriter under the Securities Act of 1933, as
amended, in disposing of portfolio securities.

7. Purchase or sell real estate, real estate mortgages, commodities or
commodity contracts, but this restriction shall not prevent the fund
from (a) investing in securities of issuers engaged in the real
estate business or the business of investing in real estate
(including interests in limited partnerships owning or otherwise
engaging in the real estate business or the business of investing in
real estate) and securities which are secured by real estate or
interests therein; (b) holding or selling real estate received in
connection with securities it holds or held; (c) trading in futures
contracts and options on futures contracts (including options on
currencies to the extent consistent with the fund's investment
objective and policies); or (d) investing in real estate investment
trust securities.

While the fund is authorized to borrow money from banks for purposes of
investment (leveraging) and to invest in securities of foreign issuers, it
has no current intention of engaging in these investment activities and
will do so only when the fund's Board of Directors determines that either
or both of these activities are in the best interests of shareholders.

The fund has also adopted certain nonfundamental investment restrictions
that may be changed by the fund's Board of Directors at any time.
Accordingly, the fund may not:

1. Purchase any securities on margin (except for such short-term
credits as are necessary for the clearance of purchases and sales of
portfolio securities) or sell any securities short (except "against
the box"). For purposes of this restriction, the deposit or payment
by the fund of underlying securities and other assets in escrow and
collateral agreements with respect to initial or maintenance margin
in connection with futures contracts and related options and options
on securities, indexes or similar items is not considered to be the
purchase of a security on margin.

2. Invest more than 5% of the value of its net assets in warrants,
included within that amount, but not to exceed 2% of the value of
the fund's net assets, may be warrants that are not listed on the
New York Stock Exchange, Inc. (the "NYSE") or the American Stock
Exchange. Warrants acquired by the fund in units or attached to
securities may be deemed to be without value.

3. Invest in mineral-type programs or leases.

4. Purchase or otherwise acquire any security if' as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.

5. Invest for the purpose of exercising control of management.

6. Purchase securities of any company with a record of less than three
years' continuous operation if such purchase would cause its
investments in such companies to exceed 5% of the value of its total
assets. (For purposes of this limitation, issuers include
predecessors, sponsors, controlling persons, general partners,
guarantors and originators of underlying assets.)

If any percentage restriction described above is complied with at the time
of an investment, a later increase or decrease in percentage resulting
from a change in values or assets will not constitute a violation of such
restriction.

Investment Adviser and Administrator - SSBC

SSBC (formerly Mutual Management Corp.) serves as investment adviser to
the Fund pursuant to a written agreement (the "Advisory Agreement"), which
was approved by the Fund's Board of directors, including a majority of the
directors who are not interested persons of the Fund or Smith Barney (the
"independent directors"). Subject to the supervision and direction of the
fund's board of directors, the manager manages the fund's portfolio in
accordance with the fund's stated investment objective and policies, makes
investment decisions for the fund, places orders to purchase and sell
securities, and employs professional portfolio managers and securities
analysts who provide research services to the fund. The manager pays the
salary of any officer and employee who is employed by both it and the
trust. The manager bears all expenses in connection with the performance
of its services. SSBC is a wholly owned subsidiary of Salomon Smith
Barney Holdings Inc. ("Holdings"), which in turn is a wholly owned
subsidiary of Citigroup Inc. ("Citigroup"). SSBC (through predecessor
entities) has been in the investment counseling business since 1968 and
renders investment advice to a wide variety of individual, institutional
and investment company clients that had aggregate assets under management
as of March 31, 1999 in excess of $ .

As compensation for SSBC's investment advisory services rendered to the
Fund, the Fund pays a fee computed daily and paid monthly at the following
annual rates of the Fund's average daily net assets: 0.55%, up to $250
million; 0.513% of the next $250 million; 0.476% of the next $500 million;
0.439% of the next $1 billion, 0.402% of the next $l billion; and 0.365%
of the net assets in excess of $3 billion. For the fiscal years ended
December 31, 1998, 1997 and 1996, the Fund paid $ , $16,921,518
and 14,352,911, respectively, in investment advisory fees.

SSBC also serves as administrator to the Fund pursuant to a written (the
"Administration Agreement"), which was most recently approved by the
Fund's Board of Directors, including a majority of the independent
directors of the Fund. SSBC pays the salary of any officer and employee
who is employed by both it and the Fund and bears all expenses in
connection with the performance of its services.

As compensation for administrative services rendered to the Fund, SSBC
receives a fee computed daily and paid monthly at the following annual
rates: 0.20%, of the value of the Fund's average daily net assets up to
$250 million; 0.187% of the next $250 million; 0.174% of the next $500
million; 0.161% of the next $1 billion; 0.148% of the next $1 billion and
0.135% of the net assets in excess of $3 billion. For the fiscal years
ended December 31, 1998, 1997 and 1996, the Fund paid $
,$6,212,415, and $5,262,374 in administration fees.

The Fund bears expenses incurred in its operation including: taxes,
interest, brokerage fees and commissions, if any; fees of Directors who
are not officers, directors, shareholders or employees of Salomon Smith
Barney or SSBC; Securities and Exchange Commission ("SEC") fees and
state Blue Sky qualification fees; charges of custodians; transfer and
dividend disbursing agent's fees; certain insurance premiums; outside
auditing and legal expenses; costs of maintaining corporate existence;
investor services (including allocated telephone and personnel expenses);
costs of preparation and printing of prospectuses and statements of
additional information for regulatory purposs and for distribution to
existing shareholders; costs of shareholders' reports and shareholder
meetings; and meetings of the officers or Board of Directors of the Fund.

Counsel and Auditors

Willkie Farr & Gallagher serves as counsel to the Fund. The independent
directors of the Fund have selected Stroock & Stroock & Lavan, LLP to
serve as their legal counsel.

KPMG LLP, 345 Park Avenue, New York, New York 10154, has been selected as
the Fund's independent auditor to examine and report on the Fund's
financial statements and highlights for the fiscal year ending December
31, 1999.

Custodian and Transfer Agent.

PNC Bank, National Association ("PNC" or "custodian"), located at 17th
and Chestnut Streets, Philadelphia, Pennsylvania, 19103, serves as the
custodian of the fund. Under its custody agreement with the fund, PNC
holds the fund's securities and keeps all necessary accounts and records.
For its services, PNC receives a monthly fee based upon the month-end
market value of securities held in custody and also receives securities
transactions charges. The assets of the fund are held under bank
custodianship in compliance with the 1940 Act.

First Data Investors Services Group, Inc. ("First Data" or "transfer
agent"), located at Exchange Place, Boston, Massachusetts 02109, serves
as the fund's transfer agent. Under the transfer agency agreement, the
transfer agent maintains the shareholder account records for the trust,
handles certain communications between shareholders and the trust and
distributes dividends and distributions payable by the trust. For these
services, the transfer agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the trust during
the month, and is reimbursed for out-of-pocket expenses.

Portfolio Transactions

Decisions to buy and sell securities for the fund are made by the manager,
subject to the overall review of the fund's Board of Directors. Although
investment decisions for the fund are made independently from those of the
other accounts managed by the manager, investments of the type that the
fund may make also may be made by those other accounts. When the fund and
one or more other accounts managed by the manager are prepared to invest
in, or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the
manager to be equitable to each. In some cases, this procedure may
adversely affect the price paid or received by the fund or the size of the
position obtained or disposed of by the fund.

Allocation of transactions on behalf of the fund, including their
frequency, to various dealers is determined by the manager in its best
judgment and in a manner deemed fair and reasonable to the fund's
shareholders. The primary considerations of the manager in allocating
transactions are availability of the desired security and the prompt
execution of orders in an effective manner at the most favorable prices.
Subject to these considerations, dealers that provide supplemental
investment research and statistical or other services to the manager may
receive orders for portfolio transactions by the fund. Information so
received is in addition to, and not in lieu of, services required to be
performed by the manager, and the fees of the manager are not reduced as a
consequence of their receipt of the supplemental information. The
information may be useful to the manager in serving both the fund and
other clients, and conversely, supplemental information obtained by the
placement of business of other clients may be useful to the manager in
carrying out its obligations to the fund.

The fund will not purchase securities during the existence of any
underwriting or selling group relating to the securities, of which the
manager is a member, except to the extent permitted by the SEC. Under
certain circumstances, the fund may be at a disadvantage because of this
limitation in comparison with other funds that have similar investment
objectives but that are not subject to a similar limitation.

The fund has paid the following in brokerage commissions for portfolio
transactions since its commencement of operations: $______ in 1997 and
$______ in 1998. Portfolio securities transactions on behalf of the fund
are placed by the manager with a number of brokers and dealers, including
Salomon Smith Barney. Salomon Smith Barney has advised the fund that in
transactions with the fund, Salomon Smith Barney charges a commission
rate at least as favorable as the rate that Salomon Smith Barney charges
its comparable unaffiliated customers in similar transactions.

Portfolio Turnover

The fund generally does not engage in short-term trading but intends to
purchase securities for long-term capital appreciation. The fund's annual
portfolio turnover rate is not expected to exceed 100%. A portfolio
turnover rate of 100% would occur if all of the securities in the fund's
portfolio were replaced once during a period of one year. The portfolio
turnover rate is calculated by dividing the lesser of purchases or sales
of portfolio securities for the year by the monthly average value of
portfolio securities. Securities with remaining maturities of one year or
less at the date of acquisition are excluded from the calculation. For
the fiscal years ended December 31, 1998 and 1997, the fund's portfolio
turnover rate was xx% and 62%, respectively.

Future portfolio turnover rates may vary greatly from year to year as well
as within a particular year and may be affected by cash requirements for
redemptions of the fund's shares. Portfolio turnover rates will largely
depend on the level of purchases and redemptions of fund shares. Higher
portfolio turnover rates can result in corresponding increases in
brokerage commissions. In addition, to the extent that the fund realizes
net short-term capital gains as the result of more portfolio transactions,
distributions of such gains would be taxable to shareholders as ordinary
income.

PURCHASE OF SHARES

Sales Charge Alternatives

The following classes of shares are available for purchase. See the
Prospectus for a discussion of factors to consider in selecting which
Class of shares to purchase.

Class A Shares. Class A shares are sold to investors at the public
offering price, which is the net asset value plus an initial sales charge
as follows:

Amount of
Investment

Sales Charge as a
%
of Transaction

Sales Charge as a
%
of Amount
Invested
Dealers'
Reallowance as %
of Offering Price
Less than $25,000
5.00
5.26
4.50
$ 25,000 - 49,999
4.00
4.17
3.60
50,000 - 99,999
3.50
3.63
3.15
100,000 - 249,999
3.00
3.09
2.70
250,000 - 499,999
2.00
2.04
1.80
500,000 and over
*
*
*

* Purchases of Class A shares of $500,000 or more will be made at net
asset value without any initial sales charge, but will be subject to
a DEFERRED SALES CHARGE of 1.00% on redemptions made within 12
months of purchase. The DEFERRED SALES CHARGE on Class A shares is
payable to Salomon Smith Barney, which compensates Salomon Smith
Barney Financial Consultants and other dealers whose clients make
purchases of $500,000 or more. The DEFERRED SALES CHARGE is waived
in the same circumstances in which the DEFERRED SALES CHARGE
applicable to Class B and Class L shares is waived. See "Deferred
Sales Charge Alternatives" and "Waivers of DEFERRED SALES CHARGE."

Members of the selling group may receive up to 90% of the sales charge and
may be deemed to be underwriters of the fund as defined in the 1933 Act.
The reduced sales charges shown above apply to the aggregate of purchases
of Class A shares of the fund made at one time by "any person," which
includes an individual and his or her immediate family, or a trustee or
other fiduciary of a single trust estate or single fiduciary account.

Class B Shares. Class B shares are sold without an initial sales charge
but are subject to a Deferred Sales Charge payable upon certain
redemptions. See "Deferred Sales Charge Provisions" below.

Class L Shares. Class L shares are sold with an initial sales charge of
1.00% (which is equal to 1.01% of the amount invested) and are subject to
a deferred sales charge payable upon certain redemptions. See "Deferred
Sales Charge Provisions" below. Until June 22, 2001 purchases of Class L
shares by investors who were holders of Class C shares of the fund on June
12, 1998 will not be subject to the 1% initial sales charge.

Class Y Shares. Class Y shares are sold without an initial sales charge
or deferred sales charge and are available only to investors investing a
minimum of $15,000,000 (except purchases of Class Y shares by Smith Barney
Concert Allocation Series Inc., for which there is no minimum purchase
amount).

Class Z Shares. Class Z Shares are sold without an initial sales charge
or deferred sales charge and are currently offered exclusively for sale to
tax-exempt employee benefit and retirement plans of Salomon Smith Barney
or any of its affiliates ("Qualified Plans") and to certain unit
investment trusts ("UIT) sponsored by Salomon Smith Barney or any of its
affiliates.

General

Investors may purchase shares from a Salomon Smith Barney Financial
Consultant or a broker that clears through Salomon Smith Barney ("Dealer
Representative"). In addition, certain investors, including qualified
retirement plans purchasing through certain Dealer Representatives, may
purchase shares directly from the fund. When purchasing shares of the
fund, investors must specify whether the purchase is for Class A, Class B,
Class L or Class Y shares. Salomon Smith Barney and Dealer
Representatives may charge their customers an annual account maintenance
fee in connection with a brokerage account through which an investor
purchases or holds shares. Accounts held directly at First Data are not
subject to a maintenance fee.

Purchases of the Fund's Class Z shares must be made in accordance with the
terms of a Qualified Plan or a Salomon Smith Barney UIT. There are no
minimum investment requirements for Class Z shares; however the Fund
reserves the right to vary this policy at any time. Shareholders
acquiring Class Z shares through a Qualified Plan or a Salomon Smith
Barney UIT should consult the terms of their respective plans for
redemption provisions.

Investors in Class A, Class B and Class L shares may open an account in
the fund by making an initial investment of at least $1,000 for each
account, or $250 for an IRA or a Self-Employed Retirement Plan, in the
fund. Investors in Class Y shares may open an account by making an initial
investment of $15,000,000. Subsequent investments of at least $50 may be
made for all Classes. For participants in retirement plans qualified under
Section 403(b)(7) or Section 401(c) of the Code, the minimum initial
investment required for Class A, Class B and Class L shares and the
subsequent investment requirement for all Classes in the fund is $25. For
shareholders purchasing shares of the fund through the Systematic
Investment Plan on a monthly basis, the minimum initial investment
requirement for Class A, Class B and Class L shares and subsequent
investment requirement for all Classes is $25. For shareholders
purchasing shares of the fund through the Systematic Investment Plan on a
quarterly basis, the minimum initial investment required for Class A,
Class B and Class L shares and the subsequent investment requirement for
all Classes is $50. There are no minimum investment requirements for
Class A shares for employees of Citigroup and its subsidiaries, including
Salomon Smith Barney, unitholders who invest distributions from a UIT
sponsored by Salomon Smith Barney, and Directors/Directors of any of the
Smith Barney Mutual Funds, and their spouses and children. The fund
reserves the right to waive or change minimums, to decline any order to
purchase its shares and to suspend the offering of shares from time to
time. Shares purchased will be held in the shareholder's account by First
Data. Share certificates are issued only upon a shareholder's written
request to First Data.

Purchase orders received by the fund or a Salomon Smith Barney Financial
Consultant prior to the close of regular trading on the NYSE, on any day
the fund calculates its net asset value, are priced according to the net
asset value determined on that day (the ''trade date''). Orders received
by a Dealer Representative prior to the close of regular trading on the
NYSE on any day the fund calculates its net asset value, are priced
according to the net asset value determined on that day, provided the
order is received by the fund or the fund's agent prior to its close of
business. For shares purchased through Salomon Smith Barney or a Dealer
Representative purchasing through Salomon Smith Barney, payment for shares
of the fund is due on the third business day after the trade date. In all
other cases, payment must be made with the purchase order.

Systematic Investment Plan. Shareholders may make additions to their
accounts at any time by purchasing shares through a service known as the
Systematic Investment Plan. Under the Systematic Investment Plan, Salomon
Smith Barney or First Data is authorized through preauthorized transfers
of at least $25 on a monthly basis or at least $50 on a quarterly basis to
charge the shareholder's account held with a bank or other financial
institution on a monthly or quarterly basis as indicated by the
shareholder, to provide for systematic additions to the shareholder's fund
account. A shareholder who has insufficient funds to complete the
transfer will be charged a fee of up to $25 by Salomon Smith Barney or
First Data. The Systematic Investment Plan also authorizes Salomon Smith
Barney to apply cash held in the shareholder's Salomon Smith Barney
brokerage account or redeem the shareholder's shares of a Smith Barney
money market fund to make additions to the account. Additional information
is available from the fund or a Salomon Smith Barney Financial Consultant
or a Dealer Representative.

Sales Charge Waivers and Reductions

Initial Sales Charge Waivers. Purchases of Class A shares may be made at
net asset value without a sales charge in the following circumstances: (a)
sales to (i) Board Members and employees of Citigroup and its subsidiaries
and any Citigroup affiliated funds including the Smith Barney Mutual Funds
(including retired Board Members and employees); the immediate families of
such persons (including the surviving spouse of a deceased Board Member or
employee); and to a pension, profit-sharing or other benefit plan for such
persons and (ii) employees of members of the National Association of
Securities Dealers, Inc., provided such sales are made upon the assurance
of the purchaser that the purchase is made for investment purposes and
that the securities will not be resold except through redemption or
repurchase; (b) offers of Class A shares to any other investment company
to effect the combination of such company with the fund by merger,
acquisition of assets or otherwise; (c) purchases of Class A shares by any
client of a newly employed Salomon Smith Barney Financial Consultant (for
a period up to 90 days from the commencement of the Financial Consultant's
employment with Salomon Smith Barney), on the condition the purchase of
Class A shares is made with the proceeds of the redemption of shares of a
mutual fund which (i) was sponsored by the Financial Consultant's prior
employer, (ii) was sold to the client by the Financial Consultant and
(iii) was subject to a sales charge; (d) purchases by shareholders who
have redeemed Class A shares in the fund (or Class A shares of another
Smith Barney Mutual Fund that is offered with a sales charge) and who wish
to reinvest their redemption proceeds in the fund, provided the
reinvestment is made within 60 calendar days of the redemption; (e)
purchases by accounts managed by registered investment advisory
subsidiaries of Citigroup; (f) direct rollovers by plan participants of
distributions from a 401(k) plan offered to employees of Citigroup or its
subsidiaries or a 401(k) plan enrolled in the Smith Barney 401(k) Program
(Note: subsequent investments will be subject to the applicable sales
charge); (g) purchases by a separate account used to fund certain
unregistered variable annuity contracts; (h) investments of distributions
from a UIT sponsored by Salomon Smith Barney; (i) purchases by investors
participating in a Salomon Smith Barney fee-based arrangement; and (j)
purchases of Class A shares by Section 403(b) or Section 401(a) or (k)
accounts associated with Copeland Retirement Programs. In order to obtain
such discounts, the purchaser must provide sufficient information at the
time of purchase to permit verification that the purchase would qualify
for the elimination of the sales charge.

Right of Accumulation. Class A shares of the fund may be purchased by
''any person'' (as defined above) at a reduced sales charge or at net
asset value determined by aggregating the dollar amount of the new
purchase and the total net asset value of all Class A shares of the fund
and of other Smith Barney Mutual Funds that are offered with a sales
charge as currently listed under ''Exchange Privilege'' then held by such
person and applying the sales charge applicable to such aggregate. In
order to obtain such discount, the purchaser must provide sufficient
information at the time of purchase to permit verification that the
purchase qualifies for the reduced sales charge. The right of
accumulation is subject to modification or discontinuance at any time with
respect to all shares purchased thereafter.

Letter of Intent - Class A Shares. A Letter of Intent for an amount of
$50,000 or more provides an opportunity for an investor to obtain a
reduced sales charge by aggregating investments over a 13 month period,
provided that the investor refers to such Letter when placing orders. For
purposes of a Letter of Intent, the ''Amount of Investment'' as referred
to in the preceding sales charge table includes (i) all Class A shares of
the fund and other Smith Barney Mutual Funds offered with a sales charge
acquired during the term of the letter plus (ii) the value of all Class A
shares previously purchased and still owned. Each investment made during
the period receives the reduced sales charge applicable to the total
amount of the investment goal. If the goal is not achieved within the
period, the investor must pay the difference between the sales charges
applicable to the purchases made and the charges previously paid, or an
appropriate number of escrowed shares will be redeemed. The term of the
Letter will commence upon the date the Letter is signed, or at the options
of the investor, up to 90 days before such date. Please contact a Salomon
Smith Barney Financial Consultant or First Data to obtain a Letter of
Intent application.

Letter of Intent - Class Y Shares. A Letter of Intent may also be used as
a way for investors to meet the minimum investment requirement for Class Y
shares (except purchases of Class Y shares by Smith Barney Concert
Allocation Series Inc., for which there is no minimum purchase amount).
Such investors must make an initial minimum purchase of $5,000,000 in
Class Y shares of the fund and agree to purchase a total of $15,000,000 of
Class Y shares of the fund within 13 months from the date of the Letter.
If a total investment of $15,000,000 is not made within the 13-month
period, all Class Y shares purchased to date will be transferred to Class
A shares, where they will be subject to all fees (including a service fee
of 0.25%) and expenses applicable to the fund's Class A shares, which may
include a Deferred Sales Charge of 1.00%. Please contact a Salomon Smith
Barney Financial Consultant or First Data for further information.

Deferred Sales Charge Provisions

''Deferred Sales Charge Shares'' are: (a) Class B shares; (b) Class L
shares; and (c) Class A shares that were purchased without an initial
sales charge but are subject to a Deferred Sales Charge. A Deferred Sales
Charge may be imposed on certain redemptions of these shares.

Any applicable Deferred Sales Charge will be assessed on an amount equal
to the lesser of the original cost of the shares being redeemed or their
net asset value at the time of redemption. Deferred Sales Charge Shares
that are redeemed will not be subject to a Deferred Sales Charge to the
extent that the value of such shares represents: (a) capital appreciation
of fund assets; (b) reinvestment of dividends or capital gain
distributions; (c) with respect to Class B shares, shares redeemed more
than five years after their purchase; or (d) with respect to Class L
shares and Class A shares that are Deferred Sales Charge Shares, shares
redeemed more than 12 months after their purchase.

Class L shares and Class A shares that are Deferred Sales Charge Shares
are subject to a 1.00% Deferred Sales Charge if redeemed within 12 months
of purchase. In circumstances in which the Deferred Sales Charge is
imposed on Class B shares, the amount of the charge will depend on the
number of years since the shareholder made the purchase payment from which
the amount is being redeemed. Solely for purposes of determining the
number of years since a purchase payment, all purchase payments made
during a month will be aggregated and deemed to have been made on the last
day of the preceding Salomon Smith Barney statement month. The following
table sets forth the rates of the charge for redemptions of Class B shares
by shareholders, except in the case of Class B shares held under the Smith
Barney 401(k) Program, as described below. See ''Smith Barney 401(k) and
ExecChoiceTM Programs.''

Year Since Purchase Payment Was
Made

Deferred Sales Charge

First

5.00%

Second

4.00

Third

3.00

Fourth

2.00

Fifth

1.00

Sixth and thereafter

0.00

Class B shares will convert automatically to Class A shares eight years
after the date on which they were purchased and thereafter will no longer
be subject to any distribution fees. There will also be converted at that
time such proportion of Class B Dividend Shares owned by the shareholders
as the total number of his or her Class B shares converting at the time
bears to the total number of outstanding Class B shares (other than Class
B Dividend Shares) owned by the shareholder.

The length of time that Deferred Sales Charge Shares acquired through an
exchange have been held will be calculated from the date that the shares
exchanged were initially acquired in one of the other Smith Barney Mutual
Funds, and fund shares being redeemed will be considered to represent, as
applicable, capital appreciation or dividend and capital gain distribution
reinvestments in such other funds. For Federal income tax purposes, the
amount of the Deferred Sales Charge will reduce the gain or increase the
loss, as the case may be, on the amount realized on redemption. The amount
of any Deferred Sales Charge will be paid to Salomon Smith Barney.

To provide an example, assume an investor purchased 100 Class B shares of
the fund at $10 per share for a cost of $1,000. Subsequently, the
investor acquired 5 additional shares of the fund through dividend
reinvestment. During the fifteenth month after the purchase, the investor
decided to redeem $500 of his or her investment. Assuming at the time of
the redemption the net asset value had appreciated to $12 per share, the
value of the investor's shares would be $1,260 (105 shares at $12 per
share). The Deferred Sales Charge would not be applied to the amount which
represents appreciation ($200) and the value of the reinvested dividend
shares ($60). Therefore, $240 of the $500 redemption proceeds ($500 minus
$260) would be charged at a rate of 4.00% (the applicable rate for Class B
shares) for a total Deferred Sales Charge of $9.60.

Waivers of Deferred Sales Charge

The Deferred Sales Charge will be waived on: (a) exchanges (see ''Exchange
Privilege''); (b) automatic cash withdrawals in amounts equal to or less
than 1.00% per month of the value of the shareholder's shares at the time
the withdrawal plan commences (see ''Automatic Cash Withdrawal Plan'')
(provided, however, that automatic cash withdrawals in amounts equal to or
less than 2.00% per month of the value of the shareholder's shares will be
permitted for withdrawal plans that were established prior to November 7,
1994); (c) redemptions of shares within 12 months following the death or
disability of the shareholder; (d) redemptions of shares made in
connection with qualified distributions from retirement plans or IRAs upon
the attainment of age 591/2; (e) involuntary redemptions; and
(f) redemptions of shares to effect a combination of the fund with any
investment company by merger, acquisition of assets or otherwise. In
addition, a shareholder who has redeemed shares from other Smith Barney
Mutual Funds may, under certain circumstances, reinvest all or part of the
redemption proceeds within 60 days and receive pro rata credit for any
Deferred Sales Charge imposed on the prior redemption.

Deferred Sales Charge waivers will be granted subject to confirmation (by
Salomon Smith Barney in the case of shareholders who are also Salomon
Smith Barney clients or by First Data in the case of all other
shareholders) of the shareholder's status or holdings, as the case may be.

Smith Barney 401(k) and ExecChoiceTM Programs

Investors may be eligible to participate in the Smith Barney 401(k)
Program or the Smith Barney ExecChoiceTM Program. To the extent applicable,
the same terms and conditions, which are outlined below, are offered to
all plans participating (''Participating Plans'') in these programs.

The fund offers to Participating Plans Class A and Class L shares as
investment alternatives under the Smith Barney 401(k) and ExecChoiceTM
Programs. Class A and Class L shares acquired through the Participating
Plans are subject to the same service and/or distribution fees as the
Class A and Class L shares acquired by other investors; however, they are
not subject to any initial sales charge or Deferred Sales Charge. Once a
Participating Plan has made an initial investment in the fund, all of its
subsequent investments in the fund must be in the same Class of shares,
except as otherwise described below.

Class A Shares. Class A shares of the fund are offered without any sales
charge or Deferred Sales Charge to any Participating Plan that purchases
$1,000,000 or more of Class A shares of one or more funds of the Smith
Barney Mutual Funds.

Class L Shares. Class L shares of the fund are offered without any sales
charge or Deferred Sales Charge to any Participating Plan that purchases
less than $1,000,000 of Class L shares of one or more funds of the Smith
Barney Mutual Funds.

401(k) and ExecChoiceTM Plans Opened On or After June 21, 1996. If, at the
end of the fifth year after the date the Participating Plan enrolled in
the Smith Barney 401(k) Program or the Smith Barney ExecChoiceTM Program, a
Participating Plan's total Class L holdings in all non-money market Smith
Barney Mutual Funds equal at least $1,000,000, the Participating Plan will
be offered the opportunity to exchange all of its Class L shares for Class
A shares of the fund. For Participating Plans that were originally
established through a Salomon Smith Barney retail brokerage account, the
five-year period will be calculated from the date the retail brokerage
account was opened. Such Participating Plans will be notified of the
pending exchange in writing within 30 days after the fifth anniversary of
the enrollment date and, unless the exchange offer has been rejected in
writing, the exchange will occur on or about the 90th day after the fifth
anniversary date. If the Participating Plan does not qualify for the five-
year exchange to Class A shares, a review of the Participating Plan's
holdings will be performed each quarter until either the Participating
Plan qualifies or the end of the eighth year.

401(k) Plans Opened Prior to June 21, 1996. In any year after the date a
Participating Plan enrolled in the Smith Barney 401(k) Program, if a
Participating Plan's total Class L holdings in all non-money market Smith
Barney Mutual Funds equal at least $500,000 as of the calendar year-end,
the Participating Plan will be offered the opportunity to exchange all of
its Class L shares for Class A shares of the fund. Such Plans will be
notified in writing within 30 days after the last business day of the
calendar year and, unless the exchange offer has been rejected in writing,
the exchange will occur on or about the last business day of the following
March.

Any Participating Plan in the Smith Barney 401(k) or the Smith Barney
ExecChoiceTM Programs, whether opened before or after June 21, 1996, that
has not previously qualified for an exchange into Class A shares will be
offered the opportunity to exchange all of its Class L shares for Class A
shares of the fund, regardless of asset size, at the end of the eighth
year after the date the Participating Plan enrolled in the Smith Barney
401(k) Program. Such Plans will be notified of the pending exchange in
writing approximately 60 days before the eighth anniversary of the
enrollment date and, unless the exchange has been rejected in writing, the
exchange will occur on or about the eighth anniversary date. Once an
exchange has occurred, a Participating Plan will not be eligible to
acquire additional Class L shares of the fund, but instead may acquire
Class A shares of the fund. Any Class L shares not converted will continue
to be subject to the distribution fee.

Participating Plans wishing to acquire shares of the fund through the
Smith Barney 401(k) Program or the Smith Barney ExecChoiceTM Program must
purchase such shares directly from the transfer agent. For further
information regarding these Programs, investors should contact a Salomon
Smith Barney Financial Consultant.

Determination of Public Offering Price

The fund offers its shares to the public on a continuous basis. The
public offering price for a Class A and Class Y share of the fund is equal
to the net asset value per share at the time of purchase, plus for Class A
shares an initial sales charge based on the aggregate amount of the
investment. The public offering price for a Class L share (and Class A
share purchases, including applicable rights of accumulation, equaling or
exceeding $500,000) is equal to the net asset value per share at the time
of purchase and no sales charge is imposed at the time of purchase. A
Deferred Sales Charge, however, is imposed on certain redemptions of Class
L shares, and Class A shares when purchased in amounts exceeding $500,000.
The method of computation of the public offering price is shown in each
fund's financial statements, incorporated by reference in their entirety
into this SAI.

REDEMPTION OF SHARES

The right of redemption of shares of the fund may be suspended or the date
of payment postponed (a) for any periods during which the NYSE is closed
(other than for customary weekend and holiday closings), (b) when trading
in the markets the fund normally utilizes is restricted, or an emergency
exists, as determined by the SEC, so that disposal of the fund's
investments or determination of its net asset value is not reasonably
practicable or (c) for any other periods as the SEC by order may permit
for the protection of the fund's shareholders.

If the shares to be redeemed were issued in certificate form, the
certificates must be endorsed for transfer (or be accompanied by an
endorsed stock power) and must be submitted to First Data together with
the redemption request. Any signature appearing on a share certificate,
stock power or written redemption request in excess of $10,000 must be
guaranteed by an eligible guarantor institution such as a domestic bank,
savings and loan institution, domestic credit union, member bank of the
Federal Reserve System or member firm of a national securities exchange.
Written redemption requests of $10,000 or less do not require a signature
guarantee unless more than one such redemption request is made in any
10-day period or the redemption proceeds are to be sent to an address
other than the address of record. Unless otherwise directed, redemption
proceeds will be mailed to an investor's address of record. First Data
may require additional supporting documents for redemptions made by
corporations, executors, administrators, directors or guardians. A
redemption request will not be deemed properly received until First Data
receives all required documents in proper form.

If a shareholder holds shares in more than one Class, any request for
redemption must specify the Class being redeemed. In the event of a
failure to specify which Class, or if the investor owns fewer shares of
the Class than specified, the redemption request will be delayed until the
Transfer Agent receives further instructions from Salomon Smith Barney, or
if the shareholder's account is not with Salomon Smith Barney, from the
shareholder directly. The redemption proceeds will be remitted on or
before the third business day following receipt of proper tender, except
on any days on which the NYSE is closed or as permitted under the 1940
Act, in extraordinary circumstances. Generally, if the redemption
proceeds are remitted to a Salomon Smith Barney brokerage account, these
funds will not be invested for the shareholder's benefit without specific
instruction and Salomon Smith Barney will benefit from the use of
temporarily uninvested funds. Redemption proceeds for shares purchased by
check, other than a certified or official bank check, will be remitted
upon clearance of the check, which may take up to ten days or more.

Qualified Plans may redeem Class Z shares on any day the Fund calculates
its net asset value.

Distribution in Kind

If the board of directors of the trust determines that it would be
detrimental to the best interests of the remaining shareholders to make a
redemption payment wholly in cash, the fund may pay, in accordance with
SEC rules, any portion of a redemption in excess of the lesser of $250,000
or 1.00% of the fund's net assets by a distribution in kind of portfolio
securities in lieu of cash. Shareholders may incur brokerage commissions
when they subsequently sell those securities.

Automatic Cash Withdrawal Plan

An automatic cash withdrawal plan (the "Withdrawal Plan") is available to
shareholders of the fund who own shares of the fund with a value of at
least $10,000 and who wish to receive specific amounts of cash monthly or
quarterly. Withdrawals of at least $50 may be made under the Withdrawal
Plan by redeeming as many shares of the fund as may be necessary to cover
the stipulated withdrawal payment. Any applicable Deferred Sales Charge
will not be waived on amounts withdrawn by shareholders that exceed 1.00%
per month of the value of a shareholder's shares at the time the
Withdrawal Plan commences. (With respect to Withdrawal Plans in effect
prior to November 7, 1994, any applicable Deferred Sales Charge will be
waived on amounts withdrawn that do not exceed 2.00% per month of the
value of a shareholder's shares at the time the Withdrawal Plan
commences). To the extent that withdrawals exceed dividends,
distributions and appreciation of a shareholder's investment in a fund,
continued withdrawal payments will reduce the shareholder's investment,
and may ultimately exhaust it. Withdrawal payments should not be
considered as income from investment in a fund. Furthermore, as it
generally would not be advantageous to a shareholder to make additional
investments in the fund at the same time he or she is participating in the
Withdrawal Plan, purchases by such shareholders in amounts of less than
$5,000 ordinarily will not be permitted.

Shareholders of a fund who wish to participate in the Withdrawal Plan and
who hold their shares of the fund in certificate form must deposit their
share certificates with the transfer agent as agent for Withdrawal Plan
members. All dividends and distributions on shares in the Withdrawal Plan
are reinvested automatically at net asset value in additional shares of
the fund involved. A shareholder who purchases shares directly through
the transfer agent may continue to do so and applications for
participation in the Withdrawal Plan must be received by the transfer
agent no later than the eighth day of the month to be eligible for
participation beginning with that month's withdrawal. For additional
information, shareholders should contact a Salomon Smith Barney Financial
Consultant.

Waivers of Deferred Sales Charge

The Deferred Sales Charge will be waived on: (a) exchanges (see "Exchange
Privilege" in the prospectus); (b) automatic cash withdrawals in amounts
equal to or less than 1.00% per month of the value of the shareholder's
shares at the time the withdrawal plan commences (see "Automatic Cash
Withdrawal Plan in the prospectus") (provided, however, that automatic
cash withdrawals in amounts equal to or less than 2.00% per month of the
value of the shareholder's shares will be permitted for withdrawal plans
that were established prior to November 7, 1994); (c) redemptions of
shares within 12 months following the death or disability of the
shareholder; (d) redemptions of shares made in connection with qualified
distributions from retirement plans or IRAs upon the attainment of age 591/2
; (e) involuntary redemptions; and (f) redemptions of shares to effect a
combination of the fund with any investment company by merger, acquisition
of assets or otherwise. In addition, a shareholder who has redeemed
shares from other Smith Barney Mutual funds may, under certain
circumstances, reinvest all or part of the redemption proceeds within 60
days and receive pro rata credit for any Deferred Sales Charge imposed on
the prior redemption. Deferred Sales Charge waivers will be granted
subject to confirmation (by Salomon Smith Barney in the case of
shareholders who are also Salomon Smith Barney clients or by the transfer
agent in the case of all other shareholders) of the shareholder's status
or holdings, as the case may be.

Additional Information Regarding Telephone Redemption And Exchange Program

Neither the fund nor its agents will be liable for following instructions
communicated by telephone that are reasonably believed to be genuine. The
fund and its agents will employ procedures designed to verify the identity
of the caller and legitimacy of instructions (for example, a shareholder's
name and account number will be required and phone calls may be recorded).
The fund reserves the right to suspend, modify or discontinue the
telephone redemption and exchange program or to impose a charge for this
service at any time following at least seven (7) days' prior notice to
shareholders.

DISTRIBUTOR

CFBDS, Inc. serves as the fund's distributor pursuant to a written
agreement dated October 8, 1998 (the "Distribution Agreement") which was
approved by the fund's Board of Directors, including a majority of the
independent directors on July 15, 1998. Prior to the merger of Travelers
Group, Inc. and Citicorp Inc. on October 8, 1998, Salomon Smith Barney
served as the fund's distributor. For the 1996, 1997 and 1998 fiscal
years, Salomon Smith Barney, received $500,000, $115,000 and __________,
respectively, in sales charges from the sale of Class A shares, and did
not reallow any portion thereof to dealers. For the fiscal years ended
October 31, 1996, 1997 and 1998, Salomon Smith Barney or its predecessor
received from shareholders $119,000, $201,000 and $_________,
respectively, in Deferred Sales Charge on the redemption of Class B and
Class L shares.

PFS Distributors, located at 3100 Breckinridge Blvd., Building 200, Duluth,
Georgia 30199-0062, also, serves as one of the Fund's distributors on a
best efforts basis requiring PFS Distributors to take and pay for only
such securities as may be sold to the public pursuant to a Distribution
Agreement. The only classes of shares being offered for sale through PFS
Distributors are Class A shares and Class B shares.

When payment is made by the investor before the settlement date, unless
otherwise noted by the investor, the funds will be held as a free credit
balance in the investor's brokerage account and Salomon Smith Barney may
benefit from the temporary use of the funds. The fund's Board of
Directors has been advised of the benefits to Salomon Smith Barney
resulting from these settlement procedures and will take such benefits
into consideration when reviewing the Investment Advisory and Distribution
Agreements for continuance.

Distribution Arrangements. To compensate Salomon Smith Barney for the
services it provides and for the expense it bears under the Distribution
Agreement, the fund has adopted a services and distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the
fund pays Salomon Smith Barney a service fee, accrued daily and paid
monthly, calculated at the annual rate of 0.25% of the value of the fund's
average daily net assets attributable to the Class A, Class B and Class L
shares. In addition, the fund pays Salomon Smith Barney a distribution
fee with respect to the Class B and Class L shares primarily intended to
compensate Salomon Smith Barney for its initial expense of paying
financial consultants a commission upon sales of those shares. The Class
B and Class L distribution fee is calculated at the annual rate of 0.75%
of the value of the fund's average daily net assets attributable to the
shares of the respective class.

The only classes of shares being offered for sale through PFS Distributors
are Class A shares and Class B shares. Pursuant to the Plan (described
above), PFS Distributors is paid an annual service fee with respect to
Class A and Class B shares of the fund sold through PFS Distributors at
the annual rate of 0.25% of the average daily net assets of the respective
class. PFS Distributors is also paid an annual distribution fee with
respect to Class B shares at the annual rate of 0.75% of the average daily
net assets attributable to that Class. Class B shares that automatically
convert to Class A shares eight years after the date of original purchase
will no longer be subject to a distribution fee. The fees are paid to PFS
Distributors, which in turn, pays PFS Investments Inc. ("PFS Investments")
to pay its Investment Registered Representatives for servicing shareholder
accounts and, in the case of Class B shares, to cover expenses primarily
intended to result in the sale of those shares. These expenses include:
advertising expenses; the cost of printing and mailing prospectuses to
potential investors; payments to and expenses of Investments Registered
Representatives and other persons who provide support services in
connection with the distribution of shares; interest and/or carrying
charges; and indirect and overhead costs of PFS Investments associated
with the sale of fund shares, including lease, utility, communications and
sales promotion expenses.

The payments to PFS Investments Registered Representatives for selling
shares of a class include a commission or fee paid by the investor or PFS
at the time of sale and, with respect to Class A and Class B shares, a
continuing fee for servicing shareholder accounts for as long as a
shareholder remains a holder of that class. PFS Investments Registered
Representatives may receive different levels of compensation for selling
different classes of shares.

PFS Investments may be deemed to be an underwriter for purposes of the
Securities Act of 1933. From time to time, PFS or its affiliates may also
pay for certain non-cash sales incentives provided to PFS Investments
Registered Representatives. Such incentives do not have any effect on the
net amount invested. In addition to the reallowances from the applicable
public offering price described above, PFS may from time to time, pay or
allow additional reallowances or promotional incentives, in the form of
cash or other compensation to PFS Investments Registered Representatives
that sell shares of the fund.

The following service and distribution fees were incurred during the
periods indicated:

DISTRIBUTION PLAN FEES

Fiscal Year
Ended 12/31/98

Fiscal Year
Ended 12/31/97

Fiscal Year
Ended 12/31/96

Class A

$ 5,849,540

$ 5,002,144

Class B

12,927,331

10,505,436

Class L

360,602

203,764

For the fiscal year ended December 31, 1998, Salomon Smith Barney and/or
PFS Distributors incurred distribution expenses totaling approximately $
for advertising, printing and mailing of Prospectuses,
support services, to Salomon Smith Barney Financial Consultants, and in
accruals for interest on the excess of Salomon Smith Barney expenses
incurred in distribution of the Fund's shares over the sum of the
distribution fees and deferred sales charges received by Salomon Smith
Barney and/or PFS Distributors from the Fund.

Under its terms, the Plan continues from year to year, provided such
continuance is approved annually by vote of the fund's Board of Directors,
including a majority of the independent directors. The Plan may not be
amended to increase the amount of the service and distribution fees
without shareholder approval, and all amendments of the Plan also must be
approved by the directors and independent directors in the manner
described above. The Plan may be terminated with respect to a class of
the fund at any time, without penalty, by vote of a majority of the
independent directors or by vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of the class. Pursuant to the
Plan, Salomon Smith Barney and PFS Distributors will provide the fund's
Board of Directors with periodic reports of amounts expended under the
Plan and the purpose for which such expenditures were made.

VALUATION OF SHARES

The net asset value per share of the fund's Classes is calculated on each
day, Monday through Friday, except days on which the NYSE is closed. The
NYSE currently is scheduled to be closed on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas, and on the preceding Friday or
subsequent Monday when one of these holidays falls on a Saturday or
Sunday, respectively. Because of the differences in distribution fees and
Class-specific expenses, the per share net asset value of each Class may
differ. The following is a description of the procedures used by the
trust in valuing its assets.

Securities listed on a national securities exchange will be valued on the
basis of the last sale on the date on which the valuation is made or, in
the absence of sales, at the mean between the closing bid and asked
prices. Over-the-counter securities will be valued at the mean between
the closing bid and asked prices on each day, or, if market quotations for
those securities are not readily available, at fair value, as determined
in good faith by the fund's board of directors. Short-term obligations
with maturities of 60 days or less are valued at amortized cost, which
constitutes fair value as determined by the fund's board of directors.
Amortized cost involves valuing an instrument at its original cost to the
fund and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the effect of fluctuating interest
rates on the market value of the instrument. All other securities and
other assets of the fund will be valued at fair value as determined in
good faith by the fund's board of directors.

EXCHANGE PRIVILEGE

Shareholders of any of the Smith Barney Mutual funds may exchange all or
part of their shares for shares of the same Class of other Smith Barney
Mutual funds, on the basis of relative net asset value per share at the
time of exchange as follows:

A. Class A and Class Y shares of the fund may be exchanged without a
sales charge for the respective shares of any of the Smith Barney
Mutual funds.

B. Class B shares of any fund may be exchanged without a sales
charge. Class B shares of the Fund exchanged for Class B shares of
another Smith Barney Mutual Fund will be subject to the higher
applicable Deferred Sales Charge of the two funds and, for purposes
of calculating Deferred Sales Charge rates and conversion periods,
will be deemed to have been held since the date the shares being
exchanged were deemed to be purchased.

C. Class L shares of any fund may be exchanged without a sales
charge. For purposes of Deferred Sales Charge applicability, Class
L shares of the fund exchanged for Class C shares of another Smith
Barney Mutual fund will be deemed to have been owned since the date
the shares being exchanged were deemed to be purchased.

D. Holders of Class Z shares should consult their Qualified Plans
for information about available exchange options.

The exchange privilege enables shareholders in any Smith Barney Mutual
fund to acquire shares of the same Class in a fund with different
investment objectives when they believe a shift between funds is an
appropriate investment decision. This privilege is available to
shareholders residing in any state in which the fund shares being acquired
may legally be sold. Prior to any exchange, the shareholder should obtain
and review a copy of the current prospectus of each fund into which an
exchange is being considered. Prospectuses may be obtained from a Salomon
Smith Barney Financial Consultant.

Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current
net asset value and, subject to any applicable Deferred Sales Charge, the
proceeds are immediately invested, at a price as described above, in
shares of the fund being acquired. Salomon Smith Barney reserves the
right to reject any exchange request. The exchange privilege may be
modified or terminated at any time after written notice to shareholders.

Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange
transactions can be detrimental to the fund's performance and its
shareholders. The manager may determine that a pattern of frequent
exchanges is excessive and contrary to the best interests of the fund's
other shareholders. In this event, the fund may, at its discretion,
decide to limit additional purchases and/or exchanges by a shareholder.
Upon such a determination, the fund will provide notice in writing or by
telephone to the shareholder at least 15 days prior to suspending the
exchange privilege and during the 15 day period the shareholder will be
required to (a) redeem his or her shares in the fund or (b) remain
invested in the fund or exchange into any of the funds of the Smith Barney
Mutual funds ordinarily available, which position the shareholder would be
expected to maintain for a significant period of time. All relevant
factors will be considered in determining what constitutes an abusive
pattern of exchanges.

PERFORMANCE DATA

From time to time the fund may advertise its total return and average
annual total return in advertisements and/or other types of sales
literature. These figures are computed separately for Class A, Class B,
Class L, Class Y and Class Z shares of the fund. These figures are based
on historical earnings and are not intended to indicate future
performance. Total return is computed for a specified period of time
assuming deduction of the maximum sales charge, if any, from the initial
amount invested and reinvestment of all income dividends and capital gain
distributions on the reinvestment dates at prices calculated as stated in
this prospectus, then dividing the value of the investment at the end of
the period so calculated by the initial amount invested and subtracting
100%. The standard average annual total return, as prescribed by the SEC
is derived from this total return, which provides the ending redeemable
value. Such standard total return information may also be accompanied
with nonstandard total return information for differing periods computed
in the same manner but without annualizing the total return or taking
sales charges into account. The fund may also include comparative
performance information in advertising or marketing its shares. Such
performance information may include data from Lipper Analytical Services,
Inc. and other financial publications.

From time to time, the trust may quote a fund's yield or total return in
advertisements or in reports and other communications to shareholders.
The trust may include comparative performance information in advertising
or marketing the fund's shares. Such performance information may include
the following industry and financial publications- Barron's, Business
Week, CDA Investment Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investors Daily, Money, Morningstar Mutual Fund
Values, The New York Times, USA Today and The Wall Street Journal. To the
extent any advertisement or sales literature of the fund describes the
expenses or performance of any Class it will also disclose such
information for the other Classes.

Average Annual Total Return

A fund's "average annual total return," as described below, is computed
according to a formula prescribed by the SEC. The formula can be
expressed as follows:

P(1 + T)n = ERV

Where: P = a hypothetical initial payment
of $1,000.

T = average annual total return.

n = number of years.

ERV = Ending Redeemable Value of a
hypothetical $1,000 investment made at
the beginning of a 1-, 5- or 10-year
period at the end of a 1-, 5- or 10-
year period (or fractional portion
thereof), assuming reinvestment of all
dividends and distributions.

The ERV assumes complete redemption of the hypothetical investment at the
end of the measuring period. A fund's net investment income changes in
response to fluctuations in interest rates and the expenses of the fund.

Class A's average annual total return was as follows for the periods
indicated:

__.__% for the one-year period ended December 31, 1998
__.__% per annum during the five-year period ended December 31, 1998
__.__% per annum during the ten-year period ended December 31, 1998

The average annual total return figures assume that the maximum 5.00%
sales charge has been deducted from the investment at the time of
purchase. If the maximum sales charge had not been deducted, Class A's
average annual total return for those same periods would have been __.__%,
__.__% and __.__%, respectively.

Class B's average annual total return was as follows for the periods
indicated:

__.__% for the one-year period ended December 31, 1998
__.__% per annum during the five-year period ended December 31, 1998
__.__% for the period from inception (November 6, 1992) through December
31, 1998

The average annual total return figures assume that the maximum applicable
deferred sales charge has been deducted from the investment at the time of
redemption. If the maximum deferred sales charge had not been deducted,
Class B's average annual total return for those same periods would have
been __.__%, __.__% and ____%, respectively.

Class L's average annual total return was as follows for the periods
indicated:

__.__% for the one-year period ended December 31, 1998
__.__% per annum during the five-year period ended December 31, 1998
__.__% for the period from inception (February 4, 1993) through December
31, 1998

The average annual total return figures assume that the maximum applicable
deferred sales charge has been deducted from the investment at the time of
redemption. If the maximum deferred sales charge had not been deducted,
Class L's average annual total return for those same periods would have
been __.__%, __.__% and __.__%, respectively.

Class Y's average annual total return was as follows for the period
indicated:

__.__% for the one-year period ended December 31,1998
__.__% for the period from inception (January 30, 1996) through December
31,1998

Class Y shares do not incur sales charges nor deferred sales charges.

Class Z's average annual total return was as follows for the periods
indicated:

__.__% for the one-year period ended December 31,1998
__.__% per annum during the five-year period ended December 31, 1998
__.__% for the period from inception (November 6, 1992) through December
31, 1998

Class Z shares do not incur sales charges or deferred sales charges.

Aggregate Total Return

The fund's "aggregate total return," as described below, represents the
cumulative change in the value of an investment in the fund for the
specified period and is computed by the following formula:

ERV - P
P

Where: P = a hypothetical initial payment of
$10,000.

ERV = Ending Redeemable Value of a hypothetical
$10,000 investment made at the beginning of
the 1-, 5- or 10-year period at the end of
the 1-, 5- or 10-year period (or fractional
portion thereof), assuming reinvestment of
all dividends and distributions.
The ERV assumes complete redemption of the hypothetical investment at the
end of the measuring period.

Class A's aggregate total return was as follows for the periods indicated:

__.__% for the one-year period ended December 31, 1998
__.__% for the five-year period ended December 31, 1998
__.__% for the ten-year period ended December 31, 1998

These aggregate total return figures assume the maximum 5.00% sales charge
has been deducted from the investment at the time of purchase. If the
maximum sales charge had not been deducted, Class A's aggregate total
return for those same periods would have been __.__%, __.__% and ___.__%
respectively.

Class B's aggregate total return was as follows for the periods indicated:

__.__% for the one-year period ended December 31, 1998
__.__% for the five-year period ended December 31, 1998
__.__% for the period from inception (November 6, 1992) through December
31, 1998.

These aggregate total return figures assume that the maximum applicable
deferred sales charge has been deducted from the investment at the time of
redemption. If the maximum applicable deferred sales charge had not been
deducted, Class B's aggregate total return for those same periods would
have been __.__%, __.__% and ___.__%, respectively.

Class L's aggregate total return was as follows for the periods indicated:

__.__% for the one-year period ended December 31, 1998
__.__% for the five-year period ended December 31, 1998
__.__% for the period from inception (February 4, 1993) through December
31, 1998

These aggregate total return figures assume that the maximum applicable
deferred sales charge has been deducted from the investment at the time of
redemption If the maximum applicable deferrec sales charge had not been
deducted, Class L's aggregate total return for those same periods would
have been __.__%, __.__% and __.__%, respectively.

Class Y's average annual total return was as follows for the period
indicated:

__.__% for the one-year period ended December 31, 1998
__.__% for the period from inception (January 30, 1996) through December
31,1998

Class Y shares do not incur sales charges or deferred sales charges.
Class Z's average annual total return was as follows for the periods
indicated:

__.__% for the one-year period ended December 31, 1998
___.__% for the five-year period ended December 31, 1998
___.__% for the period from inception (November 6, 1992) through December
31, 1997

Class Z shares do not incur sales charges or deferred sales charges.

Performance will vary from time to time depending upon market conditions,
the composition of the fund's portfolio and operating expenses and the
expenses exclusively attributable to the Class. Consequently, any given
performance quotation should not be considered representative of the
Class's performance for any specified period in the future. Because
performance will vary, it may not provide a basis for comparing an
investment in the Class with certain bank deposits or other investments
that pay a fixed yield for a stated period of time. Investors comparing a
Class's performance with that of other mutual funds should give
consideration to the quality and maturity of the respective investment
companies' portfolio securities.

TAXES

The following is a summary of the material United States federal income
tax considerations regarding the purchase, ownership and disposition of
shares of a fund. Each prospective shareholder is urged to consult his
own tax adviser with respect to the specific federal, state, local and
foreign tax consequences of investing in a fund. The summary is based on
the laws in effect on the date of this SAI, which are subject to change.

The Fund and Its Investments

The fund intends to continue to qualify to be treated as a regulated
investment company each taxable year under the Internal Revenue Code of
1986, as amended (the "Code"). To so qualify, the fund must, among other
things: (a) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities, loans and
gains from the sale or other disposition of stock or securities or foreign
currencies, or other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies; and (b)
diversify its holdings so that, at the end of each quarter of the fund's
taxable year, (i) at least 50% of the market value of the fund's assets is
represented by cash, securities of other regulated investment companies,
United States government securities and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater
than 5% of the fund's assets and not greater than 10% of the outstanding
voting securities of such issuer and (ii) not more than 25% of the value
of its assets is invested in the securities (other than United States
government securities or securities of other regulated investment
companies) of any one issuer or any two or more issuers that the fund
controls and are determined to be engaged in the same or similar trades or
businesses or related trades or businesses. The fund expects that all of
its foreign currency gains will be directly related to its principal
business of investing in stocks and securities.

As a regulated investment company, the fund will not be subject to United
States federal income tax on its net investment income (i.e., income other
than its net realized long- and short-term capital gains) and its net
realized long- and short-term capital gains, if any, that it distributes
to its shareholders, provided that an amount equal to at least 90% of the
sum of its investment company taxable income (i.e., 90% of its taxable
income minus the excess, if any, of its net realized long-term capital
gains over its net realized short-term capital losses (including any
capital loss carryovers), plus or minus certain other adjustments as
specified in the Code) and its net tax-exempt income for the taxable year
is distributed in compliance with the Code's timing and other requirements
but will be subject to tax at regular corporate rates on any taxable
income or gains that it does not distribute. Furthermore, the fund will be
subject to a United States corporate income tax with respect to such
distributed amounts in any year that it fails to qualify as a regulated
investment company or fails to meet this distribution requirement.

The Code imposes a 4% nondeductible excise tax on the fund to the extent
it does not distribute by the end of any calendar year at least 98% of its
net investment income for that year and 98% of the net amount of its
capital gains (both long-and short-term) for the one-year period ending,
as a general rule, on October 31 of that year. For this purpose, however,
any income or gain retained by the fund that is subject to corporate
income tax will be considered to have been distributed by year-end. In
addition, the minimum amounts that must be distributed in any year to
avoid the excise tax will be increased or decreased to reflect any
underdistribution or overdistribution, as the case may be, from the
previous year. The fund anticipates that it will pay such dividends and
will make such distributions as are necessary in order to avoid the
application of this tax.

If, in any taxable year, the fund fails to qualify as a regulated
investment company under the Code or fails to meet the distribution
requirement, it would be taxed in the same manner as an ordinary
corporation and distributions to its shareholders would not be deductible
by the fund in computing its taxable income. In addition, in the event of
a failure to qualify, the fund's distributions, to the extent derived from
the fund's current or accumulated earnings and profits would constitute
dividends (eligible for the corporate dividends-received deduction) which
are taxable to shareholders as ordinary income, even though those
distributions might otherwise (at least in part) have been treated in the
shareholders' hands as long-term capital gains. If the fund fails to
qualify as a regulated investment company in any year, it must pay out its
earnings and profits accumulated in that year in order to qualify again as
a regulated investment company. In addition, if the fund failed to
qualify as a regulated investment company for a period greater than one
taxable year, the fund may be required to recognize any net built-in gains
(the excess of the aggregate gains, including items of income, over
aggregate losses that would have been realized if it had been liquidated)
in order to qualify as a regulated investment company in a subsequent
year.

The fund's transactions in foreign currencies, forward contracts, options
and futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code (including
provisions relating to "hedging transactions" and "straddles") that, among
other things, may affect the character of gains and losses realized by the
fund (i.e., may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to the fund and defer fund losses. These
rules could therefore affect the character, amount and timing of
distributions to shareholders. These provisions also (a) will require the
fund to mark-to-market certain types of the positions in its portfolio
(i.e., treat them as if they were closed out) and (b) may cause the fund
to recognize income without receiving cash with which to pay dividends or
make distributions in amounts necessary to satisfy the distribution
requirements for avoiding income and excise taxes. The fund will monitor
its transactions, will make the appropriate tax elections and will make
the appropriate entries in its books and records when it acquires any
foreign currency, forward contract, option, futures contract or hedged
investment in order to mitigate the effect of these rules and prevent
disqualification of the fund as a regulated investment company.

The fund's investment in Section 1256 contracts, such as regulated futures
contracts, most forward currency forward contracts traded in the interbank
market and options on most stock indices, are subject to special tax
rules. All section 1256 contracts held by the fund at the end of its
taxable year are required to be marked to their market value, and any
unrealized gain or loss on those positions will be included in the fund's
income as if each position had been sold for its fair market value at the
end of the taxable year. The resulting gain or loss will be combined with
any gain or loss realized by the fund from positions in section 1256
contracts closed during the taxable year. Provided such positions were
held as capital assets and were not part of a "hedging transaction" nor
part of a "straddle," 60% of the resulting net gain or loss will be
treated as long-term capital gain or loss, and 40% of such net gain or
loss will be treated as short-term capital gain or loss, regardless of the
period of time the positions were actually held by the fund.

Foreign Investments. Dividends or other income (including, in some cases,
capital gains) received by the fund from investments in foreign securities
may be subject to withholding and other taxes imposed by foreign
countries. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes in some cases. The fund will
not be eligible to elect to treat any foreign taxes paid by it as paid by
its shareholders, who therefore will not be entitled to credits for such
taxes on their own tax returns. Foreign taxes paid by the fund will
reduce the return from the fund's investments.

Passive Foreign Investment Companies. If the fund purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United States federal income
tax on a portion of any "excess distribution" or gain from the disposition
of such shares even if such income is distributed as a taxable dividend by
the fund to its shareholders. Additional charges in the nature of interest
may be imposed on the fund in respect of deferred taxes arising from such
distributions or gains. If the fund were to invest in a PFIC and elected
to treat the PFIC as a "qualified electing fund" under the Code, in lieu
of the foregoing requirements, the fund might be required to include in
income each year a portion of the ordinary earnings and net capital gains
of the qualified electing fund, even if not distributed to the fund, and
such amounts would be subject to the 90% and excise tax distribution
requirements described above. In order to make this election, the fund
would be required to obtain certain annual information from the passive
foreign investment companies in which it invests, which may be difficult
or not possible to obtain.

Recently, legislation was enacted that provides a mark-to-market election
for regulated investment companies effective for taxable years beginning
after December 31, 1997. This election would result in the fund being
treated as if it had sold and repurchased all of the PFIC stock at the end
of each year. In this case, the fund would report gains as ordinary
income and would deduct losses as ordinary losses to the extent of
previously recognized gains. The election, once made, would be effective
for all subsequent taxable years of the fund, unless revoked with the
consent of the IRS. By making the election, the fund could potentially
ameliorate the adverse tax consequences with respect to its ownership of
shares in a PFIC, but in any particular year may be required to recognize
income in excess of the distributions it receives from PFICs and its
proceeds from dispositions of PFIC company stock. The fund may have to
distribute this "phantom" income and gain to satisfy its distribution
requirement and to avoid imposition of the 4% excise tax. The fund will
make the appropriate tax elections, if possible, and take any additional
steps that are necessary to mitigate the effect of these rules.

Taxation of United States Shareholders

Dividends and Distributions. Any dividend declared by the fund in
October, November or December of any calendar year and payable to
shareholders of record on a specified date in such a month shall be deemed
to have been received by each shareholder on December 31 of such calendar
year and to have been paid by the fund not later than such December 31,
provided that such dividend is actually paid by the fund during January of
the following calendar year. The fund intends to distribute annually to
its shareholders substantially all of its investment company taxable
income, and any net realized long-term capital gains in excess of net
realized short-term capital losses (including any capital loss
carryovers). The fund currently expects to distribute any excess annually
to its shareholders. However, if the fund retains for investment an
amount equal to all or a portion of its net long-term capital gains in
excess of its net short-term capital losses and capital loss carryovers,
it will be subject to a corporate tax (currently at a rate of 35%) on the
amount retained. In that event, the fund will designate such retained
amounts as undistributed capital gains in a notice to its shareholders who
(a) will be required to include in income for United Stares federal income
tax purposes, as long-term capital gains, their proportionate shares of
the undistributed amount, (b) will be entitled to credit their
proportionate shares of the 35% tax paid by the fund on the undistributed
amount against their United States federal income tax liabilities, if any,
and to claim refunds to the extent their credits exceed their liabilities,
if any, and (c) will be entitled to increase their tax basis, for United
States federal income tax purposes, in their shares by an amount equal to
65% of the amount of undistributed capital gains included in the
shareholder's income. Organizations or persons not subject to federal
income tax on such capital gains will be entitled to a refund of their pro
rata share of such taxes paid by the fund upon filing appropriate returns
or claims for refund with the Internal Revenue Service (the "IRS").

Dividends of net investment income and distributions of net realized
short-term capital gains are taxable to a United States shareholder as
ordinary income, whether paid in cash or in shares. Distributions of net-
long-term capital gains, if any, that the fund designates as capital gains
dividends are taxable as long-term capital gains, whether paid in cash or
in shares and regardless of how long a shareholder has held shares of the
fund. Dividends and distributions paid by the fund attributable to
dividends on stock of U.S. corporations received by the fund, with respect
to which the fund meets certain holding period requirements, will be
eligible for the deduction for dividends received by corporations.
Distributions in excess of the fund's current and accumulated earnings and
profits will, as to each shareholder, be treated as a tax-free return of
capital to the extent of a shareholder's basis in his shares of the fund,
and as a capital gain thereafter (if the shareholder holds his shares of
the fund as capital assets).

Shareholders receiving dividends or distributions in the form of
additional shares should be treated for United States federal income tax
purposes as receiving a distribution in the amount equal to the amount of
money that the shareholders receiving cash dividends or distributions will
receive, and should have a cost basis in the shares received equal to such
amount.

Investors considering buying shares just prior to a dividend or capital
gain distribution should be aware that, although the price of shares just
purchased at that time may reflect the amount of the forthcoming
distribution, such dividend or distribution may nevertheless be taxable to
them.

If the fund is the holder of record of any stock on the record date for
any dividends payable with respect to such stock, such dividends are
included in the fund's gross income not as of the date received but as of
the later of (a) the date such stock became ex-dividend with respect to
such dividends (i.e., the date on which a buyer of the stock would not be
entitled to receive the declared, but unpaid, dividends) or (b) the date
the fund acquired such stock. Accordingly, in order to satisfy its income
distribution requirements, the fund may be required to pay dividends based
on anticipated earnings, and shareholders may receive dividends in an
earlier year than would otherwise be the case.

Sales of Shares. Upon the sale or exchange of his shares, a shareholder
will realize a taxable gain or loss equal to the difference between the
amount realized and his basis in his shares. Such gain or loss will be
treated as capital gain or loss, if the shares are capital assets in the
shareholder's hands, and will be long-term capital gain or loss if the
shares are held for more than one year and short-term capital gain or loss
if the shares are held for one year or less. Any loss realized on a sale
or exchange will be disallowed to the extent the shares disposed of are
replaced, including replacement through the reinvesting of dividends and
capital gains distributions in the fund, within a 61-day period beginning
30 days before and ending 30 days after the disposition of the shares. In
such a case, the basis of the shares acquired will be increased to reflect
the disallowed loss. Any loss realized by a shareholder on the sale of a
fund share held by the shareholder for six months or less will be treated
for United States federal income tax purposes as a long-term capital loss
to the extent of any distributions or deemed distributions of long-term
capital gains received by the shareholder with respect to such share.

If a shareholder incurs a sales charge in acquiring shares of the fund,
disposes of those shares within 90 days and then acquires shares in a
mutual fund for which the otherwise applicable sales charge is reduced by
reason of a reinvestment right (e.g., an exchange privilege), the original
sales charge will not be taken into account in computing gain/loss on the
original shares to the extent the subsequent sales charge is reduced.
Instead, the disregarded portion of the original sales charge will be
added to the tax basis in the newly acquired shares. Furthermore, the
same rule also applies to a disposition of the newly acquired shares made
within 90 days of the second acquisition. This provision prevents a
shareholder from immediately deducting the sales charge by shifting his or
her investment in a family of mutual funds.

Backup Withholding. The fund may be required to withhold, for United
States federal income tax purposes, 31% of the dividends, distributions
and redemption proceeds payable to shareholders who fail to provide the
fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject
to backup withholding. Certain shareholders are exempt from backup
withholding. Backup withholding is not an additional tax and any amount
withheld may be credited against a shareholder's United States federal
income tax liabilities.

Notices. Shareholders will be notified annually by the fund as to the
United States federal income tax status of the dividends, distributions
and deemed distributions attributable to undistributed capital gains
(discussed above in "Dividends and Distributions") made by the fund to its
shareholders. Furthermore, shareholders will also receive, if
appropriate, various written notices after the close of the fund's taxable
year regarding the United States federal income tax status of certain
dividends, distributions and deemed distributions that were paid (or that
are treated as having been paid) by the fund to its shareholders during
the preceding taxable year.

Class Z

Qualified plan participants should consult their plan document or tax
advisors about the tax consequences of participating in a Qualified Plan.
In addition to the considerations described below, there may be other
federal, state, local, and/or foreign tax applications to consider.
Provided that a Qualified Plan has not borrowed to finance its investment
in the Fund, it will not be taxable on the receipt of dividends and
distributions from the Fund. Qualified plan participants should consult
their plan document or tax advisors about the tax consequences of
participating in a Qualified Plan.

Other Taxation

Distributions also may be subject to additional state, local and foreign
taxes depending on each shareholder's particular situation.

The foregoing is only a summary of certain material tax consequences
affecting the fund and its shareholders. Shareholders are advised to
consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the fund.
ADDITIONAL INFORMATION

Fund History. The fund was incorporated on September 2, 1969 under the
name The Shearson Appreciation Fund, Inc. On November 5, 1995, July 30,
1993 and October 14, 1994, the fund changed its name to Shearson Lehman
Brothers Appreciation Fund Inc., Smith Barney Shearson Appreciation Fund
Inc. and Smith Barney Appreciation Fund Inc., respectively.

Minimum Account Size. The fund reserves the right to involuntarily
liquidate any shareholder's account in the fund if the aggregate net asset
value of the shares held in the fund account is less than $500. (If a
shareholder has more than one account in the fund, each account must
satisfy the minimum account size.) The fund, however, will not redeem
shares based solely on market reductions in net asset value. Before the
fund exercises such right, shareholders will receive written notice and
will be permitted 60 days to bring accounts up to the minimum to avoid
involuntary liquidation.

Voting rights. The fund does not hold annual shareholder meetings. There
normally will be no meeting of shareholders for the purpose of electing
directors unless and until such time as less than a majority of the
directors holding office have been elected by shareholders. The directors
will call a meeting for any purpose upon written request of shareholders
holding at least 10% of the fund's outstanding shares and the fund will
assist shareholders in calling such a meeting as required by the 1940 Act.
When matters are submitted for shareholder vote, shareholders of each
class will have one vote for each full share owned and a proportionate
fractional vote for any fractional share held of that class. Generally,
shares of the fund will be voted on a fund-wide basis on all matters
except matters affecting only the interests of one or more of the classes.

Annual and semi-annual reports. The fund sends its shareholders a semi-
annual report and an audited annual report, which include listings of the
investment securities held by the fund at the end of the period covered.
In an effort to reduce the fund's printing and mailing costs, the fund
plans to consolidate the mailing of its semi-annual and annual reports by
household. This consolidation means that a household having multiple
accounts with the identical address of record will receive a single copy
of each report. Shareholders who do not want this consolidation to apply
to their accounts should contact their Salomon Smith Barney Financial
Consultant or the transfer agent.

FINANCIAL STATEMENTS

The fund's annual report for the fiscal year ended December 31, 1998 is
incorporated herein by reference in its entirety. The annual report was
filed on 30, 1999, Accession Number .

Statement of Additional
Information

SMITH BARNEY
APPRECIATION FUND INC.
388 Greenwich Street
New York, NY 10013

SALOMON SMITH BARNEY
A Member of Citigroup [Symbol]

- -7-

Included in Part C:

Exhibits

Exhibit No. Description of Exhibits

All references are to the Registrant's
Registration Statement on Form N-8B-1 (the
"Registration Statement") as filed with the SEC on
September 9, 1969 and Form N-1A File No. 2-34576
and 811-1940.

(a)(1) Registrant's Articles of Incorporation,
Articles of Amendment and Articles Supplementary
dated August 25, 1969, May 9, 1983, August 26,
1987, July 20, 1989, November 2, 1992, and July
30, 1993, respectively, are incorporated by
reference to Post-Effective Amendment No. 34 filed
on December 29, 1993 ("Post-Effective Amendment
No. 34").

(2) Registrant's Articles of Amendment dated
October 14, 1994, Form of Articles Supplementary
dated November 7, 1994 and Form of Articles of
Amendment dated November 7, 1993 are incorporated
by reference to Post-Effective Amendment No. 37
filed on November 7, 1994 ("Post-Effective
Amendment No. 37").

(3) Registrant's Articles of Amendment dated
June 1, 1998 is filed herein.

(b)(1) Registrant's By-Laws are incorporated by
reference to the Registration Statement.

(2) Amendment to Registrant's By-Laws are
incorporated by reference to Post-Effective
Amendment No. 24 filed on February 29, 1988.

(3) Amendment to Registrant's By-Laws dated
January 24, 1987 and October 21, 1987 are
incorporated by reference to Post-Effective
Amendment No. 26.

(4) Amendment to Registrant's By-Laws dated July 20,
1994 are incorporated by reference to Post-Effective
Amendment No. 41 filed on March 1, 1996.

(c)(1) Registrant's form of stock certificate is
incorporated by reference to Post-Effective
Amendment No. 31 filed on November 6, 1992 ("Post-
Effective Amendment No. 31").

(d) Investment Advisory Agreement between the
Registrant and Smith Barney Shearson Asset
Management, dated July 30, 1993, is incorporated
by reference to Post-Effective Amendment No. 34.

(e)(1) Distribution Agreement between the Registrant
and Smith Barney Shearson Inc., dated July 30,
1993, is incorporated by reference to Post-
Effective Amendment No. 34.

(2) Form of Distribution Agreement between the
Registrant and PFS Distributors is incorporated by
reference to Post-Effective Amendment No. 39 filed
on July 3, 1995 ("Post-Effective Amendment No.
39").

(3) Distribution Agreement between the Registrant and CFBDS, Inc.
is filed herein.

(f) Not Applicable.

(g) Form of Custodian Agreement between the
Registrant and PNC Bank, National Association is
incorporated by reference to Post-Effective
Amendment No. 39.

(h)(1) Administration Agreement between the
Registrant and Smith, Barney Advisers, Inc. dated
April 20, 1994, is incorporated by reference to
Post-Effective Amendment No. 35 filed on July 1,
1994 ("Post-Effective Amendment No. 35").

(2) Transfer Agency Agreement between the
Registrant and The Shareholder Services Group,
Inc., dated April 20, 1993, is incorporated by
reference to Post-Effective Amendment No. 35.

(3) Form of Sub-Transfer Agency Agreement between
the Registrant and PFS Shareholder Services is
incorporated by reference to Post-Effective
Amendment No. 39.

(i) Opinion of Counsel regarding legality of
shares being registered is incorporated by
reference to Post-Effective Amendment No. 38 filed
on February 28, 1995 ("Post-Effective Amendment
No. 38").

(j) Auditor's Consent (to be filed by Amendment).

(k) Not Applicable.

(l) Not Applicable.
(m) Form of Amended and Restated Services and Distribution
Plan pursuant to Rule 12b-1 between the Registrant and
Salomon Smith Barney Inc., is filed herein.

(n) A Financial Data Schedule (to be filed by Amendment).

(o)(1) Form of Rule 18f-3(d) Multiple Class Plan of
the Registrant is incorporated by reference to
Post-Effective Amendment No. 40 filed on December
22, 1995.

(2) Rule 18F-3(d) Multiple Class Plan of the Registrant is
filed herein.

Item 24. Persons Controlled by or under Common Control with
Registrant

None

Item 25. Indemnification

Response to this item is incorporated by reference
to Post-Effective Amendment No. 38.

Item 26(a). Business and Other Connections of Investment
Adviser

Investment Adviser - - SSBC Fund Management Inc.("SSBC")

SSBC, (formerly known as Mutual Management Corp.)
through its predecessors, has been in the investment
counseling business since 1968 and was incorporated in
December 1968 under the laws of the State of Delaware. SSBC
is a wholly owned subsidiary of Salomon Smith Barney Holdings Inc.,
which in turn is a wholly owned subsidiary of Citigroup
Group Inc.("Citigroup"). SSBC is registered as an
investment adviserunder the Investment Advisers Act of 1940
(the "Advisers Act").

The list required by this Item 26 of the officer and
directors of SSBC together with information as to any other
business, profession, vocation or employment of a
substantial nature engaged in by such officer and directors
during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by SSBC
pursuant to the Advisers Act (SEC File No. 801-8314).

Item 27. Principal Underwriters

(a) CFBDS, Inc., ("CFBDS") the Registrant's Distributor, is
also
the distributor for the following Smith Barney funds: Concert
Investment Series, Consulting Group Capital Markets Funds, Greenwich
Street Series Fund, Smith Barney Adjustable Rate Government Income
Fund, Smith Barney Aggressive Growth Fund Inc., Smith Barney Arizona
Municipals Fund Inc., Smith Barney California Municipals Fund Inc.,
Smith Barney Concert Allocation Series Inc., Smith Barney Equity
Funds, Smith Barney Fundamental Value Fund Inc., Smith Barney Funds,
Inc., Smith Barney Income Funds, Smith Barney Institutional Cash
Management Fund, Inc., Smith Barney Investment Funds Inc., Smith
Barney Investment Trust,
Smith Barney Managed Governments Fund Inc., Smith Barney Managed
Municipals Fund Inc., Smith Barney Massachusetts Municipals Fund,
Smith Barney Money Funds, Inc., Smith Barney Muni Funds, Smith Barney
Municipal Money Market Fund, Inc., Smith Barney
Natural Resources Fund Inc., Smith Barney New Jersey Municipals
Fund Inc., Smith Barney Oregon Municipals Fund Inc., Smith Barney
Principal Return Fund, Smith Barney Small Cap Blend Fund, Inc., Smith
Barney Telecommunications Trust, Smith Barney World Funds, Inc.,
Travelers Series Fund Inc., and various series of unit investment
trusts.

CFBDS also serves as the distributor for the following funds: The
Travelers Fund UL for Variable Annuities, The Travelers Fund VA for
Variable Annuities, The Travelers Fund BD for Variable Annuities, The
Travelers Fund BD II for Variable Annuities, The Travelers Fund BD
III for Variable Annuities, The Travelers Fund BD IV for Variable
Annuities, The Travelers Fund ABD for Variable Annuities, The
Travelers Fund ABD II for Variable Annuities, The Travelers Separate
Account PF for Variable Annuities, The Travelers Separate Account PF
II for Variable Annuities, The Travelers Separate Account QP for
Variable Annuities, The Travelers Separate Account TM for Variable
Annuities, The Travelers Separate Account TM II for Variable
Annuities, The Travelers Separate Account Five for Variable
Annuities, The Travelers Separate Account Six for Variable Annuities,
The Travelers Separate Account Seven for Variable Annuities, The
Travelers Separate Account Eight for Variable Annuities, The
Travelers Fund UL for Variable Annuities, The Travelers Fund UL II
for Variable Annuities, The Travelers Variable Life Insurance
Separate Account One, The Travelers Variable Life Insurance Separate
Account Two, The Travelers Variable Life Insurance Separate Account
Three, The Travelers Variable Life Insurance Separate Account Four,
The Travelers Separate Account MGA, The Travelers Separate Account
MGA II, The Travelers Growth and Income Stock Account for Variable
Annuities, The Travelers Quality Bond Account for Variable Annuities,
The Travelers Money Market Account for Variable Annuities, The
Travelers Timed Growth and Income Stock Account for Variable
Annuities, The Travelers Timed Short-Term Bond Account for Variable
Annuities, The Travelers Timed Aggressive Stock Account for Variable
Annuities, The Travelers Timed Bond Account for Variable Annuities.

In addition, CFBDS, the Registrant's Distributor, is also the
distributor for CitiFunds Multi-State Tax Free Trust, CitiFunds
Premium Trust, CitiFunds Institutional Trust, CitiFunds Tax Free
Reserves, CitiFunds Trust I, CitiFunds Trust II, CitiFunds Trust III,
CitiFunds International Trust, CitiFunds Fixed Income Trust,
CitiSelect VIP Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP
Folio 400, CitiSelect VIP Folio 500, CitiFunds Small Cap Growth VIP
Portfolio. CFBDS is also the placement agent for Large Cap Value
Portfolio, Small Cap Value Portfolio, International Portfolio,
Foreign Bond Portfolio, Intermediate Income Portfolio, Short-Term
Portfolio, Growth & Income Portfolio, U.S. Fixed Income Portfolio,
Large Cap Growth Portfolio, Small Cap Growth Portfolio, International
Equity Portfolio, Balanced Portfolio, Government Income Portfolio,
Tax Free Reserves Portfolio, Cash Reserves Portfolio and U.S.
Treasury Reserves Portfolio.

In addition, CFBDS is also the distributor for the following Salomon
Brothers funds: Salomon Brothers Opportunity Fund Inc., Salomon
Brothers Investors Fund Inc., Salomon Brothers Capital Fund Inc.,
Salomon Brothers Series Funds Inc., Salomon Brothers Institutional
Series Funds Inc., Salomon Brothers Variable Series Funds Inc.

In addition, CFBDS is also the distributor for the Centurion Funds,
Inc.

(b) The information required by this Item 27 with respect to each
director and officer of CFBDS is incorporated by reference to
Schedule A of Form BD filed by CFBDS pursuant to the Securities and
Exchange Act of 1934 (File No. 8-32417).

Item 28. Location of Accounts and Records

(1) Smith Barney Appreciation Fund Inc.
388 Greenwich Street
New York, New York 10013

(2) SSBC Fund Management Inc.
388 Greenwich Street
New York, New York 10013

(3) PNC Bank, National Association
17th & Chestnut Streets
Philadelphia, PA 19103

(4) First Data Investor Services Group, Inc.
One Boston Place
Boston, Massachusetts 02109

Item 29. Management Services

None

Item 30. Undertakings

None

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant
has duly caused this Post-Effective Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
and where
applicable, the true and lawful attorney-in-fact, thereto duly
authorized,
in the City of New York and State of New York on the 24th day of
February,
1999.

SMITH BARNEY APPRECIATION FUND INC.

By: /s/ Heath B. McLendon
Heath B. McLendon,
Chief Executive Officer

Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration
Statement has been signed
below by the following persons in the capacities and on the
dates indicated.

Signature Title Date

/s/ Heath B. McLendon Director, Chairman of the Board

2/24/99
Heath B. McLendon

/s/ Lewis E. Daidone Senior Vice President and
2/24/99
Lewis E. Daidone Treasurer (Chief Financial
and Accounting Officer)

/s/ Alfred J. Bianchetti* Director
2/24/99
Alfred J. Bianchetti

/s/ Herbert Barg* Director
2/24/99
Herbert Barg

/s/ Martin Brody * Director
2/24/99
Martin Brody

Signature Title Date

/s/ Burt N. Dorsett* Director
2/24/99
Burt N. Dorsett

/s/ Dwight B. Crane* Director
2/24/99
Dwight B. Crane

/s/ Elliott S. Jaffe* Director
2/24/99
Elliott S. Jaffe

/s/ Stephen E. Kaufman* Director
2/24/99
Stephen E. Kaufman

/s/ Joseph J. McCann* Director
2/24/99
Joseph J. McCann

/s/ Cornelius C. Rose, Jr.* Director
2/24/99
Cornelius C. Rose

* Signed by Heath B. McLendon, their duly authorized attorney-in-fact,
pursuant to power of attorney dated February 20, 1996.

/s/ Heath B. McLendon
Heath B. McLendon

EXHIBIT INDEX

(a)(3) Articles Amendment

(e)(3) Distribution Agreement

(j) Auditor's Consent*

(m) Form of Amended and Restated Services and Distribution Plan

(n) Financial Data Schedule*

(o)(2) Rule 18F-3(d) Multiple Class Plan

* To be filed by further Amendment

SMITH BARNEY APPRECIATION FUND INC.

ARTICLES OF AMENDMENT

Smith Barney Appreciation Fund Inc., a Maryland corporation, having
its principal office in Baltimore City, Maryland (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland that:

FIRST: The Charter of the Corporation is hereby amended to provide
that the name of all of the issued and unissued Class C Common Stock of the
Corporation is hereby changed to Class L Common Stock.

SECOND: The foregoing amendment to the Charter of the Corporation
has been approved by a majority of the entire Board of Directors and is
limited to a change expressly permitted by Section 2-605 of the Maryland
General Corporation Law to be made without action of the stockholders.

THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.

FOURTH: The amendment to the Charter of the Corporation effected
hereby shall become effective at 9:00 a.m. on June 12, 1998.

IN WITNESS WHEREOF, Smith Barney Appreciation Fund Inc. has caused
these presents to be signed in its name and on its behalf by its President
and witnessed by its Assistant Secretary as of June 1, 1998.

WITNESS: SMITH BARNEY APPRECIATION FUND INC.

By:

Michael Kocur Heath B. McLendon
Assistant Secretary President

THE UNDERSIGNED, President of Smith Barney Appreciation Fund Inc., who
executed on behalf of the Corporation Articles of Amendment of which this
Certificate is made a part, hereby acknowledges in the name and on behalf
of said Corporation the foregoing Articles of Amendment to be the corporate
act of said Corporation and hereby certifies that the matters and facts set
forth herein with respect to the authorization and approval thereof are
true in all material respects under the penalties of perjury.

Heath B. McLendon, President

LEGAL\FUNDS\APPR\APPRAMND.DOC

SMITH BARNEY APPRECIATION FUND INC.

DISTRIBUTION AGREEMENT

October 8, 1998

CFBDS, Inc.
21 Milk Street
Boston, MA 02109

Dear Sirs:

This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the "Fund")
has agreed that you shall be, for the period of this Agreement, the non-
exclusive principal underwriter and distributor of shares of the Fund and
each Series of the Fund set forth on Exhibit A hereto, as such Exhibit may
be revised from time to time (each, including any shares of the Fund not
designated by series, a "Series"). For purposes of this Agreement, the
term "Shares" shall mean shares of the each Series, or one or more
Series, as the context may require.

1. Services as Principal Underwriter and Distributor

1.1 You will act as agent for the distribution of Shares
covered by, and in accordance with, the registration statement,
prospectus and statement of additional information then in effect under
the Securities Act of 1933, as amended (the "1933 Act"), and the
Investment Company Act of 1940, as amended (the "1940 Act"), and will
transmit or cause to be transmitted promptly any orders received by you or
those with whom you have sales or servicing agreements for purchase or
redemption of Shares to the Transfer and Dividend Disbursing Agent for the
Fund of which the Fund has notified you in writing.

1.2 You agree to use your best efforts to solicit orders for
the sale of Shares. It is contemplated that you will enter into sales or
servicing agreements with registered securities dealers and banks and into
servicing agreements with financial institutions and other industry
professionals, such as investment advisers, accountants and estate
planning firms. In entering into such agreements, you will act only on
your own behalf as principal underwriter and distributor. You will not be
responsible for making any distribution plan or service fee payments
pursuant to any plans the Fund may adopt or agreements it may enter into.

1.3 You shall act as principal underwriter and distributor of
Shares in compliance with all applicable laws, rules, and regulations,
including, without limitation, all rules and regulations made or adopted
from time to time by the Securities and Exchange Commission (the "SEC")
pursuant to the 1933 Act or the 1940 Act or by any securities association
registered under the Securities Exchange Act of 1934, as amended.

1.4 Whenever in their judgment such action is warranted for
any reason, including, without limitation, market, economic or political
conditions, the Fund's officers may decline to accept any orders for, or
make any sales of, any Shares until such time as those officers deem it
advisable to accept such orders and to make such sales and the Fund shall
advise you promptly of such determination.

2. Duties of the Fund

2.1 The Fund agrees to pay all costs and expenses in
connection with the registration of Shares under the 1933 Act, and all
expenses in connection with maintaining facilities for the issue and
transfer of Shares and for supplying information, prices and other data to
be furnished by the Fund hereunder, and all expenses in connection with
the preparation and printing of the Fund's prospectuses and statements of
additional information for regulatory purposes and for distribution to
shareholders; provided however, that nothing contained herein shall be
deemed to require the Fund to pay any of the costs of advertising or
marketing the sale of Shares.

2.2 The Fund agrees to execute any and all documents and to
furnish any and all information and otherwise to take any other actions
that may be reasonably necessary in the discretion of the Fund's officers
in connection with the qualification of Shares for sale in such states and
other U.S. jurisdictions as the Fund may approve and designate to you from
time to time, and the Fund agrees to pay all expenses that may be incurred
in connection with such qualification. You shall pay all expenses
connected with your own qualification as a securities broker or dealer
under state or Federal laws and, except as otherwise specifically provided
in this Agreement, all other expenses incurred by you in connection with
the sale of Shares as contemplated in this Agreement.

2.3 The Fund shall furnish you from time to time, for use in
connection with the sale of Shares, such information reports with respect
to the Fund or any relevant Series and the Shares as you may reasonably
request, all of which shall be signed by one or more of the Fund's duly
authorized officers; and the Fund warrants that the statements contained
in any such reports, when so signed by the Fund's officers, shall be true
and correct. The Fund also shall furnish you upon request with (a) the
reports of annual audits of the financial statements of the Fund for each
Series made by independent certified public accountants retained by the
Fund for such purpose; (b) semi-annual unaudited financial statements
pertaining to each Series; (c) quarterly earnings statements prepared by
the Fund; (d) a monthly itemized list of the securities in each Series'
portfolio; (e) monthly balance sheets as soon as practicable after the end
of each month; (f) the current net asset value and offering price per
share for each Series on each day such net asset value is computed and (g)
from time to time such additional information regarding the financial
condition of each Series of the Fund as you may reasonably request.

3. Representations and Warranties

The Fund represents to you that all registration statements,
prospectuses and statements of additional information filed by the Fund
with the SEC under the 1933 Act and the 1940 Act with respect to the
Shares have been prepared in conformity with the requirements of said Acts
and the rules and regulations of the SEC thereunder. As used in this
Agreement, the terms "registration statement", "prospectus" and
"statement of additional information" shall mean any registration
statement, prospectus and statement of additional information filed by the
Fund with the SEC and any amendments and supplements thereto filed by the
Fund with the SEC. The Fund represents and warrants to you that any
registration statement, prospectus and statement of additional
information, when such registration statement becomes effective and as
such prospectus and statement of additional information are amended or
supplemented, will include at the time of such effectiveness, amendment or
supplement all statements required to be contained therein in conformance
with the 1933 Act, the 1940 Act and the rules and regulations of the SEC;
that all statements of material fact contained in any registration
statement, prospectus or statement of additional information will be true
and correct when such registration statement becomes effective; and that
neither any registration statement nor any prospectus or statement of
additional information when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of the Fund's Shares.
The Fund may, but shall not be obligated to, propose from time to time
such amendment or amendments to any registration statement and such
supplement or supplements to any prospectus or statement of additional
information as, in the light of future developments, may, in the opinion
of the Fund, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within
fifteen days after receipt by the Fund of a written request from you to do
so, you may, at your option, terminate this Agreement or decline to make
offers of the Fund's Shares until such amendments are made. The Fund
shall not file any amendment to any registration statement or supplement
to any prospectus or statement of additional information without giving
you reasonable notice thereof in advance; provided, however, that nothing
contained in this Agreement shall in any way limit the Fund's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus or statement of additional information, of
whatever character, as the Fund may deem advisable, such right being in
all respects absolute and unconditional.

4. Indemnification

4.1 The Fund authorizes you to use any prospectus or
statement of additional information furnished by the Fund from time to
time, in connection with the sale of Shares. The Fund agrees to
indemnify, defend and hold you, your several officers and directors, and
any person who controls you within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending
such claims, demands or liabilities and any such counsel fees incurred in
connection therewith) which you, your officers and directors, or any such
controlling person, may incur under the 1933 Act or under common law or
otherwise, arising out of or based upon any untrue statement, or alleged
untrue statement, of a material fact contained in any registration
statement, any prospectus or any statement of additional information or
arising out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in any registration statement, any
prospectus or any statement of additional information or necessary to make
the statements in any of them not misleading; provided, however, that the
Fund's agreement to indemnify you, your officers or directors, and any
such controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations
made by you or your representatives or agents other than such statements
and representations as are contained in any prospectus or statement of
additional information and in such financial and other statements as are
furnished to you pursuant to paragraph 2.3 of this Agreement; and further
provided that the Fund's agreement to indemnify you and the Fund's
representations and warranties herein before set forth in paragraph 3 of
this Agreement shall not be deemed to cover any liability to the Fund or
its shareholders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of
your duties, or by reason of your reckless disregard of your obligations
and duties under this Agreement. The Fund's agreement to indemnify you,
your officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon the Fund's being notified of any
action brought against you, your officers or directors, or any such
controlling person, such notification to be given by letter or by telegram
addressed to the Fund at its principal office in New York, New York and
sent to the Fund by the person against whom such action is brought, within
ten days after the summons or other first legal process shall have been
served. The failure so to notify the Fund of any such action shall not
relieve the Fund from any liability that the Fund may have to the person
against whom such action is brought by reason of any such untrue, or
alleged untrue, statement or omission, or alleged omission, otherwise than
on account of the Fund's indemnity agreement contained in this paragraph
4.1. The Fund will be entitled to assume the defense of any suit brought
to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Fund.
In the event the Fund elects to assume the defense of any such suit and
retains counsel of good standing, the defendant or defendants in such suit
shall bear the fees and expenses of any additional counsel retained by any
of them; but if the Fund does not elect to assume the defense of any such
suit, the Fund will reimburse you, your officers and directors, or the
controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by you or them.
The Fund's indemnification agreement contained in this paragraph 4.1 and
the Fund's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation
made by or on behalf of you, your officers and directors, or any
controlling person, and shall survive the delivery of any of the Fund's
Shares. This agreement of indemnity will inure exclusively to your
benefit, to the benefit of your several officers and directors, and their
respective estates, and to the benefit of the controlling persons and
their successors. The Fund agrees to notify you promptly of the
commencement of any litigation or proceedings against the Fund or any of
its officers or Board members in connection with the issuance and sale of
any of the Fund's Shares.

4.2 You agree to indemnify, defend and hold the Fund, its
several officers and Board members, and any person who controls the Fund
within the meaning of Section 15 of the 1933 Act, free and harmless from
and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) that
the Fund, its officers or Board members or any such controlling person may
incur under the 1933 Act, or under common law or otherwise, but only to
the extent that such liability or expense incurred by the Fund, its
officers or Board members, or such controlling person resulting from such
claims or demands shall arise out of or be based upon (a) any unauthorized
sales literature, advertisements, information, statements or
representations or (b) any untrue, or alleged untrue, statement of a
material fact contained in information furnished in writing by you to the
Fund and used in the answers to any of the items of the registration
statement or in the corresponding statements made in the prospectus or
statement of additional information, or shall arise out of or be based
upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by you to the Fund
and required to be stated in such answers or necessary to make such
information not misleading. Your agreement to indemnify the Fund, its
officers or Board members, and any such controlling person, as aforesaid,
is expressly conditioned upon your being notified of any action brought
against the Fund, its officers or Board members, or any such controlling
person, such notification to be given by letter or telegram addressed to
you at your principal office in Boston, Massachusetts and sent to you by
the person against whom such action is brought, within ten days after the
summons or other first legal process shall have been served. You shall
have the right to control the defense of such action, with counsel of your
own choosing, satisfactory to the Fund, if such action is based solely
upon such alleged misstatement or omission on your part or with the Fund's
consent, and in any event the Fund, its officers or Board members or such
controlling person shall each have the right to participate in the defense
or preparation of the defense of any such action with counsel of its own
choosing reasonably acceptable to you but shall not have the right to
settle any such action without your consent, which will not be
unreasonably withheld. The failure to so notify you of any such action
shall not relieve you from any liability that you may have to the Fund,
its officers or Board members, or to such controlling person by reason of
any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of your indemnity agreement contained
in this paragraph 4.2. You agree to notify the Fund promptly of the
commencement of any litigation or proceedings against you or any of your
officers or directors in connection with the issuance and sale of any of
the Fund's Shares.

5. Effectiveness of Registration

No Shares shall be offered by either you or the Fund under any of
the provisions of this Agreement and no orders for the purchase or sale of
such Shares under this Agreement shall be accepted by the Fund if and so
long as the effectiveness of the registration statement then in effect or
any necessary amendments thereto shall be suspended under any of the
provisions of the 1933 Act, or if and so long as a current prospectus as
required by Section 5(b) (2) of the 1933 Act is not on file with the SEC;
provided, however, that nothing contained in this paragraph 5 shall in any
way restrict or have an application to or bearing upon the Fund's
obligation to repurchase its Shares from any shareholder in accordance
with the provisions of the Fund's prospectus, statement of additional
information or charter documents, as amended from time to time.

6. Offering Price

Shares of any class of any Series of the Fund offered for sale by
you shall be offered for sale at a price per share (the "offering
price") equal to (a) their net asset value (determined in the manner set
forth in the Fund's charter documents and the then-current prospectus and
statement of additional information) plus (b) a sales charge, if
applicable, which shall be the percentage of the offering price of such
Shares as set forth in the Fund's then-current prospectus relating to such
Series. In addition to or in lieu of any sales charge applicable at the
time of sale, Shares of any class of any Series of the Fund offered for
sale by you may be subject to a contingent deferred sales charge as set
forth in the Fund's then-current prospectus and statement of additional
information. You shall be entitled to receive any sales charge levied at
the time of sale in respect of the Shares without remitting any portion to
the Fund. Any payments to a broker or dealer through whom you sell Shares
shall be governed by a separate agreement between you and such broker or
dealer and the Fund's then-current prospectus and statement of additional
information

7. Notice to You

The Fund agrees to advise you immediately in writing:

(a) of any request by the SEC for
amendments to the registration statement,
prospectus or statement of additional
information then in effect or for additional
information;

(b) in the event of the issuance by the
SEC of any stop order suspending the
effectiveness of the registration statement,
prospectus or statement of additional
information then in effect or the initiation of
any proceeding for that purpose;

(c) of the happening of any event that
makes untrue any statement of a material fact
made in the registration statement, prospectus
or statement of additional information then in
effect or that requires the making of a change
in such registration statement, prospectus or
statement of additional
information in order to make the statements
therein not misleading; and

(d) of all actions of the SEC with
respect to any amendment to the registration
statement, or any supplement to the prospectus
or statement of additional information which
may from time to time be filed with the SEC.

8. Term of the Agreement

This Agreement shall become effective on the date hereof, shall have
an initial term of one year from the date hereof, and shall continue for
successive annual periods thereafter so long as such continuance is
specifically approved at least annually by (a) the Fund's Board or (b) by
a vote of a majority (as defined in the 1940 Act) of the Fund's
outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board members of the
Fund who are not interested persons (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. This Agreement is terminable,
without penalty, on 30 days' notice by the Fund's Board or by vote of
holders of a majority of the relevant Series outstanding voting
securities, or on 90 days' notice by you. This Agreement will also
terminate automatically, as to the relevant Series, in the event of its
assignment (as defined in the 1940 Act and the rules and regulations
thereunder).

9. Arbitration

Any claim, controversy, dispute or deadlock arising under this
Agreement (collectively, a "Dispute") shall be settled by arbitration
administered under the rules of the American Arbitration Association
("AAA") in New York, New York. Any arbitration and award of the
arbitrators, or a majority of them, shall be final and the judgment upon
the award rendered may be entered in any state or federal court having
jurisdiction. No punitive damages are to be awarded.

10. Miscellaneous

So long as you act as a principal underwriter and distributor of
Shares, you shall not perform any services for any entity other than
investment companies advised or administered by Citigroup Inc. or its
subsidiaries. The Fund recognizes that the persons employed by you to
assist in the performance of your duties under this Agreement may not
devote their full time to such service and nothing contained in this
Agreement shall be deemed to limit or restrict your or any of your
affiliates right to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature. This
Agreement and the terms and conditions set forth herein shall be governed
by, and construed in accordance with, the laws of the State of New York.

11. Limitation of Liability (Massachusetts business trusts only)

The Fund and you agree that the obligations of the Fund under this
Agreement shall not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past, present or future,
of the Fund, individually, but are binding only upon the assets and
property of the Fund, as provided in the Master Trust Agreement. The
execution and delivery of this Agreement have been authorized by the
Trustees and signed by an authorized officer of the Fund, acting as such,
and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Fund as provided in its Master
Trust Agreement.

If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning to us
the enclosed copy, whereupon this Agreement will become binding on you.

Very truly yours,
SMITH BARNEY APPRECIATION FUND INC.

By: _____________________
Authorized Officer

Accepted:

CFBDS, INC.

By: __________________________
Authorized Officer

g:\legal\general\forms\agreemts\dist12b1\SBAppreciation
Page: 3

FORM OF
AMENDED AND RESTATED
SHAREHOLDER SERVICES AND DISTRIBUTION PLAN

This Amended and Restated Shareholder Services and Distribution Plan
(the "Plan") is adopted in accordance with Rule 12b-1 (the "Rule")
under the Investment Company Act of 1940, as amended (the "1940 Act"),
by Smith Barney Appreciation Fund Inc., a corporation organized under
the laws of the State of Maryland (the "Fund"), subject to the
following terms and conditions:

Section 1. Annual Fee.

(a) Service Fee for Class A shares. The Fund will pay to Salomon
Smith Barney Inc., a corporation organized under the laws of
the State of New York ("Salomon Smith Barney"), a service fee
under the Plan at an annual rate of 0.25% of the average daily
net assets of the Fund attributable to the Class A shares sold
and not redeemed (the "Class A Service Fee").

(b) Service Fee for Class B shares. The Fund will pay to Salomon
Smith Barney a service fee under the Plan at the annual rate of
0.25% of the average daily net assets of the Fund attributable
to the Class B shares sold and not redeemed (the "Class B
Service Fee").

(c) Distribution Fee for Class B shares. In addition to the Class B
Service Fee, the Fund will pay Salomon Smith Barney a
distribution fee under the Plan at the annual rate of 0.75% of
the average daily net assets of the Fund attributable to the
Class B shares sold and not redeemed (the "Class B
Distribution Fee").

(d) Service Fee for Class L shares. The Fund will pay to Salomon
Smith Barney a service fee under the plan at the annual rate of
0.25% of the average daily net assets of the Fund attributable
to the Class L shares sold and not redeemed (the "Class L
Service Fee").

(e) Distribution Fee for Class L shares. In addition to the Class
L Service Fee, the Fund will pay Salomon Smith Barney a
distribution fee under the Plan at the annual rate of 0.75% of
the average daily net assets of the Fund attributable to the
Class L shares sold and not redeemed (the "Class L Distribution
Fee").

(f) Payment of Fees. The Service Fees and Distribution Fees will be
calculated daily and paid monthly by the Fund with respect to
the foregoing classes of the Fund's shares (each a "Class" and
together, the "Classes") at the annual rates indicated above.

Section 2. Expenses Covered by the Plan.

With respect to expenses incurred by each Class, its respective
Service Fee and/or Distribution Fee may be used by Salomon Smith Barney
for: (a) costs of printing and distributing the Fund's prospectuses,
statements of additional information and reports to prospective
investors in the Fund; (b) costs involved in preparing, printing and
distributing sales literature pertaining to the Fund; (c) an allocation
of overhead and other branch office distribution-related expenses of
Salomon Smith Barney; (d) payments made to, and expenses of, Salomon
Smith Barney's financial consultants and other persons who provide
support services to Fund shareholders in connection with the
distribution of the Fund's shares, including but not limited to, office
space and equipment, telephone facilities, answering routine inquires
regarding the Fund and its operation, processing shareholder
transactions, forwarding and collecting proxy material, changing
dividend payment elections and providing any other shareholder services
not otherwise provided by the Fund's transfer agent; and (e) accruals
for interest on the amount of the foregoing expenses that exceed the
Distribution Fee for that Class and, in the case of Class B and Class L
shares, any contingent deferred sales charges received by Salomon Smith
Barney; provided, however, that (i) the Distribution Fee for a
particular Class may be used by Salomon Smith Barney only to cover
expenses primarily intended to result in the sale of shares of that
Class, including, without limitation, payments to the financial
consultants of Salomon Smith Barney and other persons as compensation
for the sale of the shares, and (ii) the Service Fees are intended to
be used by Salomon Smith Barney primarily to pay its financial
consultants for servicing shareholder accounts, including a continuing
fee to each such financial consultant, which fee shall begin to accrue
immediately after the sale of such shares.

Section 3. Approval by Shareholders

The Plan will not take effect, and no fees will be payable in
accordance with Section 1 of
the Plan, with respect to a Class until the Plan has been approved by a
vote of at least a majority
of the outstanding voting securities of the Class. The Plan will be
deemed to have been approved
with respect to a Class so long as a majority of the outstanding voting
securities of the Class votes for the approval of the Plan,
notwithstanding that: (a) the Plan has not been approved by a majority
of the outstanding voting securities of any other Class, or (b) the
Plan has not been
approved by a majority of the outstanding voting securities of the
Fund.

Section 4. Approval by Directors.

Neither the Plan nor any related agreements will take effect until
approved by a majority vote of both (a) the Board of Directors and (b)
those Directors who are not interested persons of the Fund and who have
no direct or indirect financial interest in the operation of the Plan
or in any agreements related to it (the "Qualified Directors"), cast in
person at a meeting called for the purpose of voting on the Plan and
the related agreements.

Section 5. Continuance of the Plan.

The Plan will continue in effect with respect to each Class until
October 8, 1999 and thereafter for successive twelve-month periods with
respect to each Class; provided, however, that such continuance is
specifically approved at least annually by the Directors of the Fund
and by a majority of the Qualified Directors.

Section 6. Termination.

The Plan may be terminated at any time with respect to a Class (i) by
the Fund without the payment of any penalty, by the vote of a majority
of the outstanding voting securities of such Class or (ii) by a
majority vote of the Qualified Directors. The Plan may remain in effect
with respect to a particular Class even if the Plan has been terminated
in accordance with this Section 6 with respect to any other Class.

Section 7. Amendments.

The Plan may not be amended with respect to any Class so as to
increase materially the amounts of the fees described in Section 1
above, unless the amendment is approved by a vote of holders of at
least a majority of the outstanding voting securities of that Class. No
material amendment to the Plan may be made unless approved by the
Fund's Board of Directors in the manner described in Section 4 above.

Section 8. Selection of Certain Directors.

While the Plan is in effect, the selection and nomination of the
Fund's Directors who are not interested persons of the Fund will be
committed to the discretion of the Directors then in office who are not
interested persons of the Fund.

Section 9. Written Reports

In each year during which the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the
Fund pursuant to the Plan or any related agreement will prepare and
furnish to the Fund's Board of Directors and the Board will review, at
least quarterly, written reports complying with the requirements of the
Rule, which set out the amounts expended under the Plan and the
purposes for which those expenditures were made.

Section 10. Preservation of Materials.

The Fund will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 9 above, for a period
of not less than six years (the first two years in an easily accessible
place) from the date of the Plan, agreement or report.

Section 11. Meanings of Certain Terms.

As used in the Plan, the terms "interested person" and "majority of
the outstanding voting securities" will be deemed to have the same
meaning that those terms have under the rules and regulations under the
1940 Act, subject to any exemption that may be granted to the Fund
under the 1940 Act, by the Securities and Exchange Commission.

IN WITNESS WHEREOF, the Fund has executed the Plan as of October 8,
1998.

SMITH BARNEY APPRECIATION FUND INC.

By: ____________________________________
Heath B. McLendon
Chairman of the Board
g:\funds\value\agreemts\12b1Plan.doc

Rule 18f-3 (d) Multiple Class Plan for Smith Barney Mutual Funds

Introduction

This plan (the "Plan") is adopted pursuant to Rule 18f-3 (d) of the
Investment Company Act of 1940, as amended (the "1940 Act").
The purpose of the Plan is to restate the existing arrangements previously
approved by the Boards of Directors and Trustees of certain of the open-end
investment companies set forth on Schedule A (the "Funds" and each a "Fund")
under the Funds' existing order of exemption (Investment Company Act Release
Nos. 20042 (January 28, 1994) (notice) and 20090 (February 23, 1994)).
Shares of the Funds are distributed pursuant to a system
(the "Multiple Class System") in which each class of shares
(a "Class") of a Fund represents a pro rata interest in the
same portfolio of investments of the Fund and differs only to the
extent outlined below.

I. Distribution Arrangements and Service Fees

One or more Classes of shares of the Funds are offered for purchase by
investors with the following sales load structure. In addition, pursuant to
Rule 12b-1 under the 1940 Act (the "Rule"), the Funds have each adopted a
plan (the "Services and Distribution Plan") under which shares of the
Classes are subject to the services and distribution fees described below.

1. Class A Shares
the 1940 Act (the "Rule"), the Funds have each adopted a plan
(the "Services and Distribution Plan") under which shares of the
Classes are subject to the services and distribution fees described below.

1. Class A Shares

Class A shares are offered with a front-end sales load and under the
Services and Distribution Plan are subject to a service fee of up to 0.25%
of average daily net assets. In addition, the Funds are permitted to
assess a contingent deferred sales charge ("CDSC") on certain redemptions
of Class A shares sold pursuant to a complete waiver of front-end sales
loads applicable to large purchases, if the shares are redeemed within one
year of the date of purchase. This waiver applies to sales of Class A shares
s equal to or exceeds $500,000 although this amount may be changed in the
future.

2. Class B Shares

Class B shares are offered without a front-end sales load, but are subject
to a five-year declining CDSC and under the Services and Distribution Plan
are subject to a service fee at an annual rate of up to 0.25% of average
daily net assets and a distribution fee at an annual rate of up to 0.75%
of average daily net assets.

3. Class D Shares

Class D shares are offered without a front-end sales load, CDSC, service
fee or distribution fee.

4. Class L Shares

Class L shares are offered with a front-end load, are subject to a one-year
CDSC and under the Services and Distribution Plan are subject to a service
fee at an annual rate of up to 0.25% of average daily net assets and a
distribution fee at an annual rate of up to 0.75% of average daily net
assets. Unlike Class B shares, Class L shares do not have the conversion
feature as discussed below and accordingly, these shares are subject to a
distribution fee for an indefinite period of time. The Funds reserve the
right to impose these fees at such higher rates as may be determined.

5. Class I Shares

Class I shares are offered without a front-end sales load, but are subject
under the Services and Distribution Plan to a service fee at an annual rate
of up to 0.25% of average daily net assets.

6. Class O Shares

Class O shares are offered without a front-end load, but are subject to a
one-year CDSC and under the Services and Distribution Plan are subject to
a service fee at an annual rate of up to 0.25% of average daily net assets
and a distribution fee at an annual rate of up to 0.50% of average daily
net assets. Unlike Class B
shares, Class O shares do not have the conversion feature as discussed
below and accordingly, these shares are subject to a distribution fee for
an indefinite period of time. The Funds reserve the right to impose these
fees at such higher rates as may be determined.

Effective June 28, 1999, Class O shares will be offered with a
front-end load and will continue to be subject to a one year CDSC, a
service fee at an annual rate of up to 0.25% of average daily net assets
and a distribution fee at an annual rate of up to 0.50% of average daily
net assets.

7. Class Y Shares

Class Y shares are offered without imposition of either a sales charge or
a service or distribution fee for investments where the amount of purchase
is equal to or exceeds a specific amount as specified in each Fund's
prospectus.

8. Class Z Shares

Class Z shares are offered without imposition of either a sales charge or
a service or distribution fee for purchase (i) by employee benefit and
retirement plans of Salomon Smith Barney Inc. ("Salomon Smith Barney")
and its affiliates, (ii) by certain unit investment trusts sponsored by
Salomon Smith Barney and its affiliates, and (iii) although not currently
authorized by the governing boards of the Funds, when and if authorized,
(x) by employees of Salomon Smith Barney and its affiliates and (y) by direct
es of any investment company listed on Schedule A and, for each of (x)
and (y), their spouses and minor children.

9. Additional Classes of Shares

The Boards of Directors and Trustees of the Funds have the authority to
create additional classes, or change existing Classes, from time to time,
in accordance with Rule 18f-3 of the 1940 Act.

II. Expense Allocations

Under the Multiple Class System, all expenses incurred by a Fund are
allocated among the various Classes of shares based on the net assets of
the Fund attributable to each Class, except that each Class's net asset
value and expenses reflect the expenses associated with that Class under
the Fund's Services and
Distribution Plan, including any costs associated with obtaining
shareholder approval of the Services and Distribution Plan
(or an amendment thereto) and any expenses specific to that Class.
Such expenses are limited to the following:

(i) transfer agency fees as identified by the transfer agent as
being attributable to a specific Class;

(ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and
proxies to current shareholders;

(iii) Blue Sky registration fees incurred by a Class of shares;

(iv) Securities and Exchange Commission registration fees incurred
by a Class of shares;

(v) the expense of administrative personnel and services as
required to support the shareholders of a specific Class;

(vi) litigation or other legal expenses relating solely to one
Class of shares; and

(vii) fees of members of the governing boards of the funds incurred
as a result of issues relating to one Class of shares.

Pursuant to the Multiple Class System, expenses of a Fund allocated to a
particular Class of shares of that Fund are borne on a pro rata basis by
each outstanding share of that Class.

III. Conversion Rights of Class B Shares

All Class B shares of each Fund will automatically convert to Class A shares
after a certain holding period, expected to be, in most cases, approximately
eight years but may be shorter. Upon the expiration of the holding period,
Class B shares (except those purchases through the reinvestment of dividends
and other
distributions paid in respect of Class B shares) will automatically
convert to Class A shares of the Fund at the relative net asset value of
each of the Classes, and will, as a result, thereafter be subject to the
lower fee under the Services and Distribution Plan. For purposes of
calculating the holding period required for conversion, newly created
Class B shares issued after the date of implementation of the Multiple Class
System are deemed to have been issued on (i) the date on which the issuance
of the Class B shares occurred or (ii) for Class B shares obtained through
an exchange, or a series of exchanges, the date on which the issuance of
the original Class B shares occurred.

Shares purchased through the reinvestment of dividends and other
distributions paid in respect of Class B shares are also Class B shares.
However, for purposes of conversion to Class A, all Class B shares in a
shareholder's Fund account that were purchased through the reinvestment of
dividends and other distributions paid in respect of Class B shares
(and that have not converted to Class A shares as provided in the following
sentence) are considered to be held in a separate sub-account.
Each time any Class B shares
in the shareholder's Fund account
(other than those in the sub-account referred to in the
preceding sentence) convert to Class A, a pro rata portion
of the Class B shares then in the sub-account also converts to
Class A. The portion is determined by the ratio that the
shareholder's Class B shares converting to Class A bears to
the shareholder's total Class B shares not acquired through dividends and
distributions. The conversion of Class B shares to Class A shares
is subject to the
continuing availability of a ruling of the Internal Revenue Service that
payment of different dividends on Class A and Class B shares does not
result in the Fund's dividends or distributions constituting "preferential
dividends" under the Internal Revenue
Code of 1986, as amended (the "Code"), and the continuing availability of
an opinion of counsel to the effect that the conversion of shares does not
constitute a taxable event under the Code.

The conversion of Class B shares to Class A shares may be suspended
if this opinion is no longer available, In the event that conversion of
Class B shares does not occur, Class B shares would continue to be subject
to the distribution fee and any incrementally higher transfer agency costs
attending the Class B shares for an indefinite period.

IV. Exchange Privileges

Shareholders of a Fund may exchange their shares at net asset value for
shares of the same Class in certain other of the Smith Barney Mutual Funds
as set forth in the prospectus for such Fund. Funds only permit exchanges
into shares of money market funds having a plan under the Rule if, as
permitted by paragraph (b) (5) of Rule 11a-3 under the 1940 Act, either
(i) the time period during which the shares of the money market funds are
held is included in the calculations of the CDSC or (ii) the time period
if the CDSC is reduced by the amount of any payments made under a plan
adopted pursuant to the Rule by the money market funds with respects to
those shares. Currently, the Funds include the time period during which
shares of the money market fund are held in the CDSC period. The exchange
privileges applicable to all Classes of shares must comply with Rule 11a-3
under the 1940 Act.

Smith Barney Sponsored Investment Companies
Operating under Rule 18f-3 - Schedule A
(as of October 31, 1998)

Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund
Smith Barney Concert Allocation Series Inc.
Conservative Portfolio
Balanced Portfolio
Global Portfolio
Growth Portfolio
Income Portfolio
High Growth Portfolio
Smith Barney Equity Funds -
Concert Social Awareness Fund
Smith Barney Large Cap Blend Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc. -
Large Cap Value Fund
Short-Term High Grade Bond Fund
U.S. Government Securities Fund
Smith Barney Income Funds -
Smith Barney Balanced Fund
Smith Barney Convertible Fund
Smith Barney Diversified Strategic Income Fund
Smith Barney Exchange Reserve Fund
Smith Barney High Income Fund
Smith Barney Municipal High Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Total Return Bond Fund

Smith Barney Investment Trust -
Smith Barney Intermediate Maturity California Municipals Fund
Smith Barney Intermediate Maturity New York Municipals Fund
Smith Barney Large Capitalization Growth Fund
Smith Barney S&P 500 Index Fund
Smith Barney Mid Cap Blend Fund
Smith Barney Investment Funds Inc. -
Concert Peachtree Growth Fund
Smith Barney Contrarian Fund
Smith Barney Government Securities Fund
Smith Barney Hansberger Global Small Cap Value Fund
Smith Barney Hansberger Global Value Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Special Equities Fund

Smith Barney Institutional Cash Management Fund, Inc.
Cash Portfolio
Government Portfolio
Municipal Portfolio
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc. -
Cash Portfolio
Government Portfolio
Retirement Portfolio
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Muni Funds -
California Money Market Portfolio
Florida Portfolio
Georgia Portfolio
Limited Term Portfolio
National Portfolio
New York Portfolio
New York Money Market
Pennsylvania Portfolio
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust -
Smith Barney Telecommunications Income Fund
Smith Barney World Funds, Inc. -
International Equity Portfolio
International Balanced Portfolio
European Portfolio
Pacific Portfolio
Global Government Bond Portfolio
Emerging Markets Portfolio