SMITH BARNEY INSTITUTIONAL CASH MANAGEMENT FUND, INC. (the "Fund")
CLASS A SHARES
CLASS B SHARES
Supplement dated November 1, 1996 to Prospectuses dated September 27, 1996
The following supplements and, to the extent inconsistent therewith,
supersedes the information contained in the Prospectus of each of the Class A
shares and Class B shares of the Fund under the section "Investment Objectives
and Policies - The Cash Portfolio - Obligations of Financial Institutions":
The Cash Portfolio may purchase fixed time deposits maturing in
less than one year, provided, however, that fixed time deposits
maturing in more than seven calendar days shall be considered
illiquid securities.
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The following replaces in its entirety the section of the Prospectus entitled
"Investment Objectives and Policies - The Municipal Portfolio - Tender Option
Bonds":
Derivative Products - The Municipal Portfolio may invest up
to 20% of the value of its assets in one or more of the three
principal types of derivative product structures described below.
Derivative products are typically structured by a bank, broker-
dealer or other financial institution. A derivative product
generally consists of a trust or partnership through which the
Portfolio holds an interest in one or more underlying bonds
coupled with a conditional right to sell ("put") the Portfolio's
interest in the underlying bonds at par plus accrued interest to a
financial institution (a "Liquidity Provider"). Typically, a
derivative product is structured as a trust or partnership which
provides for pass-through tax-exempt income. There are currently
three principal types of derivative structures: (1) "Tender
Option Bonds", which are instruments which grant the holder
thereof the right to put an underlying bond at par plus accrued
interest at specified intervals to a Liquidity Provider; (2) "Swap
Products", in which the trust or partnership swaps the payments
due on an underlying bond with a swap counterparty who agrees to
pay a floating municipal money market interest rate; and (3)
"Partnerships", which allocate to the partners income, expenses,
capital gains and losses in accordance with a governing
partnership agreement.
Investments in derivative products raise certain tax, legal,
regulatory and accounting issues which may not be presented by
investments in other municipal obligations. There is some risk
that certain issues could be resolved in a manner which could
adversely impact the performance of the Portfolio. For example,
the tax-exempt treatment of the interest paid to holders of
derivative products is premised on the legal conclusion that the
holders of such derivative products have an ownership interest in
the underlying bonds. While the Portfolio receives an opinion of
legal counsel to the effect that the income from each derivative
product is tax-exempt to the same extent as the underlying bond,
the Internal Revenue Service (the "IRS") has not issued a ruling
on this subject. Were the IRS to issue an adverse ruling, there
is a risk that the interest paid on such derivative products would
be deemed taxable.
The Portfolio intends to limit the risk of derivative
products by purchasing only those derivative products that are
consistent with the Portfolio's investment objective and policies.
The Portfolio will not use such instruments to leverage
securities. Hence, derivative products' contributions to the
overall market risk characteristics of a Portfolio will not
materially alter its risk profile and will be fully consistent
with the Portfolio's maturity guidelines.
