UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    ---------

                                    FORM 10-Q

       [X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1996

                                       OR

       [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the transition period from ____ to ____


                         Commission file number 1-12484


                           SMITH BARNEY HOLDINGS INC.
             (Exact name of registrant as specified in its charter)


            Delaware                                             06-1274088
-------------------------------                              ----------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)


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


       Registrant's telephone number, including area code: (212) 816-6000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   Yes X   No
                                        ---    ---

The registrant is a wholly owned subsidiary of Travelers Group Inc. As of the
date hereof, 100 shares of the registrant's common stock, par value $.10 per
share, were issued and outstanding.

                            REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instructions H 1 (a)
and (b) of Form 10-Q and therefore is filing this form with the reduced
disclosure format contemplated thereby.

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1996


                                TABLE OF CONTENTS


Part I.    FINANCIAL INFORMATION                                     Page Number
           ---------------------                                     -----------


  Item 1.  Financial Statements:

             Condensed Consolidated Statements of Operations
               (Unaudited) - Three and Nine Months Ended
                 September 30, 1996 and 1995                                   3

             Condensed Consolidated Statements of Financial Condition -
               September 30, 1996 (Unaudited) and December 31, 1995            4

             Condensed Consolidated Statements of Cash Flows 
               (Unaudited) - Nine Months Ended September 
               30, 1996 and 1995                                           5 - 6

             Notes to Condensed Consolidated Financial Statements
               (Unaudited)                                                7 - 13


  Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations                         14 - 18


Part II.   OTHER INFORMATION


  Item 1.  Legal Proceedings                                                  19


  Item 6.  Exhibits and Reports on Form 8-K                              19 - 20


Exhibit Index                                                                 21


Signatures                                                                    22


                                        2

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                                  (In millions)

                                         Three months ended    Nine Months ended
                                             September 30,        September 30,
                                         ------------------     ----------------
                                             1996     1995        1996     1995
                                             ----     ----        ----     ----
Revenues:

  Commissions                               $  498   $  536      $1,680   $1,475
  Principal trading                            243      255         786      762
  Investment banking                           288      243         864      585
  Asset management fees                        343      272         991      751
  Other                                         22       24          79       84
                                            ------   ------      ------   ------
                                                               
    Total non-interest revenues              1,394    1,330       4,400    3,657
                                            ------   ------      ------   ------
                                                               
  Interest and dividends                       488      434       1,396    1,311
  Interest expense                             382      341       1,095    1,029
                                            ------   ------      ------   ------
                                                               
    Net interest and dividends                 106       93         301      282
                                            ------   ------      ------   ------
                                                               
    Net revenues                             1,500    1,423       4,701    3,939
                                            ------   ------      ------   ------
                                                               
Expenses, excluding interest:                                  
                                                               
  Employee compensation and benefits           844      829       2,655    2,359
  Communications, occupancy and equipment      142      143         420      436
  Floor brokerage and other production          37       35         111      102
  Other operating and administrative                           
    expenses                                   136      116         434      337
                                            ------   ------      ------   ------
                                                               
    Total expenses, excluding interest       1,159    1,123       3,620    3,234
                                            ------   ------      ------   ------
                                                               
    Income before provision for income                         
      taxes                                    341      300       1,081      705
                                                               
Provision for income taxes                     134      123         422      296
                                            ------   ------      ------   ------
                                                               
  Net income                                $  207   $  177      $  659   $  409
                                            ======   ======      ======   ======
                                                               
                  The accompanying notes are an integral part
             of these condensed consolidated financial statements.


                                        3

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                        (In millions, except share data)


                                                    September 30,   December 31,
         ASSETS                                          1996          1995
         ------                                     -------------   ------------
                                                      (Unaudited)

Cash and cash equivalents                                 $   264        $   612
                                                                         
Cash segregated and on deposit                                           
  for Federal and other regulations                         1,123          1,072
                                                                         
Securities purchased under agreements to resell            14,130         12,087
                                                                         
Deposits paid for securities borrowed                       9,018          7,514
                                                                         
Receivable from brokers and dealers                           742            510
                                                                         
Receivable from customers                                   6,565          6,048
                                                                         
Securities owned, at market value                          10,806          8,984
                                                                         
Property, equipment and leasehold improvements,                          
  at cost, net of accumulated depreciation and                           
  amortization of $225 and $168, respectively                 445            448
                                                                         
Excess of purchase price over fair value of net                          
  assets acquired, net of accumulated amortization                       
  of $67 and $61, respectively                                281            287
                                                                         
Other assets                                                2,611          3,397
                                                          -------        -------
                                                                         
                                                          $45,985        $40,959
                                                          =======        =======
        LIABILITIES AND STOCKHOLDER'S EQUITY                             
        ------------------------------------                             
                                                                         
Commercial paper and other short-term borrowings          $ 2,781        $ 2,955
                                                                         
Securities sold under agreements to repurchase             18,683         17,167
                                                                         
Deposits received for securities loaned                     4,650          2,899
                                                                         
Payable to brokers and dealers                                204            227
                                                                         
Payable to customers                                        3,575          4,176
                                                                         
Securities sold not yet purchased, at market value          6,812          4,563
                                                                         
Notes payable                                               2,026          1,885
                                                                         
Accounts payable and accrued liabilities                    4,374          4,389
                                                                         
Subordinated indebtedness                                     245            224
                                                          -------        -------
                                                                         
                                                           43,350         38,485
                                                          -------        -------
Stockholder's equity:                                                    
                                                                         
  Common stock ($.10 par value, 1,000 shares                             
    authorized; 100 shares issued and outstanding)                       
                                                                         
  Additional paid-in capital                                1,803          1,803
                                                                         
  Retained earnings                                           827            666
                                                                         
  Cumulative translation adjustment                             5              5
                                                          -------        -------
                                                            2,635          2,474
                                                          -------        -------
                                                          $45,985        $40,959
                                                          =======        =======
                                                                    
                   The accompanying notes are an integral part
              of these condensed consolidated financial statements.


                                        4

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                  (In millions)
                                                             Nine months ended
                                                                September 30,
                                                           ---------------------
                                                               1996      1995
                                                               ----      ----
Cash flows from operating activities:

  Net income                                                $   659     $   409
  Adjustments to reconcile net income to cash
   provided by operating activities:
    Depreciation and amortization                               138         115
    Deferred tax (benefit) provision                             14          (3)

  (Increase) decrease in operating assets:
    Cash segregated and on deposit for
      Federal and other regulations                             (51)        (84)
    Securities purchased under agreements to resell          (2,043)     (3,723)
    Deposits paid for securities borrowed                    (1,504)      9,789
    Receivable from brokers and dealers                        (232)         50
    Receivable from customers                                  (517)      1,616
    Securities owned, at market value                        (1,822)     (2,116)
    Other assets                                                772         832

  Increase (decrease) in operating liabilities:
    Securities sold under agreements to repurchase            1,516       2,614
    Deposits received for securities loaned                   1,751      (3,419)
    Payable to brokers and dealers                              (23)       (973)
    Payable to customers                                       (601)     (3,817)
    Securities sold not yet purchased,
      at market value                                         2,249         815
    Accounts payable and accrued liabilities                     77         168
                                                            -------     -------

      Cash provided by operating activities                     383       2,273
                                                            -------     -------

Cash flows from investing activities:

  Purchase of property, equipment and
    leasehold improvements                                      (72)       (130)
  Other                                                         (58)        (53)
                                                            -------     -------

      Cash used in investing activities                        (130)       (183)
                                                            -------     -------

                            (continued on next page)


                                        5

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                  (In millions)
                                   (continued)

                                                             Nine Months ended
                                                               September 30,
                                                           ---------------------
                                                              1996       1995
                                                              ----       ----

Cash flows from financing activities:

  Repayments of commercial paper
    and other short-term borrowings, net                    $  (174)    $(1,903)
  Proceeds from notes payable                                   291         675
  Repayments of notes payable                                  (150)       (408)
  Proceeds from subordinated indebtedness                        26
  Repayments of subordinated indebtedness                        (5)       (157)
  Dividends paid to Travelers Group Inc.                       (584)       (156)
                                                            -------     -------

      Cash used in financing activities                        (596)     (1,949)
                                                            -------     -------

Effect of exchange rate changes on cash                          (5)          1
                                                            -------     -------

Net change in cash and cash equivalents                        (348)        142

Cash and cash equivalents, beginning of period                  612         217
                                                            -------     -------

Cash and cash equivalents, end of period                    $   264     $   359
                                                            =======     =======


Supplemental disclosures of cash flow information:

Cash paid during the period for:

  Interest                                                  $ 1,075     $ 1,019
                                                            =======     =======

  Income taxes                                              $   457     $   217
                                                            =======     =======


Dividends declared but not paid                             $   100     $   133
                                                            =======     =======


                 The accompanying notes are an integral part of
               these condensed consolidated financial statements.


                                        6

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  (In millions)

1.   Basis of Presentation
     ---------------------

The accompanying condensed consolidated financial statements include the
accounts of Smith Barney Holdings Inc., a wholly owned subsidiary of Travelers
Group Inc., and its subsidiaries (the "Company"). The Company's principal
operating subsidiary is Smith Barney Inc. ("Smith Barney"). All material
intercompany balances and transactions have been eliminated. The interim
condensed consolidated financial statements are unaudited; however, in the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation have been reflected.

These interim condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.

Certain financial information that is normally included in financial statements
prepared in accordance with generally accepted accounting principles but is not
required for interim reporting purposes has been condensed or omitted. Certain
reclassifications have been made to prior period amounts to conform to current
period presentations.

2.   Securities, at Market Value
     ---------------------------

Securities consisted of the following:

                                              September 30,         December 31,
Securities owned                                   1996                 1995
----------------                              -------------         ------------
                                                                   
U.S. Government and agencies                                       
  obligations                                     $ 5,954                $ 4,224
Corporate debt                                      2,327                  2,019
Commercial paper and                                               
  other short-term debt                               796                    815
State and municipal obligations                       568                    698
Corporate convertibles, equities                                   
  and other securities                              1,161                  1,228
                                                  -------                -------
                                                  $10,806                $ 8,984
                                                  =======                =======


                                        7

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  (In millions)

2.   Securities, at Market Value (Cont'd)
     ------------------------------------

                                              September 30,         December 31,
Securities sold not yet purchased                  1996                 1995
---------------------------------             -------------         ------------
U.S. Government and agencies
  obligations                                      $5,770                 $3,493
Corporate debt                                        353                    385
Corporate convertibles, equities                                         
  and other securities                                689                    685
                                                   ------                 ------
                                                   $6,812                 $4,563
                                                   ======                 ======

3.   Commercial Paper and Other Short-term Borrowings
     ------------------------------------------------

Commercial paper and other short-term borrowings include commercial paper and
collateralized and uncollateralized borrowings used to finance operations,
including the securities settlement process. The collateralized and
uncollateralized borrowings bear interest at variable rates based primarily on
the Federal Funds interest rate. Smith Barney's commercial paper program
consists of both discounted and interest-bearing paper.

Commercial paper and other short-term borrowings consisted of the following:

                                              September 30,         December 31,
                                                  1996                   1995
                                              -------------         ------------
Commercial paper                                  $2,604                $2,401
Uncollateralized borrowings                          177                   399
Collateralized borrowings                                                  155
                                                  ------                ------
                                                  $2,781                $2,955
                                                  ======                ======
                                                              

In addition to the revolving credit agreements referenced in Note 4, the Company
has substantial borrowing arrangements consisting of facilities that the Company
has been advised are available, but where no contractual lending obligation
exists.


                                        8

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  (In millions)

4.   Notes Payable and Subordinated Indebtedness
     -------------------------------------------

Notes payable consisted of the following:

                                               September 30,        December 31,
                                                   1996                 1995
                                               -------------        ------------
5 3/8% Notes due 1996                                                     $  150
7.4% Medium-term Note due 1996                       $   50                   50
6% Notes due 1997                                       200                  200
5 5/8% Notes due 1998                                   150                  150
5 1/2% Notes due 1999                                   200                  200
7 7/8% Notes due 1999                                   150                  150
6 5/8% Notes due 2000                                   150                  150
7.98% Notes due 2000                                    200                  200
7% Notes due 2000                                       150                  150
5 7/8% Notes due 2001                                   250             
S&P 500 Equity-Linked Notes due 2001                     41             
6 1/2% Notes due 2002                                   150                  150
7.50% Notes due 2002                                    150                  150
6 7/8% Notes due 2005                                   175                  175
Other                                                    10                   10
                                                     ------               ------
                                                     $2,026               $1,885
                                                     ======               ======
                                                                 
The Company has a $1,000 revolving credit agreement with a bank syndicate that
extends through May 1999. The Company also has a $500 364-day revolving credit
agreement that extends through May 1997. As of September 30, 1996, there were no
borrowings outstanding under either of these agreements.

Subordinated indebtedness consists of deferred compensation of $245 and $224 at
September 30, 1996 and December 31, 1995, respectively. These deferred
compensation plans have various maturities, primarily ranging from 1996 to 2000,
with interest based on the 30-day Treasury Bill rate.


                                        9

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  (In millions)

5.   Derivative Financial Instruments
     --------------------------------

The Company uses derivative financial instruments in the normal course of its
business to facilitate customer transactions, to manage exposure from loss due
to interest rate, currency and market risk and in its proprietary activities.
Trading activities are primarily generated by client order flow. To the extent
that the Company's activities are related to servicing customer business, the
objective is to minimize market risk as much as possible.

Derivative financial instruments traded by the Company include forwards,
futures, swaps and options, whose value is based upon an underlying asset, index
or reference rate, and generally represent future commitments to exchange
currencies or cash flows, or to purchase or sell other financial instruments at
specific terms at specified future dates. The Company's derivatives contracts
are generally short-term, with a weighted average maturity of approximately six
months at September 30, 1996 and seven months at December 31, 1995.

The gross notional or contractual amounts of these derivative financial
instruments set forth below do not represent the amounts subject to market risk,
but are an indication of the volume of these transactions. In many cases, these
financial instruments limit the Company's exposure to losses from market risk by
hedging other on- and off-balance sheet transactions.

                                               Notional/Contract Amount
                                       September 30, 1996    December 31, 1995
                                       ------------------    -----------------
                                       Purchase      Sale    Purchase     Sale
                                       --------      ----    --------     ----
Mortgage-backed
   contracts (TBA)                      $14,062    $14,969    $ 6,907    $ 7,479

Forward contracts:
   Foreign currency                     $14,860    $16,360    $ 6,127    $ 7,568
   Precious metals                          394        394        465        465
   Interest rate and other                  425         25                   297
Futures contracts:
   Foreign currency                     $ 2,020    $   732    $ 1,458    $    11
   Financial                                643      3,362      2,889        493
   Commodities                                2          8          9          8

                                          Held     Written      Held     Written
                                          ----     -------      ----     -------
Options:
   OTC Foreign currency                 $ 6,534    $ 6,681    $ 3,266    $ 3,502
   Exchange-traded                        2,796        172      2,201         62
   Interest rate caps,
      floors and swaptions                1,636      2,693        550      1,197
   OTC debt and equity                      656        485        210        207

                                           Open Contracts      Open Contracts
                                           --------------      --------------

Interest rate and other swaps                 $3,589              $2,305


                                       10

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  (In millions)

5.   Derivative Financial Instruments (Cont'd)
     -----------------------------------------

At September 30, 1996 and December 31, 1995, approximately $12,271 and $5,674,
respectively, of TBA purchase and sale contracts represented offsetting
purchases and sales of the same security, and over 95% of the total contract
values were for settlement within 60 days.

Written foreign currency options consist of $3,037 and $3,644 of put and call
contracts, respectively, at September 30, 1996 and $1,799 and $1,703 of put and
call contracts, respectively, at December 31, 1995.

The Company's exposure to credit risk associated with counterparty
non-performance is limited to the net replacement cost of over-the-counter
contracts (including options held) in a gain position. Options written do not
give rise to counterparty credit risk since they obligate the Company (not its
counterparty) to perform. Exchange-traded financial instruments such as futures
and options on futures generally do not give rise to significant counterparty
exposure due to the margin requirements of the individual exchanges.

6.   Commitments and Contingencies
     -----------------------------

The Company trades "when-issued" fixed income securities, both to facilitate
customer transactions and to hedge proprietary inventory positions. At September
30, 1996, the Company had commitments to purchase and sell $376 and $612,
respectively, of when-issued fixed income securities. At December 31, 1995, the
Company had commitments to purchase and sell $369 and $324, respectively, of
when-issued fixed income securities.

The Company had outstanding commitments to underwrite variable rate municipal
securities totaling $346 and $800 at September 30, 1996 and December 31, 1995,
respectively; conditions of the offerings include bond insurance and liquidity
support facilities.

At September 30, 1996 and December 31, 1995, the Company borrowed securities
having a market value of $592 and $451, respectively, against which it pledged
securities having a market value of $610 and $459, respectively.

The Company has entered into purchase agreements with various municipal issuers,
whereby the Company has purchased securities for forward delivery. These
securities have been sold to the public for the same forward delivery dates. The
total value of these commitments at September 30, 1996 and December 31, 1995 was
$299 and $475, respectively.

At September 30, 1996 and December 31, 1995, the Company had outstanding forward
repurchase agreements totaling $600 and $1,200, respectively, and forward
reverse repurchase agreements totaling $763 and $625, respectively. These
commitments represent forward financing transactions with agreed upon interest
rates and principal amounts.


                                       11

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  (In millions)

6.   Commitments and Contingencies(Cont'd)
     -------------------------------------

In the opinion of management, commitments outstanding will settle without a
material adverse effect on the financial position or the results of operations
of the Company.

The Company has been named as a defendant in legal actions relating to its
operations, some of which seek damages of material or indeterminate amounts. In
the opinion of management, based on consultation with legal counsel, these
actions would not be likely to have a material adverse effect on the results of
operations or the financial position or liquidity of the Company.

7.   Concentrations of Credit Risk
     -----------------------------

A substantial portion of the Company's securities and commodities transactions
is collateralized and executed with and on behalf of commercial banks and other
institutional investors, including other brokers and dealers. The Company's
exposure to credit risk associated with the non-performance of these customers
and counterparties in fulfilling their contractual obligations can be directly
impacted by volatile or illiquid trading markets, which may impair the ability
of customers and counterparties to satisfy their obligations to the Company.

Substantially all of the collateral held by the Company for reverse repurchase
agreements and bonds borrowed, which together represented 39% of total assets at
September 30, 1996, consisted of securities issued by the U.S. Government or
federal agencies. The Company's most significant counterparty concentrations are
other brokers and dealers, commercial banks and institutional clients and other
financial institutions. This concentration arises in the normal course of the
Company's business.

8.   Net Capital Requirements
     ------------------------

Smith Barney, as a broker-dealer, is subject to the Uniform Net Capital Rule of
the Securities and Exchange Commission (Rule 15c3-1). Under the alternative
method permitted by this rule, net capital, as defined, shall not be less than
2% of aggregate debit items arising from customer transactions, as defined. At
September 27, 1996, Smith Barney's net capital of $1,107 exceeded the minimum
requirement by $959.

The Robinson-Humphrey Company, Inc. ("RH Co."), a broker-dealer and a wholly
owned subsidiary of Smith Barney, is also subject to Rule 15c3-1. Under the
basic method permitted by this rule, RH Co., as a block positioner pursuant to
Rule 97.30 of the New York Stock Exchange, Inc., is required to maintain net
capital of $1. At September 27, 1996, RH Co.'s net capital, as defined, of $78
exceeded the minimum requirement by $77.


                                       12

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  (In millions)

8.   Net Capital Requirements (Cont'd)
     ---------------------------------

Smith Barney Europe Ltd. ("Smith Barney Europe"), a United Kingdom registered
broker-dealer and a wholly owned subsidiary of the Company, is subject to
capital requirements of the Securities and Futures Authority ("SFA"). Financial
resources must exceed the financial resources requirement as defined by the SFA.
At September 27, 1996, Smith Barney Europe's financial resources of $106
exceeded the minimum requirement by $65.


                                       13

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
Item 2.               MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

For the three months ended September 30, 1996 and 1995

The Company reported net income of $207 million for the three months ended
September 30, 1996 (the "1996 Quarter"), an increase of 17% from the $177
million reported for the three months ended September 30, 1995 (the "1995
Quarter"). Return on equity was 32.2% in the 1996 Quarter, compared to 28.9% in
the 1995 Quarter. Pre-tax profit margin increased to 22.7% in the 1996 Quarter
from 21.1% in the 1995 Quarter. Revenues, net of interest expense, increased 5%
to $1,500 million in the 1996 Quarter from $1,423 million in the 1995 Quarter.

Commission revenues decreased to $498 million in the 1996 Quarter, down 7% from
the $536 million in the 1995 Quarter. This decrease is a result of lower
activity in listed and over-the-counter securities and options.

Principal trading revenues decreased to $243 million in the 1996 Quarter, down
5% from the $255 million reported in the 1995 Quarter. This decrease is a result
of a decline in equity trading, offset to an extent by an increase in municipal
bond trading.

Investment banking revenues increased 19% to $288 million in the 1996 Quarter
from $243 million in the 1995 Quarter. This increase results from higher fee
income generated by the Company's merger and acquisition advisory activity, as
well as strong volume in taxable fixed income underwriting.

Asset management fees rose to a record $343 million in the 1996 Quarter, an
increase of 26% from the $272 million reported in the 1995 Quarter. This
increase is, to a great extent, directly related to the increase in assets under
management as well as bringing in-house all of the administrative functions for
proprietary mutual funds and money market funds in the third quarter of 1995.
Assets under management reached a record $105.4 billion at September 30, 1996
compared to $92.2 billion at September 30, 1995. Assets under management are
comprised of money market funds, mutual funds, managed accounts and accounts
managed by financial consultants.

Net interest and dividends increased 14% to a record $106 million for the 1996
Quarter from $93 million in the 1995 Quarter, primarily due to increased margin
lending to clients and increased taxable fixed income inventories.

Total expenses, excluding interest, increased 3% to $1,159 million in the 1996
Quarter from $1,123 million in the 1995 Quarter. This increase is primarily
attributable to higher production-related compensation and benefits expense, and
other operating expenses. Expenses other than interest and employee compensation
and benefits expense were $315 million in the 1996 Period compared to $294
million in the 1995 Period. Employee compensation and benefits expense, as a
percentage of net revenues, for the 1996 Quarter declined to 56.3% from 58.3% in
the 1995 Quarter and the ratio of non-compensation expenses to net revenues was
21.0% in the 1996 Quarter compared to 20.7% in the 1995 Quarter.
The Company continues to maintain its focus on controlling fixed expenses.

The Company's business is significantly affected by the levels of activity in
the securities markets. Many factors have an impact on securities markets,
including the level and trend of interest rates, the general state of the
economy and the national and worldwide political environments. An increasing
interest rate environment could have an adverse impact on the Company's
businesses, including commissions (which are linked in part to the economic
attractiveness of securities relative to time deposits) and investment banking
(which is affected by the relative benefit to corporations and other entities of
issuing debt and/or equity versus other avenues for raising capital). Such
effects, however, could be at least partially offset by a strengthening U.S.
economy that would include growth in the business sector -- accompanied by an
increase in the demand for capital -- and an increase in the capacity of
individuals to invest. A decline in interest rates could favorably impact the
Company's business. The Company's asset management business


                                       14

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

provides a more predictable and steady income stream than its other businesses.
The Company continues to maintain tight expense controls that management
believes will help the firm weather periodic downturns in market conditions.

The Company's principal business activities are, by their nature, highly
competitive and subject to various risks, particularly volatile trading markets
and fluctuations in the volume of market activity. While higher volatility can
increase risk, it can also increase order flow, which drives many of the
Company's businesses. Other market and economic conditions and the size, number
and timing of transactions, may also affect net income. As a result, revenues
and profitability can vary significantly from year to year, and from quarter to
quarter.

For the nine months ended September 30, 1996 and 1995

The Company reported net income of $659 million for the nine months ended
September 30, 1996 (the "1996 Period"), an increase of 61% from the $409 million
reported for the nine months ended September 30, 1995 (the "1995 Period").
Return on equity was 34.9% in the 1996 Period compared to 22.9% in the 1995
Period. Pre-tax profit margin increased to 23.0% in the 1996 Period from 17.9%
in the 1995 Period. Revenues, net of interest expense, increased 19% to $4,701
million in the 1996 Period from $3,939 million in the 1995 Period.

Commission revenues increased 14% to $1,680 million in the 1996 Period from
$1,475 million in the 1995 Period. This increase reflects strong activity in
listed and over-the-counter securities, as well as insurance and mutual fund
sales.

Principal trading revenues increased 3% to $786 million in the 1996 Period from
$762 million in the 1995 Period. This increase is a result of a strong
performance in over-the-counter equities, offset by a decline in municipal and
taxable fixed income trading.

Investment banking revenues increased 48% to $864 million in the 1996 Period
from $585 million in the 1995 Period. This increase reflects strong volume in
equity, public finance and taxable fixed income underwriting, as well as fee
income from merger and acquisition advisory activity.

Asset management fees increased to $991 million in the 1996 Quarter, an increase
of 32% from the $751 million reported in the 1995 Quarter. This increase is, to
a great extent, directly related to the increase in assets under management as
well as bringing in-house all of the administrative functions for proprietary
mutual funds and money market funds in the third quarter of 1995. Assets under
management reached a record $105.4 billion at September 30, 1996 compared to
$92.2 billion at September 30, 1995. Assets under management are comprised of
money market funds, mutual funds, managed accounts and accounts managed by
financial consultants.

Net interest and dividends increased 7% to $301 million in the 1996 Period from
$282 million in the 1995 Period primarily due to increased margin lending to
clients and increased taxable fixed income inventories.

Total expenses, excluding interest, increased 12% to $3,620 million for the 1996
Period from $3,234 million in the 1995 Period. This increase is primarily the
result of higher production-related employee compensation and benefits expense,
and other operating expenses. These increases were partially offset by a decline
in communications, occupancy and equipment expense. Expenses other than interest
and employee compensation and benefits were $965 million in the 1996 Period
compared to $875 million in the 1995 period. Employee compensation and benefits
expense


                                       15

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

as a percentage of net revenues for the 1996 Period declined to 56.5% from 59.9%
in the 1995 Period and the ratio of non-compensation expenses to net revenues
was 20.5% in the 1996 Period compared to 22.2% in the 1995 Period.
The Company continues to maintain its focus on controlling fixed expenses.

LIQUIDITY AND CAPITAL RESOURCES

The Company maintains a highly liquid balance sheet, with substantially all of
its assets consisting of marketable securities and short-term collateralized
receivables arising from securities transactions. The highly liquid nature of
these assets provides the Company with flexibility in financing and managing its
business. The Company monitors and evaluates the adequacy of its capital and
borrowing base on a daily basis in order to allow for flexibility in its
funding, to maintain liquidity, and to ensure that its capital base supports the
regulatory capital requirements of its subsidiaries.

The Company funds its operations through the use of its equity, long-term
borrowings, commercial paper, collateralized and uncollateralized borrowings
(through both committed and uncommitted facilities), internally generated funds,
repurchase transactions and securities lending arrangements. The maturities of
borrowings generally correspond to the anticipated holding periods of the assets
being financed. At September 30, 1996, there was $1,500 million in committed
uncollateralized revolving lines of credit available, none of which was
utilized. In addition, the Company has substantial borrowing arrangements
consisting of facilities that the Company has been advised are available, but
where no contractual lending obligation exists. These arrangements are reviewed
on an ongoing basis to ensure flexibility in meeting the Company's short-term
requirements.

As of September 30, 1996, total long-term public debt was $2,016 million, of
which $50 million will mature on November 17, 1996, compared to total long-term
public debt of $1,875 million at December 31, 1995. On October 10, 1996, the
Company issued $200 million aggregate principal amount of 7 1/8% Notes due
October 1, 2006. As of November 5, 1996, the Company had $485 million available
for issuance under a shelf registration statement filed with the Securities and
Exchange Commission.

The Company's borrowing relationships are with a broad range of banks, financial
institutions and other firms from which it draws funds. The volume of the
Company's borrowings generally fluctuates in response to changes in the level of
the Company's securities inventories, customer balances, the amount of reverse
repurchase transactions outstanding (i.e., purchases of securities under
agreements to resell the same security) and securities borrowed transactions. As
the Company's activities increase, borrowings generally increase to fund the
additional activities. Availability of financing to the Company can vary
depending upon market conditions, credit ratings, and the overall availability
of credit to the securities industry.

The Company seeks to expand and diversify its funding mix as well as its
creditor sources. Concentration levels for these sources, particularly for
short-term lenders, are closely monitored in terms of both single investor
limits and daily maturities.

The Company monitors liquidity by tracking asset levels, collateral and funding
availability to maintain flexibility to meet its financial commitments. As a
policy, the Company attempts to maintain sufficient capital and funding sources
in order to have the capacity to finance itself on a fully collateralized basis
at all times, including periods of financial stress. In addition, the Company
monitors its leverage and capital ratios on a daily basis. The Company's
leverage ratio (total assets to equity) at September 30, 1996 and December 31,
1995 was 17.5x and 16.6x, respectively.


                                       16

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


For significant transactions, the Company's credit review process includes an
initial evaluation of the counterparty's creditworthiness, with periodic reviews
of credit standing, and collateral and various other credit enhancements
obtained in certain circumstances. The Company establishes general counterparty
credit limits by product type, taking into account the perceived risk associated
with the product. Increases to these credit limits are determined individually
based on the underlying financial strength and management of the counterparty.
The usage and resultant exposure from these credit limits are monitored daily by
the Credit Analysis group.

ASSETS AND LIABILITIES

Asset and liability levels are primarily determined by order flow and can
fluctuate depending upon economic and market conditions, customer demand and
transactional volume. The Company's total assets increased to $46.0 billion at
September 30, 1996 from $41.0 billion at December 31, 1995. Securities owned at
market value increased due to trading activities, primarily in U.S. Government
and agencies obligations. The increase in securities sold not yet purchased, at
market value relates to the hedging of market risk and increased financing
requirements associated with this increased trading activity. Securities
purchased under agreements to resell and securities sold under agreements to
repurchase were impacted by higher levels of "matched book" activity. Deposits
paid for securities borrowed and deposits received for securities loaned were
impacted by higher levels of "conduit" transactions.

The Company engages in "matched book" transactions in government and
mortgage-backed securities as well as "conduit" transactions in corporate equity
and debt securities. These transactions are similar in nature. A "matched book"
transaction involves a security purchased under an agreement to resell (i.e.,
reverse repurchase transaction) and simultaneously sold under an agreement to
repurchase (i.e., repurchase transaction). A "conduit" transaction involves the
borrowing of a security from a counterparty and the simultaneous lending of the
security to another counterparty. These transactions are reported gross in the
Condensed Consolidated Statement of Financial Position and typically yield
interest spreads ranging from 10 to 30 basis points. The interest spread results
from the net of interest received on the reverse repurchase or security borrowed
transaction and the interest paid on the corresponding repurchase or security
loaned transaction. Interest rates charged or credited in these activities are
usually based on current Federal Funds rates but can fluctuate based on security
availability and other market conditions. The size of balance sheet positions
resulting from these activities can vary significantly, depending primarily on
levels of activity in the bond markets, but would not materially impact net
income.

FUTURE APPLICATION OF ACCOUNTING STANDARDS

Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation
("FAS 123"), is effective for 1996 reporting. This statement addresses the
accounting for the cost of stock-based compensation, such as stock options and
restricted stock. FAS 123 permits either expensing the value of stock-based
compensation over the period earned or disclosing in the financial statement
footnotes the pro forma impact to net income as if the value of stock-based
compensation awards had been expensed. The value of awards would be measured at
the grant date based upon estimated fair value, using option pricing models. The
Company along with affiliated companies, participates in stock option and other
stock-based incentive plans sponsored by Travelers Group Inc. The Company has
selected the disclosure alternative that requires such pro forma disclosures to
be included in annual financial statements.


                                       17

<PAGE>

                   SMITH BARNEY HOLDINGS INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


FUTURE APPLICATION OF ACCOUNTING STANDARDS (Cont'd)

In June 1996, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities ("FAS 125").
FAS 125 provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities. These standards are
based on consistent application of a financial-components approach that focuses
on control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. FAS 125 provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. This Statement is effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996, and is to be applied prospectively; however, the FASB
has announced its intention to delay until January 1, 1998 the effective date
of certain provisions. The Company is currently evaluating the impact of this
Statement.


                                       18

<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

     For information concerning several class action lawsuits filed against
Smith Barney in connection with three funds managed by Hyperion Capital
Management Inc., see the descriptions that appear in the third paragraph on page
2 of the Company's Current Report on Form 8-K, dated November 9, 1993, and the
second paragraph on page 10 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, which descriptions are incorporated by reference
herein. A copy of the pertinent paragraphs of such filings is included as an
exhibit to this Form 10-Q. In October 1996, the U.S. Court of Appeals for the
Second Circuit affirmed the district court's dismissal of the claims. Plaintiffs
have applied for a rehearing en banc.

     For information concerning two purported class actions filed in October
1994 in connection with certain public offering documents of Greyhound Bus
Lines, Inc., see the descriptions that appear in the second paragraph on page 16
of the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1994 and the fourth paragraph on page 10 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, which descriptions are
incorporated by reference herein. A copy of the pertinent paragraphs of such
filings is included as an exhibit to this Form 10-Q. Although the defendants'
motion to dismiss was granted in October 1996, plaintiffs subsequently filed a
second amended complaint. In addition, in late October 1996, a purported class
action was filed against Smith Barney, among others, in the District Court,
Dallas County, Texas, entitled Clarkson v. Greyhound Lines, Inc., et al., with
allegations similar to those in the federal case referred to above. The Company
believes it has meritorious defenses to this action and intends to contest the
allegations.

Item 6.  Exhibits and Reports on Form 8-K.

     (a)  Exhibits:

          See Exhibit Index.

     (b)  Reports on Form 8-K:

          On July 15, 1996, the Company filed a Current Report on Form 8-K,
dated July 15, 1996, reporting under Item 5 thereof the results of its
operations for the three months and six months ended June 30, 1996, and certain
other selected financial data.

          On August 7, 1996, the Company filed a Current Report on Form 8-K,
dated August 7, 1996, reporting under Item 5 thereof certain additional
information regarding legal proceedings involving the Company.

          On August 9, 1996, the Company filed a Current Report on Form 8-K,
dated August 7, 1996, filing certain exhibits under Item 7 thereof relating to
the offer and sale of the Company's S&P 500 Equity Linked Notes due August 13,
2001.


                                       19

<PAGE>

          No other reports on Form 8-K have been filed by the Company during the
quarter ended September 30, 1996; however, on October 9, 1996, the Company filed
a Current Report on Form 8-K, dated October 7, 1996, filing certain exhibits
under Item 7 thereof relating to the offer and sale of the Company's 7 1/8%
Notes due October 1, 2006; and on October 15, 1996, the Company filed a Current
Report on Form 8-K, dated October 14, 1996, reporting under Item 5 thereof the
results of its operations for the three months and nine months ended September
30, 1996, and certain other selected financial data.


                                       20

<PAGE>

                                  EXHIBIT INDEX
                                  -------------

Exhibit                                                                 Filing
Number   Description of Exhibit                                         Method
------   ----------------------                                         ------

3.01     Restated Certificate of Incorporation of Smith Barney
         Holdings Inc. (the "Company") and the Certificate of 
         Amendment thereto, effective June 1, 1994, incorporated 
         by reference to Exhibit 3.01 to the Company's Annual 
         Report on Form 10-K for the fiscal year ended December 31, 
         1994 (File No. 1-12484) (the "Company's 1994 10-K").

3.02     Restated By-Laws of the Company, as amended September 
         26, 1994, incorporated by reference to Exhibit 3.02 to 
         the Company's 1994 10-K.

10.01    Cumulative Amendment dated as of May 28, 1996 to the         Electronic
         Three-Year Competitive Advance and Revolving Credit 
         Facility Agreement dated as of July 23, 1993, as amended 
         and restated as of May 31, 1994, among the Company, the 
         Lenders named therein, Chemical Bank, Citibank, N.A. and
         Credit Lyonnais New York Branch, as Managing Agents, the 
         banks named therein, as Co-Agents, and Chemical Bank, as 
         Administrative Agent, incorporated by reference to 
         Exhibit 10.02 to the Company's Quarterly Report on 
         Form 10-Q for the fiscal quarter ended September 30, 1994
         (File No. 1-12484).

12.01    Computation of Ratio of Earnings to Fixed Charges.           Electronic

27.01    Financial Data Schedule.                                     Electronic

99.01    The third paragraph on page 2 of the Company's Current       Electronic
         Report on Form 8-K, dated November 9, 1993 (File No. 
         0-21966), and the second paragraph on page 10 of the 
         Company's Annual Report on Form 10-K for
         the fiscal year ended December 31, 1995 (File No. 1-12484).

99.02    The second paragraph on page 16 of the Company's Quarterly   Electronic
         Report on Form 10-Q for the fiscal quarter ended 
         September 30, 1994 (File No. 1-12484) and the fourth 
         paragraph on page 10 of the Company's Annual Report on 
         Form 10-K for the fiscal year ended December 31, 1995 
         (File No. 1-12484).

         The total amount of securities authorized pursuant to any 
         instrument defining rights of holders of long-term debt of 
         the Company does not exceed 10% of the total assets of the 
         Company and its consolidated subsidiaries. The Company will 
         furnish copies of any such instrument to the Commission 
         upon request.


                                       21

<PAGE>

                                   SIGNATURES
                                   ----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                  SMITH BARNEY HOLDINGS INC.
                                  --------------------------
                                  (Registrant)



Date: November 12, 1996           By: /s/ Charles W. Scharf
                                      -----------------------------------
                                      Charles W. Scharf
                                      Vice President and Chief Financial Officer



                                  By: /s/ Michael J. Day
                                      -----------------------------------
                                          Michael J. Day
                                          Vice President and Controller


                                       22

<PAGE>

                                  EXHIBIT INDEX
                                  -------------

Exhibit                                                                 Filing
Number   Description of Exhibit                                         Method
------   ----------------------                                         ------

3.01     Restated Certificate of Incorporation of Smith Barney
         Holdings Inc. (the "Company") and the Certificate of 
         Amendment thereto, effective June 1, 1994, incorporated 
         by reference to Exhibit 3.01 to the Company's Annual 
         Report on Form 10-K for the fiscal year ended December 31, 
         1994 (File No. 1-12484) (the "Company's 1994 10-K").

3.02     Restated By-Laws of the Company, as amended September 
         26, 1994, incorporated by reference to Exhibit 3.02 to 
         the Company's 1994 10-K.

10.01    Cumulative Amendment dated as of May 28, 1996 to the         Electronic
         Three-Year Competitive Advance and Revolving Credit 
         Facility Agreement dated as of July 23, 1993, as amended 
         and restated as of May 31, 1994, among the Company, the 
         Lenders named therein, Chemical Bank, Citibank, N.A. and
         Credit Lyonnais New York Branch, as Managing Agents, the 
         banks named therein, as Co-Agents, and Chemical Bank, as 
         Administrative Agent, incorporated by reference to 
         Exhibit 10.02 to the Company's Quarterly Report on 
         Form 10-Q for the fiscal quarter ended September 30, 1994
         (File No. 1-12484).

12.01    Computation of Ratio of Earnings to Fixed Charges.           Electronic

27.01    Financial Data Schedule.                                     Electronic

99.01    The third paragraph on page 2 of the Company's Current       Electronic
         Report on Form 8-K, dated November 9, 1993 (File No. 
         0-21966), and the second paragraph on page 10 of the 
         Company's Annual Report on Form 10-K for
         the fiscal year ended December 31, 1995 (File No. 1-12484).

99.02    The second paragraph on page 16 of the Company's Quarterly   Electronic
         Report on Form 10-Q for the fiscal quarter ended 
         September 30, 1994 (File No. 1-12484) and the fourth 
         paragraph on page 10 of the Company's Annual Report on 
         Form 10-K for the fiscal year ended December 31, 1995 
         (File No. 1-12484).

         The total amount of securities authorized pursuant to any 
         instrument defining rights of holders of long-term debt of 
         the Company does not exceed 10% of the total assets of the 
         Company and its consolidated subsidiaries. The Company will 
         furnish copies of any such instrument to the Commission 
         upon request.